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o o o JOHN A. KNUTSON & CO., PLLP CERTIFIED PUBUC ACCOUNTANrS 1781 PRIOR AVENUE NORTIl FALCON HElGlITS. MINNESOTA 55113 INDEPENDENT AUDITOR'S REPORT Board of Directors Ceres Environmental Services, Inc. Brooklyn Park, Minnesota We have audited the accompanying balance sheets of Ceres Environmental Services, Inc. as of December 31, 2006 and 2005, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the fil1Rnrnal statements, assessing the accounting principles used and significant estimates made by mfl1Ulgell1ent, as well as evaluating the overall financial statement presmtation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, with the eltception of the matter disclosed in the following paragraph, the financial statements referred to above present fairly, in all material respects,the financial position of Ceres Environmental Services, Inc. as of December 31,2006 and 2005, and the results of its operations and its cash flows for the years then ended in confonnity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that where a Company is the primary beneficiary of a variable interest entity, the Company must consolidate that entity's financial information with their own. Management has elected not to consolidate variable interest entities: If generally accepted accounting principles bad been followed, total assets would have increased by approximately $2,903,000, tota11iabiliti.es would have increased by approximately $2,335,000, equity would have increased by approximately $568,000, and net income would have decreased by approximately $582,000 as of December 31, 2006. Total assets would have increased by approximately $3,989,000, total liabilities would have increased by approximately $2,839,000, equity would have increased by approximately $1,150,000, and net income would have increased by approx.iIIu$lly $161,000 as of December 3], 2005. t~~=.:~ PUP Certified Public Accountants September 19, 2007 AMERICAN INSTI1UTE OF CERT1F1ED puauc ACCOtJm'ANTS PCPS - PRIVATE COMPANIES PAAC11CE SECTION MINNESOTA SOCIETY Of CER.1lFIED PUBUC ACCOUNTANTS -1-