NOTE 1 - ORGANIZATION AND FINANCIAL CONDITION

Organization

Strategic Environmental & Energy Resources, Inc. (“SEER”, “we” or the “Company”), a Nevada corporation, is a provider of industrial products and services in the environmental, energy, and rail transportation sectors. SEER has three wholly-owned operating subsidiaries which provide industrial services to companies in the petroleum, industrial, manufacturing, and medical industries: REGS, LLC (d/b/a Resource Environmental Group Services (“REGS”)) provides mobile cleaning services to refineries and other entities in Colorado, Wyoming, Oklahoma, Kansas and Utah and also operates a site in Utah, on behalf of another company, to treat frac water resulting from oil and gas exploration; Tactical Cleaning Company, LLC (“TCC”) provides cleaning services to railcar tankers from its sites in Colorado and Kansas; MV, LLC (“MV”), located in Colorado, designs and builds emission and odor control units for refineries, municipalities and other corporate entities; and two majority-owned subsidiaries, Paragon Waste Solutions, LLC (“PWS”) and ReaCH4Biogas (“Reach”). PWS was formed in November 2010, and is currently owned 54% by SEER (see Note 7). PWS is developing specific opportunities to deploy and commercialize certain patent-pending technologies for a cold plasma oxidation process that makes possible the clean destruction of hazardous chemical and biological waste (i.e., hospital red bag waste) without traditional incineration with harmful emissions. Reach (originally known as BeneFuels, LLC), was formed in February 2013, is currently owned 85% by SEER and focuses specifically on treating biogas for conversion to pipeline quality gas and/or CNG for fleet vehicles. Reach had no operations as of December 31, 2013 except for some de minimis start-up costs.

Principals of Consolidation

The accompanying consolidated financial statements include the accounts of SEER, its wholly-owned subsidiaries, REGS, TCC and MV and its majority-owned subsidiaries PWS and Reach, since their respective acquisition or formation dates. All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

Basis of Presentation - Liquidity

As shown in the accompanying consolidated financial statements, the Company has experienced recurring losses, and has an accumulated deficit of approximately $12.2 million as of December 31, 2013 and for the years ended December 31, 2013, and 2012, we incurred net losses of approximately $858,000 and $1.7 million, respectively. As of December 31, 2013, our current assets exceeded our current liabilities by $581,500. As of December 31, 2013 our assets exceed our liabilities by approximately $2 million.

Realization of a major portion of our assets as of December 31, 2013, is dependent upon our continued operations. Accordingly, we have undertaken a number of specific steps to continue to operate as a going concern. In 2013, we increased our revenues by approximately 70% over the prior year and reduced our loss from operations by $829,800. In addition, in 2013 we raised approximately $3.7 million through the sale of common stock and converted approximately $61,000 in debt to equity. We continue to focus on organic growth in our operating companies and improving gross and net margins through increased attention to pricing, aggressive cost management and overhead reductions. We made additions to our senior management team to support these initiatives, and focused on streamlining our business model to improve profitability. We also increased our business development efforts in MV to address opportunities identified in expanding markets attributable to increased interest in energy conservation and emission control regulations. There can be no assurance that the Company will achieve the desired result of net income and positive cash flow from operations in future years. Management believes that current working capital and funds available from future equity financings will be sufficient to allow the Company to maintain its operations through December 31, 2014 and into the foreseeable future.

Reclassifications

Certain reclassifications have been made in the 2012 consolidated financial statements to conform to the 2013 presentation.