<PAGE>   1

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                                     OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2001      Commission File Number 0-21054

                           SYNAGRO TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its Charter)

                  DELAWARE                                  76-0511324
      (State or other jurisdiction of                     (IRS Employer
       incorporation or organization)                   Identification No.)

         1800 BERING DRIVE, SUITE 1000                  HOUSTON, TEXAS 77057
    (Address of principal executive offices)                 (Zip Code)

                                 (713) 369-1700
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant is
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes  [X]          No  [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.

<TABLE>
<CAPTION>
                   CLASS                      OUTSTANDING AT JULY 25, 2001
                   -----                      ----------------------------
<S>                                           <C>
        Common stock, par value $.002                 19,462,880
</TABLE>
<PAGE>   2
                           SYNAGRO TECHNOLOGIES, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
    PART I -- FINANCIAL INFORMATION

    Condensed Consolidated Balance Sheets as of June 30, 2001,
       (Unaudited) and December 31, 2000 ...........................       3

    Condensed Consolidated Statements of Operations for the
       Three  and Six Months Ended June 30, 2001 and 2000 (Unaudited)      4

    Condensed Consolidated Statements of Cash Flows for the
       Six Months Ended June 30, 2001 and 2000 (Unaudited) .........       5

    Notes to Condensed Consolidated Financial Statements ...........       7

    Management's Discussion and Analysis of Financial

    Condition and Results of Operations ............................      14

    PART II -- OTHER INFORMATION ...................................      20
</TABLE>



                                       2
<PAGE>   3
                           SYNAGRO TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        JUNE 30,          DECEMBER 31,
                                                                                         2001                 2000
                                                                                    --------------       --------------
<S>                                                                                 <C>                  <C>
ASSETS
Current assets:
   Cash and cash equivalents ...............................................        $      442,656       $    4,597,420
   Restricted cash .........................................................             1,216,370            2,085,039
   Accounts receivable, net ................................................            48,226,253           50,073,651
   Note receivable, current portion ........................................               177,903              188,903
   Prepaid expenses and other current assets ...............................            10,455,212           10,385,755
                                                                                    --------------       --------------
      Total current assets .................................................            60,518,394           67,330,768

Property, machinery & equipment, net .......................................           197,586,372          198,466,357

Other assets:
   Goodwill, net ...........................................................           167,560,299          166,698,921
   Notes receivable, long-term portion .....................................                16,527               16,527
   Other, net ..............................................................            10,079,388           11,308,019
                                                                                    --------------       --------------
Total assets ...............................................................        $  435,760,980       $  443,820,592
                                                                                    ==============       ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt .......................................        $   13,929,398       $   11,450,380
   Accounts payable and accrued expenses ...................................            40,866,850           41,776,473
                                                                                    --------------       --------------
      Total current liabilities ............................................            54,796,248           53,226,853
Long-term liabilities:
   Long-term debt obligations, net .........................................           258,184,138          273,482,224
   Other long-term liabilities .............................................             7,055,848              180,205

COMMITMENTS AND CONTINGENCIES

Redeemable Preferred Stock, 69,792.29 shares issued and
   outstanding, redeemable at $1,000 per share .............................            66,769,365           63,367,178

Stockholders' equity:
   Preferred stock, $.002 par value, 10,000,000 shares authorized,
      none issued and outstanding ..........................................                    --                   --
   Common stock, $.002 par value, 100,000,000 shares authorized,
      19,462,880 and 19,435,781 shares outstanding .........................                38,927               38,872
   Additional paid in capital ..............................................           109,139,687          109,085,542
   Accumulated deficit .....................................................           (56,090,275)         (55,560,282)
   Accumulated other comprehensive income ..................................            (4,132,958)                  --
                                                                                    --------------       --------------
      Total stockholders' equity ...........................................            48,955,381           53,564,132
                                                                                    --------------       --------------
Total liabilities and stockholders' equity .................................        $  435,760,980       $  443,820,592
                                                                                    ==============       ==============
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       3
<PAGE>   4
                           SYNAGRO TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,
                                                                         2001            2000            2001            2000
                                                                     ------------    ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>             <C>
Sales ..........................................................     $ 65,800,156    $ 27,768,428    $124,595,298    $ 46,434,854
Cost of services ...............................................       47,340,024      19,510,737      92,915,735      34,602,960
                                                                     ------------    ------------    ------------    ------------
Gross profit ...................................................       18,460,132       8,257,691      31,679,563      11,831,894

Selling, general and administrative expenses ...................        4,977,487       2,537,462      10,080,031       5,017,382
Amortization of goodwill .......................................        1,150,105         815,621       2,282,753       1,438,135
                                                                     ------------    ------------    ------------    ------------
   Income from operations ......................................       12,332,540       4,904,608      19,316,779       5,376,377
                                                                     ------------    ------------    ------------    ------------
Other (income) expense:
   Other (income) expense, net .................................          (55,619)         17,862         (61,889)         13,604
   Interest expense, net .......................................        7,102,351       2,927,622      14,461,915       5,017,530
                                                                     ------------    ------------    ------------    ------------
       Total other expenses, net ...............................        7,046,732       2,945,484      14,400,026       5,031,134
                                                                     ------------    ------------    ------------    ------------
Income before provision for income taxes .......................        5,285,808       1,959,124       4,916,753         345,243
     Provision for income taxes ................................               --              --              --              --
                                                                     ------------    ------------    ------------    ------------
Net income before preferred stock dividends,
   noncash beneficial conversion charge, and
   cumulative effect of change in accounting for
   derivatives .................................................        5,285,808       1,959,124       4,916,753         345,243
Preferred stock dividends ......................................        1,843,140         591,708       3,586,061         951,134
Noncash beneficial conversion charge ...........................               --       3,505,537              --      25,643,879
Cumulative effect of change in accounting for derivatives ......               --              --       1,860,685              --
                                                                     ------------    ------------    ------------    ------------
Net income (loss) applicable to common stock ...................     $  3,442,668    $ (2,138,121)   $   (529,993)   $(26,249,770)
                                                                     ============    ============    ============    ============

Earnings per share:
   Net income before preferred stock dividends,
        noncash beneficial conversion
       charge, and cumulative effect of change in accounting for
       derivatives .............................................     $       0.27    $       0.10    $       0.25    $       0.02
   Preferred stock dividends ...................................            (0.09)          (0.03)          (0.18)          (0.05)
                                                                     ------------    ------------    ------------    ------------
       Subtotal ................................................             0.18            0.07            0.07           (0.03)
   Noncash beneficial conversion charge ........................               --           (0.18)             --           (1.34)
   Cumulative effect of change in accounting for derivatives ...               --              --           (0.10)             --
                                                                     ------------    ------------    ------------    ------------
Net income (loss) per common share, basic ......................     $       0.18    $      (0.11)   $      (0.03)   $      (1.37)
                                                                     ============    ============    ============    ============

Net income (loss) per common share, diluted ....................     $       0.11    $      (0.11)   $      (0.03)   $      (1.37)
                                                                     ============    ============    ============    ============

Weighted average shares outstanding, basic .....................       19,443,781      19,424,193      19,439,803      19,143,834
Weighted average shares outstanding, diluted ...................       49,450,137      19,424,193      19,439,803      19,143,834
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       4
<PAGE>   5
                           SYNAGRO TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED JUNE 30,
                                                                                        2001                  2000
                                                                                    -------------        --------------
<S>                                                                                 <C>                  <C>
Cash flows from operating activities:
   Net income before preferred stock dividends,
      noncash beneficial conversion charge, and
      cumulative effect of change in accounting
      for derivatives ......................................................        $   4,916,753        $      345,243
   Adjustment to reconcile net income before
      preferred stock dividends, noncash beneficial conversion charge, and
      cumulative effect of change in accounting for derivatives to net cash
      provided by operating activities:
        Depreciation........................................................            6,773,104             2,432,526
        Amortization .......................................................            2,947,244             1,438,135
        Gain on sale of property, machinery and equipment ..................              (86,448)              (17,861)
        (Increase) decrease in the following, excluding the effects
          of acquisitions:
        Accounts receivable ................................................            1,111,722            (1,214,907)
        Prepaid expenses and other assets ..................................             (724,415)              580,299
        Accounts payable, accrued expenses and other liabilities ...........             (914,476)             (348,388)
                                                                                    --------------       --------------
   Net cash provided by operating activities ...............................           14,023,484             3,215,047
                                                                                    -------------        --------------

Cash flows from investing activities:

      Purchase of businesses, net of cash acquired .........................                   --           (87,480,720)
      Purchases of property, machinery and equipment .......................           (6,097,887)           (1,837,252)
      Proceeds from sale of property, machinery and equipment ..............              266,213                85,500
      Proceeds from notes receivable .......................................               11,000                58,288
      Other ................................................................           (1,158,692)                   --
                                                                                    -------------        --------------
Net cash used in investing activities ......................................           (6,979,366)          (89,174,184)
                                                                                    -------------        --------------

Cash flows from financing activities:

      Proceeds from debt ...................................................                   --           117,384,881
      Payments on debt .....................................................          (10,763,212)          (51,584,222)
      Debt issuance costs ..................................................              (69,415)           (6,632,303)
      Increase in restricted cash  .........................................             (420,455)                   --
      Issuance of preferred stock, net of offering costs ...................                  --             28,956,076
      Exercise of options and warrants .....................................               54,200               144,167
                                                                                    --------------       --------------
   Net cash provided by (used in) financing activities .....................          (11,198,882)           88,268,599
                                                                                    -------------        --------------

Net increase (decrease) in cash and cash equivalents .......................           (4,154,764)            2,309,462
Cash and cash equivalents, beginning of period .............................            4,597,420               180,633
                                                                                    -------------        --------------
Cash and cash equivalents, end of period ...................................        $     442,656        $    2,490,095
                                                                                    =============        ==============
</TABLE>


         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       5
<PAGE>   6
                           SYNAGRO TECHNOLOGIES, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                      JUNE 30,
                                                                      --------
                                                              2001               2000
                                                              ----               ----
<S>                                                        <C>                <C>
           Supplemental Cash Flow Information

           Interest paid during the period ..........      $12,244,747        $4,472,424
           Taxes paid during the period .............               --                --
</TABLE>


                   NONCASH INVESTING AND FINANCING ACTIVITIES

During 2000, the Company issued an aggregate of 57,746.93 shares of Series C,
Series D, and Series E Preferred Stock ("Preferred Stock") with an eight percent
dividend and a beneficial conversion feature. Additionally, the Company
recognized both the value of the dividend of approximately $3,938,000 and the
value of the beneficial conversion feature of approximately $37,045,000
($25,644,000 through June 30, 2000) as a preferred stock dividend and a noncash
beneficial conversion charge, respectively. The Company recognized the value of
the dividend of approximately 3,586,000 through June 30, 2001, as a preferred
stock dividend. Dividends include the eight percent dividend on preferred stock
and accretion of preferred stock and warrants.








                                        6
<PAGE>   7
                           SYNAGRO TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)  BASIS OF PRESENTATION

GENERAL

The accompanying unaudited, condensed consolidated financial statements have
been prepared by Synagro Technologies, Inc. ("Synagro" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
These condensed consolidated financial statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
presentation of such financial statements for the periods indicated. Certain
information relating to the Company's organization and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in this Form 10-Q
pursuant to Rule 10-01 of Regulation S-X for interim financial statements
required to be filed with the Securities and Exchange Commission. However, the
Company believes that the disclosures herein are adequate to make the
information presented not misleading. The results for the three and six months
ended June 30, 2001, are not necessarily indicative of future operating results.
It is suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 2000.

The accounting policies followed by the Company in preparing interim
consolidated financial statements are consistent with those described in the
"Notes to Consolidated Financial Statements" in the Company's Form 10-K, as
amended on April 30, 2001, for the year ended December 31, 2000.

The Company is a national provider of residuals management services. The Company
is engaged in the business of managing biosolids and other organic materials for
beneficial reuse throughout the United States. The Company's services include,
among other things, land application, compliance monitoring, cleanout services,
facilities operations and maintenance, and the marketing of end products from
the treatment of such materials.

ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which requires that the Company
recognize all derivative instruments as asset or liabilities in its balance
sheet and measure them at their fair value. Changes in the fair value of a
derivative are recorded in income or directly to equity, depending on the
instrument's designated use. For derivative instruments that are designated and
qualify as a cash flow hedge, the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive income
and reclassified into income when the hedged transaction affects income, while
the ineffective portion of the gain or loss on the derivative instrument is
recognized currently in earnings. For derivative instruments that are designated
and qualify as a fair value hedge, the gain or loss on the derivative instrument
as well as the offsetting loss or gain on the hedge item attributable to the
hedged risk are recognized in current income during the period of the change in
fair values. The noncash transition adjustment related to the adoption of this
statement has been reflected as a "cumulative effect of change in accounting for
derivatives" of approximately $1,861,000 charged to net income and approximately
$2,058,000 charged to other comprehensive income included in stockholders'
equity as of January 1, 2001. See Note (5) for discussion of the Company's
current derivative contracts and hedging activities.

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires all business combinations initiated after June 30,
2001, to be accounted for using the purchase method. Under SFAS 142, goodwill
and intangible assets with indefinite lives are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will be amortized over their useful lives. The amortization provisions of
SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001.
With respect to goodwill and intangible assets attributed to acquisitions prior
to July 1, 2001, the amortization provisions of SFAS 142 will be effective
January 1, 2002. Management is currently evaluating the effect that adoption of
the provisions of SFAS 142, will have on its results of operations and financial
position.



                                        7
<PAGE>   8
USE OF ESTIMATES

In preparing financial statements in conformity with accounting principles
generally accepted in the United States, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(2)  ACQUISITIONS

2000 ACQUISITIONS

During 2000, the Company purchased Residual Technologies, Limited Partnership
and its affiliates (collectively "RESTEC"), Ecosytematics, Inc., Davis Water
Analysis, Inc., AKH Water Management, Inc., Rehbein, Inc, certain assets and
contracts of Whiteford Construction Company, Environmental Protection &
Improvement Company, Inc. ("EPIC"), and the Bio Gro Division of Waste
Management, Inc. ("Bio Gro") (collectively, the "2000 Acquisitions"). The 2000
Acquisitions were accounted for using the purchase method of accounting. The
preliminary allocation of the purchase prices, which is subject to final
adjustment, resulted in approximately $109,197,000 of goodwill that is being
amortized over 40 years.

(3) PREFERRED STOCK

PREFERRED STOCK

The Company is authorized to issue up to 10,000,000 shares of Preferred Stock,
which may be issued in one or more series or classes by the Board of Directors
of the Company. Each such series or class shall have such powers, preferences,
rights and restrictions as determined by resolution of the Board of Directors.
Series A Junior Participating Preferred Stock will be issued upon exercise of
the Stockholder Rights described below.

SERIES C REDEEMABLE PREFERRED STOCK

On January 26, 2000, the Company authorized 30,000 shares of Series C Preferred
Stock, par value $.002 per share. Upon approval by a majority of the Company's
shareholders and certain other conditions in March 2000, the Series C Preferred
Stock became convertible into Series D Preferred Stock at a rate of 1:1. The
Series C Preferred Stock is senior to the Common Stock or any other equity
securities of the Company. The liquidation value of each share of Series C
Preferred Stock is $1,000 per share ("Liquidation Value") plus accrued and
unpaid dividends. Dividends on each share of Series C Preferred Stock shall
accrue on a daily basis at the rate of 8 percent per annum on aggregate
Liquidation Value plus accrued and unpaid dividends. The Series C Preferred
Stock has no voting rights. Shares of Series C Preferred Stock are subject to
mandatory redemption by the Company on January 26, 2010, at a price per share
equal to the Liquidation Value plus accrued and unpaid dividends.

On January 27, 2000, the Company issued 17,358.824 shares of Series C Preferred
Stock, par value $.002 per share, to GTCR Fund VII, L.P. and its affiliates for
$17,358,824. On February 4, 2000, the Company issued 419.4 shares of Series C
Preferred Stock to GTCR Fund VII, L.P. and its affiliates for $419,400. On March
24, 2000, the Company issued 225.000 shares of Series C Preferred Stock to GTCR
Fund VII, L.P. and its affiliates for $225,000. On March 27, 2000, the Company
issued 1,260.000 shares of Series C Preferred Stock to GTCR Fund VII, L.P. and
its affiliates for $1,260,000. The proceeds were used primarily to fund the 2000
Acquisitions. The Company also issued warrants to GTCR Fund VII, L.P. for a
nominal price in connection with the issuance of subordinated debt, which were
immediately exercised for 272.058 shares of Series C Preferred Stock. During
April 2000, all Series C Preferred Stock was converted to Series D Preferred
Stock.

SERIES D REDEEMABLE PREFERRED STOCK

On January 26, 2000, the Company authorized 32,000 shares of Series D Preferred
Stock, par value $.002 per share. The Series D Preferred Stock is convertible by
the holders into a number of shares of Common Stock computed by (i) the sum of
(a) the number of shares to be converted multiplied by the Liquidation Value and
(b) the amount of accrued and unpaid dividends by (ii) the conversion price then
in effect. The initial conversion price is $2.50 per share, provided that in
order to prevent dilution, the conversion price may be adjusted. The Series D
Preferred Stock is senior to the Common Stock or any other equity securities of
the Company. The liquidation value of each share of Series D Preferred Stock is
$1,000 per share ("Liquidation Value") plus accrued and unpaid dividends.
Dividends on each share of Series D Preferred Stock shall accrue on a daily
basis at the rate of 8 percent per annum on the aggregate Liquidation


                                        8
<PAGE>   9
Value. The Series D Preferred Stock is entitled to one vote per share. Shares of
Series D Preferred Stock are subject to mandatory redemption by the Company on
January 26, 2010, at a price per share equal to the Liquidation Value plus
accrued and unpaid dividends.

On January 27, 2000, the Company issued 2,641.176 shares of Series D Preferred
Stock to GTCR Fund VII, L.P. and its affiliates for $2,641,176. The proceeds
were used primarily to fund the 2000 Acquisitions. The Company also issued
warrants to GTCR Fund VII, L.P. for a nominal price in connection with the
issuance of subordinated debt, which were immediately exercised for 2,857.143
shares of Series D Preferred Stock.

SERIES E REDEEMABLE PREFERRED STOCK

On June 14, 2000, the Company authorized 55,000 shares of Series E Preferred
Stock, par value $.002 per share. The Series E Preferred Stock is convertible by
the holders into a number of shares of Common Stock computed by (i) the sum of
(a) the number of shares to be converted multiplied by the Liquidation Value and
(b) the amount of accrued and unpaid dividends by (ii) the conversion price then
in effect. The initial conversion price is $2.50 per share, provided that in
order to prevent dilution, the conversion price may be adjusted. The Series E
Preferred Stock is senior to the Common Stock or any other equity securities of
the Company. The liquidation value of each share of Series E Preferred Stock is
$1,000 per share ("Liquidation Value") plus accrued and unpaid dividends.
Dividends on each share of Series E Preferred Stock shall accrue on a daily
basis at the rate of 8 percent per annum on the aggregate Liquidation Value. The
Series E Preferred Stock is entitled to one vote per share. Shares of Series E
Preferred Stock are subject to mandatory redemption by the Company on January
26, 2010, at a price per share equal to the Liquidation Value plus accrued and
unpaid dividends.

On June 15, 2000, the Company issued 6,840 shares of Series E Preferred Stock to
GTCR Fund VII, L.P. and its affiliates for $6,840,000. The proceeds were used
primarily to fund the acquisition of EPIC. The Company also issued warrants to
GTCR Fund VII, L.P. for a nominal price in connection with the issuance of
subordinated debt, which were immediately exercised for 1,400.00 shares of
Series E Preferred Stock.

On August 14, 2000, the Company issued 25,768.744 shares of Series E Preferred
Stock to GTCR Fund VII, L.P. and its affiliates, and 3,233.788 shares to
TCW/Crescent Lenders. Additionally, the Company issued 2,589.635 and 229.88
warrants to GTCR Fund VII, L.P. and Affiliates, and TCW/Crescent Lenders,
respectively, in connection with the issuance of the preferred stock; these were
immediately converted into Series E Preferred Stock. The proceeds of
approximately $29,003,000 were used to partially fund the Bio Gro acquisition.

NONCASH BENEFICIAL CONVERSION

The Series D and Series E Preferred Stock, including Series C Preferred Stock
that were converted into Series D Preferred Stock (see above), the warrants
issued in connection with the subordinated debt and warrants issued in
connection with the issuance of Preferred Stock, which were exercised for Series
C Preferred Stock, Series D Preferred Stock, and Series E Preferred Stock, are
convertible into shares of the Company's common stock at $2.50 per share. This
conversion price of $2.50 was below the market price of the Company's common
stock at the dates of issuance. Financial accounting rules require that the
Company record a "noncash beneficial conversion charge" for the difference
between the market price and the conversion price at the date of issuance of
this preferred stock. Accordingly, during 2000, the Company recognized the value
of this beneficial conversion feature of approximately $37,045,000 ($25,644,000
through June 30, 2000) as a noncash beneficial conversion charge at the dates of
issuance. The value of such preferred stock dividend has no impact on the
Company's cash flows, but reduces basic and diluted earnings applicable to
holders of Common Stock. Additionally, future issuances of Series D and Series E
Preferred Stock and warrants related to subordinated debt and issuance of
Preferred Stock may result in noncash beneficial conversions valued in future
periods recognized as noncash beneficial conversion charges.

The increase in redeemable preferred stock of approximately $3,402,000 during
the six-month period ended June 30, 2001, relates primarily to the eight percent
preferred stock dividend and accretion of preferred stock and warrants.

(4)  STOCKHOLDERS' RIGHTS PLAN

In December 1996, the Company adopted a stockholders' rights plan (the "Rights
Plan"). The Rights Plan provides for a dividend distribution of one preferred
stock purchase right ("Right") for each outstanding share of the Company's
common stock, to stockholders of record at the close of business on January 10,
1997. The Rights Plan is designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a fair
price to all of the Company's stockholders. The Rights will expire on December
31, 2006.


                                        9
<PAGE>   10
Each Right entitles stockholders to buy one one-thousandth of a newly issued
share of Series A Junior Participating Preferred Stock of the Company at an
exercise price of $10. The Rights are exercisable only if a person or group
acquires beneficial ownership of 15 percent or more of the Company's common
stock or commences a tender or exchange offer which, if consummated, would
result in that person or group owning 15 percent or more of the Common Stock of
the Company. However, the Rights will not become exercisable if Common Stock is
acquired pursuant to an offer for all shares which a majority of the board of
directors determines to be fair to and otherwise in the best interests of the
Company and its stockholders. If, following an acquisition of 15 percent or more
of the Company's Common Stock, the Company is acquired by that person or group
in a merger, or other business combination transaction, each Right would then
entitle its holder to purchase common stock of the acquiring company having a
value of twice the exercise price. The effect will be to entitle the Company
stockholder to buy stock in the acquiring company at 50 percent of its market
price.

The Company may redeem the Rights at $.001 per Right at any time on or prior to
the tenth business day following the acquisition of 15 percent or more of its
common stock by a person or group or commencement of a tender offer for such 15
percent ownership.

In connection with the issuance of the Series C Preferred Stock, Series D
Preferred Stock, and Series E Preferred Stock to GTCR Fund VII, L.P. and its
affiliates, and TCW/Crescent Lenders the Board of Directors waived the
application of the Rights Plan.

(5) DEBT

Long-term debt obligations consist of the following:

<TABLE>
<CAPTION>
                                                                                           JUNE 30,             DECEMBER 31,
                                                                                             2001                  2000
                                                                                        -------------          -------------
<S>                                                                                     <C>                    <C>
Credit facility - acquisition and term loans ...................................        $ 176,067,555          $ 185,499,999
Subordinated debt, net of fair value adjustment of $766,733 as of June 30, 2001            51,993,660             52,760,393
Maryland Energy Financing Administration Limited Obligation Solid
    Waste Disposal Revenue Bonds, 1996 series -
       Revenue bonds due 2001 to 2005 at stated interest rates of 5.45% to 5.85%           12,195,000             12,195,000
       Term revenue bond due 2010 at stated interest rate of 6.30% .............           16,295,000             16,295,000
       Term revenue bond due 2016 at stated interest rate of 6.45% .............           22,360,000             22,360,000
       Less:  Restricted cash ..................................................           (6,830,353)            (5,541,229)
Capital lease obligations ......................................................                   --                626,819
Other notes payable ............................................................               32,674                736,622
                                                                                        -------------          -------------
       Total debt, net of restricted cash ......................................          272,113,536            284,932,604
Less:
    Current maturities .........................................................           13,929,398             11,450,380
                                                                                        -------------          -------------
       Long-term debt, net of current maturities ...............................        $ 258,184,138          $ 273,482,224
                                                                                        =============          =============
</TABLE>


CREDIT FACILITY

On January 27, 2000, the Company entered into a $110 million amended and
restated Senior Credit Agreement (the "Senior Credit Agreement") by and among
the Company, Bank of America, N.A., and certain other lenders to fund working
capital for acquisitions, to refinance existing debt, to fund capital
expenditures and other general corporate purposes. The Senior Credit Agreement
bears interest at LIBOR or prime plus a margin based on a pricing schedule as
set out in the Senior Credit Agreement. The Senior Credit Agreement was
subsequently syndicated on March 15, 2000, to a banking group, and the capacity
was increased to $120 million. The Senior Credit Agreement was amended and
resyndicated on August 14, 2000, to a banking group, and the capacity was
increased to $230 million. The loan commitments under the Senior Credit
Agreement are as follows:

         (i.)     Revolving Loans up to $30,000,000 outstanding at any one time;

         (ii.)    Term A Loans (which, once repaid, may not be reborrowed) of
                  $50,000,000;

         (iii.)   Term B Loans (which, once repaid, may not be reborrowed) of
                  $100,000,000;

         (iv.)    Acquisition Loans up to $50,000,000 outstanding at any one
                  time available on a revolving basis prior to August 14, 2001,
                  provided that certain approvals are obtained and certain
                  financial ratios are met; and

         (v.)     Letters of credit issuable by the Company up to $20,000,000 as
                  a subset of the Revolving Loans. At June 30, 2001, the Company
                  had approximately $6,976,000 of letters of credit outstanding.


                                       10
<PAGE>   11
The amounts borrowed under the Senior Credit Agreement are subject to repayment
as follows:

Period Ending December 31,
--------------------------
<TABLE>
<CAPTION>
                     REVOLVING         TERM A           TERM B         ACQUISITION
                       LOANS            LOANS            LOANS            LOANS
                      ------           ------           ------           ------

<S>                  <C>               <C>              <C>            <C>
2000 .......              --             5.00%             .50%               0%
2001 .......              --            15.00%            1.00%               0%
2002 .......              --            22.50%            1.00%            5.00%
2003 .......              --            17.50%            1.00%            6.67%
2004 .......              --            20.00%            1.00%           11.67%
2005 .......          100.00%           20.00%            1.00%           76.66%
2006 .......              --               --            94.50%              --
                      ------           ------           ------           ------
                      100.00%          100.00%          100.00%          100.00%
                      ======           ======           ======           ======
</TABLE>

The Senior Credit Agreement includes mandatory repayment provisions related to
excess cash flows, proceeds from certain asset sales, debt issuances and equity
issuances, all as defined in the Senior Credit Agreement. These mandatory
repayment provisions may also reduce the available commitment for Revolving
Loans and Acquisition Loans. The Senior Credit Agreement contains standard
covenants including compliance with laws, limitations on capital expenditures,
restrictions on dividend payments, limitations on mergers and compliance with
certain financial covenants. The Company believes that it is in compliance with
those covenants as of June 30, 2001. The Senior Credit Agreement is secured by
all the assets of the Company and expires on July 27, 2006. As of June 30, 2001,
the Company has borrowed approximately $176,068,000 ($42,597,000 of Term A
Loans, $93,714,000 of Term B Loans, and $39,757,000 of Acquisition Loans), which
was primarily used to refinance existing debt, partially fund the 2000
Acquisitions, and to retire bonds assumed in the RESTEC acquisition. As of June
30, 2001, the Company has approximately $33,200,000 of unused borrowings under
the Senior Credit Agreement. The Company's Senior Credit Agreement contains
various financial covenants, including a senior debt-to-cash flow ratio, as
defined, determined at the end of each quarter. As of June 30, 2001, the maximum
senior debt that could have been outstanding while remaining in compliance with
the senior debt-to-cash flow ratio was approximately $181,900,000. As of July
25, 2001, the Company has borrowed approximately $179,268,000 ($42,597,000 of
Term A Loans, $93,714,000 of Term B Loans, $39,757,00 of Acquisition Loans, and
$3,200,000 of Revolving Loans) with approximately $30,000,000 of unused
borrowings remaining under the Senior Credit Agreement.

SUBORDINATED DEBT

On January 27, 2000, the Company entered into an agreement with GTCR Capital
providing up to $125 million in subordinated debt financing to fund acquisitions
and for certain other uses, in each case as approved by the Board of Directors
of the Company and GTCR Capital. The agreement was amended on August 14, 2000,
allowing, among other things, for GTCR Capital to syndicate a portion of the
commitment. The loans bear interest at an annual rate of 12 percent paid
quarterly and provide warrants that are convertible into Preferred Stock at $.01
per warrant. The unpaid principal plus unpaid and accrued interest must be paid
in full by January 27, 2008. The agreement contains general and financial
covenants. As of June 30, 2001, the Company has borrowed approximately
$52,760,000 of indebtedness under the terms of the agreement, which was used to
partially fund the 2000 Acquisitions. Warrants to acquire 9,225.839 shares of
Series C, D, and E Preferred Stock were issued in connection with these
borrowings. These warrants were immediately exercised.

REVENUE BONDS

The revenue bonds (the "Revenue Bonds") and the term revenue bonds (the "Term
Revenue Bonds") (collectively, the "Project Revenue Bonds") were issued in 1996
by the Maryland Energy Financing Administration pursuant to the Maryland Energy
Financing Act. The Company assumed all obligations associated with the Project
Revenue Bonds in connection with its acquisition of Bio Gro. The proceeds of the
Project Revenue Bonds were loaned pursuant to a June 1996 financing agreement
for the purposes of financing the costs of the construction of thermal
operations located in Baltimore County, Maryland, at the site of Baltimore's
Back River Wastewater Treatment Plant and in the City of Baltimore, Maryland, at
the site of Baltimore's Patapsco Wastewater Treatment Plant. Both facilities
were in operation prior to 1998.

The Project Revenue Bonds are primarily secured by the pledge of revenues and
assets related to the Company's Back River and Patapsco thermal facilities. The
underlying service contracts between the Company and the City of Baltimore
("Baltimore") obligated the

                                       11
<PAGE>   12
Company to design, construct and operate the thermal facilities and obligated
Baltimore to deliver biosolids for processing at the thermal facilities. The
Company and Baltimore have agreed that Baltimore will deposit all payments made
by Baltimore to the Company under the service contracts directly with a trustee
for the purpose of maintaining a reserve fund to service debt requirements.

The Project Revenue Bonds can be redeemed at the option of the Company at any
time on or after December 1, 2006, subject to redemption prices specified in the
financing agreement. The Project Revenue Bonds can be redeemed at the option of
the Company under certain extraordinary conditions, as defined in the financing
agreement. Additionally, the Term Revenue Bonds are subject to mandatory sinking
fund requirements prior to final maturity, beginning on December 1, 2006.

Synagro Baltimore, Inc. ("SBI"), a wholly owned subsidiary of the Company, has
guaranteed the performance of services under the underlying service agreements
with the City of Baltimore. Waste Management, Inc., under the terms of the Bio
Gro Acquisition purchase agreement, is guaranteeing the performance of services
under the underlying service agreements with First Union National Bank (the
"Trustee"). The Company is required to pay Waste Management, Inc. $500,000 per
year beginning in 2007 until the bonds are fully extinguished or the guarantee
is removed. Neither SBI nor Waste Management has guaranteed payment of debt
service on the Project Revenue Bonds.

Restricted cash represents monies held by the Trustee for the loan agreement
between the Maryland Energy Financing Administration and SBI. The loan, based on
the terms of the related indenture, requires that certain monies be placed in
restricted fund accounts to be used for various designated purposes (i.e., debt
service reserve funds, bond funds, etc.). The debt service reserve fund and the
principal fund has been presented net of long-term debt in the June 30, 2001,
balance sheet. Monies in the funds will remain restricted until such time as the
related loan matures or is paid off, whichever occurs first. SBI was in
compliance with the reserve requirements as of June 30, 2001.

At June 30, 2001, the Project Revenue Bonds were collateralized by property,
plant and equipment with a net book value of approximately $61,159,000 and
restricted cash of approximately $8,047,000, of which approximately $6,830,000
is netted against long-term debt and the difference is shown as restricted cash.

DERIVATIVES AND HEDGING ACTIVITIES

During the three months ended June 30, 2001, the Company's derivative contracts
consisted of interest rate swap agreements and option agreements related to
hedging requirements under the Company's Senior Credit Agreement. The option
agreements did not qualify for hedge accounting under SFAS 133. Changes in the
fair value of these derivatives were recognized in earnings. The Company
determined that its interest rate swap agreements qualified for hedge accounting
and designated those instruments as cash flow hedges of the Company's exposure
to changes in variable interest rates.

On June 25, 2001, the Company entered into a reverse swap on its subordinated
debt, and unwound the previously existing interest rate swap and option
agreements noted above. The balance included in other comprehensive income
included in stockholders' equity is being recognized in future periods' income
over the remaining term of the original agreement. The Company has designated
the reverse swap agreement on its subordinated debt as a fair value hedge of
changes in the value of the underlying debt as a result of changes in the
benchmark interest rate. The liability related to the reverse swap agreement
totaling approximately $7,056,000 is reflected in other long-term liabilities at
June 30, 2001; additionally, a fair value adjustment on the Company's
subordinated debt of approximately $767,000 is reflected in long-term debt at
June 30, 2001. The amount of the ineffectiveness of the reverse swap agreement
recognized in interest expense as of the three months ended June 30, 2001, is
immaterial.

On July 3, 2001, the Company entered into an interest rate cap agreement
establishing a maximum fixed LIBOR rate on $125,000,000 of its floating rate
debt at an interest rate of 6.5 percent in order to meet the hedging
requirements of its Senior Credit Agreement.

INTEREST RATE RISK

Total debt at June 30, 2001, included approximately $176,068,000 in floating
rate debt attributed to borrowings under the Senior Credit Agreement at an
average interest rate of 7.83 percent. As a result, the Company's annual
interest cost in 2001 will fluctuate based on short-term interest rates. The
Company has entered into an interest rate cap agreement at July 3, 2001,
establishing a maximum fixed LIBOR rate on $125,000,000 of its floating rate
debt at an interest rate of 6.50 percent and entered into a reverse swap
agreement at June 25, 2001, on its subordinated debt in order to manage risk and
reduce exposure to interest rate fluctuations as required under the Company's
bank credit facility. The Company has designated its interest rate cap agreement
as an effective cash flow hedge and the reverse swap agreement as an effective
fair value hedge. The impact on annual cash flow of a ten percent change in the
floating rate would be approximately $725,000 after taking into consideration
the hedge agreement.


                                       12
<PAGE>   13
(6) COMMITMENTS AND CONTINGENCIES

LITIGATION

Synagro's business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, Synagro becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. Synagro believes that these matters will not have a
material adverse effect on its results of operations or financial condition.
However, the outcome of any particular proceeding cannot be predicted with
certainty. Synagro is under various regulations to procure licenses and permits
to conduct its operations. These licenses and permits are subject to periodic
renewal without which the Company's operations could be adversely affected.
Also, there can be no assurance that regulatory requirements will not change to
the extent that it would materially affect Synagro's consolidated financial
statements.

The Company is a defendant in a lawsuit in which the plaintiff claims that the
death of an individual was allegedly caused by certain biosolids disposed of by
a wholly owned subsidiary of the Company. The litigation is currently in the
discovery phase concerning causation. The Company plans to file a motion
challenging causation. Trial is currently scheduled for February 2002. The
Company is vigorously defending itself in the litigation. Synagro cannot predict
the ultimate outcome of the matter at this time. The extent of damages, if any,
in this action has not been determined and although the Company is confident in
its position, the ultimate outcome of the foregoing litigation cannot be
determined at this time.

AZURIX CORP.

The Company is involved in two related lawsuits with Azurix Corp. ("Azurix").
These cases arise from disputes between the Company and Azurix. The events
giving rise to the lawsuits began when Synagro and Azurix entered into a
confidentiality agreement, giving Azurix access to confidential and proprietary
information about Synagro for purposes of evaluating potential transactions
between the parties, including an equity investment (through a subscription
agreement) by Azurix in Synagro to provide the equity capital for business
acquisitions and a possible merger between the two companies. Subsequently,
Synagro and Azurix supplemented the confidentiality agreement by mutually
consenting to the terms and conditions of a standstill agreement under which
Azurix agreed, among other things, not to pursue, for a specified period and in
the absence of Synagro's consent, the acquisition of companies that Synagro had
targeted for acquisition. Synagro believes that Azurix breached its obligations
to Synagro under the confidentiality and standstill agreements, as well as the
subscription agreement.

The Company filed a suit on November 1, 1999, (the "Texas Suit") seeking
injunctive relief, actual and exemplary damages, and attorneys' fees against
Azurix for violations of the standstill agreement and certain confidentiality
agreements governing Azurix's ability to use confidential and proprietary
information provided to Azurix by the Company. On June 13, 2001, the Company
filed a Second Amended Petition in which the Company seeks monetary damages,
attorneys' fees and costs of court against Azurix under several fraud theories
and for breaches of the subscription agreement and certain confidentiality and
standstill agreements. Trial in the Texas Suit is scheduled to begin in
September 2001.

Azurix filed a suit on October 29, 1999, (the "Delaware Suit") seeking
injunctive relief, declaratory relief relating to Azurix's obligations under the
standstill agreement and the stock subscription agreement entered into between
the Company and Azurix, and attorneys' and experts' fees. The Company believes
Azurix filed the Delaware Suit in an attempt to have the Company's dispute with
Azurix tried in Delaware (nonjury) rather than in Texas (jury). The Company
subsequently filed a motion with the Delaware Court to dismiss or stay the
Delaware Suit pending the resolution of the Texas Suit, which was granted in
part by a decision of the Delaware Court, on February 3, 2000, to stay the
Delaware Suit. Azurix's efforts to appeal the Delaware Court's ruling have been
denied. On August 4, 2000, Azurix filed a First Amended Answer and Counterclaim
in the Texas Suit asserting allegations of fraud, breaches of contract, and
tortious interference and seeking money damages, exemplary damages, attorneys'
fees and costs of court.

The parties are currently taking and scheduling depositions. The extent of the
damages, if any, in either action has not been determined and although the
Company is confident in its position, the ultimate outcome of the foregoing
litigation cannot be determined at this time.

RIVERSIDE COUNTY

The Company operates a composting facility in Riverside County, California,
under a conditional use permit ("CUP") that expires January 1, 2010. The CUP
conditions allow for a reduction in material intake and the CUP life in the
event of noncompliance with the CUP terms and conditions. On September 15, 1999,
the Company received a preliminary injunction restraining and enjoining the
County

                                       13
<PAGE>   14
of Riverside ("County") from restricting intake of biosolids at the Company's
Riverside composting facility based upon a June 22, 1999, order of the Board of
Supervisors of the County.

The Company has complained that its due process rights were being affected
because the County was improperly administering the odor protocol in the CUP.
Among its complaints, the Company alleges that the County was using untrained
observers to detect odor violations and that those observers were not using
scientific methods to distinguish among different sources of odors and the
levels of odor magnitude. The Court elected not to grant the Company's request
for a preliminary injunction on those issues. Rather, those issues will be
addressed during the underlying lawsuit that is still pending against the County
of Riverside.

The Company has taken the position that certain alleged odor violations asserted
by the County staff during the pending litigation were not appropriate under the
CUP. On certain of those instances, the Company has declined to reduce its
intake of biosolids. The County alleges that the odor "violations," as well as
Company's actions in not reducing intake, could reduce the term of the CUP to
January 2002. The Company disagrees and is challenging the County's position in
the lawsuit. The Company has amended the Complaint to add a claim of violation
of the Company's civil rights under U.S.C. Section 1983 based upon the County's
unfair treatment of the Company.

No trial date has been set at this time and discovery is still ongoing. If the
site is closed, the Company may incur additional costs related to contractual
agreements and site closure. Additionally, goodwill and certain assets may be
impaired. Total goodwill associated with the operations is approximately
$14,033,000 at June 30, 2001. The financial impact associated with a site
closure cannot be reasonably estimated at this time. Although the Company feels
that its case is meritorious, the ultimate outcome cannot be determined at this
time.

OTHER

For the 24 months ended October 31, 2000, the Company insured certain risks,
including auto, general and workers' compensation, with Reliance National
Insurance Company ("Reliance"). On May 29, 2001, a Pennsylvania Court entered an
order appointing the Pennsylvania Insurance Commissioner as Rehabilitator and
directing the Rehabilitator to take immediate possession of Reliance's assets
and business. On June 11, 2001, Reliance's ultimate parent, Reliance Group
Holdings, Inc., filed for bankruptcy under Chapter 11 of the United States
Bankruptcy Code of 1978, as amended. As a result of these developments, Reliance
may not be able to honor all claims against the Company that it insured. It is
not possible to predict the outcome of the litigation that might be subject to
this insurance coverage, nor is it possible at this time to predict the outcome
of Reliance's rehabilitation. At the present time, Reliance continues to honor
its obligations and continues to pay claims. However, management is currently
unable to predict the outcome of this situation.

There are various other lawsuits and claims pending against Synagro that have
arisen in the normal course of Synagro's business and relate mainly to matters
of environmental, personal injury and property damage. The outcome of these
matters is not presently determinable but, in the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the consolidated financial condition or results of operations of Synagro.

(7) COMPREHENSIVE INCOME

The Company's comprehensive income for the three and six months ended June 30,
2001 and 2000, is summarized as follows:

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                                           2001           2000           2001             2000
                                                                        -----------    -----------    -----------      ------------
<S>                                                                     <C>            <C>            <C>              <C>
     Net income (loss) applicable to common stock ................      $ 3,442,668    $(2,138,121)   $  (529,993)     $(26,249,770)
     Other comprehensive income (loss)
         Cumulative effect of change in accounting for derivatives               --             --     (2,058,208)               --
         Change in fair value of derivatives .....................       (1,030,170)            --     (2,200,696)               --
         Reclassification adjustment to earnings .................          202,760             --        125,946                --
                                                                        -----------    -----------    -----------      ------------
            Subtotal .............................................         (827,410)            --     (4,132,958)               --
                                                                        -----------    -----------    -----------      ------------
     Comprehensive income (loss) .................................      $ 2,615,258    $(2,138,121)   $(4,662,951)     $(26,249,770)
                                                                        ===========    ===========    ===========      ============
</TABLE>


(8) EARNINGS (LOSS) PER COMMON SHARE

Basic earnings per share ("EPS") are computed by dividing net income applicable
to common stock by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed by dividing net income before preferred
stock dividends by the total of the weighted average number of common shares
outstanding for the period, the weighted average number of shares of


                                       14
<PAGE>   15
common stock that would be issued assuming conversion of the Company's preferred
stock, and other common stock equivalents for options and warrants outstanding
determined using the treasury stock method. Basic and diluted EPS are the same
for the three and six months ended June 30, 2000, and the six months ended June
30, 2001, because diluted earnings per share was less dilutive than basic
earnings per share ("antidilutive"). The shares excluded from diluted EPS
assuming conversion of the Company's preferred stock and common stock
equivalents for options and warrants outstanding determined using the treasury
stock method for the three and six months ended June 30, 2000, and the six
months ended June 30, 2001, were approximately 10,688,604, 11,149,006, and
29,643,581, respectively. The adjusted number of shares for diluted EPS for the
three months ended June 30, 2001, includes approximately 30,006,356 shares, of
which approximately 29,981,825 shares relate to preferred stock and
approximately 24,531 shares relate to stock options and warrants.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated
historical and financial statements of the Company and related notes thereto
included elsewhere in this Form 10-Q and the Annual Report on Form 10-K, as
amended for the year ended December 31, 2000. This discussion contains
forward-looking statements regarding the business and industry of the Company
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on the current plans and expectations of the Company
and involve risks and uncertainties that could cause actual future activities
and results of operations to be materially different from those set forth in the
forward-looking statements.

The Company is a national provider of residuals management services. The Company
currently performs services for municipalities, local agencies and private
industry and has historically engaged in acquisitions as part of its growth
strategy. The timing and magnitude of acquisitions and assimilation costs may
materially affect future operating results. Accordingly, the operating results
for any period may not necessarily be indicative of the results that may be
achieved for any subsequent period.

HISTORICAL RESULTS AND OPERATIONS

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED JUNE 30,           SIX MONTHS ENDED JUNE 30,
                                                                   2001             2000               2001               2000
                                                              -------------     -------------      -------------      ------------
<S>                                                           <C>               <C>                <C>                <C>
Sales ...................................................     $  65,800,156     $  27,768,428      $ 124,595,298      $ 46,434,854
Cost of services ........................................        47,340,024        19,510,737         92,915,735        34,602,960
                                                              -------------     -------------      -------------      ------------
Gross profit ............................................        18,460,132         8,257,691         31,679,563        11,831,894

Selling, general and administrative expenses ............         4,977,487         2,537,462         10,080,031         5,017,382
Amortization of goodwill ................................         1,150,105           815,621          2,282,753         1,438,135
                                                              -------------     -------------      -------------      ------------
   Income from operations ...............................        12,332,540         4,904,608         19,316,779         5,376,377
                                                              -------------     -------------      -------------      ------------
Other (income) expense:
   Other income, net ....................................           (55,619)           17,862            (61,889)           13,604
   Interest expense, net ................................         7,102,351         2,927,622         14,461,915         5,017,530
                                                              -------------     -------------      -------------      ------------
      Total other expenses, net .........................         7,046,732         2,945,484         14,400,026         5,031,134
                                                              -------------     -------------      -------------      ------------
Income before provision for income taxes ................         5,285,808         1,959,124          4,916,753           345,243
     Provision for income taxes .........................                --                --                 --                --
                                                              -------------     -------------      -------------      ------------
Net income before preferred stock dividends,
   noncash beneficial conversion charge, and
   cumulative effect of change in accounting for
   derivatives ..........................................         5,285,808         1,959,124          4,916,753           345,243
Preferred stock dividends ...............................         1,843,140           591,708          3,586,061           951,134
Noncash beneficial conversion charge ....................                --         3,505,537                 --        25,643,879
Cumulative effect of change in accounting for derivatives                --                --          1,860,685                --
                                                              -------------     -------------      -------------      ------------
Net income (loss) applicable to common stock ............     $   3,442,668     $  (2,138,121)     $    (529,993)     $(26,249,770)
                                                              =============     =============      =============      ============
</TABLE>


For the three months ended June 30, 2001, net sales were approximately
$65,800,000 compared to approximately $27,768,000 for the three months ended
June 30, 2000, representing an increase of approximately $38,032,000, or 137
percent. The increase relates primarily to the full-year impact of the 2000
Acquisitions of approximately $36,345,000, or 131 percent, with the remaining
increase of approximately $1,687,000, or 6 percent, resulting from internal
growth. For the six months ended June 30, 2001, net sales were approximately
$124,595,000 compared to approximately $46,435,000 for the six months ended June
30, 2000, representing an increase of approximately $78,160,000, or 168 percent.
The increase relates primarily to the full-year impact of the 2000 Acquisitions
of approximately $75,837,000, or 163 percent, with the remaining increase
resulting from internal growth.



                                       15
<PAGE>   16
Cost of services and gross profit for the three months ended June 30, 2001, were
approximately $47,340,000 and approximately $18,460,000, respectively, compared
with approximately $19,511,000 and approximately $8,258,000, respectively, for
the three months ended June 30, 2000, resulting in gross profit as a percentage
of sales of approximately 28 percent in 2001 compared to approximately 30
percent in 2000. The increase in gross profit for the three months ended June
30, 2001, relates to the 2000 Acquisitions of approximately $10,124,000 and
increased profits relating to additional volumes. Cost of services and gross
profit for the six months ended June 30, 2001, were approximately $92,916,000
and approximately $31,680,000, respectively, compared with approximately
$34,603,000 and approximately $11,832,000, respectively, for the six months
ended June 30, 2000, resulting in gross profit as a percentage of sales of
approximately 25 percent in 2001 and 2000. The increase in gross profit for the
six months ended June 30, 2001, relates to the 2000 Acquisitions of
approximately $19,811,000 and increased profits relating to additional volumes.

Selling, general and administrative expenses were approximately $4,977,000 for
the three months ended June 30, 2001, compared to approximately $2,537,000 for
the three months ended June 30, 2000, representing an increase of approximately
$2,440,000. The increase for the three months ended June 30, 2001, relates
primarily to the full-year impact of the 2000 Acquisitions. Selling, general and
administrative expenses were approximately $10,080,000 for the six months ended
June 30, 2001, compared to approximately $5,017,000 for the six months ended
June 30, 2000, representing an increase of approximately $5,063,000. The
increase for the six months ended June 30, 2001, relates primarily to the
full-year impact of the 2000 Acquisitions. Selling, general and administrative
expenses as a percent of sales decreased from 9.1 percent of sales for the three
months ended June 30, 2000, to 7.6 percent of sales for the three months ended
June 30, 2001, and from 10.8 percent of sales for the six months ended June 30,
2000, to 8.1 percent for the six months ended June 30, 2001. These decreases are
due primarily to cost reductions from the integration of certain acquired
operations and the leverage of certain fixed administrative costs over
significantly higher sales.

Amortization of goodwill was approximately $1,150,000 for the three months ended
June 30, 2001, and $2,283,000 for the six months ended June 30, 2001, compared
to approximately $816,000 for the three months ended June 30, 2000, and
$1,438,000 for the six months ended June 30, 2000. The increases relate to
additional goodwill resulting from the 2000 Acquisitions.

Other expense, net was approximately $7,047,000 for the three months ended June
30, 2001, compared to approximately $2,945,000 for the three months ended June
30, 2000, representing an increase in expense of approximately $4,102,000. Other
expense, net for the six months ended June 30, 2001, was approximately
$14,400,000 compared to approximately $5,031,134 for the six months ended June
30, 2000. The increase relates primarily to interest expense, which increased
due to additional debt incurred to fund the 2000 Acquisitions.

As a result of the foregoing, net income before noncash beneficial conversion
charge and change in accounting for derivatives of approximately $3,443,000, or
$0.18 per share, was reported for the three months ended June 30, 2001, compared
to a net income before noncash beneficial conversion charge and change in
accounting for derivatives of approximately $1,367,000, or $0.07 per share, for
the three months ended June 30, 2000. Net income before noncash beneficial
conversion charge and change in accounting for derivatives of approximately
$1,331,000, or $0.07 per share, was reported for the six months ended June 30,
2001, compared to net loss before noncash beneficial conversion charge and
change in accounting for derivatives of approximately $(606,000), or $(0.03) per
share, for the six months ended June 30, 2000.

During the three months ended June 30, 2001, and the six-month period ending
June 30, 2001, preferred stock dividends were approximately $1,843,000 and
$3,586,000, respectively, compared to approximately $592,000 and $951,000 for
the three months ended June 30, 2000, and the six months ended June 30, 2000,
respectively. Additionally, for the three and six months ended June 30, 2000,
noncash beneficial conversion charges of approximately $3,506,000 and
$25,644,000, respectively, were recognized in connection with the issuance of
preferred stock. See Note (3) herein for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations principally through the
sale of equity and debt securities, a credit facility and through funds provided
by operating activities.

The Company purchased capital assets during the six months ended June 30, 2001,
in the amount of approximately $6,098,000 and sold capital assets with proceeds
totaling approximately $266,000.

As of June 30, 2001, the Company had current maturities on long-term debt of
approximately $13,929,000, as compared to approximately $11,450,000 at December
31, 2000. The Company's total long-term debt was approximately $272,114,000 at
June 30, 2001, reflecting a

                                       16
<PAGE>   17
decrease of approximately $12,819,000 over December 31, 2000. This decrease is
due primarily to principal payments made on the Company's Senior Credit
Agreement during the six months ended June 30, 2001.

On January 27, 2000, the Company entered into a $110 million amended and
restated Senior Credit Agreement (the "Senior Credit Agreement") by and among
the Company, Bank of America, N.A., and certain other lenders to fund working
capital for acquisitions, to refinance existing debt, to fund capital
expenditures and other general corporate purposes. The Senior Credit Agreement
bears interest at LIBOR or prime plus a margin based on a pricing schedule as
set out in the Senior Credit Agreement. The Senior Credit Agreement was
subsequently syndicated on March 15, 2000, to a banking group, and the capacity
was increased to $120 million. The Senior Credit Agreement was amended and
resyndicated on August 14, 2000, to a banking group, and the capacity was
increased to $230 million. The loan commitments under the Senior Credit
Agreement are as follows:

         (i.)     Revolving Loans up to $30,000,000 outstanding at any one time;

         (ii.)    Term A Loans (which, once repaid, may not be reborrowed) of
                  $50,000,000;

         (iii.)   Term B Loans (which, once repaid, may not be reborrowed) of
                  $100,000,000;

         (iv.)    Acquisition Loans up to $50,000,000 outstanding at any one
                  time available on a revolving basis prior to August 14, 2001,
                  provided that certain approvals are obtained and certain
                  financial ratios are met; and

         (v.)     Letters of credit issuable by the Company up to $20,000,000 as
                  a subset of the Revolving Loans. At July 25, 2001, the Company
                  had approximately $6,976,000 letters of credit outstanding.

The amounts borrowed under the Senior Credit Agreement are subject to repayment
as follows:

Period Ending December 31,

<TABLE>
<CAPTION>
                  REVOLVING          TERM A             TERM B          ACQUISITION
                    LOANS            LOANS              LOANS              LOANS
                   ------            ------             ------             ------
<S>               <C>                <C>                <C>             <C>
2000 ........          --              5.00%               .50%                 0%
2001 ........          --             15.00%              1.00%                 0%
2002 ........          --             22.50%              1.00%              5.00%
2003 ........          --             17.50%              1.00%              6.67%
2004 ........          --             20.00%              1.00%             11.67%
2005 ........      100.00%            20.00%              1.00%             76.66%
2006 ........          --                --              94.50%                --
                   ------            ------             ------             ------
                   100.00%           100.00%            100.00%            100.00%
                   ======            ======             ======             ======
</TABLE>

The Senior Credit Agreement includes mandatory repayment provisions related to
excess cash flows, proceeds from certain asset sales, debt issuances and equity
issuances, all as defined in the Senior Credit Agreement. These mandatory
repayment provisions may also reduce the available commitment for Revolving
Loans and Acquisition Loans. The Senior Credit Agreement contains standard
covenants including compliance with laws, limitations on capital expenditures,
restrictions on dividend payments, limitations on mergers and compliance with
certain financial covenants. The Company believes that it is in compliance with
those covenants as of June 30, 2001. The Senior Credit Agreement is secured by
all the assets of the Company and expires on July 27, 2006. As of June 30, 2001,
the Company has borrowed approximately $176,068,000 ($42,597,000 of Term A
Loans, $93,714,000 of Term B Loans, and $39,757,000 of Acquisition Loans), which
was primarily used to refinance existing debt, partially fund the 2000
Acquisitions, and to retire bonds assumed in the RESTEC acquisition. As of June
30, 2001, the Company has approximately $33,200,000 of unused borrowings under
the Senior Credit Agreement. The Company's Senior Credit Agreement contains
various financial covenants, including a senior debt-to-cash flow ratio, as
defined, determined at the end of each quarter. As of June 30, 2001, the maximum
senior debt that could have been outstanding while remaining in compliance with
the senior debt-to-cash flow ratio was approximately $181,900,000. As of July
25, 2001, the Company has borrowed approximately $179,268,000 ($42,597,000 of
Term A Loans, $93,714,000 of Term B Loans, $39,757,00 of Acquisition Loans, and
$3,200,000 of Revolving Loans) with approximately $30,000,000 of unused
borrowings remaining under the Senior Credit Agreement.



                                       17
<PAGE>   18
On January 27, 2000, the Company entered into an agreement with GTCR Capital
providing up to $125 million in subordinated debt financing to fund acquisitions
and for certain other uses, in each case as approved by the Board of Directors
of the Company and GTCR Capital. The agreement was amended on August 14, 2000,
allowing, among other things, for GTCR Capital to syndicate a portion of the
commitment. The loans bear interest at an annual rate of 12 percent paid
quarterly and provide warrants that are convertible into Preferred Stock at $.01
per warrant. The unpaid principal plus unpaid and accrued interest must be paid
in full by January 27, 2008. The agreement contains general and financial
covenants. As of June 30, 2001, and July 25, 2001, the Company has borrowed
approximately $52,760,000 of indebtedness under the terms of the agreement,
which was used to partially fund the 2000 Acquisitions. Warrants to acquire
9,225.839 shares of Series C, D, and E Preferred Stock were issued in connection
with these borrowings. These warrants were immediately exercised.

During August 2000, the Company assumed certain revenue bonds in connection with
the Bio Gro Acquisition. The revenue bonds (the "Revenue Bonds") and the term
revenue bonds (the "Term Revenue Bonds") (collectively, the "Project Revenue
Bonds") were issued in 1996 by the Maryland Energy Financing Administration
pursuant to the Maryland Energy Financing Act. The proceeds of the Project
Revenue Bonds were loaned to the Company pursuant to a June 1996 financing
agreement for the purposes of financing the costs of the construction of the
Company's thermal operations located in Baltimore County, Maryland, at the site
of Baltimore's Back River Wastewater Treatment Plant and in the City of
Baltimore, Maryland, at the site of Baltimore's Patapsco Wastewater Treatment
Plant. Both facilities were in operation prior to 1998.

The Project Revenue Bonds are primarily secured by the pledge of revenues and
assets related to the Company's Back River and Patapsco thermal facilities. The
underlying service contracts between the Company and Baltimore obligated the
Company to design, construct and operate the thermal facilities and obligated
Baltimore to deliver biosolids for processing at the thermal facilities. The
Company and Baltimore have agreed that Baltimore will deposit all payments made
by Baltimore to the Company under the service contracts directly with a trustee
for the purpose of maintaining a reserve fund to service debt requirements.

At June 30, 2001, the Project Revenue Bonds were collateralized by property,
plant and equipment with a net book value of approximately $61,159,000 and
restricted cash of approximately $8,047,000.

The Project Revenue Bonds can be redeemed at the option of the Company at any
time on or after December 1, 2006, subject to redemption prices specified in the
financing agreement. The Project Revenue Bonds can be redeemed at the option of
the Company under certain extraordinary conditions, as defined in the financing
agreement. Additionally, the Term Revenue Bonds are subject to mandatory sinking
fund requirements prior to final maturity, beginning on December 1, 2006.

Synagro Baltimore, Inc. ("SBI"), a wholly owned subsidiary of the Company, has
guaranteed the performance of services under the underlying service agreements
with the City of Baltimore. Waste Management, Inc., under the terms of the Bio
Gro Acquisition purchase agreement, is guaranteeing the performance of services
under the underlying service agreements with First Union National Bank (the
"Trustee"). The Company is required to pay Waste Management, Inc. $500,000 per
year beginning in 2007 until the bonds are fully extinguished or the guarantee
is removed. Neither SBI nor Waste Management has guaranteed payment of debt
service on the Project Revenue Bonds.

Restricted cash represents monies held by the Trustee for the loan agreement
between the Maryland Energy Financing Administration and SBI. The loan, based on
the terms of the related indenture, requires that certain monies be placed in
restricted fund accounts to be used for various designated purposes (i.e., debt
service reserve funds, bond funds, etc.). The debt service reserve fund has been
presented net of debt in the accompanying balance sheets. Monies in the funds
will remain restricted until such time as the related loan matures or is paid
off, whichever occurs first. SBI was in compliance with the reserve requirements
as of June 30, 2001.

At June 30, 2001, the Company had working capital of approximately $5,722,000.
Accounts receivable, notes receivable, and prepaid expenses and other currents
assets increased by approximately $1,789,000 during the six months ended June
30, 2001, primarily due to reduced receivables. The Company evaluates the
collectibility of its receivables based on a specific account-by-account review,
and has an allowance of approximately $2,156,000 at June 30, 2001. Accounts
payable and accrued expenses decreased by approximately $910,000 during the six
months ended June 30, 2001. The Company believes its cash requirements for 2001
can be met with existing cash, cash flows from operations and its borrowing
availability under current debt agreements.

The Company has undergone significant restructuring throughout the last three
years, including changes in senior management and refinancing of its
indebtedness. As a result of these changes, management believes the Company is
better positioned to respond to opportunities in the residuals market.



                                       18
<PAGE>   19
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company utilizes financial instruments, which inherently have some degree of
market risk due to interest rate fluctuations. Management is actively involved
in monitoring exposure to market risk and continues to develop and utilize
appropriate risk management techniques. The Company is not exposed to any other
significant market risks, including commodity price risk or foreign currency
exchange risk, from the use of derivative financial instruments. Management does
not currently use derivative financial instruments for trading or to speculate
on changes in commodity prices or foreign currency exchange rates.

INTEREST RATE RISK

Total debt at June 30, 2001, and July 25, 2001, included approximately
$176,068,000 and $179,268,000, respectively, in floating rate debt attributed to
borrowings under the Senior Credit Agreement at an average interest rate of 7.83
percent and 7.85 percent, respectively. As a result, the Company's annual
interest cost in 2001 will fluctuate based on short-term interest rates. The
Company has entered into an interest rate cap agreement at July 3, 2001,
establishing a maximum fixed LIBOR rate on $125,000,000 of its floating rate
debt at an interest rate of 6.50 percent and entered into a reverse swap
agreement at June 25, 2001, on its subordinated debt in order to manage risk and
reduce exposure to interest rate fluctuations as required under the Company's
Senior Credit Agreement. The Company has designated its interest rate cap
agreement as an effective cash flow hedge and the reverse swap agreement as an
effective fair value hedge. The impact on annual cash flow of a ten percent
change in the floating rate would be approximately $725,000 after taking into
consideration the hedge agreements.

At June 30, 2001, the Company's fixed rate debt had a book value and fair market
value of approximately $102,876,000.



                                       19
<PAGE>   20
                           PART II - OTHER INFORMATION

ITEM 1.

LITIGATION

Synagro's business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, Synagro becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. Synagro believes that these matters will not have a
material adverse effect on its results of operations or financial condition.
However, the outcome of any particular proceeding cannot be predicted with
certainty. Synagro is under various regulations to procure licenses and permits
to conduct its operations. These licenses and permits are subject to periodic
renewal without which the Company's operations could be adversely affected.
Also, there can be no assurance that regulatory requirements will not change to
the extent that it would materially affect Synagro's consolidated financial
statements.

The Company is a defendant in a lawsuit in which the plaintiff claims that the
death of an individual was allegedly caused by certain biosolids disposed of by
a wholly owned subsidiary of the Company. The litigation is currently in the
discovery phase concerning causation. The Company plans to file a motion
challenging causation. Trial is currently scheduled for February 2002. The
Company is vigorously defending itself in the litigation. Synagro cannot predict
the ultimate outcome of the matter at this time. The extent of damages, if any,
in this action has not been determined and although the Company is confident in
its position, the ultimate outcome of the foregoing litigation cannot be
determined at this time.

AZURIX CORP.

The Company is involved in two related lawsuits with Azurix Corp. ("Azurix").
These cases arise from disputes between the Company and Azurix. The events
giving rise to the lawsuits began when Synagro and Azurix entered into a
confidentiality agreement, giving Azurix access to confidential and proprietary
information about Synagro for purposes of evaluating potential transactions
between the parties, including an equity investment (through a subscription
agreement) by Azurix in Synagro to provide the equity capital for business
acquisitions and a possible merger between the two companies. Subsequently,
Synagro and Azurix supplemented the confidentiality agreement by mutually
consenting to the terms and conditions of a standstill agreement under which
Azurix agreed, among other things, not to pursue, for a specified period and in
the absence of Synagro's consent, the acquisition of companies that Synagro had
targeted for acquisition. Synagro believes that Azurix breached its obligations
to Synagro under the confidentiality and standstill agreements, as well as the
subscription agreement.

The Company filed a suit on November 1, 1999, (the "Texas Suit") seeking
injunctive relief, actual and exemplary damages, and attorneys' fees against
Azurix for violations of the standstill agreement and certain confidentiality
agreements governing Azurix's ability to use confidential and proprietary
information provided to Azurix by the Company. On June 13, 2001, the Company
filed a Second Amended Petition in which the Company seeks monetary damages,
attorneys' fees and costs of court against Azurix under several fraud theories
and for breaches of the subscription agreement and certain confidentiality and
standstill agreements. Trial in the Texas Suit is scheduled to begin in
September 2001.

Azurix filed a suit on October 29, 1999, (the "Delaware Suit") seeking
injunctive relief, declaratory relief relating to Azurix's obligations under the
standstill agreement and the stock subscription agreement entered into between
the Company and Azurix, and attorneys' and experts' fees. The Company believes
Azurix filed the Delaware Suit in an attempt to have the Company's dispute with
Azurix tried in Delaware (nonjury) rather than in Texas (jury). The Company
subsequently filed a motion with the Delaware Court to dismiss or stay the
Delaware Suit pending the resolution of the Texas Suit, which was granted in
part by a decision of the Delaware Court, on February 3, 2000, to stay the
Delaware Suit. Azurix's efforts to appeal the Delaware Court's ruling have been
denied. On August 4, 2000, Azurix filed a First Amended Answer and Counterclaim
in the Texas Suit asserting allegations of fraud, breaches of contract, and
tortious interference and seeking money damages, exemplary damages, attorneys'
fees and costs of court.

The parties are currently taking and scheduling depositions. The extent of the
damages, if any, in either action has not been determined and although the
Company is confident in its position, the ultimate outcome of the foregoing
litigation cannot be determined at this time.

RIVERSIDE COUNTY

The Company operates a composting facility in Riverside County, California,
under a conditional use permit ("CUP") that expires January 1, 2010. The CUP
conditions allow for a reduction in material intake and the CUP life in the
event of noncompliance with the

                                       20
<PAGE>   21
CUP terms and conditions. On September 15, 1999, the Company received a
preliminary injunction restraining and enjoining the County of Riverside
("County") from restricting intake of biosolids at the Company's Riverside
composting facility based upon a June 22, 1999, order of the Board of
Supervisors of the County.

The Company has complained that its due process rights were being affected
because the County was improperly administering the odor protocol in the CUP.
Among its complaints, the Company alleges that the County was using untrained
observers to detect odor violations and that those observers were not using
scientific methods to distinguish among different sources of odors and the
levels of odor magnitude. The Court elected not to grant the Company's request
for a preliminary injunction on those issues. Rather, those issues will be
addressed during the underlying lawsuit that is still pending against the County
of Riverside.

The Company has taken the position that certain alleged odor violations asserted
by the County staff during the pending litigation were not appropriate under the
CUP. On certain of those instances, the Company has declined to reduce its
intake of biosolids. The County alleges that the odor "violations," as well as
Company's actions in not reducing intake, could reduce the term of the CUP to
January 2002. The Company disagrees and is challenging the County's position in
the lawsuit. The Company has amended the Complaint to add a claim of violation
of the Company's civil rights under U.S.C. Section 1983 based upon the County's
unfair treatment of the Company.

No trial date has been set at this time and discovery is still ongoing. If the
site is closed, the Company may incur additional costs related to contractual
agreements and site closure. Additionally, goodwill and certain assets may be
impaired. Total goodwill associated with the operations is approximately
$14,032,000 at June 30, 2001. The financial impact associated with a site
closure cannot be reasonably estimated at this time. Although the Company feels
that its case is meritorious, the ultimate outcome cannot be determined at this
time.

OTHER

For the 24 months ended October 31, 2000, the Company insured certain risks,
including auto, general and workers' compensation, with Reliance National
Insurance Company ("Reliance"). On May 29, 2001, a Pennsylvania Court entered an
order appointing the Pennsylvania Insurance Commissioner as Rehabilitator and
directing the Rehabilitator to take immediate possession of Reliance's assets
and business. On June 11, 2001, Reliance's ultimate parent, Reliance Group
Holdings, Inc., filed for bankruptcy under Chapter 11 of the United States
Bankruptcy Code of 1978, as amended. As a result of these developments, Reliance
may not be able to honor all claims against the Company that it insured. It is
not possible to predict the outcome of the litigation that might be subject to
this insurance coverage, nor is it possible at this time to predict the outcome
of Reliance's rehabilitation. At the present time, Reliance continues to honor
its obligations and continues to pay claims. However, management is currently
unable to predict the outcome of this situation.

There are various other lawsuits and claims pending against Synagro that have
arisen in the normal course of Synagro's business and relate mainly to matters
of environmental, personal injury and property damage. The outcome of these
matters is not presently determinable but, in the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the consolidated financial condition or results of operations of Synagro. It is
reasonably possible, however, that a change in Synagro's estimate of its
probable liability with respect to these matters could occur.

ITEM 6.  FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K

(A)  Exhibit Index



                                       21
<PAGE>   22
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

    SYNAGRO TECHNOLOGIES, INC.

    Date:  August 13, 2001                  By:      /s/ Ross M. Patten
                                                --------------------------------
                                                     Chief Executive Officer

    Date:  August 13, 2001                  By:      /s/ J. Paul Withrow
                                                --------------------------------
                                                     Chief Financial Officer



                                       22
<PAGE>   23
                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT                                            DESCRIPTION OF EXHIBIT
-------                                            ----------------------

<S>              <C>
3.1              Restated Certificate of Incorporation of Synagro Technologies, Inc. (the "Company") dated August
                 16, 1996. (Exhibit 3.1 to the Company's Post-Effective Amendment No. 1 to Registration Statement
                 No. 33-95028, dated October 25, 1996, is incorporated herein by reference.)

3.2              Bylaws of the Company dated August 5, 1996. (Exhibit 3.2 to the Company's Post-Effective
                 Amendment No. 1 to Registration Statement No. 33-95028, dated October 25, 1996, is incorporated
                 herein by reference.)

4.1              Specimen Common Stock Certificate of the Company. (Exhibit 4.1 to the Company's Registration
                 Statement on Form 10, dated December 29, 1992, is incorporated herein by reference.)

4.2              Specimen Warrant Certificate of the Company. (Exhibit 4.2 to the Company's Registration
                 Statement on Form S-1 (No. 33-95028), dated July 27, 1995, and as amended, is incorporated
                 herein by reference.)

4.3              Rights Agreement, dated as of December 20, 1996, between the Company and Intercontinental
                 Registrar & Transfer Agency, Inc., as Rights Agent, which includes as Exhibit A thereto the
                 Synagro Technologies, Inc. Statement of Designations, Preferences, Limitations and Relative
                 Rights of its Series A Junior Participating Preferred Stock, and as Exhibit C thereto the Form of
                 Rights Certificate. (Incorporated by reference to Exhibit No. 4.1 to Registrant's Registration
                 Statement on Form 8-A dated December 27, 1996.)

4.4              Certificate of Designation, Preferences, Rights and Limitations of Series B Preferred Stock of
                 Synagro Technologies, Inc. (Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year
                 ended 1997, is incorporated herein by reference.)

4.5              Registration Rights Agreement dated as of March 31, 1998, among the Company, Environmental
                 Opportunities Fund, L.P., Environmental Fund (Cayman), L.P. and other purchasers of the Company's
                 Series B Preferred Stock as listed on Exhibit A thereto. (Exhibit 4.5 to the Company's Annual
                 Report on Form 10-K for the year ended 1997, is incorporated herein by reference.)

4.6              Specimen Series B Preferred Stock Certificate. (Exhibit 4.6 to the Company's Annual Report on
                 Form 10-K for the year ended 1997, is incorporated herein by reference.)

4.7              Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of
                 Synagro Technologies, Inc. (Exhibit 2.4 to the Company's Current Report on Form 8-K, dated
                 February 17, 2000, is herein incorporated by reference.)

4.8              Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock of
                 Synagro Technologies, Inc. (Exhibit 2.5 to the Company's Current Report on Form 8-K, dated
                 February 17, 2000, is herein incorporated by reference.)

4.9              Certificate of Designations, Preferences and Rights of Series E Convertible Preferred Stock of
                 Synagro Technologies, Inc. (Exhibit 2.3 to the Company's Current Report on Form 8-K, dated June
                 30, 2000, is herein incorporated by reference.)

4.10             Amended and Restated Warrant Agreement, dated August 14, 2000, by and between Synagro
                 Technologies, Inc. and GTCR Capital Partners, L.P. (Exhibit 2.6 to the Company's Current Report
                 on Form 8-K, dated August 28, 2000, is herein incorporated by reference.)

4.11             TCW/Crescent Warrant Agreement dated August 14, 2000, by and among Synagro Technologies, Inc.
                 and TCW/Crescent Mezzanine partners II, L.P., TCW/Crescent Mezzanine Trust II, TCW Leveraged
                 Income Trust, L.P., TCW Leveraged Income Trust II, L.P., and TCW Leveraged Income Trust IV, L.P.
                 (Exhibit 2.5 to the Company's Current Report on Form 8-K, dated August 28, 2000, is herein
                 incorporated by reference.)
</TABLE>



                                       23
<PAGE>   24
<TABLE>

<S>              <C>
4.12             Form of Stock Purchase Warrant (Exhibit 2.7 to the Company's Current Report on Form 8-K, dated
                 August 28, 2000, is herein incorporated by reference.)

4.13             Amended and Restated Registration Agreement dated August 14, 2000, by and between Synagro
                 Technologies, Inc., GTCR Fund VII. L.P., GTCR Co-Invest, L.P., GTCR Capital Partners, L.P.,
                 TCW/Crescent Mezzanine Partners II, L.P., TCW/Crescent Mezzanine Trust II, TCW Leveraged Income
                 Trust, L.P., TCW Leveraged Income Trust II, L.P., and TCW Leverage Income Trust IV, L.P.
                 (Exhibit 2.8 to the Company's Current Report on Form 8-K, dated August 28, 2000, is herein
                 incorporated by reference.)

4.14             Stockholders Agreement dated August 14, 2000, by and between Synagro Technologies Inc., GTCR
                 Fund VII, L.P., GTCR Co-Invest, L.P., GTCR Capital Partners, L.P., TCW/Crescent Mezzanine
                 Partners II, L.P., TCW/Crescent Mezzanine Trust II, TCW Leveraged Income Trust, L.P., TCW
                 Leveraged Income Trust II, L.P., and TCW Leveraged Income Trust IV, L.P. (Exhibit 2.9 to the
                 Company's Current Report on Form 8-K, dated August 28, 2000, is herein incorporated by
                 reference.)

4.15             Form of TCW/Crescent Warrant (Exhibit 2.10 to the Company's Current Report on Form 8-K, dated
                 August 28, 2000, is herein incorporated by reference.)

4.16             Form of GTCR Warrant (Exhibit 2.11 to the Company's Current Report on Form 8-K, dated August 28,
                 2000, is herein incorporated by reference.)

10.1             Synagro Technologies, Inc. Subscription Agreement, dated as of March 31, 1998, among the
                 Company, Environmental Opportunities Fund, L.P., Environment Opportunities Fund (Cayman), L.P.
                 and other purchasers of the Company's Series B Preferred Stock as listed on Exhibit A thereto.
                 (Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended 1997, is
                 incorporated herein by reference.)

10.2             Form of Indemnification Agreement. (Appendix F to the Company's Proxy Statement on Schedule 14A
                 for Annual Meeting of Stockholders, dated May 9, 1996, is incorporated herein by reference.)

10.3             Amended and Restated 1993 Stock Option Plan dated August 5, 1996. (Exhibit 4.1 to the Company's
                 Registration Statement on Form S-8 (No. 333-64999), dated September 30, 1998, is incorporated
                 herein by reference.)

10.4             Amended and Restated Credit Agreement dated January 27, 2000, by and among Synagro Technologies,
                 Inc., Bank of America, N.A., Canadian Imperial Bank of Commerce, and certain other lenders.
                 (Exhibit 2.4 to the Company's Current Report on Form 8-K, dated August 28, 2000, is herein
                 incorporated by reference.)

10.5             Agreement and Plan of Merger dated October 20, 1999, by and among Synagro Technologies, Inc.,
                 RESTEC Acquisition Corp., New England Treatment Company Inc., Paul A. Toretta, Frances A.
                 Guerrera, Frances A. Guerrera, as executrix of the Estate of Richard J. Guerrera, and Frances A.
                 Guerrera and Robert Dionne, as Co-Trustee of the Richard J. Guerrera Revocable Trust under
                 Agreement dated November 2, 1998, as amended by that certain Letter Amendment dated January 7,
                 2000, and that certain Second Amendment to Agreement and Plan of Merger dated January 26, 2000.
                 (Exhibit 2.1, 2.3 and 2.4 to the Company's Current Report on Form 8-K, dated February 11, 2000,
                 are herein incorporated by reference.)

10.6             Purchase and Sale Agreement dated October 20, 1999, by and among Synagro Technologies, Inc.,
                 Paul A. Toretta, Eileen Toretta, as Trustee of the Paul A. Toretta 1998 Grant, Frances A.
                 Guerrera, Frances A. Guerrera, as executrix of the Estate of Richard J. Guerrera, and Frances A.
                 Guerrera and Robert Dionne, as Co-Trustees of the Richard J. Guerrera Revocable Trust under
                 Agreement dated November 2, 1998, as amended by that certain Letter Amendment dated January 7,
                 2000, and that certain Second Amendment to Purchase and Sale Agreement and dated January 26,
                 2000. (Exhibit 2.2, 2.3 and 2.5 to the Company's Current Report on Form 8-K, dated February 11,
                 2000, are herein incorporated by reference.)

10.7             Stock Purchase Agreement dated October 20, 1999, by and among Synagro Technologies, Inc.,
                 Christopher J. Schrader and Kathleen Schrader. (Exhibit 2.1 to the Company's Current Report on
                 Form 8-K, dated February 22, 2000, is herein incorporated by reference.)
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10.8             Asset Purchase Agreement dated October 26, 1999, by and between Synagro Technologies, Inc. and
                 Whiteford Construction Co., Inc.  (Exhibit 2.1 to the Company's Current Report on Form 8-K,
                 dated April 10, 2000, is herein incorporated by reference.)

10.9             Amendment No. 1 to the Asset Purchase Agreement dated March 24, 2000, by and between Synagro
                 Technologies, Inc. and Whiteford Construction Co., Inc. (Exhibit 2.2 to the Company's Current
                 Report on Form 8-K, dated April 10, 2000, is herein incorporated by reference.)

10.10            Stock Purchase Agreement dated October 26, 1999, by and among Synagro Technologies, Inc., Gerald
                 L. Rehbein and Gordon W. Rehbein. (Exhibit 2.3 to the Company's Current Report on Form 8-K,
                 dated April 10, 2000, is herein incorporated by reference.)

10.11            Amendment No. 2 to the Stock Purchase Agreement dated March 27, 2000, by and among Synagro
                 Technologies, Inc., Gerald L. Rehbein and Gordon W. Rehbein. (Exhibit 2.5 to the Company's
                 Current Report on Form 8-K, dated April 10, 2000, is herein incorporated by reference.)

10.12            Earnout Agreement dated March 27, 2000, by and among Synagro Technologies, Inc., Gerald L.
                 Rehbein and Gordon W. Rehbein. (Exhibit 2.6 to the Company's Current Report on Form 8-K, dated
                 April 10, 2000, is herein incorporated by reference.)

10.13            Stock Purchase Agreement dated March 31, 2000, by and between Synagro Technologies, Inc. and
                 Compost America Holding Company, Inc. (Exhibit 2.1 to the Company's Current Report on Form 8-K,
                 dated June 30, 2000, is incorporated herein by reference.)

10.14            Earnout Agreement dated June 15, 2000, by and among Synagro Technologies, Inc. and Compost
                 America Holding Company, Inc. (Exhibit 2.2 to the Company's Current Report on Form 8-K, dated
                 June 30, 2000, is incorporated herein by reference.)

10.15            Purchase Agreement dated January 27, 2000, by and between Synagro Technologies, Inc. and GTCR
                 Fund VII, L.P. (Exhibit 2.1 to the Company's Current Report on Form 8-K, dated February 17,
                 2000, is herein incorporated by reference.)

10.16            Professional Services Agreement, dated January 27, 2000, by and between Synagro Technologies,
                 Inc. and GTCR Fund VII, L.P. (Exhibit 2.7 to the Company's Current Report on Form 8-K, dated
                 February 17, 2000, is herein incorporated by reference.)

10.17            Senior Subordinated Loan Agreement, dated January 27, 2000, by and among Synagro Technologies,
                 Inc., certain subsidiary guarantors and GTCR Capital Partners, L.P. (Exhibit 2.2 to the
                 Company's Current Report on Form 8-K, dated February 17, 2000, is herein incorporated by
                 reference.)

10.18            Amended and Restated Monitoring Agreement dated August 14, 2000, by and between Synagro
                 Technologies, Inc., GTCR Golder Rauner, L.L.C., and TCW/Crescent Mezzanine Partners II, L.P.,
                 TCW/Crescent Mezzanine Trust II, TCW Leveraged Income Trust, L.P., TCW Leveraged Income Trust
                 II, L.P., and TCW Leveraged Income Trust IV, L.P. (Exhibit 2.12 to the Company's Current Report
                 on Form 8-K, dated August 28, 2000, is herein incorporated by reference.)

10.19            Employment Agreement dated February 19, 1999, by and between Synagro Technologies, Inc. and Ross
                 M. Patten. (Exhibit 10.20 to the Company's Current Report on Form 10-K/A, dated April 30, 2001,
                 is herein incorporated by reference.)
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10.21            Employment Agreement dated February 19, 1999, by and between Synagro Technologies, Inc. and Mark
                 A. Rome. (Exhibit 10.21 to the Company's Current Report on Form 10-K/A, dated April 30, 2001, is
                 herein incorporated by reference.)


10.22            Employment Agreement dated February 19, 1999, by and between Synagro Technologies, Inc. and
                 Alvin L. Thomas II. (Exhibit 10.22 to the Company's Current Report on Form 10-K/A, dated April
                 30, 2001, is herein incorporated by reference.)

10.23            Employment Agreement dated May 10, 1999, by and between Synagro Technologies, Inc. and J. Paul
                 Withrow. (Exhibit 2.11 to the Company's Current Report on Form 8-K, dated February 17, 2000, is
                 herein incorporated by reference.)

10.24            Employment Agreement dated August 11, 2000, by and between Synagro Technologies, Inc. and Mark
                 A. Weidman. (Exhibit 10.24 to the Company's Current Report on Form 10-K/A, dated April 30, 2001,
                 is herein incorporated by reference.)

10.25            Amendment Concerning Employment Rights dated January 27, 2000, by and between Synagro
                 Technologies, Inc. and Ross M. Patten. (Exhibit 2.8 to the Company's Current Report on Form 8-K,
                 dated February 17, 2000, is herein incorporated by reference.)

10.26            Amendment Concerning Employment Rights dated January 27, 2000, by and between Synagro
                 Technologies, Inc. and Mark A. Rome. (Exhibit 2.9 to the Company's Current Report on Form 8-K,
                 dated February 17, 2000, is herein incorporated by reference.)

10.27            Amendment Concerning Employment Rights dated January 27, 2000, by and between Synagro
                 Technologies, Inc. and Alvin L. Thomas, II. (Exhibit 2.10 to the Company's Current Report on
                 Form 8-K, dated February 17, 2000, is herein incorporated by reference.)

10.28            Amendment Concerning Employment Rights dated January 27, 2000, by and between Synagro
                 Technologies, Inc. and J. Paul Withrow. (Exhibit 2.12 to the Company's Current Report on Form
                 8-K, dated February 17, 2000, is herein incorporated by reference.)

10.29            2000 Stock Option Plan dated October 31, 2000. (Exhibit A to the Company's Proxy Statement on
                 Schedule 14A for Annual Meeting of Stockholders, dated September 28, 2000, is herein
                 incorporated by reference.)
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