UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of ~~August~~May, ~~2005~~ 2006

Commission File Number: 0-20055

Consolidated Envirowaste Industries Inc.

(Translation of registrant’s name into English)

27715 Huntingdon Road, Abbotsford, B.C., Canada V4X 1B6
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

FORM 20-F þ FORM 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-~~TRule~~T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-~~TRule~~T Rule 101(b)(7):

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

YES þ NO o

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-1399.

SIGNATURES

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.

	CONSOLIDATED ENVIROWASTE INDUSTRIES INC. (Registrant)
			CONSOLIDATED ENVIROWASTE
Date August 25, 2005	By	"Douglas R. Halward, President"
			INDUSTRIES INC.
		(Signature)
			(Registrant)
	Douglas R. Halward, President
Date May 31, 2006		By	“Douglas R. Halward” (Signature)
	(Name and Title of the Signing Officer)
			Douglas R. Halward, President
			(Name and Title of the Signing Officer)

The following attached documents are filed under this Form 6-K:

EXHIBIT A:	News Releases dated May 31, 2006	~~News Release dated August 25, 2005~~
EXHIBIT B:	Unaudited financial statements for the six months ended March 31, 2006 and Management Discussion and Analysis	~~Unaudited financial statements for the nine months ended June 30, 2005 and Management Discussion and Analysis~~

~~“Exhibit~~ EXHIBIT A”

27715 HUNTINGDON ROAD, ABBOTSFORD, BC V4X 1B6
TELEPHONE: 604-856-6836 FACSIMILE: 604-856-5644

NEWS RELEASE

Consolidated Envirowaste Reports ~~2005~~2006 ~~3rd~~2nd Quarter Results ~~Abbotsford, British Columbia — August 25, 2005~~

~~Consolidated~~Abbotsford, ~~Envirowaste~~British ~~Industries~~Columbia ~~Inc.~~– ~~(TSX Venture Exchange-CWD-V) announced today its results for the nine months ended June~~May 3031, ~~2005. A complete copy of the Company’s report for the~~2006 ~~quarter is available at www.sedar.com. Excerpts from the unaudited financial statements are as follows:~~

							Nine Months		Nine Months
	Quarter Ended			Quarter Ended			Ended		Ended
	June 30, 2005			June 30, 2004			June 30, 2005		June 30, 2004
Revenue	$	8,489,774		$	7,383,221		$	22,345,941	$	17,742,315
Income from continuing operations before income taxes		633,142			999,189			1,788,882		1,252,790
Income from continuing operations after income taxes		305,798			646,636			812,862		646,994
Net income (loss) from discontinued operations		(514	)		(148,911	)		28,711		(67,681	)
Net income for the period		305,284			497,725			841,573		579,313
Basic earnings per common share	$	0.03		$	0.05		$	0.08	$	0.06
Diluted earnings per common share	$	0.03		$	0.05		$	0.08	$	0.06
Weighted average common shares outstanding		10,364,699			10,247,199			10,325,103		10,153,161

Consolidated Envirowaste Industries Inc. (TSX Venture Exchange-CWD-V) announced today its results for the six months ended March 31, 2006. A complete copy of the Company’s report for the six months is available at www.sedar.com. Excerpts from the unaudited financial statements are as follows:

Consolidated Envirowaste Industries Inc. recorded net income from continuing operations for the three months ended June 30, 2005 of $305,798 or $0.03 per share ($0.03 per share diluted) compared to net earnings from continuing operations of $646,636 or $0.06 per share ($0.06 per share diluted) for the three months ended June 30, 2004. After a net loss from discontinued operations for the quarter of $514 (2004 — $148,911), overall net income for the three months ended June 30, 2005 was $305,284 or $0.03 per share ($0.03 per share diluted) compared to net income of $497,725 or $0.05 per share ($0.05 per share diluted) earned in the same quarter of 2004. Revenue for the quarter increased 15% or $1.1 million to $8,489,774 compared to the third quarter of 2004 driven by revenue growth in its Florida unit. The Company experienced pressure on gross margins during the quarter compared to the third quarter of 2004 caused by higher fuel and raw material costs. Increased activity and fuel cost increases driving freight costs for product deliveries and disposal of site material accounted for a significant increase in direct selling expenses during the nine months ended June 30, 2005 when compared to the third quarter of 2004. After changes in working capital items, the Company generated 1,765,000 in cash


	Quarters Ended					Six Months Ended
	March 31, 2006		March 31, 2005			March 31, 2006		March 31, 2005

Revenue	$	8,691,667	$	6,653,408		$	16,446,271	$	13,826,989

Income from continuing operations before income taxes	$	1,307,569	$	123,617		$	2,021,380	$	1,155,740

Income (loss) from continuing operations after income taxes	$	745,394	$	(13,538	)	$	1,064,346	$	507,064

Income from discountinued operations	$	—	$	14,198		$	—	$	29,225

Net income for the period	$	745,394	$	660		$	1,064,346	$	536,289

Earnings per share-basic	$	0.07	$	—		$	0.10	$	0.05

Earnings per share-diluted	$	0.07	$	—		$	0.10	$	0.05

Weighted average common shares outstanding		10,364,699		10,250,801			10,364,699		10,305,303

~~flows~~Consolidated ~~from~~Envirowaste ~~operating~~Industries ~~activities~~Inc. ~~during~~reported ~~the~~second quarter ~~compared~~net toincome ~~generating~~of $1745,~~132,000~~394 inor ~~cash~~$0.05 per ~~flows~~share in($0.05 per share diluted) on revenues of $8,691,667 for the quarter ended ~~June~~March 3031, 2006 ~~2004-the~~compared ~~change~~to ~~primarily~~a asnet aloss ~~result~~from continuing operations of ~~the~~$13,538 or $~~735~~0.00 per share ($0.00 per share fully-diluted) on $6,~~000~~653,408 ~~proceeds~~in ~~from~~revenues for the ~~short~~2nd ~~term~~quarter ~~line~~ of ~~credit~~fiscal 2005. Revenue ~~financing~~growth ~~for~~of ~~its~~30% ~~Florida~~and ~~unit’s~~improved ~~acquisition~~operating ofmargins ~~approximately~~over ~~200~~the ~~acres~~comparable quarter of ~~land~~2005 ~~for~~produced ~~future~~the ~~strategic~~Company’s ~~business~~strongest ~~purposes~~second quarter results in several years.

~~Strong~~The ~~private sector demand, storm revenue generated in earlier quarters, and continued revenue growth in the~~ Company’s ~~Florida~~recorded ~~unit~~net ~~increased~~income ~~sales for the first nine months~~ of ~~fiscal 2005 by 26% or~~ $41,~~603~~064,~~626 to $22,~~346~~,000~~ ~~compared~~or to $~~17,742,315~~0.10 ~~for~~per ~~the~~share ~~nine months ended June 30, 2004 in spite of unfavourable currency translation differences~~($0.10 ~~Improvements~~per inshare ~~revenue~~diluted) for the ~~first three~~six ~~quarters of 2005 were offset by higher operating and selling costs, however, operating income from continuing operations for the nine~~ months ended ~~June~~March 3031, ~~2005~~2006. ~~rose~~This ~~$570,290~~compares ~~or 59%~~ to ~~$1,533,784~~ ~~compared to $963,494 for the same period in 2004. Net~~ income from continuing operations ~~increased~~ ~~26% or $165,868 for the first three quarters~~ of ~~2005 to~~ $~~812~~507,~~862~~064 ~~compared~~or to $~~646,994~~0.05 ~~for the~~per ~~same~~share ~~period last year~~($0.05 ~~Net~~per ~~income~~share ~~from~~fully ~~the~~diluted) ~~discontinued~~and ~~Georgia operations of $28,711 compared~~overall ~~to a~~ net ~~loss~~income ~~from discontinued operations~~ of $67536,~~681~~289 ~~brought~~or ~~net income for the nine months ended June 30, 2005 to~~ $~~841,573-an~~0.05 ~~increase~~per ofshare ~~45% or~~ ($~~262,260-compared~~0.05 toper ~~net~~share ~~income~~fully ofdiluted) ~~$579,313~~ for the ~~first~~ ~~three~~same ~~quarters~~six ~~of 2004. For the first nine months of fiscal 2005, Consolidated Envirowaste~~month ~~Industries~~period ~~Inc.~~ended ~~generated approximately $2~~March 31,~~377,000~~ ~~in cash flows from operating activities after changes in working capital items, compared to $2,053,000 generated in the first nine months of fiscal 2004~~2005. ~~The Company continues to reduce overall debt levels.~~

While the Canadian operations reflect seasonal demand, the CRR (Florida) unit dominated the overall performance of the Company for the six months ended March 31, 2006 with revenue from storm activity continuing well into the second quarter and very strong private sector demand. The strong second quarter increased revenues by 19% to $16,446,271 for the six months ended March 31, 2006

compared to revenue of 13,826,989 for the six months ended March 31, 2005. The Florida unit is capitalizing on its significant efforts to gain private sector market share and is benefiting from the success of its existing private sector customer base. Fuel costs continued to increase disproportionately to other operating costs, but the Company was able to adjust its pricing to improve overall margins by 13% over the comparable quarter and 3.7% for the comparative six month period over last fiscal year.

Revenues and net earnings were impacted by the continuing weakness in the US dollar reducing revenue gains by $800,000 and net earnings by approximately $0.01 per share.

The Company generated approximately $1,884,000 in cash flows before changes in working capital for the six months ended March 31, 2006. This compared to $1,360,000 generated from operations before changes in working capital for the first six months of the 2005 fiscal year reflecting higher net earnings and an offsetting $160,000 increase in unrealized foreign exchange losses (cumulative currency translation differences) in the comparable six month periods.

Consolidated Envirowaste Industries Inc. is a leading processor of wood and other organic wastes in Western Canada and Florida. The Company markets and supplies biomass boiler fuel for electric generation facilities, charcoal manufacturers and pulp and paper mills in the U.S., bulk landscaping products in both of these regions, and packaged soil products to major Western Canadian retailers.

Forward Looking Statements This report contains statements that are forward looking in nature. Such statements involve known and unknown risks and uncertainties that may cause the actual results of the Company to be materially different from those expressed or implied by those forward looking statements. Such risks include, among others: general economic and business conditions, weather factors, competition and product selling prices, raw material and operating costs, and changes in foreign currency exchange rates.

Consolidated Envirowaste Industries Inc.

“~~Per~~ James E. Darby”

James E. Darby
Chairman and Chief Executive Officer

The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of this release.

~~“Exhibit B”~~27715 HUNTINGDON ROAD, ABBOTSFORD, BC V4X 1B6 TELEPHONE: 604-856-6836 FACSIMILE: 604-856-5644

NEWS RELEASE

Consolidated Envirowaste Corrects Error in News Release dated May 31, 2006 Reporting 2006 2^nd Quarter Results

Abbotsford, British Columbia – May 31, 2006

Consolidated Envirowaste Industries Inc. (TSX Venture Exchange-CWD-V) announced today its results for the six months ended March 31, 2006. The news release announcing the second-quarter results contained a typographical error in the first paragraph following the table on page 1. The reported second quarter net income of $745,394 on revenues of $8,691,667 was correct; however, the net income per share figures immediately following of $0.05 per share ($0.05 per share diluted) should have read $0.07 per share ($0.07 per share diluted).

Consolidated Envirowaste Industries Inc.

“James E. Darby”

James E. Darby
Chairman and Chief Executive Officer

The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of this release.

EXHIBIT B

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Consolidated Financial Statements (Expressed in Canadian Dollars) March 31, 2006 and 2005

June 30, 2005 and 2004

Index

Consolidated Balance Sheets

Consolidated Statements of Income and Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

~~Schedules~~Notice: These offinancial ~~Consolidated~~statements ~~Cost~~have ofnot ~~Sales~~been reviewed by the Company’s independent auditor.

Schedules of Consolidated Direct Selling Expenses

Schedules of Consolidated General and Administrative Expenses

Notice These financial statements and related schedules have not been reviewed by the Company’s independent auditor.

Prepared by Management

Page 1 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Consolidated Balance Sheets June 30, 2005 and 2004 (audited)


Consolidated Balance Sheets					(Expressed in Canadian Dollars)
March 31, 2006 and 2005							(audited)

	March 31			March 31			September 30,
	2006			2005			2005
ASSETS (note 9)
Current
Cash and cash equivalents	$	2,196,063		$	3,182,520		$	1,760,804
Accounts receivable (note 6)		5,758,526			3,677,244			3,557,706
Inventories (notes 2 and 6)		1,189,418			995,174			931,962
Refundable income taxes		—			—			124,942
Future income tax asset		75,852			210,342			75,462
Prepaid expenses and deposits		278,793			343,043			430,187

		9,498,652			8,408,323			6,881,063
Property, plant and equipment (notes 3 and 6)		9,275,837			8,661,541			10,078,661
Assets under capital leases (note 4)		4,864,714			2,218,435			3,309,961
Future income tax asset		6,896			—			6,860
Other assets (note 5)		28,430			31,604			30,017

	$	23,674,529		$	19,319,903		$	20,306,562


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Demand loans (note 6)	$	690,000		$	590,000		$	380,000
Accounts payable and accrued liabilities (note 11)		3,512,797			2,883,765			2,503,649
Income taxes payable		542,010			159,654			—
Deferred revenue		611,831			108,741			501,229
Principal portion of long-term debt due within one year (note 7)		778,418			935,641			1,636,368
Principal portion of capital lease obligations due within one year (note 8)		1,168,599			582,094			817,614
Principal portion of loans due within one year (note 9)		70,180			—			198,389

		7,373,835			5,259,895			6,037,249
Long-term debt (note 7)		1,076,627			1,657,295			1,335,043
Obligations under capital leases (note 8)		3,521,134			1,362,084			2,160,836
Loans payable (note 9)		2,236,260			2,564,388			2,049,436
Future income taxes payable		569,999			669,632			567,073

		14,777,855			11,513,294			12,149,637


Commitments (note 13)
Contingent liabilities (note 14)

SHAREHOLDERS’ EQUITY
Share capital (note 10)		15,488,238			15,488,238			15,488,238
Contributed surplus		16,836			7,013			14,990
Unrealized foreign exchange gain (loss)		(312,857	)		63,329			13,586
Deficit		(6,295,543	)		(7,751,971	)		(7,359,889	)

		8,896,674			7,806,609			8,156,925

	$	23,674,529		$	19,319,903		$	20,306,562

	June 30,			June 30,			September 30,
	2005			2004			2004
ASSETS
Current
Cash	$	2,076,806		$	1,853,975		$	2,843,341
Accounts receivable		3,786,239			3,862,551			4,027,593
Inventories (note 2)		638,817			795,977			759,242
Refundable income taxes		—			—			70,863
Future income tax asset		212,983			204,913			219,222
Prepaid expenses and deposits		481,522			369,942			283,207
		7,196,367			7,087,358			8,203,468
Property, plant and equipment (note 3)		10,378,818			9,632,628			9,509,709
Assets under capital leases (note 4)		2,784,469			1,871,467			2,896,260
Future income tax asset		—			214,385			—
Other assets (note 5)		30,811			33,984			33,191
	$	20,390,465		$	18,839,822		$	20,642,628
LIABILITIES
Current
Demand loans, secured (note 6)	$	440,000		$	450,000		$	430,000
Accounts payable and accrued liabilities		2,616,613			2,170,773			2,336,451
Income taxes payable		339,168			336,338			—
Deferred revenue		73,564			265,503			780,421
Principal portion of long-term debt due within one year		1,715,207			1,662,263			1,553,047
Principal portion of capital lease obligations due within one year		730,550			516,421			699,392
Principal portion of loans due within one year		—			—			173,939
		5,915,102			5,401,298			5,973,250
Long-term debt (note 7)		1,668,036			2,478,596			2,285,451
Obligations under capital leases (note 8)		1,839,950			1,191,749			1,961,734
Loans payable (note 9)		2,247,825			2,498,673			2,324,734
Future income taxes payable		678,042			174,402			697,905
		12,348,955			11,744,718			13,243,074
SHAREHOLDERS’ EQUITY
Share capital (note 10)		15,488,238			15,456,513			15,456,513
Contributed Surplus		8,182			—			4,675
Unrealized foreign exchange gain (loss)		(8,223	)		176,230			226,626
Deficit		(7,446,687	)		(8,537,639	)		(8,288,260	)
		8,041,510			7,095,104			7,399,554
	$	20,390,465		$	18,839,822		$	20,642,628

See accompanying notes

~~Commitments~~On ~~(note~~behalf ~~13) Contingent~~of ~~liability~~the ~~(note 14)~~Board:

~~Approved~~“signed” by“signed” ~~the~~James ~~Directors:~~ E. Darby Douglas R. Halward Director Director Prepared by Management

~~“signed”~~Page ~~"signed"~~2 ~~James~~of ~~E.H. Darby Douglas R. Halward~~13

Prepared by Management

Page 2 of 18

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

	3 months			3 months			9 months			9 months
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Revenue
Bulk	$	728,664		$	510,807		$	1,418,121		$	1,351,936
Packaged products		1,167,488			1,135,260			1,837,572			1,915,791
Tipping and processing fees		6,593,622			5,737,154			19,090,248			14,474,588
		8,489,774			7,383,221			22,345,941			17,742,315
Cost of sales (schedule)		4,704,159			3,887,583			12,347,669			9,957,390
Gross margin		3,785,615			3,495,638			9,998,272			7,784,925
Direct selling expenses (schedule)		1,821,161			1,334,492			4,533,138			3,248,373
General and administrative expenses (schedule)		1,345,478			1,257,432			3,931,350			3,573,058
Operating income		618,976			903,714			1,533,784			963,494
Other income
Interest and sundry		7,995			2,971			17,767			34,792
Gain on disposal of property, plant and equipment		6,171			92,504			237,331			254,504
Income before income taxes		633,142			999,189			1,788,882			1,252,790
Income taxes (note 15)		327,344			352,553			976,020			605,796
Net income for the period from continuing operations		305,798			646,636			812,862			646,994
Discontinued operations
Income (loss) before income taxes		(387	)		(260,515	)		48,055			(122,298	)
Income taxes recovery (expense)		(127	)		111,604			(19,344	)		54,617
Net income (loss) from discontinued operations		(514	)		(148,911	)		28,711			(67,681	)
Net income for the period	$	305,284		$	497,725			841,573			579,313
Deficit, beginning of year								(8,288,260	)		(9,116,952	)
Deficit, end of period							$	(7,446,687	)	$	(8,537,639	)
Earnings per share for the period — basic	$	0.03		$	0.05		$	0.08		$	0.06
Weighted average number of common shares outstanding
— basic		10,364,699			10,247,199			10,325,103			10,153,161
Earnings per share — diluted	$	0.03		$	0.05		$	0.08		$	0.06
Weighted average number of common shares outstanding
— diluted		10,484,116			10,258,535			10,444,520			10,164,497



Consolidated Statements of Income and Deficit		(Expressed in Canadian Dollars)
For the six months ended March 31, 2006 and 2005


	3 months		3 months			6 months			6 months
	March 31, 2006		March 31, 2005			March 31, 2006			March 31, 2005
Revenue
Bulk	$	419,660	$	417,260		$	753,256		$	689,006

Packaged products		621,411		545,394			763,361			641,357

Tipping and processing fees		7,650,596		5,690,754			14,929,654			12,496,626

		8,691,667		6,653,408			16,446,271			13,826,989

Cost of sales		5,629,613		5,188,704			11,099,419			9,844,786

Gross margin		3,062,054		1,464,704			5,346,852			3,982,203

Selling and administrative expenses		1,637,256		1,314,290			3,278,613			2,805,839
Interest expense on long-term debt		161,782		130,699			314,580			261,556

Operating income		1,263,016		19,715			1,753,659			914,808

Other income
Interest and sundry		34,460		3,505			66,280			9,772
Gain on disposal of property, plant and equipment		10,093		100,397			201,441			231,160

Income before income tax provision		1,307,569		123,617			2,021,380			1,155,740

Income tax provision		562,175		137,155			957,034			648,676

Income (loss) for the period from continuing operations		745,394		(13,538	)		1,064,346			507,064

Discontinued operations
Income before income taxes		—		23,536			—			48,442
Income tax provision		—		9,338			—			19,217

Income from discontinued operations		—		14,198			—			29,225

Net income for the period	$	745,394	$	660			1,064,346			536,289


Deficit, beginning of year							(7,359,889	)		(8,288,260	)

Deficit, end of period						$	(6,295,543	)	$	(7,751,971	)


Earnings per share for the period
Basic	$	0.07	$	—		$	0.10		$	0.05
Diluted	$	0.07	$	—		$	0.10		$	0.05


Weighted average number of common shares outstanding
Basic		10,364,699		10,250,801			10,364,699			10,305,303
Diluted		10,535,824		10,331,629			10,535,824			10,386,131

See accompanying notes

Prepared by Management

Page 3 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

	3 months			3 months			9 months			9 months
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Cash flows from (used in) operating activities
Net income for the period	$	305,284		$	497,725		$	841,573		$	579,313
Items not involving cash:
Amortization		615,960			610,315			1,874,549			1,704,390
Gain on disposal of property, plant and equipment		(6,171	)		(92,504	)		(260,246	)		(388,154	)
Stock-based compensation		1,169			—			3,507			—
Unrealized foreign exchange loss		(71,552	)		(23,269	)		(234,849	)		(352,608	)
Issuance of shares for non-cash consideration		—			—			—			75,000
Future income taxes		5,769			(4,288	)		(13,624	)		10,909
		850,459			987,979			2,210,910			1,628,850
Change in non-cash working capital
Accounts receivable		(108,995	)		(245,716	)		241,354			(1,047,857	)
Inventories		356,357			246,720			120,425			156,959
Prepaid expenses and deposits		(138,479	)		(140,219	)		(198,315	)		(36,226	)
Accounts payable and accrued liabilities		(267,152	)		(111,723	)		280,162			303,734
Income taxes payable		179,514			238,416			410,031			400,678
Deferred revenue		(35,177	)		64,257			(706,857	)		47,654
Current portion of long-term debt		779,566			74,809			162,160			583,579
Current portion of capital lease obligations		148,456			17,921			31,158			16,051
Current portion of loans payable		—			—			(173,939	)		—
		1,764,549			1,132,444			2,377,089			2,053,422
Cash flows from (used in) financing activities
Increase (decrease) in long-term debt, net		10,741			77,181			(617,415	)		385,496
Increase (decrease) in obligations under capital leases, net		477,866			(79,749	)		(121,784	)		(374,991	)
Increase (decrease) in loans payable		(316,563	)		(11,358	)		(76,909	)		122,803
Issuance of share capital		—			—			31,725			58,431
		172,044			(13,926	)		(784,383	)		191,739
Cash flows from (used in) investing activities
Acquisition of property, plant and equipment		(2,507,454	)		(567,193	)		(2,536,581	)		(2,524,174	)
Proceeds from the sale of property, plant and equipment		386,772			103,196			513,159			403,959
Acquisition of assets under capital leases		(771,625	)		(31,875	)		(771,625	)		(42,347	)
Proceeds from the sale of assets under capital leases		—			—			425,806			—
		(2,892,307	)		(495,872	)		(2,369,241	)		(2,162,562	)
Increase (decrease) in cash position		(955,714	)		622,646			(776,535	)		82,599
Cash position, beginning of period		2,592,520			781,329			2,413,341			1,321,376
Cash position, end of period	$	1,636,806		$	1,403,975		$	1,636,806		$	1,403,975
Represented as:
Cash	$	2,076,806		$	1,853,975		$	2,076,806		$	1,853,975
Demand loans, secured		(440,000	)		(450,000	)		(440,000	)		(450,000	)
	$	1,636,806		$	1,403,975		$	1,636,806		$	1,403,975
Supplementary Information
Interest paid in cash	$	103,865		$	102,279		$	294,284		$	317,924
Income taxes paid in cash	$	144,939		$	194		$	571,028		$	142,333



Consolidated Statements of Cash Flows		(Expressed in Canadian Dollars)
For the six months ended March 31, 2006 and 2005


	3 months			3 months			6 months			6 months
	March 31, 2006			March 31, 2005			March 31, 2006			March 31, 2005
Cash flows from (used in) operating activities
Net income for the period	$	745,394		$	660		$	1,064,346		$	536,289
Items not involving cash:
Amortization		770,657			618,734			1,342,988			1,258,589
Gain on disposal of property plant and equipment		(10,093	)		(128,018	)		(201,441	)		(254,075	)
Stock-based compensation		923			1,169			1,846			2,338
Unrealized foreign exchange loss		(122,060	)		(107,149	)		(326,443	)		(163,297	)
Future income taxes		2,709			3,795			2,500			(19,393	)

		1,387,530			389,191			1,883,796			1,360,451
Change in non-cash working capital:
Accounts receivable		(2,874,475	)		(424,350	)		(2,200,820	)		350,349
Inventories		(183,612	)		(177,896	)		(257,456	)		(235,932	)
Refundable Income taxes		568,687			(31,151	)		666,952			230,517
Prepaid expenses and deposits		290,064			693,668			151,394			(59,836	)
Accounts payable and accrued liabilities		885,330			(252,367	)		1,009,148			547,314
Deferred revenue		(366,572	)		(311,136	)		110,602			(671,680	)
Current portion of long-term debt		(800,179	)		16,542			(857,950	)		(617,406	)
Current portion of capital lease obligations		325,476			7,598			350,985			(117,298	)
Current portion of loans payable		(128,209	)		(93,939	)		(128,209	)		(173,939	)

		(895,960	)		(183,840	)		728,442			612,540

Cash flows from (used in) financing activities
Increase (decrease) in demand loans		100,000			(115,000	)		310,000			160,000
Decrease in long-term debt, net		(83,667	)		(221,708	)		(258,416	)		(628,156	)
Increase (decrease) in obligations under capital leases, net		227,864			(139,528	)		1,360,298			(599,650	)
Increase in loans payable		186,824			239,654			186,824			239,654
Issuance of share capital		—			31,725			—			31,725

		431,021			(204,857	)		1,598,706			(796,427	)

Cash flows from (used in) investing activities
Acquisition of property, plant and equipment		(151,744	)		(29,127	)		(197,628	)		(29,127	)
Acquisition of assets under capital leases		(872,650	)		—			(2,613,311	)		—
Proceeds from the sale of property, plant and equipment		10,093			125,733			415,125			126,387
Proceeds from the sale of assets under capital leases		—			2,642			503,925			425,806

		(1,014,301	)		99,248			(1,891,889	)		523,066

Increase in cash and cash equivalents		(1,479,240	)		(289,449	)		435,259			339,179

Cash and cash equivalents, beginning of period		3,675,303			3,471,969			1,760,804			2,843,341

Cash and cash equivalents, end of period	$	2,196,063		$	3,182,520		$	2,196,063		$	3,182,520


Supplementary Information:
Interest paid in cash	$	110,720		$	86,150		$	212,432		$	190,419
Income taxes paid in cash	$	—		$	396,083		$	290,563		$	426,089

See accompanying notes

Prepared by Management

Page 4 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

1.Notes ~~Significant~~to ~~Accounting~~Consolidated ~~Policies~~Financial Statements (Expressed in Canadian Dollars) March 31, 2006 and 2005

The Financial Statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles within reasonable limits of materiality and within the framework of the significant accounting policies summarized below: (a) Basis of Presentation The Company follows Canadian generally accepted accounting principles in the preparation of these financial statements. All dollar amounts are reported in Canadian funds. (b) Basis of Consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, The Answer Garden Products Ltd., and its 72.74% owned subsidiary Bio-Waste Industries Limited, Envirowaste International Inc. (“EII”), a U.S. company, and its U.S subsidiaries, Consolidated Resource Recovery Inc. — Florida operations (“CRRI”), a Delaware corporation, and Consolidated Resource Recovery Inc. — Georgia operations (“Greencycle”), a Georgia corporation. (c) Use of Estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates. (d) Cash equivalents Cash equivalents consist of highly liquid investments which are readily convertible into cash with maturities of three months or less when purchased. As at June 30, 2005, cash equivalents were $nil (June 30, 2004 — $nil; September 30, 2004 — $nil). (e) Inventories Inventories of raw materials are valued at the lower of cost and net realizable value. Inventories of work-in-process and finished goods are valued at the lower of standard cost and market value. (f) Property, Plant and Equipment Property, plant and equipment are recorded at cost. Amortization is charged to earnings in amounts sufficient to allocate the costs over their estimated useful lives on a straight-line basis using the following annual rates pro-rated from initial utilization:

1.		Significant Accounting Policies

		Basis of Presentation

		These unaudited interim consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, The Answer Garden Products Ltd., and its 72.74% owned subsidiary Bio-Waste Industries Limited, Envirowaste International Inc. (“EII”), a U.S. company, and its U.S. subsidiaries, Consolidated Resource Recovery Inc. — Florida operations (“CRRI”), a Delaware corporation, and Consolidated Resource Recovery Inc. — Georgia operations (“Greencycle”), a Georgia corporation.

		The accompanying interim consolidated financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in Canada with respect to the preparation of interim financial statements. Accordingly, they do not include all of the information and disclosures required by Canadian GAAP in the preparation of annual statements. These interim financial statements follow the same accounting policies and methods of application used in the Company’s audited annual consolidated financial statements as at and for the year ended September 30, 2005.

		Comparative figures

		Certain of the prior year’s figures have been reclassified to conform to the presentation adopted in the current year.

2.		Inventories

Plant	4%, 5%, 14%, 20% & 33%
	March 31,		March 31,		September 30,
Land improvements	6.7% & 8%
	2006		2005		2005(audited)
Equipment	10%, 20%, 33% & 50%
Raw materials and supplies	$	794,141	$	700,764	$	716,208
Office equipment	20% & 33%
Work-in-process		93,423		34,839		84,005
Leasehold improvements	20% & 33%
Finished goods		301,854		259,571		131,749
Computer equipment	30%, & 33%
	$	1,189,418	$	995,174	$	931,962
Packaging plates and artwork	20%
Automotive equipment	20% & 30%

Property, Plant and Equipment


	March 31,						March 31,		September 30,
	2006						2005		2005(audited)
			Accumulated		Net Book		Net Book		Net Book
	Cost		Amortization		Value		Value		Value
Property	$	4,215,030	$	—	$	4,215,030	$	2,378,050	$	4,270,608
Plant		2,725,449		1,076,416		1,649,033		1,896,203		1,826,616
Property improvements		1,576,444		784,795		791,649		895,177		849,118
Equipment		6,081,025		3,877,318		2,203,707		2,931,138		2,627,579
Office equipment		237,321		129,009		108,312		149,825		129,017
Computer equipment		143,685		120,364		23,321		27,211		31,387
Packaging plates and artwork		347,012		324,061		22,951		27,215		29,596
Automotive equipment		904,506		642,672		261,834		356,722		314,740

	$	16,230,472	$	6,954,635	$	9,275,837	$	8,661,541	$	10,078,661

Prepared by Management

Page 5 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

1.Notes ~~Significant~~to ~~Accounting~~Consolidated ~~Policies~~Financial Statements (~~continued~~Expressed in Canadian Dollars) March 31, 2006 and 2005

(g) Assets Under Capital Leases Assets acquired under capital leases and their related obligations are recorded at an amount equivalent to the present value of the minimum future lease payments discounted at the interest rate implicit in the agreement. Leased assets are amortized on the same basis as property, plant & equipment. (h) Other Assets

Trademarks		Recorded at cost; amortized on a straight-line basis over periods of 10 years or 15 years.
Technology license		Recorded at cost; amortized on a straight-line basis over 20 years.

(i) Goodwill and Other Intangible Assets The Company follows the recommendations of the Canadian Institute of Chartered Accountants (“CICA”) Handbook, Section 3062, “Goodwill and Other Intangible Assets”, under which a recognized intangible asset should be amortized over its useful life to an enterprise unless the life is determined to be indefinite. An intangible asset with an indefinite life will not be amortized, but will be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test will consist of a comparison of the fair value of the intangible asset with its carrying amount. When the carrying amount of the intangible asset exceeds its fair value, an impairment loss will be recognized in an amount equal to the excess and charged to operations. (j) Asset Retirement Obligations Effective October 1, 2004, the Company retroactively adopted the CICA handbook Section 3110 on the recognition and measurement of asset retirement obligations, which for the Company encompasses primarily site post closure and remediation cost liabilities. Under this section, asset retirement obligations are recognized at the fair market value in the period in which the legal obligation was incurred, with fair value of a liability determined with reference to the present value of estimated future cash flows. In periods subsequent to the initial measurement, changes in the liability resulting from the passage of time and revisions to fair value calculations are recognized in the statement of operations as they occur. The nature of the Company’s operations are such that remediation cost liabilities are short term in nature, therefore costs approximate their discounted present value, and are recorded in deferred revenue (see note 1(n) Revenue Recognition and 1(p) Environmental and Site Remediation Liability). Site post closure costs have not been incurred to date, therefore the Company has not had to restate prior periods as a result of the adoption of this new policy. (k) Income Taxes Income taxes are accounted for using the asset and liability method pursuant to Section 3465, Income Taxes, of the CICA Handbook. Future taxes are recognized for the tax consequences of “temporary differences” by applying enacted or substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. In addition, Section 3465 requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not.

Prepared by Management

Page 6 of 18

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

1. Significant Accounting Policies (continued)

(l) Stock-Based Compensation The Company accounts for stock-based compensation using the fair value method for all direct awards of stocks in accordance with the CICA Handbook, section 3870. “Stock-Based Compensation and Other Stock-Based Payments”. The fair value of the options granted are estimated at the date of grant using the Black-Scholes valuation model. Stock-based compensation is amortized into earnings over the vesting period of the related options. As the expense is incurred, an offset is created in contributed surplus in shareholders’ equity, which is converted in share capital when the related options are exercised. During the period, no options were granted (June 30, 2004 — nil; September 30, 2004 — 60,000) and charged $3,507 (June 30, 2004 — nil; September 30, 2004 — $4,675) to income. (m) Foreign Currency Translation The Company treats the operations of Envirowaste International Inc. as a self-sustaining foreign operation using the current rate method of currency translation. Unrealized translation gains or losses are presented as a component of equity. (n) Revenue Recognition Revenues from the sale of bulk and packaged products are recognized when title and risk of loss transfers to the customer, which is generally upon shipment. Revenues from tipping fees are recognized as services performed and are billed pursuant to the contract terms. The Company also occasionally performs contracting services for customers under a cost plus billing arrangement. Revenues related to these services are recognized gross in net revenues, with the related costs recorded in cost of sales. Certain contracts provide for billings upon receipt of material. These revenues are deferred and then recognized as the material is processed and all contractual commitments, including disposal and site remediation have been completed. (o) Earnings Per Share Earnings per share are computed as recommended by Section 3500 of the CICA Handbook. Basic earnings per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares. Under the standard, the treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments. The treasury stock method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate. (p) Environmental and Site Remediation Liability The Company could be subject to liability for environmental matters resulting from the operations of its waste processing facilities. The Company accrues these costs in the period when responsibility is established and when such costs are probable and reasonably estimable based on current law and existing technology. Any substantial liability incurred by the Company arising from environmental damage could have material adverse effect on the Company’s business, its financial condition and on its results of operations. The Company is not presently aware of any situations that would have a material adverse impact on the business, its results of operations or its financial condition. The Company allows for post closure and remediation costs for facilities at operating locations by deferring revenue in the current period in amounts sufficient to cover future anticipated costs based on management’s judgement and experience in remediating sites.

Prepared by Management

Page 7 of 18

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

2. Inventories

	June 30,		June 30,		September 30,
	2005		2004		2004 (audited)
Raw materials and supplies	$	509,659	$	563,251	$	618,784
Work-in-process		25,605		44,594		35,714
Finished goods		103,553		188,132		104,744
	$	638,817	$	795,977	$	759,242

3. Property, Plant and Equipment

	June 30,						June 30,		September 30,
	2005						2004		2004 (audited)
			Accumulated		Net Book		Net Book		Net Book
	Cost		Amortization		Value		Value		Value
Land	$	4,270,608	$	—	$	4,270,608	$	2,378,050	$	2,378,050
Plant		2,857,632		996,222		1,861,410		2,311,856		1,965,790
Land improvements		1,570,182		695,820		874,362		627,345		940,971
Equipment		8,350,862		5,501,618		2,849,244		3,652,957		3,554,044
Office equipment		239,055		99,634		139,421		158,569		171,335
Leasehold improvements		—		—		—		14,851		10,691
Computer equipment		137,135		111,111		26,024		39,739		38,016
Packaging plates and artwork		342,322		313,776		28,546		42,272		34,707
Automotive equipment		876,469		547,266		329,203		406,989		416,105
	$	18,644,265	$	8,265,447	$	10,378,818	$	9,632,628	$	9,509,709

Assets Under Capital Leases

	June 30,						June 30,		September 30,
	March 31,						March 31,		September 30,
	2005						2004		2004 (audited)
	2006						2005		2005(audited)
			Accumulated		Net Book		Net Book		Net Book
	Cost		Amortization		Value		Value		Value
Automotive equipment	$	771,625	$	14,749	$	756,876	$	—	$	—
Equipment	$	6,548,250	$	2,320,425	$	4,227,825	$	2,218,435	$	2,593,080
Equipment		3,816,989		1,789,396		2,027,593		1,869,486		2,895,467
Automotive equipment		771,625		134,736		636,889		—		716,881
Office equipment		—		—		—		1,981		793
	$	7,319,875	$	2,455,161	$	4,864,714	$	2,218,435	$	3,309,961
	$	4,588,614	$	1,804,145	$	2,784,469	$	1,871,467	$	2,896,260

Other Assets

	June 30,		June 30,		September 30,
	March 31,		March 31,		September 30,
	2005		2004		2004 (audited)
	2006		2005		2005(audited)
Goodwill, net of accumulated amortization of $51,318	$	21,995	$	21,995	$	21,995
(June 30, 2004 - $51,318; September 30, 2004 - $51,318)
(March 31, 2005 - $51,318; September 30, 2005 - $51,318)
Trademarks, net of accumulated amortization of $22,942		8,018		11,114		10,340
Trademarks, net of accumulated amortization of $25,264		5,696		8,792		7,244
(June 30, 2004 - $19,846; September 30, 2004 - $20,620)
(March 31, 2005 - $22,168; September 30, 2005 - $23,716)
Technology license, net of accumulated amortization of $759		798		875		856
Technology license, net of accumulated amortization of $818		739		817		778
(June 30, 2004 - $682; September 30, 2004 - $701)
(March 31, 2005 - $740; September 30, 2005 - $779)
	$	3028,~~811~~430	$	3331,~~984~~604	$	3330,~~191~~017

Goodwill represents the excess of the purchase price paid over the underlying value of the assets at the time of acquisition.

		Goodwill represents the excess of the purchase price paid over the underlying value of the assets at the time of acquisition.

6.		Demand Loans, Secured

		At March 31, 2006, the Company’s subsidiary, The Answer Garden Products Ltd., had authorized credit facilities with the Royal Bank of Canada consisting or a revolving, demand operating loan of $500,000 bearing interest at the Royal Bank prime rate (“RBP”) plus 1.5% per annum, and a peak period revolving demand operating loan of $250,000 bearing interest at RBP plus 2% per annum. The credit facilities are collateralized by a first charge on all property, plant and equipment, assignment of inventories, a registered general assignment of book debts of related companies, and a postponement and assignment of claim provided by two of the Company’s directors (See Note 9). The loans are subject to certain financial covenants including a minimum debt service coverage ratio and a maximum ratio of debt to tangible net worth. The Company was in compliance with these covenants at March 31, 2006 and 2005. At March 31, 2006, borrowings outstanding on the credit facilities were $690,000 (March 31, 2005 — $590,000)

Prepared by Management

Page 86 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

6.		Demand Loans, Secured
		At June 30, 2005, the Company’s subsidiary, The Answer Garden Products Ltd., had authorized credit facilities with the Royal Bank of Canada. The credit facilities include a revolving, demand operating loan of $500,000 bearing interest at the Royal Bank prime rate (“RBP”) plus 1.5% per annum, and a peak period revolving demand loan of $250,000 bearing interest a RBP plus 2.0% per annum. The lines of credit are secured by a first charge on all property, plant and equipment, assignment of inventory, a registered general assignment of book debts of related companies, and a postponement and assignment of claim provided by two of the Company’s directors (see Note 9). The loans are subject subject to certain financial covenants including a minimum debt service coverage ratio and a maximum ratio of debt to tangible net worth. The Company was in compliance with these covenants at June 30, 2005.
		At June 30, 2005, borrowings outstanding on the operating lines of credit were $440,000 (June 30, 2004 — $450,000; September 30, 2004 — $430,000).
7.		Long-term Debt



Notes to Consolidated Financial Statements		(Expressed in Canadian Dollars)
March 31, 2006 and 2005

	June 30,			June 30,			September 30,
	2005			2004			2004 (audited)
Notes bearing interest at rates ranging from 0% to 7.03% per annum and are repayable in up to 60 monthly installments of principal and interest through 2010, collateralized by the related equipment.	$	2,145,260		$	2,834,937		$	2,685,985
Mortgage payable bearing interest at 5.95% per annum and repayable in 35 monthly installments of Cdn $30,543 (US $25,237) including interest.		502,713			905,917			774,108
Promissory note payable bearing interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 2.25% repayable in full on March 31,2006.		735,270			400,005			378,405
		3,383,243			4,140,859			3,838,498
Less: Principal due within one year		(1,715,207	)		(1,662,263	)		(1,553,047	)
Long-term portion	$	1,668,036		$	2,478,596		$	2,285,451

Long Term Debt

The mortgage and promissory note are secured by a first charge on the mortgaged property and a first security interest in all the assets of the Company’s subsidiary CRRI supported by guarantees of related companies. The mortgage and certain of the notes contain restrictive covenants, including, among others, a debt service coverage ratio and a debt to worth ratio. The Company was in compliance with or obtained a waiver for all of these covenants as of June 30, 2005. Principal obligations due within the next five years are as follows:


	March 31,			March 31,			September 30,
	2006			2005			2005(audited)
Notes bearing interest at rates ranging from 0% to 8.02% per annum and are repayable in up to 60 monthly installments of principal and interest through 2011, collateralized by the related equipment.	$	1,624,327		$	2,013,225		$	1,877,964
Mortgage payable bearing interest at 5.95% per annum and repayable in 35 monthly installments of Cdn $29,496 (US $25,237) including interest.		230,718			579,711			395,797
Promissory note payable bearing interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 3.5% repayable in full on March 31, 2006. The note was repaid prior to maturity on January 10, 2006.		—			—			697,650

		1,855,045			2,592,936			2,971,411
Less: Principal due within one year		(778,418	)		(935,641	)		(1,636,368	)


Long-term portion	$	1,076,627		$	1,657,295		$	1,335,043

2006	$	1,715,207
2007		674,877
2008		479,966
2009		359,367
2010		153,826
	$	3,383,243

		The mortgage and promissory notes are collateralized by a first charge on the mortgaged property and a first security interest in all the assets of the Company’s subsidiary CRRI supported by guarantees of related companies. The mortgage and certain of the notes contain restrictive covenants, including, among others, a debt service coverage ratio and a debt to worth ratio. The Company was in compliance with or obtained a waiver for all of these covenants as of March 31, 2006 and 2005.

		Principal obligations due within the next five years are as follows:


2007	$	778,418
2008		474,780
2009		399,642
2010		182,864
2011		19,341

	$	1,855,045

		$765,822 (US $655,249) of the current portion , and $ 1,052,359 (US $900,414) of the long-term portion of the long-term debt are repayable in US Funds.

8.		Obligations Under Capital Leases

		Capital lease obligations consist of leases on automotive and mobile equipment, repayable over varying terms from 36 to 60 months at interest rates ranging from 2.3% to 7.79% per annum. Future minimum lease payments are as follows:


2007	$	1,463,683
2008		1,216,630
2009		1,100,634
2010		999,849
2011		687,121
Minimum lease payments		5,467,917
Less: amounts representing interest		778,184

Present value of obligations under capital leases		4,689,733
Less: principal due within one year		1,168,599

	$	3,521,134

$1,136,787 (US $972,652) of the principal due within one year, and $3,447,363 (US $2,949,616) of the long-term portion of capital leases are repayable in US Funds.

Prepared by Management

Page 97 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

8.Notes ~~Obligations~~to ~~Under~~Consolidated ~~Capital~~Financial ~~Leases~~Statements ~~Capital~~(Expressed ~~lease~~in ~~obligations~~Canadian ~~consist~~Dollars) ofMarch ~~leases~~31, on2006 ~~mobile equipment~~ and ~~office equipment, repayable over varying terms from 36 to 60 months at interest rates ranging from 2.9% to 12.99% per annum. Future minimum lease payments are as follows:~~2005

2005	$	872,920
2006		799,234
2007		559,497
2008		439,620
2009		231,965
Minimum lease payments		2,903,236
Less: amounts representing interest		332,736
Present value of obligations under capital leases		2,570,500
Less: principal due within one year		730,550
	$	1,839,950

9.		Loans Payable

(a)		By loan agreements, and as amended, between the Company and two of its directors and officers, the Company has borrowed a total of $2,306,440 to meet the Company’s working capital requirements. The principal is repayable on demand and bears interest at the Royal Bank of Canada prime rate plus 3.5% per annum, payable monthly. In addition to the collateral listed below, the Company provided one of the directors with a guarantee and postponement of claim supported by a registered charge over the assets of its U.S. subsidiaries and agreed to repay note principal subject to certain conditions (see Commitments-Note 13). At March 31, 2006, $70,180 (March 31, 2005 — $nil) of the $198,389 (March 31, 2005 — $173,939) loan principal to be repaid on or before February 28, 2006 remains outstanding as the director has waived the Company’s requirement to pay the balance by the stipulated date.

(b)		On April 1, 1999, the Company borrowed $300,000 from a shareholder of the Company to meet the Company’s short term working capital requirements. Under the terms of the loan agreement, the principal is repayable on demand and the loan will bear interest at the prime rate of the Royal Bank of Canada plus 3.5% per annum, payable monthly. The company repaid $150,000 of the loan on October 22, 2002, and the remaining $150,000 balance in full on June 8, 2005.

		The loans are collateralized by a charge on the assets of the Company, a guarantee by its subsidiary, The Answer Garden Products Ltd., supported by a charge on its assets, including a mortgage over its Abbotsford, BC property. The loans are subrogated to the Royal Bank of Canada debt (Note 6). While the terms of repayment for the remaining loans are on a demand basis, the lenders will not call for repayment of the debt on or before March 31, 2007.

		The loans are summarized as follows:

9.	Loans Payable
	March 31,			March 31,		September 30,
	By loan agreements, and as amended, between the Company and one of its directors and officers, the Company has borrowed a total of $2,247,825 to meet the Company’s working capital requirements. The principal is repayable on demand and bears interest at the Royal Bank of Canada prime rate plus 3.5% per annum, payable monthly. In addition to the security listed below, the Company provided the director with a guarantee and postponement of claim supported by a registered charge over the assets of its U.S. subsidiaries and agreed to repay note principal subject to certain conditions (see Commitments — Note 13). On June 25, 2005, the Company paid $63,880 in principal and accrued interest to one of its directors and officers to fully retire his outstanding loans.
	2006			2005		2005(audited)
	On April 1, 1999, the Company borrowed $300,000 from a shareholder of the Company to meet the Company’s short term working capital requirements. Under the terms of the loan agreement, the principal is repayable on demand and the loan will bear interest at the prime rate of the Royal Bank of Canada plus 3.5 per annum, payable monthly. The company repaid $150,000 of the loan on October 22, 2002, and the remaining $150,000 balance in full on June 8, 2005.
Demand loan (a)	$	2,306,440		$	2,414,388	$	2,247,825
	The loans are secured by a charge on the assets of the Company, a guarantee by its subsidiary, The Answer Garden Products Ltd., supported by a charge on its assets, including a mortgage over its Abbotsford, B.C. property. The loans are subrogated to the Royal Bank of Canada debt (note 6).
Demand loan (b)		—			150,000		—
	While the terms of repayment for the loans are on a demand basis, the lenders will not call for repayment of the debts on or before June 30, 2005.
		2,306,440			2,564,388		2,247,825
Less: current portion due within one year		(70,180	)		—		(198,389	)
Long-term portion	$	2,236,260		$	2,564,388	$	2,049,436

10.

Share Capital

	(a)		Authorized: 100,000,000 common shares without par value.

	(b)		Issued and fully paid:


	March 31, 2006					March 31, 2005					September 30, 2005(audited)
	Number		Stated			Number		Stated			Number		Stated
	of Shares		Capital			of Shares		Capital			of Shares		Capital
Balance, beginning of period		10,364,699	$	16,142,015			10,247,199	$	16,110,290			10,247,199	$	16,110,290
Issued during the period:
Exercise of options for cash		—		—			117,500		31,725			117,500		31,725

		10,364,699		16,142,015			10,364,699		16,142,015			10,364,699		16,142,015
Share issue expenses		—		(653,777	)		—		(653,777	)		—		(653,777	)


Balance, end of period		10,364,699	$	15,488,238			10,364,699	$	15,488,238			10,364,699	$	15,488,238

Prepared by Management

Page 108 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

~~10.~~Notes ~~Share~~to ~~Capital~~Consolidated Financial Statements (Expressed in Canadian Dollars) March 31, 2006 and 2005

	(a)		Authorized: 50,000,000 common shares, no par value
	(b)		Issued and fully paid:

10.

Share Capital (cont’d)

	June 30, 2005					June 30, 2004					September 30, 2004 (audited)
	Number		Stated			Number		Stated			Number		Stated
	of Shares		Capital			of Shares		Capital			of Shares		Capital
Balance, beginning of period		10,247,199	$	16,110,290			9,994,299	$	15,976,859			9,994,299	$	15,976,859
Issued during the period:
Exercise of options for cash		117,500		31,725			152,900		58,431			152,900		58,431
For financing services		—		—			100,000		75,000			100,000		75,000
		10,364,699		16,142,015			10,247,199		16,110,290			10,247,199		16,110,290
Share issue expenses		—		(653,777	)		—		(653,777	)		—		(653,777	)
Balance, end of period		10,364,699	$	15,488,238			10,247,199	$	15,456,513			10,247,199	$	15,456,513

(c)

The Company has directors’ and employees’ stock options outstanding as follows:

	Number		Exercise Price
	of Shares		per Share		Expiry Date
Directors		402,500	$	0.60	March 14, 2007
Employees		174,000	$	0.60	March 14, 2007
Employees *		50,000	$	0.60	November 29, 2006
Employees *		60,000	$	0.44	July 7, 2009
Employees		124,000	$	0.60	March 14, 2007
Employees **		60,000	$	0.44	July 7, 2009
		636,500

* This option vested as to 20,000 shares on December 31, 2004, and will vest as to 20,000 shares each on December 31, 2005 and 2006 provided, in each case, that the employee is employed by the Company on the vesting date.


*		This option was extended one year following the employee’s cessation of employment with the Company on November 29, 2005.

**		This option vested as to 20,000 shares each on December 31, 2004 and 2005, and will vest as to 20,000 shares on December 31, 2006

		provided that the employee is employed by the Company on the vesting date.

A summary of the stock option activity for the current period is as follows:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at October 1, 2004		771,500		$	0.53
Outstanding at October 1, 2005		636,000		$	0.58
Granted		—			—
Exercised		(117,500	)		0.27
Cancelled		—
Cancelled		(17,500	)		0.42
Exercised		—
Outstanding at June 30, 2005		636,500		$	0.58
Outstanding at March 31, 2006		636,000		$	0.58

Options outstanding and exercisable at ~~June 30~~March 31, ~~2005~~2006 are as follows:

Weighted

Average

Exercise

Remaining

Price on

Range of

Remaining

Price on

Number

Contractual

Outstanding

Exercisable

Exercise

Number

Contractual

Outstanding

Exercisable

Range of Exercise Prices

Outstanding

Exercisable

Life (years)

Options

Option

Prices

Outstanding

Exercisable

Life (years)

Options

Option

$0.44 - $0.60

636,500

596,500

1.90

0.58

0.59

$0.44-$0.60

636,500

616,500

1.20

0.58

0.59

The fair value of options granted was estimated at the date of granting using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 4.0%, dividend yield of 0.0%, volatility factor of 60.03%, and a life of 5 years. On March 4, 2003, the Company adopted a share option plan subject to the rules and policies of the TSX Venture Exchange. A maximum of 1,995,260 common shares of the Company are issuable under the plan, including ~~911~~the 769,~~900~~500 options ~~outstanding~~currently ~~on the date of adoption~~outstanding.

The Company did not grant any stock options during the six months ended March 31, 2006. During the 2004 fiscal year, the Company granted 60,000 stock options, having a vesting period over the ensuing three years. The Company recognized $1,846 (March 31, 2005: $2,186) as compensation expense during the six months ended March 31, 2006.

Prepared by Management

Page 119 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

~~11.~~Notes ~~Related~~to ~~Party~~Consolidated ~~Transactions~~Financial ~~Included~~Statements ~~in accounts payable and accrued liabilities at June 30, 2005 were amounts aggregating $400,929~~ (~~June~~Expressed ~~30,~~in ~~2004~~Canadian ~~— $372,732; September 30, 2004 — $627,065~~Dollars) ~~payable~~March ~~to directors of the Company for accrued management remuneration~~31, ~~expense~~2006 ~~reimbursements,~~ and ~~accrued loan interest. In addition to loans, as detailed in Note 9, the Company had the following transactions with related parties:~~2005

	June 30,		June 30,		September 30,
	2005		2004		2004 (audited)
Management remuneration	$	252,961	$	209,343	$	597,649
Interest and loan fees		144,296		209,902		255,105
Directors’ fees		4,000		—		—
	$	401,257	$	419,245	$	852,754

11.		Related Party Transactions

		Included in accounts payable and accrued liabilities at March 31, 2006 were amounts aggregating $488,943 (March 31, 2005 — $351,422; September 30, 2005 — $708,153) payable to directors of the Company for accrued management remuneration, expense reimbursements, directors’ fees and accrued loan interest. In addition to loans, as detailed in Note 9, the Company entered into the following transactions with the directors of the Company:

	Management is of the opinion that the terms and conditions of the above noted transactions are consistent with standard business practice.
	March 31,		March 31,		September 30,
12.	Geographically Segmented Information
	2006		2005		2005(audited)
	For the nine months ended June 30, 2005
Management remuneration	$	176,567	$	165,950	$	614,409
Interest and loan fees		106,590		94,217	$	193,129
Directors’ fees		4,000		2,000	$	6,000
	$	287,157	$	262,167	$	813,538

	Canada			United States		Elimination			Consolidated
Revenue
Bulk	$	585,935		$	832,186	$	—		$	1,418,121
Packaged products		1,837,572			—		—			1,837,572
Tipping and processing fees		91,700			18,998,548		—			19,090,248
Inter-segment		454,212			62,654		(516,866	)		—
		2,969,419			19,893,388		(516,866	)		22,345,941
Expenses
Inter-segment		56,212			460,654		(516,866	)		—
Other		3,311,863			17,245,196		—			20,557,059
		3,368,075			17,705,850		(516,866	)		20,557,059
Income (loss) before income taxes		(398,656	)		2,187,538		—			1,788,882
Income taxes		—			976,020		—			976,020
Income (loss) from continuing operations		(398,656	)		1,211,518		—			812,862
Income from discontinued operations, net of tax		—			28,711		—			28,711
Net income (loss) for the period	$	(398,656	)	$	1,240,229	$	—		$	841,573

		Management is of the opinion that the terms and conditions of the above noted transactions are consistent with standard business practice and are amounts which have been agreed upon by the transacting parties.

12.		Geographically Segmented Information

	Canada			United States		Consolidated
For the six months ended March 31, 2006	Canada			United States		Elimination			Consolidated
Assets
Revenue
Property, plant & equipment	$	1,592,736		$	11,570,551	$	13,163,287
Bulk	$	366,533		$	386,723	$	—		$	753,256
Other		1,376,766			5,850,412		7,227,178
Packaged products		763,361			—					763,361
	$	2,969,502		$	17,420,963	$	20,390,465
Tipping and processing fees		45,408			14,884,246					14,929,654
Property, plant & equipment and assets acquired under capital leases — current expenditures	$	61,869		$	3,246,337	$	3,308,206
Inter-segment		274,407			—		(274,407	)		—
		1,449,709			15,270,969		(274,407	)		16,446,271
Expenses
Inter-segment		—			274,407		(274,407	)		—
Amortization		95,772			1,247,216					1,342,988
Interest		129,583			189,439					319,022
Other		1,654,369			11,108,512					12,762,881
		1,879,724			12,819,574		(274,407	)		14,424,891
Income (loss) before income taxes		(430,015	)		2,451,395		—			2,021,380
Income taxes		—			957,034		—			957,034
Income (loss) from continuing operations		(430,015	)		1,494,361		—			1,064,346
Income from discontinued operations, net of tax		—			—		—			—
Net income (loss) for the period	$	(430,015	)	$	1,494,361	$	—		$	1,064,346


For the six months ended March 31, 2006	Canada		United States		Consolidated
Assets
Property, plant & equipment and assets under capital leases	$	1,589,120	$	12,551,431	$	14,140,551
Other		1,808,144		7,725,834		9,533,978

	$	3,397,264	$	20,277,265	$	23,674,529


Property, Plant & Equipment and assets acquired under capital lease — Current Expenditures	$	82,834	$	2,728,105	$	2,810,939

Prepared by Management

Page 1210 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

~~12.~~Notes ~~Geographically~~to ~~Segmented~~Consolidated ~~Information~~Financial Statements (~~continued)~~Expressed ~~For~~in ~~the~~Canadian ~~nine~~Dollars) ~~months~~March ~~ended~~31, ~~June~~2006 ~~30,~~and ~~2004~~2005

	Canada			United States			Elimination			Consolidated
Revenue
Bulk	$	467,491		$	884,445		$	—		$	1,351,936
Packaged products		1,915,791			—			—			1,915,791
Tipping and processing fees		198,175			14,276,413			—			14,474,588
Inter-segment		549,094			379,163			(928,257	)		—
		3,130,551			15,540,021			(928,257	)		17,742,315
Expenses
Inter-segment		147,233			781,024			(928,257	)		—
Other		3,179,078			13,310,447			—			16,489,525
		3,326,311			14,091,471			(928,257	)		16,489,525
Earnings (loss) before income taxes		(195,760	)		1,448,550			—			1,252,790
Income taxes		—			605,796			—			605,796
Earnings (loss) from continuing operations		(195,760	)		842,754			—			646,994
Loss from discontinued operations, net of tax		—			(67,681	)		—			(67,681	)
Net earnings (loss) for the period	$	(195,760	)	$	775,073		$	—		$	579,313

12.

Geographically Segmented Information (cont’d)

	Canada			United States		Consolidated
For the six months ended March 31, 2005	Canada			United States		Elimination			Consolidated
Assets
Revenue
Property, plant & equipment	$	1,726,849		$	9,777,246	$	11,504,095
Bulk	$	204,194		$	484,812	$	—		$	689,006
Other		1,440,846			5,894,881		7,335,727
Packaged products		641,357			—					641,357
	$	3,167,695		$	15,672,127	$	18,839,822
Tipping and processing fees		42,722			12,453,904					12,496,626
Property, plant & equipment and assets acquired under capital leases — current expenditures	$	57,891		$	2,508,630	$	2,566,521
Inter-segment		294,960			55,943		(350,903	)		—
		1,183,233			12,994,659		(350,903	)		13,826,989
Expenses
Inter-segment		54,438			296,465		(350,903	)		—
Amortization		97,793			1,160,796					1,258,589
Interest		104,795			161,754					266,549
Other		1,405,643			9,740,468					11,146,111
		1,662,669			11,359,483		(350,903	)		12,671,249
Income (loss) before income taxes		(479,436	)		1,635,176		—			1,155,740
Income taxes		—			648,676		—			648,676
Income (loss) from continuing operations		(479,436	)		986,500		—			507,064
Loss from discontinued operations, net of tax		—			29,225		—			29,225
Net income (loss) for the period	$	(479,436	)	$	1,015,725	$	—		$	536,289

For the year ended September 30, 2004 (audited)


For the six months ended March 31, 2005	Canada		United States		Consolidated
Assets
Property, plant & equipment and assets under capital leases	$	1,578,197	$	9,301,779	$	10,879,976
Other		1,576,786		6,863,141		8,439,927

	$	3,154,983	$	16,164,920	$	19,319,903


Property, Plant & Equipment and assets acquired
under capital lease — Current Expenditures	$	—	$	29,127	$	29,127

	Canada			United States			Elimination			Consolidated
Revenue
Bulk	$	597,299		$	1,060,045		$	—		$	1,657,344
Packaged products		2,004,593			—			—			2,004,593
Tipping and processing fees		301,164			20,573,625			—			20,874,789
Inter-segment		971,419			548,727			(1,520,146	)		—
		3,874,475			22,182,397			(1,520,146	)		24,536,726
Expenses
Inter-segment		201,809			1,318,337			(1,520,146	)		—
Other		4,226,996			18,279,604			—			22,506,600
		4,428,805			19,597,941			(1,520,146	)		22,506,600
Earnings (loss) before income taxes		(554,330	)		2,584,456			—			2,030,126
Income taxes		—			1,020,096			—			1,020,096
Earnings (loss) from continuing operations		(554,330	)		1,564,360			—			1,010,030
Loss from discontinued operations, net of tax		—			(181,338	)		—			(181,338	)
Net earnings (loss) for the year	$	(554,330	)	$	1,383,022		$	—		$	828,692

	Canada		United States		Consolidated
Assets
Property, plant & equipment	$	1,674,403	$	10,731,566	$	12,405,969
Other		852,535		7,384,124		8,236,659
	$	2,526,938	$	18,115,690	$	20,642,628
Property, plant & equipment and assets acquired under capital leases — current expenditures	$	59,218	$	4,252,211	$	4,311,429

Prepared by Management

Page 1311 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.


CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Notes to Consolidated Financial Statements		(Expressed in Canadian Dollars)
March 31, 2006 and 2005

13.		Commitments
		CRRI has entered into an employment agreement with a certain member of management through December 31, 2006. This agreement provides for a total monthly salary of approximately Cdn $12,255 (US$10,000) and participation in a bonus pool based on pre-tax net profit, as defined. The salary base increases at the discretion of the Company.
		The Company has entered into operating leases for certain machinery, equipment and office space. Rental expense under these leases was approximately Cdn$1,263,187 (including US$947,399) for the nine months ended June 30, 2005. Minimum future rental payments under these leases are as follows:

12.

Geographically Segmented Information (continued)

2006	$	1,544,959
For the year ended September 30, 2005 (audited)	Canada			United States		Elimination			Consolidated
2007		1,236,034
Revenue
2008		770,099
Bulk	$	788,563		$	1,058,177	$	—		$	1,846,740
2009		—
Packaged products		1,887,257			—		—			1,887,257
2010		—
Tipping and processing fees		132,178			25,184,852		—			25,317,030
	$	3,551,092
Inter-segment		718,364			74,095		(792,459	)		—
		3,526,362			26,317,124		(792,459	)		29,051,027
Expenses
Inter-segment		55,654			736,805		(792,459	)		—
Amortization		197,360			1,963,869		—			2,161,229
Interest		235,643			320,883		—			556,526
Other		3,755,879			20,630,402		—			24,386,281
		4,244,536			23,651,959		(792,459	)		27,104,036
Income (loss) before income taxes		(718,174	)		2,665,165		—			1,946,991
Income taxes		—			1,042,619		—			1,042,619
Income (loss) from continuing operations		(718,174	)		1,622,546		—			904,372
Income from discontinued operations, net of tax		—			23,999		—			23,999
Net income (loss) for the year	$	(718,174	)	$	1,646,545	$	—		$	928,371

	Pursuant to an agreement with one of its directors (see Note 9), the Company has committed to make principal repayments on his loan on or before February 28th of the year following equivalent to 10% of its annual consolidated pre-tax profit, subject to certain restrictions.
For the year ended September 30, 2005 (audited)	Canada		United States		Consolidated
14.	Contingent Liability
Assets
	The Company has an irrevocable $10,000 letter of credit issued as a performance guarantee to one of its customers under the terms of a green waste processing contract.
Property, plant & equipment and assets under capital leases	$	1,600,473	$	11,788,149	$	13,388,622
15.	Income Taxes
Other		919,852		5,998,088		6,917,940
	The provision for income taxes from continuing operations is comprised of the following:
	$	2,520,325	$	17,786,237	$	20,306,562
Property, plant & equipment and assets acquired under capital lease — current expenditures	$	120,256	$	3,708,708	$	3,828,964

	June 30,			June 30,			September 30,
13.	Commitments
	2005			2004			2004 (audited)
	CRRI has entered into an employment agreement with a certain member of management for an indefinite period. This agreement provides for a total monthly salary of approximately Cdn $11,688 (US$ 10,000) and participation in a bonus pool based on pre-tax net profit, as defined. The salary base increases at the discretion of the Company.
Income tax from U.S. operations	$	995,364		$	551,179		$	1,020,096
	The Company has entered into operating leases for certain machinery and equipment. Rental expense under these leases was approximately Cdn $1,032,887 (including US $824,069) for the six months ended March 31, 2006. Minimum future rental payments under these leases are as follows:
Income tax recovery from Canadian operations		(139,531	)		(68,516	)		(508,000	)
		855,833			482,663			512,096
Valuation allowance on Canadian operations		139,531			68,516			508,000
Income tax expense	$	995,364		$	551,179		$	1,020,096

At June 30, 2005, management is of the opinion that the “more likely than not” criteria have been met with respect to the U.S. operations and in accordance with generally accepted accounting principles, the Company has recognized the future income tax (“FIT”) benefits arising from loss carry-forwards of prior years and other timing differences which has resulted in the FIT assets in the current year. With respect to the Canadian operations, management has claimed a valuation allowance equal to future income tax benefits arising from their loss carry forwards, reflecting the position that these tax assets, more likely than not, will not be realized. At June 30,2005, the Company had, for Canadian tax purposes, operating losses aggregating approximately $2,888,000. These losses are available to reduce taxable incomes earned by the Canadian operations of future years and expire as follows:


2007	$	2,003,503
2008		1,599,630
2009		470,325
2010		2,717
2011		—

	$	4,076,175

2005	$	1,550,000
2006		740,000
2007		—
2008		20,000
2009		—
2010		70,000
2014		508,000
	$	2,888,000

Pursuant to an agreement with one of its directors (see Note 9), the Company has committed to make principal repayments on his loan on or before February 28th of the year following, equivalent to 10% of its annual consolidated pre-tax profit, subject to certain restrictions.

The net operating losses available to offset future revenues of the U.S. operations are approximately US$66,030 and expire at various times through 2021.

Prepared by Management

Page 1412 of 1813

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.


CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Notes to Consolidated Financial Statements		(Expressed in Canadian Dollars)
March 31, 2006 and 2005

16.		Discontinued Operations
		During 2004, the Company elected to cease operations of Greencycle and focus efforts on its Florida operations. Operating activity has now ceased, and as such, the results of its operations are presented as discontinued operations on a comparative basis.
		The following summarizes the significant items removed from continuing operations on a comparative basis for the nine months ended June 30, 2005 and 2004.

14.		Contingent Liabilities

		The Company has an irrevocable $10,000 letter of credit issued as a performance guarantee to one of its customers under the terms of a green waste processing contract.

15.		Financial Instruments

		Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

		The carrying value of cash, accounts receivable, prepaid expenses and deposits, bank indebtedness, demand loans, and accounts payable and accrued liabilities approximate their fair value because of the short-term nature of those instruments.

16.		Subsequent Event

		The Company’s subsidiary, The Answer Garden Products Ltd. has committed to purchase equipment, net of trade, for $185,000 which the Company expects to finance through commercial leasing sources.

	2005			2004
Revenue	$	276,087		$	1,979,592
Equipment rentals and administrative costs charged by Florida		(35,937	)		(334,669	)
Greencycle’s share allocated costs from parent		(35,306	)		(112,320	)
Other Expenses		176,133	)		(1,600,284	)
Income (loss) net of income taxes	$	28,711		$	(67,681	)

The following summarizes the assets and liabilities of Greencycle as of June 30,2005, included in the accompanying consolidated balance sheet:

Cash	$	23,516
Accounts Receivable		5,416
Accounts Payable (including exit costs)		10,447
Payable to Affiliates		3,546

		Upon the completion of Greencycle’s commitments, the remaining net assets will be absorbed into the Florida operations.
17.		Financial Instruments
		Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subject in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
		The carrying value of cash, accounts receivable, prepaid expenses and deposits, bank indebtedness, demand loans, and accounts payable and accrued liabilities approximate their fair value because of the short-term nature of those instruments.
18.		Subsequent Event
		The following event took place subsequent to June 30, 2005:

(a) The Company’s subsidiary, The Answer Garden Products Ltd., acquired new equipment valued at $42,000 financed by capital lease. The lease is repayable in 36 monthly installments of $990 including interest at 2.3%, secured by the equipment.

19. Comparative Figures Certain 2004 comparative amounts have been reclassified to conform with the financial statement presentation adopted for the current year.

Prepared by Management

Page 1513 of 1813

~~CONSOLIDATED~~Consolidated ~~ENVIROWASTE~~Envirowaste ~~INDUSTRIES~~Industries ~~INC~~Inc.

Schedules of Consolidated Cost of Sales
For the nine months ended June 30, 2005 and 2004
	3 months			3 months			9 months			9 months
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Direct Materials
Inventory, beginning of period	$	700,764		$	725,561		$	618,784		$	739,180
Purchases of direct materials and subtrades		547,118			576,262			1,448,345			1,318,885
Testing		5,157			4,032			11,663			19,405
Cost of direct materials available for use		1,253,039			1,305,855			2,078,792			2,077,470
Less: Inventory, end of period		(509,659	)		(552,800	)		(509,659	)		(552,614	)
Direct materials used		743,380			753,055			1,569,133			1,524,856
Direct labour		1,077,007			978,002			3,067,626			2,703,323
Manufacturing overhead		2,718,520			2,082,567			7,699,610			5,764,363
Manufacturing costs incurred for the period		4,538,907			3,813,624			12,336,369			9,992,542
Work-in-process, beginning of period		34,839			46,493			35,714			26,458
		4,573,746			3,860,117			12,372,083			10,019,000
Less: Work-in-process, end of period		(25,605	)		(44,594	)		(25,605	)		(44,594	)
Cost of goods manufactured		4,548,141			3,815,523			12,346,478			9,974,406
Finished goods, beginning of period		259,571			254,966			104,744			171,116
		4,807,712			4,070,489			12,451,222			10,145,522
Less: Finished goods, end of period		(103,553	)		(182,906	)		(103,553	)		(188,132	)
Cost of sales for the period	$	4,704,159		$	3,887,583		$	12,347,669		$	9,957,390

AMENDED MANAGEMENT DISCUSSION AND ANALYSIS
Dated as of May 31, 2006

~~Prepared~~Second byQuarter ~~Management~~2006, For the Six Months Ended March 31, 2006

Page 16 of 18

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Schedules of Consolidated Direct Selling Expenses
For the nine months ended June 30, 2005 and 2004
	3 months		3 months		9 months		9 months
	June 30, 2005		June 30, 2004		June 30, 2005		June 30, 2004
Advertising	$	18,057	$	16,017	$	42,358	$	35,138
Amortization — packaging plates and artwork		3,357		4,950		10,849		14,327
Automobile		4,150		1,650		7,450		4,950
Bad debts		15,483		15,718		30,843		36,868
Commissions		—		2,100		4,200		6,300
Discounts and allowances		39,292		56,005		67,235		78,844
Entertainment and promotion		—		150		157		2,306
Freight out		1,573,889		1,111,077		3,869,966		2,726,668
Marketing consulting		2,429		6,559		15,548		28,628
Miscellaneous		26,435		13,245		81,719		31,347
Travel		133,597		107,021		398,341		282,997
Wages and benefits		4,472		—		4,472		—
Direct selling expenses	$	1,821,161	$	1,334,492	$	4,533,138	$	3,248,373

Prepared by Management

Page 17 of 18

CONSOLIDATED ENVIROWASTE INDUSTRIES INC.

Schedules of Consolidated General and Administrative Expenses
For the nine months ended June 30, 2005 and 2004
	3 months			3 months			9 months		9 months
	June 30, 2005			June 30, 2004			June 30, 2005		June 30, 2004
Advertising	$	5,103		$	7,561		$	14,078	$	22,488
Amortization		88,923			127,850			292,523		369,275
Automobile		7,150			7,814			25,762		23,573
Bank charges and interest		5,102			3,621			9,754		9,102
Business taxes, licenses and fees		15,125			18,355			58,150		55,655
Consulting fees		27,043			32,695			90,050		103,186
Directors’ fees		2,000			—			4,000		—
Education and training		19,962			6,628			38,009		17,207
Entertainment and promotion		16,255			17,106			39,329		44,153
Foreign exchange loss (gain)		(6,771	)		(1,434	)		21,963		3,450
Insurance		7,380			6,397			21,550		19,687
Interest on long-term debt		147,316			125,138			408,872		426,529
Management fees and salaries		87,011			60,628			241,867		178,845
Miscellaneous		10,727			9,725			33,745		33,502
Office and stationery		27,523			34,041			84,073		115,816
Professional fees		77,243			56,412			198,562		160,244
Rent and office services		(23,442	)		27,123			4,341		79,627
Shareholder relations		5,980			6,632			26,737		24,605
Stock-based compensation		1,169			—			3,355		—
Telephone		39,261			37,633			115,256		105,849
Transfer agent and filing fees		15,198			9,756			29,868		24,741
Travel		25,047			19,634			59,310		46,875
Wages and benefits		745,173			644,117			2,110,196		1,708,649
General and administrative expenses	$	1,345,478		$	1,257,432		$	3,931,350	$	3,573,058

Prepared by Management

Page 18 of 18

August 25, 2005

MANAGEMENT DISCUSSION AND ANALYSIS

Third Quarter 2005, For the Nine Months Ended June 30, 2005

Background

Consolidated Envirowaste Industries Inc. (the “Company”) is a leading processor of wood and ~~other~~ other organic wastes in Western Canada and Florida. Directly and indirectly through its subsidiaries, the Company markets and supplies biomass boiler fuel for electric generation facilities, charcoal manufacturers, and pulp and paper mills in the US as well as bulk landscaping products in each of these regions, and packaged soil products to major Western Canadian retailers. The Company’s Canadian Operations are comprised of itself and a wholly-owned subsidiary, The Answer ~~Garden~~ Garden Products Ltd. (“Answer”) both of Abbotsford, British Columbia and a division-Red River Soils (“Red River”) based in Winnipeg, Manitoba. The Company’s US Operations are controlled by a wholly-owned subsidiary, Envirowaste International Inc. (“EII”), which in turn controls two wholly-owned subsidiaries-Consolidated Resource Recovery Inc. (“CRR (Florida)”) based in Sarasota, Florida, and Consolidated Resource Recovery Inc. (“CRR (Georgia)”), based in Atlanta, Georgia (now inactive).

This Management Discussion and Analysis (“MD&A”) ~~should~~provides bea ~~read~~review inof ~~conjunction with~~ Consolidated Envirowaste Industries Inc.’s ~~unaudited consolidated~~ financial ~~statements~~performance for the ~~nine~~six months ended ~~June~~March 3031, ~~2005~~2006 ~~and~~relative ~~related~~to ~~notes. These~~the ~~financial~~second ~~statements~~quarter ~~are~~of ~~reported~~2005 inand ~~Canadian~~the ~~currency~~year ~~and~~ended ~~have~~September 30, ~~been~~2005, ~~prepared~~the inCompany’s ~~accordance~~financial ~~with~~condition and ~~Canadian~~future ~~generally~~prospects. ~~accepted~~The ~~accounting~~MD&A ~~principles.~~should ~~Information~~be onread in conjunction with the Company’s ~~outstanding~~annual ~~shares~~audited ~~and~~Consolidated ~~segment~~Financial ~~information~~Statements for the ~~Company’s~~years ~~two~~ended ~~business~~September 30, ~~units-Canadian~~2005 and US2004 ~~Operations~~filed ~~and information~~on ~~thereon~~SEDAR ~~are~~at www.sedar.com. ~~presented~~These infinancial ~~Notes~~statements 10together ~~and~~with 12this ~~respectively~~MD&A ofare ~~the~~prepared ~~financial~~in ~~statements.~~accordance with ~~Readers~~Canadian ~~are~~generally ~~also~~accepted ~~directed~~accounting toprinciples ~~the~~(“GAAP”) ~~annual~~for ~~audited~~interim ~~financial~~unaudited financial statements, ~~related notes~~ and, ~~management discussion~~unless ~~and~~otherwise ~~analysis for the year ended September 30~~noted, ~~2004,~~ all offinancial ~~which~~references are ~~available~~in ~~to readers~~Canadian ~~on SEDAR at www~~dollars.~~sedar.com.~~

Information on the Company’s outstanding shares and changes thereto during the six months ended March 31, 2006 and 2005 are detailed in Note 10 of the Consolidated Financial Statements. There have been no changes in share structure as set out therein. Segment information for the Company’s two business units-Canadian and US Operations-are contained in Note 12 of the financial statements. We have changed the presentation of direct selling expenses in the financial statements, the majority of which are discounts and allowances and transportation costs. Discounts and allowances are now shown as reductions of gross sales, transportation costs are included in cost of sales, and the remaining items are included in selling and administrative expenses. All comparative amounts have been restated accordingly. In accordance with Multilateral Instrument

52-109, the Chief Executive Officer and acting Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as at March 31, 2006 and have concluded that such disclosure controls and procedures were effective to provide reasonable assurance that material information relating to the Company and its subsidiaries is made known to them.

Forward Looking Statements

This report contains statements that are forward looking in nature. Such statements involve known and unknown risks and uncertainties that may cause the actual results of the Company to be materially different from those expressed or implied by those forward looking statements. Such risks include, among others: general economic and business conditions, weather factors, competition and product selling prices, raw material and operating costs, changes in foreign currency exchange rates and other factors referenced herein (see “Critical Accounting Estimates” contained in our annual MD&A for the year ended September 30, 2005).

Quarterly Results

~~The~~Consolidated ~~Company~~Envirowaste ~~recorded~~Industries ~~net~~Inc. ~~income~~reported ~~from~~second ~~continuing~~quarter ~~operations~~net ~~for~~income ~~the three months ended June 30, 2005~~ of $~~305~~745,~~798~~394 or $0.03 07 per share ($0.0307 per share diluted) on revenues of $8,691,667 for the quarter ended March 31, 2006 compared to a net ~~earnings~~loss from continuing operations of $~~646~~13,~~636~~538 or $0.0600 per share ($0.0600 per share fully-diluted) ~~for the three months ended June 30, 2004. The Company’s Georgia subsidiary ceased daily operations~~ on ~~March 31~~$6, ~~2005~~653, ~~and,~~408 isin ~~presented~~revenues asfor ~~discontinued~~the ~~operations~~2nd onquarter aof ~~comparative~~fiscal ~~basis~~2005. ~~After~~Revenue growth aof ~~net~~30% ~~loss~~and ~~from discontinued~~improved ~~operations~~operating ~~for~~margins over the comparable quarter of ~~$514~~2005 ~~(2004~~produced —the Company’s ~~$148,911),~~strongest ~~overall~~second ~~net~~quarter ~~income~~results ~~for~~in ~~the~~several ~~three~~years. ~~months ended June 30, 2005 was~~

~~Page~~The Company recorded net income of $1,064,346 or $0.10 per share ($0.10 per share diluted) for the six months ended March 31, 2006. This compares to income from continuing operations of 5$507,064 or $0.05 per share ($0.05 per share fully diluted) and overall net income of $536,289 or $0.05 per share ($0.05 per share fully diluted) for the same six month period ended March 31, 2005.

~~$305~~The CRR (Florida) unit dominated the overall performance of the Company for the six months ended March 31,~~284~~ or2006 $0with revenue from storm activity continuing well into the second quarter and very strong private sector demand.03 ~~per~~The ~~share~~strong (second quarter increased revenues by 19% to $~~0.03~~16,446,271 for ~~per~~the ~~share~~six ~~diluted)~~months ended March 31, 2006 compared to ~~net~~revenue ~~income~~ of $~~497~~13,~~725~~826,989 orfor $0the six months ended March 31, 2005.05 The Florida unit is capitalizing on its significant efforts to gain private sector ~~per~~market share ~~($0~~and is benefiting from the success of its existing private sector customer base.05 ~~per~~While fuel ~~share~~costs ~~diluted)~~continued ~~earned~~to inincrease disproportionately to other operating costs, the ~~same~~Company was able to adjust its pricing to improve overall margins by 13% for the comparable quarter ofand ~~2004~~3.7% for the comparative six month period over last fiscal year.

~~Revenue~~The ~~for~~CRR ~~the quarter increased 15% or $1.1 million to $8,489,774 compared to the third quarter of 2004 driven by revenue growth in its~~ (Florida) unit. ~~The~~which ~~Company~~is ~~experienced pressure on gross margins during~~ the ~~quarter~~core ~~compared~~of to the ~~third~~Company’s ~~quarter~~US ofoperations ~~2004~~experienced ~~caused~~a by39% ~~higher fuel and raw~~increase ~~material~~in ~~costs.~~sales ~~Increased~~in ~~activity~~terms ~~and fuel cost increases driving freight costs for product deliveries and disposal~~ of ~~site~~US ~~material~~dollars ~~accounted~~ for ~~a significant increase in direct selling expenses during~~ the ~~nine~~second ~~months~~quarter ~~ended~~of ~~June 30,~~2006 ~~2005 when~~ compared to the ~~third~~second quarter of ~~2004.~~ ~~These~~2005, ~~factors~~which ~~combined~~when totranslated ~~reduce~~into ~~net~~Canadian ~~income for the quarter from continuing operations to $305~~dollars,~~798 compared~~ toreflected ~~$646,636~~only ~~for~~an ~~the~~18% ~~three~~increase ~~months ended June 30, 2005.~~in

~~Items~~ ~~of significance during the quarter included the acquisition by its Florida subsidiary of~~2 approximately 200 acres of land for $1,892,558 (US $1,522,988) financed by a new $735,000 (US $600,000) line of credit and internal funds, and, the acquisition of new transportation equipment worth $715,000 (US $569,500) by way of capital lease. The property purchased is in close proximity to Florida’s existing operations and will be used for future strategic business purposes. The new transportation equipment will assist Florida in controlling spiralling costs of removing material from sites as contractors continue to increase prices to deal with the run-up in crude oil prices. The Company also repaid a $150,000 loan balance to a shareholder, and paid $63,880 to fully retire all outstanding loans and accrued interest due one of its officers and directors during the quarter.

~~Driven~~revenue, losing byapproximately ~~strong private sector demand~~$800,000 ~~storm~~of ~~revenue~~the ~~generated~~increase in ~~earlier~~the ~~quarters,~~currency ~~and~~translation ~~continued revenue~~of ~~growth in~~ the ~~Company’s~~US ~~Florida~~dollar ~~unit,~~vs. ~~sales~~the Canadian dollar for the first ~~nine~~six months of ~~fiscal~~2006 ~~2005 increased 26% or $4,603,626 to $22,346,000~~ compared to ~~$17,742,315~~2005. ~~for~~The ~~the~~currency ~~nine months ended June~~translation ~~30,~~difference ~~2004.~~also ~~Lower~~had ~~sales~~a ofnegative ~~packaged~~impact ~~products~~($83,000 inor ~~the~~approximately ~~first nine months of 2005 reflect weaker demand in the Canadian Prairies caused by inclement weather~~$0.01 ~~Increases~~per inshare) ~~revenue~~on ~~for~~ the ~~first three~~US ~~quarters~~operations ofcontribution ~~2005~~to ~~were~~overall ~~offset~~Company bynet ~~higher~~earnings ~~operating and selling costs, however, operating income from continuing operations~~ for the ~~nine~~six months. ~~ended~~Storm ~~June 30,~~related processing ~~2005~~continued ~~rose~~well ~~$570,290~~into orthe ~~59%~~second toquarter ~~$1,533,784 compared~~this tofiscal ~~$963,494~~year ~~for~~while ~~the~~municipal ~~same~~and ~~period~~local private inprocessing ~~2004.~~revenues ~~Net~~were ~~income~~approximately ~~from continuing operations increased 26~~23% orlower ~~$165,868~~than ~~for~~ the ~~first~~second ~~three~~quarter ~~quarters~~ of 2005 todue ~~$812,862 compared~~ to ~~$646,994 for the same~~ ~~period~~extremely ~~last~~dry ~~year.~~conditions ~~Net~~affecting ~~income from~~ the ~~discontinued~~billable ~~Georgia~~tonnage ~~operations of $28,711~~ compared to alast ~~net loss~~year. ~~from~~Reduced ~~discontinued~~material transportation ~~operations~~costs ofshowing ~~$67,681 brought net income for~~ the ~~nine~~favourable ~~months~~impact ~~ended June 30, 2005 to $841,573-an increase~~ of ~~45%~~our ordecision ~~$262,260-compared~~ to ~~net~~operate ~~income~~our ofown ~~$579,313~~transport equipment ~~for~~assisted in the ~~first three~~improvement ~~quarters~~in ofoperating ~~2004.~~margins

The ~~continuing~~Company’s ~~strength~~Canadian ofoperations ~~the~~reflect USseasonal ~~dollar~~patterns ~~reduced~~with ~~comparable~~increases ~~revenues~~in bysales ~~$642,000~~and ~~for the quarter~~capacity utilization and ~~$1,657,820~~a ~~for~~slight ~~the~~reduction ~~nine~~in ~~month~~losses ~~period~~for ~~compared~~the toquarter ~~2004.~~and ~~While~~six ~~the~~month ~~exchange~~periods ~~rate~~ended ~~differentials~~March 31, ~~between~~2006 ~~this~~compared ~~fiscal~~to ~~year~~the ~~and~~first ~~last~~two ~~had~~quarters ~~only~~of a2005. ~~minor~~This ~~impact~~reflects onadjustments ~~net~~to ~~income~~pricing ~~for~~to ~~the quarter ended June~~meet ~~30,~~rising ~~2005 (less than $20~~costs,~~000),~~ and the ~~effect~~sales of ~~exchange~~product ~~for~~to ~~the~~a ~~nine~~customer ~~month~~under ~~period~~the ~~ended~~new ~~June 30,~~long-term ~~2005~~supply agreement ~~lowered~~mentioned ~~comparable~~in ~~net~~previous ~~income by $112,000 or approximately $0~~MD&A’s.~~01 per share ($0.01 per share~~ ~~diluted).~~

~~Page~~The 2Company utilized cash flows from operations of $896,000 after changes in working capital for the three months ended March 31, 2006 compared to utilizing $184,000 in the same period last year—the changes due in large part to significant swings in accounts receivable, accounts payable and accrued liabilities, deferred revenue and current portions of long term debt in the comparable quarters. The Company, primarily through its CRR (Florida) unit invested approximately $976,000 to upgrade equipment to maintain operating efficiency and decreased cash and cash equivalents by $1.5 million for second quarter of fiscal 2006 compared to a $289,000 decrease in the second quarter of last fiscal year.

~~The~~Summary ~~table below provides selected information derived from the Company’s financial statements for each~~ of ~~the~~Quarterly ~~eight most recently completed quarters:~~Results

	Q3		Q2			Q1		Q4		Q3			Q2		Q1			Q4
	2006					2005									2004
	Jun 30,		Mar 31,			Dec 31,		Sept 30,		Jun 30,			Mar 31,		Dec 31,			Sept 30,
	Quarters					Quarters									Quarters
Quarter ended:	2005		2005			2004		2004		2004			2004		2003			2003
	2nd		1st			4th		3rd		2nd			1st		4th			3rd
Total revenues	$	8,~~489~~691,~~774~~667	$	67,~~682~~754,~~903~~604		$	76,~~173~~773,~~264~~946	$	68,~~794~~447,~~411~~623	$	76,~~383~~655,~~221~~879		$	57,~~484~~173,~~735~~579	$	46,~~874~~826,~~359~~568		$	47,~~513~~326,~~838~~234
Income (loss) before discontinued operations	$	~~305~~745,~~798~~394	$	~~($13~~318,~~538~~952	)	$	~~520~~17,~~602~~117	$	~~361~~380,~~326~~191	$	~~651~~($13,~~060~~538	)	$	32520,~~324~~602	$	~~($31~~361,~~966~~326	)	$	~~($133~~651,~~916~~060	)
Earnings per share-basic	$	0.0307	$	0.0003		$	0.0400	$	0.04	$	0.0600		$	0.0004	$	($0.0004	)	$	($0.0106	)
Earnings per share-diluted	$	0.0307	$	0.0003		$	0.0400	$	0.04	$	0.0600		$	0.0004	$	($0.0004	)	$	($0.0106	)
Net income	$	~~305~~745,~~284~~394	$	~~660~~318,952		$	~~535~~12,~~629~~405	$	~~249,~~379,677	$	~~497,725~~660		$	91535,~~975~~629	$	~~($10~~249,~~387~~379	)	$	~~($247~~497,~~124~~725	)
Earnings per share-basic	$	0.0307	$	0.0003		$	0.0500	$	0.0204	$	0.0500		$	0.0105	$	($0.0002	)	$	($0.0305	)
Earnings per share-diluted	$	0.0307	$	0.0003		$	0.0500	$	0.0204	$	0.0500		$	0.0105	$	($0.0002	)	$	($0.0305	)
Weighted average number of common shares outstanding-basic		10,~~247~~364,~~199~~699		10,~~250~~364,~~801~~699			10,~~247~~364,~~199~~699		10,~~247~~364,~~199~~699		10,~~247~~250,~~199~~801			10,~~197~~247,~~748~~199		10,~~016~~247,~~044~~199			910,~~994~~247,~~299~~199
Weighted average number of common shares outstanding-diluted		10,~~258,~~535,824		10,~~331~~552,~~629~~645			10,~~247~~511,~~199~~331		10,~~284~~484,~~074~~116		10,~~258~~331,~~535~~629			10,~~209~~247,~~084~~199		10,~~057~~284,~~702~~074			10,~~133~~258,~~484~~535

~~The~~ ~~reader will note that our first quarter of 2005 was not typical of our first~~3 quarters; although the quarter ended December 31, 2003 did have revenues above the norm from storm work. Our business, and particularly the Canadian operations which derive almost 82% of their revenues in the 2nd and 3rd quarters during the spring/summer growing season, is subject to seasonal patterns. To a lesser extent, our US operations are subject to the same seasonal patterns given that the material we process is green waste which is more abundant in the spring and summer months, while both units’ processing efficiency declines during cold or wet periods.

~~Cash~~Historically, ~~Flow~~quarterly performance has generally reflected the seasonal patterns of our business. Our business tends to generate more revenues in the 2nd and ~~Liquidity~~3rd quarters during the Spring/Summer growing seasons. Our Canadian operations generate over 80% of their revenue during these two quarters. Both the US and Canadian segments experience lower production efficiency during cold or wet weather conditions. The Company has peak demands on working capital during late fall and winter months and maintains a core of operations to meet the high demand periods. Over the previous two years, Company results have reflected increasingly volatile weather patterns—from summer drought on the Canadian West Coast last year, lengthy periods of rain last summer in the Canadian Prairie regions, to an increasing number and severity of storms in the Southeastern United States during the late fall which carries through into the winter months. Storm related revenue in both the 1st and 4th quarters of 2005 have served to smooth out these historical revenue patterns.

~~The~~Cash ~~Company generated $850~~Flow,~~000~~ inLiquidity cash flows from operations during the quarter compared to $988,000 in the comparable quarter of 2004. After changes in working capital items, the Company generated 1,765,000 in cash flows from operating activities during the quarter compared to generating $1,132,000 in cash flows in the quarter ended June 30, 2004-the change primarily as a result of the $735,000 proceeds from the short term line of credit financing for the purchase of the Florida property. For the first nine months of fiscal 2005, the Company generated approximately $2,377,000 in cash flows from operating activities after changes in working capital items, compared to $2,053,000 generated in the first nine months of fiscal 2004. Again, this is a reflection of the reduction in deferred revenue related to storm materials processed since September 30, 2004, the pay down/change in current portions of long-term debt and ~~capital~~Capital ~~lease~~Resources balances, and the payment of the current portion of loans from a Company director and officer since the relative year ends. Even with a minor increase in long term debt and the new capital lease during the third quarter, the Company continues (aided by favourable currency translation differences) to reduce overall debt levels-including a $316,000 reduction in loans payable to a shareholder and a Company director and officer in the quarter-compared to the 2004 nine month period.

~~Page~~The 3Company generated approximately $1,884,000 in cash flows before changes in working capital for the six months ended March 31, 2006. This compared to $1,360,000 generated from operations before changes in working capital for the first six months of 5the 2005 fiscal year reflecting higher net earnings and an offsetting $160,000 increase in unrealized foreign exchange losses (cumulative currency translation differences) in the comparable six month periods.

~~Working~~After ~~capital~~changes atin ~~June 30,~~working ~~2005~~capital ~~was 1.22:1~~items, ~~compared~~the toCompany ~~1.31:1~~generated atapproximately ~~June 30~~$728,000 ~~2004~~in ~~and~~cash ~~1.37:1 at~~flows ~~September 30,~~for ~~2004 reflecting~~ the ~~Company’s~~first ~~use~~two quarters of ~~internal~~fiscal ~~funds~~2006, toup ~~finance~~slightly ~~the Florida land acquisition. Debt to equity ratios continue to improve~~ from ~~1.66:1~~the ~~at June 30~~$613,000 ~~2004,~~generated toin ~~1.79:1~~the atfirst six ~~our~~months ~~September 30,~~of ~~2004 year end, to 1.54:1 at June 30,~~ 2005. ~~Recent~~Changes ~~results~~in ~~have~~working ~~not~~capital ~~only strengthened~~items ~~the~~in ~~balance sheet through~~ the ~~payout~~comparable ofsix ~~debt,~~month itperiods ~~allows~~that ~~the Company to enhance future~~had ~~earnings~~significant ~~and~~influence ~~cash~~on ~~flow~~this bydifference ~~reducing interest costs and reducing debt service obligations. It also~~included: ~~provides the Company with future borrowing capacity, should strategic investment opportunities arise.~~

~~Although~~-A ~~the~~$436,000 ~~majority~~difference ofbetween the ~~Company’s~~change ~~financial~~in ~~instruments~~income ~~(cash,~~taxes ~~accounts receivable, bank indebtedness, accounts~~ refundable/payable ~~and~~due ~~accrued liabilities etc.) are denominated in US funds, and are subject~~ to ~~exchange rate fluctuation risk versus the Canadian dollar, management is of the opinion~~higher ~~that,~~comparative inpre-tax ~~the~~quarterly ~~near term, US and Canadian exchange rates will be relatively stable compared to the~~earnings; ~~last two years.~~

~~Capital~~-A ~~Resources~~$2.5 million difference in changes to receivables offset by $462,000 difference from changes to accounts payable and accrued liabilities from the later storm processing this year when compared to last year.

At-The ~~present,~~later ~~the~~storm ~~Company~~and ~~has~~increase ~~adequate~~in ~~internal~~private ~~resources~~sector toworkloads ~~fund~~caused ~~working~~a ~~capital~~buildup ~~requirements~~of unprocessed ~~and~~product ~~operating~~on ~~lease~~our ~~commitments~~municipal ~~(Note~~sites, ~~13).~~reflecting Inhigher ~~addition~~deferred torevenues ~~these,~~than ~~Answer~~normal ~~has~~at ~~entered~~this ~~into~~point ~~a 36~~in ~~month~~the ~~capital~~comparative ~~lease~~fiscal ~~agreement~~years-hence ~~subsequent to June 30, 2005 to fund~~ the ~~purchase of equipment worth approximately~~ $42782,000. ~~Any~~swing ~~additional~~in ~~capital~~changes ~~expenditures,~~in ifdeferred ~~deemed~~revenue ~~appropriate,~~in ~~will be financed through commercial sources. During~~ the ~~quarter ended June 30, 2005, the Company did not~~ ~~issue~~comparable ~~any~~six ~~new~~month ~~shares~~fiscal ~~or stock options~~periods.

-CRR (Florida) repaid the US $600,000 note associated with the land parcel purchase last year for future strategic business purposes during this quarter which impacted the higher reduction in the current portions of long-term debt.

The Company, through its CRR (Florida) unit invested $872,000 in the second quarter of 2006 in addition to its $1.7 million investment in December, 2005 and generated $909,000 in sale proceeds to upgrade its equipment fleet, the difference financed by capital leases accounting for the increase

in both the current and long-term portions of capital lease obligations when compared to the first two quarters of fiscal 2005. Overall, the Company increased cash and cash equivalents in the first six months of fiscal 2006 by $435,000 compared to $339,000 in the same period of 2005.

Working capital at March 31, 2006 was 1.28:1 compared to 1.59:1 at this time last year improved from 1.21 at the end of the first quarter and 1.14:1 at September 30, 2005. The lower ratio at this time of year compared to last year reflects working capital employed in storm debris processing occurring later this year than last. Debt to equity at December 31, 2005 was 1.66:1 compared to 1.47:1 at December 31, 2004 and 1.49:1 at September 30, 2005, again reflecting higher storm related deferred revenue and accounts payable and accrued liability balances at this time of year as well as the addition to capital lease obligations from the equipment purchases.

The Company expects to fund its ongoing operations through cash generated from operations and existing bank facilities and fund significant capital expenditures through commercial lending sources. At March 31, 2006 the Company had fully drawn its regular revolving demand loan (March 31, 2005-fully utilized) and had available $60,000 (March 31, 2005-$160,000) of its peak period revolving demand loan available during the period from December 1^st to June 30^th each year. The US $600,000 line of credit used to purchase the Florida land parcel in fiscal 2005 was repaid (January 10, 2006) prior to its maturity date of March 31, 2006. The Company was in compliance with lending covenant requirements at March 31, 2006.

Off-Balance Sheet Arrangements

The Company ~~does~~has ~~not~~an ~~have~~irrevocable ~~any~~$10,000 ~~such~~letter ~~arrangements~~of atcredit ~~present~~issued oras ~~contemplated~~a inperformance guarantee to one of its customers under the ~~future~~terms of a green waste processing contract. The Company has no other such arrangements, present or contemplated.

Transactions with Related Parties

As detailed in Notes 9 and 11 of the financial statements, the Company ~~has~~had loans ~~payable~~outstanding tofrom ~~two~~one of its directors and officers during the quarter as well as contractual employment amounts payable to ~~them~~two of the Company’s officers and directors for accrued remuneration, accrued interest, and expense reimbursements consistent with standard business practice.

Financial ~~Instruments~~ and Other Instruments

AsThe ~~described~~majority ~~above~~of the Company’s financial instruments (cash, ~~management~~accounts isreceivable, ofbank ~~the~~indebtedness, accounts ~~opinion~~payable ~~that~~and ~~the~~accrued ~~Company~~liabilities, ~~does~~long-term ~~not~~debt, ~~face~~obligations ~~any~~under ~~undue~~capital ~~risk~~leases and ~~from~~loans ~~its~~payable) are denominated in US funds, and are subject to exchange rate fluctuation risk upon financial ~~instruments~~statement translation. ~~The~~Adverse ~~Company~~fluctuations ~~does~~in ~~not~~the ~~participate~~Canadian inand ~~any~~US ~~hedging~~exchange orrates ~~forward~~could ~~contract~~affect ~~programs~~a debt to worth covenant contained in the Company’s Canadian loan facilities agreement. Management is of the opinion that the Canadian dollar will continue its

upward trend against the US dollar, but the Company does not face any undue risk from its financial instruments. The Company does not participate in any hedging or forward contract programs.

Outlook

The Company will ~~maintain~~continue ~~normal~~to operate in an economic environment which includes high fuel prices and resulting inflationary pressure on operating ~~levels~~costs, ~~during~~as ~~the~~well ~~remaining~~as ~~three~~a ~~months~~Canadian dollar that is continuing to gain strength against its US counterpart. The Company will continue the process of ~~this~~negotiating ~~fiscal~~more ~~year~~favourable pricing for its products and ~~continue~~services ~~efforts~~where possible to ~~optimize~~preserve ~~operations~~margins ~~and~~during ~~seek~~the balance ~~new~~of ~~growth~~this ~~opportunities~~fiscal year.

~~Page~~The 4Company’s CRR (Florida) unit will work through its backlog of 5unprocessed material at its municipal sites during the remainder of the 2006 fiscal year and build on its success in the private sector.

~~Forward~~The Company’s Canadian operations, through its Red River unit, has begun supplying one of its customers under the new long-~~Looking~~term ~~Statements~~supply agreement which will continue to rebuild sales volume and utilize more capacity in its Canadian operations.

~~This~~Weather ~~report~~patterns ~~contains statements that are forward-looking in nature. Such statements involve known~~ and ~~unknown~~competitive ~~risks~~pressures ~~and~~will ~~uncertainties~~also ~~that may cause the actual results of the Company to~~ be ~~materially~~ ~~different~~important ~~from~~factors ~~those~~in ~~expressed~~operating orlevels ~~implied by those forward-looking statements. Such risks include, among others: general economic~~ and ~~business conditions, weather factors,~~ ~~competition~~results ~~and~~in ~~product~~2006. ~~selling~~The ~~prices,~~Company ~~raw~~intends ~~material~~to ~~and~~continue ~~operating~~to ~~costs,~~optimize ~~changes~~operations ~~in foreign-currency exchange rates~~ and ~~other~~identify ~~factors referenced herein~~ and inrealize ~~the Company’s annual~~on ~~statutory~~new ~~report~~growth opportunities.

~~[signed]~~“James ~~[signed]~~E. Darby” “Douglas R. Halward” James E. Darby Douglas R. Halward Chairman and Chief Executive Officer President

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