<PAGE>


          S E C U R I T I E S  A N D  E X C H A N G E  C O M M I S S I O N
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2000
                        Commission file number 333-77633

                       CAPITAL ENVIRONMENTAL RESOURCE INC.
             (Exact name of registrant as specified in its charter)

Ontario, Canada                                      Not Applicable
(Jurisdiction of incorporation)                    (I.R.S. Employer
                                                   Identification No.)

1005 Skyview Drive
Burlington, Ontario, Canada                             L7P 5B1
(Address of principal executive offices)             (Postal Code)

        Registrant's telephone number, including area code (905) 319-1237

         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 was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO _

      As of July 31, 2000, there were 7,196,627 common shares outstanding.


                                      -1-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                               INDEX TO FORM 10-Q
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>

<S>      <C>                                                                                  <C>

PART 1   FINANCIAL INFORMATION

Item 1   Financial Statements

         Consolidated Balance Sheets as at June 30, 2000 and December
         31, 1999.......................................................................       3

         Consolidated Statements of Operations and Comprehensive Income
         (Loss) for the three month and/or six month periods ended June
         30, 2000 and 1999..............................................................       5

         Consolidated Statement of Stockholders' Equity for the six month
         period ended June 30, 2000.....................................................       6

         Consolidated Statements of Cash Flows for the six month periods
         ended June 30, 2000 and 1999...................................................       7

         Notes to Consolidated Financial Statements ....................................       8

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations............................................      14

Item 3   Quantitative and Qualitative Disclosures about Market Risk.....................      22

Item 4   Submission of Matters to a Vote of Security Holders............................      22

PART II  OTHER INFORMATION

Item 1   Legal Proceedings..............................................................      23


SIGNATURES..............................................................................      24
</TABLE>


                                      -2-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                           CONSOLIDATED BALANCE SHEETS

                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>

                                                                   JUNE 30,        DECEMBER 31,
                                                                     2000             1999
                                                                   --------          --------
                                                                 (unaudited)         (audited)
<S>                                                                <C>               <C>
                                     ASSETS
CURRENT ASSETS
 Cash and cash equivalents                                         $  1,045          $  1,398
 Trade accounts receivable (net of allowance for doubtful
    accounts of $223; December 31, 1999 - $331)                      15,050            14,655
 Inventory, prepaid expenses and other current  assets                2,088             3,724
 Employee loans                                                         425               471
                                                                   --------          --------
TOTAL CURRENT ASSETS                                                 18,608            20,248

PROPERTY AND EQUIPMENT, NET                                          53,263            40,692

OTHER ASSETS
 Goodwill (net of accumulated amortization of
    $4,755; December 31, 1999 - $3,528)                              94,477            95,654
 Other intangibles and non-current assets                             4,629             5,358
 Deferred income taxes                                                4,173             4,175
                                                                   --------          --------
TOTAL ASSETS                                                       $175,150          $166,127
                                                                   ========          ========
</TABLE>


         The accompanying notes are an integral part of these statements


                                      -3-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                           CONSOLIDATED BALANCE SHEETS

                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>

                                                                              JUNE 30,         DECEMBER 31,
                                                                               2000                1999
                                                                             ---------           ---------
                                                                            (unaudited)          (audited)
<S>                                                                          <C>                 <C>
                                   LIABILITIES

CURRENT LIABILITIES
 Accounts payable and accrued liabilities                                    $  11,148           $  12,050
 Accrued purchase liabilities                                                     --                   600
 Current portion of long-term debt  (Note 3)                                    98,438              13,145
                                                                             ---------           ---------
TOTAL CURRENT LIABILITIES                                                      109,586              25,795

LONG-TERM DEBT  (Note 3)                                                         4,576              78,199

DEFERRED INCOME TAXES                                                            3,849               3,813
                                                                             ---------           ---------
                                                                               118,011             107,807
                                                                             ---------           ---------
COMMITMENTS AND CONTINGENCIES (Note 4)

                              STOCKHOLDERS' EQUITY

 Common Stock; 7,196,627 issued and outstanding;
   (December 31, 1999 - 7,196,627) (Note 5)                                     57,066              57,066
 Accumulated other comprehensive loss                                           (1,999)               (890)
 Retained earnings                                                               2,072               2,144
                                                                             ---------           ---------
TOTAL STOCKHOLDERS' EQUITY                                                      57,139              58,320
                                                                             ---------           ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $ 175,150           $ 166,127
                                                                             =========           =========
</TABLE>


         The accompanying notes are an integral part of these statements


                                      -4-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
         (IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)


                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                THREE MONTHS ENDED                        SIX MONTHS ENDED
                                                                      JUNE 30                                 JUNE 30
                                                         ---------------------------------        ---------------------------------
                                                             2000                  1999               2000                  1999
                                                         -----------           -----------        -----------           -----------
<S>                                                      <C>                   <C>                <C>                   <C>
REVENUES                                                 $    30,668           $    22,927        $    57,030           $    40,803
OPERATING EXPENSES:
   Cost of operations                                         21,218                15,681             38,213                27,693
   Selling, general and administrative expenses                5,330                 2,946              9,551                 5,284
   Depreciation and amortization expense                       2,695                 1,758              5,166                 3,291
                                                         -----------           -----------        -----------           -----------
INCOME FROM OPERATIONS                                         1,425                 2,542              4,100                 4,535

Interest and financing expense                                 2,240                 1,501              4,250                 2,751
                                                         -----------           -----------        -----------           -----------

INCOME (LOSS) BEFORE INCOME TAXES                               (815)                1,041               (150)                1,784

Income tax provision (recovery)                                 (404)                  375                (78)                  642
                                                         -----------           -----------        -----------           -----------

NET INCOME (LOSS) FOR THE PERIOD                         $      (411)          $       666        $       (72)          $     1,142
                                                         ===========           ===========        ===========           ===========

BASIC NET INCOME (LOSS) PER COMMON SHARE                 $     (0.06)          $      0.20        $     (0.01)          $      0.39
                                                         ===========           ===========        ===========           ===========

DILUTED NET INCOME (LOSS) PER COMMON SHARE               $     (0.06)          $      0.14        $     (0.01)          $      0.25
                                                         ===========           ===========        ===========           ===========

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING (Note 6)

   Basic                                                   7,196,627             3,421,380          7,196,627             2,939,975
                                                         ===========           ===========        ===========           ===========

   Diluted                                                 7,288,821             4,884,081          7,301,202             4,592,533
                                                         ===========           ===========        ===========           ===========
</TABLE>


                    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

<TABLE>

<S>                                                                                                   <C>                   <C>
NET INCOME (LOSS) FOR THE PERIOD                                                                      $   (72)              $ 1,142

Other comprehensive income (loss) -
  foreign currency translation adjustments                                                             (1,109)                   55
                                                                                                      -------               -------
Comprehensive income (loss) for the period                                                            $(1,181)              $ 1,197
                                                                                                      =======               =======
</TABLE>


         The accompanying notes are an integral part of these statements


                                      -5-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         (IN THOUSANDS OF U.S. DOLLARS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                               ACCUMULATED
                                                        COMMON STOCK               OTHER
                                                  --------------------------   COMPREHENSIVE    RETAINED
                                                    SHARES         AMOUNT          LOSS         EARNINGS      TOTAL
                                                  ------------  ------------  -------------- ------------- -----------
<S>                                                 <C>         <C>           <C>            <C>          <C>
BALANCES AT DECEMBER 31, 1999                       7,196,627   $    57,066   $       (890)  $      2,144 $    58,320

Foreign currency translation adjustments                    -             -         (1,109)             -      (1,109)

Loss for the period                                         -             -              -            (72)        (72)
                                                  ------------  ------------  -------------- ------------- -----------

BALANCES AT JUNE 30, 2000                           7,196,627   $    57,066   $     (1,999)  $      2,072  $   57,139
                                                  ============  ============  ============== ============= ===========
</TABLE>


         The accompanying notes are an integral part of these statements


                                      -6-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                     SIX MONTHS ENDED
                                                                                           JUNE 30
                                                                                ---------------------------
                                                                                    2000               1999
                                                                                --------           --------
<S>                                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss) for the period                                          $    (72)          $  1,142
      Adjustments to reconcile net income to net cash flows
        from operating activities -
         Depreciation and amortization                                             5,166              3,291
         Deferred income taxes                                                       (39)               449
         Net loss (gain) on disposal of property, plant and equipment                (58)                 5
         Other                                                                       300                136
      Changes in operating assets and liabilities, net of effect of
        acquisitions and divestitures -
         Trade accounts receivable                                                  (365)            (3,476)
         Prepaid expenses and other current assets                                 1,832               (189)
         Accounts payable and accrued liabilities                                    530              1,718
         Income and other taxes                                                   (1,359)              (605)
                                                                                --------           --------
                                                                                   5,935              2,471
                                                                                --------           --------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Acquisition of businesses, net of cash acquired                             (8,150)           (24,488)
      Capital expenditures, net of proceeds                                      (10,258)            (1,875)
      Net loans and advances to employees                                             36               (263)
      Other                                                                       (1,189)            (1,591)
                                                                                --------           --------
                                                                                 (19,561)           (28,217)
                                                                                --------           --------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of long-term debt                                    24,485             39,373
      Principal payments on long-term debt                                       (10,590)           (34,460)
      Repayment of capital lease liability                                          (531)              (638)
      Net proceeds from issuance of common stock                                    --               28,728
      Redemption of redeemable and convertible stock                                --               (6,900)
      Debt issuance costs                                                            (72)            (1,135)
                                                                                --------           --------
                                                                                  13,292             24,968
                                                                                --------           --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
       EQUIVALENTS                                                                   (19)                39
                                                                                --------           --------
DECREASE IN CASH AND CASH EQUIVALENTS                                               (353)              (739)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   1,398              1,060
                                                                                --------           --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $  1,045           $    321
                                                                                ========           ========

SUPPLEMENTARY INFORMATION ON NON-CASH TRANSACTIONS:

   Value of acquisitions partially or totally effected by the issue of
     capital stock                                                              $   --             $     66
                                                                                --------           --------
   Other long-term liabilities assumed on acquisition                           $     55           $    709
                                                                                --------           --------
   Assets acquired under capital leases                                         $     53           $  3,374
                                                                                --------           --------
</TABLE>


         The accompanying notes are an integral part of these statements


                                      -7-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

1.  BASIS OF PRESENTATION

         The accompanying interim consolidated financial statements of Capital
Environmental Resource Inc. and its subsidiaries (the "Company") for the three
and six month periods ended June 30, 2000 and 1999 have been prepared in
accordance with generally accepted accounting principles in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Operating results for the six month period
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.

         The Company's consolidated balance sheet as of June 30, 2000, and the
interim consolidated statements of operations, comprehensive income,
stockholders' equity and cash flows for the three and/or six month periods ended
June 30, 2000 and 1999 are unaudited. In the opinion of management, such
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position, results of operations, and cash flows for the periods
presented. The consolidated financial statements presented herein should be read
in conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.

2.  ACQUISITIONS

         For the six months ended June 30, 2000, the Company acquired three
solid waste collection businesses and one landfill that were accounted for using
the purchase method of accounting. The aggregate consideration for these
acquisitions was approximately $8.5 million. The purchase prices have been
allocated to the identified intangible and tangible assets acquired based on
fair values at the dates of acquisition, with any residual amounts allocated to
goodwill or landfill property as appropriate.

3. LONG-TERM DEBT

         During 1999, the Company amended and restated its Credit Facility to
increase its available credit to $85.0 million. The Company also entered into a
Term Loan for $25.0 million. The increased credit has been used primarily to
fund acquisitions. The Company has pledged all of its assets, including the
stock of its subsidiaries, as collateral under the amended Credit Facility. The
Credit Facility matures in November 2004. The Term Loan has principal repayments
beginning in November 2002.


                                      -8-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

Long-term debt consists of the following:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------
                                                         JUNE 30,            DECEMBER 31,
                                                           2000                  1999
----------------------------------------------------------------------------------------
                                                        (unaudited)            (audited)

<S>                                                      <C>                  <C>
Senior debt                                              $  96,526            $  72,763

Subordinated promissory notes                                  422               11,371

Capital lease obligations                                    4,512                4,995

Other                                                        1,554                2,215
----------------------------------------------------------------------------------------
                                                           103,014               91,344
Less:  current portion                                      98,438               13,145
----------------------------------------------------------------------------------------
                                                         $   4,576            $  78,199
----------------------------------------------------------------------------------------
</TABLE>

         As at June 30, 2000, the Company was in breach of one of the
financial covenants under its senior debt facilities. The Company is in
discussions with its bankers to obtain a waiver and/or amendment to its
senior debt facilities. Until such time as the waiver and/or amendment has
been obtained, the senior debt facility will be classified as a current
liability.

4. COMMITMENTS AND CONTINGENCIES

(a)      ENVIRONMENTAL RISKS

         The Company is subject to liability for environmental damage that its
solid waste facilities may cause, including damage to neighbouring landowners or
residents, particularly as a result of the contamination of soil, groundwater or
surface water, and especially drinking water, including damage resulting from
conditions existing prior to the acquisition of such facilities by the Company.
The Company may also be subject to liability for any off-site environmental
contamination caused by pollutants or hazardous substances whose transportation;
treatment or disposal was arranged by the Company or its predecessors. Any
substantial liability for environmental damage incurred by the Company could
have a material adverse effect on the Company's financial condition, results of
operations or cash flows. As at the date of these financial statements, the
Company is not aware of any such environmental liabilities that would be
material to the Company's operations or financial condition.

(b)      LEGAL PROCEEDINGS

         In the normal course of its business and as a result of the extensive
governmental regulation of the solid waste industry, the Company may
periodically become subject to various judicial and administrative proceedings
involving federal, state, provincial or local agencies. In these proceedings, an
agency may seek to impose fines on the Company or to revoke or deny renewal of
an operating permit held by the Company. From time to time the Company may also
be subject to actions brought by citizens' groups or adjacent landowners in
connection with the permitting and licensing of landfills and transfer stations,
or alleging environmental damage or violations of the permits and licenses
pursuant to which the Company operates.


                                      -9-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

         In addition, the Company may become party to various claims and suits
pending for alleged damages to persons and property, alleged violations of
certain laws and alleged liabilities arising out of matters occurring during the
normal operation of the waste management business. However, other than as
described below, as at June 30, 2000, there was no current proceeding or
litigation involving the Company that the Company believes will have a material
adverse impact on the Company's business, financial condition, results of
operations or cash flows.

         On October 12, 1999, Lynn Bishop and L&S Bishop Enterprises Inc.
(collectively "Bishop") commenced an action against the Company, Capital
Environmental Alberta Inc. and Tony Busseri, the former Chairman of the
Company, in which Bishop claims damages in the aggregate amount of
approximately $7.4 million. The claim includes $2.1 million for alleged
wrongful termination, $5.3 million for misrepresentations allegedly made in
connection with the Share Purchase Agreement, dated as of November 1, 1997,
among Lynn Bishop, L&S Bishop Enterprises Inc., the Company and Western Waste
Services Inc. (the "Share Purchase Agreement"), as well as $0.3 million for
punitive damages. The Company believes that Bishop's claims are wholly
without merit, and that Lynn Bishop's employment was terminated for just
cause and that it has no further obligation to Bishop beyond the contingent
payment described in Note 4 (c). The Company is defending the claim and has
issued a counterclaim against Bishop, and does not believe the outcome will
have a material adverse impact on the Company's business, financial
condition, results of operations or cash flows. Accordingly, the Company has
not made a provision for this claim in its financial statements.

(c)      CONTINGENT PAYMENT RELATED TO ACQUISITIONS

         In connection with the acquisition of Western Waste from L&S Bishop
Enterprises ("L&S"), the Company may have to make an additional payment to L&S.
L&S may elect to sell up to 112,323 shares in the future and if, at that time,
the price of the Common Stock is less than C$21.67 per share, the Company will
have to make up the shortfall. This agreement was subject to a 180-day lock-up
agreement, which expired on December 8, 1999. The Company has since been advised
that L&S has sold the aforementioned shares resulting in a shortfall of
approximately $1 million however, in view of the litigation referred to in Note
4 (b) challenging the Shares Purchase Agreement, the obligation of the Company,
if any, will not be recorded until the litigation is settled.

5. CAPITAL STOCK

     a) CHANGES IN CAPITAL STOCK SINCE INCEPTION ON MAY 23, 1997:

         COMMON AND PREFERRED STOCK

         The Company has an unlimited number of Preferred Shares, issuable in
series. As of June 30, 2000, there were no Preferred Shares authorized or
outstanding.


                                      -10-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

         On April 27, 1999, the stockholders of the Company approved a split of
the Company's Common Stock whereby 1.3847 Common Shares were issued for each
previously outstanding Common Share. All Common Shares and per Common Share data
in the financial statements has been restated to give retroactive effect to this
1.3847 for 1 stock split.

         (i)      On May 23, 1997, the Company issued 1,353,924 Common Shares
                  for nominal cash consideration.

         (ii)     On October 31, 1997, the Company issued 73,850 Common Shares
                  with a value of $789 in exchange for certain business assets
                  and cash of $89.

         (iii)    On April 1, 1998, in connection with the acquisition of
                  Muskoka Containerized Services Limited ("MCS"), the Company
                  issued 6,923 Common Shares with a value of $71 as partial
                  consideration for the acquisition of MCS.

         (iv)     On June 15, 1998, the Company issued 553,869 Common Shares for
                  net proceeds of $6,595 cash in a private placement.

         (v)      On July 2, 1998, in connection with the acquisition of Johns
                  Cartage Waste Management Services Ltd., the Company issued
                  5,192 Common Shares valued at $64 as part of the acquisition
                  consideration.

         (vi)     On March 5, 1999, in connection with the acquisition of
                  Ram-Pak Compaction Services, the Company issued 4,784 Common
                  shares valued at C$100 as part of the acquisition
                  consideration.

         (vii)    On June 8, 1999, the Company completed an Initial Public
                  Offering ("IPO") of 3,258,725 Common Shares at a price of
                  $11.00 per share. Of the 3,258,725 Common Shares sold in the
                  offering, 2,998,725 were sold by the Company and 260,000 were
                  sold by certain selling stockholders. The Company received
                  approximately $30 million in net proceeds from the IPO.

         (viii)   On June 8, 1999, the Convertible Preference Shares were
                  converted into 1,107,750 Common Shares, the Class "B" Special
                  Stock was converted into 484,645 Common Shares and the
                  Redeemable Common Shares were converted into 280,240 Common
                  Shares.

         (ix)     On June 8, 1999, in connection with the October 1, 1998
                  acquisition of General Environmental Technical Services Inc.
                  and J.V. Services of Western New York, the Company issued
                  106,128 additional Common Shares resulting in additional
                  purchase consideration of $709.

         (x)      On July 1, 1999 the Company completed the sale of 189,825
                  Common Shares to cover over-allotments in connection with the
                  initial public offering. The Company received approximately
                  $1.9 million in net proceeds from the exercise by the
                  underwriters of their over-allotment option.


                                      -11-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

     b)  STOCK OPTION AND OPTION GRANTS

         Under the 1997 Stock Option Plan, the Company may grant options to
acquire Common Shares up to a maximum of 10% of the then issued and outstanding
Common Shares on an as converted basis. All of the options issued under the 1997
plan vested on completion of the initial public offering of the Company's
securities. No option will remain exercisable later than five years after the
grant date, unless the Board of Directors determines otherwise.

         Under the 1999 Stock Option Plan, the Company may grant options to
acquire Common Shares up to a maximum of 19% of the then issued and outstanding
shares of Common Stock and Common Stock equivalents, including stock options
issued under the 1997 Stock Option Plan. Options granted to non-employee
directors will generally vest one year from the date of grant. Options granted
to non-directors become exercisable only after the second anniversary of the
grant date unless otherwise determined by the Compensation Committee. No option
will remain exercisable later than five years after the grant date, unless the
Compensation Committee determines otherwise. Upon a change of control event,
options become immediately exercisable.

         At June 30, 2000, December 31, 1999, and June 30, 1999, the aggregate
options outstanding entitled holders to purchase 1,278,648, 1,004,301 and
495,720 Common Shares, respectively, at prices ranging from C$7.22 - $18.05 and
US$4.00 - $14.50. During the six months ended June 30, 2000, no Common Shares
were issued under the plans.

         As permitted by the Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation", the Company applies APB 25 in
accounting for options to acquire Common Shares. As a result, no compensation
cost has been recognized as options have been granted at market value.

     c)  STOCK PURCHASE WARRANTS

         In 1997, the Company issued 123,084 warrants to certain founding
stockholders. These warrants entitle the holder thereof to receive upon
exercise, one common share at C$0.007 per share. These warrants expire July 15,
2002.

         At June 30, 2000, December 31, 1999, and June 30, 1999, the aggregate
warrants outstanding entitled holders to purchase 92,312, 92,312 and 123,084
Common Shares, respectively. During the six months ended June 30, 2000, no
Common Shares were issued on exercise of warrants.

     d)  SHAREHOLDER RIGHTS PLAN

         On September 2, 1999, the Company adopted a Shareholder Rights Plan
(the "Plan"). Under the terms of the Plan, Common Share purchase rights (the
"Rights") were distributed at the rate of one Right for each Common Share held.
Each Right will entitle the holder to buy 1/100th of a Common Share of the
Company at an exercise price of $60.00. The Rights will be exercisable and will
trade separately from the Common Shares only if a person or group acquires
beneficial


                                      -12-
<PAGE>


                       CAPITAL ENVIRONMENTAL RESOURCE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000
                         (IN THOUSANDS OF U.S. DOLLARS)

ownership of 20% or more of the Company's Common Shares or commences a tender or
exchange offer that would result in owning 20% or more of the Common Shares
(unless the Board of Directors determines that the acquisition is fair to all
shareholders and amends the Plan to permit the acquisition). If either of these
events occurs, the Rights will entitle each holder to receive, upon exercise, a
number of Common Shares (or, in certain circumstances, a number of Common Shares
in the acquiring company) having a Current Market Price (as defined in the Plan)
equal to approximately two times the exercise price of the Right. The Rights
will not be exercisable with respect to the share ownership of Environmental
Opportunities Fund I, Environmental Opportunities Fund II and Sanders Morris
Mundy Inc. and any affiliate or associate thereof, that already own more than
20% of the Company's Common Shares as long as these persons, along with their
affiliates and associates, do not acquire beneficial ownership of 30% or more.
The number of Rights outstanding is subject to adjustment under certain
circumstances and all Rights expire on September 30, 2009.

6.  NET INCOME (LOSS) PER SHARE INFORMATION

         The following table sets forth the computation of earnings (loss) per
Common Share:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30                                     2000                               1999
--------------------------------------------------------------------------------------------------------------------------
                                                    Basic              Diluted               Basic               Diluted
                                              ----------------------------------------------------------------------------
<S>                                           <C>                   <C>                   <C>                  <C>
Net income (loss)                             $       (72)          $       (72)          $     1,142          $     1,142
                                              -----------           -----------           -----------          -----------
Weighted average Common Shares
    outstanding - basic                         7,196,627             7,196,627             2,939,975            2,939,975
Dilutive effect of stock options and
    warrants outstanding                             --                    --                    --                253,705
Common Shares issuable upon
    conversion of redeemable and
    convertible stock                                --                    --                    --              1,398,853
                                              ----------------------------------------------------------------------------
Weighted average common shares
    outstanding - diluted                       7,196,627             7,196,627             2,939,975            4,592,533
                                              ----------------------------------------------------------------------------
 Diluted earnings (loss) per share            $     (0.01)          $     (0.01)          $      0.39          $      0.25
                                              ----------------------------------------------------------------------------
</TABLE>



                                      -13-
<PAGE>


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

================================================================================

         The following discussion should be read in conjunction with the
unaudited financial statements and notes thereto included elsewhere herein.

FORWARD LOOKING STATEMENTS

         Certain statements included in this Quarterly Report on Form 10-Q,
including, without limitation, information appearing under Part 1, Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements (within the meaning of Section 27A
of the Securities Act of 1933 (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934) that involve risks and uncertainties. Factors
set forth under the caption "Risk Factors" in the Company's Registration
Statement could affect the Company's actual results and could cause the
Company's actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company in this Report
on Form 10-Q.

OVERVIEW

         Capital Environmental Resource Inc. ("Capital" or the "Company") is
a regional, integrated solid waste services company that provides collection,
transfer, disposal, landfill and recycling services. Capital was founded in
May 1997 in order to take advantage of consolidation opportunities in the
solid waste industry in secondary markets in Canada and the northern United
States. The Company began operations in June 1997 when it acquired selected
solid waste assets and operations in Canada from Canadian Waste Services Inc.
and its parent, USA Waste Services, Inc. Since commencing operations, the
Company has acquired 42 solid waste services businesses in Canada and the
United States, including 43 collection operations, 11 transfer stations, 7
recycling processing facilities and a contract to operate 2 landfills. In
addition, the Company owns and operates a landfill located in Coronation,
Alberta. The consolidated operations presently serve over 658,000
residential, commercial and industrial customers. Largely as a result of
acquisitions, the Company believes that it has become one of the largest
solid waste services companies in Canada, and that it has significant
opportunities for further growth in both Canada and the northern United
States.

         The Company's objective is to build a leading solid waste services
company in the markets of Canada and the northern United States in markets other
than major urban centers. The Company's strategy for achieving this objective is
to make acquisitions that complement its existing business and to generate
internal growth. The Company seeks to acquire businesses that expand its
existing market presence. The Company's internal growth strategy is focused on
increasing its services to existing customers, winning new customers,
implementing selective price increases and achieving operating efficiencies.


                                      -14-
<PAGE>


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999

         The following table sets forth items in the Consolidated Statement of
Operations as a percentage of revenues and the percentage changes in the dollar
amounts of these items compared to the same period in the previous year:

<TABLE>
<CAPTION>

                                                          ($ THOUSANDS)          PERCENTAGE OF       PERCENTAGE
                                                                                     REVENUE           CHANGE
----------------------------------------------------------------------------------------------------------------------
                                                                                                      2000 Over
Three Months Ended June 30                                2000         1999       2000      1999         1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>         <C>       <C>         <C>
Revenues                                                $30,668       $22,927     100.0%    100.0%      33.8%
Cost of operations                                       21,218        15,681      69.2      68.4       35.3
Selling, general and administrative expenses              5,330         2,946      17.4      12.8       80.9
Depreciation and amortization expense                     2,695         1,758       8.8       7.7       53.3
------------------------------------------------------------------------------------------------------

Income from operations                                    1,425         2,542       4.6      11.1      (43.9)
Interest and financing expense                            2,240         1,501       7.3       6.6       49.2
------------------------------------------------------------------------------------------------------

Income (loss) before income taxes                          (815)        1,041      (2.7)      4.5
Income tax expense (recovery)                              (404)          375      (1.4)      1.6
------------------------------------------------------------------------------------------------------

Net income (loss)                                       $  (411)      $   666      (1.3)%     2.9%
======================================================================================================

EBITDA                                                  $ 4,120       $ 4,300      13.4%     18.8%      (4.2)%
======================================================================================================
</TABLE>


REVENUE

         The sources of revenue and growth rates are as follows: ($thousands)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                                                                                            GROWTH
Three Months Ended June 30                              2000                            1999                RATES
----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>               <C>          <C>         <C>
Commercial and industrial collection                $17,290       56.3%             $ 12,870     56.1%       34.3%
Residential collection                                7,041       23.0                 5,094     22.2        38.2
Transfer station and landfill                         2,694        8.8                 1,938      8.5        39.0
Commercial and residential recycling                  1,375        4.5                   613      2.7       124.3
Contract management and other
   specialized services                               2,268        7.4                 2,412     10.5        (6.0)
----------------------------------------------------------------------------------------------------------
                                                    $30,668      100.0%             $ 22,927    100.0%       33.8
----------------------------------------------------------------------------------------------------------
</TABLE>


         The composition of revenue has changed, with a higher portion being
generated from both transfer station and landfill and commercial and residential
recycling. These components have increased as a result of the revenue mix of
acquisitions made over the past twelve months.


                                      -15-
<PAGE>


         Management's estimates of the components of changes in the Company's
consolidated revenue are as follows:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------
Three Months Ended June 30                         2000                    1999
-----------------------------------------------------------------------------------
<S>                                                <C>                      <C>
Price                                              3.0%                     2.2%
Volume                                             1.1                      3.0
Acquisitions, net of divestitures                 30.3                     45.6
Foreign currency translation                       0.6                     (1.2)
Other                                             (1.2)                -
-----------------------------------------------------------------------------------

    Total                                         33.8%                    49.6%
-----------------------------------------------------------------------------------
</TABLE>


         Total revenues in the quarter were $30.7 million compared to $22.9
million in the same quarter last year. The 33.8% increase was primarily as a
result of acquisitions made over the past twelve months. The current period
pricing growth continues to be impacted by a disposal reduction in a market
place located in the United States that has been passed on to customers.
Excluding these price rollbacks, pricing growth was 4.0% in the quarter. Other
represents the impact on revenues of the April 1999 fire that destroyed one of
the Company's combined material recycling and transfer station facilities. These
facilities reopened in late June 2000.

         During the quarter ended June 30, 2000, two acquisitions were completed
with annualized revenue of approximately $3.7 million. The Company acquired
certain commercial and industrial operations located in Canton and Akron, Ohio,
from Republic Waste Service Inc. To build on this new market, the Company
acquired certain front load commercial assets and residential assets in
Columbus, Ohio. In the same period of the prior year, 11 acquisitions were
completed with annualized revenue of approximately $15.0 million.

         Revenue and growth in revenue from geographic components are as
follows: ($thousands)

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30                             2000                       1999                GROWTH RATES
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>           <C>          <C>             <C>
Eastern Canada                                    $ 15,945     52.0%         $ 11,685     51.0%           36.4%
Western Canada                                       7,658     25.0             4,818     21.0            58.9
United States                                        7,065     23.0             6,424     28.0            10.1
----------------------------------------------------------------------------------------------------
                                                  $ 30,668    100.0%         $ 22,927    100.0%           33.8%
----------------------------------------------------------------------------------------------------
</TABLE>


         The growth in revenue in both Eastern and Western Canada exceeded the
growth in revenue in the United States as significant acquisitions were
completed in Canada during the past twelve months. The United States growth rate
is lower due to the disposal price decreases in certain markets that was
required to be passed onto customers, as described in the previous section, and
the competitive environment in which the Company operates.


                                      -16-
<PAGE>


COST OF OPERATIONS

         Cost of operations include labor, fuel, equipment maintenance, tipping
fees paid to third-party disposal facilities, worker's compensation and vehicle
insurance, the cost of materials purchased to be recycled, subcontractor expense
and local, state or provincial taxes. The Company owns and operates 11 transfer
stations, which reduces costs by improving utilization of collection personnel
and equipment and by consolidating the waste stream to gain access to remote
landfills with lower disposal rates. The Company obtained long-term disposal
agreements in some of its markets, which it believes, are at or below market
disposal rates. There can be no assurance that these contracts can be renewed on
favorable terms. Cost of operations for the three months ended June 30, 2000 was
$21.2 million compared to $15.7 million for the three months ended June 30,
1999. The 35.3% increase in cost of operations was attributable primarily to
increases in the Company's revenues described above. Cost of operations as a
percentage of revenue for the three months ended June 30, 2000 was 69.2%,
compared with 68.4% in 1999. In the three months ended June 30, 2000, cost of
operations increased as a percentage of revenue primarily as a result of
increased disposal costs and additional costs associated with certain national
accounts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative ("SG&A") expenses include
management, clerical, financial, accounting and administrative compensation and
overhead costs associated with marketing and the sales force, professional
services and community relations expense. SG&A expenses for the three months
ended June 30, 2000 were $5.3 million compared to $2.9 million for the period
ended June 30, 1999. The $2.4 million (80.9%) increase primarily relates to
additional management, consulting and related costs to support the Company's
level of growth and additional requirements related to the change to a public
company in June of 1999. In addition, during the quarter the Company incurred
additional costs related to failed acquisitions, compensation costs,
restructuring fees and legal fees. SG&A expenses are not expected to increase in
the future unless the Company completes a significant acquisition in the
future. As a percentage of revenues, SG&A expenses increased to 17.4% for the
three months ended June 30, 2000 from 12.8% in the comparable period last year.

DEPRECIATION AND AMORTIZATION EXPENSE

         Depreciation and amortization expense includes depreciation of fixed
assets over the estimated useful life of the assets using the straight-line
method, the amortization of goodwill over 40 years and the amortization of other
intangible assets over appropriate time periods. The Company has accounted for
all business acquisitions since inception using purchase accounting which has
resulted in significant amounts of goodwill being included on the balance sheet.
Depreciation and amortization expense for the three months ended June 30, 2000
was $2.7 million compared to $1.8 million for the three months ended June 30,
1999. The 53.3% increase was primarily due to acquisition activity over the past
12 months. As a percentage of revenues, depreciation and amortization expense
increased to 8.8% for the three months ended June 30, 2000 from 7.7% for the
period ended June 30, 1999. The increase primarily relates to depreciation and
amortization associated with the increased goodwill on the balance sheet and
capital expenditures incurred over the past 12 months.


                                      -17-
<PAGE>


INTEREST AND FINANCING EXPENSE

         In the three months ended June 30, 2000, interest and financing expense
increased 49.2% to $2.2 million from $1.5 million for the comparable period
in 1999. The increase over the prior year was primarily a result of an
increase in the average level of outstanding debt due to borrowings to finance
acquisition activity over the past 12 months, an increase in the weighted
average rate of interest on the total debt from 7.4% in 1999 to 8.0% in 2000,
and an increase in amortization of deferred financing costs related to the 1999
expansion of the Credit Facility.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

         The following table sets forth items in the Consolidated Statement of
Operations as a percentage of revenues and the percentage changes in the dollar
amounts of these items compared to the same period in the previous year:

<TABLE>
<CAPTION>

                                                                                    PERCENTAGE OF        PERCENTAGE
                                                          ($ THOUSANDS)                 REVENUE            CHANGE
-----------------------------------------------------------------------------------------------------------------------
                                                                                                           2000 Over
Six Months Ended June  30                               2000         1999           2000       1999         1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>            <C>       <C>           <C>
Revenues                                                $57,030      $ 40,803       100.0%    100.0%        39.8%
Cost of operations                                       38,213        27,693        67.0      67.9         38.0
Selling, general and administrative expenses              9,551         5,284        16.7      13.0         80.8
Depreciation and amortization expense                     5,166         3,291         9.1       8.1         57.0
-----------------------------------------------------------------------------------------------------

Income from operations                                    4,100         4,535         7.2      11.1         (9.6)
Interest and financing expense                            4,250         2,751         7.5       6.7         54.5
-----------------------------------------------------------------------------------------------------

Income (loss) before income taxes                          (150)        1,784        (0.3)      4.4
Income tax expense (recovery)                               (78)          642        (0.2)      1.6
-----------------------------------------------------------------------------------------------------

Net income                                                $ (72)      $ 1,142        (0.1)      2.8%
=====================================================================================================

EBITDA                                                   $9,266       $ 7,826        16.2%     19.2%        18.4%
=====================================================================================================
</TABLE>


REVENUE

         The sources of revenue and growth rates are as follows: ($thousands)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                                                                                            GROWTH
Six Months Ended June 30                                   2000                            1999              RATES
----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>               <C>          <C>         <C>
Commercial and industrial collection               $ 32,505       57.0%             $ 23,171     56.8%       40.3%
Residential collection                               12,793       22.4                 9,493     23.3        34.8
Transfer station and landfill                         4,771        8.4                 3,152      7.7        51.4
Commercial and residential recycling                  2,519        4.4                 1,103      2.7       128.4
Contract management and other
   specialized services                               4,442        7.8                 3,884      9.5        14.3
----------------------------------------------------------------------------------------------------------

                                                   $ 57,030      100.0%             $ 40,803    100.0%       39.8%
----------------------------------------------------------------------------------------------------------
</TABLE>


                                      -18-
<PAGE>


         Management's estimates of the components of changes in the Company's
consolidated revenue are as follows:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
Six Months Ended June 30                                                        2000                    1999
--------------------------------------------------------------------------------------------------------------

<S>                                                                             <C>                     <C>
Price                                                                           2.6%                    2.6%
Volume                                                                          1.6                      2.5
Acquisitions, net of divestitures                                              35.4                     46.9
Foreign currency translation                                                    1.5                     (2.5)
Other                                                                          (1.3)                       -
--------------------------------------------------------------------------------------------------------------

    Total                                                                      39.8%                    49.5%
--------------------------------------------------------------------------------------------------------------
</TABLE>


         During the six months ended June 30, 2000, four acquisitions were
completed with annualized revenue of approximately $7.2 million. In the same
period of the prior year, 16 acquisitions were completed (12 in Canada and 4 in
the United States) with annualized revenue of approximately $21.0 million.

         Revenue and growth in revenue from geographic components are as
follows: ($thousands)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30                               2000                       1999                GROWTH RATES
----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>            <C>         <C>             <C>
Eastern Canada                                    $ 29,565      51.8%         $19,476      47.7%          51.8%
Western Canada                                      14,485      25.4            9,143      22.4           58.4
United States                                       12,980      22.8           12,184      29.9            6.6
----------------------------------------------------------------------------------------------------
                                                  $ 57,030     100.0%         $40,803     100.0%          39.8%
----------------------------------------------------------------------------------------------------
</TABLE>


COST OF OPERATIONS

         Cost of operations for the six months ended June 30, 2000 was $38.2
million compared to $27.7 million for the six months ended June 30, 1999. The
38.0% increase in cost of operations was attributable primarily to increases in
the Company's revenues described above. Cost of operations as a percentage of
revenue for the six months ended June 30, 2000 was 67.0%, compared with 67.9% in
1999. In the six months ended June 30, 2000, cost of operations decreased as a
percentage of revenue primarily as a result of the synergies achieved from
integrating acquisitions during the past 12 months and further internalization
of waste through the Company's transfer stations.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses for the six months
ended June 30, 2000 were $9.6 million compared to $5.3 million for the period
ended June 30, 1999. The $4.3 million (80.8%) increase primarily relates to
additional management, consulting and related costs to support the Company's
level of growth and additional requirements related to the change to a public
company in June of 1999. In addition during the period, the Company incurred
additional costs related to failed acquisitions, compensation costs,
restructuring fees and legal fees. As a percentage of revenues, SG&A expenses
increased to 16.7% for the six months ended June 30, 2000 from 13.0% in the
same period last year.

                                      -19-
<PAGE>


DEPRECIATION AND AMORTIZATION EXPENSE

         Depreciation and amortization expense for the six months ended June 30,
2000 was $5.2 million compared to $3.3 million for the six months ended June 30,
1999. The 57.0% increase was primarily due to acquisition activity over the past
12 months. As a percentage of revenues, depreciation and amortization expense
increased to 9.1% for the six months ended June 30, 2000 from 8.1% for the
period ended June 30, 1999. The increase primarily relates to depreciation and
amortization associated with the increased goodwill on the balance sheet and
capital expenditures incurred over the past 12 months.

INTEREST AND FINANCING EXPENSE

         In the six months ended June 30, 2000, interest and financing expense
increased 54.5% to $4.3 million from $2.8 million for the period ended in 1999.
The increase over the prior year was primarily a result of an increase in the
average level of outstanding debt due to borrowings to finance acquisition
activity over the past 12 months, an increase in the weighted average rate of
interest on the total debt from 7.5% in 1999 to 7.8% in 2000, and an increase
in amortization of deferred financing costs related to the 1999 expansion of the
Credit Facility.

INCOME TAXES

         The effective income tax rate during 2000 has increased to 52.0%
compared to 36.0% during the same period in 1999. The increase rate over the
prior year primarily relates to the higher proportion of business in Canada,
which has a higher tax rate than the United States, and the increase in
non-deductible goodwill amortization.

FINANCIAL CONDITION

         As of June 30, 2000 and December 31, 1999, the Company's capital
consisted of: ($thousands)

<TABLE>
<CAPTION>

------------------------- ------------------------------- ------------------------------- --------------
                                  JUNE 30, 2000                 DECEMBER 31, 1999            CHANGE
------------------------- ------------------------------- ------------------------------- --------------
                                   (unaudited)                      (audited)

<S>                              <C>            <C>                <C>         <C>               <C>
Long-term debt                   $103,014       62.8%              $91,344     59.5%             12.8%
Deferred income taxes               3,849        2.3                 3,813      2.5               0.9
Stockholders' equity               57,139       34.9%               58,320     38.0              (2.0)
------------------------- ---------------- -------------- ----------------- ------------- --------------
                                 $164,002      100.0%             $153,477    100.0%              6.9%
------------------------- ---------------- -------------- ----------------- ------------- --------------
</TABLE>


         The $11.7 million increase in long-term debt is primarily a result of
borrowing since year end to finance acquisition activity and capital
expenditures, partly offset by repayments during the quarter.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's capital requirements include acquisitions, working
capital increases and fixed asset replacement. The Company plans to meet capital
needs through various financial sources, including internally generated funds,
debt and equity financing. As of June 30, 2000, adjusted working capital was
$7.5 million (December 31, 1999 - $7.6 million), excluding the current portion
of long-term debt. The Company generally applies the cash generated from its
operations that remains available after satisfying working capital and capital
expenditure requirements to


                                      -20-
<PAGE>


reduce indebtedness under the Credit Facility and to minimize cash balances.
Working capital requirements are financed from internally generated funds and
bank borrowings.

         For the six months ended June 30, 2000, net cash provided by operations
was $5.9 million, compared to $2.5 million for the quarter ending June 30, 1999.
This increase was primarily due to reduction in the usage of cash for working
capital primarily through improved accounts receivable. Days sales outstanding
has significantly improved from 53 in June of 1999 to 42 in June 2000. This was
partly offset by higher tax payments.

         For the six months ended June 30, 2000, net cash used in investing
activities was $19.6 million. Most of this was related to spending on capital
expenditures of $10.3 million and funding current year acquisitions of
approximately $8.2 million. Capital expenditures for 2000 are expected to be
approximately $15 million primarily for vehicle and equipment additions and
replacements. The Company intends to continue to fund capital expenditures
principally through internally generated funds. The net cash used in
investing decreased $8.7 million from the $28.2 million used in investing
activities for the quarter ending June 30, 1999. This is primarily due to the
reduced acquisition activity partly offset by the timing and increased level
of capital expenditures in the current year.

         For the six months ended June 30, 2000, net cash provided by financing
activities was $13.3 million. This was provided primarily by net borrowings of
$24.5 million and was partly offset by cash used for other financing payments.
The $11.7 million decrease from the $25.0 million provided by financing
activities in the prior year was primarily due to the reduction in acquisition
activity.

         The Company has a combined $110.0 million Credit and Term Loan
Agreement ("Loan Agreement") with a syndicate of banks led by Bank of America
N.A., as agent and United States agent, Bank of America Canada as Canadian agent
and Canadian Imperial Bank of Commerce as syndication agent. As of June 30, 2000
approximately $96.5 million (December 31, 1999 - $72.8 million) under the Loan
Agreement was outstanding. The Loan Agreement is secured by all of the Company's
assets, including the interest in the equity securities of the Company's
subsidiaries. Of the $96.5 million outstanding at June 30, 2000, $19.8 million
consisted of U.S. dollar loans bearing interest at approximately 8.9% and $76.7
million consisted of Canadian dollar loans bearing interest at approximately
7.9%.

         The Company believes that its cash flows from its operations
throughout the balance of fiscal 2000 and for fiscal 2001 will be sufficient
to service its ongoing business obligations and to repay debt service
obligations based on the existing arrangements under its senior debt
facility. As a result of the breach of a covenant under the senior credit
facility, the senior debt facility is subject to demand. There is no
assurance that the Company will be successful in its efforts to have the
covenant violation waived or to have the existing covenants amended. In the
event that the Company is unsuccessful in its negotiations with the bank and
should the lenders demand payment on their senior debt facility, the Company
would be required to raise additional debt or equity to extinguish the senior
debt facility. However, there is no assurance that the Company would be
successful in obtaining additional debt or capital on acceptable terms.

         The Loan Agreement will terminate in November 2004. The Loan
Agreement requires the Company to maintain fixed financial ratios and satisfy
other predetermined requirements, such as a minimum net worth, a minimum
interest coverage ratio, a maximum debt to total capital ratio and a maximum
debt to proforma EBITDA ratio and imposes annual restrictions on capital
expenditures. The Loan Agreement also restricts the Company's ability to
incur or assume other debt or capital leases beyond a fixed amount and does
not permit the payment of cash dividends. In addition, it requires the
lenders' approval for acquisitions where the purchase price exceeds $10.0
million and for all landfill acquisitions. As of June 30, 2000, an aggregate
of $100.3 million was outstanding under the Loan Agreement, after taking into
account letters of credit of $3.8 million subject to the restrictions noted
above.

                                      -21-
<PAGE>


SEASONALITY

         The Company's results of operations vary seasonally, with revenues
typically lowest in the first quarter of the year, higher in the second and
third quarters, and lower in the fourth quarter than in the third quarter. The
Company believes this seasonality can be attributed to a number of factors.
First, less solid waste is generated during the late fall, winter and early
spring because of decreased construction and demolition. Second, some of the
Company's operating costs are higher in the winter months because winter weather
conditions slow waste collection activities, resulting in higher labor costs,
and rain and snow increase the weight of collected waste, resulting in higher
disposal costs, which are calculated on a per ton basis. Consequently, operating
income is generally lower during the winter months. Finally, during the summer
months, there are more tourists and part-time residents in some of the Company's
service areas, resulting in more residential and commercial collection business.

OTHER LEGAL PROCEEDINGS

         See Note 4 (b) of Notes to Consolidated Financial Statements.

SUBSEQUENT EVENTS

         Effective August 2, 2000, Tony Busseri, Chairman and Chief Executive
Officer, was no longer employed by the Company. Bruce Cummings, a member of
the Company's Board of Directors, assumed the position of Chairman.

         The Board of Directors established an Executive Committee to oversee
the ongoing operations of the Company and to develop ongoing operational
policies and procedures for the Company and to otherwise carry out the duties
of the CEO on an interim basis. David Lowenstein, David Langille and Bruce
McMaken were appointed members of the Executive Committee. David Lowenstein,
a member of the Company's Board, will serve as Chairman of the Executive
Committee.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------------------

         There were no material changes in information that would be provided in
this section during the six months ended June 30, 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------------------------------------

         At the Company's annual and special meeting of stockholders held on
June 6, 2000, the Company's shareholders approved the following:

1.       The election of the following as directors for the following terms:

<TABLE>
<CAPTION>

                  NAME OF DIRECTOR                   TERM
                  <S>                       <C>

                  Bruce Cummings            until the annual meeting of the
                                            shareholders for the fiscal year
                                            ended December 31, 2002

                  David Lowenstein          until the annual meeting of the
                                            shareholders for the fiscal year
                                            ended December 31, 2002

                  Allard Loopstra           until the annual meeting of the
                                            shareholders for the fiscal year
                                            ended December 31, 2002
</TABLE>


                                      -22-
<PAGE>


2.       Ratification of the appointment by the Board of Directors of the firm
         of PricewaterhouseCoopers LLP as independent auditors of the Company
         for the fiscal year ended December 31, 2000 and authorization for the
         directors to fix the remuneration therefor.

3.       Amendment of the 1999 stock option plan to increase the number of
         shares of the Company's common stock that are available for option
         grant under the plan  to 19% from 15%.


PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

--------------------------------------------------------------------------------

         See Note 4 (b) of Notes to Consolidated Financial Statements.


                                      -23-
<PAGE>


                                   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.

                                    CAPITAL ENVIRONMENTAL RESOURCE INC.

August 14, 2000                     /s/ Bruce Cummings
                                    --------------------------------------------
                                    Bruce Cummings
                                    Chairman of the Board

August 14, 2000                     /s/ David Langille
                                    --------------------------------------------
                                    David Langille
                                    Executive Vice President, Chief Financial
                                    Officer


                                      -24-