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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>As filed with the Securities and Exchange
Commission on April 30, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Registration No. 333-</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-top: black 3pt solid"><FONT STYLE="font-size: 10pt"><B>UNITED
STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Washington, D.C. 20549<BR>
_____________________________<BR>
<FONT STYLE="font-size: 12pt"><B>FORM S-1<BR>
REGISTRATION STATEMENT<BR>
</B></FONT><FONT STYLE="font-size: 10pt">UNDER<BR>
THE SECURITIES ACT OF 1933<BR>
</FONT>_____________________________<BR>
<BR>
<FONT STYLE="font-size: 12pt"><B>LAIDLAW ENERGY GROUP, INC.<BR>
</B></FONT><FONT STYLE="font-size: 10pt">(<I>Exact name of registrant as specified in its charter)</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12.6pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-align: center">New York</TD>
    <TD COLSPAN="3" STYLE="padding-top: 12.6pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-align: center">4991</TD>
    <TD STYLE="padding-top: 12.6pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-align: center">16-1485218</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-style: italic; text-align: center">(State of incorporation)</TD>
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-style: italic; text-align: center">(Primary Standard Industrial <BR> Classification Code Number)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-style: italic; text-align: center">(I.R.S. Employer <BR> Identification Number)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>90 John Street, 4<SUP>th</SUP> Floor</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10038</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 480-8400</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Address, including zip code, and telephone
        number, including area code, of registrant&rsquo;s principal executive offices)</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Michael B. Bartoszek<BR>
        Chief Executive Officer</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Laidlaw Energy Group, Inc.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>90 John Street, 4<SUP>th</SUP> Floor</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10038</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 480-8400</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Name, address, including zip code, and
        telephone number, including area code, of agent for service)</I></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_____________________________</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-size: 10pt; font-style: italic; font-weight: bold">Copies to:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Richard M. Morris</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stephen E. Fox</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Herrick, Feinstein LLP<BR>
        2 Park Avenue</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10016</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 592-1400</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt"><B>Approximate date of commencement of proposed sale to the public:</B> From time to time after the effective date of this Registration Statement.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. <FONT STYLE="font-family: Wingdings; color: black">x</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer,&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2 of the Exchange Act.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Large accelerated filer <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT></TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Accelerated filer <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Non-accelerated filer <FONT STYLE="font-family: Wingdings; color: black">&uml;</FONT> (Do not check if a smaller reporting company)</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Smaller reporting company <FONT STYLE="font-family: Wingdings; color: black">x</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 223px">&nbsp;</TD>
    <TD STYLE="width: 112px">&nbsp;</TD>
    <TD STYLE="width: 101px">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_____________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 40%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: black 0.25pt solid"><B>Title of each class of
        securities to be registered</B></P></TD>
    <TD STYLE="width: 17%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: black 0.25pt solid"><B>Amount
        to be Registered(1)</B></P></TD>
    <TD STYLE="width: 14%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: black 0.25pt solid"><B>Proposed
        maximum offering price per&nbsp;share(2)</B></P></TD>
    <TD STYLE="width: 14%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: black 0.25pt solid"><B>Proposed
        maximum aggregate offering price(2)</B></P></TD>
    <TD STYLE="width: 15%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: black 0.25pt solid"><B>Amount
        of<BR>
        registration&nbsp;fee</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 2pt; padding-bottom: 2pt; font-size: 10pt">Common Stock, $0.0001 par value per share</TD>
    <TD STYLE="padding: 2pt -6.3pt 2pt 5.4pt; font-size: 10pt; text-align: center">434,782,610 shs.(3)</TD>
    <TD STYLE="padding-top: 2pt; padding-bottom: 2pt; font-size: 10pt; text-align: center">$.0003</TD>
    <TD STYLE="padding-top: 2pt; padding-bottom: 2pt; font-size: 10pt; text-align: center">$130,435</TD>
    <TD STYLE="padding-top: 2pt; padding-bottom: 2pt; font-size: 10pt; text-align: center">$14.95</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>_____________</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">Pursuant to Rule 416 under the Securities Act of 1933, this registration statement will cover such
indeterminate number of shares of the registrant&rsquo;s common stock that may be issued with respect to stock splits, stock dividends
and similar transactions.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule
457(c) under the Securities Act of 1933, computed based upon the average of the high and low selling prices per share of the registrant&rsquo;s
common stock on April 25, 2012 on the OTC Pink market.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify">Represents shares of common stock that may be issued upon the conversion of an aggregate of 434.7826
shares of the registrant&rsquo;s Series B preferred stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_____________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: red">The information in this prospectus is not complete
and may be changed. The selling stockholders named herein may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"><FONT STYLE="color: Red">&nbsp;</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: red"><FONT STYLE="color: Red">Subject
to Completion</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: Red">Preliminary Prospectus
dated April 30, 2012</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>P R O S P E C T U S</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LAIDLAW ENERGY GROUP, INC.</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">434,782,610 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">This prospectus relates
to the sale, transfer or other disposition from time to time of up to 434,782,610 shares of our common stock, which may be offered
by the selling stockholders identified in this prospectus at fixed prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market price, at varying prices determined at the time of sale or at negotiated prices. See &ldquo;Plan
of Distribution&rdquo; for additional information. All such shares being sold by the selling stockholders are presently issued
and outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We are not offering any
shares of common stock for sale under this prospectus and we will not receive any proceeds from sales of shares of our common stock
by the selling stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our common stock is traded
on the OTC Pink market under the symbol LLEG.PK. On April 25, 2012, the last reported sale price for our common stock was $.0002
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in"><B>These are speculative
securities. Please read the &ldquo;Risk Factors&rdquo; section beginning on page 5 of this prospectus before making a decision
to invest in our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The date of this prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">TABLE OF CONTENTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 95%; padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="width: 5%; padding-right: 0; padding-left: 0; text-align: right"><U>Page</U></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Prospectus Summary</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Risk Factors</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">5</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Market For Our Common Stock</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">12</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Management&rsquo;s Discussion And Analysis Of Financial Condition And Results Of Operations</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">14</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Business</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Management</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">30</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Executive Compensation</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">32</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Certain Relationships And Related Party Transactions</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Principal Stockholders</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">34</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Description Of Capital Stock</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">37</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Selling Stockholders</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">41</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Plan Of Distribution</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">42</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Legal Matters</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">45</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Experts</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">45</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Where You Can Find Additional Information</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">45</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">Index To Financial Statements</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: right">F-1</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_____________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We are responsible for
the information contained in this prospectus. We have not, and the selling stockholders have not, authorized anyone to give you
any other information, and take no responsibility for any other information that others may give you. T<FONT STYLE="color: black">he
selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of our </FONT>common stock<FONT STYLE="color: black">.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BASIS OF PRESENTATION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Except as otherwise indicated
herein or as the context otherwise requires, in this prospectus, &ldquo;we,&rdquo; &ldquo;our&rdquo; and &ldquo;us&rdquo; refers
to Laidlaw Energy Group, Inc. and all of its consolidated subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">There are statements in
this prospectus that are not historical facts. These &ldquo;forward-looking statements&rdquo; can be identified by words such as
&ldquo;anticipate,&rdquo; &ldquo;hope,&rdquo; &ldquo;believe,&rdquo; &ldquo;estimate,&rdquo; &ldquo;expect,&rdquo; &ldquo;positioned,&rdquo;
&ldquo;strategy,&rdquo; &ldquo;forecast,&rdquo; &ldquo;goal,&rdquo; &ldquo;intend,&rdquo; &ldquo;plan,&rdquo; &ldquo;predict,&rdquo;
&ldquo;project,&rdquo; &ldquo;seek,&rdquo; &ldquo;target,&rdquo; &ldquo;will,&rdquo; &ldquo;could,&rdquo; &ldquo;may,&rdquo; &ldquo;should&rdquo;
or &ldquo;would&rdquo; or other similar expressions that convey the uncertainty of future events or outcomes. You should be aware
that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these
risks, you should read this entire prospectus carefully; especially the risks discussed under the section entitled &ldquo;Risk
Factors.&rdquo; Although management believes that the assumptions underlying the forward-looking statements included in this prospectus
are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these
forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information
represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry and
other circumstances. As a result, the identification and interpretation of data and other information and their use in developing
and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed
events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is
expressed on the achievability of those forward-looking statements. In light of these risks and uncertainties, there can be no
assurance that the results and events contemplated by the forward-looking statements contained in this prospectus will in fact
transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates.
We do not undertake any obligation to update or revise any forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CAUTIONARY NOTE REGARDING INDUSTRY DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, information
contained in this prospectus concerning our company, our business, the services we provide and intend to provide, our industry
and our general expectations concerning our industry are based on management estimates. Such estimates are derived from publicly
available information released by third party sources, as well as data from our internal research, and reflect assumptions made
by us based on such data and our knowledge of the industry, which we believe to be reasonable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PROSPECTUS SUMMARY</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in"><I>This summary highlights
information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to
you. <FONT STYLE="color: black">You should read the entire prospectus carefully together with our financial statements and the
related notes appearing elsewhere in this prospectus before you decide to invest in our common stock. This prospectus contains
forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated
in such forward-looking statements as a result of certain factors, including those discussed under the heading &ldquo;Risk Factors&rdquo;
and other sections of this prospectus.</FONT></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to develop and manage renewable
energy facilities that produce electricity and/or thermal energy for commercial and industrial purposes from sustainable biomass
sources, other renewable fuel sources or combined cycle natural gas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Biomass generally refers to any organic
matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood residues, plants
(including aquatic plants), grasses, animal manure, municipal residues and other residue materials. The primary sources of biomass
or &ldquo;feedstock&rdquo; that we expect to use in our facilities are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">clean urban wood waste comprised mainly of used lumber,
trim, shipping pallets, trees, branches and other wood debris from construction and demolition activities;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">by-products or mill residue from the manufacturing
of fibers, pulp, paper, lumber, plywood, cotton and other products;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">tops, branches, non-merchantable timber and timber
stand improvement thinnings from managed forestry operations; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">energy dedicated crops such as fast-growing trees
and grasses, stalks, straws and perennial crops.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that biomass fuels are an attractive alternative
to fossil fuels primarily because:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biofuels, wood and organic waste are the largest single
source of renewable fuel on a global basis;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the price for fossil fuels is increasing and becoming
more volatile;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the possible supply shortages for fossil fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the relative safety and environmentally friendly
ability to harvest and obtain biomass fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the numerous government sponsored incentives available
for power generation facilities that use alternative or renewable fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biomass fuels may be utilized through proven environmentally
friendly technologies;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biomass fuels are the only form of renewable energy,
other than hydropower, that can provide for dependable base-load or continuous rather than intermittent, generation of electric
and thermal energy; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">electric and thermal generation from these fuel sources
are widely considered to be carbon-neutral, which means the carbon dioxide emissions created through the combustion process are
offset by the sequestration of carbon dioxide by trees and plants.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that there is a sufficient readily
available supply of biomass fuel for our proposed facilities and intend to continue to evaluate the sufficient and reliable supply
of biomass fuel as part of our acquisition evaluation process. For instance, wood chips and related products used for industrial
purposes are quoted in weekly commodity reports and are generally readily available at &ldquo;roadside&rdquo; prices, which is
the price a buyer pays for wood chips prior to any transport and preprocessing to the end-use location at a roadside in the forest,
at a processing mill location in the case of mill residue, or at a landfill for urban wood waste.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To a lesser extent, we also intend to pursue
the development of facilities that utilize natural gas in a combined-cycle for projects that can provide both electricity and thermal
energy. A combined-cycle facility uses a steam turbine generator in concert with a combustion turbine and heat recovery steam generator
to generate electric and thermal energy in an efficient manner.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Corporate Information</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a &ldquo;reverse&rdquo; merger with Laidlaw Energy Group, Inc., referred to as the Predecessor Company,
in which we were the surviving corporation. We then changed our name to Laidlaw Energy Group, Inc. The Predecessor Company was
formed in 1999 to own and operate natural gas-fired generation assets and related entities. We had no operations or assets at the
time of our reverse merger with the Predecessor Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our executive offices are located at 90
John Street, New York, NY 10038; our telephone number is (212) 480-8400. Our website is located at http://www.laidlawenergy.com.&nbsp;The
information on our website is not part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The Offering</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 39%; padding-top: 12pt; padding-left: 5.4pt; font-size: 10pt">Common stock offered by the selling stockholders</TD>
    <TD STYLE="width: 61%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><BR STYLE="mso-special-character: line-break">
        <BR STYLE="mso-special-character: line-break">
        </P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">434,782,610 shares of common stock<SUP>(1)</SUP></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-left: 5.4pt; font-size: 10pt">Common stock to be outstanding after the offering</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><BR STYLE="mso-special-character: line-break">
        <BR STYLE="mso-special-character: line-break">
        </P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2,891,503,698 shares of common stock<SUP>(2)</SUP></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-left: 5.4pt; font-size: 10pt">Use of proceeds</TD>
    <TD STYLE="padding-top: 12pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">We will not receive any proceeds from the sale of common stock by the selling stockholders participating in this offering. The selling stockholders will receive all of the net proceeds from the sale of their respective shares of common stock in this offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Risk factors</TD>
    <TD STYLE="padding-top: 12pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">See &ldquo;Risk Factors&rdquo; on page 4 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 17.1pt; text-indent: -17.1pt"><SUP>__________</SUP></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 17.1pt; text-indent: -17.1pt"><SUP>(1)</SUP> &#9;Represents
        shares of common stock that may be issued upon the conversion of an aggregate of 434.7826 shares of our Series B preferred stock.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 17.1pt; text-indent: -17.1pt"><SUP>(2)</SUP>&#9;Based on
        our issued and outstanding shares of common stock as of April 25, 2012, and assumes the conversion, for no consideration, of all
        434.7826 shares of our Series B preferred stock. It does not assume the full exercise or conversion of any other preferred stock,
        options, warrants or other of our securities convertible into our common stock that may be outstanding.</P></TD></TR>
<TR STYLE="vertical-align: super">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 17.1pt; font-size: 10pt; text-indent: -17.1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Summary Selected Historical Financial
Data</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The following tables set
forth our summary historical financial data. The consolidated statement of operations data for the years ended December 31, 2011
and 2010 have been derived from our audited financial statements included elsewhere in this prospectus. The consolidated balance
sheet data as of December 31, 2011 and 2010 have been derived from our audited consolidated financial statements included elsewhere
in this prospectus. The data should be read in conjunction with our audited consolidated financial statements and the notes to
such statements and &quot;Management's Discussion and Analysis of Financial Condition and Results of Operations&quot; included
elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0">Statement of Operations Data</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For the Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0">Income before operating expenses</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">2,847,984</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total operating expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(980,199</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0">Total other income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">109,616</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0">Net (loss) income</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(1,231,873</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,977,401</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0">Balance Sheet Data</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">As of December 31,</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0">Cash and cash equivalents</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">1,197,563</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">745,140</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,502,206</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,562,530</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">501,442</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">559,893</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total stockholders' equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,000,764</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,002,637</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">RISK FACTORS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in"><I>Investing in our common
stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information
contained in this prospectus, before making your decision to invest in shares of our common stock. We cannot assure you that any
of the events discussed in the risk factors below will not occur. These risks could have an adverse impact on our business, results
of operations, financial condition and cash flows. If any of the following risks develops into an actual event, the trading price
of our common stock could decline, and you could lose all or part of your investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have limited operating history and have earned
limited revenues; our financial statements are subject to a going concern qualification from the Independent Registered
Public Accounting Firm that performed our audit.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have a limited operating
history and have earned limited revenues in our operating history. Our only year of profitable operations was 2010 and that
resulted primarily from the sale of our interest in the Berlin, New Hampshire project, which is a non-recurring revenue
event that accounts for approximately 85% of our total revenues since our inception.&nbsp;We did not generate any revenue or
other income in 2011, and incurred net losses of $1,231,873 during the year ended December 31, 2011. These conditions raise
substantial doubt about our ability to continue as a going concern. There is no assurance that we will achieve profitable
operations in the near future or at all. Also, there is no assurance that once we begin to generate revenues, that our
revenues will be sufficient to fund our continuing operations. Our inability to generate sufficient revenue and become
profitable may force us to curtail or temporarily discontinue our acquisitions of and retooling of biomass projects and our
day-to-day operations and may restrict our ability to develop projects in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We need additional financing to acquire and develop biomass
power generating facilities and to pursue our growth strategy.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that our cash resources
are sufficient to support our current operating and developmental activities and requirements for substantially all of 2012.
Depending on any revenues that we may generate from management fees and facilities operations, after such time, or earlier if
we decide to increase our spending levels, we will need to raise additional funds through public or private debt or equity
financing in order to continue our operations, acquire and develop biomass power generating facilities and establish a
stronger financial position. In addition, future projects may require additional investments to fund the start-up operations
of such projects until they generate sufficient cash flow from their own operations. Such capital requirements could include
deposits or other collateral to support our obligations under a power purchase agreement. It is not possible to make any
reliable estimate of the funds required to meet our future financial obligations or to pursue our growth strategy.
Furthermore, financing of planned and unplanned future projects, including with respect to our Susanville facility, is not
certain and the sources are yet unknown. Despite our efforts, there is no assurance that we will be able to secure additional
funding, or funding on terms acceptable to us, to meet our financial obligations or to pursue our growth strategy. Further,
there is no assurance that our projects will succeed at generating sufficient cash flow to support our operations even if
funded. Our failure to raise additional capital could delay or curtail our growth strategy and development efforts, or force
us to cease operations entirely.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may be unsuccessful in identifying additional potential
biomass power generating facilities, which could adversely affect our ability to generate revenues and become profitable.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our growth strategy includes identifying
biomass power generating facility opportunities that we may acquire at a substantial discount to retool or refurbish or otherwise
develop with proven technologies. Identifying such facilities and pursuing the initial assessment or planning of such facilities
are a time consuming and expensive process. We may encounter setbacks after expending a significant amount of money with respect
to a particular facility, including the possibility that we may ultimately fail to develop and/or purchase such facility. In addition,
our ability to develop or acquire a particular facility may be conditioned on securing project equity and other financing or finding
strategic investors or joint venture partners. There is no assurance as to when or whether we will successfully identify biomass
power generating facilities to develop or acquire. Further, there is no assurance that we will be able to secure additional financing
or find strategic investors or joint venture partners, if necessary, to move forward with the development or acquisition of a particular
facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have limited experience developing, acquiring and operating
biomass power generating facilities.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we have acquired, developed to
a status that was substantially ready for the commencement of construction and sold one planned biomass power generating project.
Our management has not overseen the final conversion or retooling of a large scale commercial biomass power generating facility
or operated such a biomass facility. There is no assurance that either we or any other party we have engaged or may engage to convert
and operate such facilities have developed processes that are satisfactorily designed and sufficiently efficient to provide for
a profitable biomass power generating facility. Further, the conversion of a biomass power generating facility is complicated and
we rely on and intend to rely on a number of contractors and subcontractors for the production and supply of various technologies
and assemblies. Even if we or our contractors and subcontractors are successful in producing and supplying such technologies and
assemblies, it is uncertain whether we or they will be timely in meeting our schedule or our efficiency requirements, all of which
could have a material adverse effect on our business and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may be unable to secure long-term power purchase agreements
for the sale of the power from our facilities and/or the sale of RECs and other environmental attributes</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business strategy includes pursuing
long-term power purchase agreements with utilities or end-users for the sale of electrical power and thermal energy attributes
such as RECs and/or thermal energy generated by our facilities. In addition, our ability to finance our power projects is largely
dependent upon our ability to enter into such long-term power purchase agreements, each of which may have specific requirements
and conditions. There can be no assurance that we can anticipate all of the utility or end-user requirements and conditions or
be able to meet any of those requirements and conditions. Further, there is no assurance that the pricing schedules for power generated
by any of our planned facilities will be attractive to utilities and other potential purchasers or be sufficient to enable us obtain
power purchase agreements on acceptable terms. Failure to enter into such long-term power purchase agreements for each of our biomass
power generating facilities currently in existence or that we may acquire or develop in the future may cause uncertainty with respect
to future project revenues and impair our ability to obtain sufficient financing for our biomass projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We compete with more established and well-recognized companies,
which offer similar products and services or the same products and services as we sell.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate in the alternative energy industry,
which is highly competitive, with numerous small and large companies in the United States and worldwide producing and distributing
energy from renewable resources. We compete, and expect to continue to compete, with entities whose sole business is to retrofit
existing power plants for operators, as well as entities that provide alternative energy solutions from renewable resources other
than biomass. Many of our competitors and potential competitors have substantially greater capital resources and more experience
in retrofitting and operating power plants, research and development, manufacturing and marketing. We may have difficulty competing
with more established and well-recognized companies, and any other companies that have greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. Moreover, our competitors may have broader product lines
and services and have greater name recognition than we do, and may offer discounts as a competitive tactic, causing us to reduce
the sales prices of our energy products. In addition, our competitors could introduce new products or services with features that
could render our technologies, products or services less marketable. Accordingly, there is no assurance that our business operations
will be successful due to competition from more established and well-recognized companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may not meet any of the timetables we establish from
time to time, which could result in cost overruns and adversely affect our relationships with third parties.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we may establish milestones
and timetables based upon market forces as well as our expectations regarding our plans and projects, which we would use to assess
our progress toward our growth strategy. These milestones could relate to, among other things, identifying, acquiring and developing
biomass power generating facilities and negotiating terms of power purchase agreements or other sales agreements with utilities
and other third parties. If any milestones that we establish for a project are not met, then our development of such project could
be adversely effected by cost overruns and delays, including requirements to make additional payments to third parties. In addition,
any delay in satisfying a covenant or milestone in a contract could result in the termination of such contract or subject us to
remedies enforceable by third parties. Further, potential purchasers of the power generated by our planned facilities may lose
interest or choose to purchase power from alternate sources. Currently, we have not established any milestones or timetables, other
than with respect to the exercise of our rights to purchase the land and facilities that we currently lease in Susanville, California.
There is no assurance that any milestones and time tables for a particular project or in general will be met.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We depend upon our officers for management and direction,
and the loss of any of these persons could adversely affect our operating results.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend upon our executive officers for
the development and execution of our business plan, especially Michael B. Bartoszek, our founder, President and Chief Executive
Officer, and Louis T. Bravakis, our Vice President of Project Development. These officers have extensive experience in the renewable
energy business and lead the development and management of our projects. We do not have any employment or non-competition agreements
with our executive officers nor do we maintain &ldquo;key person&rdquo; life insurance for any of our officers. The loss of any
of our officers could delay or prevent the development of our business plan as well as any future operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we cannot hire or retain skilled executive, managerial
and technical personnel, our business can be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently do not have a chief financial
officer. A failure to attract and retain a qualified individual for this position in particular, and other qualified executives,
managerial and technical employees in general, could adversely affect our operations and any future revenues. We continue to seek
additional qualified personnel in order to expand our development efforts and operations. There is no assurance that we will be
able to attract and retain any such qualified personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We depend on third parties for expertise in the development
of our biomass power generating projects.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The success of our business depends on our
ability to enter into agreements with third parties for financing, operations, construction, fuel supply, energy distribution and
other business functions. We depend on our relationships with third parties, such as engineers and regulatory specialists, to assist
in the development and maintenance of our biomass power generating projects. We also depend on contractors for the construction
of our biomass power generating facilities. Failure to hire or to enter into an agreement with any of these third parties on terms
favorable to our business could adversely affect our operations and financial condition. Any damage to our current relationships
could result in unforeseen expenses and impair our business strategy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Many of the terms of our relationships with strategic
partners that we depend on, and expect to continue to depend on, are not certain.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to implement our business strategy,
we rely upon strategic alliances with numerous consultants, contractors and equipment and biomass suppliers. The terms and conditions
of many of these agreements may allow for immediate termination, in part or in whole, by the partners in their discretion, or only
provide for a commitment on the part of the partners upon the occurrence of certain events. There is no assurance that we will
be able to enter into and perform our obligations under such strategic alliances. The failure of these events to occur or the termination
of any of these agreements could adversely affect our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Failure to obtain required permits and government approvals
and construction delays or defects could result in aborting projects or delays in the development and operation of our biomass
power generating facilities. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The development of new projects and acquisitions
of existing projects may involve delays or outright termination for numerous reasons. Terminating a project or delays in developing
and operating a facility may be due to a failure to obtain the required permits and governmental approvals, weather conditions,
changes in environmental regulation and other events that are out of our control. Any such delay could adversely affect our operations
and financial condition and could cause a default under project finance or power purchase agreements. Further, there is no assurance
that defects in the construction of our projects will not occur, which could delay the commencement of our operations or reduce
the projected production capacity. In addition, delays in the transportation of biomass sources to our facilities could further
delay and even halt operations and impair our ability to generate revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our business is subject to environmental laws and regulations,
violations of which could be expensive and harm our operating results and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business is subject to numerous federal,
state and local laws and regulations that govern environmental protection. These laws and regulations may change and evolve into
stricter standards and enforcement and larger penalties. New environmental laws and regulations may also be adopted. Our operations
may not be in compliance with new or future changes in laws and regulations. Compliance with such laws and regulations may require
significant unanticipated capital and operating expenditures. There is no assurance that we will be financially able to comply
with new or amended environmental laws and regulations. If we fail to comply with such laws and regulations, we may be subject
to fines and have our existing permits revoked or not subject to renewal. Further, private parties in such circumstances could
seek damages from us. Under any of those circumstances, we might be required to curtail or cease operations, take corrective action
or pay substantial damage claims. Thus, new or amended environmental laws and regulations may have a material and adverse effect
on our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Environmental cleanups of contaminated sites
and fines imposed by regulatory authorities on parties deemed to be liable for environmental contamination are very costly. If
contamination occurs for which we are deemed liable, the resulting expenses could have a material adverse effect on our business.
In addition, corrective action could delay operations and require significant expenditures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, some of the environmental and
other governmental laws and regulations may require us and/or our strategic partners to obtain permits prior to any development
or operation. There is no assurance that we or they will be able to obtain any or all such permits at minimal cost or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Changes in currently favorable legislation that provide
tax incentives or mandate the purchase of renewable energy by local utilities may adversely impact our profit margins.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business plan entails the generation
of revenue through electrical power, installed capacity, thermal energy and environmental attribute sales such as RECs and other
incentives, which represent a legislatively established premium paid for electricity generated from qualified renewable sources.
Favorable legislation also includes mandates requiring utilities to meet state renewable portfolio standards. We expect to qualify
for tax credits, grants and other types of incentive programs to provide additional equity capital. Accordingly, changes in legislation
that provide tax incentives would negatively impact our profit margin. We note that the federal incentive that provided a payment
of 30% of the eligible cost of qualifying assets under the Department of Treasury Section 1603 Tax Grant Program under the American
Recovery and Reinvestment Act of 2009 expired on December 31, 2011, and the U.S. federal renewable energy production tax credits
program is scheduled to expire on December 31, 2012 absent renewal. The loss of the Tax Grant program and the possible loss of
other incentive programs due to budgetary constraints or other reasons could significantly decrease the amount of capital available
and deployed in the renewable energy sector and may significantly reduce our ability to acquire needed capital and operate a renewable
energy facility on a positive cash flow basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Further, while we currently focus on developing
and acquiring projects in states with existing renewable energy legislation that mandates the purchase of renewable energy by local
utilities, there is no assurance that the currently favorable legislative and regulatory climate will continue in the current form.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Development and implementation of new technologies may
require significant capital expenditures to remain competitive.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate in an industry that is relatively
immature and subject to rapid technological development. Our success in the renewable energy industry will depend on our ability
to remain competitive by keeping abreast with the technological demands of the marketplace. Development and implementation of new
technologies could require significant capital expenditures, and there is no assurance that we will be able to develop advanced
energy production processes in a cost effective manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Further, new technology may result in better
alternatives to biomass sources, which would reduce demand for biomass energy projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We depend on third party suppliers for the supply of biomass
and other materials for our biomass power generating facilities.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend and will depend on third party
suppliers to provide the requisite biomass and other materials to power our planned facilities. A supplier&rsquo;s failure to supply
biomass or materials that meet our schedule, quality, quantity or cost requirements may negatively affect our cost targets or ability
to generate energy on a timely basis. Our inability to obtain substitute sources from alternative suppliers in a timely manner
or on terms acceptable to us would increase operating costs and adversely affect the operations of our biomass power generating
facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The pricing and availability of biomass may change to
our detriment, which could negatively impact our profit margins.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our profitability depends in part on our
ability to acquire inexpensive and plentiful biomass to fuel our biomass power generating facilities. The number of renewable energy
projects, whether ours or our competitors&rsquo;, utilizing biomass may increase substantially in the near future, which could
cause demand for biomass fuel to increase, and, accordingly, result in price increases. Although we believe that any biomass fuel
price increases can be passed through to the power purchaser, we can give no assurance of that. Any failure to pass on such price
increases could hurt our profit margins. Further, the economic viability of biomass power may be negatively impacted if demand
for biomass power declines due to price increases.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Gross margins from the sale of our products may decline
as a result of industry trends, competitive pressures and other uncertainties.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The biomass energy industry is rapidly developing
due a number of factors including governmental incentives, technological changes and expected future increases in the price of
fossil fuels. Our competitors have announced investing in new biomass energy projects. An increased number of biomass energy facilities
may cause sales prices of energy products derived from biomass sources to be lowered in order to gain market share or to increase
demand. In the face of pricing competition, we may lower the sales prices of our products, including electrical power and thermal
energy generated by our facilities, which could cause our gross margins to decline. As a result, our business, operating results
and financial condition may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Us and Our Common Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We are subject to an SEC investigation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We received  subpoenas from the SEC on
June 28, 2011 and March 28, 2012 requiring us to provide documentation to the SEC and for designated officers to provide
testimony to the SEC. The SEC is investigating us and our officers, directors and others regarding compliance or possible
violations under certain securities laws, primarily relating to our issuance and sale of unregistered securities, the
purchase and sale of our securities&nbsp;and reports and other disclosures that we&nbsp;made to our shareholders and
publicly. We have been cooperating with the SEC with respect to its investigation. Our Chief Executive Officer provided
testimony to the SEC on the record and we have produced documents to the SEC in response to the subpoena. The SEC has the
authority to order a wide scope of remedies against us and any of our officers or directors, any of which could materially
and adversely affect us, our ability to issue our securities and the price of, or ability to trade, our common stock. The SEC
is continuing its investigation and we cannot provide any assurance of when the SEC investigation will be concluded or the
effect of any remedies that the SEC may seek to enforce, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Trading of our shares was temporarily suspended and we
do not have a Market Maker.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 7, 2011, the SEC issued an order
pursuant to Section 12(k) of the Exchange Act that temporarily suspended the trading in our common stock from June 7, 2011 through
and including June 20, 2011. Each of the market makers for our common stock has declined to continue to make a market for our common
stock, and we have not been able to identify any broker-dealer that is willing to make a market for our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our securities are considered highly speculative because
of the early stage of development and nature of our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate in an industry that is highly
competitive, fast developing and subject to new technologies. We have yet to complete our first biomass power generating project,
and thus have generated limited revenues and do not expect to generate sufficient revenues or realize any material profit from
operations in the short term. Any profitability of our business depends on our successfully executing our business plan, which
is subject to the risks inherent in any new business and those risks specific to the renewable energy industry. In addition, we
continue to seek additional investment either through debt or equity to develop our projects and to sustain our future business
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our securities are subject to the &ldquo;Penny Stock&rdquo;
regulations of the SEC, which may restrict trading of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The SEC defines a &ldquo;penny stock&rdquo;
as any equity security other than a security excluded from such definition by Rule 3a51-1 of the Exchange Act. Generally, a &ldquo;penny
stock&rdquo; is any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Since our shares are not listed on a national stock exchange and the market price of
our shares is less than $5.00 per share, our securities are subject to the penny stock rules under Rule 15g-9 of the Exchange Act,
which imposes restrictions on broker-dealers who sell to persons other than established customers and accredited investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The penny stock rules require a broker-dealer
to, prior to the sale of the penny stock, approve the purchaser&rsquo;s account for transactions in penny stocks by obtaining the
purchaser&rsquo;s information regarding his or her financial situation, investment experience and investment objectives. The broker-dealer
must deliver a standardized risk disclosure document prepared by the SEC to provide the purchaser with additional information including
current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the purchaser&rsquo;s account. The broker-dealer
must make a written determination that the penny stock is a suitable investment for the purchaser and that the purchaser has sufficient
knowledge and experience in financial matters. In addition, the broker-dealer must receive the purchaser&rsquo;s written agreement
to the transaction. These additional requirements may affect the ability of broker-dealers to trade our securities and reduce the
level of trading activity in the secondary market. As a result, penny stock rules limit the marketability of our common stock and
may discourage investors from purchasing our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We do not expect to pay dividends to holders of our common
stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not paid any dividends on our common
stock and do not anticipate declaring any dividends on our common stock in the foreseeable future. Our board of directors presently
intends to retain all earnings, if any, for use in our business operations and development of facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Future sales or issuances of substantial amounts of our
common stock could affect the market price of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Future sales or issuances of substantial
amounts of our common stock, or securities convertible or exchangeable into shares of our common stock, in the public market, or
perceptions that those sales, issuances and/or conversions could occur, could adversely affect the prevailing market price of our
common stock and our ability to raise capital in the future. At the present time, we expect that we will require substantial amounts
of outside funding to finance our operations, which could be raised through the sale of our common stock or securities exercisable
or convertible into our common stock. In addition, as of December 31, 2011, our Series A preferred stock and Series C preferred
stock, collectively, are convertible into an aggregate of 3,998,974,009 shares of common stock. Furthermore, in connection with
our acquisition of the Susanville facility, we issued preferred stock which may be converted into 434,782,610 shares of our common
stock, of which this prospectus relates. We may further issue additional shares of such preferred stock contingent upon the completion
of certain milestones in the development of the Susanville facility.&nbsp;The sale of shares of our common stock by the holders
of such Series B preferred stock is restricted but we may amend the selling restrictions with respect to the sale of such shares.
The rights of such holders and our ability to issue additional shares of our common stock whether upon conversion of outstanding
shares of preferred stock or otherwise or any class of preferred stock including a class that may have rights that are senior to
the rights of our common stock, is a factor or &ldquo;overhang&rdquo; that may reduce the price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common stock price has been below $0.01 per share
and could remain at that level or, if it increases, could be subject to volatility.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market price for our common stock has
been below $0.01 and is subject to extreme price and volume fluctuations in response to market and other factors. It is impossible
to predict whether the price of our common stock will rise. Trading prices of our common stock will be influenced by our operating
results and prospects and by economic, financial and other factors. In addition, general market conditions, including the level
of, and fluctuations in, the trading prices of stocks generally, and sales of substantial amounts of common stock by us in the
market, or the perception that such sales could occur, could affect the price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>A small number of shareholders control us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Michael B. Bartoszek, our President and
Chief Executive Officer, and Louis T. Bravakis, our Executive Vice President, hold a majority of the voting power of our capital
stock through their ownership of common stock and 100% of the outstanding shares of our Series A preferred stock and Series C preferred
stock, respectively. Our Series A preferred stock is collectively entitled to 51%, and our Series C preferred stock is collectively
entitled to 10%, of the voting power, independent of the number of outstanding shares of our common stock and preferred stock at
any given time. Accordingly, Michael B. Bartoszek, acting alone or together with Louis T. Bravakis, has the ability to control
the membership of a majority of our board of directors and to decisively influence the outcome of decisions requiring shareholder
approval. The level of ownership held by these shareholders may delay, deter or prevent the change of control, even if such change
of control would be beneficial to the other holders of our securities. Additionally, as the number of shares of common stock that
Messrs. Bartoszek and Bravakis are entitled to upon conversion will depend on the number of outstanding shares of our common stock
and that may be issued upon the conversion or exercise of securities convertible into common stock as of the conversion date, we
may be required to issue to Messrs. Bartoszek and Bravakis substantial additional shares of our common stock depending on our capitalization
as of any given conversion date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have not performed a management assessment of the effectiveness
of our internal controls over financial reporting.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 404 of the Sarbanes-Oxley Act of
2002 requires annual management assessments of the effectiveness of a company&rsquo;s internal control over financial reporting
beginning in 2013. We have not yet performed such an assessment. It is possible that, if we perform such an assessment, it would
identify deficiencies with respect to our internal controls over financial reporting, and any such deficiencies may be material.
We do not have sufficient employees or staff to maintain independence in our financial management processes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">MARKET FOR OUR COMMON STOCK</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There currently is no established public
trading market for our common stock. The following table sets forth, for the fiscal quarters indicated, the high and low sales
prices for our common stock on the OTC Pink Market. Our common stock trades under the symbol LLEG.PK. Quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">High</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Low</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 1in">2010:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left; padding-left: 1in">First Quarter</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: right">$0.0027</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: right">$0.0013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Second Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0019</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Third Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0055</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Fourth Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0068</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0025</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">High</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Low</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 1in"><B>2011</B>:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left; padding-left: 1in">First Quarter</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: right">$0.0052</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: right">$0.0040</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Second Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0054</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0010</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Third Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0030</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0003</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">Fourth Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0001</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 1in">&nbsp;</P><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 1in"><B>2012:</B></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 1in">First Quarter</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">$0.0007</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">$0.0001</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 1in">Second Quarter (through April 25, 2012)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0004</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0002</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of April 25, 2012, we had 81 shareholders
of record for an aggregate of 2,456,721,088 shares of our common stock issued and outstanding. Also as of April 25, 2012, we have
an aggregate of 100,000,000 shares of common stock that may be issued upon the exercise of outstanding stock options and an aggregate
of 3,998,974,009 shares of common stock that may be issued upon the conversion of outstanding shares of our Series A preferred
stock and Series C preferred stock. As of May 10, 2012, which is the date when the outstanding shares of our Series B preferred
stock will be convertible into an aggregate of 434,782,610 shares of common stock (all of which are being registered pursuant to
the registration statement of which this prospectus forms a part), we will have an aggregate of 5,113,801,215 shares of common
stock that may be issuable upon conversion of our Series A preferred stock, Series B preferred stock and Series C preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not declared or paid any cash dividends
to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management
to utilize all available funds for the development of our business. The payment of dividends in the future will depend upon, among
other factors, our earnings, capital requirements, and operating financial conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Equity Compensation Plan Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes information
as of December 31, 2011 about our outstanding stock options and shares of common stock reserved for future issuance under our existing
equity compensation plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Plan Category</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of securities <BR>
to be issued upon<BR>
exercise of <BR>
outstanding options,<BR>
warrants and rights</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Weighted-average<BR>
exercise price of<BR>
outstanding options,<BR>
warrants and rights</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of <BR>
securities remaining<BR>
available for future<BR>
issuance under <BR>
equity compensation<BR>
plans (excluding<BR>
securities reflected in<BR>
column (a))</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Equity Compensation Plans approved by security holders&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 43%; font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Equity Compensation Plans not approved by security holders</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">100,000,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 16%; font-size: 10pt; text-align: right">0.0013</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 45pt">Total</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right; border-bottom: Black 1pt solid">100,000,000</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right; border-bottom: Black 1pt solid">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF<BR>
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-weight: normal"><I>The
following discussion of our financial condition and results of operation should be read in conjunction with the financial statements
and related notes that appear elsewhere in this prospectus. This discussion contains forward-looking statements and information
relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks
and uncertainties, including the risks in the section entitled Risk Factors beginning on page 3, that may cause our or our industry&rsquo;s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-weight: normal"><I>These
forward-looking statements speak only as of the date of this prospectus. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except
as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking
to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with
regard thereto or to conform these statements to actual results. </I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to develop and manage renewable
energy facilities that produce electricity and thermal energy for industrial purposes from sustainable biomass sources, other renewable
fuel sources or combined-cycle natural gas. Biomass generally refers to any organic matter that is available on a renewable or
recurring basis, including agricultural crops and trees, wood and wood residues, plants (including aquatic plants), grasses, animal
manure, municipal residues, and other residue materials. Combined-cycle natural gas refers to a process in which a steam turbine
generator is used in concert with a combustion turbine and heat recovery steam generator to generate electric and thermal energy
in an efficient manner. Our business has been primarily focused on, but is not limited to, developing renewable energy facilities
that use wood as the renewable fuel source. We seek to generate revenues through:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>operating and managing renewable energy facilities owned by us;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>management fees from managing renewable energy facilities owned jointly with other parties or by others;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>joint ventures or other business arrangements to develop excess space at our facilities with other developers, such as to develop
photovoltaic solar generation facilities; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the sale of our developed or partially developed facilities.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a &ldquo;reverse&rdquo; merger with Laidlaw Energy Group, Inc. in which we were the surviving corporation.
We then changed our name to Laidlaw Energy Group, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Approximately 85% of our revenues since
the August 14, 2002 merger to December 31, 2011 were generated from the sale in 2010 of our sale of our interest in a 75 megawatt
renewable energy project in Berlin, New Hampshire that we acquired in 2008 and developed to a status that was substantially ready
for the commencement of construction, and management fees. We have been investing in other projects and have not generated significant
operating revenues from any other source. We do not foresee any similar liquidity or sale event with respect to any of our current
investments for at least the next 12 months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In November 2011, we acquired assets relating
to a biomass facility in Susanville, California through the purchase of all of the membership interests of Henri Susanville LLC.
The facility is located on 40 acres of land that we lease and have an option to purchase for a net price of approximately $2.5
million as of January 30, 2013. The plant&rsquo;s assets include a boiler capable of producing 160,000 pounds of steam per hour
and a turbine that can generate approximately 12.5 megawatts of base-load electricity. The facility site has excess acreage. We
are evaluating the development of a solar generation facility that could generate approximately five megawatts of electricity or
leasing the property to a solar developer who could benefit from the generation potential and grid interconnection that the site
offers. The Susanville facility is not presently in a condition to generate electricity. We are currently evaluating our ability
to obtain sufficient financing in order to refurbish the facility and to purchase the property. The plan would be to invest approximately
$10 million over a 12 to 18 month period to refurbish the critical power generation assets and invest additional funds to purchase
the property for a net cost of approximately $2.5 million as of January 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are seeking other acquisitions and management
opportunities to be able to generate recurring revenues, however, there cannot be any assurance that we will succeed in seeking
such opportunities, whether as a result of our inability to identify additional potential biomass power generating facilities,
our inability to obtain project equity or other financing for any particular project, or our inability to secure long-term power
purchase agreements for the sale of the power from any facilities we do develop. See &ldquo;Risk Factors&mdash;Risks Related to
Our Business,&rdquo; for a discussion of these and other risks, trends and uncertainties that may adversely affect our revenues
or income or that could result in our liquidity decreasing in any material way. Potentially offsetting these risks, trends and
uncertainties are our belief that there is a growing demand for alternative energies, including energy generated from sustainable
biomass sources which, if accurate, could increase our ability to obtain financing, to identify potential projects and ultimately
to generate revenue and sustained liquidity. We can give no assurance that we will generate meaningful revenues or sustained liquidity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="margin: 0; font-size: 10pt; font-weight: bold">Results of Operations &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin: 0; text-align: right; font-size: 10pt; font-style: italic; font-weight: bold">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: left; font-size: 10pt; font-style: italic; font-weight: bold; margin-left: 0.25in">Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: left; padding-left: 0.48in">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years Ended December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Increase (Decrease)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.48in">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><B>%</B></TD><TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0.48in">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; font-size: 10pt; text-align: left; padding-left: 0.48in">Revenues</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">106,251</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(106,251</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-100</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Cost of Revenues</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">14,267</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(14,267</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-100</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; text-indent: 0.24in">Gross Profit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">91,984</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(91,984</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-100</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Gain on Sale of Equity Investment</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-100</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">Income Before Operating Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,847,984</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,847,984</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-100</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in">Total Operating Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">980,199</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">251,674</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">26</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Other Income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">109,616</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(109,616</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-100</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in; padding-bottom: 2.5pt">Net (Loss) Income</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,977,401</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(3,209,274</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-162</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There were no revenues earned for the year
ended December 31, 2011, compared to $106,251 for the year ended December 31, 2010. Prior period revenue was comprised of three
months of management fees for various projects associated with our former joint venture with a strategic partner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of revenues for the year ended December
31, 2010, consisting solely of salary expenses associated with earning the management fees, was $14,267, for a gross margin of
$91,984 or 86.6%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Income before operating expenses was zero
for the year ended December 31, 2011, compared to $2,847,984 for the year ended December 31, 2010. Income before operating expenses
for the year ended December 31, 2010 consisted primarily of a $2,756,000 gain from the sale of our interest in the Berlin, New
Hampshire project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total operating expenses, consisting primarily
of compensation, rent, travel and professional fees, increased $251,674 or 26% to $1,231,873 for the year ended December 31, 2011,
compared to $980,199 for the year ended December 31, 2010, primarily due to legal fees and rent expenses incurred in connection
with the New Bedford, Massachusetts and Susanville, California projects as well as accounting and audit fees incurred in conjunction
with the preparation of our Form 10 filed with the Securities and Exchange Commission. These increases were partially offset by
a reduction in professional fees incurred during the development of the Berlin, New Hampshire project in 2010 and a decrease in
stock based compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other income, net, of $109,616 for the year
ended December 31, 2010, is due to note proceeds forfeited by a strategic partner related to activities associated with a joint
venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net loss for the year ended December 31,
2011 was $1,231,873 compared to net income of $1,977,401 for the year ended December 31, 2010, for the reasons discussed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Year Ended December 31, 2010 Compared
to Year Ended December 31, 2009</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Years Ended December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Increase (Decrease)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">$</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; font-size: 10pt">Revenues</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">106,251</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">35,417</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">70,834</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">200</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0in; padding-bottom: 1pt">Cost of Revenues</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">14,267</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,941</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">12,326</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">635</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Gross Profit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">91,984</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33,476</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">58,508</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">175</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Gain on Sale of Equity Investment</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">N.M.</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Income Before Operating Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,847,984</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33,476</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,814,508</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8408</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0in">Total Operating Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">980,199</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">607,495</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">372,704</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">61</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Other Income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">109,616</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">4,219</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">105,397</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2498</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 2.5pt">Net Income (Loss)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,977,401</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(569,800</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,547,201</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">N.M. </TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue was $106,251 for the year ended
December 31, 2010 compared to $35,417 for the year ended December 31, 2009. Revenue for the year ended December 31, 2010 was comprised
of three months of management fees for various projects associated with our former joint venture with a strategic partner. Revenue
for the year ended December 31, 2009 was comprised of one month of management fees for various projects associated with our former
joint venture with a strategic partner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of revenues, consisting solely of salary
expenses associated with earning the management fee revenue, for the year ended December 31, 2010 was $14,267 for a gross profit
of $91,984 or 86.6% and for the year ended December 31, 2009 was $1,941 for a gross profit of $33,476 or 94.5%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Income before operating expenses was $2,847,984
for the year ended December 31, 2010 compared to $33,476 for the year ended December 31, 2009. Income before operating expenses
for the year ended December 31, 2010 consisted primarily of a $2,756,000 gain from the sale of our interest in the Berlin, New
Hampshire project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total operating expenses, consisting primarily
of compensation, rent, travel and professional fees, increased $372,704 or 61% to $980,199 for the year ended December 31, 2010
compared to $607,495 for the year ended December 31, 2009, primarily due to legal fees incurred in connection with the sale of
our interest in the Berlin, New Hampshire project in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other income, net, was $109,616 for the
year ended December 31, 2010, compared to $4,219 for the year ended December 31, 2009, representing an increase of $105,397. This
increase was primarily due to income earned in connection with a dissolved joint venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net income for the fiscal year ended December
31, 2010 was $1,977,401 compared to a net loss of $569,800 for the year ended December 31, 2009, for the reasons discussed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><B><I>Liquidity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measure our liquidity in a number of
ways, including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: Red"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><B>December 31,</B></TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; font-size: 10pt; padding-bottom: 2.5pt">Cash</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,197,563</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">745,140</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">700,541</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Working Capital</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">751,121</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,991,247</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(211,154</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: Red"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: Red"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt; color: Red">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt; color: Red"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt; color: Red">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to generate cash flows from our
business through the cash flows of projects we develop, management fees for development services, plus through the sale of our
investment in renewable energy projects. The amount, frequency and predictability of cash receipts depend on a number of factors,
including the number of projects in our portfolio and the stage of development of each project. As a result, cash flows may fluctuate
significantly from year to year. Approximately 85% of our revenues since August 2002 to December 31, 2010 were generated from the
sale in 2010 of our sale of our interest in a 75 megawatt renewable energy project in Berlin, New Hampshire that we acquired
in 2008 and developed to a status that was substantially ready for the commencement of construction. We do not foresee any similar
liquidity or sale event with respect to any of our current investments for at least the next 12 months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the year ended December
31, 2011, we did not generate any revenue, generated cash from operating activities of $425,139, incurred a net loss of
$1,231,873, and had an accumulated deficit of $1,327,594 as of December 31, 2011. These conditions raise substantial doubt
about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to
reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our cash requirements during 2012, will primarily be for the enhancement of operations, conducting project feasibility studies
and other development and operational expenses. These amounts will include employee salaries, cost of external services (consulting,
legal and other professional) and costs associated with identifying new projects. We also expect to spend approximately $20,000
per month in incremental development and operational expenses for our newly acquired facility in Susanville, California. Cash
on hand should be sufficient to fund operations for substantially all of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">We have limited
available cash resources and require additional financing in order to fund our current operations beyond this year. The next phase
of our current projects will require significant funding, including approximately $10 million to refurbish Susanville&rsquo;s
critical power generation assets and approximately $2.5 million to purchase the Susanville property. Furthermore, even if we are
successful in raising additional funds and moving ahead with certain projects, we cannot give any assurance that we will, in the
future, be able to achieve a level of profitability from operations to sustain our operations.</FONT> </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Availability of Additional Funds</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that our primary sources of additional
working capital are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>project level financing of our Susanville facility or other facilities that we may acquire or manage; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>sale of equity securities or incurrence of indebtedness.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We meet with and evaluate potential
funding sources and joint venture partners from time to time, taking into account, among other things, the cost of capital
with respect to such funding sources. As of April  30, 2012, we have not entered into any definitive agreements with any
potential funding sources to raise additional funds. Despite our efforts, there is no assurance that we will be able to
secure additional funding, or funding on terms acceptable to us, to meet our financial obligations or to pursue our growth
strategy. If we cannot raise additional capital, form a joint venture or similar commercial alliance with another entity, or
generate sufficient revenues, we may need to scale back operations, including but not limited to ceasing to further develop
one or more projects or selling such projects, cease to acquire additional facilities, or cease operations entirely.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the years ended December 31, 2011,
2010 and 2009, our sources and uses of cash were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><B>Years Ended December 31,</B></TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; font-size: 10pt; text-align: left">Net cash provided by (used in) operating activities</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">425,139</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(62,901</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(556,062</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Net cash used in investing activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(192,716</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">220,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">107,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">240,750</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Net increase (decrease) in cash and cash
    equivalents</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">452,423</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">44,599</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(315,312</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Net cash (used in) provided by operating activities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash provided by operating activities
totaled $425,139 for the year ended December 31, 2011 compared to net cash used in operating activities of $62,901 for the year
ended December 31, 2010. The net cash provided in the year ended December 31, 2011 was due primarily to $1,806,000 in proceeds
from the sale of our interest in the Berlin, New Hampshire project, partially offset by the net loss from operations of $1,231,873.
The net cash used in the year ended December 31, 2010 was primarily due to the fact that the $980,199 of operating expenses and
the net repayment of $517,500 of other liabilities exceeded the $950,000 of proceeds we received in partial payment for the Berlin,
New Hampshire project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash used in operating activities totaled
$62,901 for the year ended December 31, 2010 compared to $556,062 for the year ended December 31, 2009. The net cash used in the
year ended December 31, 2010 was primarily due to the fact that the $980,199 of operating expenses and the net repayment of $517,500
of other liabilities exceeded the $950,000 of proceeds we received in partial payment for the Berlin, New Hampshire project. The
net cash used in the year ended December 30, 2009 was primarily due to the $569,800 net loss from operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Net cash used in investing activities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash used in investing activities
totaled $192,716 for the year ended December 31, 2011 compared to zero for the year ended December 31, 2010. The net cash
used during the year ended December 31, 2011 was due to  cash outlays related to the acquisition of the Susanville
facility, including $97,500 in consideration paid to the sellers of the facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Net cash provided by financing activities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash provided by financing activities
was $220,000 for the year ended December 31, 2011 compared to $107,500 for the year ended December 31, 2010. The cash provided
during the year ended December 31, 2011 was due to $220,000 of proceeds from the issuance of preferred stock. The cash provided
during the year ended December 31, 2010 was primarily due to $100,000 of proceeds from the issuance of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash provided by financing activities
totaled $107,500 for the fiscal year ended December 31, 2010 compared to $240,750 for the fiscal year ended December 31, 2009,
which are primarily due to $100,000 and $240,750 of proceeds from the issuance of our common stock, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Off-balance sheet arrangements comprise
those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements
are not recorded as liabilities under accounting principles generally accepted in the United States. Although off-balance sheet
arrangements serve a variety of our business purposes, we are not dependent on these arrangements to maintain our liquidity and
capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements
to have a material adverse effect on liquidity and capital resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies And Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Critical accounting policies are defined
as those that involve significant judgments and uncertainties, and potentially result in materially different results under different
assumptions and conditions. We believe that our most critical accounting policies are limited to those described below. For a detailed
discussion on the application of these and other accounting policies, see Note 2 in the notes to our consolidated financial statements
included in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Use of Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Preparation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. Our significant
estimates include the allowance related to the receivable, the recoverability of long lived assets, the valuation allowance related
to deferred tax assets and the stock-based compensation assumptions. Actual results could differ from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Going Concern</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The accompanying financial statements do
not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts
and classification of liabilities that may result should we be unable to continue as a going concern. If the consolidated financial
statements were prepared on a liquidation basis, the carrying value of the assets and liabilities would be adjusted to reflect
the liquidation basis of accounting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Accounts Receivable</I> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Accounts receivable includes trade accounts
receivable, which are recorded at net invoice values and are not interest bearing, and uncollected proceeds from the sale of investments.
We maintain an allowance for doubtful accounts for estimated uncollectible accounts receivable, if any. The allowance is based
on our assessment of known delinquent accounts, the aging of accounts receivable and specific knowledge of counterparties. We re-evaluate
our allowance on a regular basis and adjust its reserves as needed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Revenue Recognition </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have generated and may generate revenues
from management fees, the sale of power, or through the sale of our interest in facilities, its joint venture interests or its
equity investments. We earn management or development fees from development projects which are recognized as the services are performed.
We consider amounts to be earned once evidence of an arrangement has been obtained, services have been rendered, fees are fixed
or determinable, and collectability is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Stock-Based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measure the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. Employee and director awards are measured
on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in
exchange for the award, which is usually the vesting period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Income Taxes</I> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We record the tax effects of all transactions
that have been reported in our financial statements. This includes tax effects that are taxable or deductible in the current reporting
period, as well as tax effects that will lead to taxable income or tax deductions in future periods. Income taxes are accounted
for using the asset/liability method. At each balance-sheet date, a current tax asset or liability is recorded, representing income
taxes currently refundable or payable. Deferred tax assets and liabilities are also recorded, representing the tax effects of temporary
book-tax differences, which will become payable or refundable in future periods. Deferred tax assets arise principally from net
operating losses and capital losses available for carryforward against future years&rsquo; taxable income. Under the asset/liability
method, the income tax provision is the result of the change in these current and deferred tax accounts from period to period,
plus or minus tax payments made or refunds received during the year. A valuation allowance is recognized against deferred tax assets
if, based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion
or all of the deferred tax asset will not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We follow Accounting Standards Codification,
or ASC, 740 rules governing uncertain tax positions which provide guidance for recognition and measurement. This prescribes a threshold
condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial
statements. It also provides accounting guidance on derecognition, classification and disclosure of these uncertain tax positions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest costs and penalties related to
income taxes are classified as interest expense and selling, general and administrative costs, respectively, in our financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recently Issued Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, the FASB issued ASU 2011-04,
Fair Value Measurement (Topic 820). This updated accounting guidance establishes common requirements for measuring fair value and
for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards.
This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures,
while other amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective
for interim and annual periods beginning after December 15, 2011. The adoption of this standard is not expected to have a material
impact on the Company&rsquo;s consolidated financial position or results of operations. Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the Company&rsquo;s financial statements upon adoption. Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the Company&rsquo;s financial statements upon adoption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of these standards are more fully described
in Note 2 to our audited consolidated financial statements included in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We dismissed our former accountant, Corso
&amp; Company, on June 7, 2011. Corso &amp; Company did not produce a report on our financial statements for any of the two years
ended December 31, 2010 or the nine months ended September 30, 2011. Accordingly, no report on our financial statements for either
of December 31, 2009 or 2010 contained an adverse opinion or a disclaimer of an opinion, or was qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to dismiss Corso &amp; Company as our accountants was recommended and approved
by our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the two years ended December 31,
2010 and subsequent period through June 7, 2011, we had no disagreements with Corso &amp; Company on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction
of Corso &amp; Company, would have caused Corso &amp; Company to make reference to the subject matter of the disagreement(s) in
connection with its report on the financial statements for each such period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 22, 2011, we engaged Marcum LLP
as our principal independent accountant to audit our financial statements. At no time prior to engaging Marcum LLP did we or anyone
acting on our behalf consult Marcum LLP regarding the application of accounting principles to a specified transaction, or the type
of audit opinion that might be rendered on our financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BUSINESS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a smaller reporting company as defined
by applicable federal securities regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a &ldquo;reverse&rdquo; merger with Laidlaw Energy Group, Inc., referred to as the Predecessor Company,
in which we were the surviving corporation. We then changed our name to Laidlaw Energy Group, Inc. The Predecessor Company was
formed in 1999 to own and operate natural gas-fired generation assets and related entities. We had no operations or assets at the
time of our reverse merger with the Predecessor Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our executive offices are located at 90
John Street, New York, NY 10038; our telephone number is (212) 480-8400. Our website is located at http://www.laidlawenergy.com.
The information on our website is not part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to develop and manage renewable
energy facilities that produce electricity and/or thermal energy for commercial and industrial purposes from sustainable biomass
sources, other renewable fuel sources or combined cycle natural gas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Biomass generally refers to any organic
matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood residues, plants
(including aquatic plants), grasses, animal manure, municipal residues and other residue materials. The primary sources of biomass
or &ldquo;feedstock&rdquo; that we expect to use in our facilities are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">clean urban wood waste comprised mainly of used lumber,
trim, shipping pallets, trees, branches and other wood debris from construction and demolition activities;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">by-products or mill residue from the manufacturing
of fibers, pulp, paper, lumber, plywood, cotton and other products;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">tops, branches, non-merchantable timber and timber
stand improvement thinnings from managed forestry operations; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">energy dedicated crops such as fast-growing trees
and grasses, stalks, straws and perennial crops.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">We believe that biomass fuels are an attractive alternative
to fossil fuels primarily because:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biofuels, wood and organic waste are the largest single
source of renewable fuel on a global basis;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the price for fossil fuels is increasing and becoming
more volatile;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the possible supply shortages for fossil fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the relative safety and environmentally friendly
ability to harvest and obtain biomass fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">of the numerous government sponsored incentives available
for power generation facilities that use alternative or renewable fuels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biomass fuels may be utilized through proven environmentally
friendly technologies;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">biomass fuels are the only form of renewable energy,
other than hydropower, that can provide for dependable base-load or continuous rather than intermittent, generation of electric
and thermal energy; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">electric and thermal generation from these fuel sources
are widely considered to be carbon-neutral, which means the carbon dioxide emissions created through the combustion process are
offset by the sequestration of carbon dioxide by trees and plants.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that there is a sufficient readily
available supply of biomass fuel for our proposed facilities and intend to continue to evaluate the sufficient and reliable supply
of biomass fuel as part of our acquisition evaluation process. For instance, wood chips and related products used for industrial
purposes are quoted in weekly commodity reports and are generally readily available at &ldquo;roadside&rdquo; prices, which is
the price a buyer pays for wood chips prior to any transport and preprocessing to the end-use location at a roadside in the forest,
at a processing mill location in the case of mill residue, or at a landfill for urban wood waste.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To a lesser extent, we also intend to pursue
the development of facilities that utilize natural gas in a combined-cycle for projects that can provide both electricity and thermal
energy. A combined-cycle facility uses a steam turbine generator in concert with a combustion turbine and heat recovery steam generator
to generate electric and thermal energy in an efficient manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our current strategy focuses on renewable
energy facilities that use wood as the primary component of the renewable fuel supply. We expect that a significant amount of our
wood fuel will be from wood waste and residue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our primary focus is developing multiple
projects and building a portfolio of projects. We will, however, also consider other opportunities that we believe would be beneficial
to us. An example of this strategy is our investment in, development and sale of our interest in a commercial biomass energy plant
located at the site of the former Fraser Papers Pulp Mill in Berlin, New Hampshire, referred to as the Berlin facility. We planned
the Berlin facility to be one of the largest commercial biomass energy plants in North America, expected to generate 75 megawatts
of electricity, and consume in excess of 750,000 tons of clean whole tree wood chips per year in order to generate an annual gross
electric output of approximately 550,000 megawatt hours. Prior to the sale of our interest in September 2010, we managed all
aspects of the development of this project, including identifying the asset, structuring the acquisition, developing the strategy
to convert the paper mill&rsquo;s boiler for biomass utilization and engaging The Babcock &amp; Wilcox Company to implement the
refurbishment. We also obtained all material permits for the Berlin facility, conducted the necessary studies, concluded the required
agreements to interconnect the facility to the power grid, and negotiated the terms of a 20-year power purchase agreement that
was subject to regulatory approval and estimated to be valued at more than $1.3 billion for 100% of the facility&rsquo;s output.
In 2010, we sold our 50% indirect interest in the Berlin facility and recognized a gain of $2,756,000. See &ldquo;&mdash;Former
Projects&mdash;Berlin Facility&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to develop biomass power generation
facilities by redeploying and refurbishing power generation assets, such as through the retrofitting of paper mills, fossil fuel
power facilities or other retired industrial facilities, as opposed to developing newly constructed &ldquo;greenfield&rdquo; projects.
We believe that this strategy will enable us to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>develop renewable energy facilities with a capital investment requirement that is lower than the capital investments that would
be required to develop a similar facility through land acquisition, demolition of any existing facility, land improvement and construction
of a new facility;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>potentially achieve more favorable returns on equity due to the lower capital investment required to retrofit an existing facility
as opposed to building a newly constructed facility;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>utilize numerous government incentive programs, including federal tax credits; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>target existing industrial sites for our projects with existing or a reduced burden for zoning and permits, thus allowing for
a shorter development cycle.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a general goal, we seek to develop such
retooled biomass projects for approximately one-half to two-thirds of the cost of a newly constructed facility with comparable
capacity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also seek to reduce our operating expenses
in the development of renewable energy facilities through strategic alliances with consultants, contractors, equipment suppliers
and others, who are aligned with our approach. To mitigate technology risk, we utilize commercially proven and available technologies
and enter into turn-key &ldquo;EPC&rdquo; - engineer, procure, construct &ndash; contracts with credit-worthy EPC contractors that
include customary performance guarantees. We intend to further reduce the capital investment requirements by seeking project financing
in the form of long-term debt as well as government tax and other incentive programs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to generate revenues through:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">operating and managing renewable energy facilities
owned by us;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">management fees from managing third party or jointly
owned renewable energy facilities;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">monetizing excess space at our facilities by leasing
or other arrangements with others, such as developers of photovoltaic solar generation facilities; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the sale of our developed or partially developed facilities.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue from operating a facility is typically generated through
the sale of electricity and, where applicable, thermal energy, under a long-term power purchase agreement with a utility or end-user
that has one or more of the following revenue components:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Electric Power. Sale of electrical power generated
by our facilities to utilities or directly to end-users that have significant electric needs or utilities.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Thermal Energy. Sale of thermal energy generated by
our facilities directly to end-users that have significant thermal energy needs.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Installed Capacity. Revenue based on the installed
capacity available for the generation of electricity or thermal energy from utilities or end-users that have significant electric
or thermal energy needs.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, we will seek to generate revenue
from the sale of environmental attributes, such as renewable energy credits, or RECs, which represent a legislatively established
premium paid for electricity generated from qualified renewable sources, such as our planned projects and monetizing tax and other
government-sponsored incentives generated by our facilities. Our facilities may also generate carbon credits if a market for such
credits is established in the jurisdictions in which we operate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also expect each project to qualify for
U.S. federal renewable energy production tax credits and the federal New Markets Tax Credits program, to the extent such programs
are in effect from time to time. Renewable energy production tax credits are a per-kilowatt-hour tax credit for electricity generated
by qualified energy resources and sold to an unrelated person during the taxable year. The duration of the tax credit is generally
10 years after the date the facility is placed in service, and the tax credit can be passed through to project stakeholders to
offset taxable income or monetized through transactions with third parties. We estimate that the amount of tax credit generated
by the type of open-loop biomass projects we typically pursue that are placed in service prior to December 31, 2013 is $11.00 per
megawatt hour. This amount is as of December 31, 2011 and is adjusted annually for inflation, and reduced for projects that receive
other federal tax credits, grants, tax-exempt financing, or subsidized energy financing. Additional tax benefits, grants and other
types of incentive programs may also be offered periodically by the federal or state governments that could offer us additional
benefits, such as state and local incentives which may include reduced property tax assessments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are currently focusing exclusively on
project development in states with existing renewable energy legislation that mandates the purchase of renewable energy by local
utilities. Currently, 30 states and the District of Columbia have passed such renewable energy or similar legislation. We believe
such a requirement on the part of utilities to secure renewable energy yields a marketplace that is favorably disposed to long-term
contracts for project outputs such as electricity, biothermal energy, RECs and capacity sales, thus providing stable, predictable
and long-term cash flows for our projects. We seek to include a mechanism in our power purchase agreements that adjusts the purchase
price of power generated by our facilities in the event of increases in biomass fuel prices to hedge against inflation and increased
pricing pressures from biomass suppliers, while at the same time protecting utility rate-payers from exposure to above market energy
prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to develop projects in locations
with a high concentration of biomass fuel, such as heavily forested regions or within close proximity to the logging and forest
products industry or other areas with sufficient biomass waste, although we also may pursue projects that are situated in urban
areas that generate biomass from other sources, such as pallet wood. We conduct studies of biomass availability before pursuing
each particular project, and we generally seek to obtain contractual commitments for biomass fuel supplies to guarantee delivery
and hedge against price increases of biomass fuel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Biomass Renewable Energy Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the 2010 preliminary data
released by the U.S. Energy Information Administration in its June 2011 &ldquo;Renewable Energy Consumption and Electricity Preliminary
Statistics 2010&rdquo;:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Biomass was the third largest renewable power source
in the United States and contributed to 13.30% of domestic electric net generation from renewable energy sources, while hydropower
conventional contributed 60.45% and wind power contributed 22.26%.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Biomass contributed to more than one-third of the
power source for electric generation from renewable power sources, excluding hydroelectric conventional power sources.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Wood and wood-derived fuels contributed to more than
22% of the power source for electric net generation of all renewable power sources excluding non-conventional hydro power sources.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The U.S. Department of Energy reported in September 2011 that the 2010 nameplate megawatt capacity of biomass
power plants is approximately 13,053. We expect that biomass will continue to grow and be an important component of the United
States fuel mix for electric generation. The U.S. Energy Information Administration Annual Energy Outlook that was released in
April 2011 projects that, assuming no additional constraints on carbon emissions, electricity generation from renewable sources
will grow by 72% in the reference case, raising the share of total generation from renewable sources from 11% in 2009 to 14% in
2035. Most of the projected growth in renewable electricity generation in the power sector is expected to be from wind and biomass
facilities. The growth in wind generation is primarily driven by state renewable portfolio standards, which we referred to as
RPS, required in the generation of electric energy and federal tax credits. Generation from biomass comes from both dedicated
biomass plants and co-firing in coal plants. Its growth is driven by site availability, state RPS requirements, the availability
of low-cost feedstock and the need by utilities for fuel diversity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Market for Renewable Energy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A significant number of states, including
California, where we currently do business, have passed legislation requiring local utilities to derive a portion of their retail
electric supply from renewable resources. Since the output from power plants is generally sold into a large pool, RECs were created
as a means of tracking the sale of renewable energy and compliance with renewable energy legislation. Essentially, RECs are financial
instruments that can be traded separately from physical energy sales. The price derived for REC sales is a function of supply and
demand in a given jurisdiction or can be established legislatively. RECs have the potential to substantially add to project revenue.
Prices for RECs are established by trading markets. Since utilities are generally required to obtain RECs in greater amounts with
each passing year in order to meet increasing state RPS, we generally seek to enter into long-term contracts with local utilities
for our projects that bundle electricity, RECs and capacity sales. Such contracts are generally beneficial to us, since they provide
a level of certainty with respect to future project revenues from a credit-worthy counter-party, and thereby provide credit support
for the long-term, non-recourse debt that is often used to fund a significant portion of power generation project capital costs.
The prices of RECs in the California market have experienced price volatility during 2011 and we do not expect to rely on the sale
of RECs as a significant part of any project&rsquo;s financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Former Projects</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Berlin Facility</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As described above, we invested in, developed
and sold our interest in the Berlin facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We identified the Berlin facility in October 2006 as the site for the potential development
of a large-scale biomass energy power plant. Through December 2008, approximately $500,000 was expended in furtherance of our efforts
to acquire and develop the Berlin facility, including commencing negotiations of a long-term power purchase agreement with The
Public Service Company of New Hampshire and executing an asset purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 23, 2008, Laidlaw Biopower
entered into a Development Agreement with PJPD Holdings, LLC, an affiliate of Cate Street Capital, Inc., providing that PJPD
would fund all of the project's development costs up, including reimbursing our costs to date, to a specified cap
in consideration for its ownership of the physical property comprising the Berlin facility. The Development
Agreement contemplated the execution of the lease whereby PJPD would receive a fixed rent payment, assignment of the asset
purchase agreement to PJPD and Laidlaw would retain any excess future cash flows generated from the contemplated biomass
energy plant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2009, we filed an application with the
New Hampshire Site Evaluation Committee for a permit to construct and operate the proposed biomass power plant. On November 8,
2010, we received unanimous approval for the requisite construction and operating permit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 8, 2010, we executed a Power Purchase
Agreement for the sale of 100% of the proposed biomass plant&rsquo;s capacity, electric output and environmental attributes with
The Public Service Company of New Hampshire which agreement was subject to certain approvals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From 2006 to 2010, we were the primary managers
of the development and construction of the project, including negotiating the terms of the construction agreement with Babcock
&amp; Wilcox as the EPC contractor, negotiating the terms of other construction related agreements, managing the permitting application
and approval process and provided testimony to the applicable state regulatory.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 27, 2010, Laidlaw
Biopower entered into a Purchase and Sale Agreement with Newco Energy, LLC, an affiliate of Cate Street Capital, to sell 100%
of  the membership interests in Laidlaw Berlin for an aggregate purchase price of $2.0 million, plus two contingent payments
that aggregated to a maximum of $7.0 million. As a result of several claims made by the buyer pursuant to the
indemnification provisions of the agreement, the remainder of $5,050,000 was subsequently settled in October 2011 for
$3,562,000, of which our 50% interest was $1,781,000, in order to avoid protracted litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>New Bedford, Massachusetts</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 5, 2011, our subsidiary Laidlaw
New Bedford Biopower, LLC entered into a Power Plant Operation and Development Lease Agreement, among other things, (a) to oversee
the management of a natural gas-fueled thermal energy facility at the former Polaroid manufacturing plant located in New Bedford,
Massachusetts, and (b) which gave us development control over the facility through the May 5, 2012 termination date of the agreement,
subject to our right to extend the term for one year. We are not extending the lease term or exercising the purchase option, and
are currently in negotiations with the landlord regarding the final lease payment and the security deposit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The facility consists of a power plant that
supplied heat, chilled water and compressed air to two large buildings. Our rent for this facility was $75,000 per annum, payable
when the lease terminates on May 5, 2012. We were also responsible for the payment of all taxes relating to the premises. The
facility ceased operations in December 2011, and our oversight of the facility was on a net zero cost basis where the former end-user
of the thermal energy paid all remaining operating costs. We did not earn any management or related fees and undertook the oversight
and management of the facility primarily to control the development opportunity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Current Projects</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><B><I>Susanville, California</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In November 2011, we acquired assets relating
to a biomass facility in Susanville, California through the purchase of all of the membership interests of Henri Susanville LLC.
The facility is located on 40 acres of land that we lease and have an option to purchase for a net price of approximately $2.5
million as of January 30, 2013. The plant&rsquo;s assets include a boiler capable of producing 160,000 pounds of steam per hour
and a turbine that can generate approximately 12.5 megawatts of base-load electricity. The facility site has excess acreage. We
are evaluating the development of a solar generation facility that could generate approximately five megawatts of electricity or
leasing the property to a solar developer who could benefit from the generation potential and grid interconnection that the site
offers. Our acquisition of the facility was for approximately $2 million, which we paid by issuing 434.78261 shares of our Series
B preferred stock that is convertible into 434,782,610 shares of our common stock and additional consideration contingent upon
specified milestones in the development of the facility of up to $2,650,000 that may be paid through the issuance of additional
shares of our Series B preferred stock at the deemed market value of our common stock of $0.0046 per share. The registration statement
of which this prospectus forms a part relates to our agreement to register the shares of our common stock underlying the Series
B preferred stock for resale by April 30, 2012, or, if certain conditions specified in the agreement are satisfied, a date not
later than May 9, 2012. The sellers are subject to certain selling restrictions including that the Series B preferred stock may
not be converted into shares of our common stock with a value that exceeds $37,500 per week.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of our purchase of the Susanville
facility, we were assigned an Agreement for Environmental Conditions, which provides for indemnification rights in our favor in
the event there are certain environmental claims on the property causing a loss to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Susanville facility is not presently
in a condition to generate electricity. Our plan is to raise and invest approximately $10 million to refurbish the critical power
generation assets, which would include a turbine overhaul, a new cooling tower, electrical work, fuel handling system upgrades
and related assets. We expect the refurbishing process to take approximately 12 to 18 months. We are presently evaluating our ability
to raise the funds necessary to refurbish the facility and raise additional funds to purchase the property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Ellicottville, New York</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We own 22.5% of the common stock of Laidlaw
Co-Gen, Inc., which is the sole holder of the capital stock of Laidlaw Energy &amp; Environmental, Inc. Laidlaw Energy &amp; Environmental
owns an approximate six megawatt combined cycle natural gas-fueled electric cogeneration facility located in Ellicottville, New
York. This facility is not currently operating. In 2005, Laidlaw Energy &amp; Environmental proposed converting this facility to
a biomass energy facility. The proposed conversion and development is subject to approvals from local governmental authorities,
which Laidlaw Energy &amp; Environmental has not been able to obtain and which we believe may be a result of perceived adverse
consequences to the neighboring community, a charge we disagree with. As a result of such failure to obtain governmental approvals,
we and the other stockholders of Laidlaw Co-Gen are evaluating the options to develop, sell or reposition this facility. We have&nbsp;determined
that the fair value of&nbsp;our investment in Laidlaw Co-Gen is below the carrying value and the investment&nbsp;has been&nbsp;written
down to zero. We are presently maintaining the facility and are incurring ordinary monthly expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Future Projects</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the ordinary course of our business,
we consider projects that complement our business strategy. For example, we have executed a non-binding letter of intent and are
currently negotiating a purchase and sales agreement to acquire an approximately 18 megawatt biomass energy power plant located
in southern California that has an existing power purchase agreement with a local utility. The facility requires repairs to certain
of its power generation assets to resume operations. We are evaluating this facility and identifying capital sources for our investment
in this facility as well as the required repairs, which we expect will be offset by certain federal incentives. Our consideration
of this acquisition is subject to the satisfactory completion of our due diligence and other conditions. There can be no assurance
that we will acquire this facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The renewable energy industry is highly
competitive, with numerous small and large companies in the United States and worldwide producing and distributing, or seeking
to produce and distribute, energy from renewable resources, including biomass. State RPS are a significant government incentive
that supports the development of renewable energy. Our competitors include any generator of electric energy through renewable sources
that meet RPS because utilities may satisfy these RPS through the purchase of electric power generated by any renewable fuel source
or solar energy. We face, and expect to continue to face, competition from these entities, from companies whose sole business is
to retrofit existing power plants for operators, as well as competition from entities that provide alternative energy solutions
from renewable resources other than biomass, such as solar, hydroelectric and wind energy producers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Many of our competitors have substantially
greater capital resources and more experience operating power plants than we do. We may have difficulty competing with larger,
more established companies, and any other companies that have greater financial, technical, research, marketing, sales, distribution,
service and other resources than we do. Moreover, any of our competitors may have broader product lines, services and have greater
name recognition than we do.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek to differentiate ourselves from
our competitors through our value-added development approach. This approach involves utilizing refurbished power generation assets,
such as retired or unused paper mills, dormant biomass plants, or fossil fuel power plants, as opposed to the development of newly
constructed &ldquo;greenfield&rdquo; projects, to significantly reduce our capital costs and thereby increase our return on equity.
To achieve this goal, we have been establishing, and will continue to establish, strategic alliances with entities, investment
bankers, private equity investors, political leaders, attorneys, consultants, contractors, equipment suppliers and others, who
are aligned with our approach. We further differentiate ourselves from our competitors by our having actual, hands-on experience
in managing the development of a commercial biomass energy power plant, which experience we gained through our investment in, development
and sale of our interest in the Berlin facility, which we planned to be one of the largest commercial biomass energy plants in
the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that the biomass electric power
generation industry is a niche industry without any dominant competitors. Aside from competition for power and environmental attribute
sales to utilities, we primarily compete regionally with other entities for development opportunities. We may also face competition
for our feedstock from self-generating biomass power plants that offtake the energy to a nearby end-user and do not sell energy
to the electric grid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not incurred any material amounts
of research and development costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Environmental Matters</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company is subject to federal, state
and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground,
the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of employees.
These laws and regulations also may require expensive pollution control equipment, permits and/or operational changes to limit
actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial
fines, criminal sanctions, permit revocations and/or facility shutdowns. There can be no assurance given that we will be able to
meet these standards, or that we will be at all times in material compliance with these laws and regulations. It is possible that
we will become subject to legal actions brought by regulatory authorities, advocacy groups and other parties for actual or alleged
violations of such laws and regulations. The most significant cost of compliance with such laws and regulations is the cost associated
with emissions controls at a commercial power facility. These costs are often part of the capital equipment that is included in
the applicable project development budget and financed as part of the project financing. We do not project any material capital
expenditures to comply with federal, state and local environmental laws and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of our purchase of the Susanville
facility, we were assigned an Agreement for Environmental Conditions, which provides for indemnification rights in our favor in
the event there are certain environmental claims on the property causing a loss to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Government Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;Our business is subject to numerous
government regulations on the federal, state and local levels. Other than the facility that is owned by Laidlaw Energy &amp; Environmental
in Ellicottville, New York, all of our current and proposed projects presently have all material government permits and approvals.
Our permits and approvals are not subject to the governmental authority&rsquo;s unilateral right to cancellation other than for
non-compliance. Approvals may be necessary for our future projects, and we will evaluate the estimated permitting and compliance
costs in the evaluation of any acquisition or development. A facility that we seek to develop will typically require either a federal
or state air emissions permit, a construction permit, if necessary, and an operating permit. These permits are often combined into
one permit issued by state environmental regulators. Projects that we develop may also require local zoning and/or planning board
approvals, water usage and wastewater discharge permits and compliance with other construction and zoning regulations, which have
a significant impact on our development strategy. In addition, utilities that purchase our electric energy are subject to federal
and state government oversight that regulates a wide scope of their activities, including their right and ability to enter into
long-term power purchase agreements and the capital investment of a facility that may be &ldquo;passed through&rdquo; to a consumer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The electric power industry, including the
renewable energy segment, has always been highly regulated. We are not aware of any significant regulatory changes that have been
adopted recently or that are the subject of introduced legislation or proposed regulations that we believe will have an adverse
effect on our business, other than the expiration, on December 31, 2011, of the Department of Treasury Section 1603 Tax Grant Program
under the American Recovery and Reinvestment Act of 2009. However, it may become the case that other regulatory approvals will
be required for the design, retrofitting and use of our planned power generation facilities. To the extent that there are delays
in gaining any such regulatory approval, our development and growth may be materially affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not have any intellectual property,
such as patents, know-how or trademarks, that are material to our business. We do not have any licenses, franchises, concessions
or royalty agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of April 25, 2012, we had five full time
employees and one part time employee. There were also approximately four personnel who worked with us as consultants in roles supporting
project development operation and construction activities. Our full and part time employees are based out of our executive office
in New York and our office in Vermont. None of our employees are members of any labor union, and we consider our labor relationships
to be good. We are currently actively seeking a full-time chief financial officer and additional project development personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Properties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We presently maintain our executive offices
in leased premises of approximately 2,500 square feet at 90 John Street, 4th Floor, New York, New York. We pay approximately $82,000
for rent per year for these premises and the lease term expires in April 2012. In addition, we have offices in leased premises
of approximately 500 square feet at 2 Spring Street, Montpelier, Vermont. We pay approximately $10,200 for rent per year for these
premises, and the lease term expires in July 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also lease a 40 acre parcel of land located
at 700-000 Sunkist Drive, Susanville, California, on which our 12.5 megawatt biomass energy power plant is located. We pay approximately
$240,000 for rent per year for these premises and the lease term expires on January 30, 2013. We are currently negotiating with
the owner of the property to extend the lease term. We also have an option to purchase the Susanville property for a price equal
to $84,909.08 per acre reduced by the sum of $5,000 per month of rent paid from November 1, 2011 (which, on January 31, 2013, would
equal $75,000) and 50% of all rent payments made prior to November 1, 2011. The total price to purchase the land should we choose
to exercise the option is estimated to be approximately $2.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also lease a power plant and related
property at the former Polaroid manufacturing facility in New Bedford, Massachusetts, that is not currently operating. The lease
expires on May 5, 2012 and can be extended at our option for an additional one year term. We are not extending the lease term or
exercising the purchase option, and are currently in negotiations with the landlord regarding the final lease payment and the security
deposit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe our properties are in good operating
condition and adequately serve our current business operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We received subpoenas from the SEC on June
28, 2011 and March 28, 2012 requiring us to provide documentation to the SEC and for designated officers to provide testimony to
the SEC. The SEC is investigating us and our officers, directors and others regarding compliance or possible violations under certain
securities laws, primarily relating to our issuance and sale of unregistered securities, the purchase and sale of our securities&nbsp;and
reports and other disclosures that we&nbsp;made to our shareholders and publicly. We have been cooperating with the SEC with respect
to&nbsp;its investigation. Our Chief Executive Officer provided testimony to the SEC on the record and we produced documents to
the SEC in response to the subpoenas. The SEC has the authority to order a wide scope of remedies against us and any of our officers
or directors, any of which could materially and adversely affect us, our ability to issue our securities and the price of, or ability
to trade, our common stock. The SEC is continuing its investigation and we cannot provide any assurance of when the SEC investigation
will be concluded or the effect of any remedies that the SEC may seek to enforce, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 3, 2009, an action titled &ldquo;Hiscock
&amp; Barclay v. Laidlaw&rdquo; was filed in the New York State Supreme Court, County of Onondaga, relating to a dispute over approximately
$140,000 of attorney billings associated with legal services provided in connection with our Ellicottville project prior to 2009.
In December 2011, the parties reached an agreement in principle whereby we agreed to pay $60,000 in full satisfaction of the dispute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 6, 2012, we received a statement
of claim and demand for arbitration before the American Arbitration Association from Chatsworth Securities LLC, seeking the collection
of $615,937.50 in placement fees which Chatsworth Securities alleges it is entitled to pursuant to the terms of a written agreement
between the parties dated December 22, 2005. On March 19, 2012, we submitted an answer to the statement of claim and a counterclaim
for contractual indemnification seeking an award of our attorneys&rsquo; fees and costs, of which Chatsworth answered on March
26, 2012. To date, an arbitrator has not yet been assigned to this matter. We believe the claim is without merit and intend to
vigorously defend against the claim; however, there can be no assurance that we will prevail in the arbitration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other than the above, there is presently
no material pending legal proceedings to which we are a party or as to which any of our property is subject, and no such proceedings
are known to us to be threatened or contemplated against us.</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">MANAGEMENT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Set forth below is a list of the names,
ages and positions of our directors and executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36%; border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; text-align: justify">Name</TD>
    <TD STYLE="width: 2%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 4%; border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; text-align: justify">Age</TD>
    <TD STYLE="width: 2%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 56%; border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; text-align: justify">Position(s)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Michael B. Bartoszek</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">44</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">President and Chief Executive Officer and Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Louis T. Bravakis</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">64</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Executive Vice President</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Theodore Alex Bravakis</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">28</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">Vice President of Project Development and Assistant Secretary</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Biographies of Directors and Executive
Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Michael B. Bartoszek</I></B> has served
as a member of our board of directors and as our President and Chief Executive Officer since 2002. Prior to founding Laidlaw Energy
Group, Inc. in 2001 and merging it with us in 2002, from 1999 to 2002, Mr. Bartoszek was founder, President and Chief Executive
Officer of Laidlaw Energy &amp; Environmental, an entity that owned and operated a natural gas-fueled power plant and related hardwood
lumber-related assets until selling those assets in August 2002. Subsequently, Mr. Bartoszek decided to focus exclusively on renewable
energy projects and devised our business model of focusing on the conversion of existing power generation assets in order to create
biomass energy power plants. Prior to founding Laidlaw Energy Group, Inc. and Laidlaw Energy &amp; Environmental, Mr. Bartoszek
spent over 10 years in the securities industry with a number of leading investment firms, including Merrill Lynch, Bear Stearns
&amp; Co. and Oppenheimer &amp; Co. and served as President and Chief Executive Officer of W.R. Lazard from 1997 to 1999. In 1995,
Mr. Bartoszek founded a successful boutique project finance advisory group at Rickel &amp; Associates, Inc., a broker-dealer, that
was engaged in advising independent power companies and other developers of major capital projects in connection with acquisitions
and financing. Mr. Bartoszek is also a member of the board of directors of Laidlaw Co-Gen.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Louis T. Bravakis</I></B> has served
as our Executive Vice President since 2006 when he joined us and has over 30 years of experience in the biomass energy field. From
2001 to 2006, Mr. Bravakis worked as a developer and project manager for biomass energy and combined heat and power projects throughout
the Northeast, including for Rex Lumber Co., Ethan Allen Furniture, Cowee Forest Products and Columbia Forest Products. In 1986,
Mr. Bravakis founded and served as President of Chiptec Wood Energy Systems, Inc., a company that manufactures advanced biomass
gasification systems. At the time of his departure in 2000, the company had built and installed over 100 biomass gasification systems.
Mr. Bravakis earned a Bachelor&rsquo;s degree in Economics from Franklin and Marshall College in 1969. Mr. Bravakis is the father
of Theodore Alex Bravakis, who is our Vice President of Project Development and Assistant Secretary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Theodore Alex Bravakis</I></B> has
served as our Vice President of Project Development and Assistant Secretary since November 2009 when he joined us. Mr. Bravakis
takes the lead on identifying and analyzing new development opportunities as they become available to us. He also manages and coordinates
the involvement of all project contributors. Before joining us in 2009, Mr. Bravakis worked as a construction manager for a small
real estate construction and management firm in Brooklyn, New York from 2006 to 2008. In 2008, Mr. Bravakis transitioned into working
for Badillo Partners, LLC, a real estate investment firm that specializes in the development and financing of affordable housing
projects throughout New York City. Mr. Bravakis earned a Bachelor&rsquo;s degree from The University of Vermont in Political Science
and Economics in 2006. Mr. Bravakis is the son of Louis T. Bravakis, our Executive Vice President.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Board Composition</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our Bylaws provide that
the Board of Directors shall consist of at least one member, and that our stockholders shall determine the number of directors
from time to time. Each director serves for a term that expires until the next annual meeting of stockholders and until his successor
shall have been elected and qualified, or until his earlier resignation, removal from office, or death.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Committees of the Board of Directors</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We do not presently have
a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees
of our Board of Directors. Nor do we have an audit committee &ldquo;financial expert.&rdquo; As such, our Board of Directors acts
as our audit committee and handles matters related to compensation and nominations of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director Independence</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We have not applied to
list our common stock on a national securities exchange or an inter-dealer quotation system which has requirements that a majority
of our board of directors be independent. However, for purposes of determining independence, we have adopted the provisions of
Nasdaq Marketplace Rule 5605. We undertook a review of the composition of our board of directors and the independence of Mr. Bartoszek,
our sole director. Based upon information requested from and provided by Mr. Bartoszek concerning his background, employment and
affiliations, including family relationships, we have determined that Mr. Bartoszek is not &ldquo;independent&rdquo; as that term
is defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. In making such determination, we considered the relationships
that Mr. Bartoszek has with us and all other facts and circumstances we deemed relevant in determining independence, including
the beneficial ownership of our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stockholder Communications with the Board</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We have not implemented
a formal policy or procedure by which our stockholders can communicate directly with our Board of Directors. Nevertheless, every
effort will be made to ensure that the views of stockholders are heard by our Board of Directors, and that appropriate responses
are provided to stockholders in a timely manner. During the upcoming year, our Board will continue to monitor whether it would
be appropriate to adopt such a process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Compensation Committee Interlocks and Insider Participation</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">None of our executive
officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function,
of any entity that has one or more of its executive officers serving as a member of our board of directors or our compensation
committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indemnification</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We do not maintain directors&rsquo;
and officers&rsquo; liability insurance. Our certificate of incorporation and bylaws include provisions limiting the liability
of directors and officers and indemnifying them under certain circumstances. See &ldquo;Description of Capital Stock&mdash;Limitation
on liability of directors and indemnification&rdquo; for further information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">EXECUTIVE COMPENSATION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Summary Compensation Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the compensation
for services paid in all capacities for the last fiscal year ending December 31, 2011 to Michael B. Bartoszek, our President and
Chief Executive Officer. No other executive officer had total compensation exceeding $100,000 for the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; font-weight: bold; text-align: center">Name and Principal Position</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; font-weight: bold; text-align: center">Year</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1.5pt solid; padding-right: 1.8pt; font-size: 10pt; font-weight: bold; text-align: center">Salary</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1.5pt solid; padding-right: 1.8pt; font-size: 10pt; font-weight: bold; text-align: center">Total</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 72%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">Michael B. Bartoszek</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0">President and Chief Executive Officer</P></TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 8%; padding-right: 0.8pt; font-size: 10pt; text-align: center">2011</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">$</TD>
    <TD STYLE="width: 7%; padding-right: 0.8pt; font-size: 10pt; text-align: right">200,000</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt; font-size: 10pt">$</TD>
    <TD STYLE="width: 7%; padding-right: 0.8pt; font-size: 10pt; text-align: right">200,000</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Outstanding Equity Awards at Fiscal
Year-End</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
as of December 31, 2011 concerning unexercised options for each of the named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="12" STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom; padding-right: 17.8pt; font-size: 10pt; font-weight: bold; text-align: center">Option Awards</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold; text-align: center">Name</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Number of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>securities</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>underlying</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>unexercised</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>exercisable</B></P></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Number of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>securities</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>underlying</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>unexercised</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>unexercisable</B></P></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Equity</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>incentive</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>plan awards:</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Number of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>securities</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>underlying</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>unexercised</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>unearned</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>options</B></P></TD>
    <TD STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0"><B>&nbsp;</B></P></TD>
    <TD STYLE="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0"><B>Option</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0"><B>exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0"><B>price&nbsp;</B></P></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>Option</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>expiration</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><B>date</B></P></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">Michael B. Bartoszek</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">75,000,000</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&mdash;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&mdash;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">$ 0.0001</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">(1)</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR>
    <TD STYLE="width: 29%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(1) These options do not have an expiration
date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have one director, Michael B. Bartoszek,
who is also our President and Chief Executive Officer. We did not pay him any compensation for his services as a director during
the year ended December 31, 2011. Upon and after the expansion of our board of directors, we do not expect to pay our directors
who are also our employees any compensation for their services as directors. We anticipate our non-employee directors will initially
be compensated with an equity grant to be determined. In addition, all directors will be reimbursed for reasonable out of pocket
expenses incurred by them in connection with attending board of directors, committee and shareholder meetings. We reserve the right
to change the manner and amount of compensation to our non-employee directors at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compensation Committee Interlocks and
Insider Participation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not currently have a compensation
committee. During the last completed fiscal year, Michael B. Bartoszek, our sole director and our President and Chief Executive
Officer, made all compensation decisions on behalf of our company. During the last fiscal year, none of our executive officers
served as a member of the compensation committee or other board committee performing equivalent functions or as a director of any
other entity, which other entity had one of its executive officers serving as one of our directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Pursuant to an Exchange
Agreement between Novus Energy, LLC and our company dated November 18, 2011, as further amended on December 15, 2011, (1) Novus
Energy, whose sole member is Mr. Louis T. Bravakis, our Executive Vice President, transferred $220,000 plus its 25% interest in
Laidlaw BioPower to us, bringing our interest in the entity up to 75% from 50%; and (2) we transferred to Mr. Brevakis a 25% interest
in the net income received from all of our power projects developed plus 1,000,000 shares of Series C preferred stock. As additional
consideration for the receipt of the Series C preferred stock, Mr. Bravakis was appointed our Executive Vice President.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">On February 17, 2011,
we granted to Theodore Alex Bravakis, our Vice President of Project Development, 2,000,000 shares of our common stock for compensatory
purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PRINCIPAL STOCKHOLDERS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have four classes of voting securities
outstanding as of April 25, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>common stock, par value $0.0001 per share;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Series A preferred stock, par value $0.001 per share;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Series B preferred stock, par value $0.001 per share; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Series C preferred stock, par value $0.001 per share.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shareholders of our common stock and shareholders of our preferred
stock vote together as a single class.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth certain information
with respect to the beneficial ownership of shares of our common stock and preferred stock, as of April 25, 2012, by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">each person known to us to beneficially own 5% or
more of the outstanding shares of such class of stock;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">each of our named executive officers and directors;
and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">all of our executive officers and directors as a group.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Beneficial ownership is determined in accordance with
the rules of the SEC and includes voting and investment power. In addition, under SEC rules, a person is deemed to be the beneficial
owner of securities which may be acquired by such person upon the exercise of options and warrants or the conversion of convertible
securities within 60 days from the date on which beneficial ownership is to be determined. Shares of common stock issuable pursuant
to the exercise of options or the conversion of preferred stock are deemed outstanding for computing the percentage of the person
holding such options or shares of preferred stock but are not outstanding for computing the percentage of any other person. Except
as indicated in the other footnotes to this table, to our knowledge, each beneficial owner listed in this table has sole voting
and investment power with respect to all shares of stock beneficially owned by that person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, the address
for each shareholder listed below is c/o Laidlaw Energy Group, Inc., 90 John Street, 4th Floor, New York, NY 10038.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 8pt">&nbsp;</TD><TD STYLE="font-size: 8pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Series A</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Preferred Stock</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Series B</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Preferred Stock</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Series C</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Preferred Stock</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Name and Address of</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficial Owner</B></FONT></P></TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Number of</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>&nbsp;Shares</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Percentage</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>of Class</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Number of</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Shares</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Percentage</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>of Class</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Number of</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Shares</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Percentage</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>of Class</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Number of</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Shares</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD><TD STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman, Times, Serif; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Percentage</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>of Class</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Beneficially</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.8pt 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Owned</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 20%; font-size: 8pt; text-align: left"><FONT STYLE="font-size: 8pt">Mazuma Holding Corp.<SUP>(1)</SUP></FONT></TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">2,009,391,779</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">81.79</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">%</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 8pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 8pt">Nature Energies, Inc.<SUP>(2)</SUP></FONT></TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">336,608,700</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">336.6087</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">77.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left"><FONT STYLE="font-size: 8pt">NZ Legacy, LLC<SUP>(3)</SUP></FONT></TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">98,173,910</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">98.17391</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">23.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left">Michael B. Bartoszek</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">3,571,597,742</TD><TD STYLE="font-size: 8pt; text-align: left"><SUP>(4)</SUP></TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">60.79</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">1,000,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">100.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 8pt; text-align: left">Louis T. Bravakis</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">688,069,510</TD><TD STYLE="font-size: 8pt; text-align: left"><SUP>(5)</SUP></TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">21.93</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">1,000,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">100.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 8pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in">All directors and executive officers as a group (three persons)</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">4,261,926,826</TD><TD STYLE="font-size: 8pt; text-align: left"><SUP>(6)</SUP></TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">65.01</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">1,000,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">100.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">1,000,000</TD><TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt">&nbsp;</TD>
    <TD STYLE="font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; text-align: right">100.0</TD><TD STYLE="font-size: 8pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">* Less than 1%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">Represents 553,933,034 shares of common stock beneficially owned by Mazuma Corp., 100,000,000 shares
of common stock beneficially owned by Mazuma Funding Corp. and 1,355,458,745 shares of common stock owned by Mazuma Holding Corp.,
which shares, upon information and belief, may be deemed beneficially owned by Mazuma Holding Corp. All of such shares were issued
to the beneficial owners between August 8, 2006 and January 6, 2010. We have no knowledge as to whether any of such entities have
sold or otherwise transferred such shares and accordingly are assuming all of such shares are still held by such entities. Such
assumptions may be incorrect. The address of each of the Mazuma entities is 3102 Maple Avenue, Dallas, Texas 75201.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">The address of Nature Energies, Inc. is P.O. Box 490550, Blaine, Minnesota 55449. Upon information
and belief, voting and investment control of Nature Energies is held by Hanalei Renouvelables SAS. From and after May 10, 2012,
Nature Energies, Inc. will have the right to acquire up to 336,608,700 shares of our common stock upon the conversion of the 336.6087
shares of Series B preferred stock that it beneficially owns, subject to certain restrictions as set forth in our certificate of
incorporation, as amended.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify">The address of NZ Legacy, LLC is 3514 E. Presidio Circle, Mesa, Arizona 85213. Upon information
and belief, voting and investment control of NZ Legacy is held by Robert Worsley. From and after May 10, 2012, NZ Legacy, LLC will
have the right to acquire up to 98,173,910 shares of our common stock upon the conversion of the 98.17391 shares of Series B preferred
stock that it beneficially owns, subject to certain restrictions as set forth in our certificate of incorporation, as amended.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD STYLE="text-align: justify">Includes (i) 7,496,979 shares of common stock owned by Laidlaw Energy Holdings, LLC, which shares
may be deemed beneficially owned by Mr. Bartoszek, as its sole member, (ii) 75,000,000 shares of common stock underlying outstanding
options, which Mr. Bartoszek has the right to exercise at any time and (iii) 3,343,404,500 shares of common stock which Mr. Bartoszek
has the right to acquire at any time upon the conversion in full of the 1,000,000 shares of Series A preferred stock that he beneficially
owns. Pursuant to our certificate of incorporation, as amended, the Series A preferred stock is convertible into a number of shares
of common stock equal to 51% of the total issued and outstanding shares of common stock plus the total number of shares of common
stock issuable upon conversion of any outstanding convertible securities convertible as of the conversion date.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD STYLE="text-align: justify">Includes (i) 25,000,000 shares of common stock underlying outstanding options, which Mr. Bravakis
has the right to exercise at any time and (ii) 655,569,510 shares of common stock which Mr. Bravakis has the right to acquire at
any time upon the conversion in full of the 1,000,000 shares of Series C preferred stock that he beneficially owns. Pursuant to
our certificate of incorporation, as amended, the Series C preferred stock is convertible into a number of shares of common stock
equal to 10% of the total issued and outstanding shares of common stock plus the total number of shares of common stock issuable
upon conversion of any outstanding convertible securities convertible as of the conversion date.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(6)</TD><TD STYLE="text-align: justify">Includes (i) 100,000,000 shares of common stock, which may be issued upon exercise in full of the
outstanding options that are beneficially owned by the applicable executive officers and directors, (ii) 3,998,974,009 shares of
common stock, which may be issued upon conversion in full of the outstanding Series A preferred stock and Series C preferred stock
that are beneficially owned by the applicable executive officers and directors and (iii) 7,496,979 shares of common stock owned
by Laidlaw Energy Holdings, LLC, which shares may be deemed beneficially owned by Mr. Bartoszek, as its sole member.&nbsp;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DESCRIPTION OF CAPITAL STOCK</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">General</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summary describes the material
terms of our capital stock. However, you should refer to the actual terms of the capital stock contained in our certificate of
incorporation, as amended, our amended and restated bylaws, and applicable law. A copy of our certificate of incorporation, as
amended, and our amended and restated bylaws are filed as exhibits to the registration statement of which this prospectus forms
a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have two classes of capital
stock, common stock, par value $0.0001 per share, and preferred stock, par value $0.001 per share, of which there are three
classes, Series A preferred stock, Series B preferred stock and Series C preferred stock. As of April 25, 2012, we have
authorized 9.0 billion shares of common stock, of which 2,456,721,088 shares are issued and outstanding, 1.0 million shares
of Series A preferred stock, all of which are issued and outstanding, 400.0 million shares of Series B preferred stock, of
which 434.78261 are issued and outstanding, and 1.0 million shares of Series C preferred stock, all of which are issued
and outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock are entitled
to one vote for each share held of record on all matters submitted to a vote of shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock are entitled
to receive dividends, as, if and when declared by our board of directors, out of funds legally available therefor, subject to any
statutory or contractual restrictions on the payment of dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event of our liquidation, dissolution
or winding up, the holders of our common stock shall only be entitled to a distribution of assets after payment in full of the
liquidation values to the holders of our Series A preferred stock, Series B preferred stock and Series C preferred stock, and then
ratably per share with the holders of the Series B preferred stock on an as-converted basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock do not have
preemptive, subscription, redemption or conversion rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series A Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holder of our Series A preferred stock
is entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holder of our Series A preferred stock
does not have any right to receive dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Series A preferred stock is convertible,
at the option of the holder at any time, into a number of shares of common stock, collectively, equal to 51% of the total issued
and outstanding shares of common stock plus the total number of shares of common stock issuable upon conversion of any outstanding
convertible securities convertible as of the conversion date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Series A preferred stock has a liquidation
value of $0.247562 per share. In the event of our liquidation, dissolution or winding up, the holders of our Series A preferred
stock and Series C preferred stock shall be entitled to receive out of our assets an amount per share equal to their respective
liquidation value, before any payment shall be made or any assets distributed to the holders of our common stock, our Series B
preferred stock or any other classes or series of our capital stock hereafter issued by us. The liquidation rights of the holders
of our Series A preferred stock shall rank pari passu with the liquidation rights of the holders of our Series C preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series B Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our Series B preferred stock
are entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each share of our Series B preferred stock,
until such time if any as it is converted into shares of our common stock in accordance with our certificate of incorporation,
as amended, shall be entitled to receive all dividends and other distributions payable on account of the common stock, as if such
share of Series B preferred stock were converted immediately prior to the record date of such dividend or distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subject to certain limitations as set forth
in our certificate of incorporation, as amended, the holder of a share of our Series B preferred stock may, six months after the
date of issuance of such share of Series B preferred stock, convert such share into 1.0 million shares of our common stock. Notwithstanding
anything to the contrary contained in our certificate of incorporation, as amended, no share of Series B preferred stock shall
be convertible into any number of shares of common stock prior to the date that is six months after the date of issuance of such
share of Series B preferred stock; and following such six month waiting period, no holder of Series B preferred stock shall convert
to common stock more than that number of shares of Series B preferred stock that would result in shares of common stock having
an aggregate value of $37,500 per week determined on a cumulative basis, such amount computed based on the five day moving average
of the closing last trade price of shares of common stock as quoted on otcmarkets.com or any such national securities exchange
if our common stock is listed on such an exchange, and each holder of Series B preferred stock shall be prohibited from converting
any amount of Series B preferred stock in excess of that amount permitted in this paragraph.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Series B preferred stock has a liquidation
value per share equal to the quotient obtained by dividing $100 by the number of shares of Series B preferred stock that are issued
and outstanding upon the date of liquidation. In the event of our liquidation, dissolution or winding up, the holders of our Series
B preferred stock shall be entitled to receive out of our assets an amount per share equal to the liquidation value thereof, before
any payment shall be made or any assets distributed to the holders of our common stock or any other classes or series of our capital
stock hereafter issued by us, other than to the holders of our Series A preferred stock and Series C preferred stock. All of our
assets available for distribution to shareholders after the liquidation value of our Series A preferred stock, Series B preferred
stock and Series C preferred stock have been paid in full to the respective holders of such preferred stock, shall be distributed
ratably per share among the holders of our common stock and Series B preferred stock, on an as-converted basis, in accordance with
our certificate of incorporation, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series C Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holder of our Series C preferred stock
is entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holder of our Series C preferred stock
does not have any right to receive dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Series C preferred stock is convertible,
at the option of the holder at any time, into a number of shares of common stock, collectively, equal to 10% of the total issued
and outstanding shares of common stock plus the total number of shares of common stock issuable upon conversion of any outstanding
convertible securities convertible as of the conversion date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Series C preferred stock has a liquidation
value of $0.03126 per share. In the event of our liquidation, dissolution or winding up, the holders of our Series A preferred
stock and Series C preferred stock shall be entitled to receive out of our assets an amount per share equal to their respective
liquidation value, before any payment shall be made or any assets distributed to the holders of our common stock, our Series B
preferred stock or any other classes or series of our capital stock hereafter issued by us. The liquidation rights of the holders
of our Series A preferred stock shall rank pari passu with the liquidation rights of the holders of our Series C preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Voting</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock and preferred
stock vote together as a single class. Generally, except for the election of directors, at any meeting duly called and held at
which a quorum is present, all matters to be voted on by our shareholders must be approved by a majority of the votes cast at such
meeting by the holders of outstanding shares of our common stock and preferred stock entitled to vote thereon who are present in
person or by proxy. At any meeting duly called and held for the election of directors at which a quorum is present, directors shall
be elected by a plurality of the votes cast by the holders of our shares entitled to elect such directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Amendments to our certificate of incorporation,
as amended, that would alter or change the powers, preferences or special rights of our preferred stock so as to affect adversely
the rights of the holders of such preferred stock must be approved by written consent or affirmative vote of the holders of at
least a majority of the then outstanding aggregate number of shares of such adversely affected preferred stock, given in writing
or by vote at a meeting, consenting or voting, as the case may be, separately as a class.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Anti-Takeover Provisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each share of Series B preferred stock is
convertible automatically into common stock in accordance with our certificate of incorporation, as amended, immediately prior
to the effectiveness of any merger or consolidation pursuant to which we are not the surviving entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, holders of our Series A preferred
stock and Series C preferred stock may convert such shares into common stock at their option at any time. See &ldquo;&ndash;Series
A Preferred stock&rdquo; and &ldquo;&ndash;Series C Preferred Stock.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A consolidation or a merger with or into
any other entity in which we are not the surviving entity, a sale, conveyance, lease, exchange or transfer of all, or substantially
all, of our assets for cash, securities or other property to any person or persons or our dissolution or winding up shall be deemed
to be a liquidation, dissolution or winding up, which would entitle the holders of our preferred stock the liquidation value of
their shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Charter and Bylaws Anti-Takeover Provisions</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our amended and restated
bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals
regarding other business to be conducted at a meeting. However, our amended and restated bylaws may have the effect of precluding
the conduct of that item of business at a meeting if the proper procedures are not followed. These provisions may discourage or
deter a potential third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting
to obtain control of our company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The foregoing provisions
of our amended and restated bylaws and the Delaware General Corporation Law may have the effect of deterring or discouraging hostile
takeovers or delaying changes in control of the company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Limitation on Liability and Indemnification of Directors
and Officers</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our certificate of incorporation,
as amended, eliminates our directors&rsquo; liability for any breach of duty in such capacity except that such personal liability
if a judgment or other final adjudication adverse to such director establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled or that his or her acts violated Section 719 of the New York Business
Corporation Law</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our amended and restated
by-laws provide that we shall indemnify every person made or threatened to be made a party to an action or proceeding by reason
of the fact that that person is or was a director or officer of our company or that person, being or having been a director or
officer of our company, served any other corporation in any capacity at our request, in the manner and to the extent provided by
the Business Corporation Law of the State of New York; and we may indemnify every person made or threatened to be made a party
to an action or proceeding by reason of the fact that that person is or was an employee of our company in a capacity other than
as an officer of our company, or that person being or having been such an employee, served any other company in any capacity at
our request, in the same manner and to the same extent as persons are to be indemnified as set forth above by reason of having
been directors or officers of the Corporation or having served any other company as described above. The provision regarding indemnification
of our directors and officers in our amended and restated by-laws will generally not limit liability under state or federal securities
laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We may also, subject to
certain limitations, pay or reimburse reasonable expenses in advance of the final disposition of any proceeding subject to indemnification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The limitation of liability
and indemnification provisions in our certificate of incorporation, as amended, and amended and restated by-laws, may discourage
stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect
of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful,
might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in
a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these
indemnification provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Transfer Agent and Registrar</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our transfer agent for
our common stock is American Registrar and Transfer Co.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING STOCKHOLDERS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">This prospectus relates
to the registration of 437,782,610 shares of our common stock on behalf of the selling stockholders named herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The shares listed below
represent shares of our common stock that may be issued upon the conversion, for no consideration, of outstanding shares of Series
B preferred stock. The selling stockholders each received the shares of Series B preferred stock in connection with our acquisition
of the Susanville facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We believe, based on information
supplied by the following persons, that the persons named in the table have sole voting and investment power with respect to all
shares of common stock which they beneficially own. The last column of the table assumes the sale of all of our shares offered
by this prospectus. The registration of the offered shares does not mean that any or all of the selling stockholders will offer
or sell any of these shares. Except as relates to our acquisition of the Susanville facility, there is not nor has there been a
material relationship between us and any of the selling stockholders within the past three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-indent: 0in; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Shares
        Beneficially Owned After Offering</B></P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Name
        of Selling Stockholder</B></P></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Number
        of Shares Beneficially Owned</B></P></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Common
        Stock Offered by Selling Stockholder</B></P></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Number</B></P></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in; border-bottom: black 0.25pt solid"><B>Percent</B></P></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-top: 6pt; padding-right: -5.05pt; font-size: 10pt">Nature Energies, Inc.</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">336,608,700(1)</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">336,608,700(1)</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">&mdash;</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">&mdash;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">NZ Legacy, LLC</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">98,173,910(2)</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">98,173,910(2)</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">&mdash;</TD>
    <TD STYLE="vertical-align: bottom; padding-top: 6pt; text-align: center; text-indent: 0in; font-size: 10pt">&mdash;</TD></TR>
</TABLE>
<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">__________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-weight: normal">(1)</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-weight: normal">Represents shares of common stock issuable upon the conversion,
for no consideration, of an aggregate of 336.6087 shares of our Series B preferred stock, which may be converted on and after May
10, 2012.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-weight: normal">(2)</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-weight: normal">Represents shares of common stock issuable upon the conversion,
for no consideration, of an aggregate of 98.17391 shares of our Series B preferred stock, which may be converted on and after May
10, 2012.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><FONT STYLE="font-weight: normal"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><FONT STYLE="font-weight: normal"></FONT></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PLAN OF DISTRIBUTION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We are registering the
shares of common stock issued to the selling stockholders to permit the resale of these shares of common stock by the holders of
the shares of common stock from time to time after the date of this prospectus. We will not receive any of the proceeds from the
sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to
register the shares of common stock excluding any printing expenses (including, without limitation, expenses of printing certificates
for the shares and of printing prospectuses), messenger, telephone and delivery expenses, Blue Sky fees or costs (including, without
limitation, fees and disbursements of our counsel in connection therewith), underwriting discounts and selling commissions and
all legal fees and expenses of legal counsel for any selling stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The selling stockholders
may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents; provided, that pursuant to the terms and conditions of certain agreements
between us and Nature Energies, Inc. and NZ Legacy, LLC (f/k/a Renegy Susanville, LLC), and the provisions of our certificate of
incorporation, as amended, the selling stockholders shall not during any week sell more shares of common stock that, in the aggregate,
has an aggregate market value of Thirty-Seven thousand and Five Hundred Dollars ($37,500), such amount computed based on the per
share price of the shares of common stock on the five day moving average of the closing last trade price of shares of common stock
as quoted on otcmarkets.com or any such national securities exchange if our shares of common stock are listed on such an exchange.
The permitted number of shares of common stock that the selling stockholders may sell during any week is computed on a cumulative
basis. Accordingly, any shares of common stock permitted to be sold by the selling stockholders during any week that are not sold
during such week, may be sold at any time after the end of such week. If the shares of common stock are sold through underwriters
or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions.
The shares of common stock may be sold on any national securities exchange or quotation service on which the securities may be
listed or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems
or in the over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be affected in transactions, which
may involve crosses or block transactions. The selling stockholders may use any one or more of the following methods when selling
shares:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">an exchange distribution in accordance with the rules of the applicable exchange;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">privately negotiated transactions;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">settlement of short sales entered into after the effective date of the registration statement of which
this prospectus is a part;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">broker-dealers may agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">through the writing or settlement of options or other hedging transactions, whether such options are
listed on an options exchange or otherwise;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">a combination of any such methods of sale; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left">any other method permitted pursuant to applicable law.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The selling stockholders
also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act,
as permitted by that rule, or Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided
that they meet the criteria and comply with the requirements of those provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Broker dealers engaged
by the selling stockholders may arrange for other broker dealers to participate in sales. If the selling stockholders effect such
transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions
from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal. Such commissions
will be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
will not be in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with NASD IM-2440.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">In connection with sales
of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of common stock short and if such short sale shall take place
after the date that the registration statement of which this prospectus forms a part is declared effective by the Commission, the
selling stockholders may deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed
shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers
that in turn may sell such shares, to the extent permitted by applicable law. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction). Notwithstanding the foregoing, the selling stockholders have been advised that they may not use shares registered
pursuant to the on this registration statement of which this prospectus forms a part to cover short sales of our common stock made
prior to the date the registration statement, of which this prospectus forms a part, has been declared effective by the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The selling stockholders
may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer
and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The selling stockholders
and any broker-dealer or agents participating in the distribution of the shares of common stock may be deemed to be &ldquo;underwriters&rdquo;
within the meaning of Section 2(11) of the Securities Act in connection with such sales. In such event, any commissions paid, or
any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by
them may be deemed to be underwriting commissions or discounts under the Securities Act. Selling Stockholders who are &quot;underwriters&quot;
within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities
Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities
Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Each selling stockholder
has informed the Company that it is not a registered broker-dealer and does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the common stock. Upon the Company being notified in writing by a selling
stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block
trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling
stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares
of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable,
(v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference
in this prospectus, and (vi) other facts material to the transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Under the securities laws
of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale
in such state or an exemption from registration or qualification is available and is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement,
of which this prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Each selling stockholder
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any other
participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability
of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the
shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees; provided, however, that each selling stockholder will pay all underwriting discounts
and selling commissions, if any, and any legal expenses incurred by it and their pro rata share of all printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses), messenger, telephone
and delivery expenses, expenses of compliance with state securities or &ldquo;blue sky&rdquo; laws (including, without limitation,
fees and disbursements of counsel for the Company in connection therewith). We will indemnify the selling stockholders against
certain liabilities, including some liabilities under the Securities Act, in accordance with a registration rights agreement, or
the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities,
including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders
specifically for use in this prospectus or permitted by us to be used in this prospectus, in accordance with the related registration
rights agreements, or we may be entitled to contribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LEGAL MATTERS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The validity of the shares
of common stock covered by this prospectus will be passed upon by Herrick, Feinstein LLP, New York, New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">EXPERTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">The financial statements
included in this prospectus have been so included in reliance on the report of Marcum LLP, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">WHERE YOU CAN FIND ADDITIONAL INFORMATION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We have filed with the
SEC under the Securities Act, a registration statement on Form&nbsp;S-1 relating to the common stock to be sold in this offering.
The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and
our capital stock. This prospectus does not contain all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information about us and our common stock, you should refer to the registration statement, including
the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document
referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is
made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified
in all respects by such reference. You may inspect a copy of the registration statement and the exhibits and schedules thereto
without charge at the Public Reference Room of the SEC at 100&nbsp;F&nbsp;Street, N.E., Washington,&nbsp;D.C. 20549. You may obtain
copies of all or any part of the registration statement from such office at prescribed rates. You may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website,
which is located at http://www.sec.gov, that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. You may access the registration statement, of which this prospectus is a part, at
the SEC&rsquo;s Internet website.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEX TO FINANCIAL STATEMENTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Laidlaw Energy Group, Inc. &amp; Subsidiaries</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center; border-bottom: Black 1pt solid">&nbsp;Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Consolidated Balance Sheets as of December 31, 2011 and 2010</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Consolidated Statements of Changes in Stockholders&rsquo; Equity for the Years Ended December 31, 2011 and 2010</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 0; padding-left: 0">&nbsp;</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 0; padding-left: 0">Notes to Consolidated Financial Statements</TD>
    <TD STYLE="padding-right: 0; padding-left: 0; text-align: center">&nbsp;F-7</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">and Stockholders of Laidlaw Energy Group, Inc. &amp; Subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have audited the accompanying consolidated balance sheets
of Laidlaw Energy Group, Inc. &amp; Subsidiaries (the &ldquo;Company&rdquo;) as of December 31, 2011 and 2010, and the related
consolidated statements of operations, changes in stockholders&rsquo; equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).&nbsp; Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement.&nbsp; The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
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&rsquo;s internal control over
financial reporting. Accordingly, we express no such opinion.&nbsp; An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.&nbsp; We believe that our audits provide
a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Laidlaw Energy Group, Inc. &amp; Subsidiaries,
as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the consolidated financial
statements, the Company needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise
substantial doubt about the Company&rsquo;s ability to continue as a going concern. Management&rsquo;s plans in regard to these
matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-variant: small-caps">/s/ Marcum LLP</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-variant: small-caps">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-variant: small-caps">Marcum LLP</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">New York, NY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">April 30, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><BR>
</P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center; font-size: 10pt; font-weight: bold">Laidlaw Energy Group, Inc. &amp; Subsidiaries &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0; font-size: 10pt; font-weight: bold">Consolidated Balance Sheets &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold">Assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Current Assets:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0.36in">Cash and cash equivalents</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">1,197,563</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">745,140</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">Accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,806,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Prepaid expenses and other current assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">55,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">Total Current Assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,252,563</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,551,140</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Idle property and equipment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,237,403</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Other assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">12,240</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">11,390</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.72in">Total Assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3,502,206</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,562,530</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Liabilities and Stockholders' Equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Current Liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">Accounts payable and accrued expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">491,442</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">327,393</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Other liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">232,500</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.72in">Total Liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">501,442</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">559,893</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Commitments and contingencies</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Stockholders' Equity:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">Convertible preferred stock, $0.001 par value; voting (see Note 6)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Series A - 1,000,000 shares authorized, issued and outstanding at</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">December 31, 2011 and 2010, liquidation preference $247,562</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Series B - 400,000,000 shares authorized, 434.782610 shares</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">issued and outstanding at December 31, 2011; none authorized</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">at December 31, 2010; liquidation preference $100</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Series C - 1,000,000 shares authorized, issued and outstanding at</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in">December 31, 2011; none authorized at December 31, 2010;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">liquidation preference $31,260</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">Common stock, $0.0001 par value; 9,000,000,000 shares authorized;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">2,456,721,088 and 2,454,721,088 shares issued and outstanding at</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.72in">December 31, 2011 and 2010, respectively (see Note 6)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">245,672</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">245,472</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">Additional paid-in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,080,686</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,851,886</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.36in">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,327,594</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(95,721</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.72in">Total Stockholders' Equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,000,764</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,002,637</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.72in">Total Liabilities and Stockholders' Equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3,502,206</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,562,530</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Notes to Consolidated Financial Statements&nbsp;</P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0"><B>Laidlaw Energy Group, Inc. &amp; Subsidiaries</B> &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0"><B>Consolidated Statements of Operations</B> &nbsp; &nbsp; &nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For The Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0.24in">Management fee revenues</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">106,251</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0.24in">Cost of revenues</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">14,267</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in">Gross Profit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">91,984</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Gain on sale of equity investment</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Income Before Operating Expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,847,984</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Operating Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 1pt">Selling, general and administrative expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">980,199</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">980,199</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">(Loss) Income From Operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,867,785</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Other Income</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Interest income</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,046</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; padding-bottom: 1pt">Other income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">107,570</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.48in; padding-bottom: 1pt">Total Other Income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">109,616</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0.48in; padding-bottom: 2.5pt">Net (Loss) Income</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(1,231,873</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,977,401</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0.48in; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.48in">(Loss) Earnings Per Common Share:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in; padding-bottom: 2.5pt">- Basic</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(0.00</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.00</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in; padding-bottom: 2.5pt">- Diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(0.00</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.00</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.48in">Weighted Average Number of</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Common Shares Outstanding:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in; padding-bottom: 2.5pt">- Basic</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,556,463,554</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,527,226,164</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.72in; padding-bottom: 2.5pt">- Diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,556,463,554</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">6,318,065,411</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;See Notes to Consolidated Financial Statements&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Laidlaw Energy
Group, Inc. &amp; Subsidiaries</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Consolidated Statements of Changes in Stockholders' Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>For The Years
Ended December 31, 2011 and 2010 &nbsp;</B></P>

<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Series A Convertible</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Series B Convertible</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Series C Convertible</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Preferred Stock</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Preferred Stock</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Preferred Stock</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Common Stock</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Paid-In</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt"><B>Amount</B></FONT></TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Capital</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Deficit</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 12%; font-size: 10pt; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Balance - December 31, 2009</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,297,071,225</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">229,707</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,642,651</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(2,073,122</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 5%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(199,764</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Common stock issued to investors for cash</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">82,649,863</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">8,265</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">91,735</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Common stock issued pursuant to stock option exercise</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">75,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">7,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">7,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Stock-based compensation</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">117,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">117,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Net income</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">1,977,401</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">1,977,401</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Balance - December 31, 2010</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,454,721,088</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">245,472</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,851,886</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(95,721</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,002,637</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Common stock issued to employee</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">200</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">9,800</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">10,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Preferred stock issued as consideration</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">`</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">for idle property and equipment</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">435</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Preferred stock issued to employee for cash</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">219,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">220,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(1,231,873</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(1,231,873</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-indent: -0.12in; padding-left: 0.12in; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Balance - December 31, 2011</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">1,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">435</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">1,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">2,456,721,088</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">245,672</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">4,080,686</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">(1,327,594</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">3,000,764</FONT></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">See Notes to Consolidated Financial Statements&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Laidlaw Energy Group, Inc. &amp; Subsidiaries<BR>
Consolidated Statements of Cash Flows<BR>
</B>&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For The Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Cash Flows From Operating Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0.24in">Net (loss) income</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">(1,231,873</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">1,977,401</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Adjustments to reconcile net (loss) income to net cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.36in">provided by (used in) operating activities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.6in">Stock-based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">117,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Gain on sale of equity investment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,756,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Changes in operating assets and liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,806,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,136,466</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Prepaid expenses and other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(55,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Other assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(850</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Accounts payable and accrued expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">119,362</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(20,768</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">Other liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(222,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(517,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">Total Adjustments</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,657,012</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(2,040,302</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">Net Cash Provided By (Used In) Operating Activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">425,139</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(62,901</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Cash Flows From Investing Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Idle property and equipment acquired for cash</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(192,716</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">Net Cash Used In Investing Activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(192,716</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Cash Flows From Financing Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Proceeds from issuance of common stock</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Proceeds from issuance of preferred stock</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">220,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Proceeds from option exercise</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">7,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0.6in">Net Cash Provided by Financing Activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">220,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">107,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0.6in">Net Increase In Cash And Cash Equivalents</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">452,423</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">44,599</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0.6in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0in">Cash And Cash Equivalents - Beginning</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">745,140</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">700,541</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Cash And Cash Equivalents - Ending</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">1,197,563</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">745,140</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Supplemental Disclosure of Cash Flow Information:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Non-cash financing activities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.6in">Preferred stock issued for idle property and equipment</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.6in">Accrued expenditures related to idle</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.72in">property and equipment</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">44,687</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;&nbsp;See Notes to Consolidated Financial Statements&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 1 &ndash; BUSINESS ORGANIZATION AND NATURE OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Laidlaw Energy Group, Inc. (&ldquo;Laidlaw&rdquo; or the &ldquo;Company&rdquo;)
is engaged in the development and management of renewable energy facilities that produce electricity and/or thermal energy for
commercial and industrial purposes from sustainable biomass sources, other renewable fuel sources or combined cycle natural gas.
The business was founded in 2002. The Company&rsquo;s particular emphasis is on biomass power generation, which is the production
of electricity and heat as a result of converting trees, plants or other similar organic sources into energy. Laidlaw's business
objective is to build and manage a profitable portfolio of renewable energy facilities through development, acquisition, joint
venture, equity investments, conversion of existing facilities, and through partnering with manufacturing businesses that have
significant energy needs. The Company may generate revenues from management fees, the sale of power, or through the sale of its
developed facilities, its joint venture interests or its equity investments. In so doing, Laidlaw intends to become a leading provider
of biomass power in the United States. Laidlaw is subject to numerous federal, state and local laws and regulations that govern
environmental protection.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Laidlaw was organized on April 2, 1993 as a New
York corporation under the name Multiair Comfort Corp. On August 4, 1995, the Company changed its name to Poly Eko Systems,
Inc. On August 14, 2002, the Company concluded a &ldquo;reverse&rdquo; merger with Laidlaw Energy Group, Inc. in which the
Company was the surviving corporation. The Company then changed its name to Laidlaw Energy Group, Inc. The Company has or had
(1) two wholly owned subsidiaries, Laidlaw Capital Management, Inc. and Laidlaw Berlin, LLC, both of which are currently
inactive; (2) a now 75% ownership interest in Laidlaw BioPower, LLC (&ldquo;Laidlaw BioPower&rdquo;), which is the entity through which the
Company formerly had a 50% interest in Laidlaw Berlin BioPower, LLC (&ldquo;Laidlaw Berlin&rdquo;; see Note 4 &ndash;
Investments); (3) a 37.5% interest in Homeland Laidlaw Energy, LLC which resulted in 2010 revenues in the form of management
fees, but was dissolved by mutual agreement of the members during 2010. During 2009, operations were de minimis and there
were no operations in 2010 up to the date of dissolution; and (4) a 22.5% interest in Laidlaw Co-Gen,
Inc.&nbsp;(&ldquo;Co-Gen&rdquo;; see Note 4 &ndash; Investments). On March 9, 2011, the Company formed Laidlaw New Bedford
Biopower, LLC, of which Laidlaw is the sole member (&ldquo;New Bedford&rdquo;; see Note 11). On November 10, 2011, the
Company acquired a new wholly owned subsidiary, whose name was changed to Laidlaw Susanville BioPower, LLC
(&ldquo;Susanville&rdquo;; see Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 &ndash; GOING CONCERN AND MANAGEMENT&rsquo;S PLANS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to 2010, the Company sustained recurring operating losses
and the Company had an accumulated deficit of $2,073,122 as of December 31, 2009.&nbsp; During 2010, the Company sold an equity
investment and received proceeds of $1,806,000 and $950,000 in 2011 and 2010, respectively.&nbsp; As of December 31, 2011, Laidlaw
had a cash balance of $1,197,563 and working capital of $751,121.&nbsp; The Company did not generate any revenues and incurred
net losses of $1,231,873 during the year ended December 31, 2011.&nbsp;These conditions raise substantial doubt about the Company&rsquo;s
ability to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s future capital requirements are expected
to be driven by the development activities in existing and new projects until such time that they become self-sufficient or there
is a liquidity event.&nbsp; In addition to the Company&rsquo;s general overhead expenses, the Company is projecting that it will
require average monthly funding of approximately $20,000 and $5,000 associated with its Susanville (see Note 5) and Ellicottville
projects (see Note 4), plus contractual one-time funding of $25,000 associated with the balance of the April 2012 lease payment
for the New Bedford facility (see Note 11), approximately $2.5 million in January 2013 if the Company elects to exercise its option
to purchase the Susanville property (see Note 5), plus approximately $10 million to refurbish Susanville&rsquo;s critical power
generation assets. Management&rsquo;s plans include raising additional funds through public or private debt, equity or project
financing to fund its capital requirements and ongoing operations.&nbsp; However, there can be no assurance the Company will be
successful in these efforts. If the Company is unable to raise sufficient additional funds, the Company might (1) forego investment
opportunities; (2) initiate cost reduction measures; (3) seek extensions of scheduled payment obligations; or (4) sell assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation
of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable
or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of
this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Basis of Presentation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company uses the accrual basis of accounting and the financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are
presented in U.S. dollars. The Company has adopted a December 31 fiscal year end. The Company&rsquo;s majority and wholly-owned
subsidiaries are managed as a single business and a single segment.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
&ndash; CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Principles of Consolidation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The balance sheets, results of operations and cash flows of
the Company and its wholly-owned subsidiaries have been included in its consolidated financial statements. All intercompany accounts
and transactions have been eliminated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Equity Investments</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Equity investments of less than 20% ownership are accounted
for using the cost method of accounting, equity investments of 20% to 50% ownership are accounted for using the equity method of
accounting and equity investments of greater than 50% ownership are consolidated within the financial statements of the Company,
as appropriate. <FONT STYLE="color: black; background-color: white">All material intercompany accounts and transactions of consolidated
subsidiaries are eliminated in consolidation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Preparation of the consolidated financial statements in accordance
with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. The Company&rsquo;s significant
estimates include the allowance related to the receivable, the recoverability of long lived assets, the valuation allowance related
to deferred tax assets and the stock-based compensation assumptions. Actual results could differ from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Cash and Cash Equivalents</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company considers all highly liquid investments with maturities
of three months or less at purchase to be cash equivalents. For the purpose of financial statement presentation, the Company includes
cash on deposit, money market funds, and amounts held by brokers in cash accounts as cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Accounts Receivable</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable represents uncollected proceeds from the
sale of an investment. The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable,
if any. The allowance is based on the Company&rsquo;s assessment of known delinquent accounts, the aging of accounts receivable
and specific knowledge of counterparties. The Company re-evaluates its allowance on a regular basis and adjusts its reserves as
needed. There is no allowance at December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Concentration of Credit Risk</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, all of the Company&rsquo;s
cash and cash equivalents were deposited with financial institutions in the United States. At December 31, 2011, the Company had
cash on deposit that was approximately $956,000 in excess of federally insured limits of $250,000. As of December 31, 2010, the
Company had one significant counterparty located in the United States that represented 100% of its accounts receivable balance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Revenue Recognition</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has generated, and may generate, revenues from management
fees,&nbsp;the sale of power, or through the sale of our interest in&nbsp;facilities, its joint venture interests or its equity
investments.&nbsp;The Company earns management or development fees from development projects which are recognized as the services
are performed.&nbsp;&nbsp;The Company considers amounts to be earned once evidence of an arrangement has been obtained, services
have been rendered, fees are fixed or determinable, and collectability is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Property and Equipment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment is recorded at cost. The cost of additions
and substantial betterments to property and equipment are capitalized. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
&ndash; CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Impairment of Long-Lived Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company reviews the carrying value of long-lived assets
for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group
to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets
are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company records the tax effects of all transactions that
have been reported in its financial statements. This includes tax effects that are taxable or deductible in the current reporting
period, as well as tax effects that will lead to taxable income or tax deductions in future periods. Income taxes are accounted
for using the asset/liability method. At each balance-sheet date, a current tax asset or liability is recorded, representing income
taxes currently refundable or payable. Deferred tax assets and liabilities are also recorded, representing the tax effects of temporary
book-tax differences, which will become payable or refundable in future periods. Deferred tax assets arise principally from net
operating losses and capital losses available for carryforward against future years&rsquo; taxable income. Under the asset/liability
method, the income tax provision is the result of the change in these current and deferred tax accounts from period to period,
plus or minus tax payments made or refunds received during the year. A valuation allowance is recognized against deferred tax assets
if, based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion
or all of the deferred tax asset will not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company follows Accounting Standards Codification (&ldquo;ASC&rdquo;)
740 rules governing uncertain tax positions which provide guidance for recognition and measurement. This prescribes a threshold
condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial
statements. It also provides accounting guidance on derecognition, classification and disclosure of these uncertain tax positions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest costs and penalties related to income taxes are classified
as interest expense and selling, general and administrative costs, respectively, in the Company's financial statements. For the
years ended December 31, 2011 and 2010, the Company did not recognize any interest or penalty expense related to income taxes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Fair Value of Financial Instruments</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s financial instruments consist of cash and
cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company determines the fair value of its assets and liabilities
based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable
inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and
the last unobservable, to measure fair value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><I>Level 1</I> &mdash; Quoted prices in active markets for identical
assets or liabilities.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><I>Level 2</I> &mdash; Inputs, other than Level 1, that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif"><I>Level 3</I> &mdash; Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of the assets or liabilities.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, all financial instruments
were measured at fair value using Level 1 inputs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Stock-Based Compensation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><FONT STYLE="color: black">The Company
measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. Employee
and director awards are measured on the grant date. The fair value amount is then recognized over the period during which services
are required to be provided in exchange for the award, usually the vesting period. The Company&rsquo;s policy is to </FONT>issue
new shares of common stock in order to meet any stock-based compensation award requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt; background-color: white"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
&ndash; CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Earnings (Loss) Per Share</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Basic EPS is computed by dividing net income or loss available
to common shareholders by the weighted average number of common shares outstanding during the period. For the years ended December
31, 2011 and 2010, the computation of Basic EPS included the impact of common shares issuable upon the exercise of stock options
with an exercise price of $0.01 or less. The computation of Diluted EPS gives effect to all potentially dilutive common shares
during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings. For the year ended December 31, 2011, 6,590,947,261 common shares issuable upon
the conversion of all outstanding and contingently issuable preferred stock were not included in the computation of Diluted EPS
because their conversion would render them anti-dilutive. For the year ended December 31, 2010, the computation of Diluted EPS
included the impact of common shares issuable upon the conversion of all preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table presents the calculation of weighted average
shares used to calculate basic and diluted earnings per share:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For The Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt">Weighted average common shares outstanding</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">2,456,463,554</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">2,398,938,493</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Weighted average impact of stock options exercisable at $0.01 or less</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">128,287,671</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Weighted average basic common shares outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,556,463,554</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,527,226,164</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Weighted average impact of preferred stock</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">3,790,839,247</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Weighted average diluted common shares outstanding</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,556,463,554</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">6,318,065,411</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><U>Recent Accounting Pronouncements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May&nbsp;2011, the FASB issued ASU 2011-04, Fair Value Measurement
(Topic 820). This updated accounting guidance establishes common requirements for measuring fair value and for disclosing information
about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards.&nbsp;This guidance
includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, while other
amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim
and annual periods beginning after December&nbsp;15, 2011. The adoption of this standard is not expected to have a material impact
on the Company&rsquo;s consolidated financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other accounting standards that have been issued or proposed
by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material
impact on the Company&rsquo;s financial statements upon adoption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4 &ndash; INVESTMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Laidlaw Berlin Biopower, LLC</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Laidlaw Berlin is a limited liability company that was
formed on April 11, 2006 and is wholly owned by Laidlaw BioPower, which, in turn, was 50% owned by the Company. In December
2008, Laidlaw Berlin entered into a development agreement with PJPD Holdings, LLC, (&ldquo;PJPD&rdquo;). PJPD acquired the
former Fraser Paper Mill located in Berlin, New Hampshire (the &ldquo;Berlin Facility&rdquo;) from North American Dismantling
Corporation. Based on the development agreement with Laidlaw Berlin, Laidlaw Berlin was to manage the process of converting
the facility into a biomass facility and PJPD was to pay and provide all of the project funding up to a specified maximum
amount. Laidlaw managed all aspects of the development of this project, including identifying the asset, developing the
strategy to convert the paper mill&rsquo;s boiler for biomass utilization and engaging Babcock &amp; Wilcox to implement the
refurbishment.&nbsp; They also obtained all material permits for the Berlin Facility, conducted the necessary studies, and
obtained the required agreements to interconnect the Berlin Facility to the power grid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4 &ndash; INVESTMENTS &ndash; CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Laidlaw Berlin Biopower, LLC</U> - Continued</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2010, Laidlaw BioPower  entered into a sales agreement
and sold Laidlaw Berlin which included their rights to the future cash flows (which heretofore were determined to have no value
for accounting purposes) in the Berlin Facility for $7,000,000. Laidlaw BioPower  received $1,900,000 (50% or $950,000 of which
was the Company&rsquo;s proportionate share) during 2010 and $50,000 ($25,000 Company share) in June 2011, which was scheduled
to be followed by the remainder of $5,050,000, subject to certain adjustments. As a result of several claims made by the buyer
pursuant to the indemnification provisions of the agreement, the remainder of $5,050,000 was subsequently settled in October 2011
for $3,562,000 ($1,781,000 Company share), in order to avoid protracted litigation. The Company accounted for its 50% interest
in Laidlaw Berlin under the equity method of accounting. The Company recognized a gain on the sale of its equity investment of
$2,756,000 (50% of the $5,512,000 of total proceeds), as its book value at the time of sale was zero. The Company did not contribute
any cash or other physical assets to Laidlaw Berlin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 18, 2011, the Company acquired an additional 25%
interest in Laidlaw Biopower, bringing its total interest in Laidlaw BioPower to 75%, pursuant to the terms of the Company&rsquo;s
issuance of it Series C Preferred Stock (see Note 9).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Laidlaw Co-Gen, Inc.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is a 22.5% shareholder in Co-Gen, a facility that
operates a natural gas combined cycle co-generation system located in Ellicottville, New York. Three other unrelated third parties
own the remaining 77.5% shareholder interest. In 2008, there were continued operating deficits coupled with issues in obtaining
a use permit to convert the facility&rsquo;s fuel source from natural gas to biomass that created uncertainty around the entity&rsquo;s
ability to pursue its business plans. The Company made advances totaling $55,700 and $102,926 to Co-Gen during the years ended
December 31, 2011 and 2010, respectively, which were expensed. The Company continues to voluntarily fund an insignificant amount
of monthly site maintenance expenses in order to sustain its investment options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 5 &ndash;  SUSANVILLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 10, 2011, the Company acquired the membership interest
of Susanville from two interest holders pursuant to a Purchase and Sale Agreement entered into with each interest holder (collectively,
the &ldquo;Agreements&rdquo;) for (a) at the closing, $97,500 in cash (b) at the closing, the number of shares of Series B Preferred
Stock (see Note 9 &ndash; Stockholders&rsquo; Equity &ndash; Preferred Stock &ndash; Series B) that are convertible into a fixed
$2,000,000 of the Company&rsquo;s common stock; (c) ten business days after the execution of a power purchase agreement, the number
of shares of Series B Preferred Stock that are convertible into $1,000,000 of the Company&rsquo;s common stock; and (d) on the
date Susanville receives sufficient project financing to refurbish the critical power generation assets, the number of shares of
Series B Preferred Stock that are convertible into $1,650,000 of the Company&rsquo;s common stock ($650,000 of which would be accelerated
upon the receipt of a federal loan guaranty commitment). The Agreements stipulate that the market value of the common stock was
to be based on the forty-five day moving average of the closing price of the Company&rsquo;s freely tradable common stock or $0.0046
per share. The aggregate number of shares of Series B Preferred Stock issued at closing was 434.782610 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Susanville owns the power generation assets that comprise an
idle 12.5 megawatt biomass energy power plant in Susanville, California and certain buildings, plus the Company also leases a 40
acre parcel of land located in Susanville, California, on which the power plant and buildings are located. The Company pays approximately
$240,000 in rent per annum for these premises and the lease term expires on January 30, 2013. During the lease term, the Company
also has an option to purchase the Susanville property, for a price equal to approximately $85,000 per acre, or approximately $3.4
million in the aggregate, reduced by (a) the $100,000 originally paid by the former lessee for the purchase option; (b) the sum
of $5,000 per month of rent paid from November 1, 2011 (which, on January 30, 2013, would equal $75,000); and (c) 50% of all rent
payments made prior to November 1, 2011 by the former lessee (or $675,000) for a net purchase price of approximately $2.5 million.
The Company is working with the lessor to formalize their oral agreement to extend the lease term by an additional year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The two sellers agreed to indemnify the Company
against any claims arising from any pre-existing environmental issues. The Company is self-insuring against any other issues
which could impair the value of the assets. If the Company doesn&rsquo;t exercise its option to purchase the Susanville
property, continue to extend the term of the lease or enter into a new lease, the buildings and any power generation assets that
aren&rsquo;t relocated prior to the surrender of the leased premises could be impaired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At acquisition, the Company recorded idle property and equipment
which aggregated $2,153,364. The amount represents the $97,500 of cash consideration, the $2,000,000 value of the Series B Preferred
Stock consideration, plus $55,864 of transaction costs. Post-acquisition, the Company added an additional $74,039 of idle property
and equipment costs, which represented consulting and wage costs associated with persons directly associated with the refurbishment
project. During the year ended December 31, 2011, the Company recorded $40,000 of rent expense related to the Susanville project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"><B>NOTE
5 &ndash; SUSANVILLE&nbsp;&ndash; CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company entered into a Registration Rights Agreement with
the two sellers whereby the Company has committed to cause a registration under the Securities Act of 1933, as amended, of the
secondary offering of their shares of common stock underlying their shares of Series B Preferred Stock on a delayed and continuous
basis. The Company is required to repurchase shares of the Series B Preferred Stock at a value of $0.0046 per share of common stock
for an amount equal to $18,750 per week, up to a maximum amount of $500,000 if the Registration Statement on Form S-1 is not filed
with the Securities and Exchange Commission on or prior to April 30, 2012, not declared effective within the period specified in
the Registration Rights Agreement, or upon certain other events that would prevent the offering of a specified minimum number of
such shares of common stock to be continued to be offered by either seller on a delayed and continuous basis in accordance with
such offering registered pursuant to an effective registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 6 &ndash; IDLE PROPERTY AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Idle property and equipment consists of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="margin: 0; font-weight: bold">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-bottom: 1pt">Susanville Biomass Plant</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,237,403</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">2,237,403</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These assets are being classified as idle property and equipment
until efforts to refurbish and restart the plant to operational status are completed. See Note 5 &ndash; Susanville for additional
information relating to the Susanville power generation assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation of the Susanville biomass plant will commence when
the facility begins operations, which is expected to occur 12 &ndash; 18 months after financing of the refurbishment is arranged.
Depreciation of the biomass plant will be performed using the straight-line method over the estimated useful lives of the underlying
power generation assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 &ndash; ACCOUNTS PAYABLE AND ACCRUED EXPENSES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts payable and accrued expenses consisted of the following
as of December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left">Accrued compensation</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">103,286</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">163,283</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Accrued professional fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">254,564</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">84,836</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Other accrued expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">133,592</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">79,274</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Total accrued expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">491,442</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">327,393</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 8 &ndash; OTHER LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2010, other liabilities of $232,500 represented
monies due to strategic partners for the sale of their 50% aggregate equity interest in Laidlaw Berlin, because the buyer paid
the Company the full proceeds of the sale (see Note 4 &ndash; Investments &ndash; Laidlaw Berlin BioPower, LLC) and the Company,
in turn, paid its strategic partners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 9 &ndash; STOCKHOLDERS&rsquo; EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Preferred Stock</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s $0.001 par value preferred stock has 402,000,000
and 10,000,000 shares authorized effective November, 18, 2011, and August 28, 2006, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Preferred Stock &ndash; Series A</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were 1,000,000 shares of Series A Preferred Stock authorized,
issued and outstanding as of December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Series A Preferred Stock shares are convertible, at the
option of the holder, at any time into that number of shares of common stock, collectively, which shall equal 60% of the sum of
the total issued and issuable common shares, including the total number of shares of common stock issuable upon the conversion
of all outstanding preferred stock and options as of the conversion date. The Series A Preferred Stock is entitled to that number
of votes equal to the number of shares of common stock into which such stock is convertible at the time of such vote. The liquidation
value of each share of Series A Preferred Stock equals $0.247562 or an aggregate of $247,562.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 18, 2011, in conjunction with and to facilitate
the issuance of the Series C Preferred Stock, the Series A Preferred Stock was amended such that the Series A Preferred Stock are
convertible, at the option of the holder, at any time into that number of shares of common stock, collectively, which shall equal
51% (previously 60%) of the sum of the total issued and issuable common shares, including the total number of shares of common
stock issuable upon the conversion of all outstanding preferred stock and options as of the conversion date. The Series A Preferred
Stock ranks on an equivalent basis as the Series C Preferred Stock in liquidation, but senior to the Series B Preferred Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Preferred Stock &ndash; Series B</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Series B Preferred Stock shares are convertible, at the
option of the holder, at any time after six months from their issuance and subject to certain price/volume limitations, into 1,000,000
shares of common stock. The Series B preferred stock is automatically convertible into common stock immediately prior to any merger
of consolidation of the Company pursuant to which the Company is not the surviving entity. The Series B Preferred Stock is entitled
to that number of votes equal to the number of shares of common stock into which such stock is convertible at the time of such
vote. The aggregate liquidation value of the Series B Preferred Stock shall equal $100 regardless of the number of Series B Preferred
Stock that are issued and outstanding and the Series B Preferred Stock ranks junior to the Series A and C Preferred Stock in liquidation.
Until the Series B Preferred Stock is converted into common stock, it is entitled to those dividends that it would have been entitled
to had it been converted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Preferred Stock &ndash; Series C</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to an Exchange Agreement between Novus Energy, LLC
(&ldquo;Novus Energy&rdquo;) and the Company dated November 18, 2011, as further amended on December 15, 2011, (1) Novus Energy,
whose sole member is an executive of the Company, transferred $220,000 plus its 25% interest in Laidlaw BioPower (which was deemed
to have de minimus value) to the Company, bringing the Company&rsquo;s interest in the entity up to 75% from 50%; and (2) the Company
transferred to the sole member 1,000,000 shares of Series C Preferred Stock. At November 18, 2011, Laidlaw BioPower did not have
any operating assets or liabilities, but the Company acquired the additional interest in order to position Laidlaw BioPower as
an investment vehicle for future transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Series C Preferred Stock shares are convertible, at the
option of the holder, at any time into that number of shares of common stock, collectively, which shall equal 10% of the sum of
the total issued and issuable common shares, including the total number of shares of common stock issuable upon the conversion
of all outstanding preferred stock and options as of the conversion date. The Series C Preferred Stock is entitled to that number
of votes equal to the number of shares of common stock into which such stock is convertible at the time of such vote. The liquidation
value of each share of Series C Preferred Stock shall equal $0.03126 or an aggregate of $31,260, and the Series C Preferred Stock
ranks on an equivalent basis as the Series A Preferred Stock in liquidation, but senior to the Series B Preferred Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 9 &ndash; STOCKHOLDERS&rsquo; EQUITY &ndash;
CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Common Stock </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s common stock has 9,000,000,000, 4,000,000,000
and 3,000,000,000 shares of common stock authorized effective January 3, 2012, November, 18, 2011 and March 17, 2009, respectively.&nbsp;
On November 18, 2011, the Company also decreased the par value of the common stock to $0.0001 from $0.001 and the impact of this
change has been reflected retrospectively in these consolidated financial statements. At December 31, 2011 and 2010, there were
2,456,721,088 and 2,454,721,088 shares issued and outstanding, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2011, the Company granted
2,000,000 shares of common stock to an executive of the Company (see Note 10 &ndash; Stock Based Compensation).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2010, the Company issued
82,649,863 shares of common stock to investors for aggregate cash proceeds of $100,000. Additionally, during the year ended December
31, 2010, the Company&rsquo;s chief executive officer exercised options to purchase 75,000,000 shares of common stock at an exercise
price of $0.0001 or aggregate proceeds of $7,500.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">No dividends have been paid to the holders of common stock during
the years ended December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 10 &ndash; STOCK BASED COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 17, 2011, the Company granted 2,000,000 shares of
immediately vested common stock to an executive of the Company. The $10,000 grant date fair value (determined by reference to the
closing price of the Company&rsquo;s common stock on the OTC Pink Market) was recognized immediately on the grant date, and is
reflected as selling, general and administrative expense in the consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 31, 2010, the Company issued stock options to purchase
25,000,000 shares of common stock with an exercise price of $0.0047 to an executive of the Company. The options were immediately
exercisable and have no expiration date. The Company recognized a $117,500 fair value expense immediately on the date of grant.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of the options activity during the years ended December&nbsp;31,
2011 and 2010 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Weighted</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Weighted</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Average</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Average</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Remaining</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Number of</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Exercise</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Life</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Intrinsic</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Options</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Price</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">In Years</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Value</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; font-size: 10pt">Balance, December 31, 2009</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">150,000,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0.0001</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt"></TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.0047</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt"></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(75,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.0001</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt"></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Forfeited</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Balance, December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.0013</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">n/a</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">345,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt"></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt"></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Forfeited</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; border-bottom: Black 1pt solid"></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid"></TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Balance, December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.0013</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 2.5pt; border-bottom: Black 2pt double">n/a</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">15,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Exercisable, December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.0013</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 2.5pt; border-bottom: Black 2pt double">n/a</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">15,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 10 &ndash; STOCK BASED COMPENSATION &ndash;
CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table presents information related to stock options
at December&nbsp;31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Options Outstanding</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Options Exercisable</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Weighted</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Average</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Exercisable</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Exercise</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Number of</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">Remaining Life</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">Number of</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Price</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Options</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">In Years</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Options</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 22%; font-size: 10pt; text-align: right">0.0001</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 23%; font-size: 10pt; text-align: right">75,000,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 23%; font-size: 10pt; text-align: right">n/a</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 23%; font-size: 10pt; text-align: right">75,000,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.0047</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">25,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 1pt">n/a</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">25,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right; padding-bottom: 2.5pt">n/a</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">100,000,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All of the outstanding and exercisable options have no expiration
date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">The Company has computed the fair value
of options granted using the Black-Scholes option pricing model.&nbsp; Forfeitures are estimated at the time of valuation and reduce
expense ratably over the vesting period, if any. This estimate&nbsp;will be&nbsp;adjusted periodically based on the extent to which
actual forfeitures differ, or are expected to differ, from the previous estimate, when it is material.&nbsp;The expected term of
options granted represents the estimated period of time that options granted are expected to be outstanding. The Company utilizes
the &ldquo;simplified&rdquo; method to develop an estimate of the expected term of &ldquo;plain vanilla&rdquo; option grants, as
the Company does not have sufficient historical option granting experience from which to estimate the expected term.&nbsp;The Company
utilizes an expected volatility figure, equivalent to the expected life of the options, based on its historical stock prices. The
risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent
with the expected term of the options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">In applying the Black-Scholes option
pricing model, the Company used the following weighted average assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="font-size: 10pt; text-align: center">For The Years Ended</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">December 31,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 56%; font-size: 10pt; text-align: left">Risk free interest rate</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 20%; font-size: 10pt; text-align: right">n/a</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right; width: 20%">0.73%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Expected term (years)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">n/a</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">25.0</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Expected volatility</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">n/a</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">50.0%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Expected dividends</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">n/a</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: right">0.0%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">There were no options granted during
year ended December 31, 2011. The weighted average estimated fair value of the stock options granted during the year ended December
31, 2010 was $0.0047 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">The Company recognized $0 and $117,500
of stock-based compensation expense during the years ended December 31, 2011 and 2010, respectively, related to stock option grants,
which are reflected as selling, general and administrative expense in the consolidated statements of operations. As of December
31, 2011, there was no unrecognized stock-based compensation expense related to stock option grants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 11 &ndash; COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Leases</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 9, 2011, the Company formed New Bedford of which
Laidlaw is the sole member. On April 29, 2011, the Company entered into a  lease of a thermo generator in New
Bedford, Massachusetts which expires on May 5, 2012. The lease payment of $75,000 is due at the end of the lease term or at
the time the Company determines to purchase the facility. The lease is extendible for an additional year for an additional
end of term lease payment of $90,000. The Company also provided $50,000 to the landlord as a security deposit under the
terms of the agreement. The agreement was intended to provide the Company with the time to improve operations, reduce
costs and assess the feasibility and economics of purchasing the facility and developing an efficient combined heat and power
system whereby low-cost energy could be provided to the tenants of the property and any excess could be sold into the power
grid. The purchase option permits the Company to purchase the facility, subject to certain conditions, for $2 million at the
end of either of the lease terms. The $2 million is payable by providing the seller with a secured promissory note in the
principal amount of $2 million which is payable from 10% of the free cash flow of the facility. The Company is not extending
the lease term or exercising the purchase option and is currently in negotiations with the landlord regarding the final lease
payment and the return of the security deposit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 11 &ndash; COMMITMENTS AND CONTINGENCIES &ndash;
CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Leases</U> &ndash; Continued</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 15, 2011, the Company entered into an operating lease
agreement for additional corporate office space at 2 Spring Street, First Floor, Montpelier, VT. The term of the lease is two years
with monthly rent of $850 and no escalation clause. Rent expense was $5,525 for the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 1, 2007 the Company entered into an operating lease
agreement for its corporate office space at 90 John Street, Suite 401, New York, NY. The lease expires on April 30, 2012. The lease
terms call for monthly rent of $5,695 in the first year and annual rent escalations of 2.7% in the second and third years, 5.9%
in the fourth year, and 2.7% in the fifth year. Rent expense was $70,530 and $50,670 for the years ended December 31, 2011 and
2010, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has total future minimum rental commitments under
its operating leases of $375,581 as of December 31, 2011, including annual amounts of $351,331 and $24,250 for the years ended
December 31, 2012 and 2013, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Profit Interest</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 18, 2011, the Company granted a 25% interest in
the net income received from all Laidlaw power projects in lieu of wages as consideration for an executive of the Company to provide
project development services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Legal and Regulatory Proceedings</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company received  subpoenas from the SEC on June 28,
2011 and March 28, 2012 requiring the company to provide documentation to the SEC and for designated officers to provide
testimony to the SEC. The SEC has information that it believes tends to show that there are possible violations by the
Company and its officers, directors and others with respect to certain applicable securities laws, including Section 5 and
17(a) of the Securities Act of 1933, as amended, Section 10(b) of the Securities and Exchange Act of 1934, as amended, and
the related regulations. Although the Company has been cooperating with the staff (&ldquo;Staff&rdquo;) of the SEC with
respect to this investigation and Michael Bartoszek, the Company&rsquo;s chief executive officer,  provided testimony to
the Staff on the record, there can be no assurances that the Staff will recommend to the SEC that no action be taken with
respect to the Company. The SEC has the authority to order a wide scope of remedies against the Company and any of its
officers or directors, any of which could materially and adversely affect the Company and the price of, or ability to trade,
its stock. Further, the Company cannot provide any assurance when the investigation will be concluded or what will be
the conclusion by the Staff or the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 3, 2009, an action titled &ldquo;Hiscock &amp;
Barclay v. Laidlaw&rdquo; was filed in the New York State Supreme Court &ndash; County of Onondaga. There has been a dispute over
approximately $140,000 of attorney billings associated with services provided prior to 2009. In December 2011, the parties reached
an agreement in principle whereby they agreed that the Company would pay $60,000 in full satisfaction of the dispute. As of the
report date, a formal settlement agreement has not been executed. This liability was recorded as of December 31, 2011 and
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Company is subject to legal proceedings and
claims arising from the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect
to such actions, will not have a material adverse effect on the financial position or results of operations of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 12 &ndash; INCOME TAXES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has filing requirements to file standalone corporate
income tax returns in the United States (Federal) and in New York. The Company&rsquo;s tax returns for the years 2010, 2009 and
2008 remain subject to examination. The Company has not yet filed its 2011 tax returns or amendments to its 2010, 2009 and 2008
tax returns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, the Company had approximately
$221,000 and $727,000 of federal and state net operating loss carryforwards available to offset future taxable income, respectively.
The federal net operating losses, if not utilized, begin expiring in 2028. In accordance with Section 382 of the Internal Revenue
Code, deductibility of the Company&rsquo;s net operating loss carryforward may be subject to an annual limitation in the event
of a change of control.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 12 &ndash; INCOME TAXES &ndash;  CONTINUED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2011, the effective state tax rate increased from
11.0% to 12.5% due to the Company&rsquo;s activities in new states. At December 31, 2011 and 2010, net deferred tax assets
consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">At December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Deferred Tax Assets:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left; padding-left: 0.12in">Net operating loss</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">103,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">327,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Equity method loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">436,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">397,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">Stock-based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">68,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">65,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0.12in">Accruals</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">24,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">24,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Gross deferred tax assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">631,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">813,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Investment gain - excess of book over tax</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(813,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Net deferred tax assets before valuation allowance</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">631,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Less: Valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(631,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Net deferred tax asset</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company believes that uncertainty exists with respect to
the future realization of the net deferred tax assets and has established a full valuation allowance as of December 31, 2011. The
deferred tax asset valuation allowance increased by approximately $631,000 during the year ended December 31, 2011 and decreased
by approximately $904,000 during the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The income tax provision (benefit) consists of the following
for the years ended December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For the Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Current:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">Federal</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left"></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">State and local</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Deferred:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; font-size: 10pt; padding-left: 0.12in">Federal</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">(461,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">768,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">State and local</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(170,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">136,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(631,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">904,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">631,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(904,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Income tax provision</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A reconciliation of the statutory federal income tax rate to
the Company&rsquo;s effective tax rate for the years ended December 31, 2011 and 2010, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For the Years Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: left">Tax provision (benefit) at federal statutory rate</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">(34.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">34.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">State income taxes, net of federal tax impact</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(12.5</TD><TD STYLE="font-size: 10pt; text-align: left">%)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">11.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Permanent differences</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(4.5</TD><TD STYLE="font-size: 10pt; text-align: left">%)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">51.0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(46.0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">%)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Effective income tax rate</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">0.0</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LAIDLAW ENERGY GROUP, INC. &amp; SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 13 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Chatsworth Claim</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 6, 2012, the Company received a statement of
claim and demand for arbitration before the American Arbitration Association from Chatsworth Securities LLC, seeking the
collection of $615,938 in placement fees which Chatsworth Securities alleges it is entitled to pursuant to the terms of a
written agreement between the parties dated December 22, 2005. On March 19, 2012, the Company submitted an answer to
the statement of claim and a counterclaim for contractual indemnification seeking an award of the Company&rsquo;s
attorney fees and costs, of which Chatsworth answered on March 26, 2012. To date, an arbitrator has not yet been
assigned to this matter. The Company believes the claim is without merit and intends to defend itself vigorously. However,
there can be no assurance that the Company will prevail in arbitration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><FONT STYLE="font-weight: normal">Through
and including&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012 (the 90th day after the date of this prospectus), all dealers effecting transactions in the registered securities
offered hereby, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement
is in addition to the obligation of dealers to deliver a prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">434,782,610 Shares</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LAIDLAW ENERGY GROUP, INC.<BR>
<BR>
Common Stock</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_________________________</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PROSPECTUS<BR>
_________________________</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PART II</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INFORMATION NOT REQUIRED IN PROSPECTUS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Item 13. Other Expenses of Issuance and Distribution</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth the costs and expenses expected to be incurred by Laidlaw Energy Group, Inc. (the &ldquo;Registrant&rdquo;) in connection
with this offering described in this registration statement. All amounts shown are estimates, except the SEC registration fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 74%; padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt; font-weight: bold; text-decoration: underline">Item</TD>
    <TD STYLE="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-decoration: underline; text-align: center">Amount to be Paid</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">SEC registration fee</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">$14.95</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Legal fees and expenses</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Accounting fees and expenses</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Printing and engraving expenses</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Transfer agent fees</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Blue sky fees and expenses</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Miscellaneous</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.6in; font-size: 10pt">Total</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: Black 1.5pt double">$*</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left; margin-left: 0.5in">_____________________<BR>
* To be provided by amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Item 14. Indemnification of Directors and Officers</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our certificate of
incorporation, as amended, eliminates the personal liability of directors to us and our shareholders for damages for any breach
of duty in such capacity except that such personal liability shall not be eliminated if a judgment or other final adjudication
adverse to such director establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled
or that his acts violated Section 719 of the Business Corporation Law of the State of New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated
bylaws provide that we shall indemnify every person made or threatened to be made a party to an action or proceeding by reason
of the fact that that person, that person's testator or intestate, is or was our director or officer or that person, that person's
testator or intestate, being or having been our director or officer, served any other corporation in any capacity at our request,
in the manner and to the extent provided in Business Corporation Law of the State of New York. In addition, our amended and restated
bylaws provide that expenses incurred by our directors and officers in defending a civil or criminal action or proceeding may be
paid by us in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount in case the person receiving such advancement is ultimately found, under Article 7 of the Business
Corporation Law of the State of New York, not to be entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced by us exceed the indemnification to which such person is entitled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Business Corporation
Law of the State of New York provides that we may indemnify any person made, or threatened to be made, a party to an action or
proceeding, whether civil or criminal, including an action by or in the right of any other corporation of any time or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer
served in any capacity at our request, by reason of the fact that he, his testator or intestate, was our director or officer, or
served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys&rsquo; fees actually or necessarily incurred
as a result of such action or proceeding, or any appeal therein, if such director of officer acted, in good faith, for a purpose
which he reasonably believed to be in, or, in the case of service for any other corporation or partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, our best interests and, in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his conduct was unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the Business
Corporation Law of the State of New York provides that when a director or officer has been successful, on the merits or otherwise,
in a corporate or derivative action against such director or officer, or in an action by an outsider or a criminal proceeding,
he or she is entitled to indemnification and we have a duty to indemnify such director or officer as authorized by the Business
Corporation Law of the State of New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Business Corporation
Law of the State of New York provides further that the indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which directors and officers may be entitled under our certificate of incorporation, as amended, or our amended
and restated bylaws or, when authorized by our certificate of incorporation, as amended, or our amended and restated bylaws, a
resolution of shareholders, a resolution of directors or an agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of a director or officer if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was
not legally entitled. The foregoing statements are subject to the detailed provisions of the Business Corporation Law of the State
of New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated
bylaws provide further that pursuant to Section 726 of the Business Corporation Law of the State of New York, we may purchase and
maintain insurance: (a) to indemnify ourselves for any obligation which we incur as a result of the indemnification of directors
and officers under our amended and restated bylaws; (b) to indemnify directors and officers in instances in which they may be indemnified
by us under our amended and restated bylaws; and (c) to indemnify directors and officers in instances in which they may not otherwise
be indemnified by us under our amended and restated bylaws provided the contract of insurance covering such directors and officers
provides, in a manner acceptable to the superintendent of insurance, for a retention amount and for co-insurance. Pursuant to our
amended and restated bylaws, no insurance may provide for any payment, other than cost of defense, to or on behalf of any director
or officer if a judgment or other final adjudication adverse to the insured director or officer establishes that his acts of active
and deliberate dishonesty were material to the cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled, or in relation to any risk the insurance of which is prohibited
under the insurance law of the State of New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Item 15. Recent Sales of Unregistered Securities</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as set forth
below, in the three years preceding the filing of this registration statement, the Registrant has not issued any securities that
were not registered under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From March 19, 2009
through January 6, 2010, we sold an aggregate of 471,500,000 shares of our common stock to Mazuma Holding Corp. and its affiliates,
for aggregate gross proceeds to us of $240,750.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 3, 2009,
we sold 19,723,866 shares of our common stock to Highwater Capital Management, LLC, for gross proceeds to us of $50,000. On January
22, 2010, we sold 32,649,863 shares of our common stock to Highwater Capital Management, LLC for gross proceeds to us of $50,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 17, 2010,
we issued to Michael B. Bartoszek, our President and Chief Executive Officer, 75,000,000 shares of our common stock, upon the exercise
of outstanding stock options, at an exercise price per share of $0.0001.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 10, 2011,
we entered into a transaction with Nature Energies, Inc. and Renegy Susanville, LLC, now known as NZ Legacy, LLC, pursuant to which
we issued 336.6087 shares of our Series B preferred stock to Nature Energies, Inc. and 98.17391 shares of our Series B preferred
stock to NZ Legacy, LLC, in each case, in exchange for all of their limited liability company interests in Laidlaw Susanville Biopower,
LLC, formerly known as Henri Susanville LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 18, 2011,
we issued 1,000,000 shares of our Series C preferred stock to Louis T. Bravakis, our Executive Vice President, as well as additional
consideration, in exchange for the transfer to us of $220,000 plus the 25% interest in Laidlaw Biopower, LLC held by an entity
whose sole member was Mr. Bravakis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares referred
to above were all issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as
amended, as offerings and sales of securities by an issuer not involving a public offering. We believe that the exemption was available
because the offer and sale of the securities did not involve a public offering and because of the limited number of recipients,
each of the purchaser&rsquo;s representations of sophistication in financial matters, and their respective access to information
concerning our company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2010,
we granted to Louis T. Bravakis, our Executive Vice President, options to purchase 25,000,000 shares of our common stock, at an
exercise price per share of $0.0047. The options do not have an expiration date. Such options were not registered under the Securities
Act of 1933, as amended, in reliance on the fact that the stock options were granted for no consideration, or were offered and
sold in transactions not involving a public offering, exempt from registration under the Securities Act of 1933, as amended, pursuant
to Section 4(2).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 17, 2011,
we granted to Theodore Alex Bravakis, our Vice President of Project Development, 2,000,000 shares of our common stock. Such shares
were not registered under the Securities Act of 1933, as amended, in reliance on the fact that the shares were granted for no consideration,
or were offered and sold in transactions not involving a public offering, exempt from registration under the Securities Act of
1933, as amended, pursuant to Section 4(2).</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Item 16. Exhibits and Financial Statement Schedules.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(a)&#9;Exhibits</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; text-align: justify">Exhibit No.</TD>
    <TD STYLE="width: 2%; padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 89%; border-bottom: black 1.5pt solid; padding-right: 0.8pt; font-size: 10pt; text-align: justify">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">3.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Certificate of Incorporation, as amended, of Laidlaw Energy Group, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">3.2</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Amended and Restated Bylaws of Laidlaw Energy Group, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">4.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Registration Rights Agreement, by and among Laidlaw Energy Group, Inc., Nature Energies, Inc. and Renegy Susanville, LLC, dated November 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">4.2</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Form of specimen stock certificate representing common stock</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">5.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Opinion of Herrick, Feinstein LLP*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Purchase and Sale Agreement, by and among Laidlaw
    Energy Group, Inc., Nature Energies, Inc., and Henri Susanville LLC, dated November 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.2</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Purchase and Sale Agreement, by and among Laidlaw
    Energy Group, Inc., Renegy Susanville, LLC, and Henri Susanville LLC, dated November 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.3</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Agreement for Environmental Conditions dated as of
    November 21, 2007 by and between Renegy Susanville, LLC and Sierra Pacific Industries as assigned by that certain Assignment
    and Assumption of Environmental Agreement dated as of November 10, 2011 by and between Renegy Susanville, LLC and Henri Susanville LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.4</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Option Agreement dated as of January 31, 2008 by and
    between Renegy Susanville, LLC and Sierra Pacific Industries, as assigned to Henri Susanville LLC  on November 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.5</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Lease Agreement dated as of January 31, 2008 by and
    between Renegy Susanville, LLC and Sierra Pacific Industries, as assigned to Henri Susanville LLC on November 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.6</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">First Amendment to Lease Agreement dated as of November 10, 2011 by and between Sierra Pacific Industries and Laidlaw Susanville Biopower, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.7</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Power Plant Operation and Development Lease with Purchase Option dated as of April 5, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.8</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Energy Services Agreement dated as of April 5, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.9</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Energy Services Agreement dated as of November 13, 2008 by and between Multilayer Coating Technologies, LLC and Konarka Technologies, Inc. as assigned by that certain Assignment and Assumption of Energy Services Agreement dated as of May 6, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify"></TD></TR></TABLE>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif"><TR STYLE="vertical-align: top"><TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify; width: 9%">10.10</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; width: 2%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify; width: 89%">Stockholders&rsquo; Agreement of Laidlaw Co-Gen, Inc. dated May 2006 by and among Laidlaw Co-Gen, Inc., RGB Co-Gen, LLC, Laidlaw Energy Group, Inc., GROG, LLC and ER Co-Gen, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.11</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Stock Pledge Agreement dated May 2006 by Laidlaw Energy Group, Inc. in favor of RGB Co-Gen LLC and ER Co-Gen, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.12</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Stock Option Agreement dated November 15, 2007 by and between Laidlaw Energy Group, Inc. and Michael B. Bartoszek</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">10.13</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Incentive Stock Option Agreement dated December 31, 2010 by Laidlaw Energy Group, Inc. to Louis T. Bravakis</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">16.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Letter relating to change in certifying accountant*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">21.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Subsidiaries of Laidlaw Energy Group, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">23.1</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Consent of Marcum LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">23.2</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; font-size: 10pt; text-align: justify">Consent of Herrick, Feinstein LLP (contained in their opinion included under Exhibit 5.1)*</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* To be filed by amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; padding-right: 5.4pt; padding-left: 0; font-size: 10pt">&nbsp;(b)</TD>
    <TD STYLE="width: 88%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt">Financial Statement Schedules</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All schedules are omitted
since the required information is not applicable, the information is presented in the Registrant&rsquo;s consolidated financial
statements and the related notes thereto or is not present in amounts sufficient to require submission of the schedules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Item 17. Undertakings</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Undertakings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The undersigned Registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">(1)&#9;To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">(i)&#9;to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the &ldquo;Act&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">(ii)&#9;to reflect
in the prospectus any facts or events arising after the effective date of this registration statement (or the most-recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set
forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">(iii)&#9;to include
any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1.1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">(2)&#9;That, for the
purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">(3)&#9;To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">(4)&#9;Insofar as
indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">(5)&#9;That, for the
purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such date of first use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SIGNATURES</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the requirements
of the Securities Act of 1933, the Registrant has duly caused this registration statement to be filed on its behalf by the undersigned,
thereunto duly authorized in the City of New York, State of New York on April 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">LAIDLAW ENERGY GROUP,
INC.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; width: 50%">&nbsp;</TD>
    <TD STYLE="width: 5%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 45%">/s/ Michael B. Bartoszek</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top">Name:<BR>
Title:</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid">Michael B. Bartoszek<BR>President and Chief Executive Officer</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities
and on the dates indicated.</P>

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    <TD STYLE="width: 40%; padding-right: 5.4pt; padding-left: 0; text-align: justify; text-indent: 0in; font-size: 10pt; font-weight: bold; text-decoration: underline">Signature</TD>
    <TD STYLE="width: 37%; padding-right: 5.4pt; padding-left: 0; text-align: justify; text-indent: 0in; font-size: 10pt; font-weight: bold; text-decoration: underline">Title</TD>
    <TD STYLE="width: 23%; padding-right: 5.4pt; padding-left: 0.24in; text-align: justify; text-indent: 0in; font-size: 10pt; font-weight: bold; text-decoration: underline">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 0; font-size: 10pt; text-align: left"><U>/s/ Michael B. Bartoszek&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
</U>Michael B. Bartoszek</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 0; text-align: justify; text-indent: 0in; font-size: 10pt">President, Chief Executive Officer and Director (principal executive, financial and accounting officer)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 0.24in; text-align: justify; text-indent: 0in; font-size: 10pt">April 30, 2012</TD></TR>
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    <TD STYLE="padding-right: 5.4pt; padding-left: 0; text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 0; text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD></TR>
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[{"type": "S-1", "sequence": "1", "filename": "v310916_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 764872}]
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As filed with the Securities and Exchange
Commission on April 30, 2012
Registration No. 333-
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________________
LAIDLAW ENERGY GROUP, INC.
(
Exact name of registrant as specified in its charter)
New York
4991
16-1485218
(State of incorporation)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
90 John Street, 4
th
Floor
New York, New York 10038
(212) 480-8400
(Address, including zip code, and telephone
        number, including area code, of registrant's principal executive offices)
Michael B. Bartoszek
Chief Executive Officer
Laidlaw Energy Group, Inc.
90 John Street, 4
th
Floor
New York, New York 10038
(212) 480-8400
(Name, address, including zip code, and
        telephone number, including area code, of agent for service)
_____________________________
Copies to:
Richard M. Morris
Stephen E. Fox
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
(212) 592-1400
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
x
_____________________________
CALCULATION OF REGISTRATION FEE
Title of each class of
        securities to be registered
Amount
        to be Registered(1)
Proposed
        maximum offering price per share(2)
Proposed
        maximum aggregate offering price(2)
Amount
        of
registration fee
Common Stock, $0.0001 par value per share
434,782,610 shs.(3)
$.0003
$130,435
$14.95
_____________
(1)
Pursuant to Rule 416 under the Securities Act of 1933, this registration statement will cover such
indeterminate number of shares of the registrant's common stock that may be issued with respect to stock splits, stock dividends
and similar transactions.
(2)
Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule
457(c) under the Securities Act of 1933, computed based upon the average of the high and low selling prices per share of the registrant's
common stock on April 25, 2012 on the OTC Pink market.
(3)
Represents shares of common stock that may be issued upon the conversion of an aggregate of 434.7826
shares of the registrant's Series B preferred stock.
_____________________________
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
The information in this prospectus is not complete
and may be changed. The selling stockholders named herein may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject
to Completion
Preliminary Prospectus
dated April 30, 2012
P R O S P E C T U S
LAIDLAW ENERGY GROUP, INC.
434,782,610 Shares of Common Stock
_________________
This prospectus relates
to the sale, transfer or other disposition from time to time of up to 434,782,610 shares of our common stock, which may be offered
by the selling stockholders identified in this prospectus at fixed prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market price, at varying prices determined at the time of sale or at negotiated prices. See "Plan
of Distribution" for additional information. All such shares being sold by the selling stockholders are presently issued
and outstanding.
We are not offering any
shares of common stock for sale under this prospectus and we will not receive any proceeds from sales of shares of our common stock
by the selling stockholders.
Our common stock is traded
on the OTC Pink market under the symbol LLEG.PK. On April 25, 2012, the last reported sale price for our common stock was $.0002
per share.
These are speculative
securities. Please read the "Risk Factors" section beginning on page 5 of this prospectus before making a decision
to invest in our common stock.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is           , 2012
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
5
Market For Our Common Stock
12
Management's Discussion And Analysis Of Financial Condition And Results Of Operations
14
Business
21
Management
30
Executive Compensation
32
Certain Relationships And Related Party Transactions
33
Principal Stockholders
34
Description Of Capital Stock
37
Selling Stockholders
41
Plan Of Distribution
42
Legal Matters
45
Experts
45
Where You Can Find Additional Information
45
Index To Financial Statements
F-1
_____________________________
We are responsible for
the information contained in this prospectus. We have not, and the selling stockholders have not, authorized anyone to give you
any other information, and take no responsibility for any other information that others may give you. T
he
selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of our
common stock
.
BASIS OF PRESENTATION
Except as otherwise indicated
herein or as the context otherwise requires, in this prospectus, "we," "our" and "us" refers
to Laidlaw Energy Group, Inc. and all of its consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS
There are statements in
this prospectus that are not historical facts. These "forward-looking statements" can be identified by words such as
"anticipate," "hope," "believe," "estimate," "expect," "positioned,"
"strategy," "forecast," "goal," "intend," "plan," "predict,"
"project," "seek," "target," "will," "could," "may," "should"
or "would" or other similar expressions that convey the uncertainty of future events or outcomes. You should be aware
that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these
risks, you should read this entire prospectus carefully; especially the risks discussed under the section entitled "Risk
Factors." Although management believes that the assumptions underlying the forward-looking statements included in this prospectus
are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these
forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information
represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry and
other circumstances. As a result, the identification and interpretation of data and other information and their use in developing
and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed
events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is
expressed on the achievability of those forward-looking statements. In light of these risks and uncertainties, there can be no
assurance that the results and events contemplated by the forward-looking statements contained in this prospectus will in fact
transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates.
We do not undertake any obligation to update or revise any forward-looking statements.
i
CAUTIONARY NOTE REGARDING INDUSTRY DATA
Unless otherwise indicated, information
contained in this prospectus concerning our company, our business, the services we provide and intend to provide, our industry
and our general expectations concerning our industry are based on management estimates. Such estimates are derived from publicly
available information released by third party sources, as well as data from our internal research, and reflect assumptions made
by us based on such data and our knowledge of the industry, which we believe to be reasonable.
ii
PROSPECTUS SUMMARY
This summary highlights
information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to
you.
You should read the entire prospectus carefully together with our financial statements and the
related notes appearing elsewhere in this prospectus before you decide to invest in our common stock. This prospectus contains
forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated
in such forward-looking statements as a result of certain factors, including those discussed under the heading "Risk Factors"
and other sections of this prospectus.
Our Business
We seek to develop and manage renewable
energy facilities that produce electricity and/or thermal energy for commercial and industrial purposes from sustainable biomass
sources, other renewable fuel sources or combined cycle natural gas.
Biomass generally refers to any organic
matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood residues, plants
(including aquatic plants), grasses, animal manure, municipal residues and other residue materials. The primary sources of biomass
or "feedstock" that we expect to use in our facilities are:
•
clean urban wood waste comprised mainly of used lumber,
trim, shipping pallets, trees, branches and other wood debris from construction and demolition activities;
•
by-products or mill residue from the manufacturing
of fibers, pulp, paper, lumber, plywood, cotton and other products;
•
tops, branches, non-merchantable timber and timber
stand improvement thinnings from managed forestry operations; and
•
energy dedicated crops such as fast-growing trees
and grasses, stalks, straws and perennial crops.
We believe that biomass fuels are an attractive alternative
to fossil fuels primarily because:
•
biofuels, wood and organic waste are the largest single
source of renewable fuel on a global basis;
•
the price for fossil fuels is increasing and becoming
more volatile;
•
of the possible supply shortages for fossil fuels;
•
of the relative safety and environmentally friendly
ability to harvest and obtain biomass fuels;
•
of the numerous government sponsored incentives available
for power generation facilities that use alternative or renewable fuels;
•
biomass fuels may be utilized through proven environmentally
friendly technologies;
•
biomass fuels are the only form of renewable energy,
other than hydropower, that can provide for dependable base-load or continuous rather than intermittent, generation of electric
and thermal energy; and
•
electric and thermal generation from these fuel sources
are widely considered to be carbon-neutral, which means the carbon dioxide emissions created through the combustion process are
offset by the sequestration of carbon dioxide by trees and plants.
We believe that there is a sufficient readily
available supply of biomass fuel for our proposed facilities and intend to continue to evaluate the sufficient and reliable supply
of biomass fuel as part of our acquisition evaluation process. For instance, wood chips and related products used for industrial
purposes are quoted in weekly commodity reports and are generally readily available at "roadside" prices, which is
the price a buyer pays for wood chips prior to any transport and preprocessing to the end-use location at a roadside in the forest,
at a processing mill location in the case of mill residue, or at a landfill for urban wood waste.
1
To a lesser extent, we also intend to pursue
the development of facilities that utilize natural gas in a combined-cycle for projects that can provide both electricity and thermal
energy. A combined-cycle facility uses a steam turbine generator in concert with a combustion turbine and heat recovery steam generator
to generate electric and thermal energy in an efficient manner.
Corporate Information
We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a "reverse" merger with Laidlaw Energy Group, Inc., referred to as the Predecessor Company,
in which we were the surviving corporation. We then changed our name to Laidlaw Energy Group, Inc. The Predecessor Company was
formed in 1999 to own and operate natural gas-fired generation assets and related entities. We had no operations or assets at the
time of our reverse merger with the Predecessor Company.
Our executive offices are located at 90
John Street, New York, NY 10038; our telephone number is (212) 480-8400. Our website is located at http://www.laidlawenergy.com. The
information on our website is not part of this prospectus.
2
The Offering
Common stock offered by the selling stockholders
434,782,610 shares of common stock
(1)
Common stock to be outstanding after the offering
2,891,503,698 shares of common stock
(2)
Use of proceeds
We will not receive any proceeds from the sale of common stock by the selling stockholders participating in this offering. The selling stockholders will receive all of the net proceeds from the sale of their respective shares of common stock in this offering.
Risk factors
See "Risk Factors" on page 4 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
__________
(1)
Represents
        shares of common stock that may be issued upon the conversion of an aggregate of 434.7826 shares of our Series B preferred stock.
(2)
Based on
        our issued and outstanding shares of common stock as of April 25, 2012, and assumes the conversion, for no consideration, of all
        434.7826 shares of our Series B preferred stock. It does not assume the full exercise or conversion of any other preferred stock,
        options, warrants or other of our securities convertible into our common stock that may be outstanding.
3
Summary Selected Historical Financial
Data
The following tables set
forth our summary historical financial data. The consolidated statement of operations data for the years ended December 31, 2011
and 2010 have been derived from our audited financial statements included elsewhere in this prospectus. The consolidated balance
sheet data as of December 31, 2011 and 2010 have been derived from our audited consolidated financial statements included elsewhere
in this prospectus. The data should be read in conjunction with our audited consolidated financial statements and the notes to
such statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.
Statement of Operations Data
For the Years Ended
December 31,
2011
2010
Income before operating expenses
$
-
$
2,847,984
Total operating expenses
$
(1,231,873
)
$
(980,199
)
Total other income
$
-
$
109,616
Net (loss) income
$
(1,231,873
)
$
1,977,401
Balance Sheet Data
As of December 31,
2011
2010
Cash and cash equivalents
$
1,197,563
$
745,140
Total assets
$
3,502,206
$
2,562,530
Total liabilities
$
501,442
$
559,893
Total stockholders' equity
$
3,000,764
$
2,002,637
4
RISK FACTORS
Investing in our common
stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information
contained in this prospectus, before making your decision to invest in shares of our common stock. We cannot assure you that any
of the events discussed in the risk factors below will not occur. These risks could have an adverse impact on our business, results
of operations, financial condition and cash flows. If any of the following risks develops into an actual event, the trading price
of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Business
We have limited operating history and have earned
limited revenues; our financial statements are subject to a going concern qualification from the Independent Registered
Public Accounting Firm that performed our audit.
We have a limited operating
history and have earned limited revenues in our operating history. Our only year of profitable operations was 2010 and that
resulted primarily from the sale of our interest in the Berlin, New Hampshire project, which is a non-recurring revenue
event that accounts for approximately 85% of our total revenues since our inception. We did not generate any revenue or
other income in 2011, and incurred net losses of $1,231,873 during the year ended December 31, 2011. These conditions raise
substantial doubt about our ability to continue as a going concern. There is no assurance that we will achieve profitable
operations in the near future or at all. Also, there is no assurance that once we begin to generate revenues, that our
revenues will be sufficient to fund our continuing operations. Our inability to generate sufficient revenue and become
profitable may force us to curtail or temporarily discontinue our acquisitions of and retooling of biomass projects and our
day-to-day operations and may restrict our ability to develop projects in the future.
We need additional financing to acquire and develop biomass
power generating facilities and to pursue our growth strategy.
We believe that our cash resources
are sufficient to support our current operating and developmental activities and requirements for substantially all of 2012.
Depending on any revenues that we may generate from management fees and facilities operations, after such time, or earlier if
we decide to increase our spending levels, we will need to raise additional funds through public or private debt or equity
financing in order to continue our operations, acquire and develop biomass power generating facilities and establish a
stronger financial position. In addition, future projects may require additional investments to fund the start-up operations
of such projects until they generate sufficient cash flow from their own operations. Such capital requirements could include
deposits or other collateral to support our obligations under a power purchase agreement. It is not possible to make any
reliable estimate of the funds required to meet our future financial obligations or to pursue our growth strategy.
Furthermore, financing of planned and unplanned future projects, including with respect to our Susanville facility, is not
certain and the sources are yet unknown. Despite our efforts, there is no assurance that we will be able to secure additional
funding, or funding on terms acceptable to us, to meet our financial obligations or to pursue our growth strategy. Further,
there is no assurance that our projects will succeed at generating sufficient cash flow to support our operations even if
funded. Our failure to raise additional capital could delay or curtail our growth strategy and development efforts, or force
us to cease operations entirely.
We may be unsuccessful in identifying additional potential
biomass power generating facilities, which could adversely affect our ability to generate revenues and become profitable.
Our growth strategy includes identifying
biomass power generating facility opportunities that we may acquire at a substantial discount to retool or refurbish or otherwise
develop with proven technologies. Identifying such facilities and pursuing the initial assessment or planning of such facilities
are a time consuming and expensive process. We may encounter setbacks after expending a significant amount of money with respect
to a particular facility, including the possibility that we may ultimately fail to develop and/or purchase such facility. In addition,
our ability to develop or acquire a particular facility may be conditioned on securing project equity and other financing or finding
strategic investors or joint venture partners. There is no assurance as to when or whether we will successfully identify biomass
power generating facilities to develop or acquire. Further, there is no assurance that we will be able to secure additional financing
or find strategic investors or joint venture partners, if necessary, to move forward with the development or acquisition of a particular
facility.
5
We have limited experience developing, acquiring and operating
biomass power generating facilities.
To date, we have acquired, developed to
a status that was substantially ready for the commencement of construction and sold one planned biomass power generating project.
Our management has not overseen the final conversion or retooling of a large scale commercial biomass power generating facility
or operated such a biomass facility. There is no assurance that either we or any other party we have engaged or may engage to convert
and operate such facilities have developed processes that are satisfactorily designed and sufficiently efficient to provide for
a profitable biomass power generating facility. Further, the conversion of a biomass power generating facility is complicated and
we rely on and intend to rely on a number of contractors and subcontractors for the production and supply of various technologies
and assemblies. Even if we or our contractors and subcontractors are successful in producing and supplying such technologies and
assemblies, it is uncertain whether we or they will be timely in meeting our schedule or our efficiency requirements, all of which
could have a material adverse effect on our business and operating results.
We may be unable to secure long-term power purchase agreements
for the sale of the power from our facilities and/or the sale of RECs and other environmental attributes
.
Our business strategy includes pursuing
long-term power purchase agreements with utilities or end-users for the sale of electrical power and thermal energy attributes
such as RECs and/or thermal energy generated by our facilities. In addition, our ability to finance our power projects is largely
dependent upon our ability to enter into such long-term power purchase agreements, each of which may have specific requirements
and conditions. There can be no assurance that we can anticipate all of the utility or end-user requirements and conditions or
be able to meet any of those requirements and conditions. Further, there is no assurance that the pricing schedules for power generated
by any of our planned facilities will be attractive to utilities and other potential purchasers or be sufficient to enable us obtain
power purchase agreements on acceptable terms. Failure to enter into such long-term power purchase agreements for each of our biomass
power generating facilities currently in existence or that we may acquire or develop in the future may cause uncertainty with respect
to future project revenues and impair our ability to obtain sufficient financing for our biomass projects.
We compete with more established and well-recognized companies,
which offer similar products and services or the same products and services as we sell.
We operate in the alternative energy industry,
which is highly competitive, with numerous small and large companies in the United States and worldwide producing and distributing
energy from renewable resources. We compete, and expect to continue to compete, with entities whose sole business is to retrofit
existing power plants for operators, as well as entities that provide alternative energy solutions from renewable resources other
than biomass. Many of our competitors and potential competitors have substantially greater capital resources and more experience
in retrofitting and operating power plants, research and development, manufacturing and marketing. We may have difficulty competing
with more established and well-recognized companies, and any other companies that have greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. Moreover, our competitors may have broader product lines
and services and have greater name recognition than we do, and may offer discounts as a competitive tactic, causing us to reduce
the sales prices of our energy products. In addition, our competitors could introduce new products or services with features that
could render our technologies, products or services less marketable. Accordingly, there is no assurance that our business operations
will be successful due to competition from more established and well-recognized companies.
We may not meet any of the timetables we establish from
time to time, which could result in cost overruns and adversely affect our relationships with third parties.
From time to time, we may establish milestones
and timetables based upon market forces as well as our expectations regarding our plans and projects, which we would use to assess
our progress toward our growth strategy. These milestones could relate to, among other things, identifying, acquiring and developing
biomass power generating facilities and negotiating terms of power purchase agreements or other sales agreements with utilities
and other third parties. If any milestones that we establish for a project are not met, then our development of such project could
be adversely effected by cost overruns and delays, including requirements to make additional payments to third parties. In addition,
any delay in satisfying a covenant or milestone in a contract could result in the termination of such contract or subject us to
remedies enforceable by third parties. Further, potential purchasers of the power generated by our planned facilities may lose
interest or choose to purchase power from alternate sources. Currently, we have not established any milestones or timetables, other
than with respect to the exercise of our rights to purchase the land and facilities that we currently lease in Susanville, California.
There is no assurance that any milestones and time tables for a particular project or in general will be met.
6
We depend upon our officers for management and direction,
and the loss of any of these persons could adversely affect our operating results.
We depend upon our executive officers for
the development and execution of our business plan, especially Michael B. Bartoszek, our founder, President and Chief Executive
Officer, and Louis T. Bravakis, our Vice President of Project Development. These officers have extensive experience in the renewable
energy business and lead the development and management of our projects. We do not have any employment or non-competition agreements
with our executive officers nor do we maintain "key person" life insurance for any of our officers. The loss of any
of our officers could delay or prevent the development of our business plan as well as any future operations.
If we cannot hire or retain skilled executive, managerial
and technical personnel, our business can be adversely affected.
We currently do not have a chief financial
officer. A failure to attract and retain a qualified individual for this position in particular, and other qualified executives,
managerial and technical employees in general, could adversely affect our operations and any future revenues. We continue to seek
additional qualified personnel in order to expand our development efforts and operations. There is no assurance that we will be
able to attract and retain any such qualified personnel.
We depend on third parties for expertise in the development
of our biomass power generating projects.
The success of our business depends on our
ability to enter into agreements with third parties for financing, operations, construction, fuel supply, energy distribution and
other business functions. We depend on our relationships with third parties, such as engineers and regulatory specialists, to assist
in the development and maintenance of our biomass power generating projects. We also depend on contractors for the construction
of our biomass power generating facilities. Failure to hire or to enter into an agreement with any of these third parties on terms
favorable to our business could adversely affect our operations and financial condition. Any damage to our current relationships
could result in unforeseen expenses and impair our business strategy.
Many of the terms of our relationships with strategic
partners that we depend on, and expect to continue to depend on, are not certain.
In order to implement our business strategy,
we rely upon strategic alliances with numerous consultants, contractors and equipment and biomass suppliers. The terms and conditions
of many of these agreements may allow for immediate termination, in part or in whole, by the partners in their discretion, or only
provide for a commitment on the part of the partners upon the occurrence of certain events. There is no assurance that we will
be able to enter into and perform our obligations under such strategic alliances. The failure of these events to occur or the termination
of any of these agreements could adversely affect our business, operating results and financial condition.
Failure to obtain required permits and government approvals
and construction delays or defects could result in aborting projects or delays in the development and operation of our biomass
power generating facilities.
The development of new projects and acquisitions
of existing projects may involve delays or outright termination for numerous reasons. Terminating a project or delays in developing
and operating a facility may be due to a failure to obtain the required permits and governmental approvals, weather conditions,
changes in environmental regulation and other events that are out of our control. Any such delay could adversely affect our operations
and financial condition and could cause a default under project finance or power purchase agreements. Further, there is no assurance
that defects in the construction of our projects will not occur, which could delay the commencement of our operations or reduce
the projected production capacity. In addition, delays in the transportation of biomass sources to our facilities could further
delay and even halt operations and impair our ability to generate revenues.
7
Our business is subject to environmental laws and regulations,
violations of which could be expensive and harm our operating results and financial condition.
Our business is subject to numerous federal,
state and local laws and regulations that govern environmental protection. These laws and regulations may change and evolve into
stricter standards and enforcement and larger penalties. New environmental laws and regulations may also be adopted. Our operations
may not be in compliance with new or future changes in laws and regulations. Compliance with such laws and regulations may require
significant unanticipated capital and operating expenditures. There is no assurance that we will be financially able to comply
with new or amended environmental laws and regulations. If we fail to comply with such laws and regulations, we may be subject
to fines and have our existing permits revoked or not subject to renewal. Further, private parties in such circumstances could
seek damages from us. Under any of those circumstances, we might be required to curtail or cease operations, take corrective action
or pay substantial damage claims. Thus, new or amended environmental laws and regulations may have a material and adverse effect
on our business, operating results and financial condition.
Environmental cleanups of contaminated sites
and fines imposed by regulatory authorities on parties deemed to be liable for environmental contamination are very costly. If
contamination occurs for which we are deemed liable, the resulting expenses could have a material adverse effect on our business.
In addition, corrective action could delay operations and require significant expenditures.
In addition, some of the environmental and
other governmental laws and regulations may require us and/or our strategic partners to obtain permits prior to any development
or operation. There is no assurance that we or they will be able to obtain any or all such permits at minimal cost or at all.
Changes in currently favorable legislation that provide
tax incentives or mandate the purchase of renewable energy by local utilities may adversely impact our profit margins.
Our business plan entails the generation
of revenue through electrical power, installed capacity, thermal energy and environmental attribute sales such as RECs and other
incentives, which represent a legislatively established premium paid for electricity generated from qualified renewable sources.
Favorable legislation also includes mandates requiring utilities to meet state renewable portfolio standards. We expect to qualify
for tax credits, grants and other types of incentive programs to provide additional equity capital. Accordingly, changes in legislation
that provide tax incentives would negatively impact our profit margin. We note that the federal incentive that provided a payment
of 30% of the eligible cost of qualifying assets under the Department of Treasury Section 1603 Tax Grant Program under the American
Recovery and Reinvestment Act of 2009 expired on December 31, 2011, and the U.S. federal renewable energy production tax credits
program is scheduled to expire on December 31, 2012 absent renewal. The loss of the Tax Grant program and the possible loss of
other incentive programs due to budgetary constraints or other reasons could significantly decrease the amount of capital available
and deployed in the renewable energy sector and may significantly reduce our ability to acquire needed capital and operate a renewable
energy facility on a positive cash flow basis.
Further, while we currently focus on developing
and acquiring projects in states with existing renewable energy legislation that mandates the purchase of renewable energy by local
utilities, there is no assurance that the currently favorable legislative and regulatory climate will continue in the current form.
Development and implementation of new technologies may
require significant capital expenditures to remain competitive.
We operate in an industry that is relatively
immature and subject to rapid technological development. Our success in the renewable energy industry will depend on our ability
to remain competitive by keeping abreast with the technological demands of the marketplace. Development and implementation of new
technologies could require significant capital expenditures, and there is no assurance that we will be able to develop advanced
energy production processes in a cost effective manner.
Further, new technology may result in better
alternatives to biomass sources, which would reduce demand for biomass energy projects.
8
We depend on third party suppliers for the supply of biomass
and other materials for our biomass power generating facilities.
We depend and will depend on third party
suppliers to provide the requisite biomass and other materials to power our planned facilities. A supplier's failure to supply
biomass or materials that meet our schedule, quality, quantity or cost requirements may negatively affect our cost targets or ability
to generate energy on a timely basis. Our inability to obtain substitute sources from alternative suppliers in a timely manner
or on terms acceptable to us would increase operating costs and adversely affect the operations of our biomass power generating
facilities.
The pricing and availability of biomass may change to
our detriment, which could negatively impact our profit margins.
Our profitability depends in part on our
ability to acquire inexpensive and plentiful biomass to fuel our biomass power generating facilities. The number of renewable energy
projects, whether ours or our competitors', utilizing biomass may increase substantially in the near future, which could
cause demand for biomass fuel to increase, and, accordingly, result in price increases. Although we believe that any biomass fuel
price increases can be passed through to the power purchaser, we can give no assurance of that. Any failure to pass on such price
increases could hurt our profit margins. Further, the economic viability of biomass power may be negatively impacted if demand
for biomass power declines due to price increases.
Gross margins from the sale of our products may decline
as a result of industry trends, competitive pressures and other uncertainties.
The biomass energy industry is rapidly developing
due a number of factors including governmental incentives, technological changes and expected future increases in the price of
fossil fuels. Our competitors have announced investing in new biomass energy projects. An increased number of biomass energy facilities
may cause sales prices of energy products derived from biomass sources to be lowered in order to gain market share or to increase
demand. In the face of pricing competition, we may lower the sales prices of our products, including electrical power and thermal
energy generated by our facilities, which could cause our gross margins to decline. As a result, our business, operating results
and financial condition may be adversely affected.
Risks Related to Us and Our Common Shares
We are subject to an SEC investigation.
We received  subpoenas from the SEC on
June 28, 2011 and March 28, 2012 requiring us to provide documentation to the SEC and for designated officers to provide
testimony to the SEC. The SEC is investigating us and our officers, directors and others regarding compliance or possible
violations under certain securities laws, primarily relating to our issuance and sale of unregistered securities, the
purchase and sale of our securities and reports and other disclosures that we made to our shareholders and
publicly. We have been cooperating with the SEC with respect to its investigation. Our Chief Executive Officer provided
testimony to the SEC on the record and we have produced documents to the SEC in response to the subpoena. The SEC has the
authority to order a wide scope of remedies against us and any of our officers or directors, any of which could materially
and adversely affect us, our ability to issue our securities and the price of, or ability to trade, our common stock. The SEC
is continuing its investigation and we cannot provide any assurance of when the SEC investigation will be concluded or the
effect of any remedies that the SEC may seek to enforce, if any.
9
Trading of our shares was temporarily suspended and we
do not have a Market Maker.
On June 7, 2011, the SEC issued an order
pursuant to Section 12(k) of the Exchange Act that temporarily suspended the trading in our common stock from June 7, 2011 through
and including June 20, 2011. Each of the market makers for our common stock has declined to continue to make a market for our common
stock, and we have not been able to identify any broker-dealer that is willing to make a market for our common stock.
Our securities are considered highly speculative because
of the early stage of development and nature of our business.
We operate in an industry that is highly
competitive, fast developing and subject to new technologies. We have yet to complete our first biomass power generating project,
and thus have generated limited revenues and do not expect to generate sufficient revenues or realize any material profit from
operations in the short term. Any profitability of our business depends on our successfully executing our business plan, which
is subject to the risks inherent in any new business and those risks specific to the renewable energy industry. In addition, we
continue to seek additional investment either through debt or equity to develop our projects and to sustain our future business
operations.
Our securities are subject to the "Penny Stock"
regulations of the SEC, which may restrict trading of our common stock.
The SEC defines a "penny stock"
as any equity security other than a security excluded from such definition by Rule 3a51-1 of the Exchange Act. Generally, a "penny
stock" is any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Since our shares are not listed on a national stock exchange and the market price of
our shares is less than $5.00 per share, our securities are subject to the penny stock rules under Rule 15g-9 of the Exchange Act,
which imposes restrictions on broker-dealers who sell to persons other than established customers and accredited investors.
The penny stock rules require a broker-dealer
to, prior to the sale of the penny stock, approve the purchaser's account for transactions in penny stocks by obtaining the
purchaser's information regarding his or her financial situation, investment experience and investment objectives. The broker-dealer
must deliver a standardized risk disclosure document prepared by the SEC to provide the purchaser with additional information including
current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the purchaser's account. The broker-dealer
must make a written determination that the penny stock is a suitable investment for the purchaser and that the purchaser has sufficient
knowledge and experience in financial matters. In addition, the broker-dealer must receive the purchaser's written agreement
to the transaction. These additional requirements may affect the ability of broker-dealers to trade our securities and reduce the
level of trading activity in the secondary market. As a result, penny stock rules limit the marketability of our common stock and
may discourage investors from purchasing our common stock.
We do not expect to pay dividends to holders of our common
stock.
We have not paid any dividends on our common
stock and do not anticipate declaring any dividends on our common stock in the foreseeable future. Our board of directors presently
intends to retain all earnings, if any, for use in our business operations and development of facilities.
Future sales or issuances of substantial amounts of our
common stock could affect the market price of our common stock.
Future sales or issuances of substantial
amounts of our common stock, or securities convertible or exchangeable into shares of our common stock, in the public market, or
perceptions that those sales, issuances and/or conversions could occur, could adversely affect the prevailing market price of our
common stock and our ability to raise capital in the future. At the present time, we expect that we will require substantial amounts
of outside funding to finance our operations, which could be raised through the sale of our common stock or securities exercisable
or convertible into our common stock. In addition, as of December 31, 2011, our Series A preferred stock and Series C preferred
stock, collectively, are convertible into an aggregate of 3,998,974,009 shares of common stock. Furthermore, in connection with
our acquisition of the Susanville facility, we issued preferred stock which may be converted into 434,782,610 shares of our common
stock, of which this prospectus relates. We may further issue additional shares of such preferred stock contingent upon the completion
of certain milestones in the development of the Susanville facility. The sale of shares of our common stock by the holders
of such Series B preferred stock is restricted but we may amend the selling restrictions with respect to the sale of such shares.
The rights of such holders and our ability to issue additional shares of our common stock whether upon conversion of outstanding
shares of preferred stock or otherwise or any class of preferred stock including a class that may have rights that are senior to
the rights of our common stock, is a factor or "overhang" that may reduce the price of our common stock.
10
Our common stock price has been below $0.01 per share
and could remain at that level or, if it increases, could be subject to volatility.
The market price for our common stock has
been below $0.01 and is subject to extreme price and volume fluctuations in response to market and other factors. It is impossible
to predict whether the price of our common stock will rise. Trading prices of our common stock will be influenced by our operating
results and prospects and by economic, financial and other factors. In addition, general market conditions, including the level
of, and fluctuations in, the trading prices of stocks generally, and sales of substantial amounts of common stock by us in the
market, or the perception that such sales could occur, could affect the price of our common stock.
A small number of shareholders control us.
Michael B. Bartoszek, our President and
Chief Executive Officer, and Louis T. Bravakis, our Executive Vice President, hold a majority of the voting power of our capital
stock through their ownership of common stock and 100% of the outstanding shares of our Series A preferred stock and Series C preferred
stock, respectively. Our Series A preferred stock is collectively entitled to 51%, and our Series C preferred stock is collectively
entitled to 10%, of the voting power, independent of the number of outstanding shares of our common stock and preferred stock at
any given time. Accordingly, Michael B. Bartoszek, acting alone or together with Louis T. Bravakis, has the ability to control
the membership of a majority of our board of directors and to decisively influence the outcome of decisions requiring shareholder
approval. The level of ownership held by these shareholders may delay, deter or prevent the change of control, even if such change
of control would be beneficial to the other holders of our securities. Additionally, as the number of shares of common stock that
Messrs. Bartoszek and Bravakis are entitled to upon conversion will depend on the number of outstanding shares of our common stock
and that may be issued upon the conversion or exercise of securities convertible into common stock as of the conversion date, we
may be required to issue to Messrs. Bartoszek and Bravakis substantial additional shares of our common stock depending on our capitalization
as of any given conversion date.
We have not performed a management assessment of the effectiveness
of our internal controls over financial reporting.
Section 404 of the Sarbanes-Oxley Act of
2002 requires annual management assessments of the effectiveness of a company's internal control over financial reporting
beginning in 2013. We have not yet performed such an assessment. It is possible that, if we perform such an assessment, it would
identify deficiencies with respect to our internal controls over financial reporting, and any such deficiencies may be material.
We do not have sufficient employees or staff to maintain independence in our financial management processes.
11
MARKET FOR OUR COMMON STOCK
There currently is no established public
trading market for our common stock. The following table sets forth, for the fiscal quarters indicated, the high and low sales
prices for our common stock on the OTC Pink Market. Our common stock trades under the symbol LLEG.PK. Quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
High
Low
2010:
First Quarter
$0.0027
$0.0013
Second Quarter
0.0019
0.0012
Third Quarter
0.0055
0.0014
Fourth Quarter
0.0068
0.0025
High
Low
2011
:
First Quarter
$0.0052
$0.0040
Second Quarter
0.0054
0.0010
Third Quarter
0.0030
0.0003
Fourth Quarter
0.0010
0.0001
2012:
First Quarter
$0.0007
$0.0001
Second Quarter (through April 25, 2012)
0.0004
0.0002
As of April 25, 2012, we had 81 shareholders
of record for an aggregate of 2,456,721,088 shares of our common stock issued and outstanding. Also as of April 25, 2012, we have
an aggregate of 100,000,000 shares of common stock that may be issued upon the exercise of outstanding stock options and an aggregate
of 3,998,974,009 shares of common stock that may be issued upon the conversion of outstanding shares of our Series A preferred
stock and Series C preferred stock. As of May 10, 2012, which is the date when the outstanding shares of our Series B preferred
stock will be convertible into an aggregate of 434,782,610 shares of common stock (all of which are being registered pursuant to
the registration statement of which this prospectus forms a part), we will have an aggregate of 5,113,801,215 shares of common
stock that may be issuable upon conversion of our Series A preferred stock, Series B preferred stock and Series C preferred stock.
We have not declared or paid any cash dividends
to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management
to utilize all available funds for the development of our business. The payment of dividends in the future will depend upon, among
other factors, our earnings, capital requirements, and operating financial conditions.
12
Equity Compensation Plan Information
The following table summarizes information
as of December 31, 2011 about our outstanding stock options and shares of common stock reserved for future issuance under our existing
equity compensation plans.
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
Equity Compensation Plans approved by security holders
—
$
—
—
Equity Compensation Plans not approved by security holders
100,000,000
$
0.0013
—
Total
100,000,000
—
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operation should be read in conjunction with the financial statements
and related notes that appear elsewhere in this prospectus. This discussion contains forward-looking statements and information
relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks
and uncertainties, including the risks in the section entitled Risk Factors beginning on page 3, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements.
These
forward-looking statements speak only as of the date of this prospectus. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except
as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking
to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with
regard thereto or to conform these statements to actual results.
Overview
We seek to develop and manage renewable
energy facilities that produce electricity and thermal energy for industrial purposes from sustainable biomass sources, other renewable
fuel sources or combined-cycle natural gas. Biomass generally refers to any organic matter that is available on a renewable or
recurring basis, including agricultural crops and trees, wood and wood residues, plants (including aquatic plants), grasses, animal
manure, municipal residues, and other residue materials. Combined-cycle natural gas refers to a process in which a steam turbine
generator is used in concert with a combustion turbine and heat recovery steam generator to generate electric and thermal energy
in an efficient manner. Our business has been primarily focused on, but is not limited to, developing renewable energy facilities
that use wood as the renewable fuel source. We seek to generate revenues through:
·
operating and managing renewable energy facilities owned by us;
·
management fees from managing renewable energy facilities owned jointly with other parties or by others;
·
joint ventures or other business arrangements to develop excess space at our facilities with other developers, such as to develop
photovoltaic solar generation facilities; and
·
the sale of our developed or partially developed facilities.
We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a "reverse" merger with Laidlaw Energy Group, Inc. in which we were the surviving corporation.
We then changed our name to Laidlaw Energy Group, Inc.
Approximately 85% of our revenues since
the August 14, 2002 merger to December 31, 2011 were generated from the sale in 2010 of our sale of our interest in a 75 megawatt
renewable energy project in Berlin, New Hampshire that we acquired in 2008 and developed to a status that was substantially ready
for the commencement of construction, and management fees. We have been investing in other projects and have not generated significant
operating revenues from any other source. We do not foresee any similar liquidity or sale event with respect to any of our current
investments for at least the next 12 months.
In November 2011, we acquired assets relating
to a biomass facility in Susanville, California through the purchase of all of the membership interests of Henri Susanville LLC.
The facility is located on 40 acres of land that we lease and have an option to purchase for a net price of approximately $2.5
million as of January 30, 2013. The plant's assets include a boiler capable of producing 160,000 pounds of steam per hour
and a turbine that can generate approximately 12.5 megawatts of base-load electricity. The facility site has excess acreage. We
are evaluating the development of a solar generation facility that could generate approximately five megawatts of electricity or
leasing the property to a solar developer who could benefit from the generation potential and grid interconnection that the site
offers. The Susanville facility is not presently in a condition to generate electricity. We are currently evaluating our ability
to obtain sufficient financing in order to refurbish the facility and to purchase the property. The plan would be to invest approximately
$10 million over a 12 to 18 month period to refurbish the critical power generation assets and invest additional funds to purchase
the property for a net cost of approximately $2.5 million as of January 30, 2013.
14
We are seeking other acquisitions and management
opportunities to be able to generate recurring revenues, however, there cannot be any assurance that we will succeed in seeking
such opportunities, whether as a result of our inability to identify additional potential biomass power generating facilities,
our inability to obtain project equity or other financing for any particular project, or our inability to secure long-term power
purchase agreements for the sale of the power from any facilities we do develop. See "Risk Factors—Risks Related to
Our Business," for a discussion of these and other risks, trends and uncertainties that may adversely affect our revenues
or income or that could result in our liquidity decreasing in any material way. Potentially offsetting these risks, trends and
uncertainties are our belief that there is a growing demand for alternative energies, including energy generated from sustainable
biomass sources which, if accurate, could increase our ability to obtain financing, to identify potential projects and ultimately
to generate revenue and sustained liquidity. We can give no assurance that we will generate meaningful revenues or sustained liquidity.
Results of Operations
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Years Ended December 31,
Increase (Decrease)
2011
2010
$
%
Revenues
$
-
$
106,251
$
(106,251
)
-100
%
Cost of Revenues
-
14,267
(14,267
)
-100
%
Gross Profit
-
91,984
(91,984
)
-100
%
Gain on Sale of Equity Investment
-
2,756,000
(2,756,000
)
-100
%
Income Before Operating Expenses
-
2,847,984
(2,847,984
)
-100
%
Total Operating Expenses
1,231,873
980,199
251,674
26
%
Other Income
-
109,616
(109,616
)
-100
%
Net (Loss) Income
$
(1,231,873
)
$
1,977,401
$
(3,209,274
)
-162
%
There were no revenues earned for the year
ended December 31, 2011, compared to $106,251 for the year ended December 31, 2010. Prior period revenue was comprised of three
months of management fees for various projects associated with our former joint venture with a strategic partner.
Cost of revenues for the year ended December
31, 2010, consisting solely of salary expenses associated with earning the management fees, was $14,267, for a gross margin of
$91,984 or 86.6%.
Income before operating expenses was zero
for the year ended December 31, 2011, compared to $2,847,984 for the year ended December 31, 2010. Income before operating expenses
for the year ended December 31, 2010 consisted primarily of a $2,756,000 gain from the sale of our interest in the Berlin, New
Hampshire project.
Total operating expenses, consisting primarily
of compensation, rent, travel and professional fees, increased $251,674 or 26% to $1,231,873 for the year ended December 31, 2011,
compared to $980,199 for the year ended December 31, 2010, primarily due to legal fees and rent expenses incurred in connection
with the New Bedford, Massachusetts and Susanville, California projects as well as accounting and audit fees incurred in conjunction
with the preparation of our Form 10 filed with the Securities and Exchange Commission. These increases were partially offset by
a reduction in professional fees incurred during the development of the Berlin, New Hampshire project in 2010 and a decrease in
stock based compensation.
15
Other income, net, of $109,616 for the year
ended December 31, 2010, is due to note proceeds forfeited by a strategic partner related to activities associated with a joint
venture.
Net loss for the year ended December 31,
2011 was $1,231,873 compared to net income of $1,977,401 for the year ended December 31, 2010, for the reasons discussed above.
Year Ended December 31, 2010 Compared
to Year Ended December 31, 2009
Years Ended December 31,
Increase (Decrease)
2010
2009
$
%
Revenues
$
106,251
$
35,417
$
70,834
200
%
Cost of Revenues
14,267
1,941
12,326
635
%
Gross Profit
91,984
33,476
58,508
175
%
Gain on Sale of Equity Investment
2,756,000
-
2,756,000
N.M.
Income Before Operating Expenses
2,847,984
33,476
2,814,508
8408
%
Total Operating Expenses
980,199
607,495
372,704
61
%
Other Income
109,616
4,219
105,397
2498
%
Net Income (Loss)
$
1,977,401
$
(569,800
)
$
2,547,201
N.M.
Revenue was $106,251 for the year ended
December 31, 2010 compared to $35,417 for the year ended December 31, 2009. Revenue for the year ended December 31, 2010 was comprised
of three months of management fees for various projects associated with our former joint venture with a strategic partner. Revenue
for the year ended December 31, 2009 was comprised of one month of management fees for various projects associated with our former
joint venture with a strategic partner.
Cost of revenues, consisting solely of salary
expenses associated with earning the management fee revenue, for the year ended December 31, 2010 was $14,267 for a gross profit
of $91,984 or 86.6% and for the year ended December 31, 2009 was $1,941 for a gross profit of $33,476 or 94.5%.
Income before operating expenses was $2,847,984
for the year ended December 31, 2010 compared to $33,476 for the year ended December 31, 2009. Income before operating expenses
for the year ended December 31, 2010 consisted primarily of a $2,756,000 gain from the sale of our interest in the Berlin, New
Hampshire project.
Total operating expenses, consisting primarily
of compensation, rent, travel and professional fees, increased $372,704 or 61% to $980,199 for the year ended December 31, 2010
compared to $607,495 for the year ended December 31, 2009, primarily due to legal fees incurred in connection with the sale of
our interest in the Berlin, New Hampshire project in 2010.
Other income, net, was $109,616 for the
year ended December 31, 2010, compared to $4,219 for the year ended December 31, 2009, representing an increase of $105,397. This
increase was primarily due to income earned in connection with a dissolved joint venture.
Net income for the fiscal year ended December
31, 2010 was $1,977,401 compared to a net loss of $569,800 for the year ended December 31, 2009, for the reasons discussed above.
Liquidity and Capital Resources
Liquidity
We measure our liquidity in a number of
ways, including the following:
December 31,
2011
2010
2009
Cash
$
1,197,563
$
745,140
$
700,541
Working Capital
$
751,121
$
1,991,247
$
(211,154
)
16
We intend to generate cash flows from our
business through the cash flows of projects we develop, management fees for development services, plus through the sale of our
investment in renewable energy projects. The amount, frequency and predictability of cash receipts depend on a number of factors,
including the number of projects in our portfolio and the stage of development of each project. As a result, cash flows may fluctuate
significantly from year to year. Approximately 85% of our revenues since August 2002 to December 31, 2010 were generated from the
sale in 2010 of our sale of our interest in a 75 megawatt renewable energy project in Berlin, New Hampshire that we acquired
in 2008 and developed to a status that was substantially ready for the commencement of construction. We do not foresee any similar
liquidity or sale event with respect to any of our current investments for at least the next 12 months.
During the year ended December
31, 2011, we did not generate any revenue, generated cash from operating activities of $425,139, incurred a net loss of
$1,231,873, and had an accumulated deficit of $1,327,594 as of December 31, 2011. These conditions raise substantial doubt
about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to
reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
Our cash requirements during 2012, will primarily be for the enhancement of operations, conducting project feasibility studies
and other development and operational expenses. These amounts will include employee salaries, cost of external services (consulting,
legal and other professional) and costs associated with identifying new projects. We also expect to spend approximately $20,000
per month in incremental development and operational expenses for our newly acquired facility in Susanville, California. Cash
on hand should be sufficient to fund operations for substantially all of 2012.
We have limited
available cash resources and require additional financing in order to fund our current operations beyond this year. The next phase
of our current projects will require significant funding, including approximately $10 million to refurbish Susanville's
critical power generation assets and approximately $2.5 million to purchase the Susanville property. Furthermore, even if we are
successful in raising additional funds and moving ahead with certain projects, we cannot give any assurance that we will, in the
future, be able to achieve a level of profitability from operations to sustain our operations.
Availability of Additional Funds
We expect that our primary sources of additional
working capital are:
·
project level financing of our Susanville facility or other facilities that we may acquire or manage; and
·
sale of equity securities or incurrence of indebtedness.
We meet with and evaluate potential
funding sources and joint venture partners from time to time, taking into account, among other things, the cost of capital
with respect to such funding sources. As of April  30, 2012, we have not entered into any definitive agreements with any
potential funding sources to raise additional funds. Despite our efforts, there is no assurance that we will be able to
secure additional funding, or funding on terms acceptable to us, to meet our financial obligations or to pursue our growth
strategy. If we cannot raise additional capital, form a joint venture or similar commercial alliance with another entity, or
generate sufficient revenues, we may need to scale back operations, including but not limited to ceasing to further develop
one or more projects or selling such projects, cease to acquire additional facilities, or cease operations entirely.
17
During the years ended December 31, 2011,
2010 and 2009, our sources and uses of cash were as follows:
Years Ended December 31,
2011
2010
2009
Net cash provided by (used in) operating activities
$
425,139
$
(62,901
)
$
(556,062
)
Net cash used in investing activities
(192,716
)
-
-
Net cash provided by financing activities
220,000
107,500
240,750
Net increase (decrease) in cash and cash
    equivalents
$
452,423
$
44,599
$
(315,312
)
Net cash (used in) provided by operating activities
Net cash provided by operating activities
totaled $425,139 for the year ended December 31, 2011 compared to net cash used in operating activities of $62,901 for the year
ended December 31, 2010. The net cash provided in the year ended December 31, 2011 was due primarily to $1,806,000 in proceeds
from the sale of our interest in the Berlin, New Hampshire project, partially offset by the net loss from operations of $1,231,873.
The net cash used in the year ended December 31, 2010 was primarily due to the fact that the $980,199 of operating expenses and
the net repayment of $517,500 of other liabilities exceeded the $950,000 of proceeds we received in partial payment for the Berlin,
New Hampshire project.
Net cash used in operating activities totaled
$62,901 for the year ended December 31, 2010 compared to $556,062 for the year ended December 31, 2009. The net cash used in the
year ended December 31, 2010 was primarily due to the fact that the $980,199 of operating expenses and the net repayment of $517,500
of other liabilities exceeded the $950,000 of proceeds we received in partial payment for the Berlin, New Hampshire project. The
net cash used in the year ended December 30, 2009 was primarily due to the $569,800 net loss from operations.
Net cash used in investing activities
Net cash used in investing activities
totaled $192,716 for the year ended December 31, 2011 compared to zero for the year ended December 31, 2010. The net cash
used during the year ended December 31, 2011 was due to  cash outlays related to the acquisition of the Susanville
facility, including $97,500 in consideration paid to the sellers of the facility.
Net cash provided by financing activities
Net cash provided by financing activities
was $220,000 for the year ended December 31, 2011 compared to $107,500 for the year ended December 31, 2010. The cash provided
during the year ended December 31, 2011 was due to $220,000 of proceeds from the issuance of preferred stock. The cash provided
during the year ended December 31, 2010 was primarily due to $100,000 of proceeds from the issuance of our common stock.
Net cash provided by financing activities
totaled $107,500 for the fiscal year ended December 31, 2010 compared to $240,750 for the fiscal year ended December 31, 2009,
which are primarily due to $100,000 and $240,750 of proceeds from the issuance of our common stock, respectively.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements comprise
those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements
are not recorded as liabilities under accounting principles generally accepted in the United States. Although off-balance sheet
arrangements serve a variety of our business purposes, we are not dependent on these arrangements to maintain our liquidity and
capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements
to have a material adverse effect on liquidity and capital resources.
Critical Accounting Policies And Estimates
Critical accounting policies are defined
as those that involve significant judgments and uncertainties, and potentially result in materially different results under different
assumptions and conditions. We believe that our most critical accounting policies are limited to those described below. For a detailed
discussion on the application of these and other accounting policies, see Note 2 in the notes to our consolidated financial statements
included in this prospectus.
18
Use of Estimates
Preparation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. Our significant
estimates include the allowance related to the receivable, the recoverability of long lived assets, the valuation allowance related
to deferred tax assets and the stock-based compensation assumptions. Actual results could differ from those estimates.
Going Concern
The accompanying financial statements do
not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts
and classification of liabilities that may result should we be unable to continue as a going concern. If the consolidated financial
statements were prepared on a liquidation basis, the carrying value of the assets and liabilities would be adjusted to reflect
the liquidation basis of accounting.
Accounts Receivable
Accounts receivable includes trade accounts
receivable, which are recorded at net invoice values and are not interest bearing, and uncollected proceeds from the sale of investments.
We maintain an allowance for doubtful accounts for estimated uncollectible accounts receivable, if any. The allowance is based
on our assessment of known delinquent accounts, the aging of accounts receivable and specific knowledge of counterparties. We re-evaluate
our allowance on a regular basis and adjust its reserves as needed.
Revenue Recognition
We have generated and may generate revenues
from management fees, the sale of power, or through the sale of our interest in facilities, its joint venture interests or its
equity investments. We earn management or development fees from development projects which are recognized as the services are performed.
We consider amounts to be earned once evidence of an arrangement has been obtained, services have been rendered, fees are fixed
or determinable, and collectability is reasonably assured.
Stock-Based Compensation
We measure the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. Employee and director awards are measured
on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in
exchange for the award, which is usually the vesting period.
Income Taxes
We record the tax effects of all transactions
that have been reported in our financial statements. This includes tax effects that are taxable or deductible in the current reporting
period, as well as tax effects that will lead to taxable income or tax deductions in future periods. Income taxes are accounted
for using the asset/liability method. At each balance-sheet date, a current tax asset or liability is recorded, representing income
taxes currently refundable or payable. Deferred tax assets and liabilities are also recorded, representing the tax effects of temporary
book-tax differences, which will become payable or refundable in future periods. Deferred tax assets arise principally from net
operating losses and capital losses available for carryforward against future years' taxable income. Under the asset/liability
method, the income tax provision is the result of the change in these current and deferred tax accounts from period to period,
plus or minus tax payments made or refunds received during the year. A valuation allowance is recognized against deferred tax assets
if, based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion
or all of the deferred tax asset will not be realized.
19
We follow Accounting Standards Codification,
or ASC, 740 rules governing uncertain tax positions which provide guidance for recognition and measurement. This prescribes a threshold
condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial
statements. It also provides accounting guidance on derecognition, classification and disclosure of these uncertain tax positions.
Interest costs and penalties related to
income taxes are classified as interest expense and selling, general and administrative costs, respectively, in our financial statements.
Recently Issued Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04,
Fair Value Measurement (Topic 820). This updated accounting guidance establishes common requirements for measuring fair value and
for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards.
This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures,
while other amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective
for interim and annual periods beginning after December 15, 2011. The adoption of this standard is not expected to have a material
impact on the Company's consolidated financial position or results of operations. Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the Company's financial statements upon adoption. Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the Company's financial statements upon adoption.
All of these standards are more fully described
in Note 2 to our audited consolidated financial statements included in this prospectus.
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
We dismissed our former accountant, Corso
& Company, on June 7, 2011. Corso & Company did not produce a report on our financial statements for any of the two years
ended December 31, 2010 or the nine months ended September 30, 2011. Accordingly, no report on our financial statements for either
of December 31, 2009 or 2010 contained an adverse opinion or a disclaimer of an opinion, or was qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to dismiss Corso & Company as our accountants was recommended and approved
by our board of directors.
During the two years ended December 31,
2010 and subsequent period through June 7, 2011, we had no disagreements with Corso & Company on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction
of Corso & Company, would have caused Corso & Company to make reference to the subject matter of the disagreement(s) in
connection with its report on the financial statements for each such period.
On June 22, 2011, we engaged Marcum LLP
as our principal independent accountant to audit our financial statements. At no time prior to engaging Marcum LLP did we or anyone
acting on our behalf consult Marcum LLP regarding the application of accounting principles to a specified transaction, or the type
of audit opinion that might be rendered on our financial statements.
20
BUSINESS
Overview
We are a smaller reporting company as defined
by applicable federal securities regulations.
We were organized on April 2, 1993 as a
New York corporation under the name Multiair Comfort Corp. On August 4, 1995, we changed our name to Poly Eko Systems, Inc. On
August 14, 2002, we concluded a "reverse" merger with Laidlaw Energy Group, Inc., referred to as the Predecessor Company,
in which we were the surviving corporation. We then changed our name to Laidlaw Energy Group, Inc. The Predecessor Company was
formed in 1999 to own and operate natural gas-fired generation assets and related entities. We had no operations or assets at the
time of our reverse merger with the Predecessor Company.
Our executive offices are located at 90
John Street, New York, NY 10038; our telephone number is (212) 480-8400. Our website is located at http://www.laidlawenergy.com.
The information on our website is not part of this prospectus.
Our Business
We seek to develop and manage renewable
energy facilities that produce electricity and/or thermal energy for commercial and industrial purposes from sustainable biomass
sources, other renewable fuel sources or combined cycle natural gas.
Biomass generally refers to any organic
matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood residues, plants
(including aquatic plants), grasses, animal manure, municipal residues and other residue materials. The primary sources of biomass
or "feedstock" that we expect to use in our facilities are:
•
clean urban wood waste comprised mainly of used lumber,
trim, shipping pallets, trees, branches and other wood debris from construction and demolition activities;
•
by-products or mill residue from the manufacturing
of fibers, pulp, paper, lumber, plywood, cotton and other products;
•
tops, branches, non-merchantable timber and timber
stand improvement thinnings from managed forestry operations; and
•
energy dedicated crops such as fast-growing trees
and grasses, stalks, straws and perennial crops.
We believe that biomass fuels are an attractive alternative
to fossil fuels primarily because:
•
biofuels, wood and organic waste are the largest single
source of renewable fuel on a global basis;
•
the price for fossil fuels is increasing and becoming
more volatile;
•
of the possible supply shortages for fossil fuels;
•
of the relative safety and environmentally friendly
ability to harvest and obtain biomass fuels;
•
of the numerous government sponsored incentives available
for power generation facilities that use alternative or renewable fuels;
•
biomass fuels may be utilized through proven environmentally
friendly technologies;
•
biomass fuels are the only form of renewable energy,
other than hydropower, that can provide for dependable base-load or continuous rather than intermittent, generation of electric
and thermal energy; and
•
electric and thermal generation from these fuel sources
are widely considered to be carbon-neutral, which means the carbon dioxide emissions created through the combustion process are
offset by the sequestration of carbon dioxide by trees and plants.
21
We believe that there is a sufficient readily
available supply of biomass fuel for our proposed facilities and intend to continue to evaluate the sufficient and reliable supply
of biomass fuel as part of our acquisition evaluation process. For instance, wood chips and related products used for industrial
purposes are quoted in weekly commodity reports and are generally readily available at "roadside" prices, which is
the price a buyer pays for wood chips prior to any transport and preprocessing to the end-use location at a roadside in the forest,
at a processing mill location in the case of mill residue, or at a landfill for urban wood waste.
To a lesser extent, we also intend to pursue
the development of facilities that utilize natural gas in a combined-cycle for projects that can provide both electricity and thermal
energy. A combined-cycle facility uses a steam turbine generator in concert with a combustion turbine and heat recovery steam generator
to generate electric and thermal energy in an efficient manner.
Our Strategy
Our current strategy focuses on renewable
energy facilities that use wood as the primary component of the renewable fuel supply. We expect that a significant amount of our
wood fuel will be from wood waste and residue.
Our primary focus is developing multiple
projects and building a portfolio of projects. We will, however, also consider other opportunities that we believe would be beneficial
to us. An example of this strategy is our investment in, development and sale of our interest in a commercial biomass energy plant
located at the site of the former Fraser Papers Pulp Mill in Berlin, New Hampshire, referred to as the Berlin facility. We planned
the Berlin facility to be one of the largest commercial biomass energy plants in North America, expected to generate 75 megawatts
of electricity, and consume in excess of 750,000 tons of clean whole tree wood chips per year in order to generate an annual gross
electric output of approximately 550,000 megawatt hours. Prior to the sale of our interest in September 2010, we managed all
aspects of the development of this project, including identifying the asset, structuring the acquisition, developing the strategy
to convert the paper mill's boiler for biomass utilization and engaging The Babcock & Wilcox Company to implement the
refurbishment. We also obtained all material permits for the Berlin facility, conducted the necessary studies, concluded the required
agreements to interconnect the facility to the power grid, and negotiated the terms of a 20-year power purchase agreement that
was subject to regulatory approval and estimated to be valued at more than $1.3 billion for 100% of the facility's output.
In 2010, we sold our 50% indirect interest in the Berlin facility and recognized a gain of $2,756,000. See "—Former
Projects—Berlin Facility" below.
We seek to develop biomass power generation
facilities by redeploying and refurbishing power generation assets, such as through the retrofitting of paper mills, fossil fuel
power facilities or other retired industrial facilities, as opposed to developing newly constructed "greenfield" projects.
We believe that this strategy will enable us to:
·
develop renewable energy facilities with a capital investment requirement that is lower than the capital investments that would
be required to develop a similar facility through land acquisition, demolition of any existing facility, land improvement and construction
of a new facility;
·
potentially achieve more favorable returns on equity due to the lower capital investment required to retrofit an existing facility
as opposed to building a newly constructed facility;
·
utilize numerous government incentive programs, including federal tax credits; and
·
target existing industrial sites for our projects with existing or a reduced burden for zoning and permits, thus allowing for
a shorter development cycle.
As a general goal, we seek to develop such
retooled biomass projects for approximately one-half to two-thirds of the cost of a newly constructed facility with comparable
capacity.
We also seek to reduce our operating expenses
in the development of renewable energy facilities through strategic alliances with consultants, contractors, equipment suppliers
and others, who are aligned with our approach. To mitigate technology risk, we utilize commercially proven and available technologies
and enter into turn-key "EPC" - engineer, procure, construct – contracts with credit-worthy EPC contractors that
include customary performance guarantees. We intend to further reduce the capital investment requirements by seeking project financing
in the form of long-term debt as well as government tax and other incentive programs.
22
We seek to generate revenues through:
•
operating and managing renewable energy facilities
owned by us;
•
management fees from managing third party or jointly
owned renewable energy facilities;
•
monetizing excess space at our facilities by leasing
or other arrangements with others, such as developers of photovoltaic solar generation facilities; and
•
the sale of our developed or partially developed facilities.
Revenue from operating a facility is typically generated through
the sale of electricity and, where applicable, thermal energy, under a long-term power purchase agreement with a utility or end-user
that has one or more of the following revenue components:
•
Electric Power. Sale of electrical power generated
by our facilities to utilities or directly to end-users that have significant electric needs or utilities.
•
Thermal Energy. Sale of thermal energy generated by
our facilities directly to end-users that have significant thermal energy needs.
•
Installed Capacity. Revenue based on the installed
capacity available for the generation of electricity or thermal energy from utilities or end-users that have significant electric
or thermal energy needs.
In addition, we will seek to generate revenue
from the sale of environmental attributes, such as renewable energy credits, or RECs, which represent a legislatively established
premium paid for electricity generated from qualified renewable sources, such as our planned projects and monetizing tax and other
government-sponsored incentives generated by our facilities. Our facilities may also generate carbon credits if a market for such
credits is established in the jurisdictions in which we operate.
We also expect each project to qualify for
U.S. federal renewable energy production tax credits and the federal New Markets Tax Credits program, to the extent such programs
are in effect from time to time. Renewable energy production tax credits are a per-kilowatt-hour tax credit for electricity generated
by qualified energy resources and sold to an unrelated person during the taxable year. The duration of the tax credit is generally
10 years after the date the facility is placed in service, and the tax credit can be passed through to project stakeholders to
offset taxable income or monetized through transactions with third parties. We estimate that the amount of tax credit generated
by the type of open-loop biomass projects we typically pursue that are placed in service prior to December 31, 2013 is $11.00 per
megawatt hour. This amount is as of December 31, 2011 and is adjusted annually for inflation, and reduced for projects that receive
other federal tax credits, grants, tax-exempt financing, or subsidized energy financing. Additional tax benefits, grants and other
types of incentive programs may also be offered periodically by the federal or state governments that could offer us additional
benefits, such as state and local incentives which may include reduced property tax assessments.
We are currently focusing exclusively on
project development in states with existing renewable energy legislation that mandates the purchase of renewable energy by local
utilities. Currently, 30 states and the District of Columbia have passed such renewable energy or similar legislation. We believe
such a requirement on the part of utilities to secure renewable energy yields a marketplace that is favorably disposed to long-term
contracts for project outputs such as electricity, biothermal energy, RECs and capacity sales, thus providing stable, predictable
and long-term cash flows for our projects. We seek to include a mechanism in our power purchase agreements that adjusts the purchase
price of power generated by our facilities in the event of increases in biomass fuel prices to hedge against inflation and increased
pricing pressures from biomass suppliers, while at the same time protecting utility rate-payers from exposure to above market energy
prices.
23
We seek to develop projects in locations
with a high concentration of biomass fuel, such as heavily forested regions or within close proximity to the logging and forest
products industry or other areas with sufficient biomass waste, although we also may pursue projects that are situated in urban
areas that generate biomass from other sources, such as pallet wood. We conduct studies of biomass availability before pursuing
each particular project, and we generally seek to obtain contractual commitments for biomass fuel supplies to guarantee delivery
and hedge against price increases of biomass fuel.
Biomass Renewable Energy Industry
According to the 2010 preliminary data
released by the U.S. Energy Information Administration in its June 2011 "Renewable Energy Consumption and Electricity Preliminary
Statistics 2010":
•
Biomass was the third largest renewable power source
in the United States and contributed to 13.30% of domestic electric net generation from renewable energy sources, while hydropower
conventional contributed 60.45% and wind power contributed 22.26%.
•
Biomass contributed to more than one-third of the
power source for electric generation from renewable power sources, excluding hydroelectric conventional power sources.
•
Wood and wood-derived fuels contributed to more than
22% of the power source for electric net generation of all renewable power sources excluding non-conventional hydro power sources.
The U.S. Department of Energy reported in September 2011 that the 2010 nameplate megawatt capacity of biomass
power plants is approximately 13,053. We expect that biomass will continue to grow and be an important component of the United
States fuel mix for electric generation. The U.S. Energy Information Administration Annual Energy Outlook that was released in
April 2011 projects that, assuming no additional constraints on carbon emissions, electricity generation from renewable sources
will grow by 72% in the reference case, raising the share of total generation from renewable sources from 11% in 2009 to 14% in
2035. Most of the projected growth in renewable electricity generation in the power sector is expected to be from wind and biomass
facilities. The growth in wind generation is primarily driven by state renewable portfolio standards, which we referred to as
RPS, required in the generation of electric energy and federal tax credits. Generation from biomass comes from both dedicated
biomass plants and co-firing in coal plants. Its growth is driven by site availability, state RPS requirements, the availability
of low-cost feedstock and the need by utilities for fuel diversity.
The Market for Renewable Energy
A significant number of states, including
California, where we currently do business, have passed legislation requiring local utilities to derive a portion of their retail
electric supply from renewable resources. Since the output from power plants is generally sold into a large pool, RECs were created
as a means of tracking the sale of renewable energy and compliance with renewable energy legislation. Essentially, RECs are financial
instruments that can be traded separately from physical energy sales. The price derived for REC sales is a function of supply and
demand in a given jurisdiction or can be established legislatively. RECs have the potential to substantially add to project revenue.
Prices for RECs are established by trading markets. Since utilities are generally required to obtain RECs in greater amounts with
each passing year in order to meet increasing state RPS, we generally seek to enter into long-term contracts with local utilities
for our projects that bundle electricity, RECs and capacity sales. Such contracts are generally beneficial to us, since they provide
a level of certainty with respect to future project revenues from a credit-worthy counter-party, and thereby provide credit support
for the long-term, non-recourse debt that is often used to fund a significant portion of power generation project capital costs.
The prices of RECs in the California market have experienced price volatility during 2011 and we do not expect to rely on the sale
of RECs as a significant part of any project's financing.
Former Projects
Berlin Facility
As described above, we invested in, developed
and sold our interest in the Berlin facility.
We identified the Berlin facility in October 2006 as the site for the potential development
of a large-scale biomass energy power plant. Through December 2008, approximately $500,000 was expended in furtherance of our efforts
to acquire and develop the Berlin facility, including commencing negotiations of a long-term power purchase agreement with The
Public Service Company of New Hampshire and executing an asset purchase agreement.
24
On December 23, 2008, Laidlaw Biopower
entered into a Development Agreement with PJPD Holdings, LLC, an affiliate of Cate Street Capital, Inc., providing that PJPD
would fund all of the project's development costs up, including reimbursing our costs to date, to a specified cap
in consideration for its ownership of the physical property comprising the Berlin facility. The Development
Agreement contemplated the execution of the lease whereby PJPD would receive a fixed rent payment, assignment of the asset
purchase agreement to PJPD and Laidlaw would retain any excess future cash flows generated from the contemplated biomass
energy plant.
In 2009, we filed an application with the
New Hampshire Site Evaluation Committee for a permit to construct and operate the proposed biomass power plant. On November 8,
2010, we received unanimous approval for the requisite construction and operating permit.
On June 8, 2010, we executed a Power Purchase
Agreement for the sale of 100% of the proposed biomass plant's capacity, electric output and environmental attributes with
The Public Service Company of New Hampshire which agreement was subject to certain approvals.
From 2006 to 2010, we were the primary managers
of the development and construction of the project, including negotiating the terms of the construction agreement with Babcock
& Wilcox as the EPC contractor, negotiating the terms of other construction related agreements, managing the permitting application
and approval process and provided testimony to the applicable state regulatory.
On August 27, 2010, Laidlaw
Biopower entered into a Purchase and Sale Agreement with Newco Energy, LLC, an affiliate of Cate Street Capital, to sell 100%
of  the membership interests in Laidlaw Berlin for an aggregate purchase price of $2.0 million, plus two contingent payments
that aggregated to a maximum of $7.0 million. As a result of several claims made by the buyer pursuant to the
indemnification provisions of the agreement, the remainder of $5,050,000 was subsequently settled in October 2011 for
$3,562,000, of which our 50% interest was $1,781,000, in order to avoid protracted litigation.
New Bedford, Massachusetts
On April 5, 2011, our subsidiary Laidlaw
New Bedford Biopower, LLC entered into a Power Plant Operation and Development Lease Agreement, among other things, (a) to oversee
the management of a natural gas-fueled thermal energy facility at the former Polaroid manufacturing plant located in New Bedford,
Massachusetts, and (b) which gave us development control over the facility through the May 5, 2012 termination date of the agreement,
subject to our right to extend the term for one year. We are not extending the lease term or exercising the purchase option, and
are currently in negotiations with the landlord regarding the final lease payment and the security deposit.
The facility consists of a power plant that
supplied heat, chilled water and compressed air to two large buildings. Our rent for this facility was $75,000 per annum, payable
when the lease terminates on May 5, 2012. We were also responsible for the payment of all taxes relating to the premises. The
facility ceased operations in December 2011, and our oversight of the facility was on a net zero cost basis where the former end-user
of the thermal energy paid all remaining operating costs. We did not earn any management or related fees and undertook the oversight
and management of the facility primarily to control the development opportunity.
Current Projects
Susanville, California
In November 2011, we acquired assets relating
to a biomass facility in Susanville, California through the purchase of all of the membership interests of Henri Susanville LLC.
The facility is located on 40 acres of land that we lease and have an option to purchase for a net price of approximately $2.5
million as of January 30, 2013. The plant's assets include a boiler capable of producing 160,000 pounds of steam per hour
and a turbine that can generate approximately 12.5 megawatts of base-load electricity. The facility site has excess acreage. We
are evaluating the development of a solar generation facility that could generate approximately five megawatts of electricity or
leasing the property to a solar developer who could benefit from the generation potential and grid interconnection that the site
offers. Our acquisition of the facility was for approximately $2 million, which we paid by issuing 434.78261 shares of our Series
B preferred stock that is convertible into 434,782,610 shares of our common stock and additional consideration contingent upon
specified milestones in the development of the facility of up to $2,650,000 that may be paid through the issuance of additional
shares of our Series B preferred stock at the deemed market value of our common stock of $0.0046 per share. The registration statement
of which this prospectus forms a part relates to our agreement to register the shares of our common stock underlying the Series
B preferred stock for resale by April 30, 2012, or, if certain conditions specified in the agreement are satisfied, a date not
later than May 9, 2012. The sellers are subject to certain selling restrictions including that the Series B preferred stock may
not be converted into shares of our common stock with a value that exceeds $37,500 per week.
25
As part of our purchase of the Susanville
facility, we were assigned an Agreement for Environmental Conditions, which provides for indemnification rights in our favor in
the event there are certain environmental claims on the property causing a loss to us.
The Susanville facility is not presently
in a condition to generate electricity. Our plan is to raise and invest approximately $10 million to refurbish the critical power
generation assets, which would include a turbine overhaul, a new cooling tower, electrical work, fuel handling system upgrades
and related assets. We expect the refurbishing process to take approximately 12 to 18 months. We are presently evaluating our ability
to raise the funds necessary to refurbish the facility and raise additional funds to purchase the property.
Ellicottville, New York
We own 22.5% of the common stock of Laidlaw
Co-Gen, Inc., which is the sole holder of the capital stock of Laidlaw Energy & Environmental, Inc. Laidlaw Energy & Environmental
owns an approximate six megawatt combined cycle natural gas-fueled electric cogeneration facility located in Ellicottville, New
York. This facility is not currently operating. In 2005, Laidlaw Energy & Environmental proposed converting this facility to
a biomass energy facility. The proposed conversion and development is subject to approvals from local governmental authorities,
which Laidlaw Energy & Environmental has not been able to obtain and which we believe may be a result of perceived adverse
consequences to the neighboring community, a charge we disagree with. As a result of such failure to obtain governmental approvals,
we and the other stockholders of Laidlaw Co-Gen are evaluating the options to develop, sell or reposition this facility. We have determined
that the fair value of our investment in Laidlaw Co-Gen is below the carrying value and the investment has been written
down to zero. We are presently maintaining the facility and are incurring ordinary monthly expenses.
Future Projects
In the ordinary course of our business,
we consider projects that complement our business strategy. For example, we have executed a non-binding letter of intent and are
currently negotiating a purchase and sales agreement to acquire an approximately 18 megawatt biomass energy power plant located
in southern California that has an existing power purchase agreement with a local utility. The facility requires repairs to certain
of its power generation assets to resume operations. We are evaluating this facility and identifying capital sources for our investment
in this facility as well as the required repairs, which we expect will be offset by certain federal incentives. Our consideration
of this acquisition is subject to the satisfactory completion of our due diligence and other conditions. There can be no assurance
that we will acquire this facility.
Competition
The renewable energy industry is highly
competitive, with numerous small and large companies in the United States and worldwide producing and distributing, or seeking
to produce and distribute, energy from renewable resources, including biomass. State RPS are a significant government incentive
that supports the development of renewable energy. Our competitors include any generator of electric energy through renewable sources
that meet RPS because utilities may satisfy these RPS through the purchase of electric power generated by any renewable fuel source
or solar energy. We face, and expect to continue to face, competition from these entities, from companies whose sole business is
to retrofit existing power plants for operators, as well as competition from entities that provide alternative energy solutions
from renewable resources other than biomass, such as solar, hydroelectric and wind energy producers.
26
Many of our competitors have substantially
greater capital resources and more experience operating power plants than we do. We may have difficulty competing with larger,
more established companies, and any other companies that have greater financial, technical, research, marketing, sales, distribution,
service and other resources than we do. Moreover, any of our competitors may have broader product lines, services and have greater
name recognition than we do.
We seek to differentiate ourselves from
our competitors through our value-added development approach. This approach involves utilizing refurbished power generation assets,
such as retired or unused paper mills, dormant biomass plants, or fossil fuel power plants, as opposed to the development of newly
constructed "greenfield" projects, to significantly reduce our capital costs and thereby increase our return on equity.
To achieve this goal, we have been establishing, and will continue to establish, strategic alliances with entities, investment
bankers, private equity investors, political leaders, attorneys, consultants, contractors, equipment suppliers and others, who
are aligned with our approach. We further differentiate ourselves from our competitors by our having actual, hands-on experience
in managing the development of a commercial biomass energy power plant, which experience we gained through our investment in, development
and sale of our interest in the Berlin facility, which we planned to be one of the largest commercial biomass energy plants in
the United States.
We believe that the biomass electric power
generation industry is a niche industry without any dominant competitors. Aside from competition for power and environmental attribute
sales to utilities, we primarily compete regionally with other entities for development opportunities. We may also face competition
for our feedstock from self-generating biomass power plants that offtake the energy to a nearby end-user and do not sell energy
to the electric grid.
Research and Development
We have not incurred any material amounts
of research and development costs.
Environmental Matters
The Company is subject to federal, state
and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground,
the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of employees.
These laws and regulations also may require expensive pollution control equipment, permits and/or operational changes to limit
actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial
fines, criminal sanctions, permit revocations and/or facility shutdowns. There can be no assurance given that we will be able to
meet these standards, or that we will be at all times in material compliance with these laws and regulations. It is possible that
we will become subject to legal actions brought by regulatory authorities, advocacy groups and other parties for actual or alleged
violations of such laws and regulations. The most significant cost of compliance with such laws and regulations is the cost associated
with emissions controls at a commercial power facility. These costs are often part of the capital equipment that is included in
the applicable project development budget and financed as part of the project financing. We do not project any material capital
expenditures to comply with federal, state and local environmental laws and regulations.
As part of our purchase of the Susanville
facility, we were assigned an Agreement for Environmental Conditions, which provides for indemnification rights in our favor in
the event there are certain environmental claims on the property causing a loss to us.
Government Regulation
Our business is subject to numerous
government regulations on the federal, state and local levels. Other than the facility that is owned by Laidlaw Energy & Environmental
in Ellicottville, New York, all of our current and proposed projects presently have all material government permits and approvals.
Our permits and approvals are not subject to the governmental authority's unilateral right to cancellation other than for
non-compliance. Approvals may be necessary for our future projects, and we will evaluate the estimated permitting and compliance
costs in the evaluation of any acquisition or development. A facility that we seek to develop will typically require either a federal
or state air emissions permit, a construction permit, if necessary, and an operating permit. These permits are often combined into
one permit issued by state environmental regulators. Projects that we develop may also require local zoning and/or planning board
approvals, water usage and wastewater discharge permits and compliance with other construction and zoning regulations, which have
a significant impact on our development strategy. In addition, utilities that purchase our electric energy are subject to federal
and state government oversight that regulates a wide scope of their activities, including their right and ability to enter into
long-term power purchase agreements and the capital investment of a facility that may be "passed through" to a consumer.
27
The electric power industry, including the
renewable energy segment, has always been highly regulated. We are not aware of any significant regulatory changes that have been
adopted recently or that are the subject of introduced legislation or proposed regulations that we believe will have an adverse
effect on our business, other than the expiration, on December 31, 2011, of the Department of Treasury Section 1603 Tax Grant Program
under the American Recovery and Reinvestment Act of 2009. However, it may become the case that other regulatory approvals will
be required for the design, retrofitting and use of our planned power generation facilities. To the extent that there are delays
in gaining any such regulatory approval, our development and growth may be materially affected.
Intellectual Property
We do not have any intellectual property,
such as patents, know-how or trademarks, that are material to our business. We do not have any licenses, franchises, concessions
or royalty agreements.
Employees
As of April 25, 2012, we had five full time
employees and one part time employee. There were also approximately four personnel who worked with us as consultants in roles supporting
project development operation and construction activities. Our full and part time employees are based out of our executive office
in New York and our office in Vermont. None of our employees are members of any labor union, and we consider our labor relationships
to be good. We are currently actively seeking a full-time chief financial officer and additional project development personnel.
Properties
We presently maintain our executive offices
in leased premises of approximately 2,500 square feet at 90 John Street, 4th Floor, New York, New York. We pay approximately $82,000
for rent per year for these premises and the lease term expires in April 2012. In addition, we have offices in leased premises
of approximately 500 square feet at 2 Spring Street, Montpelier, Vermont. We pay approximately $10,200 for rent per year for these
premises, and the lease term expires in July 2013.
We also lease a 40 acre parcel of land located
at 700-000 Sunkist Drive, Susanville, California, on which our 12.5 megawatt biomass energy power plant is located. We pay approximately
$240,000 for rent per year for these premises and the lease term expires on January 30, 2013. We are currently negotiating with
the owner of the property to extend the lease term. We also have an option to purchase the Susanville property for a price equal
to $84,909.08 per acre reduced by the sum of $5,000 per month of rent paid from November 1, 2011 (which, on January 31, 2013, would
equal $75,000) and 50% of all rent payments made prior to November 1, 2011. The total price to purchase the land should we choose
to exercise the option is estimated to be approximately $2.5 million.
We also lease a power plant and related
property at the former Polaroid manufacturing facility in New Bedford, Massachusetts, that is not currently operating. The lease
expires on May 5, 2012 and can be extended at our option for an additional one year term. We are not extending the lease term or
exercising the purchase option, and are currently in negotiations with the landlord regarding the final lease payment and the security
deposit.
We believe our properties are in good operating
condition and adequately serve our current business operations.
28
Legal Proceedings
We received subpoenas from the SEC on June
28, 2011 and March 28, 2012 requiring us to provide documentation to the SEC and for designated officers to provide testimony to
the SEC. The SEC is investigating us and our officers, directors and others regarding compliance or possible violations under certain
securities laws, primarily relating to our issuance and sale of unregistered securities, the purchase and sale of our securities and
reports and other disclosures that we made to our shareholders and publicly. We have been cooperating with the SEC with respect
to its investigation. Our Chief Executive Officer provided testimony to the SEC on the record and we produced documents to
the SEC in response to the subpoenas. The SEC has the authority to order a wide scope of remedies against us and any of our officers
or directors, any of which could materially and adversely affect us, our ability to issue our securities and the price of, or ability
to trade, our common stock. The SEC is continuing its investigation and we cannot provide any assurance of when the SEC investigation
will be concluded or the effect of any remedies that the SEC may seek to enforce, if any.
On September 3, 2009, an action titled "Hiscock
& Barclay v. Laidlaw" was filed in the New York State Supreme Court, County of Onondaga, relating to a dispute over approximately
$140,000 of attorney billings associated with legal services provided in connection with our Ellicottville project prior to 2009.
In December 2011, the parties reached an agreement in principle whereby we agreed to pay $60,000 in full satisfaction of the dispute.
On February 6, 2012, we received a statement
of claim and demand for arbitration before the American Arbitration Association from Chatsworth Securities LLC, seeking the collection
of $615,937.50 in placement fees which Chatsworth Securities alleges it is entitled to pursuant to the terms of a written agreement
between the parties dated December 22, 2005. On March 19, 2012, we submitted an answer to the statement of claim and a counterclaim
for contractual indemnification seeking an award of our attorneys' fees and costs, of which Chatsworth answered on March
26, 2012. To date, an arbitrator has not yet been assigned to this matter. We believe the claim is without merit and intend to
vigorously defend against the claim; however, there can be no assurance that we will prevail in the arbitration.
Other than the above, there is presently
no material pending legal proceedings to which we are a party or as to which any of our property is subject, and no such proceedings
are known to us to be threatened or contemplated against us.
29
MANAGEMENT
Set forth below is a list of the names,
ages and positions of our directors and executive officers.
Name
Age
Position(s)
Michael B. Bartoszek
44
President and Chief Executive Officer and Director
Louis T. Bravakis
64
Executive Vice President
Theodore Alex Bravakis
28
Vice President of Project Development and Assistant Secretary
Biographies of Directors and Executive
Officers
Michael B. Bartoszek
has served
as a member of our board of directors and as our President and Chief Executive Officer since 2002. Prior to founding Laidlaw Energy
Group, Inc. in 2001 and merging it with us in 2002, from 1999 to 2002, Mr. Bartoszek was founder, President and Chief Executive
Officer of Laidlaw Energy & Environmental, an entity that owned and operated a natural gas-fueled power plant and related hardwood
lumber-related assets until selling those assets in August 2002. Subsequently, Mr. Bartoszek decided to focus exclusively on renewable
energy projects and devised our business model of focusing on the conversion of existing power generation assets in order to create
biomass energy power plants. Prior to founding Laidlaw Energy Group, Inc. and Laidlaw Energy & Environmental, Mr. Bartoszek
spent over 10 years in the securities industry with a number of leading investment firms, including Merrill Lynch, Bear Stearns
& Co. and Oppenheimer & Co. and served as President and Chief Executive Officer of W.R. Lazard from 1997 to 1999. In 1995,
Mr. Bartoszek founded a successful boutique project finance advisory group at Rickel & Associates, Inc., a broker-dealer, that
was engaged in advising independent power companies and other developers of major capital projects in connection with acquisitions
and financing. Mr. Bartoszek is also a member of the board of directors of Laidlaw Co-Gen.
Louis T. Bravakis
has served
as our Executive Vice President since 2006 when he joined us and has over 30 years of experience in the biomass energy field. From
2001 to 2006, Mr. Bravakis worked as a developer and project manager for biomass energy and combined heat and power projects throughout
the Northeast, including for Rex Lumber Co., Ethan Allen Furniture, Cowee Forest Products and Columbia Forest Products. In 1986,
Mr. Bravakis founded and served as President of Chiptec Wood Energy Systems, Inc., a company that manufactures advanced biomass
gasification systems. At the time of his departure in 2000, the company had built and installed over 100 biomass gasification systems.
Mr. Bravakis earned a Bachelor's degree in Economics from Franklin and Marshall College in 1969. Mr. Bravakis is the father
of Theodore Alex Bravakis, who is our Vice President of Project Development and Assistant Secretary.
Theodore Alex Bravakis
has
served as our Vice President of Project Development and Assistant Secretary since November 2009 when he joined us. Mr. Bravakis
takes the lead on identifying and analyzing new development opportunities as they become available to us. He also manages and coordinates
the involvement of all project contributors. Before joining us in 2009, Mr. Bravakis worked as a construction manager for a small
real estate construction and management firm in Brooklyn, New York from 2006 to 2008. In 2008, Mr. Bravakis transitioned into working
for Badillo Partners, LLC, a real estate investment firm that specializes in the development and financing of affordable housing
projects throughout New York City. Mr. Bravakis earned a Bachelor's degree from The University of Vermont in Political Science
and Economics in 2006. Mr. Bravakis is the son of Louis T. Bravakis, our Executive Vice President.
Board Composition
Our Bylaws provide that
the Board of Directors shall consist of at least one member, and that our stockholders shall determine the number of directors
from time to time. Each director serves for a term that expires until the next annual meeting of stockholders and until his successor
shall have been elected and qualified, or until his earlier resignation, removal from office, or death.
30
Committees of the Board of Directors
We do not presently have
a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees
of our Board of Directors. Nor do we have an audit committee "financial expert." As such, our Board of Directors acts
as our audit committee and handles matters related to compensation and nominations of directors.
Director Independence
We have not applied to
list our common stock on a national securities exchange or an inter-dealer quotation system which has requirements that a majority
of our board of directors be independent. However, for purposes of determining independence, we have adopted the provisions of
Nasdaq Marketplace Rule 5605. We undertook a review of the composition of our board of directors and the independence of Mr. Bartoszek,
our sole director. Based upon information requested from and provided by Mr. Bartoszek concerning his background, employment and
affiliations, including family relationships, we have determined that Mr. Bartoszek is not "independent" as that term
is defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. In making such determination, we considered the relationships
that Mr. Bartoszek has with us and all other facts and circumstances we deemed relevant in determining independence, including
the beneficial ownership of our securities.
Stockholder Communications with the Board
We have not implemented
a formal policy or procedure by which our stockholders can communicate directly with our Board of Directors. Nevertheless, every
effort will be made to ensure that the views of stockholders are heard by our Board of Directors, and that appropriate responses
are provided to stockholders in a timely manner. During the upcoming year, our Board will continue to monitor whether it would
be appropriate to adopt such a process.
Compensation Committee Interlocks and Insider Participation
None of our executive
officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function,
of any entity that has one or more of its executive officers serving as a member of our board of directors or our compensation
committee.
Indemnification
We do not maintain directors'
and officers' liability insurance. Our certificate of incorporation and bylaws include provisions limiting the liability
of directors and officers and indemnifying them under certain circumstances. See "Description of Capital Stock—Limitation
on liability of directors and indemnification" for further information.
31
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation
for services paid in all capacities for the last fiscal year ending December 31, 2011 to Michael B. Bartoszek, our President and
Chief Executive Officer. No other executive officer had total compensation exceeding $100,000 for the year ended December 31, 2011.
Name and Principal Position
Year
Salary
Total
Michael B. Bartoszek
President and Chief Executive Officer
2011
$
200,000
$
200,000
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth information
as of December 31, 2011 concerning unexercised options for each of the named executive officers.
Option Awards
Name
Number of
securities
underlying
unexercised
options
exercisable
Number of
securities
underlying
unexercised
options
unexercisable
Equity
incentive
plan awards:
Number of
securities
underlying
unexercised
unearned
options
Option
exercise
price
Option
expiration
date
Michael B. Bartoszek
75,000,000
—
—
$ 0.0001
(1)
__________
(1) These options do not have an expiration
date.
Director Compensation
We have one director, Michael B. Bartoszek,
who is also our President and Chief Executive Officer. We did not pay him any compensation for his services as a director during
the year ended December 31, 2011. Upon and after the expansion of our board of directors, we do not expect to pay our directors
who are also our employees any compensation for their services as directors. We anticipate our non-employee directors will initially
be compensated with an equity grant to be determined. In addition, all directors will be reimbursed for reasonable out of pocket
expenses incurred by them in connection with attending board of directors, committee and shareholder meetings. We reserve the right
to change the manner and amount of compensation to our non-employee directors at any time.
Compensation Committee Interlocks and
Insider Participation
We do not currently have a compensation
committee. During the last completed fiscal year, Michael B. Bartoszek, our sole director and our President and Chief Executive
Officer, made all compensation decisions on behalf of our company. During the last fiscal year, none of our executive officers
served as a member of the compensation committee or other board committee performing equivalent functions or as a director of any
other entity, which other entity had one of its executive officers serving as one of our directors.
32
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Pursuant to an Exchange
Agreement between Novus Energy, LLC and our company dated November 18, 2011, as further amended on December 15, 2011, (1) Novus
Energy, whose sole member is Mr. Louis T. Bravakis, our Executive Vice President, transferred $220,000 plus its 25% interest in
Laidlaw BioPower to us, bringing our interest in the entity up to 75% from 50%; and (2) we transferred to Mr. Brevakis a 25% interest
in the net income received from all of our power projects developed plus 1,000,000 shares of Series C preferred stock. As additional
consideration for the receipt of the Series C preferred stock, Mr. Bravakis was appointed our Executive Vice President.
On February 17, 2011,
we granted to Theodore Alex Bravakis, our Vice President of Project Development, 2,000,000 shares of our common stock for compensatory
purposes.
33
PRINCIPAL STOCKHOLDERS
We have four classes of voting securities
outstanding as of April 25, 2012:
·
common stock, par value $0.0001 per share;
·
Series A preferred stock, par value $0.001 per share;
·
Series B preferred stock, par value $0.001 per share; and
·
Series C preferred stock, par value $0.001 per share.
Shareholders of our common stock and shareholders of our preferred
stock vote together as a single class.
The following table sets forth certain information
with respect to the beneficial ownership of shares of our common stock and preferred stock, as of April 25, 2012, by:
•
each person known to us to beneficially own 5% or
more of the outstanding shares of such class of stock;
•
each of our named executive officers and directors;
and
•
all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with
the rules of the SEC and includes voting and investment power. In addition, under SEC rules, a person is deemed to be the beneficial
owner of securities which may be acquired by such person upon the exercise of options and warrants or the conversion of convertible
securities within 60 days from the date on which beneficial ownership is to be determined. Shares of common stock issuable pursuant
to the exercise of options or the conversion of preferred stock are deemed outstanding for computing the percentage of the person
holding such options or shares of preferred stock but are not outstanding for computing the percentage of any other person. Except
as indicated in the other footnotes to this table, to our knowledge, each beneficial owner listed in this table has sole voting
and investment power with respect to all shares of stock beneficially owned by that person.
Unless otherwise indicated, the address
for each shareholder listed below is c/o Laidlaw Energy Group, Inc., 90 John Street, 4th Floor, New York, NY 10038.
34
Common Stock
Series A
Preferred Stock
Series B
Preferred Stock
Series C
Preferred Stock
Name and Address of
Beneficial Owner
Number of
Shares
Beneficially
Owned
Percentage
of Class
Beneficially
Owned
Number of
Shares
Beneficially
Owned
Percentage
of Class
Beneficially
Owned
Number of
Shares
Beneficially
Owned
Percentage
of Class
Beneficially
Owned
Number of
Shares
Beneficially
Owned
Percentage
of Class
Beneficially
Owned
Mazuma Holding Corp.
(1)
2,009,391,779
81.79
%
—
—
—
—
—
—
Nature Energies, Inc.
(2)
336,608,700
—
—
—
336.6087
77.0
%
—
—
NZ Legacy, LLC
(3)
98,173,910
—
—
—
98.17391
23.0
%
—
—
Michael B. Bartoszek
3,571,597,742
(4)
60.79
%
1,000,000
100.0
%
—
—
—
—
Louis T. Bravakis
688,069,510
(5)
21.93
%
—
—
—
—
1,000,000
100.0
%
All directors and executive officers as a group (three persons)
4,261,926,826
(6)
65.01
%
1,000,000
100.0
%
—
—
1,000,000
100.0
%
35
__________
* Less than 1%
(1)
Represents 553,933,034 shares of common stock beneficially owned by Mazuma Corp., 100,000,000 shares
of common stock beneficially owned by Mazuma Funding Corp. and 1,355,458,745 shares of common stock owned by Mazuma Holding Corp.,
which shares, upon information and belief, may be deemed beneficially owned by Mazuma Holding Corp. All of such shares were issued
to the beneficial owners between August 8, 2006 and January 6, 2010. We have no knowledge as to whether any of such entities have
sold or otherwise transferred such shares and accordingly are assuming all of such shares are still held by such entities. Such
assumptions may be incorrect. The address of each of the Mazuma entities is 3102 Maple Avenue, Dallas, Texas 75201.
(2)
The address of Nature Energies, Inc. is P.O. Box 490550, Blaine, Minnesota 55449. Upon information
and belief, voting and investment control of Nature Energies is held by Hanalei Renouvelables SAS. From and after May 10, 2012,
Nature Energies, Inc. will have the right to acquire up to 336,608,700 shares of our common stock upon the conversion of the 336.6087
shares of Series B preferred stock that it beneficially owns, subject to certain restrictions as set forth in our certificate of
incorporation, as amended.
(3)
The address of NZ Legacy, LLC is 3514 E. Presidio Circle, Mesa, Arizona 85213. Upon information
and belief, voting and investment control of NZ Legacy is held by Robert Worsley. From and after May 10, 2012, NZ Legacy, LLC will
have the right to acquire up to 98,173,910 shares of our common stock upon the conversion of the 98.17391 shares of Series B preferred
stock that it beneficially owns, subject to certain restrictions as set forth in our certificate of incorporation, as amended.
(4)
Includes (i) 7,496,979 shares of common stock owned by Laidlaw Energy Holdings, LLC, which shares
may be deemed beneficially owned by Mr. Bartoszek, as its sole member, (ii) 75,000,000 shares of common stock underlying outstanding
options, which Mr. Bartoszek has the right to exercise at any time and (iii) 3,343,404,500 shares of common stock which Mr. Bartoszek
has the right to acquire at any time upon the conversion in full of the 1,000,000 shares of Series A preferred stock that he beneficially
owns. Pursuant to our certificate of incorporation, as amended, the Series A preferred stock is convertible into a number of shares
of common stock equal to 51% of the total issued and outstanding shares of common stock plus the total number of shares of common
stock issuable upon conversion of any outstanding convertible securities convertible as of the conversion date.
(5)
Includes (i) 25,000,000 shares of common stock underlying outstanding options, which Mr. Bravakis
has the right to exercise at any time and (ii) 655,569,510 shares of common stock which Mr. Bravakis has the right to acquire at
any time upon the conversion in full of the 1,000,000 shares of Series C preferred stock that he beneficially owns. Pursuant to
our certificate of incorporation, as amended, the Series C preferred stock is convertible into a number of shares of common stock
equal to 10% of the total issued and outstanding shares of common stock plus the total number of shares of common stock issuable
upon conversion of any outstanding convertible securities convertible as of the conversion date.
(6)
Includes (i) 100,000,000 shares of common stock, which may be issued upon exercise in full of the
outstanding options that are beneficially owned by the applicable executive officers and directors, (ii) 3,998,974,009 shares of
common stock, which may be issued upon conversion in full of the outstanding Series A preferred stock and Series C preferred stock
that are beneficially owned by the applicable executive officers and directors and (iii) 7,496,979 shares of common stock owned
by Laidlaw Energy Holdings, LLC, which shares may be deemed beneficially owned by Mr. Bartoszek, as its sole member.
36
DESCRIPTION OF CAPITAL STOCK
General
The following summary describes the material
terms of our capital stock. However, you should refer to the actual terms of the capital stock contained in our certificate of
incorporation, as amended, our amended and restated bylaws, and applicable law. A copy of our certificate of incorporation, as
amended, and our amended and restated bylaws are filed as exhibits to the registration statement of which this prospectus forms
a part.
We have two classes of capital
stock, common stock, par value $0.0001 per share, and preferred stock, par value $0.001 per share, of which there are three
classes, Series A preferred stock, Series B preferred stock and Series C preferred stock. As of April 25, 2012, we have
authorized 9.0 billion shares of common stock, of which 2,456,721,088 shares are issued and outstanding, 1.0 million shares
of Series A preferred stock, all of which are issued and outstanding, 400.0 million shares of Series B preferred stock, of
which 434.78261 are issued and outstanding, and 1.0 million shares of Series C preferred stock, all of which are issued
and outstanding.
Common Stock
The holders of our common stock are entitled
to one vote for each share held of record on all matters submitted to a vote of shareholders.
The holders of our common stock are entitled
to receive dividends, as, if and when declared by our board of directors, out of funds legally available therefor, subject to any
statutory or contractual restrictions on the payment of dividends.
In the event of our liquidation, dissolution
or winding up, the holders of our common stock shall only be entitled to a distribution of assets after payment in full of the
liquidation values to the holders of our Series A preferred stock, Series B preferred stock and Series C preferred stock, and then
ratably per share with the holders of the Series B preferred stock on an as-converted basis.
The holders of our common stock do not have
preemptive, subscription, redemption or conversion rights.
Series A Preferred Stock
The holder of our Series A preferred stock
is entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.
The holder of our Series A preferred stock
does not have any right to receive dividends.
Our Series A preferred stock is convertible,
at the option of the holder at any time, into a number of shares of common stock, collectively, equal to 51% of the total issued
and outstanding shares of common stock plus the total number of shares of common stock issuable upon conversion of any outstanding
convertible securities convertible as of the conversion date.
Our Series A preferred stock has a liquidation
value of $0.247562 per share. In the event of our liquidation, dissolution or winding up, the holders of our Series A preferred
stock and Series C preferred stock shall be entitled to receive out of our assets an amount per share equal to their respective
liquidation value, before any payment shall be made or any assets distributed to the holders of our common stock, our Series B
preferred stock or any other classes or series of our capital stock hereafter issued by us. The liquidation rights of the holders
of our Series A preferred stock shall rank pari passu with the liquidation rights of the holders of our Series C preferred stock.
37
Series B Preferred Stock
The holders of our Series B preferred stock
are entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.
Each share of our Series B preferred stock,
until such time if any as it is converted into shares of our common stock in accordance with our certificate of incorporation,
as amended, shall be entitled to receive all dividends and other distributions payable on account of the common stock, as if such
share of Series B preferred stock were converted immediately prior to the record date of such dividend or distribution.
Subject to certain limitations as set forth
in our certificate of incorporation, as amended, the holder of a share of our Series B preferred stock may, six months after the
date of issuance of such share of Series B preferred stock, convert such share into 1.0 million shares of our common stock. Notwithstanding
anything to the contrary contained in our certificate of incorporation, as amended, no share of Series B preferred stock shall
be convertible into any number of shares of common stock prior to the date that is six months after the date of issuance of such
share of Series B preferred stock; and following such six month waiting period, no holder of Series B preferred stock shall convert
to common stock more than that number of shares of Series B preferred stock that would result in shares of common stock having
an aggregate value of $37,500 per week determined on a cumulative basis, such amount computed based on the five day moving average
of the closing last trade price of shares of common stock as quoted on otcmarkets.com or any such national securities exchange
if our common stock is listed on such an exchange, and each holder of Series B preferred stock shall be prohibited from converting
any amount of Series B preferred stock in excess of that amount permitted in this paragraph.
Our Series B preferred stock has a liquidation
value per share equal to the quotient obtained by dividing $100 by the number of shares of Series B preferred stock that are issued
and outstanding upon the date of liquidation. In the event of our liquidation, dissolution or winding up, the holders of our Series
B preferred stock shall be entitled to receive out of our assets an amount per share equal to the liquidation value thereof, before
any payment shall be made or any assets distributed to the holders of our common stock or any other classes or series of our capital
stock hereafter issued by us, other than to the holders of our Series A preferred stock and Series C preferred stock. All of our
assets available for distribution to shareholders after the liquidation value of our Series A preferred stock, Series B preferred
stock and Series C preferred stock have been paid in full to the respective holders of such preferred stock, shall be distributed
ratably per share among the holders of our common stock and Series B preferred stock, on an as-converted basis, in accordance with
our certificate of incorporation, as amended.
Series C Preferred Stock
The holder of our Series C preferred stock
is entitled to the number of votes, collectively, equal to the number of shares of common stock into which such stock is convertible
at the time the holders of record are determined for such vote, on all matters submitted to a vote of shareholders.
The holder of our Series C preferred stock
does not have any right to receive dividends.
Our Series C preferred stock is convertible,
at the option of the holder at any time, into a number of shares of common stock, collectively, equal to 10% of the total issued
and outstanding shares of common stock plus the total number of shares of common stock issuable upon conversion of any outstanding
convertible securities convertible as of the conversion date.
Our Series C preferred stock has a liquidation
value of $0.03126 per share. In the event of our liquidation, dissolution or winding up, the holders of our Series A preferred
stock and Series C preferred stock shall be entitled to receive out of our assets an amount per share equal to their respective
liquidation value, before any payment shall be made or any assets distributed to the holders of our common stock, our Series B
preferred stock or any other classes or series of our capital stock hereafter issued by us. The liquidation rights of the holders
of our Series A preferred stock shall rank pari passu with the liquidation rights of the holders of our Series C preferred stock.
38
Voting
The holders of our common stock and preferred
stock vote together as a single class. Generally, except for the election of directors, at any meeting duly called and held at
which a quorum is present, all matters to be voted on by our shareholders must be approved by a majority of the votes cast at such
meeting by the holders of outstanding shares of our common stock and preferred stock entitled to vote thereon who are present in
person or by proxy. At any meeting duly called and held for the election of directors at which a quorum is present, directors shall
be elected by a plurality of the votes cast by the holders of our shares entitled to elect such directors.
Amendments to our certificate of incorporation,
as amended, that would alter or change the powers, preferences or special rights of our preferred stock so as to affect adversely
the rights of the holders of such preferred stock must be approved by written consent or affirmative vote of the holders of at
least a majority of the then outstanding aggregate number of shares of such adversely affected preferred stock, given in writing
or by vote at a meeting, consenting or voting, as the case may be, separately as a class.
Anti-Takeover Provisions
Each share of Series B preferred stock is
convertible automatically into common stock in accordance with our certificate of incorporation, as amended, immediately prior
to the effectiveness of any merger or consolidation pursuant to which we are not the surviving entity.
In addition, holders of our Series A preferred
stock and Series C preferred stock may convert such shares into common stock at their option at any time. See "–Series
A Preferred stock" and "–Series C Preferred Stock."
A consolidation or a merger with or into
any other entity in which we are not the surviving entity, a sale, conveyance, lease, exchange or transfer of all, or substantially
all, of our assets for cash, securities or other property to any person or persons or our dissolution or winding up shall be deemed
to be a liquidation, dissolution or winding up, which would entitle the holders of our preferred stock the liquidation value of
their shares.
Charter and Bylaws Anti-Takeover Provisions
Our amended and restated
bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals
regarding other business to be conducted at a meeting. However, our amended and restated bylaws may have the effect of precluding
the conduct of that item of business at a meeting if the proper procedures are not followed. These provisions may discourage or
deter a potential third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting
to obtain control of our company.
The foregoing provisions
of our amended and restated bylaws and the Delaware General Corporation Law may have the effect of deterring or discouraging hostile
takeovers or delaying changes in control of the company.
Limitation on Liability and Indemnification of Directors
and Officers
Our certificate of incorporation,
as amended, eliminates our directors' liability for any breach of duty in such capacity except that such personal liability
if a judgment or other final adjudication adverse to such director establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled or that his or her acts violated Section 719 of the New York Business
Corporation Law
Our amended and restated
by-laws provide that we shall indemnify every person made or threatened to be made a party to an action or proceeding by reason
of the fact that that person is or was a director or officer of our company or that person, being or having been a director or
officer of our company, served any other corporation in any capacity at our request, in the manner and to the extent provided by
the Business Corporation Law of the State of New York; and we may indemnify every person made or threatened to be made a party
to an action or proceeding by reason of the fact that that person is or was an employee of our company in a capacity other than
as an officer of our company, or that person being or having been such an employee, served any other company in any capacity at
our request, in the same manner and to the same extent as persons are to be indemnified as set forth above by reason of having
been directors or officers of the Corporation or having served any other company as described above. The provision regarding indemnification
of our directors and officers in our amended and restated by-laws will generally not limit liability under state or federal securities
laws.
39
We may also, subject to
certain limitations, pay or reimburse reasonable expenses in advance of the final disposition of any proceeding subject to indemnification.
The limitation of liability
and indemnification provisions in our certificate of incorporation, as amended, and amended and restated by-laws, may discourage
stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect
of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful,
might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in
a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
Transfer Agent and Registrar
Our transfer agent for
our common stock is American Registrar and Transfer Co.
40
SELLING STOCKHOLDERS
This prospectus relates
to the registration of 437,782,610 shares of our common stock on behalf of the selling stockholders named herein.
The shares listed below
represent shares of our common stock that may be issued upon the conversion, for no consideration, of outstanding shares of Series
B preferred stock. The selling stockholders each received the shares of Series B preferred stock in connection with our acquisition
of the Susanville facility.
We believe, based on information
supplied by the following persons, that the persons named in the table have sole voting and investment power with respect to all
shares of common stock which they beneficially own. The last column of the table assumes the sale of all of our shares offered
by this prospectus. The registration of the offered shares does not mean that any or all of the selling stockholders will offer
or sell any of these shares. Except as relates to our acquisition of the Susanville facility, there is not nor has there been a
material relationship between us and any of the selling stockholders within the past three years.
Shares
        Beneficially Owned After Offering
Name
        of Selling Stockholder
Number
        of Shares Beneficially Owned
Common
        Stock Offered by Selling Stockholder
Number
Percent
Nature Energies, Inc.
336,608,700(1)
336,608,700(1)
—
—
NZ Legacy, LLC
98,173,910(2)
98,173,910(2)
—
—
__________
(1)
Represents shares of common stock issuable upon the conversion,
for no consideration, of an aggregate of 336.6087 shares of our Series B preferred stock, which may be converted on and after May
10, 2012.
(2)
Represents shares of common stock issuable upon the conversion,
for no consideration, of an aggregate of 98.17391 shares of our Series B preferred stock, which may be converted on and after May
10, 2012.
41
PLAN OF DISTRIBUTION
We are registering the
shares of common stock issued to the selling stockholders to permit the resale of these shares of common stock by the holders of
the shares of common stock from time to time after the date of this prospectus. We will not receive any of the proceeds from the
sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to
register the shares of common stock excluding any printing expenses (including, without limitation, expenses of printing certificates
for the shares and of printing prospectuses), messenger, telephone and delivery expenses, Blue Sky fees or costs (including, without
limitation, fees and disbursements of our counsel in connection therewith), underwriting discounts and selling commissions and
all legal fees and expenses of legal counsel for any selling stockholder.
The selling stockholders
may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents; provided, that pursuant to the terms and conditions of certain agreements
between us and Nature Energies, Inc. and NZ Legacy, LLC (f/k/a Renegy Susanville, LLC), and the provisions of our certificate of
incorporation, as amended, the selling stockholders shall not during any week sell more shares of common stock that, in the aggregate,
has an aggregate market value of Thirty-Seven thousand and Five Hundred Dollars ($37,500), such amount computed based on the per
share price of the shares of common stock on the five day moving average of the closing last trade price of shares of common stock
as quoted on otcmarkets.com or any such national securities exchange if our shares of common stock are listed on such an exchange.
The permitted number of shares of common stock that the selling stockholders may sell during any week is computed on a cumulative
basis. Accordingly, any shares of common stock permitted to be sold by the selling stockholders during any week that are not sold
during such week, may be sold at any time after the end of such week. If the shares of common stock are sold through underwriters
or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions.
The shares of common stock may be sold on any national securities exchange or quotation service on which the securities may be
listed or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems
or in the over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be affected in transactions, which
may involve crosses or block transactions. The selling stockholders may use any one or more of the following methods when selling
shares:
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
settlement of short sales entered into after the effective date of the registration statement of which
this prospectus is a part;
·
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share;
·
through the writing or settlement of options or other hedging transactions, whether such options are
listed on an options exchange or otherwise;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
The selling stockholders
also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act,
as permitted by that rule, or Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided
that they meet the criteria and comply with the requirements of those provisions.
42
Broker dealers engaged
by the selling stockholders may arrange for other broker dealers to participate in sales. If the selling stockholders effect such
transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions
from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal. Such commissions
will be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
will not be in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with NASD IM-2440.
In connection with sales
of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of common stock short and if such short sale shall take place
after the date that the registration statement of which this prospectus forms a part is declared effective by the Commission, the
selling stockholders may deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed
shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers
that in turn may sell such shares, to the extent permitted by applicable law. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction). Notwithstanding the foregoing, the selling stockholders have been advised that they may not use shares registered
pursuant to the on this registration statement of which this prospectus forms a part to cover short sales of our common stock made
prior to the date the registration statement, of which this prospectus forms a part, has been declared effective by the SEC.
The selling stockholders
may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer
and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.
The selling stockholders
and any broker-dealer or agents participating in the distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act in connection with such sales. In such event, any commissions paid, or
any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by
them may be deemed to be underwriting commissions or discounts under the Securities Act. Selling Stockholders who are "underwriters"
within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities
Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities
Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Each selling stockholder
has informed the Company that it is not a registered broker-dealer and does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the common stock. Upon the Company being notified in writing by a selling
stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block
trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling
stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares
of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable,
(v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference
in this prospectus, and (vi) other facts material to the transaction.
43
Under the securities laws
of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale
in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement,
of which this prospectus forms a part.
Each selling stockholder
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any other
participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability
of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the
shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees; provided, however, that each selling stockholder will pay all underwriting discounts
and selling commissions, if any, and any legal expenses incurred by it and their pro rata share of all printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses), messenger, telephone
and delivery expenses, expenses of compliance with state securities or "blue sky" laws (including, without limitation,
fees and disbursements of counsel for the Company in connection therewith). We will indemnify the selling stockholders against
certain liabilities, including some liabilities under the Securities Act, in accordance with a registration rights agreement, or
the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities,
including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders
specifically for use in this prospectus or permitted by us to be used in this prospectus, in accordance with the related registration
rights agreements, or we may be entitled to contribution.
44
LEGAL MATTERS
The validity of the shares
of common stock covered by this prospectus will be passed upon by Herrick, Feinstein LLP, New York, New York.
EXPERTS
The financial statements
included in this prospectus have been so included in reliance on the report of Marcum LLP, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the
SEC under the Securities Act, a registration statement on Form S-1 relating to the common stock to be sold in this offering.
The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and
our capital stock. This prospectus does not contain all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information about us and our common stock, you should refer to the registration statement, including
the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document
referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is
made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified
in all respects by such reference. You may inspect a copy of the registration statement and the exhibits and schedules thereto
without charge at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain
copies of all or any part of the registration statement from such office at prescribed rates. You may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website,
which is located at http://www.sec.gov, that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. You may access the registration statement, of which this prospectus is a part, at
the SEC's Internet website.
45
INDEX TO FINANCIAL STATEMENTS
Laidlaw Energy Group, Inc. & Subsidiaries
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2011 and 2010
F-3
Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010
F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2011 and 2010
F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010
F-6
Notes to Consolidated Financial Statements
F-7
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Laidlaw Energy Group, Inc. & Subsidiaries
We have audited the accompanying consolidated balance sheets
of Laidlaw Energy Group, Inc. & Subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related
consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Laidlaw Energy Group, Inc. & Subsidiaries,
as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the consolidated financial
statements, the Company needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Marcum LLP
Marcum LLP
New York, NY
April 30, 2012
F-
2
Laidlaw Energy Group, Inc. & Subsidiaries
Consolidated Balance Sheets
December 31,
2011
2010
Assets
Current Assets:
Cash and cash equivalents
$
1,197,563
$
745,140
Accounts receivable
-
1,806,000
Prepaid expenses and other current assets
55,000
-
Total Current Assets
1,252,563
2,551,140
Idle property and equipment
2,237,403
-
Other assets
12,240
11,390
Total Assets
$
3,502,206
$
2,562,530
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses
$
491,442
$
327,393
Other liabilities
10,000
232,500
Total Liabilities
501,442
559,893
Commitments and contingencies
-
-
Stockholders' Equity:
Convertible preferred stock, $0.001 par value; voting (see Note 6)
Series A - 1,000,000 shares authorized, issued and outstanding at
December 31, 2011 and 2010, liquidation preference $247,562
1,000
1,000
Series B - 400,000,000 shares authorized, 434.782610 shares
issued and outstanding at December 31, 2011; none authorized
at December 31, 2010; liquidation preference $100
-
-
Series C - 1,000,000 shares authorized, issued and outstanding at
December 31, 2011; none authorized at December 31, 2010;
liquidation preference $31,260
1,000
-
Common stock, $0.0001 par value; 9,000,000,000 shares authorized;
2,456,721,088 and 2,454,721,088 shares issued and outstanding at
December 31, 2011 and 2010, respectively (see Note 6)
245,672
245,472
Additional paid-in capital
4,080,686
1,851,886
Accumulated deficit
(1,327,594
)
(95,721
)
Total Stockholders' Equity
3,000,764
2,002,637
Total Liabilities and Stockholders' Equity
$
3,502,206
$
2,562,530
See Notes to Consolidated Financial Statements
F-
3
Laidlaw Energy Group, Inc. & Subsidiaries
Consolidated Statements of Operations
For The Years Ended
December 31,
2011
2010
Management fee revenues
$
-
$
106,251
Cost of revenues
-
14,267
Gross Profit
-
91,984
Gain on sale of equity investment
-
2,756,000
Income Before Operating Expenses
-
2,847,984
Operating Expenses
Selling, general and administrative expenses
1,231,873
980,199
Total Operating Expenses
1,231,873
980,199
(Loss) Income From Operations
(1,231,873
)
1,867,785
Other Income
Interest income
-
2,046
Other income
-
107,570
Total Other Income
-
109,616
Net (Loss) Income
$
(1,231,873
)
$
1,977,401
(Loss) Earnings Per Common Share:
- Basic
$
(0.00
)
$
0.00
- Diluted
$
(0.00
)
$
0.00
Weighted Average Number of
Common Shares Outstanding:
- Basic
2,556,463,554
2,527,226,164
- Diluted
2,556,463,554
6,318,065,411
See Notes to Consolidated Financial Statements
F-
4
Laidlaw Energy
Group, Inc. & Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For The Years
Ended December 31, 2011 and 2010
Series A Convertible
Series B Convertible
Series C Convertible
Additional
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
Paid-In
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Total
Balance - December 31, 2009
1,000,000
$
1,000
-
$
-
-
$
-
2,297,071,225
$
229,707
$
1,642,651
$
(2,073,122
)
$
(199,764
)
Common stock issued to investors for cash
-
-
-
-
-
-
82,649,863
8,265
91,735
-
100,000
Common stock issued pursuant to stock option exercise
-
-
-
-
-
-
75,000,000
7,500
-
-
7,500
Stock-based compensation
-
-
-
-
-
-
-
-
117,500
-
117,500
Net income
-
-
-
-
-
-
-
-
-
1,977,401
1,977,401
Balance - December 31, 2010
1,000,000
$
1,000
-
$
-
-
$
-
2,454,721,088
$
245,472
$
1,851,886
$
(95,721
)
$
2,002,637
Common stock issued to employee
-
-
-
-
-
-
2,000,000
200
9,800
-
10,000
Preferred stock issued as consideration
`
for idle property and equipment
-
-
435
-
-
-
-
-
2,000,000
-
2,000,000
Preferred stock issued to employee for cash
-
-
-
-
1,000,000
1,000
-
-
219,000
-
220,000
Net loss
-
-
-
-
-
-
-
-
-
(1,231,873
)
(1,231,873
)
Balance - December 31, 2011
1,000,000
$
1,000
435
$
-
1,000,000
$
1,000
2,456,721,088
$
245,672
$
4,080,686
$
(1,327,594
)
$
3,000,764
See Notes to Consolidated Financial Statements
F-
5
Laidlaw Energy Group, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
For The Years Ended
December 31,
2011
2010
Cash Flows From Operating Activities
Net (loss) income
$
(1,231,873
)
$
1,977,401
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Stock-based compensation
10,000
117,500
Gain on sale of equity investment
-
(2,756,000
)
Changes in operating assets and liabilities:
Accounts receivable
1,806,000
1,136,466
Prepaid expenses and other current assets
(55,000
)
-
Other assets
(850
)
-
Accounts payable and accrued expenses
119,362
(20,768
)
Other liabilities
(222,500
)
(517,500
)
Total Adjustments
1,657,012
(2,040,302
)
Net Cash Provided By (Used In) Operating Activities
425,139
(62,901
)
Cash Flows From Investing Activities
Idle property and equipment acquired for cash
(192,716
)
-
Net Cash Used In Investing Activities
(192,716
)
-
Cash Flows From Financing Activities
Proceeds from issuance of common stock
-
100,000
Proceeds from issuance of preferred stock
220,000
-
Proceeds from option exercise
-
7,500
Net Cash Provided by Financing Activities
220,000
107,500
Net Increase In Cash And Cash Equivalents
452,423
44,599
Cash And Cash Equivalents - Beginning
745,140
700,541
Cash And Cash Equivalents - Ending
$
1,197,563
$
745,140
Supplemental Disclosure of Cash Flow Information:
Non-cash financing activities:
Preferred stock issued for idle property and equipment
$
2,000,000
$
-
Accrued expenditures related to idle
property and equipment
$
44,687
$
-
See Notes to Consolidated Financial Statements
F-
6
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Laidlaw Energy Group, Inc. ("Laidlaw" or the "Company")
is engaged in the development and management of renewable energy facilities that produce electricity and/or thermal energy for
commercial and industrial purposes from sustainable biomass sources, other renewable fuel sources or combined cycle natural gas.
The business was founded in 2002. The Company's particular emphasis is on biomass power generation, which is the production
of electricity and heat as a result of converting trees, plants or other similar organic sources into energy. Laidlaw's business
objective is to build and manage a profitable portfolio of renewable energy facilities through development, acquisition, joint
venture, equity investments, conversion of existing facilities, and through partnering with manufacturing businesses that have
significant energy needs. The Company may generate revenues from management fees, the sale of power, or through the sale of its
developed facilities, its joint venture interests or its equity investments. In so doing, Laidlaw intends to become a leading provider
of biomass power in the United States. Laidlaw is subject to numerous federal, state and local laws and regulations that govern
environmental protection.
Laidlaw was organized on April 2, 1993 as a New
York corporation under the name Multiair Comfort Corp. On August 4, 1995, the Company changed its name to Poly Eko Systems,
Inc. On August 14, 2002, the Company concluded a "reverse" merger with Laidlaw Energy Group, Inc. in which the
Company was the surviving corporation. The Company then changed its name to Laidlaw Energy Group, Inc. The Company has or had
(1) two wholly owned subsidiaries, Laidlaw Capital Management, Inc. and Laidlaw Berlin, LLC, both of which are currently
inactive; (2) a now 75% ownership interest in Laidlaw BioPower, LLC ("Laidlaw BioPower"), which is the entity through which the
Company formerly had a 50% interest in Laidlaw Berlin BioPower, LLC ("Laidlaw Berlin"; see Note 4 –
Investments); (3) a 37.5% interest in Homeland Laidlaw Energy, LLC which resulted in 2010 revenues in the form of management
fees, but was dissolved by mutual agreement of the members during 2010. During 2009, operations were de minimis and there
were no operations in 2010 up to the date of dissolution; and (4) a 22.5% interest in Laidlaw Co-Gen,
Inc. ("Co-Gen"; see Note 4 – Investments). On March 9, 2011, the Company formed Laidlaw New Bedford
Biopower, LLC, of which Laidlaw is the sole member ("New Bedford"; see Note 11). On November 10, 2011, the
Company acquired a new wholly owned subsidiary, whose name was changed to Laidlaw Susanville BioPower, LLC
("Susanville"; see Note 5).
NOTE 2 – GOING CONCERN AND MANAGEMENT'S PLANS
Prior to 2010, the Company sustained recurring operating losses
and the Company had an accumulated deficit of $2,073,122 as of December 31, 2009.  During 2010, the Company sold an equity
investment and received proceeds of $1,806,000 and $950,000 in 2011 and 2010, respectively.  As of December 31, 2011, Laidlaw
had a cash balance of $1,197,563 and working capital of $751,121.  The Company did not generate any revenues and incurred
net losses of $1,231,873 during the year ended December 31, 2011. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
The Company's future capital requirements are expected
to be driven by the development activities in existing and new projects until such time that they become self-sufficient or there
is a liquidity event.  In addition to the Company's general overhead expenses, the Company is projecting that it will
require average monthly funding of approximately $20,000 and $5,000 associated with its Susanville (see Note 5) and Ellicottville
projects (see Note 4), plus contractual one-time funding of $25,000 associated with the balance of the April 2012 lease payment
for the New Bedford facility (see Note 11), approximately $2.5 million in January 2013 if the Company elects to exercise its option
to purchase the Susanville property (see Note 5), plus approximately $10 million to refurbish Susanville's critical power
generation assets. Management's plans include raising additional funds through public or private debt, equity or project
financing to fund its capital requirements and ongoing operations.  However, there can be no assurance the Company will be
successful in these efforts. If the Company is unable to raise sufficient additional funds, the Company might (1) forego investment
opportunities; (2) initiate cost reduction measures; (3) seek extensions of scheduled payment obligations; or (4) sell assets.
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation
of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable
or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of
this uncertainty.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company uses the accrual basis of accounting and the financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are
presented in U.S. dollars. The Company has adopted a December 31 fiscal year end. The Company's majority and wholly-owned
subsidiaries are managed as a single business and a single segment.
F-
7
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
– CONTINUED
Principles of Consolidation
The balance sheets, results of operations and cash flows of
the Company and its wholly-owned subsidiaries have been included in its consolidated financial statements. All intercompany accounts
and transactions have been eliminated.
Equity Investments
Equity investments of less than 20% ownership are accounted
for using the cost method of accounting, equity investments of 20% to 50% ownership are accounted for using the equity method of
accounting and equity investments of greater than 50% ownership are consolidated within the financial statements of the Company,
as appropriate.
All material intercompany accounts and transactions of consolidated
subsidiaries are eliminated in consolidation.
Use of Estimates
Preparation of the consolidated financial statements in accordance
with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. The Company's significant
estimates include the allowance related to the receivable, the recoverability of long lived assets, the valuation allowance related
to deferred tax assets and the stock-based compensation assumptions. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities
of three months or less at purchase to be cash equivalents. For the purpose of financial statement presentation, the Company includes
cash on deposit, money market funds, and amounts held by brokers in cash accounts as cash.
Accounts Receivable
Accounts receivable represents uncollected proceeds from the
sale of an investment. The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable,
if any. The allowance is based on the Company's assessment of known delinquent accounts, the aging of accounts receivable
and specific knowledge of counterparties. The Company re-evaluates its allowance on a regular basis and adjusts its reserves as
needed. There is no allowance at December 31, 2011 and 2010.
Concentration of Credit Risk
As of December 31, 2011 and 2010, all of the Company's
cash and cash equivalents were deposited with financial institutions in the United States. At December 31, 2011, the Company had
cash on deposit that was approximately $956,000 in excess of federally insured limits of $250,000. As of December 31, 2010, the
Company had one significant counterparty located in the United States that represented 100% of its accounts receivable balance.
Revenue Recognition
The Company has generated, and may generate, revenues from management
fees, the sale of power, or through the sale of our interest in facilities, its joint venture interests or its equity
investments. The Company earns management or development fees from development projects which are recognized as the services
are performed.  The Company considers amounts to be earned once evidence of an arrangement has been obtained, services
have been rendered, fees are fixed or determinable, and collectability is reasonably assured.
Property and Equipment
Property and equipment is recorded at cost. The cost of additions
and substantial betterments to property and equipment are capitalized. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations as incurred.
F-
8
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
– CONTINUED
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets
for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group
to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets
are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value.
Income Taxes
The Company records the tax effects of all transactions that
have been reported in its financial statements. This includes tax effects that are taxable or deductible in the current reporting
period, as well as tax effects that will lead to taxable income or tax deductions in future periods. Income taxes are accounted
for using the asset/liability method. At each balance-sheet date, a current tax asset or liability is recorded, representing income
taxes currently refundable or payable. Deferred tax assets and liabilities are also recorded, representing the tax effects of temporary
book-tax differences, which will become payable or refundable in future periods. Deferred tax assets arise principally from net
operating losses and capital losses available for carryforward against future years' taxable income. Under the asset/liability
method, the income tax provision is the result of the change in these current and deferred tax accounts from period to period,
plus or minus tax payments made or refunds received during the year. A valuation allowance is recognized against deferred tax assets
if, based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion
or all of the deferred tax asset will not be realized.
The Company follows Accounting Standards Codification ("ASC")
740 rules governing uncertain tax positions which provide guidance for recognition and measurement. This prescribes a threshold
condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial
statements. It also provides accounting guidance on derecognition, classification and disclosure of these uncertain tax positions.
Interest costs and penalties related to income taxes are classified
as interest expense and selling, general and administrative costs, respectively, in the Company's financial statements. For the
years ended December 31, 2011 and 2010, the Company did not recognize any interest or penalty expense related to income taxes.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and
cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.
The Company determines the fair value of its assets and liabilities
based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable
inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and
the last unobservable, to measure fair value:
·
Level 1
— Quoted prices in active markets for identical
assets or liabilities.
·
Level 2
— Inputs, other than Level 1, that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.
·
Level 3
— Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of the assets or liabilities.
As of December 31, 2011 and 2010, all financial instruments
were measured at fair value using Level 1 inputs.
Stock-Based Compensation
The Company
measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. Employee
and director awards are measured on the grant date. The fair value amount is then recognized over the period during which services
are required to be provided in exchange for the award, usually the vesting period. The Company's policy is to
issue
new shares of common stock in order to meet any stock-based compensation award requirements.
F-
9
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
– CONTINUED
Earnings (Loss) Per Share
Basic EPS is computed by dividing net income or loss available
to common shareholders by the weighted average number of common shares outstanding during the period. For the years ended December
31, 2011 and 2010, the computation of Basic EPS included the impact of common shares issuable upon the exercise of stock options
with an exercise price of $0.01 or less. The computation of Diluted EPS gives effect to all potentially dilutive common shares
during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings. For the year ended December 31, 2011, 6,590,947,261 common shares issuable upon
the conversion of all outstanding and contingently issuable preferred stock were not included in the computation of Diluted EPS
because their conversion would render them anti-dilutive. For the year ended December 31, 2010, the computation of Diluted EPS
included the impact of common shares issuable upon the conversion of all preferred stock.
The following table presents the calculation of weighted average
shares used to calculate basic and diluted earnings per share:
For The Years Ended
December 31,
2011
2010
Weighted average common shares outstanding
2,456,463,554
2,398,938,493
Weighted average impact of stock options exercisable at $0.01 or less
100,000,000
128,287,671
Weighted average basic common shares outstanding
2,556,463,554
2,527,226,164
Weighted average impact of preferred stock
-
3,790,839,247
Weighted average diluted common shares outstanding
2,556,463,554
6,318,065,411
Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement
(Topic 820). This updated accounting guidance establishes common requirements for measuring fair value and for disclosing information
about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards. This guidance
includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, while other
amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim
and annual periods beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact
on the Company's consolidated financial position or results of operations.
Other accounting standards that have been issued or proposed
by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material
impact on the Company's financial statements upon adoption.
NOTE 4 – INVESTMENTS
Laidlaw Berlin Biopower, LLC
Laidlaw Berlin is a limited liability company that was
formed on April 11, 2006 and is wholly owned by Laidlaw BioPower, which, in turn, was 50% owned by the Company. In December
2008, Laidlaw Berlin entered into a development agreement with PJPD Holdings, LLC, ("PJPD"). PJPD acquired the
former Fraser Paper Mill located in Berlin, New Hampshire (the "Berlin Facility") from North American Dismantling
Corporation. Based on the development agreement with Laidlaw Berlin, Laidlaw Berlin was to manage the process of converting
the facility into a biomass facility and PJPD was to pay and provide all of the project funding up to a specified maximum
amount. Laidlaw managed all aspects of the development of this project, including identifying the asset, developing the
strategy to convert the paper mill's boiler for biomass utilization and engaging Babcock & Wilcox to implement the
refurbishment.  They also obtained all material permits for the Berlin Facility, conducted the necessary studies, and
obtained the required agreements to interconnect the Berlin Facility to the power grid.
F-
10
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – INVESTMENTS – CONTINUED
Laidlaw Berlin Biopower, LLC
- Continued
In August 2010, Laidlaw BioPower  entered into a sales agreement
and sold Laidlaw Berlin which included their rights to the future cash flows (which heretofore were determined to have no value
for accounting purposes) in the Berlin Facility for $7,000,000. Laidlaw BioPower  received $1,900,000 (50% or $950,000 of which
was the Company's proportionate share) during 2010 and $50,000 ($25,000 Company share) in June 2011, which was scheduled
to be followed by the remainder of $5,050,000, subject to certain adjustments. As a result of several claims made by the buyer
pursuant to the indemnification provisions of the agreement, the remainder of $5,050,000 was subsequently settled in October 2011
for $3,562,000 ($1,781,000 Company share), in order to avoid protracted litigation. The Company accounted for its 50% interest
in Laidlaw Berlin under the equity method of accounting. The Company recognized a gain on the sale of its equity investment of
$2,756,000 (50% of the $5,512,000 of total proceeds), as its book value at the time of sale was zero. The Company did not contribute
any cash or other physical assets to Laidlaw Berlin.
On November 18, 2011, the Company acquired an additional 25%
interest in Laidlaw Biopower, bringing its total interest in Laidlaw BioPower to 75%, pursuant to the terms of the Company's
issuance of it Series C Preferred Stock (see Note 9).
Laidlaw Co-Gen, Inc.
The Company is a 22.5% shareholder in Co-Gen, a facility that
operates a natural gas combined cycle co-generation system located in Ellicottville, New York. Three other unrelated third parties
own the remaining 77.5% shareholder interest. In 2008, there were continued operating deficits coupled with issues in obtaining
a use permit to convert the facility's fuel source from natural gas to biomass that created uncertainty around the entity's
ability to pursue its business plans. The Company made advances totaling $55,700 and $102,926 to Co-Gen during the years ended
December 31, 2011 and 2010, respectively, which were expensed. The Company continues to voluntarily fund an insignificant amount
of monthly site maintenance expenses in order to sustain its investment options.
NOTE 5 –  SUSANVILLE
On November 10, 2011, the Company acquired the membership interest
of Susanville from two interest holders pursuant to a Purchase and Sale Agreement entered into with each interest holder (collectively,
the "Agreements") for (a) at the closing, $97,500 in cash (b) at the closing, the number of shares of Series B Preferred
Stock (see Note 9 – Stockholders' Equity – Preferred Stock – Series B) that are convertible into a fixed
$2,000,000 of the Company's common stock; (c) ten business days after the execution of a power purchase agreement, the number
of shares of Series B Preferred Stock that are convertible into $1,000,000 of the Company's common stock; and (d) on the
date Susanville receives sufficient project financing to refurbish the critical power generation assets, the number of shares of
Series B Preferred Stock that are convertible into $1,650,000 of the Company's common stock ($650,000 of which would be accelerated
upon the receipt of a federal loan guaranty commitment). The Agreements stipulate that the market value of the common stock was
to be based on the forty-five day moving average of the closing price of the Company's freely tradable common stock or $0.0046
per share. The aggregate number of shares of Series B Preferred Stock issued at closing was 434.782610 shares.
Susanville owns the power generation assets that comprise an
idle 12.5 megawatt biomass energy power plant in Susanville, California and certain buildings, plus the Company also leases a 40
acre parcel of land located in Susanville, California, on which the power plant and buildings are located. The Company pays approximately
$240,000 in rent per annum for these premises and the lease term expires on January 30, 2013. During the lease term, the Company
also has an option to purchase the Susanville property, for a price equal to approximately $85,000 per acre, or approximately $3.4
million in the aggregate, reduced by (a) the $100,000 originally paid by the former lessee for the purchase option; (b) the sum
of $5,000 per month of rent paid from November 1, 2011 (which, on January 30, 2013, would equal $75,000); and (c) 50% of all rent
payments made prior to November 1, 2011 by the former lessee (or $675,000) for a net purchase price of approximately $2.5 million.
The Company is working with the lessor to formalize their oral agreement to extend the lease term by an additional year.
The two sellers agreed to indemnify the Company
against any claims arising from any pre-existing environmental issues. The Company is self-insuring against any other issues
which could impair the value of the assets. If the Company doesn't exercise its option to purchase the Susanville
property, continue to extend the term of the lease or enter into a new lease, the buildings and any power generation assets that
aren't relocated prior to the surrender of the leased premises could be impaired.
At acquisition, the Company recorded idle property and equipment
which aggregated $2,153,364. The amount represents the $97,500 of cash consideration, the $2,000,000 value of the Series B Preferred
Stock consideration, plus $55,864 of transaction costs. Post-acquisition, the Company added an additional $74,039 of idle property
and equipment costs, which represented consulting and wage costs associated with persons directly associated with the refurbishment
project. During the year ended December 31, 2011, the Company recorded $40,000 of rent expense related to the Susanville project.
F-
11
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 – SUSANVILLE – CONTINUED
The Company entered into a Registration Rights Agreement with
the two sellers whereby the Company has committed to cause a registration under the Securities Act of 1933, as amended, of the
secondary offering of their shares of common stock underlying their shares of Series B Preferred Stock on a delayed and continuous
basis. The Company is required to repurchase shares of the Series B Preferred Stock at a value of $0.0046 per share of common stock
for an amount equal to $18,750 per week, up to a maximum amount of $500,000 if the Registration Statement on Form S-1 is not filed
with the Securities and Exchange Commission on or prior to April 30, 2012, not declared effective within the period specified in
the Registration Rights Agreement, or upon certain other events that would prevent the offering of a specified minimum number of
such shares of common stock to be continued to be offered by either seller on a delayed and continuous basis in accordance with
such offering registered pursuant to an effective registration statement.
NOTE 6 – IDLE PROPERTY AND EQUIPMENT
Idle property and equipment consists of:
December 31,
2011
2010
Susanville Biomass Plant
$
2,237,403
$
-
$
2,237,403
$
-
These assets are being classified as idle property and equipment
until efforts to refurbish and restart the plant to operational status are completed. See Note 5 – Susanville for additional
information relating to the Susanville power generation assets.
Depreciation of the Susanville biomass plant will commence when
the facility begins operations, which is expected to occur 12 – 18 months after financing of the refurbishment is arranged.
Depreciation of the biomass plant will be performed using the straight-line method over the estimated useful lives of the underlying
power generation assets.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following
as of December 31, 2011 and 2010:
December 31,
2011
2010
Accrued compensation
$
103,286
$
163,283
Accrued professional fees
254,564
84,836
Other accrued expenses
133,592
79,274
Total accrued expenses
$
491,442
$
327,393
NOTE 8 – OTHER LIABILITIES
As of December 31, 2010, other liabilities of $232,500 represented
monies due to strategic partners for the sale of their 50% aggregate equity interest in Laidlaw Berlin, because the buyer paid
the Company the full proceeds of the sale (see Note 4 – Investments – Laidlaw Berlin BioPower, LLC) and the Company,
in turn, paid its strategic partners.
F-
12
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – STOCKHOLDERS' EQUITY
Preferred Stock
The Company's $0.001 par value preferred stock has 402,000,000
and 10,000,000 shares authorized effective November, 18, 2011, and August 28, 2006, respectively.
Preferred Stock – Series A
There were 1,000,000 shares of Series A Preferred Stock authorized,
issued and outstanding as of December 31, 2011 and 2010.
The Series A Preferred Stock shares are convertible, at the
option of the holder, at any time into that number of shares of common stock, collectively, which shall equal 60% of the sum of
the total issued and issuable common shares, including the total number of shares of common stock issuable upon the conversion
of all outstanding preferred stock and options as of the conversion date. The Series A Preferred Stock is entitled to that number
of votes equal to the number of shares of common stock into which such stock is convertible at the time of such vote. The liquidation
value of each share of Series A Preferred Stock equals $0.247562 or an aggregate of $247,562.
On November 18, 2011, in conjunction with and to facilitate
the issuance of the Series C Preferred Stock, the Series A Preferred Stock was amended such that the Series A Preferred Stock are
convertible, at the option of the holder, at any time into that number of shares of common stock, collectively, which shall equal
51% (previously 60%) of the sum of the total issued and issuable common shares, including the total number of shares of common
stock issuable upon the conversion of all outstanding preferred stock and options as of the conversion date. The Series A Preferred
Stock ranks on an equivalent basis as the Series C Preferred Stock in liquidation, but senior to the Series B Preferred Stock.
Preferred Stock – Series B
The Series B Preferred Stock shares are convertible, at the
option of the holder, at any time after six months from their issuance and subject to certain price/volume limitations, into 1,000,000
shares of common stock. The Series B preferred stock is automatically convertible into common stock immediately prior to any merger
of consolidation of the Company pursuant to which the Company is not the surviving entity. The Series B Preferred Stock is entitled
to that number of votes equal to the number of shares of common stock into which such stock is convertible at the time of such
vote. The aggregate liquidation value of the Series B Preferred Stock shall equal $100 regardless of the number of Series B Preferred
Stock that are issued and outstanding and the Series B Preferred Stock ranks junior to the Series A and C Preferred Stock in liquidation.
Until the Series B Preferred Stock is converted into common stock, it is entitled to those dividends that it would have been entitled
to had it been converted.
Preferred Stock – Series C
Pursuant to an Exchange Agreement between Novus Energy, LLC
("Novus Energy") and the Company dated November 18, 2011, as further amended on December 15, 2011, (1) Novus Energy,
whose sole member is an executive of the Company, transferred $220,000 plus its 25% interest in Laidlaw BioPower (which was deemed
to have de minimus value) to the Company, bringing the Company's interest in the entity up to 75% from 50%; and (2) the Company
transferred to the sole member 1,000,000 shares of Series C Preferred Stock. At November 18, 2011, Laidlaw BioPower did not have
any operating assets or liabilities, but the Company acquired the additional interest in order to position Laidlaw BioPower as
an investment vehicle for future transactions.
The Series C Preferred Stock shares are convertible, at the
option of the holder, at any time into that number of shares of common stock, collectively, which shall equal 10% of the sum of
the total issued and issuable common shares, including the total number of shares of common stock issuable upon the conversion
of all outstanding preferred stock and options as of the conversion date. The Series C Preferred Stock is entitled to that number
of votes equal to the number of shares of common stock into which such stock is convertible at the time of such vote. The liquidation
value of each share of Series C Preferred Stock shall equal $0.03126 or an aggregate of $31,260, and the Series C Preferred Stock
ranks on an equivalent basis as the Series A Preferred Stock in liquidation, but senior to the Series B Preferred Stock.
F-
13
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – STOCKHOLDERS' EQUITY –
CONTINUED
Common Stock
The Company's common stock has 9,000,000,000, 4,000,000,000
and 3,000,000,000 shares of common stock authorized effective January 3, 2012, November, 18, 2011 and March 17, 2009, respectively. 
On November 18, 2011, the Company also decreased the par value of the common stock to $0.0001 from $0.001 and the impact of this
change has been reflected retrospectively in these consolidated financial statements. At December 31, 2011 and 2010, there were
2,456,721,088 and 2,454,721,088 shares issued and outstanding, respectively.
During the year ended December 31, 2011, the Company granted
2,000,000 shares of common stock to an executive of the Company (see Note 10 – Stock Based Compensation).
During the year ended December 31, 2010, the Company issued
82,649,863 shares of common stock to investors for aggregate cash proceeds of $100,000. Additionally, during the year ended December
31, 2010, the Company's chief executive officer exercised options to purchase 75,000,000 shares of common stock at an exercise
price of $0.0001 or aggregate proceeds of $7,500.
No dividends have been paid to the holders of common stock during
the years ended December 31, 2011 and 2010.
NOTE 10 – STOCK BASED COMPENSATION
On February 17, 2011, the Company granted 2,000,000 shares of
immediately vested common stock to an executive of the Company. The $10,000 grant date fair value (determined by reference to the
closing price of the Company's common stock on the OTC Pink Market) was recognized immediately on the grant date, and is
reflected as selling, general and administrative expense in the consolidated statements of operations.
On December 31, 2010, the Company issued stock options to purchase
25,000,000 shares of common stock with an exercise price of $0.0047 to an executive of the Company. The options were immediately
exercisable and have no expiration date. The Company recognized a $117,500 fair value expense immediately on the date of grant.
A summary of the options activity during the years ended December 31,
2011 and 2010 is presented below:
Weighted
Weighted
Average
Average
Remaining
Number of
Exercise
Life
Intrinsic
Options
Price
In Years
Value
Balance, December 31, 2009
150,000,000
$
0.0001
Granted
25,000,000
$
0.0047
Exercised
(75,000,000
)
$
0.0001
Forfeited
-
-
Balance, December 31, 2010
100,000,000
$
0.0013
n/a
$
345,000
Granted
-
Exercised
-
Forfeited
-
-
Balance, December 31, 2011
100,000,000
$
0.0013
n/a
$
15,000
Exercisable, December 31, 2011
100,000,000
$
0.0013
n/a
$
15,000
F-
14
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – STOCK BASED COMPENSATION –
CONTINUED
The following table presents information related to stock options
at December 31, 2011:
Options Outstanding
Options Exercisable
Weighted
Average
Exercisable
Exercise
Number of
Remaining Life
Number of
Price
Options
In Years
Options
$
0.0001
75,000,000
n/a
75,000,000
0.0047
25,000,000
n/a
25,000,000
100,000,000
n/a
100,000,000
All of the outstanding and exercisable options have no expiration
date.
The Company has computed the fair value
of options granted using the Black-Scholes option pricing model.  Forfeitures are estimated at the time of valuation and reduce
expense ratably over the vesting period, if any. This estimate will be adjusted periodically based on the extent to which
actual forfeitures differ, or are expected to differ, from the previous estimate, when it is material. The expected term of
options granted represents the estimated period of time that options granted are expected to be outstanding. The Company utilizes
the "simplified" method to develop an estimate of the expected term of "plain vanilla" option grants, as
the Company does not have sufficient historical option granting experience from which to estimate the expected term. The Company
utilizes an expected volatility figure, equivalent to the expected life of the options, based on its historical stock prices. The
risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent
with the expected term of the options.
In applying the Black-Scholes option
pricing model, the Company used the following weighted average assumptions:
For The Years Ended
December 31,
2011
2010
Risk free interest rate
n/a
0.73%
Expected term (years)
n/a
25.0
Expected volatility
n/a
50.0%
Expected dividends
n/a
0.0%
There were no options granted during
year ended December 31, 2011. The weighted average estimated fair value of the stock options granted during the year ended December
31, 2010 was $0.0047 per share.
The Company recognized $0 and $117,500
of stock-based compensation expense during the years ended December 31, 2011 and 2010, respectively, related to stock option grants,
which are reflected as selling, general and administrative expense in the consolidated statements of operations. As of December
31, 2011, there was no unrecognized stock-based compensation expense related to stock option grants.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Leases
On March 9, 2011, the Company formed New Bedford of which
Laidlaw is the sole member. On April 29, 2011, the Company entered into a  lease of a thermo generator in New
Bedford, Massachusetts which expires on May 5, 2012. The lease payment of $75,000 is due at the end of the lease term or at
the time the Company determines to purchase the facility. The lease is extendible for an additional year for an additional
end of term lease payment of $90,000. The Company also provided $50,000 to the landlord as a security deposit under the
terms of the agreement. The agreement was intended to provide the Company with the time to improve operations, reduce
costs and assess the feasibility and economics of purchasing the facility and developing an efficient combined heat and power
system whereby low-cost energy could be provided to the tenants of the property and any excess could be sold into the power
grid. The purchase option permits the Company to purchase the facility, subject to certain conditions, for $2 million at the
end of either of the lease terms. The $2 million is payable by providing the seller with a secured promissory note in the
principal amount of $2 million which is payable from 10% of the free cash flow of the facility. The Company is not extending
the lease term or exercising the purchase option and is currently in negotiations with the landlord regarding the final lease
payment and the return of the security deposit.
F-
15
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – COMMITMENTS AND CONTINGENCIES –
CONTINUED
Leases
– Continued
On June 15, 2011, the Company entered into an operating lease
agreement for additional corporate office space at 2 Spring Street, First Floor, Montpelier, VT. The term of the lease is two years
with monthly rent of $850 and no escalation clause. Rent expense was $5,525 for the year ended December 31, 2011.
On June 1, 2007 the Company entered into an operating lease
agreement for its corporate office space at 90 John Street, Suite 401, New York, NY. The lease expires on April 30, 2012. The lease
terms call for monthly rent of $5,695 in the first year and annual rent escalations of 2.7% in the second and third years, 5.9%
in the fourth year, and 2.7% in the fifth year. Rent expense was $70,530 and $50,670 for the years ended December 31, 2011 and
2010, respectively.
The Company has total future minimum rental commitments under
its operating leases of $375,581 as of December 31, 2011, including annual amounts of $351,331 and $24,250 for the years ended
December 31, 2012 and 2013, respectively.
Profit Interest
On November 18, 2011, the Company granted a 25% interest in
the net income received from all Laidlaw power projects in lieu of wages as consideration for an executive of the Company to provide
project development services.
Legal and Regulatory Proceedings
The Company received  subpoenas from the SEC on June 28,
2011 and March 28, 2012 requiring the company to provide documentation to the SEC and for designated officers to provide
testimony to the SEC. The SEC has information that it believes tends to show that there are possible violations by the
Company and its officers, directors and others with respect to certain applicable securities laws, including Section 5 and
17(a) of the Securities Act of 1933, as amended, Section 10(b) of the Securities and Exchange Act of 1934, as amended, and
the related regulations. Although the Company has been cooperating with the staff ("Staff") of the SEC with
respect to this investigation and Michael Bartoszek, the Company's chief executive officer,  provided testimony to
the Staff on the record, there can be no assurances that the Staff will recommend to the SEC that no action be taken with
respect to the Company. The SEC has the authority to order a wide scope of remedies against the Company and any of its
officers or directors, any of which could materially and adversely affect the Company and the price of, or ability to trade,
its stock. Further, the Company cannot provide any assurance when the investigation will be concluded or what will be
the conclusion by the Staff or the SEC.
On September 3, 2009, an action titled "Hiscock &
Barclay v. Laidlaw" was filed in the New York State Supreme Court – County of Onondaga. There has been a dispute over
approximately $140,000 of attorney billings associated with services provided prior to 2009. In December 2011, the parties reached
an agreement in principle whereby they agreed that the Company would pay $60,000 in full satisfaction of the dispute. As of the
report date, a formal settlement agreement has not been executed. This liability was recorded as of December 31, 2011 and
2010.
In addition, the Company is subject to legal proceedings and
claims arising from the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect
to such actions, will not have a material adverse effect on the financial position or results of operations of the Company.
NOTE 12 – INCOME TAXES
The Company has filing requirements to file standalone corporate
income tax returns in the United States (Federal) and in New York. The Company's tax returns for the years 2010, 2009 and
2008 remain subject to examination. The Company has not yet filed its 2011 tax returns or amendments to its 2010, 2009 and 2008
tax returns.
As of December 31, 2011 and 2010, the Company had approximately
$221,000 and $727,000 of federal and state net operating loss carryforwards available to offset future taxable income, respectively.
The federal net operating losses, if not utilized, begin expiring in 2028. In accordance with Section 382 of the Internal Revenue
Code, deductibility of the Company's net operating loss carryforward may be subject to an annual limitation in the event
of a change of control.
F-
16
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – INCOME TAXES –  CONTINUED
During 2011, the effective state tax rate increased from
11.0% to 12.5% due to the Company's activities in new states. At December 31, 2011 and 2010, net deferred tax assets
consisted of the following:
At December 31,
2011
2010
Deferred Tax Assets:
Net operating loss
$
103,000
$
327,000
Equity method loss
436,000
397,000
Stock-based compensation
68,000
65,000
Accruals
24,000
24,000
Gross deferred tax assets
631,000
813,000
Investment gain - excess of book over tax
-
(813,000
)
Net deferred tax assets before valuation allowance
631,000
-
Less: Valuation allowance
(631,000
)
-
Net deferred tax asset
$
-
$
-
The Company believes that uncertainty exists with respect to
the future realization of the net deferred tax assets and has established a full valuation allowance as of December 31, 2011. The
deferred tax asset valuation allowance increased by approximately $631,000 during the year ended December 31, 2011 and decreased
by approximately $904,000 during the year ended December 31, 2010.
The income tax provision (benefit) consists of the following
for the years ended December 31, 2011 and 2010:
For the Years Ended
December 31,
2011
2010
Current:
Federal
$
-
$
-
State and local
-
-
-
-
Deferred:
Federal
(461,000
)
768,000
State and local
(170,000
)
136,000
(631,000
)
904,000
Change in valuation allowance
631,000
(904,000
)
Income tax provision
$
-
$
-
A reconciliation of the statutory federal income tax rate to
the Company's effective tax rate for the years ended December 31, 2011 and 2010, are as follows:
For the Years Ended
December 31,
2011
2010
Tax provision (benefit) at federal statutory rate
(34.0
%)
34.0
%
State income taxes, net of federal tax impact
(12.5
%)
11.0
%
Permanent differences
(4.5
%)
1.0
%
Change in valuation allowance
51.0
%
(46.0
%)
Effective income tax rate
0.0
%
0.0
%
F-
17
LAIDLAW ENERGY GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – SUBSEQUENT EVENTS
Chatsworth Claim
On February 6, 2012, the Company received a statement of
claim and demand for arbitration before the American Arbitration Association from Chatsworth Securities LLC, seeking the
collection of $615,938 in placement fees which Chatsworth Securities alleges it is entitled to pursuant to the terms of a
written agreement between the parties dated December 22, 2005. On March 19, 2012, the Company submitted an answer to
the statement of claim and a counterclaim for contractual indemnification seeking an award of the Company's
attorney fees and costs, of which Chatsworth answered on March 26, 2012. To date, an arbitrator has not yet been
assigned to this matter. The Company believes the claim is without merit and intends to defend itself vigorously. However,
there can be no assurance that the Company will prevail in arbitration.
F-
18
Through
and including                  , 2012 (the 90th day after the date of this prospectus), all dealers effecting transactions in the registered securities
offered hereby, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement
is in addition to the obligation of dealers to deliver a prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
434,782,610 Shares
LAIDLAW ENERGY GROUP, INC.
Common Stock
_________________________
PROSPECTUS
_________________________
, 2012
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table
sets forth the costs and expenses expected to be incurred by Laidlaw Energy Group, Inc. (the "Registrant") in connection
with this offering described in this registration statement. All amounts shown are estimates, except the SEC registration fee.
Item
Amount to be Paid
SEC registration fee
$14.95
Legal fees and expenses
*
Accounting fees and expenses
*
Printing and engraving expenses
*
Transfer agent fees
*
Blue sky fees and expenses
*
Miscellaneous
*
Total
$*
_____________________
* To be provided by amendment.
Item 14. Indemnification of Directors and Officers
Our certificate of
incorporation, as amended, eliminates the personal liability of directors to us and our shareholders for damages for any breach
of duty in such capacity except that such personal liability shall not be eliminated if a judgment or other final adjudication
adverse to such director establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled
or that his acts violated Section 719 of the Business Corporation Law of the State of New York.
Our amended and restated
bylaws provide that we shall indemnify every person made or threatened to be made a party to an action or proceeding by reason
of the fact that that person, that person's testator or intestate, is or was our director or officer or that person, that person's
testator or intestate, being or having been our director or officer, served any other corporation in any capacity at our request,
in the manner and to the extent provided in Business Corporation Law of the State of New York. In addition, our amended and restated
bylaws provide that expenses incurred by our directors and officers in defending a civil or criminal action or proceeding may be
paid by us in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount in case the person receiving such advancement is ultimately found, under Article 7 of the Business
Corporation Law of the State of New York, not to be entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced by us exceed the indemnification to which such person is entitled.
The Business Corporation
Law of the State of New York provides that we may indemnify any person made, or threatened to be made, a party to an action or
proceeding, whether civil or criminal, including an action by or in the right of any other corporation of any time or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer
served in any capacity at our request, by reason of the fact that he, his testator or intestate, was our director or officer, or
served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually or necessarily incurred
as a result of such action or proceeding, or any appeal therein, if such director of officer acted, in good faith, for a purpose
which he reasonably believed to be in, or, in the case of service for any other corporation or partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, our best interests and, in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his conduct was unlawful.
II-
1
In addition, the Business
Corporation Law of the State of New York provides that when a director or officer has been successful, on the merits or otherwise,
in a corporate or derivative action against such director or officer, or in an action by an outsider or a criminal proceeding,
he or she is entitled to indemnification and we have a duty to indemnify such director or officer as authorized by the Business
Corporation Law of the State of New York.
The Business Corporation
Law of the State of New York provides further that the indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which directors and officers may be entitled under our certificate of incorporation, as amended, or our amended
and restated bylaws or, when authorized by our certificate of incorporation, as amended, or our amended and restated bylaws, a
resolution of shareholders, a resolution of directors or an agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of a director or officer if a judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was
not legally entitled. The foregoing statements are subject to the detailed provisions of the Business Corporation Law of the State
of New York.
Our amended and restated
bylaws provide further that pursuant to Section 726 of the Business Corporation Law of the State of New York, we may purchase and
maintain insurance: (a) to indemnify ourselves for any obligation which we incur as a result of the indemnification of directors
and officers under our amended and restated bylaws; (b) to indemnify directors and officers in instances in which they may be indemnified
by us under our amended and restated bylaws; and (c) to indemnify directors and officers in instances in which they may not otherwise
be indemnified by us under our amended and restated bylaws provided the contract of insurance covering such directors and officers
provides, in a manner acceptable to the superintendent of insurance, for a retention amount and for co-insurance. Pursuant to our
amended and restated bylaws, no insurance may provide for any payment, other than cost of defense, to or on behalf of any director
or officer if a judgment or other final adjudication adverse to the insured director or officer establishes that his acts of active
and deliberate dishonesty were material to the cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled, or in relation to any risk the insurance of which is prohibited
under the insurance law of the State of New York.
Item 15. Recent Sales of Unregistered Securities
Except as set forth
below, in the three years preceding the filing of this registration statement, the Registrant has not issued any securities that
were not registered under the Securities Act.
From March 19, 2009
through January 6, 2010, we sold an aggregate of 471,500,000 shares of our common stock to Mazuma Holding Corp. and its affiliates,
for aggregate gross proceeds to us of $240,750.
On November 3, 2009,
we sold 19,723,866 shares of our common stock to Highwater Capital Management, LLC, for gross proceeds to us of $50,000. On January
22, 2010, we sold 32,649,863 shares of our common stock to Highwater Capital Management, LLC for gross proceeds to us of $50,000.
On September 17, 2010,
we issued to Michael B. Bartoszek, our President and Chief Executive Officer, 75,000,000 shares of our common stock, upon the exercise
of outstanding stock options, at an exercise price per share of $0.0001.
On November 10, 2011,
we entered into a transaction with Nature Energies, Inc. and Renegy Susanville, LLC, now known as NZ Legacy, LLC, pursuant to which
we issued 336.6087 shares of our Series B preferred stock to Nature Energies, Inc. and 98.17391 shares of our Series B preferred
stock to NZ Legacy, LLC, in each case, in exchange for all of their limited liability company interests in Laidlaw Susanville Biopower,
LLC, formerly known as Henri Susanville LLC.
II-
2
On November 18, 2011,
we issued 1,000,000 shares of our Series C preferred stock to Louis T. Bravakis, our Executive Vice President, as well as additional
consideration, in exchange for the transfer to us of $220,000 plus the 25% interest in Laidlaw Biopower, LLC held by an entity
whose sole member was Mr. Bravakis.
The shares referred
to above were all issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as
amended, as offerings and sales of securities by an issuer not involving a public offering. We believe that the exemption was available
because the offer and sale of the securities did not involve a public offering and because of the limited number of recipients,
each of the purchaser's representations of sophistication in financial matters, and their respective access to information
concerning our company.
On December 31, 2010,
we granted to Louis T. Bravakis, our Executive Vice President, options to purchase 25,000,000 shares of our common stock, at an
exercise price per share of $0.0047. The options do not have an expiration date. Such options were not registered under the Securities
Act of 1933, as amended, in reliance on the fact that the stock options were granted for no consideration, or were offered and
sold in transactions not involving a public offering, exempt from registration under the Securities Act of 1933, as amended, pursuant
to Section 4(2).
On February 17, 2011,
we granted to Theodore Alex Bravakis, our Vice President of Project Development, 2,000,000 shares of our common stock. Such shares
were not registered under the Securities Act of 1933, as amended, in reliance on the fact that the shares were granted for no consideration,
or were offered and sold in transactions not involving a public offering, exempt from registration under the Securities Act of
1933, as amended, pursuant to Section 4(2).
Item 16. Exhibits and Financial Statement Schedules.
(a)	Exhibits
Exhibit No.
Description
3.1
Certificate of Incorporation, as amended, of Laidlaw Energy Group, Inc.
3.2
Amended and Restated Bylaws of Laidlaw Energy Group, Inc.
4.1
Registration Rights Agreement, by and among Laidlaw Energy Group, Inc., Nature Energies, Inc. and Renegy Susanville, LLC, dated November 10, 2011
4.2
Form of specimen stock certificate representing common stock
5.1
Opinion of Herrick, Feinstein LLP*
10.1
Purchase and Sale Agreement, by and among Laidlaw
    Energy Group, Inc., Nature Energies, Inc., and Henri Susanville LLC, dated November 10, 2011
10.2
Purchase and Sale Agreement, by and among Laidlaw
    Energy Group, Inc., Renegy Susanville, LLC, and Henri Susanville LLC, dated November 10, 2011
10.3
Agreement for Environmental Conditions dated as of
    November 21, 2007 by and between Renegy Susanville, LLC and Sierra Pacific Industries as assigned by that certain Assignment
    and Assumption of Environmental Agreement dated as of November 10, 2011 by and between Renegy Susanville, LLC and Henri Susanville LLC
10.4
Option Agreement dated as of January 31, 2008 by and
    between Renegy Susanville, LLC and Sierra Pacific Industries, as assigned to Henri Susanville LLC  on November 10, 2011
10.5
Lease Agreement dated as of January 31, 2008 by and
    between Renegy Susanville, LLC and Sierra Pacific Industries, as assigned to Henri Susanville LLC on November 10, 2011
10.6
First Amendment to Lease Agreement dated as of November 10, 2011 by and between Sierra Pacific Industries and Laidlaw Susanville Biopower, LLC
10.7
Power Plant Operation and Development Lease with Purchase Option dated as of April 5, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC
10.8
Energy Services Agreement dated as of April 5, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC
10.9
Energy Services Agreement dated as of November 13, 2008 by and between Multilayer Coating Technologies, LLC and Konarka Technologies, Inc. as assigned by that certain Assignment and Assumption of Energy Services Agreement dated as of May 6, 2011 by and between Multilayer Coating Technologies, LLC and Laidlaw New Bedford Biopower, LLC
II-
3
10.10
Stockholders' Agreement of Laidlaw Co-Gen, Inc. dated May 2006 by and among Laidlaw Co-Gen, Inc., RGB Co-Gen, LLC, Laidlaw Energy Group, Inc., GROG, LLC and ER Co-Gen, LLC
10.11
Stock Pledge Agreement dated May 2006 by Laidlaw Energy Group, Inc. in favor of RGB Co-Gen LLC and ER Co-Gen, LLC
10.12
Stock Option Agreement dated November 15, 2007 by and between Laidlaw Energy Group, Inc. and Michael B. Bartoszek
10.13
Incentive Stock Option Agreement dated December 31, 2010 by Laidlaw Energy Group, Inc. to Louis T. Bravakis
16.1
Letter relating to change in certifying accountant*
21.1
Subsidiaries of Laidlaw Energy Group, Inc.
23.1
Consent of Marcum LLP
23.2
Consent of Herrick, Feinstein LLP (contained in their opinion included under Exhibit 5.1)*
__________
* To be filed by amendment.
(b)
Financial Statement Schedules
All schedules are omitted
since the required information is not applicable, the information is presented in the Registrant's consolidated financial
statements and the related notes thereto or is not present in amounts sufficient to require submission of the schedules.
Item 17. Undertakings
Undertakings
The undersigned Registrant hereby undertakes:
(1)	To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)	to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act");
(ii)	to reflect
in the prospectus any facts or events arising after the effective date of this registration statement (or the most-recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii)	to include
any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2)	That, for the
purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3)	To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4)	Insofar as
indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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4
(5)	That, for the
purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such date of first use.
II-
5
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the Registrant has duly caused this registration statement to be filed on its behalf by the undersigned,
thereunto duly authorized in the City of New York, State of New York on April 30, 2012.
LAIDLAW ENERGY GROUP,
INC.
By:
/s/ Michael B. Bartoszek
Name:
Title:
Michael B. Bartoszek
President and Chief Executive Officer
Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Michael B. Bartoszek
Michael B. Bartoszek
President, Chief Executive Officer and Director (principal executive, financial and accounting officer)
April 30, 2012