U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X] Annual report under Section 13 or 15 (d) of the Securities Exchange Act of
1934 for the fiscal year ended September 30, 2001.

[ ] Transition report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 for the transition period from _____________to______________

Commission File Number    001-15567
                       --------------



                                  PROBEX CORP.
                 (Name of Small Business Issuer in Its Charter)

         Delaware                                     33-0294243
-------------------------------               ---------------------------
(State or Other Jurisdiction                      (I.R.S. Employer
Incorporation or Organization)                   Identification No.)


13355 Noel Road, Suite 1200
Dallas, TX                                             75240
----------------------------------------      ----------------------------
(Address of Principal Executive Offices)             (Zip code)

                                 (972) 788-4772
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code.)


Securities registered under Section 12(b) of the Exchange Act:

         Title of Each Class                     Name of Each Exchange
         -------------------                      on Which Registered
    Common Stock, $0.001 par value               ---------------------
                                                American Stock Exchange

Securities registered under Section 12(g) of the Exchange Act:    None
                                                              ------------------
                                                               (Title of class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
   -------------    --------------

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ____________

State issuer's revenues for its most recent fiscal year: $15,528,606

The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of December 15, 2001 was $36,534,963. For
purposes of this computation, all executive officers, directors and 10%
stockholders were deemed affiliates. Such a determination should not be
construed as an admission that such executive officers, directors or 10%
stockholders are affiliates.

As of December 7, 2001, there were 31,704,784 shares of the common stock, $0.001
par value, of the Company issued and outstanding.

Transitional Small Business Disclosure Format:    Yes          No    X
                                                      --------    ----------

                       DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement pertaining to the 2002 Annual
Meeting of Stockholders (the "Proxy Statement") and filed or to be filed not
later than 120 days after the end of the fiscal year pursuant to Regulation 14A
is incorporated herein by reference into Part III.

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                                  PROBEX CORP.
                                      INDEX


                                                                                                  Page No.
<S>       <C>       <C>                                                                             <C>
PART I
          Item 1.   Description of Business..........................................................1

          Item 2.   Description of Properties.......................................................17

          Item 3.   Legal Proceedings...............................................................18

          Item 4.   Submission of Matters to a Vote of Security Holders.............................18

PART II
          Item 5.   Market for the Common Stock and Related Stockholder Matters.....................18

          Item 6.   Management's Discussion and Analysis or Plan of Operations......................21

          Item 7.   Financial Statements............................................................27

          Item 8.   Changes in and Disagreements with Accountants on Accounting
                        And Financial Disclosure....................................................51

PART III
          Item 9.   Directors, Executive Officers, Promoters and Control Persons....................51

          Item 10.  Executive Compensation..........................................................51

          Item 11.  Security Ownership of Certain Beneficial Owners and Management..................51

          Item 12.  Certain Relationships and Related Transactions..................................51

          Item 13.  Exhibits and Reports on Form 8-K................................................52

SIGNATURES..........................................................................................60



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<PAGE>

                                     PART I

         Included in this report, exhibits and associated documents are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as well as
historical information. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations reflected in such forward-looking statements will prove to be
correct. Our actual results could differ materially from those anticipated in
forward-looking statements as a result of certain factors, including matters
described in the section titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Forward-looking statements
include those that use forward-looking terminology, such as the words
"anticipate," "believe," "estimate," "expect," "intend," "may," "project,"
"plan," and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements
are reasonable and achievable, such statements involve risks and uncertainties
and no assurance can be given that the actual results will be consistent with
these forward-looking statements.

         Unless the context otherwise requires, "Probex," the "Company," "we,"
"our," "us" and similar expressions refer to Probex Corp. and its subsidiaries.

Item 1.  Description of Business

History

         Our predecessor, Conquest Ventures, Inc., was incorporated as a
Colorado corporation in August 1988. Conquest Ventures engaged in an unrelated
line of business that had been discontinued by 1994, when it acquired certain
technology rights from Probex Technologies, L.P. In connection with the 1994
acquisition, Conquest Ventures changed its name to Probex Corp. and focused its
subsequent activities on research and development of the acquired technology
that lead to our present line of business. On August 31, 2000, we were
reincorporated as a Delaware corporation.

         On May 1, 2000, we formed a wholly owned subsidiary, Probex Fluids
Recovery, Inc., (PFR) to acquire substantially all of the assets of Petroleum
Products, Inc. (PPI) and Intercoastal Trading Company, Inc. (ITC). PPI and ITC
are in the business of collecting, purchasing, selling, delivering and marketing
spent lubricating oil in Ohio, Kentucky and the surrounding areas. On September
29, 2000, PFR acquired substantially all of the assets of Specialty
Environmental Services (SES), a division of Pennzoil-Quaker State Company. SES,
headquartered in Shreveport, Louisiana, is a collector of spent lubricating oils
and related products, primarily in the Southeastern United States. PPI, ITC and
SES are being operated under their respective trade names (such as SES a
division of PFR) until we commence operations at our first facility for
processing spent lubricating oil.

Overview

         We are an energy technology company that has developed a patented
process that enables us to produce premium quality lubricating base oils from
collected spent lubricating oil in an environmentally beneficial and economical
manner. We have worked over six years and invested approximately $12 million in
the development of this patented process. This technology also possesses the
capability to produce both light distillate fuel and an asphalt modifier from
collected spent lubricating oil, in addition to premium quality lube base oils.

         We have a fully operational pilot plant, which has the capacity to
process approximately two barrels of collected spent lubricating oil per day
into premium quality lubricating base oils. This pilot plant has been, and


                                       1
<PAGE>

continues to be utilized to demonstrate our technology to leading industry
experts. We believe, and evaluations conducted by two insurance companies and
the independent engineering firm of R. W. Beck, Inc., have reported that the
technology in our pilot plant is scalable up to full plant specifications. Due
to the success of our pilot plant, together with Bechtel Corporation we have
designed our first full scale plant to be built in Wellsville, Ohio. We plan to
begin construction of the Wellsville facility as soon as project financing is
completed. We currently believe that project financing could take place in the
second calendar quarter of 2002, though there can be no guarantee that there
will not be delays in obtaining our project financing or that the project
financing will be successfully completed because of the capital intensive nature
of the project.

         Currently our only operations consist of the collection and sale of
spent lubricants. Our goal is to have our collection operations supply our
planned plants with substantially all of the necessary collected spent
lubricating oil feedstock. We intend to further increase our market share of the
spent lubricants collection business through expansion of national accounts,
acquisitions of established spent lubricants collectors and street collections.
While market timing appears favorable, there can be no assurances that we will
be able to complete any further expansion or acquisitions.


Industry Background

Spent Lubricants Collection Opportunity

         Consumer and industrial lubricating oils, such as motor oils, are
comprised of base oils and a "package" of additives. Each producer of
lubricating oils tailors these additives to improve the operating
characteristics of lubricating base oil for their specific market application.
During use, many of these additives are substantially degraded, depleted or
contaminated. However, the underlying lubricating base oil, a valuable petroleum
product, remains largely unaffected. Thus, an inexpensive process for precisely
separating and recovering the valuable lubricating base oil component of
collected spent lubricating oil for reuse would be very beneficial to the
environment through the preservation of natural resources and reduction in
pollution.

         Based on a 1998 study conducted by the U.S. Department of Energy,
approximately 1.3 billion gallons per year of spent lubricating oil is generated
by automobiles, light trucks, and other transportation engines and machinery in
the United States. About 430 million gallons of the spent lubricating oil
generated annually are either consumed at the point of generation (as in gas
station space heaters) or not recovered, and presumably a substantial portion of
that unrecovered amount is not properly disposed of. Of the approximately 900
million gallons per year that are collected, only approximately 140 million
gallons are reprocessed, yielding approximately 70 million gallons of
lubricating base oil. The balance of the spent lubricating oil collected is
burned as low grade fuel. Thus only 16% of the total amount of spent lubricants
collected, and approximately 11% of the total amount of spent lubricating oil,
is reprocessed into lubricating base oil.

         Worldwide, an estimated 5.3 billion gallons per year of spent
lubricating oils are generated. Collection and reprocessing efforts are hindered
by the lack of a cost effective and environmentally sound technology that can
provide a consistent and valuable outlet for the collected spent lubricating
oil. Without such technology, collected spent lubricating oils are exposed to
the pricing volatility associated with fuel market outlets and increasing
regulatory restrictions on air emissions from burner fuels.


                                       2
<PAGE>

Current Spent Lubricating Oil Reprocessing Technologies and Companies.

         Highly sophisticated separation units utilized by the refining or
petrochemical-processing industries could be employed to extract the valuable
lubricating base oil with great precision. However, employing this type of
equipment to reprocess spent lubricating oil creates a thick black sludge as the
spent lubricating oil is heated. The black sludge causes rapid fouling within
the processing equipment and the process must be shut down to clean the
equipment.

         To address this fouling problem, existing commercial reprocessors have
been forced to employ relatively ineffective and maintenance-intensive
separation equipment, which is designed to reduce fouling rather than provide
effective separation. This, in turn, has necessitated additional processing
equipment and additional costs to rectify the shortcomings of the separation
process. Such reprocessors, at best, merely restore the base oil contained
within the spent lubricating oil back to its original quality, rather than
upgrade it to a higher quality lubricating base oil. See "Competition."


Supply and Product Markets

Supply Market

         The spent lubricating oil collection industry in the U.S. is
fragmented. The largest and only national collector, Safety-Kleen Corporation,
is believed to collect approximately 25% of all available spent lubricating oil
appropriate for use as reprocessing feedstock. A number of mid-size regional
companies and hundreds of small local collection companies collect the balance
of the available spent lubricating oils. We currently collect our spent
lubricating oil through ownership of three strategically located collection
companies and intend to secure the majority of our lubricating oil collection
requirements through ownership of additional strategically located collection
companies in order to provide a more stable and economically attractive
feedstock supply.

         We expect to collect enough spent lubricating oil in 2002 to supply
up to 35 million gallons, or about 60%, of our first planned plant's feedstock
requirements. The remainder of the feedstock for that plant is secured through
signed third-party commitments. We are continuing to aggressively pursue
expansion of national accounts as well as continuing to evaluate potential
acquisitions of additional spent lubricating oil collectors to reduce the amount
that will be secured from third-parties. We cannot assure you; however, that we
will be able to complete any further expansion or acquisitions of lubricant
collectors.


Product Market


         We currently sell, and will continue to sell until our first plant is
operational, all of our spent lubricating oil collections into burner fuel
markets.

         Our proprietary processing technology separates collected spent
lubricating oil into three valuable products: (i) high quality lubricating base
oils desirable for use in motor oils meeting new industry standards, (ii) light
distillate that is useful as a low-ash industrial fuel or refinery feed for the
manufacture of gasoline, and (iii) an asphalt modifier suited for specialty
chemical and asphalt market outlets. Each of our proposed facilities, when
operational, is expected to supply approximately 2.5% of U.S. transportation
lubricating base oil demand and less than 0.1% of U.S. fuel oil and asphalt
demand. See "Technology and Products." We believe that the potential markets for
such reprocessed products are large.


                                       3
<PAGE>

New Motor Oil Standard

         Passenger car motor oils are licensed under a certification system that
is administered by the American Petroleum Institute (API). API-licensed motor
oils (API lubricants) comprise the highest quality motor oils and represent
virtually all of the motor oils that are consumed in the U.S.. API lubricants
are required by automotive manufacturers for use in cars and light trucks in
order to maintain adequate protection of the vehicle engine during use and to
preserve full coverage under most manufacturer engine warranties.

         Periodically, a consortium of American and Japanese automobile and
engine manufacturers, who are members of the International Lubricant
Standardization and Approval Committee (ILSAC), review and revise standards for
API lubricants. The revisions periodically set forth by ILSAC effectively
increase the performance standards for API lubricants that are used in the
engines of lighter transportation vehicles, such as cars and light trucks.
Improvements in fuel economy, reduced emissions, improved lubrication under
widely divergent temperature conditions, and suitability of motor oils to new
engine designs all factor into new industry standards set forth by ILSAC.
Moreover, there is a trend toward converging the domestic and international
standards into a common international standard, and other markets, such as
Europe, have standards that are even more demanding than the ILSAC/API
standards. The latest standard, ILSAC GF-3, replaces GF-2 and was approved in
September 2000. This new industry-wide automotive motor oil performance standard
became effective in July 2001 and is required for model year 2002 automobiles.
Information released by ILSAC has indicated that improved fuel economy, reduced
emissions, and reduced oil consumption were all significant factors in the
adoption of the new GF-3 standard.

         Prior upgrades in ILSAC motor oil performance standards have been
largely addressed through improved lubricant additive performance, without major
performance improvements in the base oil component of the motor oil. In
contrast, the new GF-3 standards, in addition to requiring additive formulation
improvements, will require the use of significantly higher performance
lubricating base oils for the common viscosity grades. As a result, the number
of GF-3 compliant lighter viscosity lubricating base oil production plants is
anticipated to decrease significantly.

         We anticipate producing GF-3 compliant lubricating base oils and are
positioning our premium base oil products to meet the demands of independent
blenders. Current GF-3 compliant base oil pricing in the lighter viscosity
grades is approximately 7 cents/gal above current prices of base oils that do
not meet GF-3 specifications.


Our Solution

         Today, most spent lubricating oils are either burned or improperly
disposed of with serious damaging impact to soil, water and air. In an effort to
reduce such harmful effects on the environment, our solution includes the
following:

         o        Collecting and purchasing a portion of the spent lubricating
                  oil generated;

         o        Storing and delivering the collected spent lubricating oil to
                  our plants strategically located near densely populated
                  regions with large supplies of spent lubricating oil;

         o        Processing a majority of the collected spent lubricating oil
                  into premium quality lubricating base oils meeting GF-3
                  standards using our proprietary technology, ProTerra (TM); and


                                       4
<PAGE>


         o        Selling and distributing the premium quality lubricating base
                  oil to oil compounders and blenders for its return into the
                  lubricating base oils marketplace.


         By providing a viable economic and environmentally beneficial
alternative to the present use and disposal of collected spent lubricating oil,
we believe that we are well positioned to take advantage of the opportunities in
the lubricating base oils market.


Strategy

         Our goal is to be a world market leader in the production of premium
quality lubricating base oils and associated products from collected spent
lubricating oil through the timely commercialization of our proprietary
technology. Our strategy for achieving this goal is based on the following core
elements.

Technological Leadership. We believe that we offer the most innovative, cost
effective and environmentally beneficial technology to date that enables the
reprocessing of collected spent lubricating oil. We have sought and obtained
U.S. patent protection for our proprietary technology, ProTerra. Additionally,
we have filed for patent protection worldwide. We believe we have adequately
protected our technology in order to create meaningful barriers of entry into
this market niche.

Existence and Development of Quality Strategic Relationships. We have
consummated strategic relationships with Environmental Resources Management and
Bechtel Corporation. Each of these entities, or their affiliates or principals,
have invested directly in us. We are finalizing an agreement with an AAA-rated
international insurance company for a facility that provides technology and
market risk coverage to the senior lenders for our planned Wellsville plant. In
addition, we may from time to time develop further strategic relationships that
we believe will contribute materially to the rapid implementation of our
technology, on both a domestic and international basis.

Global Presence. We are currently negotiating a joint venture agreement with a
multi-national European conglomerate for the development of a plant employing
our proprietary technology in Europe.

Acquisition of Quality Spent Lubricants Collectors. We have established through
PFR a significant position in the spent lubricants collection industry, and we
intend to further increase our market share of the spent lubricants collection
business through a combination of increased street collections, expansion of
national accounts and potential acquisitions of established spent lubricants
collectors.

Develop Customer and Supplier Relationships. We have entered into multi-year
contracts to sell a total of 26 million gallons per year of our high quality
lubricating base oil products to seven independent lubricating oil
manufacturers. This total represents about 75% of the anticipated yield of
lubricating base oils from our first planned plant, satisfying project lender
requirements for product sales contracts and allowing us flexibility in the
market.


Strategic Alliances

         We have strategic relationships that we believe are of material benefit
and significance to the implementation of our corporate goals. Our principal
strategic relationships are with the following companies.


                                       5
<PAGE>

Bechtel Corporation

         On February 29, 2000, we entered into a Memorandum of Understanding
with Bechtel Corporation (Bechtel) to commence negotiations with respect to a
strategic worldwide alliance agreement, which was subsequently reached, and we
are currently completing an engineering, procurement, and construction (EPC)
agreement with Bechtel for our planned Wellsville facility. We have also entered
into an agreement to license MP Refining Technology owned by Bechtel to enhance
our own proprietary technology (ProTerra). Upon entering into the Memorandum of
Understanding, we issued Bechtel a warrant, which had a two-year expiration, to
purchase up to 200,000 shares of our common stock at an exercise price of $3.00
per share, as consideration for Bechtel agreeing to defer up to $1 million of
license and engineering payments for our first plant to be built in Wellsville,
Ohio. On March 27, 2000, Bechtel made a $600,000 investment in us by exercising
this warrant. On January 31, 2001 we entered into a Strategic Alliance Agreement
with Bechtel and are continuing to negotiate the EPC agreement for Wellsville.

         In July 2000, we issued another warrant to purchase up to 200,000
shares of our common stock to United Infrastructure Company, LLC (UIC), an
affiliate of Bechtel Enterprises Holdings, Inc., as consideration for providing
assistance to us in our financing efforts and for other financial advisory
services. This warrant will expire on July 27, 2002 and has an exercise price of
$3.00 per share.

         Additionally, in August 2000, UIC, committed to invest up to $5 million
in us through the purchase of shares of our common stock. Since that time, UIC
has invested a total of $3.5 million in us, including $1.5 million of
convertible debt in September 2001, which counted towards UIC's total investment
commitment. In addition, UIC has the option to make future investments in us of
up to $7.5 million for each subsequent plant, or a higher amount as mutually
agreed, from time to time, for as long as an Alliance agreement between Probex
and Bechtel exists. Further, in conjunction with the commitment by UIC, we
agreed to appoint a representative of UIC as an advisory member to our board of
directors.


Environmental Resources Management

         Individual principals of Environmental Resources Management (ERM), a
$28 million annual revenue environmental consulting firm, have invested directly
in us and we have retained ERM to perform our permitting work for the initial
production plant to be built in Wellsville, Ohio, and to provide permitting and
environmental management services in support of the operations of PFR.


HSB Group, Inc.

         In November 2000, Hartford Steam Boiler Inspection & Insurance Company
(HSB) was acquired by American International Group, Inc., (AIG). We no longer
maintain a strategic relationship with HSB, and we have decided to pursue other
technology and market risk coverage facilities. HSB, and AIG as a result of its
acquisition of HSB; however, continues to own a significant amount of our common
stock.


Technology and Products

         Our patented ProTerra(TM) technology separates collected spent
lubricating oil into three valuable product groups, trademarked under the names
ProLube(TM), ProPower(TM), and ProBind(TM). We believe that our ProTerra

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<PAGE>

technology will enable the processing of spent lubricating oil into premium
quality lubricating base oils at lower cost than has been possible to date. At
the same time, unlike other commercial reprocessing methods, to date, rather
than just restoring the original lubricating base oil, ProTerra is expected to
enhance it beyond original performance standards.

         ProTerra is an extension of conventional crude oil refining techniques
that employs a unique set of operating parameters. ProTerra will enable us to
construct and operate processing plants utilizing conventional process equipment
capable of achieving significant performance improvements over current
reprocessing facility configurations.

         ProTerra employs a relatively straightforward technique that, in the
initial processing stage, virtually eliminates collected spent lubricating oil's
propensity to foul. This key attribute allows us to apply proprietary
adaptations of sophisticated, yet conventional, distillation and separation
technologies that before now could not be effectively employed in processing
collected spent lubricating oil. These technologies, in parallel applications,
employ commonly used refining and petrochemical equipment and operate under
conditions that are well understood and highly predictable. Furthermore, we
anticipate that ProTerra will provide cost-effective operations. Most
importantly, the distillation and separations processes are so effective that
they actually enhance the lubricating base oil product beyond its original
quality by correcting certain shortcomings in its original manufacture. These
results are based on extensive pilot plant testing and tests by independent
lubricant manufacturers and independent engineers. While we believe that the
results achieved are credible, we cannot assure you that the same results will
be achieved on a commercial production scale.


Future Products.

         ProLube

         The primary product created by ProTerra is ProLube, a premium quality
lubricating base oil that, in the typical domestic plant configuration will be
manufactured in two of the most popular viscosity grades. As has been confirmed
by two independent additive companies, ProTerra actually enhances the quality of
the underlying lubricating base oil contained in the collected spent lubricating
oil.

         In that regard, we have provided samples of the lubricating base oils
produced in our pilot facility to Infineum (a joint venture of Shell and
ExxonMobil chemical companies) and Lubrizol, two of the four primary additive
companies. Both companies have confirmed both the physical and chemical
performance characteristics of ProLube lube base oil. Specifically, ProLube has
exhibited strong Noack performance (a test for volatility at high temperatures),
as well as positive low temperature and oxidative stability properties, and
therefore, is expected to be desirable for use in the formulation of premium
quality motor oil lubricants.

         Our entry into the lubricating base oil market, which is expected to
represent approximately 85% of our total projected revenues, may be timely. As
discussed above under "New Motor Oil Standard", more stringent motor oil
standards (called GF-3) were approved in September 2000 and are being applied to
market year 2002 automobiles. In our management's opinion, the number of
lubricating base oil suppliers that are expected to meet the new GF-3 standards
is declining, compared with the GF-2 standards. Because of GF-3, most
independent motor oil formulators are being required to secure new lubricating
base oil suppliers in order to continue to manufacture the full range of
viscosity grade compliant motor oil products. We plan to produce GF-3 compliant

                                       7
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lubricating base oils and, if able to do so, we would be optimally positioned to
meet the new upgraded lubricating base oil requirements for independent motor
oil formulators.

         Independent lubricant formulators in North America, collectively,
purchase approximately 670 million gallons of lubricating base oil annually.
Based on our discussions with firms in the industry, we believe that there is a
strong desire to maintain multiple lubricating base oil supply sources. Thus, we
expect to provide a strategically valuable source of supply for these
independent formulators.

         We have entered into contracts to sell about 75% of the lubricating
base oil products that are expected to be produced at our planned Wellsville
facility. We also intend to market the non-contractual portions of our products
on the spot market in order to maximize total revenues.


         ProPower

         ProPower is a fuel oil that is expected to be a high quality, light
distillate that is useful as a low-ash industrial fuel or refinery feed for the
manufacture of gasoline.


         ProBind

         The final product produced by ProTerra is ProBind, an asphalt modifier,
which is comprised primarily of the concentrated additives inherent within
collected spent lubricating oil and, therefore, has numerous valuable
performance enhancing properties. Asphalt products often require specialty
chemicals that promoting thickening at higher temperatures and increase
elasticity at lower temperatures. We believe that ProBind will be positioned
against certain specialty chemical asphalt modifiers once testing and in-use
applications corroborate the higher value properties of ProBind. We have also
received strong indications of interest in contractual supply arrangements for
our fuel oil and our asphalt modifier from several large users.


Research And Development

         We have invested approximately $12 million in the development of our
proprietary technology, which has received broad protection under two U.S.
patents covering 102 claims. After having completed the construction of our
pilot plant and conducted many test runs, we are finalizing the design of our
plant to be constructed in Wellsville, Ohio. We are presently negotiating an
Engineering, Procurement and Construction (EPC) agreement with Bechtel for the
construction of the Wellsville plant and any subsequent U.S. plants. However, we
cannot assure you that we will be successful in consummating a construction
contract with Bechtel.


Intellectual Property and Proprietary Rights

         Our intellectual property protection strategy is twofold. The first
element of the strategy is patent protection. We received from the United States
Patent Office two patents covering 102 claims. These patents cover our
de-fouling pretreatment and distillation processes until September 2017. We have
filed for and hope to secure the broadest possible patent protection for the
core elements of our technology in as many major world markets as possible where
patents are recognized and enforced.

                                       8
<PAGE>


         The second element of our intellectual property protection strategy is
the protection of our trade secrets. Our patent applications were filed in 1997
and early 1998 before the major portion of our pilot testing program.
Accordingly, essentially all of the process condition optimizations developed
through pilot testing have not been disclosed under our patent filings. We
presently intend to maintain this information as a closely protected trade
secret, thereby providing a significant measure of intellectual property
protection even in markets where patents are effectively unenforceable.

         We also have filed trademark applications in the United States and
several other countries for ProTerra, ProLube, ProPower and ProBind, as well as
Purifine(TM), Purafine(TM), Purefine(TM) and Profine(TM), all of which are
pending.



Environmental and Government Consents

         Our process is expected to be environmentally beneficial and is not
expected to produce harmful levels of emissions or waste by-products, other than
treatable water. However, our business operations are subject to certain
federal, state and local requirements which regulate health, safety,
environment, zoning and land-use. In September 1992, the Environmental
Protection Agency enacted regulations that govern the management of spent
lubricating oils. Although collected spent lubricating oils are not classified
as a hazardous waste under federal law, certain states do regulate spent
lubricating oil as hazardous wastes, which may affect us. Operating and other
permits are generally required for our planned facilities, including the planned
plant in Wellsville. The significant permits necessary to construct and operate
the Wellsville facility are in place, but are subject to revocation,
modification and renewal. Many of the environmental laws and regulations
applicable to us provide for substantial fines and criminal sanctions for
violations. It is possible that future developments, such as stricter
environmental laws, regulations or enforcement policies, could affect the
handling, manufacture, use, emission or disposal of substances or pollutants at
and in our plants. Moreover, some risk of environmental costs and liabilities is
inherent in our particular operations and products, as it is with other
companies engaged in similar businesses. There can be no assurance that material
costs and liabilities will not be incurred. Due to increasingly stringent
environmental regulations arising from current and future requirements of
proposed laws, we may have significant capital requirements for environmental
projects in the future.


Competition

         Safety-Kleen is the largest domestic reprocessor of collected spent
lubricating oil into lubricating base oil, and therefore a prospective
competitor. However, we believe that Safety-Kleen is not currently capable of
producing GF-3 compliant lubricating base oils for the 10W-30 or 5W-30 viscosity
grades. Using a non-proprietary thin or wiped film process at a large facility
in East Chicago, Indiana, Safety-Kleen at one point reprocessed 85 million
gallons of collected spent lubricating oil each year into GF-2 and generic
quality lubricating base oil, fuel and asphalt byproducts. Evergreen Oil Inc.
employs a similar technology at a much smaller 12 million gallon per year
reprocessing facility in Northern California. Other competing technologies
include the thermal deasphalting process of IFP/Viscolube, a joint technology
venture of the Institut Francais du Petrole and Viscolube/Italiana S.p.A.;

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<PAGE>

Universal Oil Products' HyLube direct contact hydrogenation; Kinetic Technology
Incorporated's process; and Interline Resources Corporation's propane extraction
system.

         To date, we have not generated revenues from our anticipated core line
of business. While ProTerra has been validated by independent and reputable
testing laboratories, there can be no assurances that we will be successful in
entering the oil reprocessing industry or generating revenue from our ProTerra
reprocessing operations. In addition, we cannot assure that we will be able to
secure equity and/or debt financing as needed to continue operations. Finally,
while we believe ProTerra offers a unique technology for reprocessing collected
spent lubricating oil, even if we complete our first plant and begin actual
production, because of the expected high quality of our base oil products we
anticipate being in a business that is highly competitive.



Employees

         As of December 31, 2001, we had a total of 109 employees, of which 62
were in operations, 9 were in sales and marketing, 4 were in research and
development, and 34 were in finance and administration. None of our employees
are represented by a labor union. We have not experienced any work stoppage and
consider relations with our employees to be good.


Risk Factors
------------

If any of the following risks actually occur, our business, results of
operations, and financial condition would likely suffer.

Risks Related to Our Business

We anticipate approximately $7 million of additional capital will be required to
sustain our operations in fiscal year 2002. If we are not able to obtain
additional capital in the near term, we may not be able to continue as a going
concern. Additionally, if we do not receive the necessary capital to sustain our
operations, we may be forced to sell assets or take other measures.

We may be unable to obtain necessary additional financing. Our limited revenue
requires us to seek additional funds, which are only presently available to us
through external financing. We presently require external financing for
corporate overhead and other requirements, including satisfaction of accounts
payable to complete the development of our initial project(s). A much larger
amount of external financing, presently anticipated to exceed $125 million,
which we will be seeking to secure on a project supported basis largely in the
form of debt, is required to construct our initial plant and commence commercial
operations. If we are not able to obtain the necessary capital resources, our
potential as a going concern will be seriously affected.

We have short-term obligations that are secured by our assets that mature in the
near term. We had $8.3 million of short-term loans that matured on December 31,
2001. We extended the maturity of $3.5 million of these obligations until June
30, 2002. We extended the maturity of the remainder of these obligations until
January 31, 2002, and are in process of negotiating a further extension of these
obligations to June 30, 2002. If we are unsuccessful in extending the maturity
date of the obligations maturing on January 31, 2002, we will need additional
capital to repay these obligations or risk foreclosure on our assets secured by
such obligations.

We have a history of operating losses and our future profitability is uncertain.
We have incurred net losses since our inception. We have not derived any
revenues to date from the use or sale of our reprocessing technology and, at


                                       10
<PAGE>

September 30, 2001, we had an accumulated deficit of $31,648,358. We expect to
continue to incur losses for at least 24 months as we increase our expenditures
for the continued commercialization of our reprocessing technology. The time
required for us to become profitable is highly uncertain, and we cannot assure
you that we will achieve profitability.

We have had increases in leverage that could adversely affect our financial
condition. As of September 30, 2001:

o        We had approximately $31.4 million in consolidated debt, of which
         approximately $19.9 million is secured by certain of our assets; and
o        We had a ratio of consolidated debt to equity of 83-to-1.

Our leverage could have important consequences for you. For example, it could:

o        make it more difficult for us to satisfy our obligations with respect
         to our debt outstanding;
o        limit our ability to obtain additional financing for working capital,
         acquisitions, debt service requirements or other purposes;
o        increase our vulnerability to adverse economic and industry conditions;
o        require us to dedicate a substantial portion of our cash flow from
         operations to payments on our debt, thereby reducing funds available
         for continued technology commercialization, operations, future business
         opportunities or other purposes;
o        limit our flexibility in planning for, or reacting to, changes in our
         business and the industry in which we will compete; and
o        place us at a competitive disadvantage compared to our competitors that
         have less debt.

We are dependent on our strategic alliances. We are dependent on collaborative
relationships for the refinement of certain aspects of our technology, and our
project development and commercialization strategy contemplates continued
dependence on collaborative partners. We cannot assure you that we will be
successful in maintaining or further formalizing our existing collaborative
relationships or establishing such new relationships.

         In particular, we envision that Bechtel will oversee plant design and
construction pursuant to an engineering, procurement and construction contract.
We cannot assure you; however, that we will reach a final agreement with Bechtel
for the design and construction of our plant(s). In addition, an AAA rated
insurance company is expected to issue a technology and market cover facility
for our proprietary technology to reprocess used lubricating oil. We cannot
assure you, however, that we will receive this facility for our reprocessing
technology.

Our success depends on our technology being scalable to full plant
specifications. The commercialization of our technology is dependent on our
ability to replicate our reprocessing technology in a full-scale production
facility. While our reprocessing technology has been demonstrated in our pilot
plant, we cannot assure you, however, that we will be capable of successfully
implementing it in a full-scale production facility.

Uncertain application of intellectual property laws may jeopardize our patents
and proprietary technologies. Our ability to compete will depend in significant
part on the proprietary nature of our technologies. We rely upon patent and
trade secret laws to establish and maintain proprietary rights in our
technologies and processes. Although we have received patents in the U.S. and
applied for patents abroad on certain aspects of our reprocessing technologies
and anticipate filing additional patent applications in the future, we cannot
assure you that such patents will provide sufficient protection or be of


                                       11
<PAGE>

commercial benefit to us. We also seek to protect our technology through
confidentiality agreements and trade secret protection where patent protection
is not believed to be appropriate or obtainable. We cannot assure you that the
steps we have taken to protect our proprietary rights will be adequate to
prevent misappropriation of our technologies or that competitors will not
independently develop technologies that are substantially equivalent or superior
to our technologies. In addition, the laws of some foreign countries may not
permit the protection of proprietary rights to the same extent, as do the laws
of the U.S. In the event that protective measures are not successful and we are
unable to maintain the proprietary nature of our technologies, we may not be
able to maintain the competitive advantage necessary for us to become and remain
profitable, and our financial condition or results of operations would be
materially and adversely affected accordingly.

Integrating our recently acquired businesses and potential future acquisitions
could challenge our management. Our future growth depends in part upon the
successful integration of the acquired assets of PPI, ITC and SES into our other
operations. We cannot assure you that we will be able to successfully operate
this line of business and their related personnel. Our failure to successfully
integrate and manage the personnel and operations of PPI, ITC and SES and to
retain their employees and customers could have a material adverse effect on our
business, financial condition and results of operations.

We may in the future undertake acquisitions that could present challenges for
our management. Acquisitions involve numerous risks, including the need to
assimilate new operations and personnel, implement new business processes and
manage geographically remote business units. These needs may divert management's
attention from other business concerns. An acquisition could result in the use
of a significant portion of our cash or, if an acquisition is financed with our
securities, in significant dilution to our stockholders. In addition, we cannot
assure you that any product or service we acquire will gain acceptance in our
markets. If we fail to respond effectively to these challenges, any future
acquisition could have a material adverse effect on our business, financial
condition and results of operations.

Our current revenue is primarily derived from services that we do not expect to
be the major source of our revenues in the future. Because we have not
commercially offered any of our reprocessed lubricating base oil products, we
currently derive all of our revenue from the services and products provided by
PPI, ITC and SES. Substantially all of the assets of PPI and ITC were acquired
in May 2000 and SES in September 2000, through our wholly owed subsidiary,
Probex Fluids Recovery, Inc. (PFR). PPI, ITC and SES's services and products,
however, are an integral component of our business model. As a result, our
revenue from the collection and sale of spent lubricating oil may not reflect
the allocation of revenue we expect from our future lines of business.

Since a significant portion of our spent lubricating oil is collected from a
limited number of suppliers, a loss of one or more of these suppliers could
adversely affect our business. We currently collect and expect to continue to
collect a significant portion of our spent lubricating oil from a limited number
of suppliers. As a result, the loss or reduction in the number of suppliers of
our spent lubricating oil could significantly reduce our ability to generate
revenue and earnings. In the year ended September 30, 2001, our three largest
suppliers represented approximately 29% of the spent lubricating oil that we
collected.

Since a significant portion of our current revenue is derived from a limited
number of customers, a loss of one or more of these customers could adversely
affect our business. We currently derive and expect to continue to derive a
significant portion of our current revenue from a limited number of customers.
As a result, the loss of or reduction in the amount of spent lubricating oil
collected and sold to any of these customers could significantly reduce our


                                       12
<PAGE>

revenue and earnings. In the year ended September 30, 2001, our three largest
customers represented approximately 27% of our revenue.

The expected fluctuations of our quarterly results could cause our stock price
to fluctuate or decline. We expect that our quarterly operating results will
fluctuate significantly in the future based upon a number of factors, many of
which are not within our control. We plan to further increase our operating
expenses in order to expand our sales and marketing activities, fund research
and development activities and broaden our service and production capabilities.
We base our operating expenses on anticipated market growth and our operating
expenses are relatively fixed in the short term. As a result, if our revenue is
lower than we expect, our quarterly operating results may not meet the
expectations of public market analysts or investors, which could cause the
market price of our common stock to decline. Due to the uncertainty surrounding
our revenue and expenses, we believe quarter-to-quarter comparisons of our
historical operating results should not be relied upon as an indicator of our
future performance.

If we fail to manage our growth, our business could be adversely affected. We
anticipate that we will need to experience significant growth in our business in
a short period in order to pursue existing and potential market opportunities.
Our growth could include an expansion in our staff and customer base,
acquisitions of oil collectors and the development of our lubricating base oil
products. The number of people we employ increased from 91 to 117 between
September 2000 and 2001, and was subsequently reduced to 109 on December 31,
2001. We expect this growth to continue upon project financing. These changes
are could place a strain upon our management, systems and resources. We cannot
assure you that we will be able to successfully manage growth in our business,
staff, customer base, products or services. Our failure to do so could have an
adverse effect upon our business, financial condition and results of operations.

Our success depends on retaining our current key personnel and attracting
additional qualified employees. Our future success is dependent in large part on
a number of key senior management, research and development and sales and
marketing employees, in particular: Charles M. Rampacek, Chairman of the Board,
President and Chief Executive Officer; Bruce A. Hall, Senior Vice President and
Chief Financial Officer, David J. McNiel, Senior Vice President of Operations,
and Martin R. MacDonald, Senior Vice President of Technology and Business
Development. The loss of one or more key employees could have a material adverse
effect on our business, financial condition and results of operations.

         Our future success also will depend to a significant extent on our
ability to attract, train, motivate and retain highly qualified employees. These
employees include managerial and sales personnel, as well as highly skilled
professionals and other senior technical personnel. We believe that there is a
shortage of, and significant competition for, individuals with the advanced
technological skills necessary to develop, manufacture and market our products.
We expect that it will become increasingly difficult to hire additional
personnel with such expertise and experience. Our inability to hire and retain
qualified personnel or our loss of the services of key personnel could have a
material adverse effect upon our business, financial condition and results of
operations.

Our success depends upon our ability to collect spent lubricating oil and market
our reprocessed lubricating base oil products. Our business model depends on our
ability to maintain a constant and consistent supply of spent lubricating oil
and derive revenue from selling our reprocessed lubricating base oil products.
As a result, our future financial performance will depend in large part on
market acceptance of our products, such as ProLube, our ability to maintain a
constant and consistent supply of used lubricating oil, and our ability to adapt
and modify our reprocessed lubricating base oil products to meet the evolving
needs of our customers and government standards. Competition and the future

                                       13
<PAGE>

effects of product enhancements makes the life cycle of our products difficult
to estimate, including developments in the refining and reprocessing industries
in which we operate. The failure of our products to gain widespread acceptance,
whether as a result of competition, technological change or otherwise, would
have a material adverse effect on our business, financial condition and results
of operations.

Delays in plant construction could negatively impact our business. We have an
aggressive construction schedule for our production facilities. Our success will
depend to a substantial degree on our ability to construct production facilities
on a timely basis. Construction is often not completed on time and significant
delays may result in loss of sales, increases in cost, and harm to the
competitiveness of our products or our ability to attract and sustain strategic
relationships. Our failure to construct these production facilities on a timely
basis may have a material adverse effect on our business, financial condition
and results of operations.

Risks Related to Our Industry

The acceptance of our reprocessed lubricating base oil products is uncertain.
Our business model depends on demand for reprocessed lubricating base oil
products.

The growth of reprocessed lubricating base oil products could be limited by:

o        supply of spent lubricating oil;
o        price of spent lubricating oil; and
o        alternative lubricating base oil products.

If our reprocessed lubricating base oil products are not accepted or are
perceived to be ineffective, our business, financial condition and results of
operations will be adversely affected.

Adverse market conditions and volatility of lubricating base oils prices and
volumes may adversely affect us. The revenues generated by our operations will
be highly dependent on the prices of, and demand for, lubricating base oil.
Historically, the prices of lubricating base oil have been related to crude oil
prices, which have been volatile and are likely to be volatile in the future.
However, the spent lubricating oil, which is used as feedstock, is more
correlated to the price of Number 6 Oil, a by-product of the refining process,
which is much less volatile than crude. Therefore, Probex's margins are
volatile, but less volatile than the refining crack spread due to the more
stable nature of the spent lubricating oil feedstock prices.

Government regulation and legal uncertainties could increase our cost of doing
business. Due to increasing environmental concerns with respect to petroleum
products, laws and regulations applicable to petroleum-based products are
becoming more prevalent. The adoption or modification of these laws or
regulations could inhibit the growth in the use of our products and decrease the
acceptance of our products, which could have a material adverse effect on our
business, financial condition and results of operations.

         Due to global environmental concern, state and foreign governments also
may attempt to regulate petroleum based products and their production. We cannot
assure you that violations of domestic or foreign laws will not occur or that
these governments will not allege violations of such laws and regulations. In
addition, the applicability of existing laws or regulations relating to issues
such as motor oil standards and hazardous waste are uncertain. We may have
difficulty complying with existing or new laws and regulations, and as a result
our business, financial condition and results of operations may be adversely
affected.


                                       14
<PAGE>

We cannot accurately predict the size of our product market, and if this market
is not as large as we expect, our business prospects will suffer. Our growth
will depend in part on the development and widespread acceptance of reprocessed
lubricating base oils as an alternative for conventional lubricating base oils.
Use of reprocessed lubricating base oils is not widespread, and market
acceptance of our reprocessed lubricating base oils as an alternative to
conventional lubricating base oils is subject to a high level of uncertainty.
Accordingly, we may fail to accurately estimate the size of our market or the
potential demand for our products. This failure could have a material adverse
effect on our business, financial condition and results of operations.

If we are unable to respond to changes in motor oil standards, our technology
could become obsolete and we could lose revenue. The motor oil standards are
subject to change. The introduction or announcement of new motor oil standards
or products or enhancements by our competitors or us could render our existing
products obsolete or unmarketable. To remain competitive, we must be ready to
change and improve our products in response to industry changes, including
changes in motor oil standards. Accordingly, our future success will depend on
our ability to enhance our products or expand the applications of our products
in a manner that will respond to market needs and satisfy the demand for
increasingly sophisticated requirements.

         The timeliness of product introductions can have a material impact on
market acceptance of the product. Because it is generally not possible to
predict the time required and costs involved in reaching certain research and
development objectives, estimated product development schedules could require
extensions and actual development costs could exceed budgeted amounts. If we are
unable to develop and introduce new products or enhanced products in a timely
manner, our business, financial condition and results of operations could be
materially adversely affected.

Competition in the lubricating base oil market is characterized as intense. We
are smaller and have had a more limited operating history than most of our
competitors. We will compete with major and independent lubricating base oil
producers. We also compete for the equipment and labor to operate production
facilities. We also expect competition from emerging companies. We cannot assure
you that competitors will not develop products and services that are superior to
or that achieve greater market acceptance than our products and services. We
expect that competition will continue to intensify as the market for our
products develop. Our failure to remain competitive could have a material
adverse effect on our business, financial condition and results of operations.

Many of our competitors have substantially greater resources than we do. Many of
our current and potential competitors have significantly greater financial,
technical, marketing and other resources than us. As a result, our competitors
may respond more quickly than us to new or emerging technologies and evolving
industry standards, or may devote greater resources than us to the development,
promotion, sale and support of their products. Current and potential competitors
have established or may establish in the future cooperative relations among
themselves or with third parties to increase the ability of their products to
address the needs of our potential customers. As a result, new competitors or
alliances among our existing competitors may emerge and rapidly decrease our
market share. We cannot assure you that we can maintain our competitive position
against current and potential competitors, especially those with significantly
greater financial, marketing, service, support, technical and other competitive
resources than us, or that competitive pressures faced by us would not have a
material adverse effect on our business, financial condition and results of
operations.

Our potential customers are subject to a regulatory environment and to industry
standards that may change in a manner adverse to our interests. Our potential
customers are subject to a number of government regulations and industry
standards. Our products must comply with these regulations and standards. For

                                       15
<PAGE>

example, our products are affected by motor oil standards that generally are
changed every few years. Changes to these standards will likely require us to
make periodic changes to our products. In addition, there has been growth in the
use and generation of alternative lubricating base oils, such as synthetic
lubricating base oils. Action by regulatory authorities to substantially
restrict the availability of conventional petroleum products, or other related
regulatory developments, could have an adverse effect on our customers and,
therefore, could have a material adverse effect on our business, financial
condition and results of operations.

Risks Related to Our Common Stock

Our common stock will likely be subject to substantial price and volume
fluctuations. The price and trading volumes of our common stock may fluctuate
widely due to our limited public float and other reasons, which may be unrelated
to our businesses or results of operations. This market volatility, as well as
general domestic or international economic, market and political conditions,
could materially adversely affect the price of our common stock without regard
to our operating performance. In addition, our future operating results may fall
below the expectations of public market analysts and investors. If we fail to
meet these expectations, the market price of our common stock would likely
decrease significantly.

We may be unable to maintain a listing for our common stock. Our common stock is
currently listed on the American Stock Exchange (AMEX). We cannot assure you;
however, that we will continue to be listed on the AMEX or that there will be
any sustained, active market for our common stock. If we fail to maintain our
listing, the market value of our common stock likely would decline. As a result,
holders likely would find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, our common stock.

We have preferred stock outstanding and have the authority to issue additional
preferred stock without stockholder approval. We currently have outstanding
532,000 shares of Series A 10% Cumulative Convertible Preferred Stock, or Series
A Preferred Stock, which is senior to our common stock with respect to dividends
and upon liquidation. The issuance of additional equity securities may result in
dilution to current stockholders.

We may never declare dividends on our common stock. We have never declared or
paid a dividend on our common stock, and we expect that a substantial portion of
our future earnings, if any, will be retained by us for expansion and
development purposes, which may include acquisitions. Whether we pay dividends
on our common stock in the future will be at the discretion of our board of
directors and will depend upon, among other things, future earnings, operations,
capital requirements and surplus, our general financial condition, preferred
stock preferences, restrictive covenants in any loans or other agreements, and
other factors as our board of directors may deem to be relevant, including the
desirability of cash dividends to stockholders.

The liquidity of our common stock is affected by the small size of the public
float. There has been a limited public market for our common stock. We cannot
predict the extent to which investor interest in our company will be maintained
which is necessary for an active, liquid trading market for our common stock.
Active trading markets generally result in lower price volatility and more
efficient execution of buy and sell orders for investors.

Anti-takeover and Corporate Governance.

Our certificate of incorporation contains provisions that could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us without negotiating with

                                       16
<PAGE>

our board of directors. These provisions could limit the price that investors
might be willing to pay in the future for our securities.

We have the authority to issue additional preferred stock without stockholder
approval. Our certificate of incorporation provides that we can issue preferred
stock with rights senior to those of our common stock or impose various
procedural and other requirements, which could make it more difficult for
stockholders to effect certain corporate actions.

We have a classified Board of Directors. Our Board is divided into three
classes. Directors in each class are elected for terms of three years. As a
result, the ability of stockholders to effect a change in control of us through
the election of new directors is limited by the inability of stockholders to
elect a majority of our Board at any particular meeting.

Our certificate of incorporation prohibits stockholders from acting by written
consent in lieu of an annual or special meeting. Our certificate of
incorporation prohibits stockholder action by written consent in lieu of a
meeting of stockholders. As a result, the ability of stockholders to effect a
change in control of us through action by written consent is limited by the
inability of stockholders to act without a meeting.


                      Item 2. Description of the Properties

         The Company's principal business address is One Galleria Tower, 13355
Noel Road, Suite 1200, Dallas, TX 75240. At this location, the Company leases
approximately 7,130 square feet of space as a tenant. The term of this lease is
through February 28, 2004 and the monthly rent is $14,850. Our executive and
administrative staff are at this location. The Company has a laboratory at 1467
Lemay, Suite 112, Carrollton, TX. At this location, the Company leases
approximately 4,700 square feet of space as a tenant. The term of this lease is
through June 30, 2002, with an option to renew for one year, and the monthly
rent is $6,267. In addition, the Company has office and warehouse space at 2760
Valley View Drive, Shreveport, LA 71108. At this location, the Company leases
approximately 8,850 square feet of space as a tenant. The term of this lease is
through December 31, 2010 and the monthly rent is $8,100. Further, we lease
storage tanks in various states, which are used in conjunction with our spent
lubricants collection operations.

         In June 1999, we secured, and currently hold, an option from The Port
Authority of Columbiana County (the "Port Authority") in Wellsville, Ohio, to
purchase a 22-acre site for our first domestic facility. This site and the
surrounding property will be improved by construction of an adjacent highway
interchange primarily using federal funds. The Federal Highway administration
has determined that no transfers of title to such land to private industry may
take place prior to completion of the highway interchange that is projected to
occur in 2003. Should we exercise the option to purchase the land, an interim
lease agreement would be in effect until the seller certifies in writing that
the highway interchange is complete. Rental payments under the interim lease
will be $20,000 per month and payments, in total, will be credited against the
purchase price. To date we have paid $521,167 for this option to purchase, which
will be credited to the purchase price as well.


Wellsville Project


         We are presently engaged in the development of our first production
facility, to be located in Wellsville, Ohio, which will produce premium quality
lubricating base oils and associated products from collected spent lubricating
oil.

                                       17
<PAGE>


Since June 1999, we have held an option to purchase a 22-acre site, which is
strategically located near Wellsville on the Ohio River in the center of large
supply and product markets. It includes a barge dock, significant tankage, a
rail spur, and will have rail and truck loading and unloading racks. We have
obtained our material environmental permits, and the land has been cleared in
anticipation of commencement of construction once project financing is obtained.

         As noted earlier, we are currently negotiating an EPC agreement with
Bechtel, a global engineering/construction firm. This EPC agreement will include
provisions encompassing industry-standard design, material, and workmanship
warranties as well as appropriate and necessary credit-support commitments.
Because these negotiations are not yet completed, we cannot assure you that we
will consummate this EPC agreement with Bechtel.

         We plan to operate this initial plant facility ourselves and utilize
contracts for repair and maintenance. We envision that the maintenance
contractor would be responsible for maintenance of the entire facility,
including battery limit plant operations, material transfers and
storage(scheduled and unscheduled). We will secure the necessary feedstock,
operate the facility and market the products.

         We are in negotiations with various potential lenders to provide the
financing for Wellsville. Altogether, we are seeking to raise approximately $140
million through a combination of debt and equity financing for the project. Of
the $140 million, approximately $125 million will be used for the Wellsville
facility, and the remainder will be used for general corporate purposes and to
provide sufficient working capital until operational start-up of the Wellsville
facility. With regard to the technology and market risk coverage for the senior
project lenders, we are negotiating an agreement with an AAA-rated international
insurance company to provide a risk coverage facility. That agreement is
expected to be integrated with cost and schedule guarantees from Bechtel as part
of the proposed EPC agreement. Finally, we have secured multi-year executed
product sales contracts necessary to provide the revenue streams to support our
projected plant debt service requirements. While we believe that we will be
successful in completing these agreements and obtaining project financing, there
can be no assurance that the EPC contract and risk coverage facility will be
completed or that project financing will be obtained.



                            Item 3. Legal Proceedings

         As of December 31, 2001, there were no legal proceedings initiated by
or against the Company.

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

There were no matters submitted to a vote of security holders during the three
months ended September 30, 2001.


                                     PART II

       Item 5. Market for the Common Stock and Related Stockholder Matters

         In June 1996, our common stock commenced quotation on the NASDAQ
Electronic Bulletin Board under the symbol "PRB". However, there was no active
market for our common stock and our listing was suspended. In January 1998, our
market maker made a re-application to the NASDAQ and the re-listing was

                                       18
<PAGE>

approved. Shares of our common stock traded inactively on the NASD
over-the-counter bulletin board under the symbol "PRBX". Since February 3, 2000
our common stock has been listed and is trading on the American Stock Exchange
under the symbol "PRB". At the same time, our common stock ceased trading on the
NASD over-the-counter bulletin board.

         Through September 30, 2001, the volume of trading in our common stock
has been relatively small, and none of our shares of common stock issued to date
have been registered under the Securities Act of 1933 or any of the securities
laws or regulations of any state or other foreign country.


         The range of high and low sales prices or bids for our common stock for
the last eight quarters is:
Market Performance Data*
Quarterly Market Prices
                                 2001                              2000
                          High            Low               High            Low
First Quarter            $2.44           $1.38             $2.69           $1.81
Second Quarter           $1.93           $1.38             $5.25           $3.50
Third Quarter            $1.82           $1.45             $3.87           $2.50
Fourth Quarter           $1.58           $1.05             $3.19           $2.12
--------------------------------------------------------------------------------

*For Fiscal Years ended September 30.

         The information since February 3, 2000 is based on the high and low
sales price as reported on the American Stock Exchange. The high and low bid
information for the periods prior to February 3, 2000 was obtained from the Pink
Sheets, LLC (formerly known as the National Quotation Bureau, Inc).
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.









                                       19
<PAGE>

         As of November 30, 2001, there were approximately 648 holders of record
of our common stock.

         On July 21, 1999, our board of directors approved a series of preferred
stock, which currently consists of up to 550,000 shares of preferred stock (such
amount may from time to time be increased or decreased by the board of
directors), designated as Series A 10% Cumulative Convertible Preferred Stock
Series A (Series A Preferred Stock). The Series A Preferred Stock, with respect
to rights on liquidation, winding up and dissolution, ranks senior to all
classes and series of common stock and may rank senior to other classes of
preferred stock. The Series A Preferred Stock has a liquidation preference of
$10.00 per share plus accrued and unpaid dividends, that is prior to the
liquidation preference of the common stock. The Series A Preferred Stock is
entitled to receive semi-annual dividends at the rate of $1.00 per annum payable
either in cash or shares of common stock valued at $1.50 per share, at our
option. The holders of Series A Preferred Stock are not entitled to vote, except
on certain limited matters and to the extent required by law. Each share of
Series A Preferred Stock is convertible at any time into 5.33333 shares of
common stock and shall be automatically converted, without further action on the
part of the Company or the holder thereof, into 5.33333 fully paid and
non-assessable shares of common stock on the date following any thirty-day
trading period in which the average daily closing price of our common stock
exceeds $5.625 per share. We will not issue any fractional shares of common
stock upon the conversion of the Series A Preferred Stock.



Dividend Policy

         Dividends on the Series A Preferred Stock are payable on May 1 and
November 1 (or, if not a business day, on the next succeeding business day) of
each year; provided; however, that at the final closing of the offering (March
2000), we paid an initial dividend payment on each share of Series A Preferred
Stock from the date of original issuance of such shares. We declared and paid,
in the form of common stock, the required dividends in November 2000 and May
2001. We currently expect to make dividend payments on the Series A Preferred
Stock in cash in the future, to the extent available.

         We have not declared or paid any cash or other dividends on our common
stock for the last two (2) fiscal years and in any subsequent period for which
financial information is required, and we have no intention of doing so in the
foreseeable future.


Recent Sales of Unregistered Securities

During the three months ended September 30, 2001, we issued the securities
listed below:

In July, we:

-        paid interest on the 7% Senior Secured Convertible Notes Due November
         2004, issued by Probex Fluids Recovery, Inc., a wholly-owned subsidiary
         of the Company, in the form of shares of our common stock. Pursuant to
         the terms of the notes, interest is payable in shares of common stock
         to holders of the notes who made a one-time election to receive
         interest payments in the form of our common stock. The interest payment

                                       20
<PAGE>

         on the notes in the form of common stock was $288,998, resulting in the
         issuance of an aggregate of 176,218 shares of our common stock.

-        issued 22,945 shares of our common stock to lenders as consideration
         for the extension of the maturity date of a loan made to us. These
         shares were issued at a value per share equal to $1.308


In August, we:

-        issued 13,333 shares of our common stock upon the conversion of our
         Series A 10% Cumulative Convertible Stock at the election of the
         holder. Prior to such issuance, the holder tendered 2,500 shares of our
         Series A 10% Cumulative Convertible Preferred Stock.


In September, we:

-        issued 733,574 shares of our common stock to lenders as consideration
         for extending the maturity dates of certain loans to us. These shares
         were issued at a value per share ranging from $1.185 to $1.302.

-        issued 535,707 shares of our common stock to holders of Probex Fluid
         Recovery's 7% Senior Secured Convertible Notes due November 2004,
         pursuant to the First Amendment to Note Purchase Agreement. This
         amendment provides for the issuance of our common stock as
         consideration for the extension of certain registration rights granted
         under that certain Note Purchase Agreement, dated November 29, 2000, on
         a quarterly basis.

-        issued warrants to purchase an aggregate of 818,417 shares of our
         common stock to lenders in connection with the extension of the
         maturity date of short-term loans in the aggregate principal amount of
         $4.83 million made by such lenders to us. Such warrants have an
         exercise price ranging from $1.28 to $1.58 per share and expire from
         April 30, 2006 to five years from the date of consummation of project
         financing for the facility to be built in Wellsville, Ohio.

-        granted options to purchase an aggregate of 11,000 shares of our common
         stock to certain of our directors, executive officers and employees
         under our 1999 Omnibus Stock and Incentive Plan, as amended.

         With respect to the issuance of options to purchase our common stock,
we relied on Section 2(a)(3) of the Securities Act of 1933 as a basis for an
exemption from registration of the securities issued, as the options were not an
event of sale. With respect to each of the other foregoing transactions, we
relied on Section 4(2) of the Securities Act of 1933 as a basis for an exemption
from registration of the securities issued, as none of the transactions involved
any public offering.


       Item 6. Management's Discussion and Analysis or Plan of Operations

         The following discussion includes forward-looking statements for
purposes of the Securities Act of 1933, and the Securities Exchange Act of 1934,
and as such involves known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the Company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. The words "expect",

                                       21
<PAGE>

"estimate", "anticipate", "predict", "believes", "plan", "seek', "objective",
and similar expressions are intended to identify forward-looking statements.
Important factors that could cause the actual results, performance or
achievement of the Company to differ materially from the Company's expectations
include the following:
         o        one or more of the assumptions or other factors discussed in
                  connection with particular forward-looking statements prove
                  not to be accurate;
         o        mistakes in cost estimates and cost overruns;
         o        the Company's inability to timely obtain financing for general
                  operations including the financing of plants and the marketing
                  of the Company's products;
         o        non-acceptance of one or more products of the Company in the
                  market place for whatever reason;
         o        the Company's inability to support any product to meet market
                  demand;
         o        generally unfavorable economic conditions which would
                  adversely effect purchasing decisions by distributors,
                  resellers or consumers;
         o        development of a similar competing technology;
         o        the inability to successfully integrate one or more
                  acquisitions, joint ventures or new subsidiaries with the
                  Company's operations (including the inability to successfully
                  integrate businesses which may be diverse as to type,
                  geographic area, or customer base and the diversion of
                  management's attention among several acquired businesses)
                  without substantial costs, delays, or other problems;
         o        if the Company experiences labor and/or employment problems
                  such as the loss of key personnel, inability to hire and/or
                  retain competent personnel, etc.;
         o        if the Company is unable to timely enter into an engineering,
                  procurement and construction (EPC) agreement and to secure a
                  risk coverage facility on satisfactory terms and conditions;
                  and
         o        if the Company experiences unanticipated problems and/or force
                  majeure events (including but not limited to accidents, fires,
                  acts of God etc.) or is adversely affected by problems of its
                  suppliers, shippers, customers or others.

         All forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements, which may be made to reflect events or circumstances
after the date initially filed or published or to reflect the occurrence of
unanticipated events.

         The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.


General

         We are an energy technology company that has developed a patented
process enabling us to produce premium quality lubricating base oils from
collected spent lubricating oil in an environmentally beneficial and economical
manner. We have worked over six years and invested approximately $12 million in
the development of this patented process. This technology also possesses the
capability to produce both light distillate fuel and an asphalt modifier from
collected spent lubricating oil, in addition to premium lubricating base oils.

         We have invested the majority of our resources since inception on
research and development of our patented ProTerra(TM) technology, and expect to
begin construction of our first reprocessing facility in Wellsville, Ohio, as
soon as project financing is obtained. Operating start up is targeted for
approximately 22 months after project financing is completed. Subsequent plants
are anticipated for sites along the Gulf Coast, in the Northeast, Southeast,
California and in Europe.


                                       22
<PAGE>

         Our patented technology has been validated through extensive pilot
testing, and results have also been validated by two independent additive
companies as well as by leading technical experts in the refining and
lubricating base oil processing industries. We have attracted and retained
strong, experienced persons in management functions with a depth of expertise in
commercializing new technologies, managing early stage companies, and in the
spent lubricants collection and lubricating base oil industries.

         Our objective is to provide new outlets in the market for a material
portion of the estimated 5.3 billion gallons of available spent lubricating oil
worldwide, as well as to supply premium quality lubricating base oils that will
comply with the new motor oil standards implemented in the United States for
model year 2002 automobiles, and thereafter around the world.

         We have formed critical strategic alliances with Bechtel Corporation
(Bechtel) and Environmental Resources Management (ERM). We are currently
negotiating an engineering, procurement and construction agreement with Bechtel
for Wellsville. ERM is providing permitting and environmental management
services for the Company. Both are direct or indirect investors in Probex. We
are also finalizing an agreement with an AAA-rated international insurance
company for a facility that provides technology and market risk coverage to the
senior project lenders for our planned Wellsville plant. In addition, we may
from time to time develop further strategic relationships that we believe will
contribute materially to the rapid implementation of our technology, on both a
domestic and international basis.

         In conjunction with the commercialization of our ProTerra technology,
we have formed a wholly owned subsidiary, Probex Fluids Recovery, Inc. (PFR).
Our goal is to have PFR's collection operations supply our plants with
substantially all of the necessary collected spent lubricating oil feedstock. We
intend to further increase our market share of the spent lubricants collection
business through growth in street collections, expansion of national accounts
and acquisitions of established spent lubricating oil collectors. While market
timing appears favorable, there can be no assurances that we will be able to
complete any further expansion or acquisitions. Until our reprocessing plants
come on line, the spent lubricants collected by PFR will continue to be sold
into the fuel markets, providing cash flow to us and helping to offset overhead
expenses incurred in commercialization of the ProTerra process.

          PFR is expected to collect approximately 35 million gallons of spent
lubricating oil in 2002, or approximately 60% of the feedstock requirement for
our initial Wellsville facility. The remainder is covered through third-party
commitments, though we anticipate significantly increasing the Company-owned
portion of collections prior to commencement of operations at Wellsville.

          The commercialization of our technology, including the growth of our
spent lubricants collection business and the construction and operation of our
initial plant facility, will require significant additional capital. While we
believe that we will be successful, at this time, there can be no assurance that
we will raise this additional capital upon terms acceptable to us. See the
discussion below under the section "Liquidity and Capital Resources."

         In August and September 2000, we were granted two patents from the U.S.
Patent Office for our proprietary spent lubricating oil processing technology.
Together, the patents provide broad coverage for 102 claims of the ProTerra
process, including pivotal elements, which de-chlorinate and de-foul the spent
oil. The patents give us the right to exclude others from using this technology
in the United States through September 2017. In addition to these issued
patents, ProTerra is protected by pending patents in major countries.


                                       23
<PAGE>

Results of Operations - Fiscal 2001 versus Fiscal 2000

         The following is a discussion of the results of the operations for the
fiscal year ended September 30, 2001 compared with the year ended September 30,
2000, and changes in the financial condition during the fiscal year ended
September 30, 2001.

Operating Revenue. Total operating revenue for fiscal year 2001 was $15,528,606
as compared to $2,684,869 for fiscal year 2000. The increase of operating
revenue in fiscal 2001 reflects a full 12 months of the SES operating revenue
versus zero months in fiscal 2000. In addition, fiscal 2001 has a full 12 months
of PPI/ITC operating revenue versus only five months in fiscal 2000.

Cost of Sales. Total cost of sales for fiscal year 2001 was $7,218,380 as
compared to $1,306,386 for fiscal year 2000. The increase in cost of sales in
fiscal 2001 reflects a full 12 months of the SES cost of sales versus zero
months in fiscal 2000. In addition, fiscal 2001 has a full 12 months of PPI/ITC
cost of sales versus only five months in fiscal 2000.

Operating Expense. Total operating expense for fiscal year 2001 was $6,875,328
as compared to $544,752 for fiscal year 2000. The increase of operating expense
in fiscal 2001 reflects a full 12 months of the SES operating expense versus
zero months in fiscal 2000. In addition, fiscal 2001 has a full 12 months of
PPI/ITC operating expense versus only five months in fiscal 2000.

Research and Development. Total research and development expense for fiscal year
2001 was $2,970,225 as compared to $1,995,604 for fiscal year 2000. The increase
in research and development expense is attributable to additional resources,
including employees, consultants, and testing required to advance the
commercialization of the Company's proprietary reprocessing technology.

Selling, General and Administration. Total selling, general and administration
expense for fiscal year 2001 was $6,082,398 as compared to $4,691,797 for fiscal
year 2000. The increase in selling, general and administration expense is
attributable to additional resources, including employees, consultants, legal
counsel, and other infrastructure changes required to advance the
commercialization of the Company's proprietary reprocessing technology.

Depreciation and Amortization. Total depreciation and amortization expense for
fiscal year 2001 was $1,220,759 as compared to $399,038 for fiscal year 2000.
The increase of cost of depreciation and amortization in fiscal 2001 reflects a
full 12 months of the SES depreciation and amortization versus zero months in
fiscal 2000. In addition, fiscal 2001 has a full 12 months of PPI/ITC
depreciation and amortization versus only five months in fiscal 2000.

Interest - net. In fiscal year 2001, the Company incurred net interest expense
of $7,637,351 ($34,872 interest income and $7,672,223 interest expense) compared
with net interest expense of $28,290 ($131,869 interest income and $160,159
interest expense) for fiscal year 2000. In accordance with the provisions of
Financial Accounting Standard 123, Accounting for Stock-Based Compensation, and
Emerging Issues Task Force Issue Number 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, we recorded non-cash interest charges of approximately $6.8
million related to corporate financing activities for the fiscal year 2001.

Income Taxes. There was no federal income tax liability in fiscal year end 2001
and 2000 due to a net loss in each period. There was a $22,000 state income tax
expense in fiscal year end 2001 versus none in fiscal year end 2000.

                                       24
<PAGE>

Results of Operations - Fiscal 2000 versus Fiscal 1999

         The following is a discussion of the results of the operations for the
year ended September 30, 2000 compared with the fiscal year ended September 30,
1999, and changes in the financial condition during the fiscal year ended
September 30, 2000.

Operating Revenue. Total operating revenue for fiscal year 2000 was $2,684,869
as compared to none for fiscal year 1999. The lack of operating revenue in
fiscal 1999 reflects the developmental stage of the business. As previously
discussed, the May 1, 2000 purchase of PPI/ITC directly contributed to spent oil
collections related operating revenue recognized in fiscal year 2000.

Cost of Sales. Total cost of sales for fiscal year 2000 was $1,306,386 as
compared to none for fiscal year 1999. The lack of cost of sales in fiscal year
1999 reflects the developmental stage of the business. As previously discussed,
the May 1, 2000 purchase of PPI/ITC directly contributed to spent oil
collections related cost of sales recognized in fiscal year 2000.

Operating Expense. Total operating expense for fiscal year 2000 was $544,752 as
compared to none for fiscal year 1999. The lack of operating expense in fiscal
year 1999 reflects the developmental stage of the business. As previously
discussed, the May 1, 2000 purchase of PPI/ITC directly contributed to spent oil
collections related operating expense recognized in fiscal year 2000.

Research and Development. Total research and development expense for fiscal year
2000 was $1,995,604 as compared to $1,076,069 for fiscal year 1999. The increase
in research and development expense is attributable to additional resources,
including employees, consultants, and testing, required to advance the
commercialization of the Company's proprietary reprocessing technology.

Selling, General and Administration. Total selling, general and administration
expense for fiscal year 2000 was $4,691,797 as compared to $1,079,016 for fiscal
year 1999. The increase in selling, general and administration expense is
attributable to additional resources, including employees, consultants, legal
counsel, and other infrastructure changes, required to advance the
commercialization of the Company's proprietary reprocessing technology.

Depreciation and Amortization. Total depreciation and amortization expense for
fiscal year 2000 was $399,038 as compared to $163,139 for fiscal year 1999. The
primary increase in depreciation and amortization expense is attributable to
fixed assets and goodwill related to the May 1, 2000 purchase of PPI/ITC. In
addition, depreciation was adjusted favorably $230,131 for fiscal year 1999 due
to a new company accounting policy of expensing fixed asset purchases less than
$1,000 each.

Interest - net. In fiscal year 2000, the Company incurred net interest expense
of $28,290 ($131,869 interest income and $160,159 interest expense) compared
with net interest expense of $107,820 ($10,667 interest income and $118,487
interest expense) for fiscal year 1999. This decrease in interest expense
resulted from proceeds of a preferred stock offering being held in an interest
bearing escrow account until the closing of that offering.

Income Taxes. There was no income tax liability in fiscal year end 2000 and 1999
due to a net loss in each period.


                                       25
<PAGE>

Liquidity and Capital Resources

         We anticipate that approximately $7 million of additional capital will
be required to sustain our operations for fiscal year 2002. If we do not receive
the necessary capital to sustain our operations, we may be forced to sell assets
or take other measures, which could have material adverse effects on our
business prospects.

         We are highly leveraged. At September 30, 2001, our ratio of total
indebtedness to equity was 83.02. Our ability to repay our indebtedness and
related interest charges is dependent upon our ability to obtain additional
capital.

         We are seeking to raise approximately $140 million of project financing
through a combination of debt and equity. Of the $140 million, approximately
$125 million will be used for the Wellsville facility, and the remainder will be
used for general corporate purposes and to provide sufficient working capital
until operational start-up of the Wellsville facility.

         From time to time we have also conducted interim financing for working
capital and general corporate purposes. During the fiscal year ended September
30, 2001, we raised $2,040,863 from the sale of common stock (net of offering
costs), $12,500,000 from the issuance of convertible debenture notes, and
$9,880,000 of proceeds from short term debt. In addition, we made payments of
$7,464,668 on existing debt during this same time. The remainder of the proceeds
were used to finance ongoing operations, acquisitions, and working capital.

         In September 2001, United Infrastructure Company, LLC (UIC) an
affiliate of Bechtel Corporation, made a convertible loan to us totaling $1.5
million in support of the development and commercialization of the Wellsville
facility. This $1.5 million counts against the $5 million commitment to purchase
our common stock made in August 2000. To date, UIC has invested $3.5 million in
us. We have formed a strategic worldwide alliance with Bechtel and are
negotiating an EPC agreement for Wellsville. If the EPC agreement is entered
into, UIC will have the option to make future investments of up to $7.5 million
for each subsequent plant, or a higher amount as mutually agreed, from time to
time, for as long as an Alliance Agreement between Probex and Bechtel exists.

         In September 2001, accounts of Zesiger Capital Group, LLC made a
convertible loan to us totaling $1.5 million in support of the development and
commercialization of the Wellsville facility. To date, accounts of Zesiger
Capital Group, LLC have invested $9.25 million in us. Additionally, in September
2001, another third party investor loaned us $0.5 million.

         Our debt is secured by all of our assets, other than our intellectual
property. We have $8.33 million aggregate principal amount of short term and
convertible debt that matured at December 31, 2001. We have extended the
maturity of $3.5 million of these obligations until June 30, 2002. We extended
the maturity of the remainder of our short term debt maturing on December 31,
2001 until January 31, 2002, and we are in negotiations to further extend the
maturity of these obligations until June 30, 2002. If we are unsuccessful in
extending the maturity of our obligations maturing on January 31, 2002, we will
require additional capital to repay this debt or risk foreclosure on our assets
securing such obligations.

         In October 2001, as a result of our inability to secure commitments for
project financing by September 30, 2001, an event of default occurred under the
Note Purchase Agreement governing PFR's 7% Senior Secured Convertible Notes, Due
November 2004. In accordance with the Note Purchase Agreement, we believe that
we have fully cured such event of default by obtaining approval of the required
holders of management's plan to obtain project financing. One noteholder who
holds a note in the aggregate principal amount of $1 million, however, has made
claims that events of default are continuing. We currently believe that such


                                       26
<PAGE>

noteholder's claims are without merit and intend to vigorously defend any action
sought by such noteholder. In December 2001, we entered into a standstill
agreement with this noteholder. This standstill agreement expired on December
31,2001.

         In order to continue with our business plan of commercializing our
ProTerra technology, we will require significant additional capital in the short
term. A significant portion of this amount will be used to finance the
construction of our first reprocessing plant in Wellsville, Ohio. The remaining
amount will be used for working capital and general corporate purposes, and by
PFR for growth in street collections, expansion of national accounts and
acquisitions of additional collection companies. Presently, our only source of
revenues is from the operations of our wholly owned subsidiary, PFR, which we
believe will continue to generate positive cash flow in fiscal 2002 to offset a
portion of our working capital requirements. However, there can be no assurance
that additional financing will be available, if and when needed, or that, if
available, such financing could be completed on commercially favorable terms.
Failure to obtain additional funding would have a material adverse affect on our
business, results of operations and financial condition.








                          Item 7. Financial Statements

Filed herewith are the following audited financial statements of the Company:

                                                                        Page No.
                                                                        --------

Report of Ernst & Young LLP, Independent Auditors...........................28

Consolidated Balance Sheet as of September 30, 2001.........................29

Consolidated Statements of Operations for the years ended
September 30, 2001 and 2000.................................................30

Consolidated Statements of Stockholders' Equity for the years ended
September 30, 2001 and 2000.................................................31

Consolidated Statements of Cash Flows for the years ended
September 30, 2001 and 2000.................................................32

Notes to Consolidated Financial Statements..................................33









                                       27
<PAGE>



                Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors and Shareholders
Probex Corp.

         We have audited the accompanying consolidated balance sheet of Probex
Corp. as of September 30, 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended September
30, 2001 and 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Probex Corp. at September 30, 2001, and the consolidated results of its
operations and its cash flows for the years ended September 30, 2001 and 2000 in
conformity with accounting principles generally accepted in the United States.


        As discussed in Note 1 to the financial statements, the Company's
recurring losses from operations and working capital deficiency raise
substantial doubt about its ability to continue as a going concern. Management's
plans as to these matters are also described in Note 1. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

/s/ ERNST & YOUNG LLP

Dallas, Texas
November 2, 2001









                                       28
<PAGE>

<TABLE>
<CAPTION>


                                  PROBEX CORP.
                           CONSOLIDATED BALANCE SHEET
                                                                                      September 30,
                                                                                           2001

<S>                                                                                <C>
ASSETS
Cash and cash equivalents                                                          $          586,173
Accounts and notes receivable                                                               2,714,505
Inventories                                                                                   614,374
Prepaid and other current assets                                                              370,249
                                                                                  -----------------------
Total current assets                                                                        4,285,301

Property, plant and equipment - net                                                        15,317,481
Goodwill - net                                                                              5,808,841
Patents - net                                                                                 419,861
Investments in affiliate - at equity                                                          719,704
Deferred debt offering costs - net                                                          1,677,099
Deferred offering costs                                                                     3,215,524
Other assets                                                                                  357,930
                                                                                  -----------------------
TOTAL ASSETS                                                                       $       31,801,741
                                                                                  =======================

LIABILITIES
Accounts payable                                                                   $        1,048,024
Accrued liabilities                                                                         2,443,055
Deferred plant design costs                                                                 6,454,197
Current maturities of capital lease obligations                                               186,531
Short-term debt - net of note discount                                                      7,370,264
Current maturities of long-tem debt                                                           279,496
                                                                                  -----------------------
Total current liabilities                                                                  17,781,567

Capital lease obligations, long-term                                                          158,727
Long-term debt                                                                             13,482,927
                                                                                  -----------------------
TOTAL LIABILITIES                                                                          31,423,221

COMMITMENTS AND CONTINGENCIES
                                                                                                  -

STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value, 10,000,000 authorized:
 10% Cumulative Convertible Preferred Stock, Series A,
 authorized 550,000 shares:
issued - 532,500
                                                                                                  533

Common Stock, $0.001 par value, authorized 100,000,000 shares:
issued-30,680,685                                                                              30,681

Additional Paid In Capital                                                                 32,722,140
Deferred stock compensation expense                                                         (547,516)
Accumulated Deficit                                                                      (31,648,358)
Less:  Treasury Stock  (common: 167,011 shares) at cost                                     (178,960)
                                                                                  -----------------------
TOTAL STOCKHOLDERS' EQUITY                                                                    378,520
                                                                                  -----------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $       31,801,741
                                                                                  =======================



</TABLE>

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


                                       29
<PAGE>
<TABLE>
<CAPTION>

                                  PROBEX CORP.
              CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


                                                                      Year Ended
                                                                    September 30
                                                        2001                        2000
                                           ---------------------------------------------------------

<S>                                         <C>                                   <C>

REVENUES                                    $    15,528,606                       $  2,684,869
COST OF SALES                                     7,218,380                          1,306,386
                                           ---------------------------------------------------------
GROSS PROFIT                                      8,310,226                          1,378,483

EXPENSES:
Operating                                         6,875,328                            544,752
Research and development                          2,970,225                          1,995,604
Selling, general and administrative               6,082,398                          4,691,797
Depreciation and amortization                     1,220,759                            399,038
                                           ---------------------------------------------------------
TOTAL EXPENSES                                   17,148,710                          7,631,191
                                           ---------------------------------------------------------

OPERATING LOSS                                   (8,838,484)                       (6,252,708)

Interest - net                                   (7,637,351)                          (28,290)
Other - net                                          (2,713)                            15,508
Equity in net income in affiliate                     25,257                               -
                                           ---------------------------------------------------------
NET LOSS BEFORE INCOME TAX                      (16,453,291)                       (6,265,490)
                                           ---------------------------------------------------------

Provision for income tax                            (22,000)                               -
                                           ---------------------------------------------------------
NET LOSS                                    $   (16,475,291)                      $(6,265,490)
                                           =========================================================

NET LOSS PER SHARE                          $         (0.61)                      $     (0.31)
                                           =========================================================



</TABLE>










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


                                       30
<PAGE>
<TABLE>
<CAPTION>


                                  PROBEX CORP.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY




                                                                 Preferred Stock
                                                    ------------------------------------------
                                                    Shares             Shares
                                                    Issued           Subscribed         Amount
                                                    ------           ----------         ------
<S>                                                <C>               <C>            <C>

BALANCE AT SEPTEMBER 30, 1999                          -             190,000          1,608,227
     Issued for stock that was subscribed

     Issued from exercise of warrants

     Issued for consulting services

     Issued for conversion of debt

     Issued from private stock sale
      and issuance of subscribed stock             535,00            (190,000)        3,026,185

     Subscribed in private stock sale
      Receipt of stock from Dissolution
      of Probex Technologies

     Preferred Stock dividend accrual

     Preferred Stock dividend paid
      out in Common Stock

     Issued for purchase of PPI/ITC

     Issued for employee stock awards

     Amortization of Deferred Stock
      Expense

     Additional paid in capital to
      warrants granted to non employees

     Additional paid in capital
      related to employee stock options

     Amortization related to employee
      stock options

     Net loss
                                                   ----------------------------------------------
BALANCE AT SEPTEMBER 30, 2000                      535,000               -           $4,634,412

     Reclass of excess of $0.001 par
      per share to additional paid in
      capital                                                                       (4,633,877)

    Issued for consulting services

    Issued for conversion of debt

    Issued from private stock sale

    Issued from exercise of Warrants
     Issued from exercise of Stock
     Options

    Issued from conversion of
     Preferred Stock                               (2,500)                 (2)

    Preferred Stock dividend paid
     out in Common Stock

    Debenture note interest  paid
     out in Common Stock

    Bridge note interest  paid out
     in Common Stock

    Preferred Stock dividend accrual
     Amortization of Deferred Stock
     Expense

    Warrants granted to directors

    Warrants granted to underwriters

    Amortization related to employee
     stock options

    Additional paid in capital
     related to interest expense on 7%
     convertible debentures

    Discounts related to warrants
     attached to bridge loans

    Net loss
                                                   ---------------------------------------------
BALANCE AT SEPTEMBER 30, 2001                      532,500               -           $      533
                                                   =============================================

</TABLE>


<TABLE>
<CAPTION>



                                                                 Common Stock
                                                    ------------------------------------------
                                                    Shares           Shares
                                                    Issued         Subscribed          Amount
                                                    ------         ----------          ------
<S>                                                 <C>            <C>                <C>

BALANCE AT SEPTEMBER 30, 1999                       18,932,029       2,011,388        $ 8,645,861

     Issued for stock that was subscribed            2,011,388     (2,011,388)

     Issued from exercise of warrants                  363,631                            690,360

     Issued for consulting services                    115,800                            146,636

     Issued for conversion of debt                   2,796,114                            750,000

     Issued from private stock sale
      and issuance of subscribed stock

     Subscribed in private stock sale                  240,750                            609,494

    Receipt of stock from Dissolution
     of Probex Technologies

    Preferred Stock dividend accrual

    Preferred Stock dividend paid
      out in Common Stock                              183,925                            275,897

    Issued for purchase of PPI/ITC                     800,000                          1,500,000

    Issued for employee stock awards                    87,500                             87,500

    Amortization of Deferred Stock
     Expense

    Additional paid in capital to
     warrants granted to non employees

    Additional paid in capital
     related to employee stock options

    Amortization related to employee
     stock options

     Net loss
                                                    ----------------------------------------------
BALANCE AT SEPTEMBER 30, 2000                       25,531,137             -        $  12,705,748

    Reclass of excess of $0.001 par
     per share to additional paid in
     capital                                                                         (12,680,218)

    Issued for consulting services                      43,373                                 43

    Issued for conversion of debt                    1,099,107                              1,099

    Issued from private stock sale                   1,528,572                              1,529

    Issued from exercise of Warrants                   283,773                                284

    Issued from exercise of Stock
     Options                                           326,666                                327

    Issued from conversion of
     Preferred Stock                                    13,333                                 13

    Preferred Stock dividend paid
     out in Common Stock                               356,671                                357

    Debenture note interest  paid
     out in Common Stock                               741,534                                742

    Bridge note interest  paid out
     in Common Stock                                   756,519                                757

    Preferred Stock dividend accrual

    Amortization of Deferred Stock
     Expense

    Warrants granted to directors

    Warrants granted to underwriters

    Amortization related to employee
     stock options

    Additional paid in capital
     related to interest expense on 7%
     convertible debentures

    Discounts related to warrants
     attached to bridge loans

    Net loss
                                                    ---------------------------------------------
BALANCE AT SEPTEMBER 30, 2001                       30,680,685             -        $      30,681

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



</TABLE>

<TABLE>
<CAPTION>

                                                    Additional         Deferred
                                                     Paid In            Stock              Accumulated
                                                     Capital           Expense               Deficit
                                                    --------------------------------------------------

<S>                                                  <C>              <C>                 <C>

BALANCE AT SEPTEMBER 30, 1999                        $   -            $(5,209)            $(7,889,522)

     Issued for stock that was subscribed

     Issued from exercise of warrants

     Issued for consulting services

     Issued for conversion of debt

     Issued from private stock sale
      and issuance of subscribed stock

     Subscribed in private stock sale

     Receipt of stock from Dissolution
      of Probex Technologies

     Preferred Stock dividend accrual                                                        (483,034)

     Preferred Stock dividend paid
      out in Common Stock

     Issued for purchase of PPI/ITC

     Issued for employee stock awards

     Amortization of Deferred Stock
      Expense                                                            4,168

     Additional paid in capital to
      warrants granted to non employees               1,022,596

     Additional paid in capital
      related to employee stock options               1,867,135    (1,867,135)

     Amortization related to employee
      stock options                                                    635,023

     Net loss                                                                              (6,265,490)
                                                    ------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000                        $2,889,731    (1,233,153)           $(14,638,046)

     Reclass of excess of $0.001 par
      per share to additional paid in
      capital                                        17,314,095

     Issued for consulting services                      83,051

    Issued for conversion of debt                     1,537,234

    Issued from private stock sale                    1,830,563

    Issued from exercise of Warrants                   223,487

    Issued from exercise of Stock
     Options                                            163,006

    Issued from conversion of
     Preferred Stock                                       (11)

    Preferred Stock dividend paid
     out in Common Stock                                534,650

    Debenture note interest  paid
     out in Common Stock                                875,345

    Bridge note interest  paid out
     in Common Stock                                    147,180

    Preferred Stock dividend accrual                                                         (535,021)

    Amortization of Deferred Stock
     Expense                                                             1,042

    Warrants granted to directors                        17,403

    Warrants granted to underwriters                  1,347,357

    Amortization related to employee
      stock options                                                    684,595

    Additional paid in capital
     related to interest expense on 7%
     convertible debentures                           3,125,000

    Discounts related to warrants
     attached to bridge loans                         2,634,049

    Net loss                                                                              (16,475,291)
                                                    ---------------------------------------------------
BALANCE AT SEPTEMBER 30, 2001                       $32,722,140     $(547,516)           $(31,648,358)
                                                    ===================================================



</TABLE>

<TABLE>
<CAPTION>


                                                                                         Total
                                                        Treasury Stock                Stockholders'
                                                    ------------------------
                                                    Shares            Amount            Equity
                                                    ------            ------            ------
<S>                                              <C>                <C>              <C>

BALANCE AT SEPTEMBER 30, 1999                         -             $     -          $2,359,357

     Issued for stock that was subscribed                                                  -

     Issued from exercise of warrants                                                   690,360

     Issued for consulting                                                              146,636

     Issued for conversion of debt                                                      750,000
     Issued from private stock sale
      and issuance of subscribed stock                                                3,026,185

     Subscribed in private stock sale                                                   609,494

     Receipt of stock from Dissolution
      of Probex Technologies                      (62,690)            (627)               (627)

     Preferred Stock dividend accrual                                                 (483,034)

     Preferred Stock dividend paid
      out in Common Stock                                                               275,897

     Issued for purchase of PPI/ITC                                                   1,500,000

     Issued for employee stock awards                                                    87,500

     Amortization of Deferred Stock
      Expense                                                                             4,168

     Additional paid in capital to
      warrants granted to non employees                                               1,022,596

     Additional paid in capital
      related to employee stock options                                                      -

     Amortization related to employee
      stock options                                                                     635,023

     Net loss                                                                       (6,265,490)
                                                  ----------------------------------------------
BALANCE AT SEPTEMBER 30, 2000                     (62,690)          $ (627)      $    4,358,065

     Reclass of excess of $0.001 par
      per share to additional paid in
      capital                                                                               -

     Issued for consulting services                                                      83,094

     Issued for conversion of debt                                                    1,538,333

     Issued from private stock sale                                                   1,832,092

     Issued from exercise of Warrants              (8,242)         (15,000)             208,771

     Issued from exercise of Stock
      Options                                     (96,079)        (163,333)                 -

     Issued from conversion of
      Preferred Stock                                                                       -

     Preferred Stock dividend paid
      out in Common Stock                                                               535,007

     Debenture note interest  paid
      out in Common Stock                                                               876,087

     Bridge note interest  paid out
      in Common Stock                                                                   147,937

     Preferred Stock dividend accrual                                                 (535,021)

     Amortization of Deferred Stock
      Expense                                                                             1,042

     Warrants granted to directors                                                       17,403

     Warrants granted to underwriters                                                 1,347,357

     Amortization related to employee
      stock options                                                                     684,595

     Additional paid in capital
      related to interest expense on 7%
      convertible debentures                                                          3,125,000

     Discounts related to warrants
      attached to bridge loans                                                        2,634,049

     Net loss                                                                      (16,475,291)
                                                 =----------------------------------------------
BALANCE AT SEPTEMBER 30, 2001                    (167,011)        $  (178,960)    $     378,520
                                                 ===============================================

</TABLE>



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

                                       31

<PAGE>

<TABLE>
<CAPTION>


                                             PROBEX CORP.
                            CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                                                          Year Ended September 30,
                                                                           2001             2000
                                                                     -----------------------------------
<S>                                                              <C>                  <C>

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                         $ (16,475,291)         (6,265,490)

Adjustments:
   Depreciation and amortization                                      1,220,759            399,038
   Provision for doubtful accounts                                       50,000               -
   Income from investment in affiliate                                 (25,257)               -
   Stock option compensation                                            684,595            635,023
   Gain on disposition of assets                                           -               (4,576)
   Stock issued for consulting services                                  83,094            146,626
   Warrants issued to advisory board members                             17,403               -
   Stock issued for employee compensation                                 1,042             87,500
   Stock issued for interest expense                                  1,024,024               -
   Interest expense related to 7% convertible notes                   3,125,000               -
   Amortization of discount on notes                                  2,058,718               -
   Amortization of deferred financing costs                             441,342               -
   Changes in operating assets and liabilities:
      (Increase) decrease in accounts and notes receivable          (1,027,332)          (337,580)
      (Increase) decrease in inventories                              (516,213)           (24,883)
      (Increase) decrease in prepaid and other                        (254,401)          (102,161)
      (Increase) decrease in other assets                                59,753               -
      Increase (decrease) in accounts payable                         (110,914)            821,172
      Increase (decrease) in accrued liabilities                        267,376          1,706,074
      Increase (decrease) in other long term liabilities                   -             7,501,054
                                                                     -----------------------------------
NET CASH USED BY OPERATING ACTIVITIES                               (9,376,302)          4,561,797


CASH FLOWS USED BY INVESTING ACTIVITIES
Business acquisitions
                                                                           -           (8,984,090)
Investments in affiliates
                                                                           (1)                -
Purchase of property, plant and equipment
                                                                   (4,426,665)         (3,362,316)
Proceeds from sale of property, plant and equipment
                                                                           -                35,326
Cost of patents
                                                                     (289,267)                -
                                                                     -----------------------------------
NET CASH USED BY INVESTING ACTIVITIES
                                                                   (4,715,933)        (12,311,080)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Principal payments on capital lease obligations
                                                                     (150,487)                -
Proceeds from short-term borrowings
                                                                     9,880,000                -
Principal payments on short-term borrowings
                                                                   (7,227,091)                -
Proceeds from long-term borrowings
                                                                    12,500,000          1,200,000
Principal payments on long-term borrowings
                                                                     (237,577)                -
Deferred financing costs
                                                                   (2,562,112)                -
Proceeds from sale of preferred stock
                                                                          -             3,026,185
Proceeds from sale of common stock
                                                                     2,040,863          1,299,855
                                                                     -----------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES
                                                                    14,243,596          5,526,040

NET INCREASE IN CASH                                                   151,361        (2,223,243)
CASH AT BEGINNING OF PERIOD
                                                                       434,812          2,658,055
                                                                     -----------------------------------
CASH AT END OF PERIOD                                              $   586,173     $      434,812
                                                                     ===================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid for interest                                          $   493,933            188,625
Non-cash investing and financing activities:
   Purchase price adjustment to goodwill                           $   694,446      $      -
   Deferred plant design costs                                       4,816,308          1,637,889
   Deferred financing costs in accrued expenses                      1,424,496            -
   Capital lease obligations incurred for purchase of equipment        426,522             84,125
   Conversion of debt and accrued interest to equity                 1,538,333            -
   Warrants issued to underwriters for future offering               1,347,357            -
   Discounts on bridge notes payable                                 3,055,400            -

</TABLE>

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

                                       32
<PAGE>

                          Probex Corp. and Subsidiaries
                   Notes to Consolidated Financial Statements
                               September 30, 2001

1.       Summary of Significant Accounting Policies

Nature of business

         We are an energy technology company that has developed a patented
process that enables us to produce premium quality lubricating base oils from
collected spent lubricating oils in an environmentally beneficial and economical
manner. While our primary business will be the production of premium quality
lubricating base oils from collected spent lubricating oils, we currently
operate in a single industry segment, the collection and sales of spent
lubricants in the United States.

         We incurred a net loss of $16,475,291 and used cash in operations of
$9,376,302 for the year ended September 30, 2001. In addition, at September 30,
2001, our current liabilities exceeded current assets by $13,496,266, and our
stockholders' equity was $378,520. We are highly leveraged. At September 30,
2001, our ratio of total indebtedness to equity was 83.02. Our existence and
plans for commercializing our patented technology for reprocessing spent
lubricating oil are dependent upon our ability to obtain the capital necessary
to operate, primarily through the issuance of additional debt or equity.

         We have funded our operations and research and development projects
during 2001 in part by sale of equity and conducting interim financings. During
the fiscal year ended September 30, 2001, we raised $2,040,863 from the sale of
common stock (net of offering costs), $12,500,000 from the issuance of
convertible debenture notes, and $9,880,000 of proceeds from short term debt. In
addition, we made payments of $7,464,668 on existing debt during this same time.

         We anticipate approximately $7,000,000 of additional capital will be
required to sustain our operations for fiscal year 2002. If we do not receive
the necessary capital to sustain our operations for fiscal year 2002, we may be
unable to continue as a going concern. Management believes the Company will
successfully complete its plan to raise additional capital in 2002 and that
funds will be available to meet the Company's obligations for at least the next
12 months.

         We are also seeking to raise approximately $140 million of project
financing through a combination of debt and equity. Of the $140 million,
approximately $125 million will be used for the Wellsville facility, and the
remainder will be used for general corporate purposes and to provide sufficient
working capital until operational start-up of the Wellsville facility.

         In addition to the above, the Company believes it may be required to
seek shareholder approval to increase the number of authorized shares in
connection with its project financing for its planned Wellsville, Ohio
reprocessing facility.

         The financial statements do not include any adjustments to reflect the
possible effects on recoverability and classification of assets or
classification of liabilities which may result from the inability of the Company
to continue as a going concern.



                                       33
<PAGE>



CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of Probex Corp. and its wholly owned subsidiaries: Probex Fluids Recovery, Inc.,
Quadrex Corporation and Apollo Oil Company. However, we dissolved the dormant
Quadrex Corporation and Apollo Oil Company subsidiaries in October 2001 (see
Note 11). Significant intercompany transactions and balances have been
eliminated in consolidation.

INVESTMENT IN AFFILIATE

         Our 50% investment in our affiliate, SES of Texas, is stated at cost,
adjusted for equity in undistributed earnings since the acquisition.

ACCOUNTING ESTIMATES

         When preparing financial statements in conformity with generally
accepted accounting principles, our management must make estimates based on
future events which affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the financial
statements, and revenues and expenses during the reporting period. Actual
results could differ from these estimates.

CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include all highly liquid investments with a
maturity date of three months or less when purchased.

INVENTORIES

         Inventories are stated at the lower of cost or market. Cost is computed
on a weighted average basis. There is a risk that we will forecast demand for
our products and market conditions incorrectly and accumulate excess
inventories. Therefore, there can be no assurance that we will not accumulate
excess inventory and incur inventory charges at the lower of cost or market in
the future.

PLANT, PROPERTY AND EQUIPMENT

         Fixed assets greater than $1,000 are recorded at cost and depreciated
over their estimated useful lives, which range from three to ten years, using
the straight-line method. Deferred plant design costs represent costs related to
the pre-construction design of our reprocessing facilities. Amortization of
these costs will begin when the first plant is placed in service. Equipment
leased under capital leases is amortized over the life of the respective lease.

GOODWILL

         Goodwill represents the excess purchase price over the fair market
value of the net assets acquired. Goodwill is being amortized on a straight-line
basis of 15 years. Accumulated amortization of goodwill was $529,408 and
$106,859 for 2001 and 2000, respectively.



                                       34
<PAGE>

PATENTS

         Patents represent the direct costs associated with obtaining the
patents and are being amortized on a straight-line basis over 17 years.
Accumulated amortization of patents was $21,867 and $4,354 for 2001 and 2000,
respectively.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

         We account for the impairment of long-lived assets in accordance with
Financial Accounting Standards, SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the book value of the asset may not be recoverable.
At each year-end, we review our long-lived assets (including goodwill) for
impairment based on estimated future non-discounted cash flows attributable to
the assets. In the event that such cash flows are not expected to be sufficient
to recover the recorded value of the assets, the assets are written down to
their estimated fair values. We have not recorded any impairment charges to
date.

REVENUE RECOGNITION

         Revenue is recognized when title passes to the customer, typically upon
delivery.

RESEARCH AND DEVELOPMENT

         Research and development costs are charged to expense when incurred.

ENVIRONMENTAL MATTERS

         Our operations are subject to extensive and evolving federal, state and
local environmental laws and regulations related to the discharge of materials
into the environment. Our process is not expected to produce harmful levels of
emissions or waste by-products, other than water, which can be treated for
conventional disposal. However, these laws and regulations would require us to
remove or mitigate the environmental effects of the disposal or release of
petroleum or chemical substances at various sites should they occur. Compliance
with such laws and regulations can be costly. Additionally, governmental
authorities may enforce the laws and regulations with a variety of civil and
criminal enforcement measures, including monetary penalties and remediation
requirements.

         PFR will account for future environmental expenditures by expensing or
capitalizing them depending on their future economic benefit. Expenditures that
relate to an existing condition caused by past operations and that have no
future economic benefits are expensed. Liabilities for expenditures of a
non-capital nature are recorded when environmental assessment and/or remediation
is probable, and the costs can be reasonably estimated.

INCOME TAXES

         The provision for income taxes is based on pretax income as reported
for financial statement purposes. Deferred income taxes are provided in
accordance with the liability method of accounting for income taxes to recognize
the tax effects of temporary differences between financial statement and income
tax accounting. Valuation allowances are established when necessary to reduce
tax assets to the amount expected to be realized.


                                       35
<PAGE>

         A valuation allowance is provided for deferred tax assets if it is more
likely than not that these items will either expire before we are able to
realize their benefit, or future deductibility is uncertain. Deferred tax assets
and liabilities are recognized for the expected future tax consequences of
events that have been realized in the financial statements or tax returns.

         We have incurred net operating losses for federal income tax purposes
and we are uncertain as to whether we will generate future taxable income during
the carry forward period. Accordingly, we have made no provision for federal
income taxes in the statements of operations and our net current and non-current
deferred tax assets have been fully reserved at September 30, 2001.

STOCK COMPENSATION

         We have elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), in accounting for our
employee stock options. Under APB 25, if the exercise price of an employee's
stock options equals or exceeds the market price of the underlying stock on the
date of grant and certain other plan conditions are met, no compensation expense
is recognized. See Note 5 regarding the pro forma net loss per common share
information as required by the alternative fair value accounting provided for
under Financial Accounting Standards Board Statement No. 123, Accounting for
Stock-Based Compensation, (SFAS No. 123).

         We account for stock-based awards issued to non-employees in accordance
with the fair value method of SFAS 123 and Emerging Issues Task Force Issue No.
96-18. Accordingly, we measure the cost of such awards based on the fair market
value of the options using the Black-Scholes method option-pricing model.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         We define the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between willing
parties. The carrying value of accounts receivable, accounts payable and accrued
liabilities approximates fair value because of the short maturity of those
instruments. The estimated fair value of our long-term obligations is estimated
based on the current rates offered to us for similar maturities. Based on
prevailing interest rates, management believes that the fair value of notes
payable approximates book value at September 30, 2001.

ACCUMULATED OTHER COMPREHENSIVE INCOME

         As of the date of these Consolidated Financial Statements, we had no
components of other comprehensive income as defined by Statement of Financial
Accounting Standards No. 130.


LOSS PER COMMON SHARE

         Basic earnings per share is computed only on the weighted average
number of common shares outstanding during the respective periods, and the
dilutive effect of stock options and warrants is excluded. Diluted earnings per
share is computed using the additional dilutive effect, if any, of stock options
and warrants using the treasury stock method based on the average market price
of the stock during the respective periods.

         The effect of stock options, warrants and other convertible securities
that aggregated 28,526,158 and 9,200,604 shares as of September 30, 2001 and
2000, respectively, would be anti-dilutive due to our losses in 2001 and 2000

                                       36
<PAGE>

and, accordingly, are not included in the computation of diluted earnings per
share for the respective periods.

         The following table summarizes the numerator and denominator elements
of the basic EPS computations.
<TABLE>
<CAPTION>

                                                                   Year ended September 30,
                                                                 2001                      2000
                                                        ----------------------- -----------------------
              <S>                                                 <C>                    <C>

              Loss                                                $ 16,475,291           $  6,265,490
              Preferred Dividends                                      535,020                483,034
              Loss available to common                              17,010,311              6,748,524
              Shares (Denominator)                                  27,832,334             21,696,687
              Loss Per Share                                           ($0.61)                ($0.31)

</TABLE>


NEW ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under these new rules, goodwill and
intangible assets deemed to have indefinite lives, will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.

         We will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
increase in net income of $422,550 ($0.01 per share) per year. During 2002, we
will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of October 1, 2001, and we have not yet
determined what the effect of these tests will be on our earnings and financial
position of the Company.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" ("FAS 143"), which is effective for years beginning after June 15,
2002, which will be the Company's fiscal year 2003. FAS 143 addresses legal
obligations associated with the retirement of tangible long-lived assets that
result from the acquisition, construction, development or normal operation of a
long-lived asset. The standard requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. Any associated
asset retirement costs are to be capitalized as part of the carrying amount of
the long-lived asset and expensed over the life of the asset. The Company has
not yet determined what the effect of FAS 143 will be on the earnings and
financial position of the Company.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (FAS 144), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations, for a
disposal of a segment of a business. FAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. We
expect to adopt FAS 144 as of October 1, 2001 and we do not expect that the

                                       37
<PAGE>

adoption of the Statement will have a significant impact on our financial
position and results of operations.


2.       ACQUISITIONS

Petroleum Products, Inc. and Intercoastal Trading Company, Inc.

         Effective May 1, 2000, we purchased substantially all of the assets of
Petroleum Products, Inc. (PPI) and Intercoastal Trading Company, Inc. (ITC) for
$4.6 million consisting of cash of $1.6 million, a promissory note of $1.5
million and the issuance of 800,000 shares of our common stock valued at $1.875
per share. PPI operates as a spent lubricating oil collection company primarily
in Ohio. ITC purchases spent lubricating oil from PPI and other spent
lubricating oil collectors and sells the spent lubricating oil primarily in the
Gulf Coast market.

         We accounted for the acquisition using the purchase method of
accounting. The purchase price was allocated to the assets and liabilities
acquired based upon the fair value of those assets and liabilities as of the
acquisition date. Accordingly, the excess of the aggregate purchase price over
fair value of the net assets acquired of approximately $3.7 million was recorded
as goodwill and is being amortized on a straight-line basis over 15 years.

The purchase price was allocated as follows:

Fair value of tangible assets acquired                        $ 1,009,153
Goodwill and other intangible assets                            3,712,071
Fair value of liabilities assumed                                (121,224)
                                                             ---------------
Net purchase price                                              4,600,000
PPI/ITC acquisition-related costs and expenses                    181,418
                                                             ---------------
Total purchase price                                          $ 4,781,418
                                                             ===============


Specialty Environmental Services

         On the close of business on September 29, 2000, we acquired
substantially all of the assets and selected liabilities of Specialty
Environmental Services ("SES"), a division of Pennzoil-Quaker State, for $5.55
million in exchange for a promissory note made in favor of the seller. SES is
engaged in the spent lubricants collection business. We accounted for the
acquisition using the purchase method of accounting. The purchase price was
allocated to the assets and liabilities acquired based upon the fair value of
those assets and liabilities as of the acquisition date. Accordingly, the excess
of the aggregate purchase price over fair value of the net assets acquired of
approximately $3.0 million was recorded as goodwill and is being amortized on a
straight-line basis over 15 years.




                                       38
<PAGE>


The purchase price was allocated as follows:

Fair value of tangible assets acquired                         $2,613,465
Goodwill and other intangible assets                            2,986,535
Fair value of liabilities assumed                                 (50,000)
                                                              ------------
Net purchase price                                              5,550,000
Pennzoil-Quaker State acquisition-related costs and
  expenses                                                        152,672
                                                              -------------
Total purchase price                                          $ 5,702,672
                                                              =============

         The operating results of these acquired businesses have been included
in the Consolidated Statements of Operations from the dates of acquisition.

Specialty Environmental Services of Texas, Inc.

         In April 2001, we exercised our option to acquire a 50% interest in
Specialty Environmental Services of Texas, Inc. (SES of Texas), obtained by the
September 29, 2000 acquisition of SES. Since we do not exercise control of this
company, our investment is accounted for using the equity method of accounting.
The initial investment in SES of Texas was recorded by adjusting the original
purchase price allocation for the acquisition of SES, and reducing the goodwill
recorded by $694,447.

         Our 50% investment in SES of Texas is stated at cost, adjusted for
equity in undistributed earnings since the acquisition.

Pro Forma Results of Operation

         The following table reflects the pro forma results of operation as
though the acquisition of PPI/ITC and SES, the related borrowings, and the
common stock issuances had been consummated on October 1, 1999:

                                    Year Ended September 30, 2000

Revenues                                    $15,674,000
Net loss                                    $(4,252,000)


3.       PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment at September 30, 2001 consisted of the following.

Land and land improvements                              $      135,000
Buildings and leasehold improvements                           318,706
Machinery and equipment                                      4,111,687
Deferred plant design costs                                 12,143,886
                                                         --------------
                                                            16,709,279
Accumulated depreciation                                    (1,391,798)
                                                         --------------
                                                        $   15,317,481

         At September 30, 2001, property, plant and equipment included
approximately $12.1 million of costs related to the pre-construction design of
our first reprocessing facility. Certain vendors have agreed to defer payment
until financing for the construction of the Wellsville facility is complete. At

                                       39
<PAGE>

September 30, 2001, $6.5 million has been deferred and is included in Deferred
plant design costs in the accompanying financial statements. The facility is
anticipated to be built in Wellsville, Ohio, and is expected to be placed into
service during Fiscal 2004. Accordingly, these costs are not currently being
depreciated. Though we believe our construction timetable is reasonable, the
timing of the completion of the facility is dependent upon purchasing the land
and our operations, cash flows, alternative uses of capital and alternative
sources of financing among other market conditions.

Depreciation expense was $780,697 and $287,825 for 2001 and 2000, respectively.


4. SHORT-TERM AND LONG-TERM DEBT

<TABLE>
<CAPTION>

Short-Term Debt

Our short-term debt at September 30, 2001 consisted of the following:

<S>                                                                                 <C>
$3,000,000 bridge loan dated February 20, 2001, bearing interest
at 12% due January 31, 2002, net of unamortized discount of $112,407                $2,887,593

$1,830,000 bridge loan dated April to July 2001, bearing interest
at 12% due January 31, 2002, net of unamortized discount of $74,292                  1,755,708

$3,000,000 convertible bridge loan dated September 2001, bearing interest at
12%, due January 31, 2002, net of unamortized
discount of $748,829                                                                 2,251,171

$500,000 bridge loan dated September 2001, bearing interest at
12%, due June 30, 2002, net of unamortized discount of $61,398                         438,602

$75,000 line of credit                                                                  37,190
                                                                                 -------------
                                                                                    $7,370,264
                                                                                 =============
</TABLE>

         On August 30, 2000, we issued a convertible promissory note in the
aggregate principal amount of $1.5 million at an interest rate equal to 10% per
annum to the General Conference Corporation of Seventh-day Adventists. The
proceeds of this loan were used for working capital purposes. The entire
principal balance plus accrued interest was converted into 1,099,107 shares of
our common stock at maturity on November 30, 2000.

         On September 29, 2000, in conjunction with the acquisition of
substantially all the assets of SES, we issued a short-term note to the seller.
We agreed to pay the seller the principal sum of $5,550,000, together with
interest at a rate equal to 13% per annum for the first 30 days, and an interest
rate equal to 18% per annum thereafter. On October 13, 2000, we repaid
$1,000,000 plus accrued interest of $30,063; on November 2, 2000, we repaid
another $1,000,000 plus accrued interest of $37,284.72; and on November 29,
2000, we repaid the final $3,550,000 plus accrued interest of $49,700.

         On November 2, 2000, we issued to lenders promissory notes in the
aggregate principal amount of $1.25 million at an interest rate equal to 12% per
annum. The proceeds of this loan were used for working capital purposes. On
December 12, 2000, we repaid all principal and related accrued interest.


                                       40
<PAGE>

         In December 2000, the balance of the $100,000 8% PPI acquisition
working capital note plus accrued interest was repaid.

         On January 22, 2001, we issued to three of our officers, promissory
notes in the aggregate principal amount of $300,000 at an interest rate equal to
10% per annum. The proceeds of this loan were used for working capital purposes.
On February 5, 2001, we repaid all principal and related accrued interest.

         On February 20, 2001, we issued to lenders promissory notes in the
aggregate principal amount of $3 million at an interest rate equal to 10% per
annum. The proceeds of this loan were used for working capital purposes. This
loan is secured by a first priority security interest in all the assets of
Probex, other than its intellectual property and capital stock of PFR. In
connection with these notes, we incurred $600,480 of discount on note costs
related to warrants issued to the placement agents and noteholders. On June 30,
2001, the note term was extended and we incurred an additional $180,000 of
discount on note costs related to warrants issued to the placement agents and
noteholders. On September 30, 2001, the note term was extended and we incurred
an additional $112,408 of discount on note costs related to warrants issued to
the placement agents and noteholders. These costs are being amortized over the
term of the notes and charged to interest expense. Additionally, on June 30,
2001, the interest rate was increased to 12% per annum retroactive to the
origination date of the promissory notes.

         In April, May, June, and July 2001, we issued to lenders promissory
notes in the aggregate principal amount of $1,830,000 at an interest rate equal
to 10% per annum. The proceeds of this loan were used for working capital
purposes. This loan is secured by a second priority security interest in all the
assets of Probex, other than its intellectual property and capital stock of PFR.
In connection with the delivery of these notes, we incurred $351,991 of discount
on note costs related to warrants issued to noteholders. On September 1, 2001,
the note term was extended and we incurred an additional $31,612 of discount on
note costs related to warrants issued to the noteholders. These costs are being
amortized over the term of the notes and charged to interest expense.
Additionally, on September 1, 2001, the interest rate was increased to 12% per
annum retroactive to the origination date of the promissory notes.

         In September 2001, we issued to lenders convertible promissory notes in
the aggregate principal amount of $3,000,000 at an interest rate equal to 12%
per annum. The proceeds of this loan were used for working capital purposes.
This loan is secured by a third priority security interest in all the assets of
Probex, other than its intellectual property and capital stock of PFR. If we
consummate an equity financing for our facility to be built in Wellsville, Ohio
prior to maturity of these notes, which has been extended to January 31, 2001,
the notes automatically convert into the securities issued in connection with
such financing at a conversion rate equal to purchase price paid by investors
for such securities. In connection with these notes, we incurred $940,197 of
discount on note costs related to common stock issued to noteholders. These
costs are being amortized over the term of the notes and charged to interest
expense.


                                       41
<PAGE>

         In September 2001, we issued to a lender a promissory note in the
principal amount of $500,000 at an interest rate equal to 12% per annum. The
proceeds of this loan were used for working capital purposes. This loan is
secured by a fourth priority security interest in all the assets of Probex,
other than its intellectual property and capital stock of PFR. In connection
with this note, we incurred $83,148 of discount on note costs related to
warrants issued to the noteholder. These costs are being amortized over the term
of the note and charged to interest expense.

         At September 30, 2001, we had an uncommitted bank line of credit, which
provides for unsecured borrowings for working capital of up to $75,000, of which
$37,190 was outstanding. The interest rate at the close of business on September
30, 2001 was 11%.

         We incurred $7,672,223 and $160,159 of interest expense in 2001 and
2000, respectively, and paid $493,933 and $188,625 of interest in 2001 and 2000,
respectively.

         The weighted-average interest rate on short-term borrowings outstanding
as of September 30, 2001 was 12%.


Long-Term Debt

Our long-term debt at September 30, 2001 consisted of the following:

7% Senior Secured Convertible Notes                      $ 12,500,000
8% Acquisition Note                                         1,262,423
Less current portion                                         (279,496)
                                                         -------------
                                                         $ 13,482,927
                                                         =============

         On May 1, 2000, in conjunction with the acquisition of substantially
all of the assets of PPI, we issued a promissory note to the seller, who is
currently an employee of the Company. We have agreed to pay the seller the
principal sum of $1,500,000 together with interest in arrears on the unpaid
principal balance at an annual rate equal to 8%. The principal amount of this
note is due and payable in semi-annual installments of $150,000, plus interest
amortized, from 2001 to 2005. On January 2, 2001, we paid the first of these
semi-annual installments. On September 10, 2001, we paid the second of these
semi-annual installments.

         On November 29, 2000, we closed a private placement of $12.5 million in
aggregate principal amount of 7% senior secured convertible notes. The notes
bear interest payable semiannually, commencing on January 1, 2001, with the
principal amount due on November 28, 2004. The notes were issued by our
collection subsidiary, PFR, are secured by the assets of PFR, guaranteed by
Probex and convertible into Probex common stock. The conversion price of these
notes into common stock is $1.40 per share, subject to adjustment. In accordance
with Emerging Issues Task Force No. 98-5, "Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios", we recorded an additional interest expense of approximately $3.125
million in the first quarter of fiscal year 2001. In connection with these
notes, we incurred $2,118,441 of deferred financing costs, including $1,218,357
related to warrants issued to placement agents. These costs are being amortized
over the term of the notes.

         In October 2001, as a result of our inability to secure commitments for
project financing by September 30, 2001, an event of default occurred under the
Note Purchase Agreement governing PFR's 7% Senior Secured Convertible Notes, Due
November 2004. In accordance with the Note Purchase Agreement, we believe that
we have fully cured such event of default by obtaining approval of the required
holders of management's plan to obtain project financing. One noteholder who
holds a note in the aggregate principal amount of $1 million, however, has made
claims that events of default are continuing. We currently believe that such
noteholder's claims are without merit and intend to vigorously defend any action
sought by such noteholder. In December 2001, we entered into a standstill
agreement with this noteholder. This standstill agreement expired on December
31,2001.

5.       STOCKHOLDERS' EQUITY

CAPITAL STRUCTURE

         We are authorized to issue up to 100,000,000 shares of our common
stock, $0.001 par value per share, of which 30,680,685 shares were issued and
outstanding at September 30, 2001.

         On February 1, 2000, we filed a Form 10-SB/A, pursuant to Section 12(b)
of the Securities Exchange Act of 1934, which was subsequently declared
effective by the Securities and Exchange Commission on February 2, 2000. On
February 3, 2000, our common stock began trading on the American Stock Exchange
under the symbol "PRB".


                                       42
<PAGE>

         We are also authorized to issue 10,000,000 shares of preferred stock,
$0.001 par value per share, of which 550,000 shares are designated as Series A
10% Cumulative Convertible Preferred Stock, or Series A Preferred Stock. As of
September 30, 2001, 532,500 shares of Series A Preferred Stock were issued and
outstanding.
ISSUANCES PREFERRED STOCK

Series A 10% Cumulative Convertible Preferred Stock:

         In July 1999, we initiated a private placement to investors for up to
$5.0 million of Series A Preferred Stock at $10.00 per share. Each share of
Series A Preferred Stock is convertible at any time at the option of the holder
into 5.33333 shares of common stock of the Company, or a $1.875 conversion price
per share of common stock, and shall be automatically converted, without further
action on the part of the Company or the holder, into 5.33333 shares of common
stock on the date following any thirty-day trading period in which the average
daily closing price of our common stock exceeds $5.625 per share. The holders of
Series A Preferred Stock are not entitled to vote, except on certain limited
matters and to the extent required by law. The Series A Preferred Stock, with
respect to rights on liquidation, winding up and dissolution, ranks senior to
all classes and series of common stock and may rank senior to other classes of
preferred stock. The Series A Preferred Stock has a liquidation preference of
$10.00 per share plus accrued and unpaid dividends, that is prior to the
liquidation preference of the common stock. Each share of Series A Preferred
Stock is entitled to receive semi-annual dividends at the rate of $1.00 per
annum payable either in cash or in common stock at $1.50 per share, at our
option.

         The offering was completed in December 1999 with a total of $5,350,000
of gross proceeds.

         As a result of the above Series A Preferred Stock private placement, we
incurred $715,588 of expenses ($615,600 of placement fees and $99,988 of legal
fees) and these have been recorded as offering costs and offset against the
Series A Preferred Stock proceeds in the Consolidated Financial Statements.

         On August 8, 2001, 2,500 shares of Series A Preferred Stock were
converted into the 13,333 shares of our common stock.

         During fiscal 2001, we issued 356,671 shares of our common stock at
$1.50 per share to holders of Series A Preferred Stock in lieu of cash dividends
for November 2000 and May 2001.

ISSUANCES OF COMMON STOCK

Private Placements:

         On October 12, 2000, we entered into a stock purchase agreement for the
issuance of 500,000 shares of common stock at $2.00 per share resulting in
$1,000,000 of cash proceeds. On March 31, 2001, pursuant to the ratchet price
provisions contained in the stock purchase agreement, we issued an additional
214,286 shares of our common stock to the purchaser in order to bring the
effective common stock purchase price to $1.40 per share.

         On December 29, 2000, we issued 100,000 shares of our common stock at
$1.40 per share resulting in $140,000 of cash proceeds.


                                       43
<PAGE>

         As result of these stock issuances, we incurred $307,908 of stock
issuance costs and these have been recorded as offering costs and offset against
the common stock proceeds in the Consolidated Financial Statements.

         On February 5, 2001, we entered into a stock purchase agreement for the
issuance of 714,286 shares of our common stock at $1.40 per share resulting in
$1,000,000 of cash proceeds.

         During April 2001, warrants to purchase our common stock, expiring
April 26, 2001, were exercised at a price of $1.00 per share resulting in the
issuance of an aggregate of 208,773 shares of our common stock and cash proceeds
of $208,773. Also in April 2001, warrants to purchase our common stock, expiring
April 26, 2001, were exercised at a price of $0.20 per share resulting in the
issuance of an aggregate of 75,000 shares of our common stock and proceeds of
$15,000.

         On June 21, 2001, stock options to purchase our common stock, expiring
June 30, 2009, were exercised at a price of $0.50 per share in a cashless
exercise transaction resulting in the issuance of an aggregate of 326,666 shares
of our common stock.

Issued to Non-Employees for Services Rendered:

         On November 9, 2000, we agreed to issue 16,666 shares of our common
stock to one consultant as compensation for services rendered.

         On February 13, 2001, we agreed to issue 13,664 shares of our common
stock to a consultant as compensation for services rendered. Certificates
representing these shares were subsequently issued in May 2001.

         On May 17, 2001, the Company issued an additional 12,075 shares of our
common stock to this consultant as compensation for services rendered.

         On June 21, 2001, we issued 968 shares of our common stock to one
consultant as compensation for services rendered.

Conversion of Debt to Equity:

         On November 30, 2000, a third party lender converted a loan in the
principal amount of $1,500,000 and accrued interest of $38,333 into 1,099,107
shares of our common stock.

Common stock issued to holders of Series A Preferred Stock for dividends in lieu
of cash:

         On November 11, 2000, we issued 179,804 shares of our common stock to
holders of our Series A Preferred Stock as dividends for the six-month period
ended October 31, 2000.

         On April 24, 2001, we issued 176,867 shares of our common stock to
holders of our Series A Preferred Stock as a dividend for the six-month period
ended April 30, 2001.

Common stock issued to lenders for interest in lieu of cash:

         On February 6, 2001, we issued 29,609 shares of our common stock to
holders of PFR's 7% Senior Secured Convertible Notes due November 2004 as
interest for the one-month period ended December 31, 2000.


                                       44
<PAGE>

         In July and September, 2001, we issued an aggregate of 711,925 shares
of our common stock to holders of PFR's 7% Senior Secured Convertible Notes due
November 2004 as interest for the six-month period ended June 30, 2001 and for
extensions of registration rights obligations of the Company to the end of the
following calendar quarter.

         In July, August, and September 2001, we issued 756,519 shares of our
common stock to holders of our bridge notes as consideration for the extension
of the maturity date of such notes.

Treasury Stock

         In April 2001, we received 8,242 shares of our common stock at market
price, totaling $15,000, in a cashless exercise of a warrant to purchase our
common stock.

         In June 2001, we received 96,079 shares of our common stock at market
price, totaling $163,333, in a cashless exercise of a stock option to purchase
our common stock.

WARRANTS TO PURCHASE OUR COMMON STOCK

The following table summarizes activity related to warrants and contingent
warrants as of September 30, 2001:
<TABLE>
<CAPTION>

                                                                        Number of Shares         Avg Price            Avg Life
                                                                        ---------------------------------------------------------
<S>                                                                       <C>                    <C>                     <C>

Balance at September 30, 1999                                              3,600,552             $    0.96               1.16
Granted                                                                    1,610,683                  2.44               2.81
    Exercised                                                               (363,631)                 1.92               1.05
    Expired                                                                      --                   0.00               0.00
                                                                        ---------------------------------------------------------
Balance at September 30, 2000                                              4,847,604                  1.38               1.72
    Granted                                                                5,970,905                  1.50               4.42
    Exercised                                                                283,773                  0.79               0.00
    Expired                                                                   35,483                  1.00               0.00
                                                                        ---------------------------------------------------------
Balance at September 30, 2001                                             10,449,253             $    1.47               3.31
                                                                        =========================================================

</TABLE>

         The above warrants to purchase our common stock are exercisable at
September 30, 2001, except for 685,000 shares acquirable pursuant to the
exercise of warrants that are contingent upon the occurrence of future events,
none of which have occurred.


OPTIONS

         In July 1999, we adopted the 1999 Omnibus Stock and Incentive Plan (the
"1999 Plan") in order to grant stock options to purchase an aggregate of
2,750,000 shares thereunder. The plan is administered by the compensation
committee of our board of directors. In July 2000, our shareholders adopted the
1999 Omnibus Stock and Incentive Plan, as amended and restated, primarily to
increase the number of shares available under such plan from 2,750,000 to
5,750,000. In February 2001, our shareholders adopted an amendment to the 1999
Omnibus Stock and Incentive Plan, primarily to increase the number of shares
available under such plan from 5,750,000 to 8,750,000.


                                       45
<PAGE>




<TABLE>
<CAPTION>

The following table summarizes activity related to options:
                                                                           Number of Shares      Weighted Avg.
<S>                                                                            <C>               <C>

Balance at September 30, 1999                                                  2,698,000         $0.5000
    Granted                                                                    2,690,000          2.1854
    Exercised                                                                         --             -
    Forfeited                                                                     50,000          0.5000
                                                                             ---------------------------
Balance at September 30, 2000                                                  5,338,000          1.3493
    Granted                                                                    1,294,000          2.0045
    Exercised                                                                    326,666          0.5000
    Forfeited                                                                     45,000          1.3216
                                                                            ------------------------------
Balance at September 30, 2001                                                  6,260,334         $1.5483
                                                                            ==============================

</TABLE>

            All options issued to employees during the twelve months ended
September 30, 2001 were issued with exercise prices equal to or greater than
fair market value.

<TABLE>
<CAPTION>

The terms of options to purchase our common stock are summarized below:

                                                             Weighted Avg.         OPTION PRICE
                                                                             --------------------------
                                               NUMBER        Contractual       WEIGHTED
         RANGE OF EXERCISE PRICES              GRANTED       Life              AVERAGE       TOTAL
         ------------------------              -------------------------     ------------
       <S>                                     <C>               <C>           <C>         <C>

          Granted at Market Value

                At $0.50 per share             2,361,334         7.7           $ 0.500     $1,180,667
                At $1.00 to $1.99                914,000         9.3           $ 1.687     $1,542,473
                At $2.00 to $2.99                814,000         9.1           $ 2.365     $1,924,712
                At $3.00 to $3.99                121,000         8.5           $ 3.718     $  449,875
                At $4.00 to $4.99                  5,000         8.4           $ 4.813     $   24,063

       Granted below Market Value


                        At $1.875                880,000         9.8           $ 1.875      1,650,000

                At $2.20 to $2.50              1,165,000         9.9           $ 2.230      2,603,500
                                            ------------                       -------    -----------

                                               6,260,334                       $ 1.498     $9,375,290
                                            ============                       =======    ===========


</TABLE>


                                       46
<PAGE>



At September 30, 2001, exercisable options are as follows:

                                                  Number
RANGE OF EXERCISE PRICES                          Exercisable
------------------------                          -----------
Granted at Market Value

      At $0.50 per share                             760,666
      At $1.50 to $1.99                              318,333
      At $2.00 to $2.99                              167,664
      At $3.00 to $3.99                              106,996
      At $4.00 to $4.99                                1,650

Granted below Market Value

       At $1.875                                     269,166
       At $2.20 to $3.375                            495,030
                                                   ---------
                                                   2,119,505
                                                   =========

COMPENSATION EXPENSE FOR OPTIONS GRANTED TO EMPLOYEES, OFFICERS AND DIRECTORS


Substantially all options issued to employees prior to fiscal year 2000 were
issued with exercise prices equal to fair value. Fair value for all options
issued is generally the trading price at the date of issuance. Had compensation
cost for our stock options been determined consistent with SFAS 123, the
Company's net loss per share would have been adjusted to the pro forma amounts
indicated below:

                                            YEAR ENDED SEPTEMBER 30,
                               -------------------------------------------------
                                         2001                      2000
                               -------------------------------------------------
Net loss as reported             $   (16,475,291)         $    (6,265,734)
                                  ===============          ===============
     Pro forma                   $   (17,490,995          $    (5,933,508)
                                  ===============          ===============
Loss per common share
(basic and diluted)
     As reported                 $        (0.61)          $        (0.29)
                                  ===============          ===============
     Pro forma                   $        (0.65)          $        (0.27)
                                  ===============          ===============

         The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and we anticipate making awards in the future under our stock-based compensation
plan.

         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes method option-pricing model. The following assumptions
were used for grants in 2001: dividend yield of 0%, volatility 46%, risk free
interest rate estimated as 5% with an expected life of 10 years. The following

                                       47
<PAGE>

assumptions were used for grants in 2000: dividend yield of 0%, volatility of
33%, risk free interest rate estimated as 6% with an expected life of 10 years.

         The weighted-average grant date fair value of options granted during
the year with an exercise price that equals or exceeds the market price of the
stock on the grant date was $1.21, and $0.92, respectively for fiscal year 2001.
The weighted-average grant date fair value of options granted during the year
with an exercise price that equals, exceeds, or is less than the market price of
the stock on the grant date was $1.47, $1.31, and $1.91, respectively for fiscal
year 2000.

         The model is based on historical stock prices and volatility, which,
due to the low volume of transactions, may not be representative of future price
variances.


6.       INCOME TAXES

The components of deferred tax assets and liabilities at September 30 are as
follows:
<TABLE>
<CAPTION>

                                                                2001                          2000
         <S>                                                 <C>                           <C>

         Deferred tax assets

             Issuance of options                             $    467,720                  $   234,958

             Issuance of warrants                                 255,521                       255,521

             Depreciation                                              -                         55,175

             Net operating loss                                 9,769,990                     4,359,992
                                                               ----------                     ---------

         Total deferred tax assets                             10,493,231                     4,905,646

         Valuation allowance                                  (10,490,057)                   (4,899,352)
                                                              ------------                    ----------

         Net deferred tax asset                                     3,174                         6,294

           Deferred tax liability                                     -                          (6,294)

           Depreciation                                            (3,174)                           -
                                                              ------------                   -----------
         Net deferred tax asset                              $        -                     $        -
                                                              ============                   ===========

</TABLE>


         In assessing the recoverability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The valuation allowance has been increased
by $5,590,705 during fiscal year 2001 as a result of incurring net operating
losses. Net Operating loss carryforwards aggregate approximately $27,695,000 and
expire in the years 2005 through 2016.



                                       48
<PAGE>



         Our income tax expense (benefit) for the years ended September 30
differed from the statutory federal tax rate as follows:

<TABLE>
<CAPTION>


                                                                                 2001                         2000
                                                                                 ----                         ----
<S>                                                                        <C>                          <C>

Statutory rate applied to loss before income taxes                         $ (5,594,119)                $  (2,130,267)

State income tax expense                                                         22,000                           -
 Warrant issuance costs                                                             -                        (116,786)
    Other                                                                         3,414                        10,470

    Increase in valuation allowance                                           5,590,705                     2,236,583
                                                                            -----------                   ------------

         Income tax expense                                                $     22,000                  $        -
                                                                            ============                  ============

</TABLE>

7.       LEASE COMMITMENTS

         We have various lease agreements for offices, branches, trucks, lab
equipment and personal property. Most leases contain renewal options and some
contain purchase options. No leases contain restrictions on our activities
concerning dividends, additional debt or further leasing. Rental expense charged
to continuing operations under operating leases for the years ended September
30, 2001 and 2000 was $1,489,837 and $212,116, respectively.

         Future minimum fixed lease obligations, excluding taxes, insurance and
other costs payable directly by us as of September 30, 2001, were:


                                               Minimal Lease Commitments
Fiscal                                    Capital                    Operating
                                          -------                    ---------

2002                                     $ 212,214                  $ 1,190,135
2003                                        92,470                      830,898
2004                                        24,336                      569,861
2005                                        14,942                      443,145
2006                                        13,697                      197,640
After 2006                                     --                          --
                                         ----------                  ----------
Total minimum lease payments                357,659                 $ 3,231,679
                                                                    ===========
Less amounts representing interest         (89,240)
                                         ----------
Present value of net minimum capital
      capital lease payments              $ 268,419
                                         ==========


8.       COMMITMENTS AND CONTINGENCIES

         In June 1999, we secured and currently hold an option from The Port
Authority of Columbiana County (the "Port Authority") in Wellsville, Ohio, to
purchase a 22-acre site for our first domestic facility. Additionally, the site
and other surrounding property will be improved by the construction of an
adjacent highway interchange primarily using Federal Funds. The Federal Highway
administration has determined that no transfers of title to such land to private
industry may take place prior to completion of the highway interchange that is
projected to occur in 2003 (see Properties Section, Item2). Should we exercise

                                       49
<PAGE>

the option to purchase the land, an interim lease agreement would be in effect
until the seller certifies in writing that the highway interchange is complete.
Rental payments under the interim lease will be $20,000 per month and payments
in total will be credited against the purchase price. To date, we have paid
$521,167 for this option to purchase and such payments will be credited towards
the purchase price.


9.       BENEFIT PLANS

         We adopted a voluntary 401(k) investment plan in May 2000 that covers
all eligible employees. We, at our discretion, may match a percentage of
employee contributions. We did not make any contributions in 2001.


10.      CONCENTRATION OF CREDIT RISK

         The Company sells its products to customers in the United States. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral. The Company maintains reserves
for potential credit losses and such losses, in the aggregate, have not exceeded
management expectations.

         Our financial instruments that are potentially exposed to credit risk
consist primarily of cash and cash equivalents, accounts receivable, and
accounts payable, for which the carrying amounts approximate fair value. We
invest available cash in money market securities of high credit quality
financial institutions. At certain times during the year, our demand deposits
held in banks exceeded the federally insured limit of $100,000.

Customers representing over 10% of revenue were as follows:

                                                          2001   2000
                                                         -------------
Wal-Mart                                                    14%    0%
Fortis International                                         8%   47%
Gladieux Trading                                             5%   16%
Texaco                                                       0%   14%

We had $458,180 in trade accounts receivable from these customers at September
30, 2001.


Suppliers representing over 10% of purchases of used oil were as follows:

                                                           2001   2000
                                                          -------------
Akron Canton Waste Oil                                       17%   16%
Oil Recovery Services                                        12%    5%
Central Ohio Oil                                             10%    9%
Environmental Specialists                                     4%   12%
Everclear                                                     0%   12%




                                       50
<PAGE>



11.      SUBSEQUENT EVENTS (unaudited)

         On December 28, 2001, we entered into a stock purchase agreement for
the issuance of 1,677,852 shares of our common stock at a purchase price per
share equal to $0.745, resulting in gross proceeds to us of $1,250,000.

         On October 4, 2001, we dissolved our wholly owned subsidiary Apollo Oil
Company.

         On October 5, 2001, we dissolved our wholly owned subsidiary Quadrex
Corporation.

         We are currently negotiating the extension through June 30, 2002, of
certain of our short term obligations, which could result in the issuance of up
to approximately 900,000 shares of our common stock at market prices during that
time.


            Item 8. Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure

         There has not been any changes in, or disagreements with accountants on
accounting and financial disclosure for the year ended September 30, 2001

                                    PART III

      Item 9. Directors, Executive Officers, Promoters and Control Persons

         Information contained under the caption "Election of Directors" in the
Company's 2002 Definitive Proxy Statement ("Proxy Statement") is incorporated
herein by reference in response to this Item. 9.

                         Item 10. Executive Compensation

         Information contained under the captions "Executive Compensation" and
"Election of Directors" in the Proxy Statement is incorporated herein by
reference in response to this Item. 10.


     Item 11. Security Ownership of Certain Beneficial Owners and Management

         Information contained under the caption "Principal Stockholders" in the
Proxy Statement is incorporated herein by reference in response to this Item.
11.

             Item 12. Certain Relationships and Related Transactions

         Information contained under the caption "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by reference
in response to this Item. 12.


                                       51
<PAGE>



                    Item 13. Exhibits and Reports on Form 8-K

a)       EXHIBITS

Exhibit
Number                     Description

3.1*     Certificate of Incorporation, as amended.

3.2*     Bylaws of the Registrant, as amended to date.

4.1*     Form of Common Stock Certificate.

4.2      Form of Series A 10% Cumulative Convertible Preferred Stock Certificate
         (filed as Exhibit 4.2 to the 2000 Form 10-KSB for the fiscal year ended
         September 30, 2000 (the "2000 Form 10-KSB") and incorporated herein by
         reference).

4.3.1    Form of Class "F" Warrants, at $1.00 per share, post-split, expiring
         April 26, 2001 (filed as exhibit 4.3.1 to the Registrant's Form 10-SB
         dated December 21, 1999 (the "Form 10-SB") and incorporated herein by
         reference).

4.3.2    Form of Class "H" Warrants, at $1.00 per share, post-split, expiring
         April 26, 2001 (filed as Exhibit 4.3.2 to the Form 10-SB and
         incorporated herein by reference).

4.3.3    Form of Class "K" Warrants, at $0.20 per share, post-split, expiring
         April 26, 2001 (filed as Exhibit 4.3.3 to the Form 10-SB and
         incorporated herein by reference).

4.3.4    Form of Class "N" Warrants, at $1.00 per share, expiring from August
         15, 2002 to June 8, 2003 (filed as Exhibit 4.3.4 to the Form 10-SB and
         incorporated herein by reference).

4.3.5    Form of Class "P" Warrants, at $0.20 per share, expiring September 2,
         2003 (filed as Exhibit 4.3.6 to the Form 10-SB and incorporated herein
         by reference).

4.3.6    Form of Class "Q-a" Warrants, at $0.55 per share, expiring April 16,
         2004 (filed as Exhibit 4.3.8 to the Form 10-SB and incorporated herein
         by reference).

4.3.7    Form of Class "R" Warrants, at $1.00 per share, expiring June 4, 2001
         (filed as Exhibit 4.3.9 to the Form 10-SB and incorporated herein by
         reference).

4.3.8    Form of Class "R-a" Warrants, at $0.55 per share, expiring June 4, 2004
         (filed as Exhibit 4.3.10 to the Form 10-SB and incorporated herein by
         reference).

4.3.9    Form of Class "S" Warrants, at $0.50 to $1.00 per share, expiring from
         August 28, 2002 to October 28, 2004 (filed as Exhibit 4.3.11 to the
         Form 10-SB and incorporated herein by reference).

4.3.10   Form of Class "T" Warrants, at $0.50 per share, expiring December 1,
         2003 (filed as Exhibit 4.3.12 to the Registrant's Form 10-SB/A dated
         February 1, 2000 (the "Form 10-SB/A") and incorporated herein by
         reference).

4.3.11   Form of Class "U" Warrants, at $0.50 per share, expiring January 31,
         2004 (filed as Exhibit 4.3.13 to the Form 10-SB/A and incorporated
         herein by reference).


                                       52
<PAGE>

4.3.12   Form of Class "V" Warrants, at $1.875 per share, expiring December 15,
         2004 (filed as Exhibit 4.3.14 to the Registrant's Form 10-QSB for the
         quarter ended December 31, 1999 (the "December 1999 10-QSB" ) and
         incorporated herein by reference).

4.3.13   Form of Class "W" Warrants, at $1.00 per share, expiring October 5,
         2001 (filed as Exhibit 4.3.15 to the Registrant's Form 10-QSB for the
         quarter ended March 31, 2000 (the "March 2000 10-QSB") and incorporated
         herein by reference).

4.3.14   Warrant to purchase 200,000 shares of the Registrant's common stock
         granted to Bechtel Corporation, at $3.00 per share, expiring on
         February 28, 2002 (filed as Exhibit 4.3.16 to the March 2000 10-QSB and
         incorporated herein by reference).

4.3.15   Warrant to purchase 200,000 shares of the Registrant's common stock
         granted to Bechtel Corporation, at an exercise price of $3.00 per share
         and expiring on June 27, 2002 (filed as Exhibit 4.3.14.2 to the 2000
         Form 10-KSB and incorporated herein by reference).

4.3.16   Form of Class "Y" Warrants, at $2.70 per share, expiring December 15,
         2004 (filed as Exhibit 4.3.17 to the March 2000 10-QSB and incorporated
         herein by reference).

4.3.17   Form of Class "Z" Warrants, at $3.00 per share, expiring June 21, 2005
         (filed as Exhibit 4.3.16 to the 2000 Form 10-KSB and incorporated
         herein by reference).

4.3.18   Form of Class "AA" Warrants, at $3.12 per share, expiring May 23, 2005
         (filed as Exhibit 4.3.17 to the Registrant's Form 10-QSB for the
         quarter ended December 31, 2000 (the "2000 Form 10-KSB") and
         incorporated herein by reference).

4.3.19   Form of Class "AC" Warrants, at $1.9625 per share, expiring on November
         2, 2005 (filed as Exhibit 4.3.18 to the 2000 Form 10-KSB and
         incorporated herein by reference).

4.3.20   Form of Class "AD" Warrants, exercisable at $1.9625 per share, expiring
         November 2, 2005 (filed as Exhibit 4.3.19 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.21   Form of Class "AE" Warrants, exercisable at $1.40 per share, expiring
         November 28,2003 (filed as Exhibit 4.3.20 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.22   Form of Class "AG" Warrants, exercisable at $1.40 per share, expiring
         November 29,2005 (filed as Exhibit 4.3.21 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.23   Form of Class "AH" Warrants, exercisable at $1.40 per share, expiring
         December 26,2005 (filed as Exhibit 4.3.22 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.24*  Form of Class "AI" Warrants, exercisable at $1.243 per share, expiring
         February 12, 2006


                                       53
<PAGE>

4.3.25*  Warrant to purchase 250,000 shares of the Registrant's common stock
         issued to United Infrastructure Company, L.L.C., exercisable at $1.40
         per share and expires on January ___, 2006.


4.3.26   Form of Class "AK" Warrants, exercisable at $1.579 per share, expiring
         April 30, 2006 (filed as Exhibit 4.3.25 to the March 2001 10-QSB and
         incorporated herein by reference).

4.3.27*  Form of Class "AK-A" Warrants, exercisable at $1.243 per share (subject
         to adjustment) and expiring on September 1, 2006.

4.3.28*  Form of Class "AL" Warrant, which expire ten years from the date of
         issuance (subject to certain conditions which may cause the warrant to
         expire earlier) and have an exercise price ranging from $1.47 to $1.75.
         (filed as Exhibit 4.3.26 to the Registrant's Form 10-QSB for the
         quarter ended June 30, 2001 (the "June 2001 10-QSB") and incorporated
         herein by reference).

4.3.29*  Warrant to purchase 275,000 shares of the Registrant's common stock
         issued to Single Spur Investments, L.L.C., which expires September 13,
         2006 and has an exercise price of $1.243 (subject to adjustment).

10.1.1   1999 Omnibus Stock and Incentive Plan, as amended and restated, of the
         Registrant (filed as Exhibit 10.1 to the 2000 Form 10-KSB and
         incorporated herein by reference).

10.1.2*  First Amendment to 1999 Omnibus Stock and Incentive Plan as amended and
         restated dated January 5, 2001.

10.2     Amended and Restated Investor Rights Agreement between HSB Engineering
         Finance Corporation, Inc., a Delaware corporation, and the Registrant,
         effective as of June 2, 2000 (filed as Exhibit 10.2 to the 2000 Form
         10-KSB and incorporated herein by reference).

10.3     Financial Advisory Fee Agreement between Silver Lake Industries, Inc.,
         a Texas corporation, Brycap Investments, Inc., a Texas corporation, and
         the Registrant, dated as of March 29, 2000 (filed as Exhibit 10.9 to
         the Form 10-SB and incorporated herein by reference).

10.4     Financial Consulting Services Agreement between Travis Morgan
         Securities, Inc. and the Registrant, dated as of April 16, 1999 (filed
         as Exhibit 10.10 to the Form 10-SB and incorporated herein by
         reference).

10.5     Option to Purchase or Lease Agreement between Columbiana County Port
         Authority, a body of corporate and politic, and the Registrant, dated
         as of June 1999 (filed as Exhibit 10.11 to the Form 10-SB and
         incorporated herein by reference).

10.6     Financial Consulting Services Agreement between National Capital
         Merchant Group, Ltd., a Bahamian company, and the Registrant, dated as
         of June 7, 1999 (filed as Exhibit 10.12 to the Form 10-SB and
         incorporated herein by reference).

10.7     Financial Advisory Fee Agreement between William M. Noble, Jr., an
         individual resident of the State of Texas, and the Registrant, dated as
         of June 28, 1999 (filed as Exhibit 10.13 to the Form 10-SB and
         incorporated herein by reference).

10.8     Placement Agent Agreement between APS Financial Corporation, a Colorado
         corporation, and the Registrant, dated as of July 21, 1999 (filed as
         Exhibit 10.14 to the Form 10-SB and incorporated herein by reference).


                                       54
<PAGE>

10.9     Financial Advisory Fee Agreement between APS Financial Corporation, a
         Colorado corporation, and the Registrant, dated as of August 6, 1999
         (filed as Exhibit 10.15 to the Form 10-SB and incorporated herein by
         reference).

10.10    Financial Advisory Fee Agreement between Michael D. Billings, an
         individual resident of the State of Texas, and the Registrant, dated as
         of May 7, 1999 (filed as Exhibit 10.17 to the Form 10-SB and
         incorporated herein by reference).

10.11    Fee Agreement between Enventures Capital, LLC, a Massachusetts limited
         liability company, and the Registrant, dated as of January 17, 2000
         (filed as Exhibit 10.17 to the Form 10-SB/A and incorporated herein by
         reference).

10.12    Memorandum of Understanding between Bechtel Corporation and the
         Registrant, effective January 1, 2000. (Confidential Treatment granted
         by the Commission. Confidential parts of this document have been
         redacted and have been separately filed with the Commission.) (filed as
         Exhibit 10.18 to the March 2000 10-QSB and incorporated herein by
         reference).

10.13.1  Asset Purchase Agreement dated as of May 1, 2000, by and among Probex
         Fluids Recovery, Inc., the Registrant, Petroleum Products, Inc. and
         William and Phyllis L. Snedegar (filed as Exhibit 99.1 to the
         Registrant's Form 8-K dated May 1, 2000 and filed May 16, 2000 (the
         "May 2000 8-K") and incorporated herein by reference).

10.13.2  Promissory Note dated as of May 1, 2000, made by the Registrant in
         favor of Petroleum Products, Inc. in the aggregate principal amount of
         $1.5 million (filed as Exhibit 99.3 to the May 2000 8-K and
         incorporated herein by reference).

10.14    Asset Purchase Agreement dated as of May 1, 2000, by and among Probex
         Fluids Recovery, Inc., the Registrant, Intercoastal Trading Company,
         Inc., William Snedegar, and William Keith Mills (filed as Exhibit 99.2
         to the May 2000 8-K and incorporated herein by reference).

10.15    Employment Agreement dated as of May 1, 2000, by and between William
         Snedegar and Probex Fluids Recovery, Inc. (filed as Exhibit 99.4 to the
         May 2000 8-K and incorporated herein by reference).

10.16    Employment Agreement dated as of May 1, 2000, by and between William
         Keith Mills and Probex Fluids Recovery, Inc. (filed ad Exhibit 99.5 to
         the May 2000 8-K and incorporated herein by reference).

10.17    Financial Advisory Agreement between Stonegate Securities, Inc. and the
         Registrant, dated as of May 23, 2000 (filed as Exhibit 10.21 to the
         Registrant's Form 10-QSB for the quarter ended June 30, 2000 (the "June
         2000 10-QSB") and incorporated herein by reference).

10.18    Convertible Promissory Note dated August 30, 2000, as amended, made by
         the Registrant in favor of General Conference of Seventh-day Adventists
         in the aggregate principal amount of $1.5 million (filed as Exhibit
         10.18 to the 2000 Form 10-KSB and incorporated herein by reference).


                                       55
<PAGE>

10.19.1  Asset Purchase Agreement dated as of September 6, 2000, by and between
         the Registrant and Pennzoil-Quaker State Company (filed as Exhibit
         10.22 to the Registrant's Form 8-K dated October 16, 2000 (the "October
         2000 8-K") and incorporated herein by reference).

10.19.2  First Amendment to the Asset Purchase Agreement, dated as of September
         29, 2000, by and among the Registrant, Probex Fluids Recovery, Inc. and
         Pennzoil-Quaker State Company (filed as Exhibit 10.22.1 to the October
         2000 8-K and incorporated herein by reference).

10.19.3  Term Note dated as of September 29, 2000, in the aggregate principal
         amount of $5.55 million, made by the Registrant in favor of
         Pennzoil-Quaker State Company (filed as Exhibit 10.23 to the October
         2000 8-K and incorporated herein by reference).

10.19.4  Pledge Agreement dated as of September 29, 2000, made by the Registrant
         in favor of Pennzoil-Quaker State Company, pursuant to which the
         Registrant pledged all of the outstanding shares of Probex Fluids
         Recovery, Inc. to Pennzoil-Quaker State Company as security for the
         Promissory Note of even date (filed as Exhibit 10.24 to the October
         2000 8-K and incorporated herein by reference).

10.19.5  Security Agreement dated as of September 29, 2000, executed by Probex
         Fluids Recovery, Inc., which secures all of the assets of Probex Fluids
         Recovery, Inc. under the Promissory Note of even date (filed as Exhibit
         10.25 to the October 2000 8-K and incorporated herein by reference).

10.19.6  Used Product Collection Agreement dated as of September 29, 2000, by
         and between Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company (filed as Exhibit 10.26 to the October 2000 8-K and
         incorporated herein by reference).

10.19.7  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Tampa, Florida (filed as Exhibit 10.27 to
         the October 2000 8-K and incorporated herein by reference).

10.19.8  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Atlanta, Georgia (filed as Exhibit 10.28
         to the October 2000 8-K and incorporated herein by reference).

10.19.9  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Baton Rouge, Louisiana (filed as Exhibit
         10.29 to the October 2000 8-K and incorporated herein by reference).

10.19.10 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Shreveport, Louisiana (filed as Exhibit
         10.30 to the October 2000 8-K and incorporated herein by reference).


                                       56
<PAGE>

10.19.11 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Houston, Texas (filed as Exhibit 10.31 to
         the October 2000 8-K and incorporated herein by reference).

10.19.12 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at San Antonio, Texas (filed as Exhibit
         10.32 to the October 2000 8-K and incorporated herein by reference).

10.20.1  Stock Purchase Agreement dated as of October 12, 2000, by and between
         the Registrant and United Infrastructure Company LLC, pursuant to which
         United Infrastructure Company purchased 500,000 shares, subject to
         upward adjustments, of the Registrant's common stock at $2.00 per share
         (filed as Exhibit 10.20.1 to the 2000 Form 10-KSB and incorporated
         herein by reference).

10.20.2  Registration Rights Agreement dated as of October 12, 2000, by and
         between the Registrant and United Infrastructure Company LLC (filed as
         Exhibit 10.21.2 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.21.1  Form of Promissory Note made by the Registrant in favor of Cambridge
         Strategies Group, LLC ($750,000), Michael and Cindi Crockett ($250,000)
         and Beachcraft Limited Partnership ($250,000), dated as of November 2,
         2000 (filed as Exhibit 10.21.1 to the 2000 Form 10-KSB and incorporated
         herein by reference).

10.21.2  Security Agreement dated as of November 2, 2000, made by the Registrant
         in favor of the Cambridge Strategies Group, LLC, as collateral agent,
         Michael and Cindi Crockett, and Beachcraft Limited Partnership, which
         secures the obligations of the Registrant under those certain
         promissory notes of even date (filed as Exhibit 10.21.2 to the 2000
         Form 10-KSB and incorporated herein by reference).

10.22.1  Note Purchase Agreement dated as of November 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc., Wilmington Trust Company, as
         collateral agent, and the purchasers named therein (filed as Exhibit
         10.21.1 to the 2000 Form 10-KSB and incorporated herein by reference).

10.22.2* First Amendment to Note Purchase Agreement, effective as of July 5,
         2001, by and among the Registrant, Probex Fluids Recovery, Inc. and the
         holders of the 7% Senior Secured Convertible Notes Due 2004.

10.22.3  Form of 7% Senior Secured Convertible Notes Due 2004 issued by Probex
         Fluids Recovery, Inc., which are secured by the assets of Probex Fluids
         Recovery, Inc., guaranteed by the Registrant and convertible into the
         Registrant's common stock (filed as Exhibit 10.22.2 to the 2000 Form
         10-KSB and incorporated herein by reference).

10.22.4  Guaranty dated as of November 29, 2000, from the Registrant to and for
         the benefit of the holders of the 7% Senior Secured Convertible Notes
         and acknowledged by Wilmington Trust Company, as collateral agent
         (filed as Exhibit 10.22.3 to the 2000 Form 10-KSB and incorporated
         herein by reference).


                                       57
<PAGE>

10.22.5  Security Agreement dated as of November 29, 2000, by and between Probex
         Fluids Recovery, Inc., Wilmington Trust Company, as collateral agent,
         which secures all the obligations of Probex Fluids Recovery, Inc. under
         the 7% Senior Secured Convertible Notes (filed as Exhibit 10.22.4 to
         the 2000 Form 10-KSB and incorporated herein by reference).

10.22.6  Pledge Agreement dated as of November 29, 2000, by and between the
         Registrant and Wilmington Trust Company, as collateral agent, pursuant
         to which the Registrant pledges its ownership in all of the outstanding
         shares of Probex Fluids Recovery, Inc. as security for the obligations
         under those certain 7% Senior Secured Convertible Notes (filed as
         Exhibit 10.22.5 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.22.7  Intercreditor and Collateral Agency Agreement dated as of November 29,
         2000, by and among the Registrant, Probex Fluids Recovery, Inc.,
         Wilmington Trust Company, as collateral agent, and the purchasers named
         therein (filed as Exhibit 10.22.6 to the 2000 Form 10-KSB and
         incorporated herein by reference).

10.22.8  Escrow Agreement dated as of November 29, 2000, by and between Probex
         Fluids Recovery, Inc. and Wilmington Trust Company for the benefit of
         the holders of the 7% Senior Secured Convertible Notes (filed as
         Exhibit 10.22.7 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.23    Financial Advisory Fee Agreement, dated as of October 11, 2000, by and
         between the registrant and Credit Suisse First Boston Corporation
         (filed as Exhibit 10.23 to the December 2000 10-QSB and incorporated
         herein by reference).

10.24    Strategic Alliance Agreement, dated as of February 2, 2001, by and
         between Bechtel Corporation and the Registrant (Confidential treatment
         granted by the Commission. Confidential portions of this document have
         been redacted and have been separately filed with the Commission)
         (filed as Exhibit 10.24 to the March 2001 10-QSB and incorporated
         herein by reference).

10.25    Stock Purchase Agreement, dated as of February 2, 2001, by and between
         United Infrastructure Company, LLC and the Registrant (filed as Exhibit
         10.25 to the March 2001 10-QSB and incorporated herein by reference).

10.26    Registration Rights Agreement, dated as of February 2, 2001, by and
         between United Infrastructure Company, LLC and the Registrant (filed as
         Exhibit 10.26 to the March 2001 10-QSB and incorporated herein by
         reference).

10.27.1* Form of Promissory Notes, dated as of February 20, 2001, in the
         aggregate principal amount of $3 million made by the Registrant in
         favor of lenders as amended by those certain Allonges to the Notes.


                                       58
<PAGE>



10.27.2* Security Agreement dated as of February 20, 2001, by and among the
         Registrant, Cambridge Strategies Group, LLC, as collateral agent, and
         the secured parties named therein, which secures the obligations of the
         Registrant under those certain promissory notes of even date.

10.28.1* Form of Promissory Notes, dated from April 30, 2001 to July 13, 2001,
         in aggregate principal amount of $1.83 million made by the Registrant
         in favor of lenders as amended by those certain Allonges to the Notes.

10.28.2* Security Agreement dated as of July 13, 2001, by and among the
         Registrant, Falcon Capital Management, as collateral agent, and the
         secured parties named therein, which secures the obligations of the
         Registrant under those certain promissory notes described in Exhibit
         10.28.1 above.

10.29.1* Loan Agreement dated as of September 7, 2001, by and among the
         Registrant and the lenders named therein.

10.29.2* Form of Promissory Notes, dated as of September 7, 2001, in the
         aggregate principal amount of $3 million made by the Registrant in
         favor of the lenders named in the Loan Agreement set forth in Exhibit
         10.29.1 above.

10.29.3* Intercreditor and Security Agreement, dated as of September 7, 2001, by
         and among the Registrant and United Infrastructure Company, LLC, as
         collateral agent, and the secured parties named therein, which secures
         the obligations of the Registrant under those certain promissory notes
         described in Exhibit 10.29.2 above.

10.29.4* Registration Rights Agreement, dated as of September 7, 2001, by and
         among the Registrant and the investors named therein.

10.30.1* Promissory Note, dated as of September 13, 2001, in the aggregate
         principal amount of $500,000 made by the Registrant in favor of Single
         Spur Investments, LLC as amended by that certain Allonge to the Note.

10.30.2* Security Agreement dated as of September 13, 2001, by and between the
         Registrant Single Spur Investements, LLC, as secured party, which
         secures the obligations of the Registrant under that certain promissory
         note described in Exhibit 10.30.1 above.

16.1     M. C. Hunter & Associates Response Letter dated February 15, 2000
         (filed as Exhibit 99.1 to the Registrant's Form 8-K dated February 17,
         2000 and incorporated herein by reference).

21.1*    List of Subsidiaries of Registrant.

* Filed herewith.

b)       REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended September 30,
2001.


                                       59
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                         PROBEX CORP.


                                        By: /s/ Bruce A. Hall
                                           ------------------------------------
                                        Name:    Bruce A. Hall
                                        Title:   Senior Vice President, Chief
                                                 Financial Officer and Secretary

Date:  January 14, 2002


         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.


        Date                                         Signature



January 14, 2002                             /s/ Charles M. Rampacek
                                           -------------------------------------
                                           Charles M. Rampacek
                                           Chairman of the Board, Chief
                                           Executive Officer, President,
                                           and Director



January 14, 2002                            /s/ John N. Brobjorg
                                           -------------------------------------
                                           John N. Brobjorg
                                           Vice President and Corporate
                                           Controller



January 14, 2002                            /s/ Bob G. Gower
                                           -------------------------------------
                                           Dr. Bob G. Gower
                                           Director


January 14, 2002                            /s/ Thomas G. Murray
                                           -------------------------------------
                                           Thomas G. Murray
                                           Director


January 14, 2002                           /s/ Thomas G. Plaskett
                                           -------------------------------------
                                           Thomas G. Plaskett
                                           Director


<PAGE>


                               INDEX TO EXHIBITS

Exhibit
Number                     Description

3.1*     Certificate of Incorporation, as amended.

3.2*     Bylaws of the Registrant, as amended to date.

4.1*     Form of Common Stock Certificate.

4.2      Form of Series A 10% Cumulative Convertible Preferred Stock Certificate
         (filed as Exhibit 4.2 to the 2000 Form 10-KSB for the fiscal year ended
         September 30, 2000 (the "2000 Form 10-KSB") and incorporated herein by
         reference).

4.3.1    Form of Class "F" Warrants, at $1.00 per share, post-split, expiring
         April 26, 2001 (filed as exhibit 4.3.1 to the Registrant's Form 10-SB
         dated December 21, 1999 (the "Form 10-SB") and incorporated herein by
         reference).

4.3.2    Form of Class "H" Warrants, at $1.00 per share, post-split, expiring
         April 26, 2001 (filed as Exhibit 4.3.2 to the Form 10-SB and
         incorporated herein by reference).

4.3.3    Form of Class "K" Warrants, at $0.20 per share, post-split, expiring
         April 26, 2001 (filed as Exhibit 4.3.3 to the Form 10-SB and
         incorporated herein by reference).

4.3.4    Form of Class "N" Warrants, at $1.00 per share, expiring from August
         15, 2002 to June 8, 2003 (filed as Exhibit 4.3.4 to the Form 10-SB and
         incorporated herein by reference).

4.3.5    Form of Class "P" Warrants, at $0.20 per share, expiring September 2,
         2003 (filed as Exhibit 4.3.6 to the Form 10-SB and incorporated herein
         by reference).

4.3.6    Form of Class "Q-a" Warrants, at $0.55 per share, expiring April 16,
         2004 (filed as Exhibit 4.3.8 to the Form 10-SB and incorporated herein
         by reference).

4.3.7    Form of Class "R" Warrants, at $1.00 per share, expiring June 4, 2001
         (filed as Exhibit 4.3.9 to the Form 10-SB and incorporated herein by
         reference).

4.3.8    Form of Class "R-a" Warrants, at $0.55 per share, expiring June 4, 2004
         (filed as Exhibit 4.3.10 to the Form 10-SB and incorporated herein by
         reference).

4.3.9    Form of Class "S" Warrants, at $0.50 to $1.00 per share, expiring from
         August 28, 2002 to October 28, 2004 (filed as Exhibit 4.3.11 to the
         Form 10-SB and incorporated herein by reference).

4.3.10   Form of Class "T" Warrants, at $0.50 per share, expiring December 1,
         2003 (filed as Exhibit 4.3.12 to the Registrant's Form 10-SB/A dated
         February 1, 2000 (the "Form 10-SB/A") and incorporated herein by
         reference).

4.3.11   Form of Class "U" Warrants, at $0.50 per share, expiring January 31,
         2004 (filed as Exhibit 4.3.13 to the Form 10-SB/A and incorporated
         herein by reference).


<PAGE>

4.3.12   Form of Class "V" Warrants, at $1.875 per share, expiring December 15,
         2004 (filed as Exhibit 4.3.14 to the Registrant's Form 10-QSB for the
         quarter ended December 31, 1999 (the "December 1999 10-QSB" ) and
         incorporated herein by reference).

4.3.13   Form of Class "W" Warrants, at $1.00 per share, expiring October 5,
         2001 (filed as Exhibit 4.3.15 to the Registrant's Form 10-QSB for the
         quarter ended March 31, 2000 (the "March 2000 10-QSB") and incorporated
         herein by reference).

4.3.14   Warrant to purchase 200,000 shares of the Registrant's common stock
         granted to Bechtel Corporation, at $3.00 per share, expiring on
         February 28, 2002 (filed as Exhibit 4.3.16 to the March 2000 10-QSB and
         incorporated herein by reference).

4.3.15   Warrant to purchase 200,000 shares of the Registrant's common stock
         granted to Bechtel Corporation, at an exercise price of $3.00 per share
         and expiring on June 27, 2002 (filed as Exhibit 4.3.14.2 to the 2000
         Form 10-KSB and incorporated herein by reference).

4.3.16   Form of Class "Y" Warrants, at $2.70 per share, expiring December 15,
         2004 (filed as Exhibit 4.3.17 to the March 2000 10-QSB and incorporated
         herein by reference).

4.3.17   Form of Class "Z" Warrants, at $3.00 per share, expiring June 21, 2005
         (filed as Exhibit 4.3.16 to the 2000 Form 10-KSB and incorporated
         herein by reference).

4.3.18   Form of Class "AA" Warrants, at $3.12 per share, expiring May 23, 2005
         (filed as Exhibit 4.3.17 to the Registrant's Form 10-QSB for the
         quarter ended December 31, 2000 (the "2000 Form 10-KSB") and
         incorporated herein by reference).

4.3.19   Form of Class "AC" Warrants, at $1.9625 per share, expiring on November
         2, 2005 (filed as Exhibit 4.3.18 to the 2000 Form 10-KSB and
         incorporated herein by reference).

4.3.20   Form of Class "AD" Warrants, exercisable at $1.9625 per share, expiring
         November 2, 2005 (filed as Exhibit 4.3.19 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.21   Form of Class "AE" Warrants, exercisable at $1.40 per share, expiring
         November 28,2003 (filed as Exhibit 4.3.20 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.22   Form of Class "AG" Warrants, exercisable at $1.40 per share, expiring
         November 29,2005 (filed as Exhibit 4.3.21 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.23   Form of Class "AH" Warrants, exercisable at $1.40 per share, expiring
         December 26,2005 (filed as Exhibit 4.3.22 to the December 2000 10-QSB
         and incorporated herein by reference).

4.3.24*  Form of Class "AI" Warrants, exercisable at $1.243 per share, expiring
         February 12, 2006



<PAGE>

4.3.25*  Warrant to purchase 250,000 shares of the Registrant's common stock
         issued to United Infrastructure Company, L.L.C., exercisable at $1.40
         per share and expires on January ___, 2006.


4.3.26   Form of Class "AK" Warrants, exercisable at $1.579 per share, expiring
         April 30, 2006 (filed as Exhibit 4.3.25 to the March 2001 10-QSB and
         incorporated herein by reference).

4.3.27*  Form of Class "AK-A" Warrants, exercisable at $1.243 per share (subject
         to adjustment) and expiring on September 1, 2006.

4.3.28*  Form of Class "AL" Warrant, which expire ten years from the date of
         issuance (subject to certain conditions which may cause the warrant to
         expire earlier) and have an exercise price ranging from $1.47 to $1.75.
         (filed as Exhibit 4.3.26 to the Registrant's Form 10-QSB for the
         quarter ended June 30, 2001 (the "June 2001 10-QSB") and incorporated
         herein by reference).

4.3.29*  Warrant to purchase 275,000 shares of the Registrant's common stock
         issued to Single Spur Investments, L.L.C., which expires September 13,
         2006 and has an exercise price of $1.243 (subject to adjustment).

10.1.1   1999 Omnibus Stock and Incentive Plan, as amended and restated, of the
         Registrant (filed as Exhibit 10.1 to the 2000 Form 10-KSB and
         incorporated herein by reference).

10.1.2*  First Amendment to 1999 Omnibus Stock and Incentive Plan as amended and
         restated dated January 5, 2001.

10.2     Amended and Restated Investor Rights Agreement between HSB Engineering
         Finance Corporation, Inc., a Delaware corporation, and the Registrant,
         effective as of June 2, 2000 (filed as Exhibit 10.2 to the 2000 Form
         10-KSB and incorporated herein by reference).

10.3     Financial Advisory Fee Agreement between Silver Lake Industries, Inc.,
         a Texas corporation, Brycap Investments, Inc., a Texas corporation, and
         the Registrant, dated as of March 29, 2000 (filed as Exhibit 10.9 to
         the Form 10-SB and incorporated herein by reference).

10.4     Financial Consulting Services Agreement between Travis Morgan
         Securities, Inc. and the Registrant, dated as of April 16, 1999 (filed
         as Exhibit 10.10 to the Form 10-SB and incorporated herein by
         reference).

10.5     Option to Purchase or Lease Agreement between Columbiana County Port
         Authority, a body of corporate and politic, and the Registrant, dated
         as of June 1999 (filed as Exhibit 10.11 to the Form 10-SB and
         incorporated herein by reference).

10.6     Financial Consulting Services Agreement between National Capital
         Merchant Group, Ltd., a Bahamian company, and the Registrant, dated as
         of June 7, 1999 (filed as Exhibit 10.12 to the Form 10-SB and
         incorporated herein by reference).

10.7     Financial Advisory Fee Agreement between William M. Noble, Jr., an
         individual resident of the State of Texas, and the Registrant, dated as
         of June 28, 1999 (filed as Exhibit 10.13 to the Form 10-SB and
         incorporated herein by reference).

10.8     Placement Agent Agreement between APS Financial Corporation, a Colorado
         corporation, and the Registrant, dated as of July 21, 1999 (filed as
         Exhibit 10.14 to the Form 10-SB and incorporated herein by reference).



<PAGE>

10.9     Financial Advisory Fee Agreement between APS Financial Corporation, a
         Colorado corporation, and the Registrant, dated as of August 6, 1999
         (filed as Exhibit 10.15 to the Form 10-SB and incorporated herein by
         reference).

10.10    Financial Advisory Fee Agreement between Michael D. Billings, an
         individual resident of the State of Texas, and the Registrant, dated as
         of May 7, 1999 (filed as Exhibit 10.17 to the Form 10-SB and
         incorporated herein by reference).

10.11    Fee Agreement between Enventures Capital, LLC, a Massachusetts limited
         liability company, and the Registrant, dated as of January 17, 2000
         (filed as Exhibit 10.17 to the Form 10-SB/A and incorporated herein by
         reference).

10.12    Memorandum of Understanding between Bechtel Corporation and the
         Registrant, effective January 1, 2000. (Confidential Treatment granted
         by the Commission. Confidential parts of this document have been
         redacted and have been separately filed with the Commission.) (filed as
         Exhibit 10.18 to the March 2000 10-QSB and incorporated herein by
         reference).

10.13.1  Asset Purchase Agreement dated as of May 1, 2000, by and among Probex
         Fluids Recovery, Inc., the Registrant, Petroleum Products, Inc. and
         William and Phyllis L. Snedegar (filed as Exhibit 99.1 to the
         Registrant's Form 8-K dated May 1, 2000 and filed May 16, 2000 (the
         "May 2000 8-K") and incorporated herein by reference).

10.13.2  Promissory Note dated as of May 1, 2000, made by the Registrant in
         favor of Petroleum Products, Inc. in the aggregate principal amount of
         $1.5 million (filed as Exhibit 99.3 to the May 2000 8-K and
         incorporated herein by reference).

10.14    Asset Purchase Agreement dated as of May 1, 2000, by and among Probex
         Fluids Recovery, Inc., the Registrant, Intercoastal Trading Company,
         Inc., William Snedegar, and William Keith Mills (filed as Exhibit 99.2
         to the May 2000 8-K and incorporated herein by reference).

10.15    Employment Agreement dated as of May 1, 2000, by and between William
         Snedegar and Probex Fluids Recovery, Inc. (filed as Exhibit 99.4 to the
         May 2000 8-K and incorporated herein by reference).

10.16    Employment Agreement dated as of May 1, 2000, by and between William
         Keith Mills and Probex Fluids Recovery, Inc. (filed ad Exhibit 99.5 to
         the May 2000 8-K and incorporated herein by reference).

10.17    Financial Advisory Agreement between Stonegate Securities, Inc. and the
         Registrant, dated as of May 23, 2000 (filed as Exhibit 10.21 to the
         Registrant's Form 10-QSB for the quarter ended June 30, 2000 (the "June
         2000 10-QSB") and incorporated herein by reference).

10.18    Convertible Promissory Note dated August 30, 2000, as amended, made by
         the Registrant in favor of General Conference of Seventh-day Adventists
         in the aggregate principal amount of $1.5 million (filed as Exhibit
         10.18 to the 2000 Form 10-KSB and incorporated herein by reference).



<PAGE>

10.19.1  Asset Purchase Agreement dated as of September 6, 2000, by and between
         the Registrant and Pennzoil-Quaker State Company (filed as Exhibit
         10.22 to the Registrant's Form 8-K dated October 16, 2000 (the "October
         2000 8-K") and incorporated herein by reference).

10.19.2  First Amendment to the Asset Purchase Agreement, dated as of September
         29, 2000, by and among the Registrant, Probex Fluids Recovery, Inc. and
         Pennzoil-Quaker State Company (filed as Exhibit 10.22.1 to the October
         2000 8-K and incorporated herein by reference).

10.19.3  Term Note dated as of September 29, 2000, in the aggregate principal
         amount of $5.55 million, made by the Registrant in favor of
         Pennzoil-Quaker State Company (filed as Exhibit 10.23 to the October
         2000 8-K and incorporated herein by reference).

10.19.4  Pledge Agreement dated as of September 29, 2000, made by the Registrant
         in favor of Pennzoil-Quaker State Company, pursuant to which the
         Registrant pledged all of the outstanding shares of Probex Fluids
         Recovery, Inc. to Pennzoil-Quaker State Company as security for the
         Promissory Note of even date (filed as Exhibit 10.24 to the October
         2000 8-K and incorporated herein by reference).

10.19.5  Security Agreement dated as of September 29, 2000, executed by Probex
         Fluids Recovery, Inc., which secures all of the assets of Probex Fluids
         Recovery, Inc. under the Promissory Note of even date (filed as Exhibit
         10.25 to the October 2000 8-K and incorporated herein by reference).

10.19.6  Used Product Collection Agreement dated as of September 29, 2000, by
         and between Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company (filed as Exhibit 10.26 to the October 2000 8-K and
         incorporated herein by reference).

10.19.7  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Tampa, Florida (filed as Exhibit 10.27 to
         the October 2000 8-K and incorporated herein by reference).

10.19.8  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Atlanta, Georgia (filed as Exhibit 10.28
         to the October 2000 8-K and incorporated herein by reference).

10.19.9  Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Baton Rouge, Louisiana (filed as Exhibit
         10.29 to the October 2000 8-K and incorporated herein by reference).

10.19.10 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Shreveport, Louisiana (filed as Exhibit
         10.30 to the October 2000 8-K and incorporated herein by reference).



<PAGE>

10.19.11 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at Houston, Texas (filed as Exhibit 10.31 to
         the October 2000 8-K and incorporated herein by reference).

10.19.12 Services Agreement dated as of September 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc. and Pennzoil-Quaker State
         Company for the operations at San Antonio, Texas (filed as Exhibit
         10.32 to the October 2000 8-K and incorporated herein by reference).

10.20.1  Stock Purchase Agreement dated as of October 12, 2000, by and between
         the Registrant and United Infrastructure Company LLC, pursuant to which
         United Infrastructure Company purchased 500,000 shares, subject to
         upward adjustments, of the Registrant's common stock at $2.00 per share
         (filed as Exhibit 10.20.1 to the 2000 Form 10-KSB and incorporated
         herein by reference).

10.20.2  Registration Rights Agreement dated as of October 12, 2000, by and
         between the Registrant and United Infrastructure Company LLC (filed as
         Exhibit 10.21.2 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.21.1  Form of Promissory Note made by the Registrant in favor of Cambridge
         Strategies Group, LLC ($750,000), Michael and Cindi Crockett ($250,000)
         and Beachcraft Limited Partnership ($250,000), dated as of November 2,
         2000 (filed as Exhibit 10.21.1 to the 2000 Form 10-KSB and incorporated
         herein by reference).

10.21.2  Security Agreement dated as of November 2, 2000, made by the Registrant
         in favor of the Cambridge Strategies Group, LLC, as collateral agent,
         Michael and Cindi Crockett, and Beachcraft Limited Partnership, which
         secures the obligations of the Registrant under those certain
         promissory notes of even date (filed as Exhibit 10.21.2 to the 2000
         Form 10-KSB and incorporated herein by reference).

10.22.1  Note Purchase Agreement dated as of November 29, 2000, by and among the
         Registrant, Probex Fluids Recovery, Inc., Wilmington Trust Company, as
         collateral agent, and the purchasers named therein (filed as Exhibit
         10.21.1 to the 2000 Form 10-KSB and incorporated herein by reference).

10.22.2* First Amendment to Note Purchase Agreement, effective as of July 5,
         2001, by and among the Registrant, Probex Fluids Recovery, Inc. and the
         holders of the 7% Senior Secured Convertible Notes Due 2004.

10.22.3  Form of 7% Senior Secured Convertible Notes Due 2004 issued by Probex
         Fluids Recovery, Inc., which are secured by the assets of Probex Fluids
         Recovery, Inc., guaranteed by the Registrant and convertible into the
         Registrant's common stock (filed as Exhibit 10.22.2 to the 2000 Form
         10-KSB and incorporated herein by reference).

10.22.4  Guaranty dated as of November 29, 2000, from the Registrant to and for
         the benefit of the holders of the 7% Senior Secured Convertible Notes
         and acknowledged by Wilmington Trust Company, as collateral agent
         (filed as Exhibit 10.22.3 to the 2000 Form 10-KSB and incorporated
         herein by reference).



<PAGE>

10.22.5  Security Agreement dated as of November 29, 2000, by and between Probex
         Fluids Recovery, Inc., Wilmington Trust Company, as collateral agent,
         which secures all the obligations of Probex Fluids Recovery, Inc. under
         the 7% Senior Secured Convertible Notes (filed as Exhibit 10.22.4 to
         the 2000 Form 10-KSB and incorporated herein by reference).

10.22.6  Pledge Agreement dated as of November 29, 2000, by and between the
         Registrant and Wilmington Trust Company, as collateral agent, pursuant
         to which the Registrant pledges its ownership in all of the outstanding
         shares of Probex Fluids Recovery, Inc. as security for the obligations
         under those certain 7% Senior Secured Convertible Notes (filed as
         Exhibit 10.22.5 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.22.7  Intercreditor and Collateral Agency Agreement dated as of November 29,
         2000, by and among the Registrant, Probex Fluids Recovery, Inc.,
         Wilmington Trust Company, as collateral agent, and the purchasers named
         therein (filed as Exhibit 10.22.6 to the 2000 Form 10-KSB and
         incorporated herein by reference).

10.22.8  Escrow Agreement dated as of November 29, 2000, by and between Probex
         Fluids Recovery, Inc. and Wilmington Trust Company for the benefit of
         the holders of the 7% Senior Secured Convertible Notes (filed as
         Exhibit 10.22.7 to the 2000 Form 10-KSB and incorporated herein by
         reference).

10.23    Financial Advisory Fee Agreement, dated as of October 11, 2000, by and
         between the registrant and Credit Suisse First Boston Corporation
         (filed as Exhibit 10.23 to the December 2000 10-QSB and incorporated
         herein by reference).

10.24    Strategic Alliance Agreement, dated as of February 2, 2001, by and
         between Bechtel Corporation and the Registrant (Confidential treatment
         granted by the Commission. Confidential portions of this document have
         been redacted and have been separately filed with the Commission)
         (filed as Exhibit 10.24 to the March 2001 10-QSB and incorporated
         herein by reference).

10.25    Stock Purchase Agreement, dated as of February 2, 2001, by and between
         United Infrastructure Company, LLC and the Registrant (filed as Exhibit
         10.25 to the March 2001 10-QSB and incorporated herein by reference).

10.26    Registration Rights Agreement, dated as of February 2, 2001, by and
         between United Infrastructure Company, LLC and the Registrant (filed as
         Exhibit 10.26 to the March 2001 10-QSB and incorporated herein by
         reference).

10.27.1* Form of Promissory Notes, dated as of February 20, 2001, in the
         aggregate principal amount of $3 million made by the Registrant in
         favor of lenders as amended by those certain Allonges to the Notes.



<PAGE>



10.27.2* Security Agreement dated as of February 20, 2001, by and among the
         Registrant, Cambridge Strategies Group, LLC, as collateral agent, and
         the secured parties named therein, which secures the obligations of the
         Registrant under those certain promissory notes of even date.

10.28.1* Form of Promissory Notes, dated from April 30, 2001 to July 13, 2001,
         in aggregate principal amount of $1.83 million made by the Registrant
         in favor of lenders as amended by those certain Allonges to the Notes.

10.28.2* Security Agreement dated as of July 13, 2001, by and among the
         Registrant, Falcon Capital Management, as collateral agent, and the
         secured parties named therein, which secures the obligations of the
         Registrant under those certain promissory notes described in Exhibit
         10.28.1 above.

10.29.1* Loan Agreement dated as of September 7, 2001, by and among the
         Registrant and the lenders named therein.

10.29.2* Form of Promissory Notes, dated as of September 7, 2001, in the
         aggregate principal amount of $3 million made by the Registrant in
         favor of the lenders named in the Loan Agreement set forth in Exhibit
         10.29.1 above.

10.29.3* Intercreditor and Security Agreement, dated as of September 7, 2001, by
         and among the Registrant and United Infrastructure Company, LLC, as
         collateral agent, and the secured parties named therein, which secures
         the obligations of the Registrant under those certain promissory notes
         described in Exhibit 10.29.2 above.

10.29.4* Registration Rights Agreement, dated as of September 7, 2001, by and
         among the Registrant and the investors named therein.

10.30.1* Promissory Note, dated as of September 13, 2001, in the aggregate
         principal amount of $500,000 made by the Registrant in favor of Single
         Spur Investments, LLC as amended by that certain Allonge to the Note.

10.30.2* Security Agreement dated as of September 13, 2001, by and between the
         Registrant Single Spur Investements, LLC, as secured party, which
         secures the obligations of the Registrant under that certain promissory
         note described in Exhibit 10.30.1 above.

16.1     M. C. Hunter & Associates Response Letter dated February 15, 2000
         (filed as Exhibit 99.1 to the Registrant's Form 8-K dated February 17,
         2000 and incorporated herein by reference).

21.1*    List of Subsidiaries of Registrant.


* Filed herewith.