Future operations:

The company has generated negative cash flows from operations over the last four years and has an accumulated deficit of CAD66,032,950 at March 31, 2009. The company operated the RSI facility in Quebec during the quarter for less than 1 week due to a lack of volume to support efficient operations. The RSI facility re-opened on April 6, 2009.

The company is continuing with its operational reorganization plans and on December 18, 2008 sold its MRR and TCI facilities. The company has also entered into an agreement to sell the Belledune facility which is not operational.

Continued operations depend on the company’s ability to generate future profitable operations, to obtain sufficient financing to fund future operations and, ultimately, to generate positive cash flows from operating activities. The company is continuing to focus on securing sufficient sales volumes at profitable sales prices and to maintain the cost reduction strategies implemented during previous years.

The ability of the company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities as they become due is dependent on the successful completion of the actions taken or planned, some of which are described above, which management believes will mitigate the adverse financial conditions faced by the company. There is uncertainty as to whether or not these objectives will be achieved. If the company’s strategies are achieved, management believes that the company will have sufficient cash and working capital to fund operations beyond the first quarter of 2010.

Significant accounting policies:

Revenue recognition:

The company provides highly specialized treatment of contaminated materials. In some cases, the company is also engaged to remove and transport the contaminated materials to its facilities for processing and disposal. The company recognizes revenue for these activities using the proportional performance method when all of the following criteria are met:

Remediation activities are completed for each batch of material or waste stream being treated;

The company has confirmed that the contaminants have been destroyed in accordance with the contract terms; and

Collection is reasonably assured.

For those contracts whereby the company is engaged to transport the contaminated material from the customer’s site to the company’s facilities, the transportation costs incurred are deferred until the materials have been treated and the company has determined that the contaminants have been destroyed in accordance with the contract terms. Transportation costs are reimbursable under the terms of the contract.

All other processing costs are expensed as incurred.

Revenue from long-term fixed-price soil remediation contracts is recognized using the percentage of completion method, based on the ratio of costs incurred to date over estimated total costs. This method is used because management considers costs to be the best available measure of performance on these contracts. Contract costs include all direct material and wages and related benefits. Revenue related to unpriced change orders under the percentage of completion method is recognized to the extent of the costs incurred, if the amount is probable of collection. If it is probable that the contract will be adjusted by an amount that exceeds the costs attributable to the change order and the amount of the excess can be reliably estimated, revenue in excess of the costs attributable to unpriced change orders is recorded when realization is assured beyond a reasonable doubt.

The company records revenue relating to claims to the extent of costs incurred and only when it is probable that the claim will result in additional contract revenue and the amount can be reasonably estimated. Claims are amounts in excess of the agreed upon contract price that the company seeks to collect from its customers for customer-caused delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs.

The company did not have any long-term fixed price contracts in process during the three month period ended March 31, 2009 and 2008.

Change in accounting policies:

On January 1, 2009 the company adopted the Canadian Institute of Chartered Accountants (CICA) issued Handbook Section 3064, Goodwill and Intangible Assets. Section 3064, which replaces Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. This new standard establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions relating to the definition and initial recognition of intangible assets, including internally generated intangible assets, are equivalent to the corresponding provisions of International Financial Reporting Standard, IAS 38, Intangible Assets. This new standard did not have an impact on the company’s consolidated financial results.

On January 1, 2009, the company adopted the Emerging Issues Committee (EIC) of the AcSB EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. This new standard did not have an impact on the company’s consolidated financial results.

Recent accounting pronouncement:

In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to report under IFRS effective for fiscal periods beginning on or after January 1, 2011. The company has completed an initial impact assessment process focusing on differences between IFRS and the company’s accounting policies and is in the process of developing a plan to convert its consolidated financial statements to IFRS. The company has begun to establish a project plan and identify key individuals with an initial focus on the componentization of capital assets. The company will continue to invest in training and resources required throughout the transition period to ensure a timely conversion. Upon adoption of IFRS, it is likely that changes in accounting policies will be required that may materially impact the company’s consolidated financial statements.

In January 2009, the CICA issued Handbook Section 1601, Consolidated Financial Statements, which replaces the existing standards. This section establishes the standards for preparing consolidated financial statements and is effective for 2011. Earlier adoption is permitted. The company is currently evaluating the impact of adopting this standard on its consolidated financial statements.