SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549
                         ______________________
                    
                               FORM 10-K

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

               For the fiscal year ended December 31, 1997
                      Commission file number 0-25998

                     WASTE SYSTEMS INTERNATIONAL, INC.
          (Exact name of registrant as specified in its charter)


              Delaware                                 95-4203626
   (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)

     420 Bedford Street, Suite 300
        Lexington, Massachusetts                         02173
  (Address of principal executive offices)             (zip code)


                            (781) 862-3000 Phone
                             (781) 862-2929 Fax
              (Registrant's telephone number, including area code)
                         ________________________

              Securities registered  pursuant to Section 12(b) of the
                Act: None Securities  registered pursuant to Section
                            12(g) of the Act:

                     Common Stock, $.01 par value per share
                               Series F Warrants
                            Placement Agent Warrants
                         ________________________

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  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-K or any
amendment to this Form 10-K X

         As of March 24,  1998,  the  market  value of the  voting  stock of the
Registrant held by non-affiliates of the Registrant was $66,854,700

         The number of shares of the Registrant's  common stock, par value 
$.01 per share, outstanding as of March 24, 1998 was 3,911,181.
                                        
                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 1997 Annual  Meeting of
Stockholders  are  incorporated  by  reference  into Part III of this Form 10-K.
Portions of the  Registration  Statement  on Form S-1 of Waste Systems 
International, Inc.(formerly BioSafe  International, Inc.), (No.  33-93966) are 
incorporated  by reference into Part IV of this Form
10-K.

<PAGE>






                                TABLE OF CONTENTS

                                                  
                                                                            PAGE

PART I
         Item 1.    Business                                                   1
         Item 2.    Properties                                                 8
         Item 3.    Legal Proceedings                                          8
         Item 4.    Submission of Matters 
                    to a Vote of Security Holders                              9
PART II
         Item 5.    Market For Registrant's Common Equity and 
                    Related Stockholder Matters                               11
         Item 6.    Selected Financial Data                                   12
         Item 7.    Management's Discussion and 
                    Analysis of Financial Condition
                    and Results of Operations                                 14
         Item 8.    Financial Statements and Supplementary Data               22
         Item 9.    Changes in and Disagreements with
                    Accountants on Accounting and 
                    Financial Disclosure                                      47

PART III

         Item 10.   Directors and Executive Officers                          47
         Item 11.   Executive Compensation                                    47
         Item 12.   Security Ownership of Certain Beneficial 
                    Owners and Management                                     47
         Item 13.   Certain Relationships and Related 
                    Transactions                                              47

PART IV
         Item 14.   Exhibits, Financial Statement Schedules, 
                    and Reports on Form 8-K                                   48

Signatures                                                                    50


<PAGE>
                                              



Note Regarding Forward Looking Statements:


This Annual Report on Form 10-K contains  forward-looking  statements concerning
among other things,  the Company's  expected  future  revenues,  operations  and
expenditures and estimates of the potential markets for the Company's  services.
Such  statements  made by the Company  fall within the meaning of Section 27A of
the  Securities  Act of 1933,  as amended,  and  Section  21E of the  Securities
Exchange  Act of 1934,  as  amended.  All such  forward-looking  statements  are
necessarily  only estimates of future results and the actual results achieved by
the  Company may differ  materially  from these  projections  due to a number of
factors as  discussed  in the  section  entitled  "Management's  Discussion  and
Analysis  of  Financial  Condition  and Results of  Operations--Certain  Factors
Affecting Future Operating Results" of this Form 10-K.

                                PART I

Item 1.  Business

The Company

         Waste Systems International,  Inc. (referred to herein as the "Company"
or "WSI") is a regional integrated  non-hazardous solid waste management company
that provides solid waste collection,  recycling, transfer and disposal services
to commercial and residential customers.

         The  Company  currently  owns and  operates a solid  waste  landfill in
Moretown,  Vermont,  three  transfer  stations and collection  operations  which
operate as an integrated  solid waste  operation,  serving over 4,400 commercial
and  residential  customers in the  Burlington,  St. Albans,  St.  Johnsbury and
Barre-Montpelier, Vermont areas.

         The Company currently has two additional landfill projects at different
stages of  development.  In November 1997, WSI signed a definitive  agreement to
acquire a  700-acre,  3 million  cubic  yard  permitted  municipal  solid  waste
landfill in Hopewell, Pennsylvania. This transaction is expected to close by the
end of May, 1998.  Additionally,  the Company entered into a contract to operate
and  remodel  an  existing   30-acre   municipal   landfill  in  South   Hadley,
Massachusetts.  On March 16,  1998 the  Company  filed  its draft  environmental
impact  report with the  Massachusetts  Department of  Environmental  Protection
("MDEP") and  anticipates  receiving all of its required MDEP permits during the
second or third quarter of 1998,  which would allow WSI to begin accepting solid
waste at the first 6-acre lined cell by the first or second quarter of 1999. The
South Hadley  landfill  project is currently  expected to have  approximately  2
million cubic yards of new capacity for future disposal.

         On March 23, 1998, the Company signed a definitive agreement to acquire
Horvath  Sanitation,  Inc.,  d/b/a  Eagle  Waste  ("Eagle"),  which  is based in
Altoona, Pennsylvania.  This transaction is also expected to close by the end of
May 1998.  Eagle has  approximately  $8 million in annual  revenue and  collects
approximately  200 tons  per day of  solid  waste.  Eagle's  operations  will be
integrated with the Hopewell, Pennsylvania landfill acquisition discussed above.
Ultimately,  WSI intends to create integrated solid waste management  operations
in the geographical areas surrounding each of its landfills.

         WSI's  objective  is to  expand  the  current  geographic  scope of its
operations  and to become one of the leading  providers of  non-hazardous  solid
waste management  services in each market that it serves.  The Company's primary
growth strategy is to acquire landfills in or near urban metropolitan areas, and
to  secure  dedicated  waste  streams  for  such  landfills  by  acquisition  or
development of collection operations and transfer stations.  The internalization
of waste  streams is a major  component of the Company's  strategy.  The Company
believes that significant  opportunities  exist to expand its operations in each
of its current and targeted markets.


                                       1
<PAGE>


Industry Overview

         Based on published  industry  information,  the solid waste  management
industry  generated  approximately  $36  billion in revenue  during  1997 and is
expected  to  grow  to $40  billion  by the  year  2000.  Of  the  $36  billion,
approximately  43% is controlled by public  companies  with the remaining  split
almost equally between 6,000 small private operators and municipal governments.

         The  solid  waste   management   industry  is  generally   experiencing
significant  consolidation  and  integration.  The  Company  believes  that  the
consolidation  and  integration  is a result  of the  following  factors,  among
others: (i) increasingly stringent environmental regulations which have resulted
in an increased need for substantial  capital  requirements to remain  compliant
with such  regulations;  (ii) the inability of many smaller operators to achieve
the  economies of scale  necessary to compete with larger  providers;  (iii) the
competitive and economic benefits of providing integrated collection, recycling,
transfer and disposal services; and (iv) the privatization of solid waste assets
and services by municipalities.  Although  significant  consolidation within the
solid waste management industry has occurred,  the Company believes the industry
remains highly fragmented and that a substantial number of potential acquisition
opportunities remain.

Strategy and Acquisition Program

         WSI is pursuing an  acquisition  strategy to achieve its  objective  of
becoming a leading  provider of integrated  solid waste  management  services in
each of the  markets  it serves.  The key  elements  of its  strategy  are:  (i)
identify  landfills  near  urban  metropolitan  centers  that  are  economically
feasible for  acquisition;  (ii) develop an  integrated  solid waste  management
operation which provides collection,  recycling,  transfer and disposal services
to increase and control waste streams to its landfills;  (iii)  consolidate  and
expand  its  operations   around  each  of  its  landfills   through   "tuck-in"
acquisitions;   (iv)   improve   existing  and   acquired   operations   through
internalization of the waste stream, thus increasing operating  efficiencies and
improving capacity utilization; and (v) internal growth.

         The following  table sets forth  acquisitions  completed by the Company
through February 1998:
<TABLE>
<CAPTION>

<C>                        <C>                    <C>                           <C>

Acquisition                Month Acquired         Principal Business            Location             Market Area

Moretown Landfill             July 1995           Landfill                      Moretown, VT           Vermont

The Hartigan Company          January 1997        Solid waste collection        Stowe, VT           Central Vermont

CSWD Transfer Station         October 1997        Transfer Station              Burlington, VT           N.W.
VT.

Doyle Disposal                January 1998        Solid waste collection        Barre, VT           Central Vermont

Perkins Disposal              January 1998        Solid waste collection        St. Johnsbury, VT     N. E. Vermont

Rapid Rubbish                                     Solid waste collection/
       Removal , Inc.         February 1998       Transfer Station              St. Johnsbury, VT     N. E.  Vermont

Greenia Trucking              February 1998       Solid waste collection        St. Albans, VT        N. W.  Vermont

</TABLE>


In addition,  the Company has signed certain  agreements for the  acquisition or
operation of landfills and  collection  companies  described  under  "Integrated
Solid Waste Management Operations - Hopewell, Pennsylvania" and "--South Hadley,
Massachusetts."  There can be no assurance  that the Company will continue to be
successful in executing its acquisition  strategy.  See Management's  Discussion
and Analysis of Financial  Condition and Results of Operations - Certain Factors
Affecting Future Operating Results - "Ability to Identify, Acquire and Integrate
Acquisition Targets")


                                       2
<PAGE>



Integrated Solid Waste Management Operations

         The Company believes that it can successfully  create  integrated solid
waste  management  operations by acquiring or developing  disposal  capacity and
subsequently  integrating them with strategically  located collection operations
and transfer  stations.  The Company's  strategy,  if successful  would ensure a
steady and  growing  long-term  waste  stream to its  landfills.  The  Company's
current integrated solid waste management operations are as follows:

         Moretown,  Vermont.  The Company established its first integrated solid
waste management operations in the geographical area surrounding its landfill in
Moretown, Vermont. In addition to the landfill in Moretown, Vermont, the Company
currently owns and/or operates three transfer stations and collection operations
serving over 4,400 commercial and residential  customers in the Burlington,  St.
Albans, St. Johnsbury and Barre-Montpelier, Vermont areas. The first cell ("Cell
1") at the Company's  landfill is currently  operating at approximately  300-350
tons per day ("TPD") with remaining  estimated permitted capacity as of December
31, 1997 of  approximately  215,000 cubic yards. A permit  application was filed
with the Vermont  Agency of Natural  Resources for the  development  of a second
cell ("Cell 2") on April 3, 1997.  On March 11,  1998,  WSI  received  its draft
certification  for Cell 2 from the  Vermont  Agency of  Natural  Resources.  The
Company expects to receive all of the permits  required for Cell 2 by the end of
the second quarter of 1998 although no assurances can be given that all required
permits will be issued in accordance with the Company's expected schedule.  When
all of the permits are granted,  the Company will begin  construction  on Cell 2
which will increase the permitted  landfill capacity by an estimated 1.3 million
cubic yards. For the year ended December 31, 1997, approximately 24%
of the waste  received at its  Moretown,  Vermont  landfill was collected by the
Company's  hauling  operations or received at the Company's  transfer  stations.
Also,  100%  of the  waste  collected  by the  Company  was  disposed  of at its
Moretown, Vermont landfill.

         Hopewell,  Pennsylvania.  In  November  1997,  WSI signed a  definitive
agreement  to acquire  the  700-acre,  3 million  cubic yard permitted municipal
solid waste landfill in Hopewell, Pennsylvania. The purchase price of 
approximately  $6.0 million will be paid primarily by the assumption of
debt on the facility.  The existing  landfill  consists of five permitted cells,
one of which is  currently  operating.  The  Hopewell  project  represents a new
market for the  Company,  in which it  intends  to build a network of  adjoining
collection  operations  and transfer  stations  within the central  Pennsylvania
region.  The Company has also  identified  additional  room for expansion at the
landfill. This transaction is expected to close by the end of May, 1998.

         On March 23, 1998, the Company signed a definitive agreement to acquire
Horvath  Sanitation,  Inc.,  d/b/a  Eagle  Waste  ("Eagle"),  which  is based in
Altoona, Pennsylvania.  Eagle has approximately $8 million in annual revenue and
collects  approximately 200 tons per day of solid waste. Eagle's operations will
be integrated with the Hopewell,  Pennsylvania landfill as discussed above.   
The Company has also identified additional tuck-in opportunities for acquisition
of collection companies and transfer stations in the area, which would help 
ensure WSI a stable,  long-term  waste stream to the landfill.

         South  Hadley,  Massachusetts.  WSI  and  the  Town  of  South  Hadley,
Massachusetts  have entered  into a contract as of August 22, 1995,  whereby the
Company will operate and remodel (see  "Landfill  Remodeling"  below) the town's
30-acre  municipal  solid waste  landfill.  The Town of South Hadley will retain
full  ownership  of the  landfill  while the Company  operates  and remodels the
facility.  In March 1997,the Company received a landfill  disruption permit from
the MDEP which enabled WSI to begin engineering work and feasibility  studies at
the  South  Hadley  landfill.  On March  16,  1998 the  Company  filed its draft
environmental  impact report with the MDEP and anticipates  receiving all of its
operating and  construction  permits during the second or third quarter of 1998,
which would allow WSI to begin  accepting  solid waste at the first 6-acre lined
cell  during the first or second  quarter  of 1999.  The South  Hadley  landfill
project is currently expected to have approximately 2 million cubic yards of new
capacity for future disposal.


                                       3
<PAGE>


Landfill Remodeling

         Municipal waste at landfills  typically  contains a large amount of low
density, bulky material. The Company believes that by processing and recycling a
percentage of this material, it is possible to recapture approximately 40-80% of
the landfill's  original  permitted  disposal  capacity.  The remodeling process
begins with the  excavation  of the landfill and  processing  of existing  solid
waste.  The  landfill is then lined in  accordance  with  current  environmental
standards,  and the remaining processed solid waste is returned to the new lined
landfill.  At this point,  the site is  considered  operational  and is ready to
receive additional solid waste from outside sources.

         The benefits of landfill remodeling are: (a) the entire landfill can be
brought into compliance with current applicable environmental  regulations;  (b)
the  useful  life of the  landfill  can be  extended  as a result of the  volume
reduction of the existing waste creating substantial new waste capacity; and (c)
the  high  cost  of  closing  down  a  landfill  in   compliance   with  current
environmental  regulations  can be deferred and the future  closure costs can be
financed through the utilization of the new waste capacity.

Medical Waste Technology

         WSI  currently  maintains  ownership  of an  infectious  medical  waste
disposal technology,  known as the continuous flow auger ("CFA") process,  which
is  the  subject  of a U.S.  patent  and a  pending  European  Community  patent
application.  This process is fully  developed  and requires no further  capital
funding. The Company's activities in this area have been limited to licensing of
the  technology  and related  engineering  consulting  services to licensees.  A
previous world-wide  licensing  arrangement with BioMedical Waste Systems,  Inc.
("BioMed")  was  terminated  as to most  jurisdictions  as a result of  BioMed's
failure to make contractual minimum payments. In February 1996, WSI entered into
an  exclusive  licensing  arrangement  for the United  Kingdom and Ireland  with
ScotSafe  Limited  ("ScotSafe"),  which was  expanded  to cover all of Europe in
November  1996.  This  arrangement  was  terminated  in late 1997 as a result of
ScotSafe's failure to pay royalties due. Subsequent to the termination, ScotSafe
was  placed  into  receivership  and  its  assets  were  purchased  by  Eurocare
Environmental   Services,  Ltd.  ("Eurocare")  in  December  1997.  Eurocare  is
currently  operating the three  facilities the Company  constructed for ScotSafe
without a licensing  agreement.  The Company  petitioned  Scottish Courts for an
interim interdict,  which would have required Eurocare to cease operations until
proper  licensing  of the CFA  process  was  obtained  from WSI.  The  Company's
petition  to the Court was denied  since the Company  currently  does not hold a
European  patent on the CFA  process.  However,  since the  Company  does have a
European  patent  application  pending,  the Scottish  courts have required that
Eurocare  track all waste  processed  at the  plants  and to remove  some of the
recommended  modifications to the standard CFA process which were recommended by
WSI while under  agreement with  ScotSafe.  Although no assurances can be given,
the Company  expects to be granted its European  patents  during 1998,  at which
time,  the  Company  will  act  vigorously  to  protect  its  rights  to the CFA
technology against Eurocare and seek substantial damages. Otherwise, the Company
has no licenses or other  revenue-paying  arrangements  with  respect to the CFA
technology, and is reassessing its business plans in this respect.

Competition

         The solid  waste  management  industry is highly  competitive  and very
fragmented and requires  substantial  labor and capital  resources.  Competition
exists for collection, recycling, transfer and disposal services. The markets in
which the Company  competes or is likely to compete in are usually served by one
or more of the large  national,  regional or local solid waste companies who may
have greater  financial,  marketing or technical  resources  than WSI and may be
able to achieve greater economies of scale than the Company.

         The Company also competes with counties,  municipalities  and operators
of alternative  disposal  facilities that operate their own waste collection and
disposal facilities.  The availability of user fees, charges or tax revenues and
the availability of tax-exempt financing may provide a competitive  advantage to
the  public  sector.  Additionally,  alternative  disposal  facilities  such  as
recycling and incineration may reduce the demand for the disposal of solid waste
in landfills.

         The Company competes for waste collection and disposal  business on the
basis of quality of operation,  price and  geographical  location.  From time to
time,  competitors may reduce the price of their services in an effort to expand
or maintain market share or to win competitively bid contracts.

         Competition  also exists  within the industry for  acquisition  targets
where the Company will usually  compete with publicly owned national or regional
solid waste management companies.


                                       4
<PAGE>


Government Regulation

         The Company and its  customers  are subject to  extensive  and evolving
environmental  laws and  regulations  that  have been  enacted  in  response  to
technological  advances and increased concern over environmental  issues.  These
regulations are  administered  by the U.S. EPA and various other federal,  state
and local  environmental,  transportation  and health and safety  agencies.  The
Company believes that such laws and regulations have the effect of enhancing the
potential  market in which the Company operates by allowing the Company to offer
economical  solutions for regulatory  problems to its customers and  acquisition
candidates.  On the other hand, such laws and regulations  represent a potential
constraint on the  Company's  operation of projects for its customers or for its
own account.

         In order to develop and operate a landfill project, the Company must go
through several governmental review processes and obtain one or more permits and
often zoning or other land use  approvals.  These permits and zoning or land use
approvals  are  difficult  and time  consuming  to obtain  and may be opposed by
various local authorities and ad hoc citizens' groups. Once obtained,  operating
permits  generally must be periodically  renewed and are subject to modification
and revocation by the issuing agency.

         The Company's landfill  operations  subject it to certain  operational,
monitoring, site maintenance,  closure and post-closure, and financial assurance
obligations  which  change  from  time to time  and  which  could  give  rise to
increased  capital  expenditures  and operating  costs.  In connection  with the
Company's preliminary  development of landfill projects, the Company will expend
considerable  time,  effort and  resources  in complying  with the  governmental
review and permitting  process  necessary to develop or increase the capacity of
these landfills.  Governmental  authorities have the power to enforce compliance
with these laws and  regulations  and to obtain  injunctions  or impose civil or
criminal penalties in the case of violations. Failure to correct the problems to
the satisfaction of the authorities  could lead to curtailed  operations or even
closure of a landfill.

         The  principal  federal,  state,  and local  statutes  and  regulations
applicable to the Company's operations are as follows:

         The Resource  Conservation and Recovery Act of 1976. RCRA regulates the
generation,  treatment, storage, handling,  transportation and disposal of solid
waste and  requires  states to develop  programs to ensure the safe  disposal of
solid  waste.   RCRA  divides  solid  waste  into  two  groups,   hazardous  and
non-hazardous.  Wastes are generally  classified as hazardous wastes if they (i)
either  (a) are  specifically  included  on a list of  hazardous  wastes  or (b)
exhibit  certain  hazardous   characteristics  and  (ii)  are  not  specifically
designated  as  non-hazardous.  Wastes  classified  as hazardous  under RCRA are
subject to much stricter regulation than wastes classified as non-hazardous, and
businesses that deal with hazardous waste are subject to regulatory  obligations
in addition to those imposed on handlers of non-hazardous waste.

         Among the wastes  that are  specifically  designated  as  non-hazardous
waste are household waste and "special" waste, including items such as petroleum
contaminated   soils,   asbestos,   foundry  sand,   shredder   fluff  and  most
non-hazardous industrial waste products.

         The  EPA  regulations   issued  under  Subtitle  C  of  RCRA  impose  a
comprehensive   "cradle  to  grave"   system  for   tracking   the   generation,
transportation,  treatment,  storage  and  disposal  of  hazardous  wastes.  The
Subtitle C  Regulations  impose  obligations  on  generators,  transporters  and
disposers of hazardous  waste, and require permits that are costly to obtain and
maintain for sites where such material is treated, stored or disposed.  Subtitle
C requirements  include detailed operating,  inspection,  training and emergency
preparedness  and response  standards,  as well as requirements for manifesting,
record keeping and reporting,  corrective action, facility closure, post-closure
and financial  responsibility.  Most states have promulgated regulations modeled
on some or all of the  Subtitle  C  provisions  issued  by the EPA.  Some  state
regulations impose different, additional obligations.



                                       5
<PAGE>



         The  Company  is  not  involved  with  transportation  or  disposal  of
hazardous  substances (as defined in CERCLA) in  concentrations  or volumes that
would classify those materials as hazardous wastes.

         In October  1991,  the U.S.  EPA  adopted new  regulations  pursuant to
Subtitle D of RCRA (the "Subtitle D Regulations").  These new regulations became
generally  effective in October 1993 (except for certain MSW landfills accepting
less than 100 TPD,  as to which the  effective  date was April 9, 1994,  and new
financial  assurance  requirements,  which became  effective  April 9, 1997) and
include location  restrictions,  facility design standards,  operating criteria,
closure  and  post-closure   requirements,   financial  assurance  requirements,
groundwater  monitoring  requirements,  groundwater  remediation  standards  and
corrective action requirements.  In addition, these regulations require that new
landfills meet more stringent liner design criteria  (typically,  composite soil
and synthetic liners or two or more synthetic  liners) designed to keep leachate
out of groundwater and have extensive collection systems to control leachate for
treatment  prior to  disposal.  Groundwater  wells  must  also be  installed  at
virtually all landfills to monitor  groundwater  quality.  The regulations  also
require,  where threshold test levels are present, that methane gas generated at
landfills  be  controlled  in a  manner  that  protects  human  health  and  the
environment.  Each state is required to revise its landfill  regulations to meet
these requirements or such requirements,  will be automatically  imposed upon it
by the U.S.  EPA.  Each state is also  required to adopt and  implement a permit
program or other  appropriate  system to ensure that landfills  within the state
comply  with  the  Subtitle  D  criteria.   Many  states  have  already  adopted
regulations  or programs as stringent as or more  stringent  than the Subtitle D
Regulations, which were first proposed in August 1988.

         The Federal  Water  Pollution  Control  Act of 1972 (the  "Clean  Water
Act").  The Clean  Water Act  establishes  rules  regulating  the  discharge  of
pollutants from a variety of sources, including solid waste disposal sites, into
waters of the United States. If runoff or collected  leachate from the Company's
landfills and transfer  stations are  discharged  into streams,  rivers or other
surface  waters of the United  States,  the Clean  Water Act would  require  the
Company  to apply  for and  obtain a  discharge  permit,  conduct  sampling  and
monitoring and, under certain  circumstances,  reduce the quantity of pollutants
in such discharge. Also, virtually all landfills are required to comply with the
new federal  storm water  regulations,  which are  designed to prevent  possibly
contaminated  storm  water from  flowing  into  surface  waters.  The Company is
working with the appropriate  regulatory  agencies to ensure that its facilities
are in compliance with Clean Water Act requirements,  particularly as they apply
to treatment and discharge of leachate and storm water.  The Company has secured
or has applied for the required  discharge  permits under the Clean Water Act or
comparable  state-delegated  programs. To ensure compliance with the Clean Water
Act  pretreatment and discharge  requirements,  the Company has either installed
wastewater  treatment  systems  at its  facilities  to  treat  its  effluent  to
acceptable  levels before discharge or has arranged to discharge its effluent to
municipal  wastewater  treatment  facilities.  The  Company  believes  that  its
facilities  are in  compliance  in all  material  respects  with Clean Water Act
requirements.

         The Comprehensive Environmental Response,  Compensation,  and Liability
Act of 1980  ("Superfund"  or "CERCLA").  CERCLA  established  a regulatory  and
remedial  program  intended  to provide  for the  investigation  and  cleanup of
facilities  from  which  there  has been,  or is  threatened,  a release  of any
hazardous  substance  into  the  environment.  CERCLA's  primary  mechanism  for
remedying  such  problems is to impose  strict joint and several  liability  for
cleanup of facilities on current owners and operators of the site, former owners
and  operators  of  the  site  at the  time  of the  disposal  of the  hazardous
substances,  as well  as the  generators  of the  hazardous  substances  and the
transporters  who  arranged  for  disposal or  transportation  of the  hazardous
substances.   The  costs  of  CERCLA  investigation  and  cleanup  can  be  very
substantial.  Liability  under  CERCLA  does not depend  upon the  existence  or
disposal of "hazardous waste" but can also be founded upon the existence of even
very small  amounts of the numerous  "hazardous  substances"  listed by the EPA,
many of which can be found in household  waste.  If the Company were to be found
to be a responsible  party for a CERCLA cleanup,  either at one of the Company's
owned or  operated  facilities,  the  enforcing  agency  could hold the  Company
completely  responsible for all  investigative and remedial costs even if others
may also be liable.  CERCLA also authorized the imposition of a lien in favor of
the United  States upon all real  property  subject to or affected by a remedial
action  for all costs for which a party is  liable.  The  Company's  ability  to
obtain  reimbursement  from others for their allocable share of such costs would
be limited by the Company's ability to find other responsible  parties and prove
the extent of their  responsibility and by the financial resources of such other
parties.  In the past,  legislation has been introduced in Congress to limit the
liability  of   municipalities   and  others  under  CERCLA  as  generators  and
transporters  of municipal solid waste.  Although such  legislation has not been
enacted,  if it were to pass it would limit the  Company's  ability to seek full
contribution from  municipalities for CERCLA cleanup costs even if the hazardous
substances  that were  released  and caused  the need for  cleanup at one of the
Company's  facilities  were  generated  by or  transported  to the facility by a
municipality.



                                      6
<PAGE>


         The Clean Air Act. The Clean Air Act provides for  regulation,  through
state implementation of federal requirements,  of the emission of air pollutants
from  certain  landfills  based upon the date of the landfill  construction  and
volume per year of  emissions  of  regulated  pollutants.  The EPA has  recently
promulgated new source performance standards regulating air emissions of certain
regulated  pollutants (methane and non-methane organic compounds) from municipal
solid  waste  landfills.  The EPA may also  issue  regulations  controlling  the
emissions of particular  regulated air  pollutants  from  municipal  solid waste
landfills. Landfills located in areas with air pollution problems may be subject
to even more  extensive  air  pollution  controls and emission  limitations.  In
addition,  the EPA has issued  standards  regulating  the removal,  handling and
disposal of asbestos-containing materials.

         Each  of the  federal  statutes  described  above  contains  provisions
authorizing,  under certain  circumstances,  the bringing of lawsuits by private
citizens to enforce the provisions of the statutes.

         The  Hazardous  Materials  Transportation  Act. The  transportation  of
hazardous waste is regulated both by the EPA pursuant to RCRA and by the federal
Department  of  Transportation  ("DOT")  pursuant  to  the  Hazardous  Materials
Transportation Act ("HMTA").  Pursuant to the HMTA, DOT has enacted  regulations
governing the transport of hazardous  waste.  These  regulations  govern,  among
other things,  packaging of the hazardous waste during  transport,  labeling and
marking requirements, and reporting of and response to spills of hazardous waste
during  transport.  In addition,  under both the HMTA and RCRA,  transporters of
hazardous waste must comply with manifest and record keeping requirements, which
are designed to ensure that a shipment of hazardous waste is properly identified
and can be  tracked  from its  point of  generation  to point of  disposal  at a
permitted hazardous waste treatment, storage or disposal facility.

         The  Occupational  Safety  and  Health  Act  of  1970  ("OSHA").   OSHA
authorizes  the  Occupational  Safety and Health  Administration  to  promulgate
occupational   safety  and  health  standards.   Various  of  those  promulgated
standards, including standards for notices of hazards, safety in excavation, and
the handling of asbestos, may apply to certain of the Company's operations. OSHA
regulations set forth  requirements for the training of employees  handling,  or
who may be exposed in the workplace to,  concentrations  of  asbestos-containing
materials that exceed  specified  action levels.  The OSHA  regulations also set
standards for employee protection,  including medical  surveillance,  the use of
respirators,  protective  clothing and  decontamination  units,  during asbestos
demolition, removal or encapsulation as well as its storage,  transportation and
disposal.  In addition,  OSHA specifies a maximum permissible exposure level for
airborne  asbestos in the  workplace.  The company has no direct  involvement in
asbestos removal or abatement projects.

         State  and  Local  Regulation.  Each  state in which  the  Company  now
operates or may  operate in the future has laws and  regulations  governing  the
generation,  storage, treatment, handling,  transportation and disposal of solid
and hazardous  waste,  water and air pollution  and, in most cases,  the citing,
design,  operation,   maintenance,   closure  and  post-closure  maintenance  of
landfills  and  transfer  stations.  In  addition,   many  states  have  adopted
"Superfund"  statutes  comparable  to, and in some cases  more  stringent  than,
CERCLA.  These statutes impose  requirements  for  investigation  and cleanup of
contaminated  sites and  liability  for costs and damages  associated  with such
sites,  and some  provide  for the  imposition  of liens  on  property  owned by
responsible  parties.  Furthermore,  many  municipalities  also have ordinances,
local laws and regulations  affecting Company  operations.  These include zoning
and health  measures that limit solid waste  management  activities to specified
sites or activities,  flow control  provisions that direct the delivery of solid
wastes to specific facilities, laws that grant the right to establish franchises
for  collection  services  and  then put out for bid for the  right  to  provide
collection  services,  and bans or other  restrictions  on the movement of solid
wastes into a municipality.

         Certain  permits and approvals may limit the types of waste that may be
accepted  at a  landfill  or the  quantity  of waste that may be  accepted  at a
landfill during a given time period. In addition, certain permits and approvals,
as well as  certain  state  and  local  regulations,  may  limit a  landfill  to
accepting  waste that  originates  from  specified  geographic  areas or seek to
restrict the importation of out-of-state waste or otherwise discriminate against
out-of-state waste.  Generally,  restrictions on the importation of out-of-state
waste  have  not  withstood  judicial  challenge.   However,   proposed  federal
legislation   would  allow  individual   states  to  prohibit  the  disposal  of
out-of-state  waste or to limit the amount of  out-of-state  waste that could be
imported for disposal and would require states, under certain circumstances,  to
reduce  the  amounts  of waste  exported  to other  states.  If this or  similar
legislation is enacted, states in which the Company operates landfills could act
to limit or prohibit the importation of out-of-state  waste.  Such state actions
could adversely  affect landfills within those states that receive a significant
portion of waste originating from out-of-state.


                                       7
<PAGE>


         In addition,  certain  states and  localities may for economic or other
reasons  restrict the  exportation of waste from their  jurisdiction  or require
that a  specified  amount of waste be  disposed of at  facilities  within  their
jurisdiction.  In 1994, the United States  Supreme Court held  unconstitutional,
and therefore  invalid, a local ordinance that sought to impose flow controls on
taking waste out of the locality. However, certain state and local jurisdictions
continue to seek to enforce such restrictions and, in certain cases, the Company
may elect not to challenge such restrictions based upon various  considerations.
In addition, the aforementioned  proposed federal legislation would allow states
and localities to impose certain flow control  restrictions.  These restrictions
could result in the volume of waste going to landfills  being reduced in certain
areas, which may adversely affect the Company's ability to operate its landfills
at their full capacity and/or affect the prices that can be charged for landfill
disposal services.

         There  has been an  increasing  trend at the  federal,  state and local
level to mandate and encourage waste reduction at the source and waste recycling
and to prohibit  the  disposal of certain  types of solid  wastes,  such as yard
wastes, in landfills. The enactment of regulations reducing the volume and types
of wastes  available for transport to and disposal in landfills could affect the
Company's ability to operate its facilities at their full capacity.

         The Company  believes that it is in compliance with federal,  state and
local regulations  based on the Company's  internal review process which has not
identified  any non  compliance  and the Company has not  received any verbal or
written notification from any governmental agency to the contrary.

Employees of the Registrant

         As of December 31, 1997, WSI had 35 full time employees. As a result of
the acquisitions  executed subsequent to year-end,  the Company had 60 full time
employees  as of March 24,  1998 and,  based on  acquisitions  under  definitive
agreements  as of March 23,  1998,  the Company  expects the number of full time
employees to grow to approximately 175 by June 30, 1998. WSI believes its future
success  will  depend in part on its  continued  ability to  recruit  and retain
highly qualified technical and managerial personnel.

         WSI's employees are not subject to any collective bargaining agreement.
WSI considers its relations with its employees to be good.

Item 2.  Properties

                  The Company owns and operates landfills, transfer stations and
other  facilities  described  under Item I - Business  "Integrated  Solid  Waste
Management   Operations".   In  addition,   the  Company  leases  its  corporate
headquarters,   located  at  420   Bedford   Street,   Suite   300,   Lexington,
Massachusetts.  WSI currently occupies  approximately  11,000 square feet at the
Lexington  location  under the terms of a lease  expiring  in March  2003,  with
annual rent of approximately $200,000.

Item 3.  Legal Proceedings

         Richard  Rosen.  In  July  1996,  the  Company  commenced   arbitration
proceedings  against Richard Rosen ("Rosen"),  former Chairman,  Chief Executive
Officer and  President of the  Company,  seeking to recover  amounts,  excluding
interest and litigation costs,  which the Company believes it was owed by Rosen.
This action was undertaken at the direction of the Board of Directors  following
its  receipt  of a report  by a special  committee  of the  Board  appointed  to
investigate  Rosen's financial  dealings with the Company,  in consultation with
independent  counsel  retained  in  connection  with  its  investigation.  Rosen
resigned from all offices with the Company on March 27, 1996.  Amounts which the
Company sought to recover included  unreimbursed  advances and amounts which the
Company believed  constituted  improper expense  reimbursements  and payments of
Company funds for personal benefit.

         An arbitration hearing was completed on October 25, 1996. On January 2,
1997, the  arbitrator  issued the Award of  Arbitrator,  directing  Rosen to pay
$780,160,  excluding interest and litigation costs, for breaches by Rosen of his
employment agreement with the Company "in failing to discharge in good faith the
duties of his  positions  and failing to act under the direction of the Board of
Directors' of the Company.  On February 25, 1997 the Middlesex Superior Court in
Cambridge,  Massachusetts  confirmed the arbitration  award and entered judgment
against  Rosen,  which is now  non-appealable,  in an  amount  of  approximately
$833,000. The Company is currently pursuing discovery against Rosen through this
forum  to  identify  assets  that  Rosen  may  have  available  to  satisfy  the
outstanding  judgment.  In August of 1996,  the  Company  secured a  preliminary
injunction in Middlesex  Superior  Court with respect to any future sales of the
Company's  stock by Rosen.  The Company has filed a Motion in such action asking
the Court to issue a  broader  form of  permanent  injunction  in the  case.  On
September  8, 1997 the  Company  commenced  a  supplementary  process  action in
Cambridge  District  Court  to  collect  on  such  judgment,  including  seeking
foreclosure  on all shares of the  Company's  stock owned by Rosen.  On March 5,
1998 the judge granted the Company's motion and the Company is in the process of
obtaining  all the  shares  held by Rosen.  No  assurance  can be given that the
Company  will be able to collect the entire  balance of any  amounts  awarded in
arbitration  including interest and litigation costs. The Company is carrying on
its  December  31, 1997  balance  sheet an amount of  $300,000  in  unreimbursed
advances due from Rosen, but the Company's other claims and additional  advances
have not been reflected on the balance sheet at this time.  The Company  expects
to have received in the aggregate a minimum of approximately $300,000 from Rosen
in cash or stock by March 31, 1998.


                                      8
<PAGE>


         On March 27, 1997,  Rosen  commenced  an action  against the Company in
Middlesex  County  (Massachusetts)  Superior Court,  seeking an award of damages
resulting  from the Company's  alleged  breach of a Memorandum of  Understanding
entered into between the Company and Rosen in connection with the termination of
Rosen's  employment with the Company,  in which Rosen had been granted an option
to purchase certain assets of the Company not related to its core business.  The
Company believes this claim to be frivolous and is vigorously defending this 
action.

         Marguerite Piret. In October 1997 in the Middlesex  Superior Court, the
Company  commenced an action against  Marguerite A. Piret, a former  director of
the  Company  and the wife of  Rosen,  seeking  damages  against  Ms.  Piret for
breaches of her fiduciary duty as a former director of the Company.  The case is
in the  discovery  stage  and no trial  date has been  set.  If the  Company  is
successful  in its claims,  the Company  may  recover  direct and  consequential
damages from Ms. Piret.

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

           The Company held a special  meeting in lieu of its annual  meeting of
stockholders  on October 24, 1997 (the "1997 Annual  Meeting").  The record date
for the meeting was September 10, 1997. As of such record date, the total number
of  shares of Common  Stock  eligible  to vote at the 1997  Annual  Meeting  was
18,195,904,  representing a like number of votes, and the total number of shares
of Series A Preferred  Stock  eligible  to vote at the 1997  Annual  Meeting was
95,880, representing a number of votes equivalent to 34,090,638 shares of Common
Stock,  for an  aggregate  of  52,256,542  votes  eligible  to be  cast  on each
proposal.

           Proposal 1: Election of Directors:  The Board of Directors  nominated
seven  individuals to serve as Directors of the Company,  including four who are
required to be elected by class vote of the Preferred  Stock.  The  stockholders
voted to elect Jay  Matulich,  Robert  Rivkin  and  Philip  Strauss  to serve as
directors of the Company.  There were  38,629,202  votes cast for,  35,125 votes
against and 213,660  abstaining  from the election of Jay  Matulich.  There were
38,627,944 votes cast for, 36,383 votes cast against and 213,660 abstaining from
the election of Robert  Rivkin.  There were  38,625,802  votes cast for,  38,525
votes cast against and 213,660  abstaining  from the election of Philip Strauss.
David J. Breazzano,  Charles Johnston,  Judy K. Mencher and William B. Philipbar
were elected by class vote of the  Preferred  Stock to serve as Directors of the
Company.

           Proposal 2:  Approval of Corporate  Re-organization:  A vote was also
held to change the  Company's  state of  incorporation  to Delaware  from Nevada
through a merger of the Company into a wholly-owned subsidiary,  and all effects
thereof,  including (a) the conversion of the outstanding  Company securities of
the surviving corporation, (b) certain amendments to the Corporation' s Articles
of Incorporation and By-laws (c) an increase in the Company's  authorized common
stock, $.01 par value per share (the "Common Stock"),  from 20,000,000 shares to
30,000,000,   and  (d)  the  change  in  the   Company's   name  from   "BioSafe
International,  Inc."  to  "Waste  Systems  International,   Inc.".  There  were
31,237,007  votes cast for,  195,855 votes cast against,  215,510 votes eligible
abstaining and 7,229,615 votes eligible not voted.

           Proposal 3: Approval of Amendments to Company's 1995 Stock Option and
Incentive Plan, as amended:  A vote was also held to approve an amendment to the
Company's  1995 Stock Option and Incentive Plan to increase the number of shares
of the  Company's  Common Stock  reserved for issuance  thereunder  from 300,000
shares to 1,700,000.  There were 37,574,419  votes cast for,  441,633 votes cast
against, 634,918 votes eligible abstaining and 227,017 votes eligible not voted.



                                     9
<PAGE>


           Proposal 4:  Approval of  Amendments  to Company's  1995 Stock Option
Plan for Non-Employee  Directors, as amended: A vote was also held to approve an
amendment to the Company's 1995 Stock Option Plan for Non-Employee  Directors to
provide for the grant to each newly-elected  non-employee  director of an option
to purchase 4,000 shares of the Company's Common Stock upon such election. There
were  37,691,958  votes cast for,  348,209  votes cast  against,  696,608  votes
eligible abstaining and 141,212 votes eligible not voted.

           Proposal 5:  Ratification  of KPMG Peat  Marwick  LLP as  Independent
Auditors: The stockholders also voted to ratify the Directors: selection of KPMG
Peat  Marwick,  LLP as the  Company's  independent  auditors for the fiscal year
ended December 31, 1997. There were 38,666,557 votes cast for, 26,100 votes cast
against, 99,525 votes eligible abstaining and 85,805 votes eligible not voted.

             The Company held a special  meeting of stockholders on February 13,
1998.  The record date for the meeting was December 30, 1997.  As of such record
date,  the total  number of shares  of  Common  Stock  eligible  to vote at such
special  meeting of stockholders  was 19,467,074,  representing a like number of
votes,  and the total number of shares Series A Preferred Stock eligible to vote
at such special  meeting of  stockholders  was 92,580,  representing a number of
votes  equivalent  to  32,917,306  shares of Common  Stock,  for an aggregate of
52,384,380 votes eligible to be cast on each proposal.

         Proposal 1: Approval of 1-for-5 Reverse Stock Split:  The  stockholders
of  the  Company  approved  a  one-for-five  reverse  stock  split.  There  were
40,166,667  votes cast for,  353,274 votes cast against,  61,005 votes  eligible
abstaining and 11,803,434 votes eligible not voted. No fractional shares will be
issued in connection with the reverse stock split, and stockholders will receive
cash in payment for any fractional shares otherwise issuable



                                       10
<PAGE>



                                         PART II

Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters

         The Company's  Common Stock is currently quoted on the NASDAQ Small-Cap
Market under the symbol "WSII".  The following table sets forth the high and low
bid  information  of the common stock for the periods  indicated and restated to
reflect a one-for five reverse stock split effective February 13, 1998.


             1997                                  High                 Low
First quarter ended March 31, 1997                $2.80                 $1.55
Second quarter ended June 30, 1997                 2.35                  1.25
Third quarter ended September 30, 1997             3.15                  1.40
Fourth quarter ended December 31, 1997             5.00                  2.80

             1996

First quarter ended March 31, 1996               $15.60                $13.10
Second quarter ended June 30, 1996                11.25                 15.90
Third quarter ended September 30, 1996             7.50                  6.55
Fourth quarter ended December 31, 1996             3.75                  2.80

         On March 24, 1998,  the reported last sale price of the common stock on
the NASDAQ  Small-Cap  Market was $6.00per share,  and there were 357 holders of
record of common stock.

         The Company  has never paid  dividends  on its Common  Stock and has no
present intention to pay dividends.  The Company's intention is to retain future
anticipated earnings to finance the expansion of its business.

         The Company has  outstanding  $9,257,807  of principal  amount Series A
Convertible  Preferred  Stock,  par value $0.001 per share  ("Series A Preferred
Stock"), which was issued in a private placement on June 26, 1997, bears an 8.0%
annual cumulative dividend, and is convertible into common stock at a conversion
price of $1.40625 per share of common stock, which conversion price may be reset
to a lower conversion price upon the occurrence of certain events.  The dividend
is payable in cash or in additional  shares of preferred  stock at the Company's
option and is  subject to  increase  to a 14% annual  rate on/or  after June 26,
2000.  The Series A  Preferred  Stock is also  redeemable  (a) at the  Company's
option for Common Stock, if the Company's average closing Common Stock price for
any 20 consecutive  trading days occurring after June 26, 1998 equals or exceeds
$2.8125 and (b) at the Company's  option for cash equal to the redemption  price
as set forth in the Certificate of Designation of the Series A Preferred  Stock,
if any Series A Preferred  Stock is  outstanding  on June 26, 2002, in each case
subject to certain trading  requirements.  Cumulative  dividends on the Series A
Preferred  Stock as of December 31, 1997,  which have not been declared or paid,
are approximately  $395,000. The purchasers of the Series A Preferred Stock were
granted registration rights covering the underlying Common Stock into which such
preferred stock is convertible,  and a registration  statement for the resale of
such common stock has been filed with the Commission but is not yet effective.

         The Company also has outstanding  $4,048,750 of principal amount Series
B Convertible  Preferred  Stock, par value $0.001 per share ("Series B Preferred
Stock"),  which was  issued on  December  31,  1997 in a  private  placement  in
exchange for outstanding  convertible notes of the Company,  bears a 6.0% annual
cumulative dividend,  and is convertible into common stock at a conversion price
of $6.25  per share of common  stock.  The  dividend  is  payable  in cash or in
additional  shares of Series B  Preferred  Stock at the  Company's  option.  The
Series B Preferred  Stock is also  redeemable  (a) at the  Company's  option for
Common  Stock,  if the  Company's  average  closing  Common  Stock  price for 20
consecutive trading days equals or exceeds $6.25 and (b) at the Company's option
for  cash  equal to the  redemption  price as set  forth in the  Certificate  of
Designation of the Series B Preferred  Stock, if any Series B Preferred Stock is
outstanding on October 6, 2000.  Cumulative  dividends on the Series B Preferred
Stock as of  December  31,  1997,  which  have not been  declared  or paid,  are
approximately  $1,000.  The  purchasers  of the  Series B  Preferred  Stock were
granted registration rights covering the underlying Common Stock into which such
preferred stock is convertible.







                                       11
<PAGE>

===========================================================
Item 6. Selected Consolidated Financial and Operating Data
===========================================================
<TABLE>
               Waste Systems International, Inc. and Subsidiaries
                             Selected Financial Data
     (in thousands except for outstanding shares and earnings per share data)


                                                            Fiscal Year Ended
                                              Dec. 31,      Dec. 31,    Dec. 31,       Dec. 31,    Dec. 31,
                                                1997          1996          1995         1994        1993
<S>                                           <C>            <C>          <C>              <C>        <C>
Statement of Operations Data:
    Revenues                                  $3,458         $1,496       $1,344           $0          $0
                                              -------        -------      ------         ------      -------

    Cost of operations:
      Operating expenses                       1,719            921          766
                                                                                            -           -
      Depreciation and amortization              692            370           72
                                                                                            -           -
      Write-off of landfill  
        development costs                      1,495          6,652           -             -           -
                                              -------        -------      ------         ------     -------   
                                                           
         Total cost of operations              3,906          7,943          838            -           -
                                              -------        -------      ------         ------     -------
                                                                                           
            Gross profit (loss)                 (448)        (6,447)         506            -           -
                                                                                           
    Selling, general and                       
     administrative expenses                   2,138          2,443        3,286          1,485         936
  
    Amortization of prepaid 
     consulting fees                             -              834          501            -           -
                                                                   
   Restructuring                                 596          1,741           -             -           -
                                              -------        -------      ------         ------     --------
            Loss from operations              (3,182)       (11,465)     (3,281)         (1,485)       (936)
                                              -------        -------      ------         ------     -------
    Other income (expense):
         Royalty and other income              
         (expense), net                         (521)           923          865          1,850       1,300
   
         Interest income                         172            178          289             14          27
         Interest expense and              
              financing costs                 (1,355)        (1,182)       (471)           (166)       (125)
   
         Equity in loss of affiliate              -             (96)          -              -           -
                                                                          
         Gain on sale of assets                   -              -            -             223          -
                                                                          
         Write-off of accounts and                                      
           notes receivable                     (568)            -       (2,975)             -           -
         Loss on investment in                                             
           marketable securities                   -             -          (91)            (9)          -
         Write-off of assets                       -            (22)           -             -           -
                                                  
            Total other income                -------        -------      ------         ------     -------
                 (expense)                    (2,272)          (199)     (2,383)          1,912       1,202
                                              -------        -------      ------         ------     -------
                              
            Income (loss) before income
              taxes, minority
              interest, discontinued
              operations and
              extraordinary item              (5,454)       (11,664)     (5,664)           427         266

    Federal and state income tax 
       expense (benefit)                           6           (23)        (110)           185         103
                                              -------        -------      ------         ------     -------

            Income (loss) before
              minority interest
              discontinued
              operations and
              extraordinary item              (5,460)       (11,641)     (5,554)           242         163

    Minority interest                              5           (12)           13
                                              -------        -------      ------         ------     -------                         
              continuing operations           (5,455)       (11,629)     (5,567)           242         163
   

    Discontinued operations                       -          (2,261)     (2,303)
                                              -------        -------      ------         ------     ------- 
              extraordinary item              (5,455)       (13,890)     (7,870)           242         163
             

    Extraordinary item - loss on               
      extinguishment of debt                    (134)             -           -             -           -
                                              

            Net income (loss)                 (5,589)       (13,890)     (7,870)           242         163

    Preferred stock dividend                                                  10           108
                                                   -              -                                    -
            Net income (loss)
               available for                  -------        -------      ------          ------      ------
               common shareholders           ($5,589)      ($13,890)    ($7,880)          $134        $163
                                              =======        =======     =======          ======      ======        
    Earnings (loss) per share:
            Income (loss) from                ($1.51)        ($4.10)     ($2.88)          $0.15       $0.22
              continuing operations
              Discontinued operations           0.00          (0.80)      (1.19)           0.00        0.00
              Extraordinary item               (0.04)          0.00        0.00            0.00        0.00
                                              -------        -------      ------          ------      ------
              Earnings (loss) per share       ($1.55)        ($4.90)     ($4.08)          $0.15       $0.22
                                              =======        =======      ======          ======      ======
    Weighted average number of shares
    used in computation of earnings 
    (loss) per share                        3,612,623      2,834,841   1,932,809         899,727     729,181
                                             
                                         12
<PAGE>                                 

Item 6. Selected Consolidated Financial and Operating Data -
(Continued)

               Waste Systems International, Inc. and Subsidiaries
                             Selected Financial Data
      (in thousands except for outstanding shares and earnings per share data)


                                                                 Fiscal Year Ended
                                           Dec. 31,      Dec. 31,      Dec. 31,     Dec. 31,    Dec. 31,
                                             1997          1996          1995         1994        1993

    EBIDTA  (1)                                ($190)      ($1,516)    ($2,592)     ($1,476)      ($903)
    Capital expenditures                        $998        $6,599      $9,749         $807        $138
    Cash flow from operating activities      ($4,581)      ($3,912)    ($3,083)       ($209)      ($567)
    Cash flow from investing activities         $706       ($7,641)   ($10,267)     ($1,588)      ($138)
    Cash flow from financing activities       $6,575        $6,581     $18,416       $1,965        $639

Balance Sheet Data (at period end):
    Cash and cash equivalents                 $2,964          $265      $5,237         $171          $3
    Working capital                            1,532        (4,508)      2,393          659         (88)
    Total assets                              18,560        16,858      23,508        4,369       1,289
    Long-term debt, less current               7,201         9,450      12,266        1,263         505
    maturities
    Total stockholder's equity                 5,972        (1,849)      3,292          597        (403)
    (deficit)
</TABLE>


(1) EBITDA is defined as operating income from continuing operations excluding 
    one-time charges for write-off of landfill development costs and 
    restructuring charges, plus depreciation and amortization, which includes  
    depreciation and amortization included in selling, general and 
    administrative expenses. EBITDA does not represent, and
    should not be considered as an  alternative to net income or cash flows from
    operating  activities,  each as  determined  in  accordance  with  generally
    accepted  accounting   principles  ("GAAP").   Moreover,   EBITDA  does  not
    necessarily  indicate whether cash flow will be sufficient for such items as
    working  capital  or  capital  expenditures,  or to react to  changes in the
    Company's  industry or to the economy in general.  The Company believes that
    EBITDA is a measure  commonly  used by  lenders  and  certain  investors  to
    evaluate a company's  performance in the solid waste  industry.  The Company
    also  believes  that  EBITDA  data  may  help to  understand  the  Company's
    performance  because such data may reflect the Company's ability to generate
    cash  flows,  which is an  indicator  of its  ability  to  satisfy  its debt
    service,  capital  expenditures  and working capital  requirements.  Because
    EBITDA is not  calculated by all companies and analysts in the same fashion,
    the EBITDA  measures  presented by the Company may not be  comparable to the
    similarly-titled  measures  reported  by  other  companies.   Therefore,  in
    evaluating EBITDA data, investors should consider,  among other factors: the
    non-GAAP  nature of EBITDA;  actual cash flows;  the actual  availability of
    funds for debt service,  capital  expenditures and working capital;  and the
    comparability  of the  Company's  EBITDA data to  similarly-titled  measures
    reported by other companies.
                                   
                                        13
<PAGE>                             

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Note Regarding Forward Looking Statements:

This Annual Report on Form 10-K contains  forward-looking  statements concerning
among other things,  the Company's  expected  future  revenues,  operations  and
expenditures and estimates of the potential markets for the Company's  services.
Such  statements  made by the Company  fall within the meaning of Section 27A of
the  Securities  Act of 1933,  as amended, and  Section 21E of the  Securities
Exchange  Act of 1934,  as  amended.  All such  forward-looking  statements  are
necessarily  only estimates of future results and the actual results achieved by
the  Company may differ  materially  from these  projections  due to a number of
factors as  discussed  in the  section  entitled  "Management's  Discussion  and
Analysis  of  Financial  Condition  and Results of  Operations--Certain  Factors
Affecting Future Operating Results" of this Form 10-K.

Introduction

         Waste Systems International,  Inc. (referred to herein as the "Company"
or "WSI") is a regional integrated  non-hazardous solid waste management company
that provides solid waste collection,  recycling, transfer and disposal services
to commercial and residential customers.

         The  Company  currently  owns and  operates a solid  waste  landfill in
Moretown,  Vermont,  three  transfer  stations and collection  operations  which
currently  operate as an integrated  solid waste  operation,  serving over 4,400
commercial  and  residential  customers  in  the  Burlington,  St.  Albans,  St.
Johnsbury and Barre-Montpelier, Vermont areas.

         The Company currently has two additional landfill projects at different
stages of  development.  In November 1997, WSI signed a definitive  agreement to
acquire a  700-acre,  3 million  cubic  yard  permitted  municipal  solid  waste
landfill in Hopewell, Pennsylvania. This transaction is expected to close by the
end of May, 1998.  Additionally,  the Company entered into a contract to operate
and  remodel  an  existing   30-acre   municipal   landfill  in  South   Hadley,
Massachusetts.  On March 16,  1998 the  Company  filed  its draft  environmental
impact report with the MDEP and  anticipates  receiving all of its required MDEP
permits  during the first or second  quarter of 1998,  which  would allow WSI to
begin  accepting solid waste at the first 6-acre lined cell during the second or
third quarter of 1999. The South Hadley landfill  project is currently  expected
to have approximately 2 million cubic yards of new capacity for future disposal.

         On March 23, 1998, the Company signed a definitive agreement to acquire
Horvath  Sanitation,  Inc.,  D/B/A  Eagle  Waste  ("Eagle"),  which  is based in
Altoona, Pennsylvania.  This transaction is also expected to close by the end of
May 1998.  Eagle has  approximately  $8 million in annual  revenue and  collects
approximately  200 tons  per day of  solid  waste.  Eagle's  operations  will be
integrated with the Hopewell, Pennsylvania landfill acquisition discussed above.
Ultimately,  WSI intends to create integrated solid waste management  operations
in the geographical areas surrounding each of its landfills.

         WSI's  objective  is to  expand  the  current  geographic  scope of its
operations  and to become one of the leading  providers of  non-hazardous  solid
waste management  services in each market that it serves.  The Company's primary
growth strategy is to acquire landfills in or near urban metropolitan areas, and
to  secure  dedicated  waste  streams  for  such  landfills  by  acquisition  or
development of collection operations and transfer stations.  The internalization
of waste  streams is a major  component of the Company's  strategy.  The Company
believes that significant  opportunities  exist to expand its operations in each
of its current and targeted markets.



                                       14
<PAGE>



Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Results of Operations

         Revenues.  Revenues  for the year ended  December  31,  1997  increased
$1,962,000 to $3,458,000  from  $1,496,000 in 1996. The increase of 131% was due
primarily to increased waste volume accepted at the Company's Moretown,  Vermont
landfill,  in its first full year of operation,  the  acquisition  on October 6,
1997 of the CSWD transfer  station  located in  Burlington,  VT and the internal
growth of the  Company's  collection  operations.  All 1997 revenues were
generated  from the  Company's  Vermont  operation  as compared  to 1996,  where
approximately  $1,157,000 or 77% was generated from the Company's  operations at
the Fairhaven  landfill.  See Note 6 to the  Consolidated  Financial  Statements
presented in Item 8.

         Operating  expenses.  Operating  expenses  for 1997 were  approximately
$1,718,000  as compared  to  $921,000  for 1996.  The  increase of $797,000  was
primarily due to the growth of the Company's  Vermont  operations.  During 1997,
the Company's Vermont operations  expanded as a result of the Company's purchase
of a collection  company and the CSWD transfer  station.  (See Item 1 Business -
"Integrated Solid Waste Management Operations")

         Depreciation and  amortization.  Depreciation and amortization  expense
was $692,000 and $370,000 for the years-ended 1997 and 1996,  respectively.  The
increase of 87% was due primarily to the growth in the operation at the Company'
Vermont  landfill  which  resulted  in  increased  amortization  of  capitalized
landfill  costs and to a substantial  increase in capital  equipment used in the
Company's other Vermont operations.

         Write- off of  landfill  development  projects.  Write-off  of landfill
development  costs were $1,495,000 and $6,652,000 for the  years-ended  1997 and
1996,  respectively.  The write-off of landfill development costs are related to
the  Fairhaven  landfill  project.  See  Note  6 to the  Consolidated  Financial
Statements presented in Item 8. On February 24, 1998, the Company entered into a
termination  agreement  with the Town of Fairhaven  that required the Company to
perform a certain amount of construction  and closure work at the landfill.  The
estimated  costs to terminate this project have been reserved for by the Company
as of December 31, 1997 and are included in accrued expenses on the December 31,
1997 balance sheet. See Notes 6 and 8 to the Consolidated  Financial  Statements
presented in Item 8. .

         Gross margins,  excluding the write-off of landfill  development  costs
and restructuring charges for 1997 and 1996 were 30.3% and 13.7%,  respectively.
The  increase  was  primarily  due to increased  efficiencies  at the  Company's
Vermont operations as discussed above.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  expenses for 1997 were approximately  $2,138,000,  a decrease of
12.5% from 1996. The decrease was due to the  restructuring  undertaken in March
of 1996 and to the  cessation  of  operations  at the  Fairhaven  landfill.  The
decrease  was   partially   offset  by   increases   in  selling,   general  and
administrative expenses at the Company's Vermont operations and general 
corporate expenses due the building of an infrastructure necessary to support  
increases in acquisition, operating and administrative activities.

         Restructuring.  Restructuring  charges for 1997 and 1996 were  $596,000
and  $1,742,000,  respectively,  which  consisted of costs incurred for employee
severance,  non-cancelable  lease commitments,  professional fees and litigation
costs.  The  restructuring  has resulted in annual savings of  approximately  $4
million.  See Note 4 to the Consolidated  Financial Statements presented in Item
8.

         Royalty and other income (expense).  Royalty and other income (expense)
decreased approximately  $1,444,000 in 1997 to ($521,000) from $923,000 in 1996.
The  decrease  in 1997 was due to the  termination  of the  Company's  licensing
agreement with ScotSafe.  See Note 3 to the  Consolidated  Financial  Statements
presented in Item 8.

         Interest   expense.   Interest  expense  for  1997  was   approximately
$1,355,000 (net of capitalized interest of $24,000) as compared to approximately
$1,182,000  (net of  capitalized  interest of $42,000)  for 1996.  The  increase
resulted  primarily from  additional  indebtedness  incurred in connection  with
acquisitions and capital expenditures at the Company's Vermont operations.



                                       15
<PAGE>



         Write-off of accounts and notes  receivable.  During the fourth quarter
of 1997, the Company wrote-off an uncollectible  receivable due from ScotSafe of
approximately  $570,000.  See Note 3 to the  Consolidated  Financial  Statements
presented in Item 8.


Financial Position

         WSI had  approximately  $3.0  million in cash as of December  31, 1997.
This  represented  an increase of  approximately  $2.7 million from December 31,
1996. Working capital as of December 31, 1997, was approximately  $1,532,000, an
increase of approximately $6.0 million over December 31, 1996. This increase was
primarily  due to the  proceeds  from the January  1997  Regulation  "D" private
placement of common  stock,  the  proceeds  from the March 1997 Howard Bank term
loan, the increased level of operations at the Company's Vermont operations, and
the proceeds from the June 1997  Regulation  "D" private  placement of preferred
stock.  See  Notes  6, 7,  12 and 13 to the  Consolidated  Financial  Statements
presented in Item 8.

         At December 31, 1997, the Company had approximately $945,000 in net 
trade accounts receivable related to waste collection and disposal services
as compared to approximately $331,000 at  December  31,  1996.  The  increase is
primarily  due  to  increased  levels  of  operation  at the  Company's  Vermont
operation.  Approximately  94% or $888,000  of such  receivables  is  considered
current or within 90 days due.  The  Company  has  estimated  an  allowance  for
doubtful accounts of approximately  $46,000,  which is considered  sufficient to
cover estimated future bad debts.

         During  the  year  ended  December  31,  1997,   the  Company   devoted
substantial  resources to various project  development  and related  activities.
Additions to property and equipment of $3,283,359were made during the year ended
December 31, 1997,  which primarily  consisted of property and equipment for the
Company's Vermont operations.


Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Results of Operations

         Revenues.  Revenues for the year ended  December 31, 1996 and 1995 were
approximately  $1,496,000  and  $1,344,000.  Revenues for 1996 were derived from
operations  at the  Fairhaven  landfill,  and from the Moretown  landfill  which
commenced  operations  on October 6, 1996.  Revenues for 1995 were entirely from
operations at the Fairhaven landfill.

         Operating  Expenses.  Operating  expenses  for 1996  were  $921,000  as
compared to $766,000 in 1995.  The increase of $155,000  primarily  consisted of
operating costs  associated with the Moretown,  Vermont landfill which commenced
operations on October 6, 1996.

         Depreciation and  amortization.  Depreciation and amortization  expense
was  $370,000  and  $72,000  for 1997 and 1996,  respectively.  The  increase of
$299,000 is primarily due to the additional  property and equipment acquired for
use at the Fairhaven and Vermont landfill.

         Write-off of landfill costs. In 1996, the Company wrote-off its capital
investment in the Fairhaven landfill project of approximately $6.7 million due 
to the uncertain economic viability of the project. See Notes 6 and 8 to the 
Consolidated Financial Statements presented in Item 8.

         Selling,    general   and   administrative.    Selling,   general   and
administrative expenses consist of project development activities, marketing and
sales costs, salaries and benefits, and legal, accounting and other professional
fees, and other  administrative  costs.  These costs totaled  $2,443,000 for the
year ended  December  31,  1996,  as compared to  $3,287,000  for the year ended
December 31, 1995. This represented a decrease of $844,000,  which was primarily
the result of the restructuring  undertaken on March 27, 1996. See Note 4 to the
Consolidated Financial Statements included in Item 8.



                                       16
<PAGE>


         Amortization of prepaid  consulting fees On March 29, 1995, the Company
entered into a two-year agreement with Liviakis Financial  Communications,  Inc.
("Liviakis"), whereby Liviakis would provide ongoing assistance and consultation
to the  Company  on  matters  concerning  mergers  and  acquisitions,  corporate
finance,  investor relations and financial public relations. As compensation for
services to be rendered by Liviakis,  the Company issued  890,000  unregistered,
restricted  shares of Common Stock. As a result,  on March 29, 1995, the Company
recorded a prepaid asset of $1,335,000.  The Company was amortizing this expense
over the two years of the  Agreement,  at a rate of $167,000 per  quarter,  or a
total of $501,000 for the year ended December 31, 1996. On December 18, 1996 the
Company  terminated its consulting  agreement  with Liviakis.  As a result,  the
Company  expensed  the  remaining  prepaid  consulting  fees  in the  amount  of
$333,750.

         Restructuring.  On March 27, 1996, the Company  announced its intention
to take meaningful  action to conserve cash and working  capital,  including the
restructuring of the Company's  operations to focus its resources and activities
on developing an integrated solid waste management operation.  See Note 4 to the
Consolidated Financial Statements presented in Item 8. As a result , the Company
recorded  restructuring  charges of  $1,742,000,  which  included  accruals  for
employee  severance,  non-cancelable  lease  commitments,  professional fees and
litigation costs. 

         Royalty and other income  (expense),  net. Through the first quarter of
1995,  substantially  all of WSI's revenue had been attributable to the sale and
licensing of WSI's  medical waste  treatment  technologies  to BioMedical  Waste
Systems,  Inc.  ("BioMed").  On August 31,  1995,  the  Company  terminated  its
agreement  with BioMed in most  territories  as a result of BioMed's  failure to
make required payments to the Company as required by the licensing agreement.

         In February  1996,  the Company  entered into a licensing  and services
agreement with ScotSafe Limited  ("ScotSafe"),  a Glasgow,  Scotland company for
the exclusive  rights to use the Company's  continuous  feed auger medical waste
processing  technology  in the British  Isles and  Ireland.  The Company  earned
royalties and consulting fees of approximately  $1,000,000 during the year ended
December 31, 1996 from the completion of three medical waste treatment 
facilities by ScotSafe during this period.  See Note 3 to the Consolidated  
Financial Statements presented in Item 8.

         Interest  expense.  The  increase of  $710,000  in interest  expense to
$1,182,000  in 1996  from  $472,000  in 1995 was  primarily  the  result  of the
Company's  November 1995  Regulation S offering of $11.2 million in subordinated
convertible debt, which bears interest at 10%.  See Note 7 to the Consolidated
Financial Statements presented in Item 8.

Liquidity and Capital Resources

         The Company's  business is capital  intensive.  The  Company's  capital
requirements,  which  are  substantial,   include  acquisitions,   property  and
equipment  purchases and capital  expenditures  for landfill cell  construction,
landfill  development and landfill closure activities.  Principally due to these
factors,  the Company may incur working capital  deficits.  The Company plans to
meet its capital needs through various financing sources,  including  internally
generated funds and debt, including bank financing, and equity securities.

         To date, WSI has financed its activities primarily through the issuance
of debt and equity securities,  including  convertible  subordinated  notes.  
See Notes 7, 12 and 13 to the Consolidated Financial Statements presented in 
Item 8. The Company has raised,  from inception  through  December 31, 1997,  
cumulative net proceeds of  approximately  $34.3 million through  private  
placements of equity securities  and the issuance of long-term  debt. If the 
Company is successful in raising additional capital, WSI intends to aggressively
pursue and develop an integrated  solid  waste  management  company.  There can
be no  assurance  that additional  debt or equity  financing  will be available,
or available on terms acceptable to the Company.  Failure of the Company to 
obtain required  financing in the  short  term  could  have a  material  adverse
effect  on the  Company's financial condition and operation.

         Net  cash  used by  operating  activities  for  1997  and 1996 was $4.6
million  and  $3.9  million,  respectively.  The  use of  $4.6  million  in 1997
consisted  of the  substantial  completion  of  the  restructuring  and  related
liabilities, the termination of the Fairhaven landfill project and the growth of
the  Company's  Vermont  operations.  See Notes 4, 6 and 8 to  the  Consolidated
Financial Statements presented in Item 8.

         Net cash provided (used) by investing  activities for 1997 and 1996 was
$706,000 and ($7.7)  million,  respectively.  The net cash provided by investing
activities  in 1997 of $706,000 was primarily due to the reduction in collateral
requirements on the Vermont landfill  closure and post-closure  performance bond
of approximately $1.0 million and the  proceeds  from the sale of the  Fairhaven
equipment for approximately $800,000,  offset by additional capital expenditures
for the Company's Vermont operations. The net cash used by investing activities 
in 1996 was primarily the result of the Company's  investment in the Moretown,  
Vermont and Fairhaven, Massachusetts landfills.



                                       17
<PAGE>


         The Company's  capital  expenditures and capital needs for acquisitions
have  increased   significantly,   reflecting  the  Company's  rapid  growth  by
acquisition  and  development  of revenue  producing  assets  and will  increase
further  as the  Company  continues  to  complete  acquisitions.  Capital
expenditures  for  1998 are  currently  expected to be  approximately  $6
million with respect to the  businesses  that the Company  owned at December 31,
1997,  compared to total capital  expenditures  of $1 million in 1997 and $6.6
million in 1996.  Additionally, total capital  expenditures are expected to 
further increase in 1998  due to  acquisitions. The  decrease  of  $5.6 million
in  1997  capital expenditures from 1996 capital expenditures  relating to
businesses owned by the Company  as of  December  31,1  997  is  primarily  due 
to  the  completion  of construction of Cell 1 at the Moretown  landfill and 
construction  costs at the Fairhaven, Massachusetts landfill.

         Net  cash  provided  by  financing  activities  for  1997  and 1996 was
approximately  $6.8 million and $6.6  million,  respectively.  The 1997 proceeds
were  primarily  due to the  Company's  June  of  1997  Regulation  "D"  private
placement of Series A Convertible  Preferred  Stock which raised net proceeds of
approximately  $7.6  million.  The  1996  proceeds  were  primarily  due  to the
Company's  June of 1996  Regulation  S offering  of common  stock  which  raised
approximately $6.6 million.

         At December 31,  1997,  the Company had  approximately  $5.4 million of
long-term  and  short-term  debt,  $2.7 million in capital  leases and equipment
notes  payable.  In addition,  on February 12, 1998,  the Company closed a $5
million bridge loan. See Note 15 to the Consolidated Financial Statements 
presented in Item 8..

Certain Factors Affecting Future Operating Results

         History of Losses.  During the fiscal years  ending  December 31, 1997,
1996 and 1995, the Company suffered net losses (including non-recurring charges)
of approximately ($5,589,000),  ($13,890,000) and ($7,880,000) respectively,  on
revenues of $3,458,000,  $1,496,000, and $1,344,000 respectively.  Prospects for
future  profitability  are heavily  dependent  upon the success of the Company's
acquisition  strategy and in its ability to continue to build  integrated  solid
waste  management  operations.  There can be no assurance that WSI will generate
sufficient revenue to be profitable or, if profitable, to maintain profitability
in future years

         Uncertain  Ability to Finance  the  Company's  Growth.  The Company has
limited  liquidity  in  relation  to  its  short-term  capital  commitments  and
operating cash requirements. Additionally, WSI will require substantial funds to
complete  and  bring  to  commercial  viability  all  of its  currently  planned
projects.  The Company also  anticipates  that any future business  acquisitions
will be financed through cash from operations, borrowings under its bank line of
credit,  the  issuance of the  Company's  common stock or seller  financing,  or
additional  equity or debt financings.  Therefore,  WSI's ability to satisfy its
capital  commitments  and  operating  requirements  are dependent on a number of
pending or future  financing  activities,  none of which are assured  successful
completion.  Any failure of the Company to obtain  sufficient  financing  in the
short run would have a  materially  adverse  effect on the  Company's  financial
condition and operations.

         Dependence  on  Management.  The  Company's  future  success  is highly
dependent  upon the services of its  executive  officers,  particularly,  Philip
Strauss,  Chairman,  Chief Executive  Officer and President of the Company,  and
Robert Rivkin, Vice President,  Chief Financial Officer, Treasurer and Secretary
of the Company. The loss of the services of Mr. Strauss or Mr. Rivkin could have
a material  adverse effect on the Company's  business,  financial  condition and
results of operations.  WSI does not currently maintain key man insurance on any
of its personnel.

         The  Company's  future  success  is  also  highly  dependent  upon  its
continuing  ability to  identify,  hire,  train and  motivate  highly  qualified
personnel. WSI faces competition for hiring such personnel from other companies,
government entities and other organizations. There can be no assurances that WSI
will be successful in attracting and retaining  qualified  personnel as required
for its  projected  operations.  The  inability to attract and retain  qualified
personnel  could have a material  adverse  effect upon the  Company's  business,
financial condition and results of operations.



                                       18
<PAGE>



         Ability to Manage Growth. The Company's objective is to contiue to grow
by expanding its services in markets where it can be one of the largest and most
profitable fully-integrated solid waste management companies.  Accordingly,  the
Company may experience  periods of significant rapid growth.  Such growth, if it
were to occur, could place a significant strain on the Company's  management and
its  operational,  financial  and other  resources.  Any  failure  to expand its
operational,  and  financial  systems  and  controls  or to recruit  appropriate
personnel in an  efficient  manner at a pace  consistent  with such growth could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

         Ability to Identify,  Acquire and Integrate  Acquisition  Targets.  The
future success of the Company is highly  dependent upon the Company's  continued
ability to successfully  identify,  acquire and integrate additional solid waste
collection,  recycling,  transfer and disposal  businesses.  As competition  for
acquisition candidates increases within the solid waste management industry, the
availability of suitable candidates at terms favorable to the Company decreases.
The Company  competes for acquisition  candidates with larger,  more established
companies  that may have  significantly  greater  capital  resources,  which can
further decrease the availability of suitable acquisition candidates.  There can
be no assurance that the Company will be able to identify  suitable  acquisition
candidates and if available,  will be able to obtain  necessary  financings at a
price or on terms and conditions  favorable to the Company,  or to  successfully
integrate the acquisitions with current operations.

         The  Company  believes  that a  significant  factor in its  ability  to
consumate  acquisitions will be the attractiveness of the Company's common stock
as consideration for potential  acquisition targets. This attractiveness may, in
large part, be dependent upon the relative market price and capital appreciation
prospects of the Company's equity securities as compared to its competitors.  If
the market price of the  Company's  common stock were to decline,  the Company's
acquistion program could be materially adversely affected.

         Competition. The solid waste management industry is highly competitive,
very  fragmented  and  requires   substantial   labor  and  capital   resources.
Competition exists for collection, recycling, transfer and disposal services, 
and acquisition targets.The markets the Company competes or is likely to compete
in are usually served by one or more of the large national, regional or local 
solid waste companies who may have accumulated substantial goodwill  and or have
greater financial,  marketing or technical  resources than WSI. The Company also
competes with counties,  municipalities  and operators of  alternative  disposal
facilities that operate their own waste collection and disposal facilities.  The
availability  of user fees,  charges or tax  revenues  and the  availability  of
tax-exempt  financing may provide a competitive  advantage to the public sector.
Additionally, alternative disposal facilities such as recycling and incineration
may reduce the demand for the disposal of solid waste in landfills.  Competition
for waste collection and disposal business is based on the quality of operation,
price and geographical  location.  From time to time, competitors may reduce the
price of their  services in an effort to expand or maintain  market  share or to
win competitively bid contracts. There can be no assurance that the Company will
be able to successfully bid such contracts or compete with the larger and better
capitalized companies.

         Limitations  on  Landfill  Permitting  and  Expansion.   The  Company's
operations depend on its ability to expand the landfills it owns or operates and
develop new landfill sites.  There can be no assurances that the Company will be
successful in obtaining new landfill  sites or expanding the permitted  capacity
of its landfill. The  process  of  obtaining  required  permits  and
approvals  to operate and expand  landfills  and  transfer  stations  has become
increasingly  difficult  and  expensive.  The process can take several years and
involves   hearings  and  compliance  with  zoning,   environmental   and  other
requirements.  There can be no assurance  that the Company will be successful in
obtaining and maintaining required permits. Even when granted,  final permits to
expand are often not approved  until the  remaining  capacity of the landfill is
very low.  In the event the  Company  exhausts  its  permitted  capcaity  at its
landfill,  the Company's  ability to expand  internally  will be limited and the
Company will be required to cap and close the landfill. In addition, the Company
could  be  forced  to  dispose  of  its  waste  at  landfills  operated  by  its
competitors.  The additional  costs could have a material  adverse effect on the
Company's business.

         Geographic  Concentration  of  Operations.  The Company  has  initially
established  integrated  solid waste  management  operations in Vermont,  and is
developing  integrated solid waste management operations in Central Pennsylvania
and  Western  Massachusetts.  Since  the  Company's  current  primary  source of
revenues  will be  concentrated  in these  geographic  locations,  the Company's
business,  financial  condition  and  results of  operations  can be  materially
effected  by, but not  limited to, the  following:  (i)  downturns  in the local
economy,  (ii) severely harsh weather  conditions,  and (iii) state regulations.
Additionally,  the  growing  competition  within the local  economies  for waste
streams may make it increasingly difficult to expand within these regions. There
can be no  assurance  that the Company  will be able to continue to increase the
waste stream to its landfills,  or be able to expand its  geographic  markets to
lessen the effects of adverse events that may occur in these region.



                                       19
<PAGE>



         Seasonality.  The Company's  revenues and results of operations tend to
vary  seasonally.  The winter  months of the fourth  and first  quarters  of the
calendar year tend to yield lower revenues than those experienced  in the warmer
months of the second and third quarters.  The primary reasons for lower revenues
in the winter months  include,  but are not limited to: (i) harsh winter weather
conditions  which  can  interfere  with  collection  and  transportation;   (ii)
construction  and  demolition  activities  which  generate  landfill  waste  are
primarily performed in the warmer seasons;  and (iii) the volume of waste in the
region is generally  lower in comparison to that which occurs in warmer  months.
The Company  believes that the seasonality of the revenue stream will not have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations on an annualized basis.

         Environmental and Government Regulations. The Company and its customers
operate in a highly regulated environment, and in general the Company's landfill
projects will be required to have federal, state and/or local government permits
and approvals (see "Business-Government  Regulation.").  Any of these permits or
approvals  may be subject to denial,  revocation or  modification  under various
circumstances.  In addition, if new environmental legislation or regulations are
enacted or existing legislation or regulations are amended or are interpreted or
enforced differently,  WSI or its customers may be required to obtain additional
operating permits or approvals. There can be no assurance that WSI will meet all
of the  applicable  regulatory  requirements.  Any delay in  obtaining  required
permits  or  approvals  will tend to cause  delays in the  Company's  ability to
obtain bond or other project financing,  resulting in increases in the Company's
needs to invest  working  capital in projects  prior to obtaining more permanent
financing, and will also tend to reduce project returns by deferring the receipt
of project  revenues.  In the event that the  Company is  required to cancel any
planned project as a result of the inability to obtain required permits or other
regulatory  impediments,  the Company may lose any investment it has made in the
project up to that point,  and the  cancellation of any landfill  projects,  may
have a  materially  adverse  effect on the  Company's  financial  condition  and
results of operations.
       
        Potential  Environmental  Liability and Adverse Effect of Environmental
Regulation. WSI's business exposes it to the risk that it will be held liable if
harmful  substances escape into the environment and cause damages or injuries as
a result  of its  operating  activities.  Moreover,  federal,  state  and  local
environmental  legislation and regulations require substantial  expenditures and
impose significant liabilities for noncompliance.  See  "Business--Government
Regulation" in Item 1.

         Potential  Adverse  Community  Relations.   The  potential  exists  for
unexpected delays,  costs and litigation resulting from community resistance and
concerns relating to specific projects in various communities.

         Performance  or Surety Bonds and Letters of Credit.  The Company may be
required to post a  performance  or surety  bond,  or letter of credit to ensure
proper closure and post-closure  monitoring and maintenance at its landfills and
transfer stations.  Failure to obtain performance or surety bonds, or letters of
credit in sufficient  amounts or at acceptable rates may have a material adverse
impact on the Company's business, financial condition and results of operations.

         Limits on Insurance.  The Company has obtained environmental impairment
liability insurance covering claims for sudden or gradual onset of environmental
damage.  If the Company were to incur a liability  for  environmental  damage in
excess of its  insurance  limits,  its  financial  condition  could be adversely
affected. The Company carries a comprehensive general liability insurance policy
which  management  considers  adequate  at this time to  protect  its assets and
operations from other risks.


                                       20
<PAGE>


         Adequacy of Accruals for Closure and  Post-Closure  Costs.  The Company
has material financial obligations relating to closure and post-closure costs of
its  existing  landfills  and any  landfill  it may  purchase  or operate in the
future.  The Company estimates and accrues closure and post-closure  costs based
on  engineering  estimates of airspace  usage and remaining  airspace  capacity.
There can be no assurances that the Company's financial  obligations for closure
and  post-closure  costs will not exceed the amount  accrued,  and that this may
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

         Capital  Expenditures.  The Company  capitalizes,  in  accordance  with
generally  accepted  accounting  principles,  certain  expenditures and advances
relating to  acquisitions,  pending  acquisitions  and  landfill  projects.  The
Company's  policy is to expense in the current period,  all unamortized  capital
expenditures  and advances  relating to any operation that is  permanently  shut
down or any acquisition  that will not be consummated  and any landfill  project
that is terminated.  Thus, the Company may be required to incur a charge against
earnings  in future  periods  that could have a material  adverse  effect on the
Company's business, financial conditions and results of operations.

Inflation

         WSI does not believe its operations  have been  materially  affected by
inflation.




                                       21
<PAGE>




Item 8.  Financial Statements and Supplementary Data


                WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES

                    Index to Consolidated Financial Statements


                                                                        Page No.

Report of Independent Accountants                                             23

Consolidated Balance Sheets at 
     December 31, 1997 and 1996                                            24-25

Consolidated Statements of Operations
    for the years ended  December 31, 1997, 1996 and 1995                     26

Consolidated Statements of Cash Flows for the years 
    ended December 31, 1997, 1996 and 1995                                 27-28

Consolidated Statements of Stockholders' Equity (Deficit) 
    for the years ended December 31, 1997, 1996 and 1995                   29-31

Notes to Consolidated Financial Statements                                 32-46










                                       22
<PAGE>






                   Report of Independent Accountants



The Board of Directors 
Waste Systems International, Inc.:

We have audited the  accompanying  consolidated  balance sheets of Waste Systems
International, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1997  and  1996,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity  (deficit),  and cash  flows  for each of the years in the
three-year  period  ended  December  31,  1997.  These  consolidated   financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of Waste Systems
International,  Inc. and  subsidiaries as of December 31, 1997 and 1996, and the
consolidated  results of their  operations  and their cash flows for each of the
years in the  three-year  period ended  December 31, 1997,  in  conformity  with
generally accepted accounting principles.

The  consolidated  financial  statements have been prepared  assuming that Waste
Systems  International,  Inc. will continue as a going concern.  As discussed in
Note  1 to  the  consolidated  financial  statements,  the  Company  must  raise
substantial  additional capital and must achieve a level of revenues adequate to
support the Company's cost structure,  which raises  substantial doubt about its
ability to continue as a going concern.  The financial statements do not include
adjustments that might result from the outcome of this uncertainty.

                                                                               
KPMG Peat Marwick LLP


Boston, Massachusetts
March 26, 1998





                                       23
<PAGE>






               WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets




                                                December 31,       December 31,
         Assets                                     1997               1996
         ------                                 ------------       ------------

Current assets:
   Cash and cash equivalents                  $    2,964,274      $     264,776
   Accounts and notes receivable, net (Note 3)       944,793          1,158,677
   Assets held for sale (Notes 4 and 6)              125,000            275,000
   Prepaid expenses 
    and other current assets (Note 5)              1,241,092            499,000
                                                ------------       ------------
      Total current assets                         5,275,159         2,197,453

Accounts and notes receivable (Note 3)                     -            451,169
Restricted cash and securities                       254,000          1,210,017
Property and equipment, net (Note 6)              12,487,183         11,705,712
Deferred financing costs, net                        362,174            664,105
Other assets (Note 5)                                181,738            629,634
                                                ------------       ------------
      Total assets                            $   18,560,254      $  16,858,090



  See accompanying notes to consolidated financial statements.

                                   24
<PAGE>                             

               WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets



                                                December 31,       December 31,
Liabilities and Stockholders' Equity (Deficit)      1997               1996
----------------------------------------------  ------------      -------------

Current liabilities:
   Current portion of long-term debt
      and notes payable (Note 7)              $      843,831      $   2,165,378
   Accounts payable                                  353,937          1,529,076
   Accrued expenses (Notes 6, 8 and 11)            1,766,386          1,225,715
   Restructuring and current liabilities
      related to discontinued operations (Note 4)    778,609          1,785,097
                                                ------------      -------------
      Total current liabilities                    3,742,763          6,705,266


Long-term debt and notes payable (Note 7)          7,201,262          9,450,373
Landfill closure and post-closure
   costs (Notes 10 and 11)                         1,644,000          1,520,000
                                                ------------      -------------
 Total liabilities                                12,588,025         17,675,639
                                                ------------      -------------
Commitments and Contingencies (Note 11)

Minority interest (Notes 12 and 13)                        -          1,031,456
                                                ------------      -------------

Stockholders' equity (deficit): (Notes 12, 13, 14 and 15)
   Common stock, $.01 par value.  Authorized
      30,000,000 shares;  3,893,415 and 3,360,514
      shares issued and outstanding at
      December 31, 1997 and 1996, respectively        38,934             33,605
   Preferred stock, $.001 par value.  Authorized
      1,000,000 shares:
      Series A Convertible Preferred Stock;
       200,000 designated, 92,580 and 0 issued
       and outstanding at December 31, 1997
       and 1996, resepctively                      9,257,807                  -
      Series B Convertible Preferred Stock;
       100,000 designated, 40,488 and 0 issued
       and outstanding at December 31, 1997
       and 1996, respectively                      4,048,750                  -
   Additional paid-in capital                     21,432,437         21,334,447
   Accumulated deficit                           (28,805,699)       (23,217,087)
                                                ------------      -------------
      Total stockholders' equity (deficit)         5,972,229         (1,849,005)
                                                ------------      -------------
      Total liabilities and stockholders'
         equity (deficit)                     $   18,560,254      $  16,858,090
                                                ============       ============



 See accompanying notes to consolidated financial statements.

                                    25
<PAGE>                        

               WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations



                                                   Years ended December 31,
                                       -----------------------------------------
                                             1997          1996          1995
                                             ----          ----          ----
Revenues
                                         3,457,692     1,495,606     1,344,397
                                       ------------  ------------  ------------
Cost of operations:
   Operating expenses                    1,718,214       920,553       766,012
   Depreciation and amortization           692,224       369,785        71,649
   Write-off of landfill development
      costs (Note 6)                     1,495,388     6,652,075             -
                                       ------------  ------------  ------------
      Total cost of operations           3,905,826     7,942,413       837,661
                                       ------------  ------------  ------------
      Gross profit (loss)                 (448,134)   (6,446,807)      506,736

Selling, general and administrative
   expenses                              2,138,180     2,442,816     3,286,680
Amortization of prepaid consulting fees          -       834,375       500,625
Restructuring (Note 4)                     596,426     1,741,729             -
                                       ------------  ------------  ------------
      Loss from operations              (3,182,740)  (11,465,727)   (3,280,569)
                                       ------------  ------------  ------------
Other income (expense):
   Royalty and other income
      (expense), net (Note 3)             (520,846)      922,703       865,220
   Interest income                         172,363       178,224       289,145
   Interest expense and financing
      costs                             (1,354,614)   (1,182,118)     (471,763)
   Equity in loss of affiliate                   -       (96,144)            -
   Write-off of accounts and notes
      receivable (Note 3)                 (568,217)            -    (2,975,001)
   Loss on investment in marketable
      securities                                 -             -       (90,625)
   Write-off of assets                           -       (21,858)            -
                                       ------------  ------------  ------------
      Total other income (expense)      (2,271,314)     (199,193)   (2,383,024)
                                       ------------  ------------  ------------

      Loss before income taxes,
         minority interest,
         discontinued operations
         and extraordinary item         (5,454,054)  (11,664,920)   (5,663,593)

Federal and state income
   tax expense (benefit) (Note 9)            5,622       (23,456)     (109,465)
                                       ------------  ------------  ------------
      Loss before minority interest,
         discontinued operations
         and extraordinary item         (5,459,676)  (11,641,464)   (5,554,128)

Minority interest (Note 12)                  4,971       (12,655)       13,016
                                       ------------  ------------  ------------
      Loss from continuing
         operations                     (5,454,705)  (11,628,809)   (5,567,144)

Discontinued operations (Note 4)                 -    (2,260,963)   (2,303,835)
                                       ------------  ------------  ------------
      Loss before extraordinary
         item                           (5,454,705)  (13,889,772)   (7,870,979)

Extraordinary item - Loss on
   extinguishment of debt                 (133,907)            -             -
                                       ------------  ------------  ------------
      Net loss                          (5,588,612)   (13,889,772)  (7,870,979)

Preferred stock dividends                        -             -         9,500
                                       ------------  ------------  ------------
      Net loss available for
         common shareholders            (5,588,612)  (13,889,772)   (7,880,479)
                                       ============  ============  ============
Net loss per share:
    Income (loss) from
       continuing operations                 (1.51)        (4.10)        (2.88)
    Extraordinary item                       (0.04)            -             -
    Discontinued operations                      -         (0.80)        (1.19)
                                       ------------  ------------  ------------
    Net loss per share                       (1.55)        (4.90)        (4.08)
                                       ============  ============  ============

Weighted average number of shares
   used in computation of net
   income (loss) per share                3,612,623     2,834,841     1,932,809



  See accompanying notes to consolidated financial statements.

                                        26

<PAGE>                             
<TABLE>

                          WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES

                                 Consolidated Statements of Cash Flows

<CAPTION>


                                                                         Year ended December 31,
                                                                    1997          1996           1995
                                                                -----------------------------------------        
                                                                     
<S>                                                           <C>           <C>             <C>
Cash flows from operating activities:
    Net loss                                                  $ (5,588,612) $ (13,889,772)  $ (7,870,979)
    Adjustments to reconcile net loss to
      net cash used by operating activities:
      Depreciation and amortization                                900,549      1,556,380        689,186
      Write-off of landfill development costs                    1,495,388      6,652,075              -
      Equity on loss in affiliate                                        -         96,144              -
      Write-off of accounts and notes receivable                   568,217              -      2,975,001
      Loss on investment in marketable securities                        -              -         90,625
      Write-off of assets                                                -         21,858              -
      Minority interest                                              4,971        (12,655)        13,016
      Discontinued operations                                            -      2,260,963      2,303,835
      Extraordinary item - loss on extinguishment of debt          133,907              -              -
      Deferred income taxes                                              -              -       (185,000)
      Allowance for doubtful accounts - non -trade                       -              -        219,645
      Allowance for doubtful accounts - trade                       23,333         10,000         12,500
      Issuance of common stock for services                         44,854         17,157        303,300
      Changes in assets and liabilities:
         Accounts and notes receivable                              73,503        375,519     (1,695,436)
         Prepaid expenses and other current assets                (242,092)        16,558       (512,653)
         Accounts payable                                       (1,175,139)     (1,253,507)    2,157,252
         Accrued expenses                                           62,463        853,051        129,163
         Accrued landfill closure & post-closure costs             124,000         20,000              -
         Income and franchise taxes payable                              -        (75,535)       (22,470)
                                                                -----------   ------------   ------------          
      Net cash used by continuing operations                    (3,574,658)    (3,351,764)    (1,393,015)
      Net cash used by discontinued operations                  (1,006,448)      (560,377)    (1,689,906)
                                                                -----------   ------------   ------------          
         Net cash used by operating activities                  (4,581,146)    (3,912,141)    (3,082,921)


Cash flows from investing activities:
    Assets held for sale                                                 -        127,500       (287,219)
    Restricted cash and securities                                 956,017     (1,022,517)      (187,500)
    Investment in affiliate                                              -        (86,115)       (10,029)
    Landfills                                                     (307,552)    (5,199,493)    (8,699,803)
    Landfill development projects                                 (263,868)      (467,855)      (324,752)
    Machinery and equipment                                       (114,330)      (914,600)      (724,822)
    Rolling stock                                                 (122,905)             -              -
    Containers                                                    (189,109)       (16,716)             -
    Proceeds on the sale of equipment                              800,000              -              -
    Patents                                                              -        (35,261)       (20,795)
    Other assets                                                   (52,127)       (26,162)       (12,316)
                                                                -----------   ------------   ------------          
         Net cash provided (used) by investing activities          706,126     (7,641,219)   (10,267,236)
                                                                -----------   ------------   ------------          

Cash flows from financing activities:
    Deferred financing and registration costs                      (56,098)        (86,074)    (1,216,480)
    Net borrowings and advances  
      from stockholders and related parties                              -       (114,575)      (662,072)
    Repayments of notes payable and long-term debt              (2,445,476)      (426,734)    (1,000,984)
    Borrowings from notes payable and long-term debt             1,143,861      1,117,982        568,271
    Issuance of subordinated notes payable                               -              -     11,225,000
    Repayments of subordinated notes payable                             -              -       (490,000)
    Minority interest                                               (4,971)             -      1,031,095
    Proceeds from issuance of common stock                         686,724      6,090,473      8,970,998
    Proceeds from issuance of Series A preferred stock           7,250,478              -              -
    Proceeds from issuance of Series B preferred stock                   -              -              -
    Preferred stock dividends                                            -              -         (9,500)
                                                                -----------   ------------   ------------          
         Net cash provided by financing activities               6,574,518      6,581,072     18,416,328
                                                                -----------   ------------   ------------          
Increase (decrease) in cash                                      2,699,498     (4,972,288)     5,066,171
Cash, beginning of period                                          264,776      5,237,064        170,893
                                                                -----------   ------------   ------------          
Cash, end of period                                           $  2,964,274  $     264,776   $  5,237,064
                                                                ============  ============   ============ 


See accompanying notes to consolidated financial statements.

</TABLE>


                                          27

<PAGE>                             


Supplemental disclosures of cash flow information:


     During the years ended December 31, 1997, 1996 and 1995, cash paid for 
     interest was $1,493,221, $1,201,864, and $221,458, respectively.

Supplemental disclosures of noncash activities:

     In June  1997,  the  Company  issued  Series A  Preferred  Stock  valued at
     $850,000  in  exchange  for the  remaining  20%  minority  interest  in the
     Moretown, Vermont landfill.

     In June 1997, the Company issued Series A Preferred Stock valued at $44,854
     in exchange for consulting services.

     In June 1997, the Company wrote down assets to their net  realizable  value
     of $863,428  related to the Fairhaven  landfill  project.  This was charged
     against the restructuring and current liabilities accrual.

     In June 1997,  the Company  issued  Series A Preferred  Stock at a value of
     $700,000  and  retired the FDIC loan of  $511,093  and accrued  interest of
     $55,000. The pay off resulted in a realized loss on the early retirement of
     debt of $133,907.

     In October 1997, the Company  converted 4,800 shares valued at $480,000,  
     of its Series A Preferred Stock into 341,334 shares of its Common Stock.

     In December 1997, the Company converted $3,950,000,  plus accrued interest,
     of its 10% Convertible,  Redeemable, Subordinated Notes due October 6, 2000
     for 44,488 shares of its Series B Convertible Preferred Stock.


     In 1997, 1996 and 1995,  the Company  acquired  assets of @2,190,050, 
     $683,777 and $1,148,516, respectively under  capital  lease obligations.

     In 1996, the Company  exchanged  $2,850,000 of convertible  subordinated  
     debt and $27,425 of accrued interest for 313,992 shares of common stock. 

          See accompanying notes to consolidated financial statements.
                    
                                   28
<PAGE>                           



<TABLE>

               WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES

            Consolidated Statements of Stockholders' Equity (Deficit)

                                                                                                      
                                                                                                      
 <CAPTION>


                                Preferred Stock       Preferred Stock                          Additional              Stockholders'
                                    Series A              Series B            Common Stock      paid-in   Accumulated    equity
                               Shares     Amount     Shares     Amount     Shares     Amount    capital      deficit    (deficit)
                             ---------- ---------- ---------- ----------  --------- ---------- ---------- ------------ ------------

<S>                          <C>        <C>        <C>        <C>         <C>       <C>        <C>        <C>          <C>
Balance, December 31, 1994           -    475,000      4,750    475,000    538,535      5,385  1,541,861   (1,424,806)     597,440

Issuance of common stock
    through March 29, 1995           -          -          -          -     16,540        165    321,335            -      321,500

Preferred stock dividends            -          -          -          -          -          -     (9,500)           -       (9,500)
 
Issuance of common stock due
    to 1.75-to-1 Stock Split         -          -          -          -    416,308      4,163     (4,163)           -            -

Issuance of common stock at
    $10.00 per share, for
    conversion of preferred
    stock on March 29, 1995          -   (475,000)    (4,750)  (475,000)    47,500        475    474,525            -            -

Issuance of common stock at
    $10.00 per share, in exchange
    for debt and accrued interest
    on March 29, 1995                -          -          -          -    111,716      1,117  1,116,039            -     1,117,156

Issuance of common stock at
    $10.00 per share, through
    Private Placement on
    March 29,1995                    -          -          -          -    400,000      4,000  3,996,000            -     4,000,000

Capitalization of BioSafe
    International, Inc.              -          -          -          -     60,000        600     30,930      (31,530)            -

Issuance of common stock at
    $10.00 per share, for
    investment banking services      -          -          -          -     40,000        400       (400)           -             -

Issuance of common stock at
    $10.00 per share, net of 25%
    discount due to restrictions
    on sale or transfer of stock, 
    for prepaid consulting services  -          -          -          -    178,000      1,780  1,342,120            -     1,343,900

Issuance of common stock at
    $10.00 per share, through
    private placement in
    April, 1995                      -          -          -          -    502,000      5,020  5,017,490            -     5,022,510

Expenses incurred in
    connection with the
    issuance of common stock
    and merger in March and
    April, 1995                      -          -          -          -          -          - (1,295,047)           -    (1,295,047)

Issuance of 110,000
    Series C Warrants to
    purchase stock at
    $10.00 per share                 -          -          -          -          -          -          -            -             -

Issuance of 561,000 Series D
    Warrants to purchase common
    stock at $23.75 per share        -          -          -          -          -          -          -            -             -

Issuance of 100,000 Series E
    Warrants to purchase common
    stock at $17.50 per share        -          -          -          -          -          -          -            -             -

Issuance of 144,000 merger-related
    Placement Agent Warrants to
    purchase common stock at
    $11.50 per share                 -          -          -          -          -          -          -            -             -

Issuance of 22,925 Warrants to
    purchase common stock at
    $11.45 per share                 -          -          -          -          -          -          -            -             -

Issuance of 10,000 Warrants to
    purchase common stock at
    $17.50 per share                 -          -          -          -          -          -          -            -             -

Exercise of Series A Warrants
    to purchase 21,919 shares of
    common stock at $12.15 per
    share                            -          -          -          -     21,919        219    265,937            -       266,156

Exercise of Series D Warrants
    to purchase 1,125 shares of
    common stock at $23.75 per
    share                            -          -          -          -      1,125         11     26,708            -        26,719

Exercise of Series E Warrants
    to purchase 225 shares of
    common stock at $17.50 per
    share                            -          -          -          -        225          2      3,939            -         3,941

Exercise of Warrants to purchase
    400 shares of common stock
    at $11.45 per share              -          -          -          -        400          4      4,576            -         4,580

Exercise of merger-related
    Placement Agent Warrants to
    purchase 3,000 shares of
    common stock at
    $11.50 per share                 -          -          -          -      3,000         30     34,470            -        34,500

Issuance of 2,000 shares
    and 2,000 shares of common
    stock at $40.00 and $21.25 per
    share, respectively, for
    consulting services              -          -          -          -      4,000         40    122,460            -       122,500

Expenses incurred in connection
    with the securities
    registration statement 
    on Form S-1                      -          -          -          -          -          -   (393,775)           -      (393,775)

Issuance of 25,000 Warrants
    to purchase common stock
    at $14.45 per share              -          -          -          -          -          -          -            -             -

Issuance of Series F Warrants
    to purchase a number of
    shares of common stock
    equal to the number of
    shares of common stock
    issuable upon conversion
    of the convertible debentures
    (or, in the case of the first
    200 units, 150% of such number
    of shares), at the lesser of a
    price equal to 75% of the 20-day 
    average bid price of the common 
    stock immediately prior to the 
    date nine months following the 
    issuance of the convertible 
    debentures or $45.00 per share   -          -          -          -          -          -          -            -             -

Issuance of 140,313 convertible
   debenture-related Placement
   Agent Warrants to purchase
   common stock at $50.00
   per share                         -          -          -          -          -          -          -            -             -

Net loss for the year ended                                                       
   December 31, 1995                 -          -          -          -          -          -          -   (7,870,979)   (7,870,979)
                             ---------- ---------- ---------- ----------  --------- ---------- ---------- ------------ ------------
   Balance, December 31, 1995        -          -          -          -  2,341,268     23,413 12,595,503   (9,327,315)    3,291,601
     
                                                  29
<PAGE>                                            



Exercise of Warrants to purchase
    1,728 shares of common stock
    at $11.45 per share              -          -          -          -      1,728         17     19,769            -        19,786

Exercise of merger-related
    Placement Agent Warrants to
    purchase 1,755 shares of
    common stock at                 
    $11.50 per share                 -          -          -          -      1,755         18     20,165            -        20,183

Exercise of merger-related
    Placement Agent Warrants to
    purchase 6,444 shares of
    common stock at
    $11.50 per share                 -          -          -          -      6,444         64     74,042            -        74,106
                                                                                                              
Exercise of Options to purchase
    656 shares of common stock
    at $10.00 per share              -          -          -          -        656          7      6,555            -         6,562

Issuance of common stock at
   $9.70 per share, through
   private placement in
   June, 1996                        -          -          -          -    660,949      6,609  6,404,591            -     6,411,200

Expenses incurred in
   connection with the
   private placement in
   June, 1996                        -          -          -          -          -          -   (651,926)           -      (651,926)

Issuance of 70,000 warrents to
   purchase common stock at $17.50
   per share in exchange for cancellation
   of 140,313 convertible debenture
   -related placement agent warrents
   issued in 1995 to purchase common
   stock at $50.00 per share         -          -          -          -          -          -          -            -             -

Exercise of Options to purchase
    656 shares of common stock
    at $10.00 per share              -          -          -          -        656          7      6,555            -         6,562

Issuance of common stock at
    $11.25 per share, net of 50%
    discount due to restrictions on                 
    sale, for director's fee         -          -          -          -      2,000         20     11,230            -        11,250

Conversion of convertible
   debentures, plus
   accrued interest at a  
   conversion price of $9.16         -          -          -          -     313,992      3,140 2,874,285            -     2,877,425

Reclassification of deferred
financing
   costs related to convertible
   debentures converted to
   common stock                      -          -          -          -          -          -   (235,888)           -      (235,888)

Exercise of Series C Warrants
   to purchase 400 shares of
   common stock at $10.00 per
   share                             -          -          -          -        400          4      3,996            -         4,000

Issuance of common stock at
    $7.50 per share, net of 50%
    discount due to restrictions on
    sale, for director's fee        -           -          -          -      1,575         16      5,890            -         5,906

Issuance of common stock at
    $6.85 per share, in exchange
   for debt in November 1996        -           -          -          -     29,091        291    199,709            -       200,000

Net loss for the year ended
   December 31, 1996                -           -          -          -          -          -          -  (13,889,772)  (13,889,772)
                             ---------- ---------- ---------- ----------  --------- ---------- ---------- ------------ ------------
Balance, December 31, 1996          -           -          -          -  3,360,514     33,605 21,334,477  (23,217,087)   (1,849,005)
                                       
                                          30
<PAGE>                                 

Issuance of common stock at $2.50
   per share, in connection with a
   private placement, January 1997   -          -          -          -    172,000      1,720    428,280             -      430,000

Issuance of Series A Convertible
   Preferred Stock, 8% cumulative 
   annual dividend, convertible 
   into common stock at a price 
   of $1.406 per share, 
   June 1997                    97,380  9,737,807          -          -          -          -   (892,475)           -     8,845,332

Issuance of common stock at $3.75
   per share, in connection with
   the purchase of minority 
   interest in the Company's 
   collection operations in 
   Vermont, September 1997           -          -          -          -     18,667        187     69,813            -        70,000

Exercise of Series E Warrants to
   purchase 901 shares of common
   stock at $17.50 per share, 
   November 1997                     -          -         -            -       901          9     15,755            -        15,764

Conversion of Series A Convertible
   Preferred Stock for common 
   stock at $1.406 per share, 
   September and October 1997   (4,800)  (480,000)         -          -    341,334      3,413    476,587            -             -

Issuance of Series B Convertible
   Preferred Stock, 6% cumulative
   annual dividend, convertible
   into common stock at a price 
   of $6.26 per share, 
   December 30, 1997                 -          -     40,488  4,048,750          -          -          -            -     4,048,750

Net loss for the year ended
   December 31, 1997                 -          -          -          -          -          -          -   (5,588,612)   (5,588,612)
                             ---------- ---------- ---------- ----------  --------- ---------- ---------- ------------ ------------
Balance, December 31, 1997      92,580  9,257,807     40,488  4,048,750  3,893,415     38,934 21,432,437  (28,805,699)    5,972,229

                             


See accompanying notes to the consolidated financial statements

                                   31
<PAGE>                            


</TABLE>


     
                  WASTE SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Note  1.  Business and Nature of Operations

         Waste  Systems  International,  Inc.  (the  "Company"  or "WSI"),  is a
regional  integrated  non-hazardous solid waste management company that provides
collection,   recycling,  transfer  and  disposal  services  to  commercial  and
residential customers.

         Prior to March 27,  1996,  the  Company  had been  actively  developing
environmental  technologies  with potential  application in a number of business
areas. On March 27, 1996, the Company announced its intention to take meaningful
actions to  conserve  cash and  working  capital,  including  restructuring  the
Company's  operations  to focus its  resources  and  activities on developing an
integrated  solid  waste  management  operation.  See Note 4 for  discussion  of
non-recurring charges related to the restructuring and discontinued operations.

         Since  inception,  the  Company has devoted  substantial  resources  to
various  development  projects  and  related  activities.  The Company has under
definitive   agreement  certain  acquisitions  (See  Notes  6  and  15)  and  is
undertaking negotiations with a number of additional  acquisitions,  which would
increase the  Company's  capital  requirements  accordingly.  In  addition,  the
Company  requires cash to fund its corporate staff and other overhead  expenses,
which may grow significantly as the Company expands the scope of its operations.
Although  the  Company is  producing  revenue  and cash  flows from its  Vermont
operations,  additional  financing  will be  necessary  to satisfy  existing and
pending  commitments.  The Company's  alternatives  under  consideration in this
regard  include the raising of additional  equity or long-term  debt and certain
prospects for bank financing. There can be no assurance that all or any of these
financing plans and expectations will be realized.

Note  2.  Summary of Significant Accounting Policies

         Basis  for  Presentation:   The  accompanying   consolidated  financial
statements  include  the  accounts  of the  Company  and its  subsidiaries.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

         Minority interest  represents 20% of WSI's Vermont  operations  through
June  30,  1997.  On June 30,  1997,  the  Company  purchased  the 20%  minority
interest. See Note 12.

         Use of Estimates: The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates and assumptions that affect reported amounts of assets and liabilities
and  disclosures of contingent  assets and  liabilities at the date of the 
financial statements  and the  reported  amounts  of  revenues  and  expenses  
during  the reporting period. Actual results could differ from those estimates.

         Cash and Cash  Equivalents:  All short-term  investments  which have an
original  maturity  of 90 days or less,  and are  valued  at cost  plus  accrued
interest which approximates market, are considered to be cash equivalents.

         Restricted Cash and Securities:  Restricted cash and securities consist
principally  of funds or  securities  deposited  in  connection  with the future
financial  obligation of landfill or transfer station closure and  post-closure.
Amounts are principally invested in fixed income securities of U.S. governmental
and financial institutions.  The Company considers its investments to be held to
maturity.  Substantially  all of these  investments  mature within one year. The
investments are valued at cost plus accrued interest, which approximates market.

         Fair Value of Financial Instruments:  Statement of Financial Accounting
Standards No. 102, "Disclosures About the Fair Value of Financial  Instruments",
requires  disclosure of information  about the fair value of certain financial
instruments for which it is practicable to estimate that value.  For purposes of
the following  disclosure the fair value of a financial instrument is the amount
at which the  instrument  could be  exchanged in a current  transaction  between
willing  parties  other than in a forced  sale or  liquidation.  Management  has
determined  that the  carrying  value of its  financial  assets and  liabilities
approximates fair value at December 31, 1997.



                                       32
<PAGE>





         Property and Equipment:  Property and equipment are stated at cost. The
cost of all  maintenance  and  repairs are charged to  operations  as  incurred.
Depreciation   for   financial   reporting   purposes  is  provided   using  the
straight-line method over the estimated useful lives of the assets as follows:

     Buildings, facilities and improvements                          10-30 years
     Machinery and equipment                                          3-10 years
     Rolling stock                                                    3-10 years
     Containers                                                       5-10 years


         Capitalization of landfill  development costs begins upon determination
by the  Company of the  economic  feasibility  or  extended  useful life of each
landfill  acquired as a result of  comprehensive  engineering and  profitability
studies and with the signing of landfill  management  contracts  for  facilities
operated by the Company that are not owned.  Capital costs include  acquisition,
engineering,  legal,  and other direct costs  associated with the permitting and
development  of new  landfills,  expansions  at  existing  landfills,  and  cell
development. These costs are capitalized and not amortized until all permits are
obtained and operations have commenced.

         Interest  is  capitalized  on  landfill  development  costs  related to
permitting,  site preparation,  and facility construction during the period that
these  assets  are  undergoing  activities  necessary  for their  intended  use.
Interest costs of  approximately  $24,000,  $42,000 and $82,000 were capitalized
during 1997, 1996 and 1995, respectively.

         Landfill  development costs are amortized using the  unit-of-production
method,  which is calculated using the total units of airspace filled during the
year  in  relation  to  total  estimated   permitted  airspace   capacity.   The
determination of airspace usage and remaining  airspace capacity is an essential
component in the  amortization  calculation.  The  determination is performed by
conducting annual  topography  surveys of the Company's  landfill  facilities to
determine remaining airspace capacity in each landfill. The surveys are reviewed
by the Company's  consulting  engineers,  the Company's  internal  operating and
engineering  staff,  and its financial and accounting  staff.  Current  year-end
remaining  airspace capacity is compared with prior year-end  remaining airspace
capacity to determine the amount of airspace  used during the current year.  The
result is compared  against the  airspace  consumption  figures  used during the
current  year  for  accounting  purposes  to  ensure  proper  recording  of  the
amortization  provision.  The  reevaluation  process did not  materially  impact
results of operations for any years presented.

         The   Company   performs   assessments   for  each   landfill   of  the
recoverability  of  capitalized  costs which requires  considerable  judgment by
management with respect to certain external factors,  including, but not limited
to,  anticipated  future  revenues,  estimated  economic  life  and  changes  in
environmental  regulation. It is the Company's policy to periodically review and
evaluate  that the  benefits  associated  with these  costs are  expected  to be
realized and therefore capitalization and amortization is justified. Capitalized
costs related to landfill  development for which no future  economic  benefit is
determined by the Company are expensed in the period in which such determination
is made.

         Landfill  Closure and  Post-Closure  Costs:  The Company has a material
financial  obligation  relating  to  closure  and  post-closure  activities  for
landfills it owns or operates.  Accordingly,  the Company  estimates and accrues
closure  and  post-closure  costs  on  a  unit-of-production   basis  over  each
landfill's estimated remaining permitted airspace capacity. The accrual is based
on final capping of the site, site inspection,  leachate management, methane gas
control and recovery,  groundwater  monitoring,  and  operation and  maintenance
costs to be incurred during the period after the facility closes.  The estimated
costs are expressed in current  dollars and are not discounted to reflect timing
of future expenditures.  The Company has accrued  approximately $1.6 million and
$1.5 million for closure and  post-closure  costs at December 31, 1997 and 1996,
respectively.  The engineering and accounting staff of the Company  periodically
review its future obligation for closure and post-closure costs. If estimates of
the  permitted  air  space  capacity  or the  estimated  costs  of  closure  and
post-closure have changed, the Company revises the rates at which it accrues the
future costs.

         The Company  records  reserves  for landfill  closure and  post-closure
costs,  as  necessary,  as a  component  of the  purchase  price  of  facilities
acquired,  in  acquisitions  accounted for under the purchase  method,  when the
acquisition is consummated.



                                      33
<PAGE>


         Deferred Financing Costs:  Deferred  financing costs are amortized on a
straight-line  basis over the life of the related notes payable or debt.

         Income Taxes:  The Company uses the asset and liability method of 
accounting for deferred income taxes.

         Revenue  Recognition:  The  Company's  revenues  are derived  primarily
from its  collection,  recycling, transfer and disposal services.  The Company 
records revenues when the services are performed.

         The  Company   recognizes   royalty  revenue  from  its  medical  waste
technology  business  based  on the  terms  of the  license  agreement  and  for
consulting services when rendered.

         Cost of  Revenues:  Cost  of  revenues  includes  direct  labor,  fuel,
equipment maintenance, insurance, depreciation and amortization of equipment and
landfill  development  costs,  accruals  for ongoing  closure  and  post-closure
regulatory  compliance (for landfills owned), and other routine  maintenance and
operating costs directly related to landfill  operations.  Also included in cost
of revenues are payments  made to the towns in which each landfill is located in
the form of "Host Town Fees" and "Closure  Fees" (for  landfills  operated under
management  contracts),  which are negotiated on a rate per ton basis as part of
the  contract  with the  Town.  In Towns  where  landfills  are  operated  under
management  contracts,  the Town is responsible for the closure and post-closure
costs related to the landfill.

         Earnings Per Share: In 1997, the Financial  Accounting  Standards Board
issued Statement of Financial  Accounting  Standards No. 128, Earnings Per Share
(SFAS 128).  SFAS 128  replaced  the  calculation  of primary and fully  diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share,  basic earnings per share  excludes any dilutive  effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously  reported fully diluted  earnings per share.  Earnings
per share amounts for all periods have been  presented , and where  appropriate,
restated to conform to the SFAS 128  requirements.  Weighted  average  number of
common and common  equivalent  shares  outstanding  and  earnings per common and
common  equivalent  shares have been  restated to give effect to a one-for-five 
reverse stock split effective February 18, 1998.

         Impairment of Long-Lived  Assets and  Long-Lived  Assets to be Disposed
Of: The Company  adopted the  provisions  of SFAS No. 121,  "Accounting  for the
impairment  of Long-Lived  Assets to Be Disposed  Of", on January 1, 1997.  This
Statement requires that long-lived assets and certain  identifiable  intangibles
be reviewed for impairment whenever events or changes in circumstances  indicate
that the carrying amount of an asset may not be recoverable.  Recoverability  of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are  considered  to be  impaired,  the  impairment  to be  recognized  is
measured  by the amount by which the  carrying  amount of the assets  exceed the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. Adoption of this Statement
did not have a material impact on the Company's financial  position,  results of
operations, or liquidity in 1997.

         Reclassifications:  Certain amounts in prior year financial  statements
have been  reclassified to conform to their 1997 presentation.




                                      34
<PAGE>



Note  3.  Accounts and Notes Receivable

         Accounts and notes receivable consist of the following:
           
                                                           December 31,
                                                      1997            1996
              Trade                             $     990,626    $   353,862
              ScotSafe Limited                            -          719,703
              Other                                       -          558,781
                                                 -------------    -----------
                                                      990,626      1,632,346
              Allowance for doubtful accounts         (45,833)       (22,500)
                                                 -------------    -----------
                                                      944,793      1,609,846
              Less current portion                   (944,793)    (1,158,677)
                                                 -------------    ------------
              Long-term portion                 $         -         $451,169    
                                                 =============    ============


       Trade:  Trade  accounts  receivable  consists  primarily  of fees due 
from third parties for collection, recycling, transfer and disposal services.

         ScotSafe  Limited:  On February 9, 1996,  the  Company  entered  into a
licensing and royalty  agreement with ScotSafe  Limited  (ScotSafe),  a Glasgow,
Scotland based company,  for the exclusive rights to use WSI's CFA medical waste
processing  technology in the British Isles and Ireland. On November 6, 1996 the
Company and ScotSafe expanded their licensing  agreement  throughout Europe. The
initial licensing  agreement  contemplated that ScotSafe would establish as many
as nine CFA plants,  each of which would result in additional  licensing fees to
WSI. In accordance  with the  agreement,  the Company  would  provide  technical
assistance  in  connection  with these  facilities  including  facility  design,
installation,  testing and  training.  In addition to royalty  payments for each
plant,  ScotSafe agreed to pay WSI for consulting and other services,  and would
reimburse  the Company  for its  out-of-pocket  expenses  and  disbursements  in
connection  with these  services.  During the forth  quarter of 1997 the Company
terminated its licensing  agreements  with ScotSafe and wrote off the receivable
due from ScotSafe of approximately  $570,000 because ScotSafe was in default for
failure  to pay the  Company  royalties  due under  the terms of the  agreement.
Subsequent to the  termination,  ScotSafe was placed into  receivership  and its
assets were purchased by Eurocare Environmental  Services,  Ltd. ("Eurocare") in
December 1997.  Eurocare is currently operating the three facilities the Company
constructed for ScotSafe without a licensing  agreement.  The Company petitioned
Scottish Courts for an interim interdict,  which would have required Eurocare to
cease  operations  until proper  licensing of the CFA process was obtained  from
WSI. The Company's  petition to the Court was denied since the Company currently
does not hold a European patent on the CFA process.  However,  since the Company
does have a European  patent  application  pending,  the  Scottish  courts  have
required  that  Eurocare  track all waste  processed at the plants and to remove
some of the  recommended  modifications  to the standard CFA process  which were
recommended by WSI while under  agreement with ScotSafe.  The Company expects to
be granted its European patents during 1998, at which time, the Company will act
vigorously to protect its rights to the CFA technology against Eurocare and seek
substantial  damages.  As of December  31, 1997 the Company has set up a reserve
for these litigation costs of $300,000. See Note 8.



                                       35
<PAGE>



Note  4.  Restructuring of Operations, Discontinued Operations and Assets Held 
          for Sale

         On  March  27,  1996,  the  Company  announced  its  intention  to take
meaningful   action  to  conserve  cash  and  working  capital,   including  the
restructuring of the Company's  operations to focus its resources and activities
on developing a fully integrated solid waste  management  company.  Also on that
date,  Richard H. Rosen  ("Rosen")  resigned from the offices of Chairman of the
Board of Directors,  President,  Chief Executive  Officer,  and Treasurer of the
Company and all of its subsidiaries and affiliates (See Note 5 - Due from Former
Employee). The Board of Directors named Philip Strauss, Chief Operating Officer,
to the additional  positions of Chief  Executive  Officer,  and President of the
Company, and on June 24, 1996 the Company also named Philip Strauss, Chairman of
the Board of Directors.

         Restructuring  of Operations:  During the years ended December 31, 1997
and 1996, the Company recorded restructuring charges of $596,426 and $1,741,729,
respectively,  for  costs  associated  with  management's  plan to  focus on the
development  of an  integrated  solid  waste  management  company.  These  costs
included  accruals for employee  severance,  non-cancelable  lease  commitments,
professional fees and litigation  costs. The restructuring  plan has resulted in
annual savings of approximately $4.0 million. At December 31, 1997 and 1996, the
Company had reserves and liabilities associated with restructuring activities of
$778,609 and $1,414,625, respectively.

         Discontinued  Operations:  On March 27, 1996,  as part of the announced
restructuring, the Company ceased operations at its technology center in Woburn,
Massachusetts,  and discharged all employees and consultants  previously engaged
in developing  technologies with potential  application in activities  including
the  manufacture of useful  materials  from tires and other recycled  materials,
contaminated  soil  cleanup and  recycling,  industrial  sludge  disposal,  size
reduction equipment design and manufacture (the "Ancillary  Technologies"),  and
Major Sports Fantasies,  Inc. ("MSF"), a business unrelated to the environmental
industry.  No  substantial  revenues were received  from the  technology  center
operations or MSF activities.

         The expenses  associated with operating the Ancillary  Technologies and
MSF for all periods  presented  are  reported in the  accompanying  consolidated
statements  of  operations  and cash flows under  discontinued  operations.  The
charge for discontinued  operations  relates primarily to losses from operations
and the costs associated with the termination of these operations. There were no
material  asset sales from these  operations  and no  interest  costs or general
corporate overhead costs have been allocated to the discontinued operations.  At
December 31, 1997 and 1996, the Company has reserves and  liabilites  associated
with discontinued operations of $0 and $370,472, respectively.

         Assets Held for Sale:  During the fourth  quarter of 1995,  the Company
recorded a non-recurring charge to 1995 earnings of $2,303,835 primarily related
to the  write-down  of  the  assets  of the  discontinued  operations  to  their
estimated net realizable  value.  During 1996 the Company recorded an additional
charge of  $2,260,963  to reduce the  carrying  value of the assets to their net
realizable   value  and  to  complete  the   discontinuance   of  the  Anciliary
Technologies and MSF operations. No income tax expense or benefit was recognized
due to the Company's net operating loss  carryforwards.  The Company disposed of
the remaining assets held for sale from the discontinued operations during 1997.
As of December 31, 1997 the remaining  asset held for sale  represents  property
owned in the area of the Fairhaven landfill project which the Company expects to
dispose of during 1998. See Note 6.

Note  5.  Due From Former Employee

         In July 1996, the Company commenced arbitration proceedings against Dr.
Richard Rosen (Rosen), former Chairman, Chief Executive Officer and Treasurer of
the Company,  seeking to recover  amounts,  excluding  interest  and  litigation
costs,  which  the  Company  believes  it was owed by  Rosen.  This  action  was
undertaken at the direction of the Board of Directors following its receipt of a
report by a special  committee  of the Board  appointed to  investigate  Rosen's
financial  dealings with the Company,  in consultation with independent  counsel
retained in connection with its  investigation.  Rosen resigned from all offices
with the Company on March 27, 1996.  Amounts which the Company sought to recover
included   unreimbursed   advances  and  amounts  which  the  Company   believed
constituted  improper expense  reimbursements  and payments of Company funds for
personal benefit.

         An arbitration hearing was completed on October 25, 1996. On January 2,
1997, the  arbitrator  issued the Award of  Arbitrator,  directing  Rosen to pay
$780,160,  excluding interest and litigation costs, for breaches by Rosen of his
employment agreement with the Company "in failing to discharge in good faith the
duties of his  positions  and failing to act under the direction of the Board of
Directors" of the Company.  On February 25, 1997 the Middlesex Superior Court in
Cambridge,  Massachusetts  confirmed  the  arbitration  award  and  entered  the
judgment against Rosen, which is now  non-appealable,  in an amount
of approximately  $830,000.  The Company is currently pursuing discovery against
Rosen  through  this forum to  identify  all of the  assets  that Rosen may have
available to satisfy the  outstanding  judgment.  In August of 1996, the Company
secured a preliminary injunction in Middlesex Superior Court with respect to any
future sales of the Company's stock by Rosen.  The Company has filed a Motion in
such action asking the Court to issue a broader form of permanent  injunction in
the case.  Finally,  on September 8, 1997 the Company  commenced a supplementary
process  action  in  Cambridge  District  Court  to  collect  on such  judgment,
including  seeking  foreclosure  of all shares of the  Company's  stock owned by
Rosen.  On March 5, 1998, the judge granted the Company's  supplementary  action
and the Company is in the process of obtaining all the shares held by Rosen.  No
assurance  can be given  that the  Company  will be able to  collect  the entire
balance of any amounts awarded in arbitration  including interest and legal fees
which  continue to accrue.  The Company is  carrying  on its  December  31, 1997
balance sheet an amount of approximately  $300,000 in unreimbursed  advances due
from Rosen, but the Company's other claims and additional advances have not been
reflected on the balance sheet at this time. The Company anticipates receiving a
minimum of $300,000  from Rosen in cash or stock by March 31,  1998.  The amount
due from Rosen is classified in prepaid expenses and other current assets.

                                        36
<PAGE>                                  


Note  6.  Property and Equipment

    Property and equipment are stated at cost and consist of the following;
                                                              December 31,
                                                        1997             1996
    Landfills                                       $8,412,010     $   8,015,606
    Landfill development projects                      691,225           427,357
    Buildings, facilities and improvements           1,823,981         1,123,001
    Machinery and equipment                          1,513,720         2,656,789
    Rolling stock                                      662,595              -
    Containers                                         401,941            16,716
                                                  -------------    -------------
                                                    13,505,472        12,239,469
    Less accumulated depreciation and amortization  (1,018,289)        (533,757)
                                                  -------------    -------------
            Property and equipment, net            $12,487,183    $   11,705,712
                                                    ===========    =============

         Moretown,  Vermont.  The Company established its first integrated solid
waste management operations in the geographical area surrounding its landfill in
Moretown, Vermont. In addition to the landfill in Moretown, Vermont, the Company
currently owns and/or operates three transfer stations and collection operations
serving over 4,400 commercial and residential customers in the Burlington,
St. Albans,  St. Johnsbury and  Barre-Montpelier,  Vermont areas. The first cell
("Cell 1") at the  Company's  landfill is currently  operating at  approximately
300-350 tons per day ("TPD") with remaining  estimated  permitted capacity as of
December 31, 1997 of approximately 215,000 cubic yards. A permit application was
filed with the Vermont  Agency of Natural  Resources  for the  development  of a
second cell  ("Cell 2") on April 3, 1997.  On March 11,  1998 WSI  received  its
draft certification for Cell 2 from the Vermont Agency of Natural Resources. The
Company expects to receive all of the permits  required for Cell 2 by the end of
the second  quarter of 1998.  When all of the permits are  granted,  the Company
will begin  construction  on Cell 2 which will increase the  permitted  landfill
capacity by an estimated additional 1.3 million cubic yards.

         Hopewell,  Pennsylvania.  In  November  1997,  WSI signed a  definitive
agreement to acquire the  700-acre,  3 million  cubic yard  permitted  municipal
solid  waste  landfill  in  Hopewell,   Pennsylvania.   The  purchase  price  of
approximately  $6.0 million will be paid  primarily by the assumption of debt on
the facility.  The existing  landfill  consists of five permitted  cells, one of
which is currently  operating.  The Hopewell project represents a new market for
the  Company,  in which it intends to build a network  of  adjoining  collection
companies and transfer  stations within the central  Pennsylvania  region.  This
transaction is expected to close by the end of May 1998.

         South  Hadley,  Massachusetts.  WSI  and  the  Town  of  South  Hadley,
Massachusetts  have entered into a contract whereby the Company will operate and
remodel the Town's 30-acre  municipal  solid waste  landfill.  The Town of South
Hadley will retain full ownership of the landfill while the Company operates and
remodels the facility.  The Company received a landfill  disruption  permit from
the MDEP which enabled WSI to begin engineering work and feasibility  studies at
the  South  Hadley  landfill.  On March  16,  1998 the  Company  filed its draft
environmental  impact report with the MDEP and anticipates  receiving all of its
operating and  construction  permits during the second or third quarter of 1998,
which would allow WSI to begin  accepting  solid waste at the first 6-acre lined
cell  during the first or second  quarter  of 1999.  The South  Hadley  landfill
project is currently  expected to have in excess of 2 million cubic yards of new
capacity for future disposal.



                                        37
<PAGE>                           


         Fairhaven, Massachusetts. On July 24, 1994, WSI entered into a contract
with the Town of  Fairhaven,  Massachusetts  to operate  and  remodel the Town's
existing  26-acre  landfill.  The Company  began  operating the landfill in June
1995, and commenced the operations after obtaining necessary  remodeling permits
in October  1995.  On November 8, 1995,  an action was brought  against  various
parties  including the Company relating to the remodeling  permits issued at the
Fairhaven  landfill,  seeking among other things, to appeal the permits that had
been issued.  On June 2, 1997, the judge ruled in the Company's favor.  However,
based on the extensive delays associated with the litigation and the engineering
impacts of the delays  associated  with the  litigation,  which  resulted in the
uncertainty  of the  long-term  economic  viability of the project,  the Company
terminated  the Fairhaven  landfill  project.  On February 24, 1998, the Company
entered into a termination  agreement  with the Town of Fairhaven  that required
the Company to perform a certain amount of construction  and closure work at the
landfill.  The estimated  costs to terminate this project have been reserved for
and are included in accrued expenses at December 31,1997. See Note 8.

         Write-off of landfill development costs in 1997 primarily represent the
Company's  cost to  liquidate  the  equipment  which  was used at the  Fairhaven
landfill  and the costs to  physically  close the landfill  under the  Company's
Termination  Agreement  with the Town of  Fairhaven.  The Company  wrote-off its
capital investment in the project at December 31, 1996.


Note  7.  Long-term Debt and Notes Payable

   Long-term debt and notes payable consists of:
                                                             December 31,
                                                        1997             1996

    Convertible subordinated debentures             $  4,425,000   $   8,525,000
    Capital leases and equipment notes payable         2,626,700       1,589,989
    Howard Bank Term Loan                                748,000             -
    Mortgages                                            189,350         195,372
    FDIC and Boston Private Bank                             -           661,826
    Other notes payable                                   56,043         643,564
                                                    -------------  -------------
                                                       8,045,093      11,615,751
        Less current portion                             843,831       2,165,378
                                                    -------------  -------------
        Long-term portion                          $   7,201,262  $    9,450,373
                                                    =============  =============


Scheduled  maturities of long-term  debt and notes  payable,  excluding
capital leases are as follows:

         Payments due in the year ending December 31,
           1998                                                  $       398,679
           1999                                                          343,309
           2000                                                        4,509,052
           2001                                                            8,870
           2002                                                            9,772
            Thereafter:                                                  148,711
                                                                 ---------------
                                                                 $     5,418,393



                                       38
<PAGE>



         Convertible  Subordinated  Debt:  On October 6 and 12, and  November 7,
1995, the Company closed a "Regulation S" offering of $11,225,000 in Convertible
Subordinated  Notes and Warrants to overseas  investors,  which  resulted in net
proceeds to the Company of  $10,085,587.  The  offering  consisted of 449 units.
Each unit sold for $25,000,  and consisted of one Convertible  Subordinated Note
("Note") along with Series F Warrants  ("Warrants") to purchase shares of Common
Stock at a price of $12.20.  The Notes  mature on September  30, 2000,  and bear
interest at 10%, payable quarterly.  The Notes are convertible into Common Stock
at $9.20 per share.  The Notes are  callable at the option of the Company at any
time after  October 6, 1996,  if the closing  sale price of the Common Stock has
exceeded  $50.00 per share for a period of 20 consecutive  trading days prior to
redemption  notice.  The Warrants  expire on September  30, 1998.  The Notes and
Warrants have not been  registered  under the Securities Act and may not be sold
in the United States without such  registration or an applicable  exemption from
the requirement of registration. Under most circumstances,  resale in the United
States of Notes and shares of Common Stock  acquired on  conversion  of Notes or
exercise   of   Warrants   is  exempt   from   registration   under   prevailing
interpretations  of Regulation S. In connection  with the offering,  the Company
issued to the  Placement  Agent  warrants to  purchase  up to 140,313  shares of
Common Stock at $50 per share.  These warrants were subsequently  exchanged into
70,000  warrants at $17.50 as part of a subsequent  financing in June 1996,  see
Note 13 - Common Stock.


         As of December  31, 1996,  $2,850,000  of notes plus $27,425 of accrued
interest had been converted into 313,992 shares of common stock. On December 31,
1997, the Company converted  $3,950,000 of Convertible  Subordinated  Debentures
and  $110,625 of accrued  interest  into 40,488  shares of Series B  Convertible
Preferred Stock. See Note 12.

         Capital Leases and Equipment Notes Payable:  The Company leases certain
facilities,  equipment,  and vehicles under  agreements  which are classified as
capital leases.

     Leased capital assets included in property and equipment are as follows:
                                                       December 31,
                                                   1997             1996
                                                   ----             ----
             Land and Buildings               $1,634,078     $      56,250
             Machinery and equipment           1,881,630         2,378,560
                                             -------------    -------------
                                               3,515,708         2,434,810
             Accumulated depreciation           (207,053)         (202,714)
                                              $3,308,655     $   2,232,096
                                             =============    =============


     Future  minimum  lease  payments, by year  and  in  the  aggregate,  under
non-cancelable  capital  leases and  operating  leases with initial or remaining
terms of one year or more at December 31, 1997 are as follows:

                                                        Capital        Operating
                                                         Leases          Leases
         Payments due in the year ending December 31,
             1998$                                    $   672,030    $   197,058
             1999                                         669,420        255,163
             2000                                         643,051        276,879
             2001                                         389,618        298,595
             2002                                         200,040        304,024
             Thereafter                                 1,225,229         76,006
                                                     -------------  ------------
         Minimum lease payments                         3,799,388    $ 1,407,725
                                                     =============
         Less:  interest                                1,172,688
                                                     -------------
         Present value of net minimum lease payments    2,626,700
         Less current portion                             445,153
                                                      -------------
         Long-term portion                           $  2,181,547
                                                      =============

         The  Company's  rental  expense for  operating  leases was $81,757,  
$293,766,  and $292,492 for the years ended December 31, 1997, 1996 and 1995, 
respectively.

         Howard Bank Term Loan:  On March 31,  1997,  the Company  closed a $1.0
million term loan with The Howard Bank of Burlington,  Vermont.  The term of the
loan is payable  in 36 equal  monthly  payments  and bears  interest  at 12% per
annum. The proceeds from the loan were used for the initial costs of development
of Cell 2 at the Moretown  landfill (See Note 6) and for general working capital
purposes at its operations in Vermont.

         Mortgages:  Mortgage notes are secured by the respective  assets,  and 
are due in various amounts through 2015.



                                       39
<PAGE>


Note  8.  Accrued Expenses

     Accrued expenses consisted of the following:

                                                        December 31,
                                                   1997             1996

        Interest                             $     103,578     $  242,185
        Professional and consulting fees           265,024        237,399
        Fairhaven landfill (See Note 6)            756,000        500,000
        ScotSafe litigation (See Note 3)           300,000           -
        Other                                      341,784        246,131
                                                 -------------  -------------

                                             $   1,766,386    $ 1,225,715
                                                 =============  =============

Note  9.  Income Taxes

<TABLE>
<CAPTION>
         Income tax expense (benefit) consists of:
                                                                  Current          Deferred        Total
              <S>                                               <C>             <C>            <C>
                   Year ended December 31, 1997:
                 Federal                                        $           -   $           -  $           -
                 State                                                  5,622               -          5,622
                                                                -------------   -------------  -------------
                                                                $       5,622    $          -  $       5,622
                                                                =============   =============  =============

              Year ended December 31, 1996:
                 Federal                                        $           -   $           -  $           -
                 State                                               (23,456)               -        (23,456)
                                                                -------------   -------------  --------------
                                                                $    (23,456)    $          -  $     (23,456)
                                                                =============   =============  ==============

              Year ended December 31, 1995:
                 Federal                                        $           -   $   (141,358)  $   (141,358)
                 State                                                 75,535        (43,642)         31,893
                                                                -------------   -------------  -------------
                                                                $      75,535   $   (185,000)  $   (109,465)
                                                                =============   =============  ============


         A  reconciliation  between federal income tax expense  (benefit) at the
statutory rate and the Company's federal tax expense (benefit) is as follows for
the year ended December 31:

                                                                     1997            1996            1995
                                                                     ----            ----            ----

              Statutory Federal income tax (benefit)          $ (1,898,217)  $    (4,717,894)  $( 2,708,925)
              State taxes, net of Federal income tax benefit      (530,947)       (1,210,466)      (704,604)
              Valuation allowance                                2,432,087         5,898,245      3,294,764
              Other                                                  2,699             6,659          9,300
                                                              -------------  ----------------  -------------

                                                              $      5,622  $        (23,456)  $   (109,465)
                                                              =============  ================  =============

</TABLE>




                                       40
<PAGE>




     The tax effects of temporary differences between financial statement and
tax accounting that gave rise to significant portions of the Company's  net 
deferred tax assets and deferred tax  liabilities at December 31, 1997 and 1996 
are presented below.

                                                        1997           1996
                                                        ----           ----

     Deferred tax assets:
       Accounts receivable                       $      11,528  $       9,788
       Property and equipment                          194,942        236,323
       Other accrued liabilities                     4,371,736      4,320,664
       Operating loss and credit carryforwards       4,543,738      4,626,234
                                                  ------------     ----------
           Gross deferred tax assets                 9,121,944      9,193,009
           Less: valuation allowance                (9,121,944)    (9,193,009)

                  Net deferred tax assets               -                 -
                                                  ------------     -----------
              Deferred tax liabilities:
                  Total deferred tax liabilities        -                 -
                                                  ------------     -----------

                  Net deferred tax liability    $       -         $       -
                                                  =============   ============

         At December 31, 1997 the Company had net operating  loss  carryforwards
for Federal income tax purposes of approximately $10 million which generally are
available to offset  future  Federal  taxable  income,  if any, and which expire
during the years ending December 31, 2009 through 2012. The Company underwent an
ownership  change as defined in Internal  Revenue  Code  Section 382 on June 30,
1997 and as a result will be restricted in its ability to use net operating loss
carryforwards  generated prior to the ownership to offset future taxable income.
The Company's future use of net operating loss carryforwards  generated prior to
the ownership change will be subject to an annual limitation  generally equal to
the  product of the  long-term  tax  exempt  rate for June 1997 of 5.64% and the
value of the  Company  as of June 30,  1997.  As a result of this  limitation  a
portion of its Federal and state net  operating  loss  carryforwards  may expire
unused.

 Note  10.  Landfill Closure and Post-Closure Costs

         Landfills are typically  developed in a series of cells,  each of which
is  constructed,  filled,  and capped in sequence over the operating life of the
landfill.  When the cell is filled and the  operating  life of the  landfill  is
over,  the final  cell  must be  capped,  the  entire  site  must be closed  and
post-closure  care and  monitoring  activities  begin.  The  Company  will  have
material  financial  obligations  relating to the final closure and post-closure
costs of each landfill the Company owns.

         The Company has estimated as of December 31, 1997, that the total costs
for final closure and  post-closure  of Cells I and II at the Moretown,  Vermont
landfill,  including  capping costs,  cap maintenance,  groundwater  monitoring,
methane gas monitoring,  and leachate  treatment and disposal for up to 30 years
after closure, is approximately $4.2 million. Based upon the capacity of Cells I
and II, approximately $1.6 million has been accrued for at December 31, 1997.

         The Company bases its estimates for these accruals on respective  State
regulatory  requirements,   including  input  from  its  internal  and  external
consulting  engineers and  interpretations of current  requirements and proposed
regulatory  changes.  The closure and post-closure  requirements are established
under the standards of the U.S.  Environmental  Protection  Agency's  Subtitle D
regulations as implemented and applied on a state-by-state basis.

         The determination of airspace usage and remaining  airspace capacity is
an essential component in the calculation of closure and post-closure  accruals.
See Note 2 - Summary of Significant  Accounting  Policies  Landfill  Closure and
Post-Closure Costs.



                                       41
<PAGE>



Note  11.  Commitments and Contingencies

         Landfill related activities.  In the normal course of its business, and
as a  result  of  the  extensive  governmental  regulation  of the  solid  waste
industry,  the Company  periodically  may become subject to various judicial and
administrative proceedings involving federal, state, or local agencies. In these
proceedings,  the agency may seek to impose fines on the Company or to revoke or
deny renewal of an operating permit held by the Company.  From time to time, the
Company  also may be  subjected  to  actions  brought  by  citizens'  groups  in
connection  with the  permitting  of its  landfills  or  transfer  stations,  or
alleging  violations  of the permits  pursuant  to which the  Company  operates.
Certain  federal and state  environmental  laws impose  strict  liability on the
Company for such  matters as  contamination  of water  supplies or the  improper
disposal of waste. The Company's  operation of landfills  subjects it to certain
operational,  monitoring, site maintenance, closure and post-closure obligations
which could give rise to increased costs for monitoring and corrective measures.
See Note 10 Landfill Closure and Post Closure Costs.

         The Company has obtained  environmental  impairment liability insurance
covering  claims for sudden or gradual  onset of  environmental  damage.  If the
Company  were to incur  liability  for  environmental  damage  in  excess of its
insurance  limits,  its financial  condition  could be adversely  affected.  The
Company  carries  a  comprehensive  general  liability  insurance  policy  which
management  considers adequate at this time to protect its assets and operations
from other risks.

         None of the  Company's  landfills  are  currently  connected  with  the
Superfund National Priorities List or potentially responsible party issues.

         Employment   Contracts.   The  Company  has  entered  into   employment
agreements  with its two senior  executives  which  expire on June 10,  1999 and
subsequently  provide for employment  until terminated by either party at annual
salaries of $175,000.

         Legal Matters.  The Company is party to pending legal  proceedings  and
claims. Although the outcome of such proceedings and claims cannot be determined
with certainty, the Company's management,  after consultation with outside legal
counsel,  is of the opinion that the expected  final  outcome  should not have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations or liquidity.

         Richard  Rosen.  In  July  1996,  the  Company  commenced   arbitration
proceedings  against Richard Rosen ("Rosen"),  former Chairman,  Chief Executive
Officer and  President of the  Company,  seeking to recover  amounts,  excluding
interest and litigation costs,  which the Company believes it was owed by Rosen.
This action was undertaken at the direction of the Board of Directors  following
its  receipt  of a report  by a special  committee  of the  Board  appointed  to
investigate  Rosen's financial  dealings with the Company,  in consultation with
independent  counsel  retained  in  connection  with  its  investigation.  Rosen
resigned from all offices with the Company on March 27, 1996.  Amounts which the
Company sought to recover included  unreimbursed  advances and amounts which the
Company believed  constituted  improper expense  reimbursements  and payments of
Company funds for personal benefit.

         An arbitration hearing was completed on October 25, 1996. On January 2,
1997, the  arbitrator  issued the Award of  Arbitrator,  directing  Rosen to pay
$780,160,  excluding interest and litigation costs, for breaches by Rosen of his
employment agreement with the Company "in failing to discharge in good faith the
duties of his  positions  and failing to act under the direction of the Board of
Directors of the Company.  On February 25, 1997 the Middlesex  Superior Court in
Cambridge,  Massachusetts  confirmed  the  arbitration  award  and  entered  the
judgment against Rosen, which is now  non-appealable,  in an amount in excess of
$833,000. The Company is currently pursuing discovery against Rosen through this
forum  to  identify  assets  that  Rosen  may  have  available  to  satisfy  the
outstanding  judgment.  In August of 1996,  the  Company  secured a  preliminary
injunction in Middlesex  Superior  Court with respect to any future sales of the
Company's  stock by Rosen.  The Company has filed a Motion in such action asking
the Court to issue a  broader  form of  permanent  injunction  in the  case.  On
September  8, 1997 the  Company  commenced  a  supplementary  process  action in
Cambridge  District  Court  to  collect  on  such  judgment,  including  seeking
foreclosure  on all shares of the  Company's  stock owned by Rosen.  On March 5,
1998 the judge granted the Company's motion and the Company is in the process of
obtaining  all the  shares  held by Rosen.  No  assurance  can be given that the
Company  will be able to collect the entire  balance of any  amounts  awarded in
arbitration  including interest and litigation costs. The Company is carrying on
its  December  31, 1997  balance  sheet an amount of  $300,000  in  unreimbursed
advances due from Rosen, but the Company's other claims and additional  advances
have  not  been  reflected  on the  balance  sheet  at this  time.  The  Company
anticipates receiving a minimum of approximately  $300,000 from Rosen in cash or
stock by March 31, 1998



                                       42
<PAGE>



         On March 27, 1997,  Rosen  commenced  an action  against the Company in
Middlesex  County  (Massachusetts)  Superior Court,  seeking an award of damages
resulting  from the Company's  alleged  breach of a Memorandum of  Understanding
entered into between the Company and Rosen in connection with the termination of
Rosen's  employment with the Company,  in which Rosen had been granted an option
to purchase certain assets of the Company not related to its core business.  The
Company believes this claim to be frivolous and is vigorously defending this
action.

         Marguerite Piret. In October 1997 in the Middlesex  Superior Court, the
Company  commenced an action against  Marguerite A. Piret, a former  director of
the Company and the wife of Rosen,  seeking  damages  against Ms.  Piret for her
independent  breaches of fiduciary duty as a former director of the Company. The
case is in the  discovery  stage  and no trial  date has yet  been  set.  If the
Company  is  successful  in its  claims,  the  Company  may  recover  direct and
consequential damages from Ms. Piret.

Note  12.  Preferred Stock

         On June 30, 1997, the Company closed a Regulation "D" private placement
of  Series A  Convertible  Preferred  Stock,  which  raised  gross  proceeds  of
approximately  $9.7  million.  As  part of the  private  placement, the  Company
converted  approximately $570,000 in bank debt into preferred stock and acquired
the minority interest in its Vermont operations for $850,000 in preferred stock.

         During the six months ended  December 31, 1997,  holders of $480,000 in
face amount of Series A Preferred Stock  converted  their preferred  shares into
341,334 shares of common stock.

         The Series A Preferred Stock bears an 8.0% annual cumulative  dividend,
and is convertible  into common stock at a conversion  price of $1.406 per share
of common stock, which conversion price may be reset to a lower conversion price
upon the  occurrence  of certain  events.  The dividend is payable in cash or in
additional  shares of preferred stock at the Company's  option and is subject to
adjustment after 3 years. The Series A Preferred Stock is also  redeemable(a) at
the Company's  option for Common Stock, if the Company's  average closing Common
Stock price for any 20 consecutive  trading days  occurring  after June 26, 1998
equals or exceeds $2.8125 and (b) at the Company's  option for cash equal to the
redemption  price as set forth in the Certificate of Designation of the Series A
Preferred  Stock,  if any Series A Preferred  Stock is  outstanding  on June 26,
2002,  in each  case ,  subject  to  certain  trading  requirements.  Cumulative
dividends  on the Series A Preferred  Stock,  as of December 31, 1997 which have
not been  declared or paid are  approximately  $395,000.  The  purchasers of the
Series  A  Preferred  Stock  were  granted   registration  rights  covering  the
underlying  Common Stock into which such preferred stock is  convertible,  and a
registration  statement  for the resale of such common stock has been filed with
the Commission but is not yet effective.


         On December 31,  1997,  WSI retired  approximately  $4.0 million of its
outstanding  10%  Convertible  Debentures in exchange for the issuance of a like
amount of 40,488 shares of Series B Preferred Stock.  See Note 7 to the 
Consolidated Financial Statements presented in Item 8.

         The Series B Preferred Stock bears a 6.0% annual  cumulative  dividend,
and is convertible into common stock at a conversion price of $6.25 per share of
common stock. The dividend is payable in cash or in additional  shares of Series
B Preferred Stock at the Company's  option if the Company's  closing stock price
for 20  consecutive  days  equals or  exceeds  $6.25  per  share.  The  Series B
Preferred Stock is also redeemable (a) at the Company's  option for Common Stock
if the Company's  average closing Common Stock price for 20 consecutive  trading
days equals or exceeds $6.25 and (b) at the  Company's  option for cash equal to
the  redemption  price as set forth in the  Certificate  of  Designation  of the
Series B Preferred  Stock,  if any Series B Preferred  Stock is  outstanding  on
October 6, 2000.  Cumulative  dividends on the Series B Preferred  Stock,  as of
December 31, 1997 which have not been declared or paid are approximately $1,000.
The purchasers of the Series B Preferred Stock were granted  registration rights
covering  the  underlying  Common  Stock  into  which  such  preferred  stock is
convertible.



                                       43
<PAGE>



Note  13.  Common Stock

         On January  21,  1997,  the  Company  closed a  Regulation  "D" private
placement  of  172,000  shares of common  stock at $2.50  per share  with  gross
proceeds of $430,000. These shares have not been registered under the Securities
Act and may not be sold in the United  States  without such  registration  or an
applicable exemption form the requirement of registration.

         In September  1997, the Company issued 18,667 shares of common stock in
conection  with the purchase of the minority  interest in the Company's  Vermont
hauling business for $70,000.

         On October 7, 1997,  the Company  filed an S-3  Registration  Statement
with the Securities and Exchange Commission to register approximately  7,100,000
shares of common stock primarily consisting of shares which are reserved for the
issuance  to  holders  of Series A  Preferred  Stock  upon  conversion  of their
preferred  shares to common  stock and the  shares  issued in the  January  1997
private placement.

         In December 1997, the Company's  Board of Directors  approved a one for
five reverse  stock split of the Company's  Common Stock.  On February 13, 1998,
the  stockholders  of the Company  approved the reverse stock split at a special
stockholders'  meeting.  No fractional  shares will be issued in connection with
the reverse stock split, and  stockholders  will receive cash in payment for any
fractional shares otherwise issuable.  The Company's  financial  statements have
been restated to reflect the one-for-five reverse split.


Note  14.  Stock Options

         Employee Stock Option Plan. Pursuant to the Company's 1995 Stock Option
and Incentive Plan as amended (the "Plan"),  options to purchase up to 1,700,000
shares of Common Stock were reserved for issuance to employees  and  consultants
of the Company.  Options  granted under the Plan may be either  Incentive  Stock
Options or  Non-Qualified  Stock Options for purposes of federal income tax law.
Options are  generally  subject to vesting  over a period of four years from the
date of grant and are  exercisable  only to the extent vested from time to time,
although  certain  options have provided for earlier  vesting.  The selection of
individuals to receive awards of options under the Plan and the amount and terms
of such awards may be  determined by the Board of Directors of the Company or an
Administering Committee appointed by the Board of Directors.

         As of December 31, 1997, options to purchase 1,327,417 shares of Common
Stock had been  granted  and options to  purchase  up to an  additional  372,583
shares remained  available for grant.  The per share weighted average fair value
of stock  options  granted  during  1997 and 1996 was  approximately  $4.08  and
$15.34,  respectively,  using  the Black  Scholes  option-price  model  with the
following  weighted average  assumptions:  volativity,  30%;  expected  dividend
yield, 0%; risk free interest rate, 5.5%; and expected life, 5 years.

         The Company  applies APB Opinion No. 25 in accounting for stock options
and,  accordingly,  no  compensation  cost has been  recorded  in the  financial
statements.  If the Company had determined  compensation costs based on the fair
value of its stock options at their grant date under SFAS No. 123, the Company's
net losses in 1997 and 1996 would have increased to the amounts shown below.

                                                        1997             1996
                                                  ------------       ----------

                Net loss
                   - as reported               $   (5,588,612)   $  (13,889,772)

                   - pro forma                     (6,006,315)      (14,334,772)

                      Net loss per share

                   - as reported                  $     (1.55)   $        (4.90)

                   - pro forma                          (1.68)            (5.06)

         Pro forma net income  reflects  only the effects of options  granted in
1997 and 1996. Therefore, it does not reflect the full effect of calculating the
cost of stock  options  under SFAS No. 123  because  the cost of options  issued
prior  to  January  1,  1995  are not  considered.  As a  result,  it may not be
representative  of the pro  forma  effects  on  operating  results  that will be
disclosed in future years.





                                       44
<PAGE>




         Changes  in  options  and  option  shares  under  the plan  during  the
respective years were as follows:
<TABLE>
<CAPTION>
  
                                                        1997                                1996
                                            ----------------------------         ---------------------------
         <S>                               <C>              <C>                 <C>
                                           Weighted Avg.                        Weighted Avg.
                                           exercise price      Number           exercise price       Number
                                             per share       of shares           per share         of shares
         Options outstanding,
              beginning of year                 $1.41           161,200             $1.41            123,825
         Options granted                         1.43         1,179,217              1.41            148,250
         Options exercised                                            -              1.41            (1,312)
         Options canceled                        1.64          (13,000)              1.41          (109,563)
                                                           ------------                        -------------
         Options outstanding,
              end of year                        1.42         1,327,417              1.41            161,200
         Shares reserved for future grants                      372,583                              138,800
                                                           ------------                        -------------

         Total options in the plan                            1,700,000                              300,000
                                                           ============                        =============

         Options exercisable, end of year       $1.42           114,900             $1.41            102,225
                                                           ============                        =============
</TABLE>

         Effective  June 30, 1997,  the Board of Directors  offered all employee
participants in the Stock Option Plan the opportunity to reprice to $0.28125 per
share any currently  outstanding stock options with exercise prices in excess of
$0.28125  per  share.   Each  repriced  option  retained  the  vesting  schedule
associated with the original grant.

Options  outstanding  at December  31, 1997 and related  proceeds to the Company
were as follows:
                                      Shares             Price          Exercise
                                   Under Option        Per Share        Proceeds

                                    1,298,417            $1.41        $1,830,768
                                       22,000             1.88            41,360
                                        1,000             2.19             2,190
                                        1,000             3.13             3,130
                                        5,000             3.75            18,750
                                  --------------                      ----------
                                    1,327,417                         $1,896,198
                                  ==============                      ==========

         Non-Employee  Directors  Stock Option Plan.  Pursuant to the  Company's
1995 Stock Option Plan for Non-Employee  Directors as amended,  each Director is
entitled to receive a grant of a Non Qualified  Stock Options to purchase  2,000
shares of the  Company's  Common  Stock for each  calendar  year of service as a
director of the Company  commencing January 1, 1996. Each such option is subject
to  vesting  at a rate of 400  shares  for each year that the  holder  remains a
Director of the  Company.  In  addition,  the plan  provides for the issuance of
4,000 fully vested  options upon the election of each new member of the Board of
Directors initially elected after December 24, 1997,  excluding employees of the
Company.





                                       45
<PAGE>




Changes in options and option shares under the plan during the respective  years
were as follows:
<TABLE>
<CAPTION>

                                                        1997                                1996
                                           ----------------------------         -----------------------------
<S>                                        <C>             <C>                  <C>     
                                           Weighted Avg.                        Weighted Avg.
                                           exercise price    Number             exercise price     Number
                                            per share       of shares           per share         of shares
         Options outstanding,
              beginning of year                 $1.41            19,416             $1.41              8,750
         Options granted                         2.28            35,480              1.41             10,666
         Options exercised                          -                 -                 -                  -
         Options canceled                        2.15          (27,416)                 -                  -
                                                           ------------                        -------------
         Options outstanding,
              end of year                       $1.79            27,480             $1.41             19,416
                                                           ============                        =============

         Options exercisable,
              end of year                       $1.84            21,500             $1.41              7,041
                                                           ============                        =============

</TABLE>


Options  outstanding  at December  31, 1997 and related  proceeds to the Company
were as follows:
                                                    
                                            Shares       Price          Exercise
                                         Under Option  Per Share        Proceeds

                                             14,000       $1.41          $19,740
                                             13,480        2.19           29,521
                                         --------------            -------------
                                             27,480                      $49,261
                                         ==============            =============

Note  15.  Subsequent Events

              In January 1998,  the Company  entered into an  additional  credit
facility  with  The  Howard  Bank in  Vermont  for  $2.25  million  to fund  the
development and expansion of its integrated solid waste management operations in
Vermont and for general working capital purposes.

         On February 12, 1998,  the Company  closed a $5 million bridge loan for
use in closing certain acquisitions.
     
         On February 13, 1998, the  stockholders  of the Company  approved a one
for five reverse stock split at a special  stockholders'  meeting. No fractional
shares were issued in connection with the reverse stock split,  and stockholders
received cash in payment for any fractional shares otherwise issuable.  See Note
13.

         As of February 16, 1998,  WSI had closed 3  acquisitions  of collection
companies and a transfer station, and signed definitive  agreements to acquire 2
additional  collection  companies in the State of Vermont. The acquisitions have
combined  annual  revenues  of  approximately   $5  million.   The  remaining  2
acquisitions  are  expected to close by March 31,  1998.  The  Company  plans to
integrate  these  acquisitions  with its  current  operations  in  Vermont.  The
acquisitions will be accounted for using the purchase method of accounting.

         On March 24,  1998,  the  Company  signed a  definitive  agreement  to
acquire Horvath Sanitation, Inc., D/B/A Eagle Waste ("Eagle"), which is based in
Altoona,  PA. Eagle has  approximately $8 million in annual revenue and collects
approximately 200 tons per day of solid waste.



                                       46
<PAGE>





Item 9.Changes in and Disagreements with Accountants on Accounting 
       and Financial Disclosure

             None.

                               PART III

Item 10.  Directors and Executive Officers of the Registrant

         The  information  appearing  under the caption "Information  Regarding
Nominees and Executive  Officers" in the Company's Proxy  Statement  relating to
the 1998 Annual Meeting of Stockholders is incorporated herein by reference.

Item 11.  Executive Compensation

         The information appearing under the following captions in the Company's
Proxy  Statement  relating  to  the  1998  Annual  Meeting  of  Stockholders  is
incorporated herein by reference.

         "Director  Compensation",  "Executive  Compensation",   "Compensation  
Committee  Interlocks  and  Insider Participation."

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The information  appearing under the caption "Beneficial  Ownership" in
the  Company's  Proxy   Statement   relating  to  the  1998  Annual  Meeting  of
Stockholders is incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions

          The information appearing under the caption "Certain Relationships and
Transactions"  in the  Company's  Proxy  Statement  relating  to the 1998 Annual
Meeting of Stockholders is incorporated herein by reference.




                                       47
<PAGE>




                               PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(A)      1.  Financial Statements

         The  financial  statements  are listed  under  Part II,  Item 8 of this
Report.

         2.  Financial Statement Schedules

         The financial  statement  schedules are listed under Part II, Item 8 of
this Report.

         3.  Exhibits

         The exhibits are listed below under Part IV, Item 14(c) of this report.

(B)      Reports on Form 8-K

         Reports on Form 8-K were filed  with the  commission  during the fourth
         quarter  of  1997  to  report  the  following  items  as of  the  dates
         indicated:

         Waste  Systems  International,  Inc.  filed a report  on Form 8-K dated
         November 27, 1997 reporting under Item 5 the acquisition of a 700 acre,
         3 million  permitted  cubic yard  municipal  solid  waste  landfill  in
         Hopewell,  Pennsylvania.  The  report  incorporated  by  reference  the
         contents of WSI's press release dated November 20, 1997.

(C)       Exhibits

 Exhibit No.                                 Description

 2.1        Articles of Merger of BioSafe International, Inc., a Nevada 
            Corporation, with and into Waste Systems International, Inc., a 
            Delaware Corporation, filed October 24, 1997 (Incorporated by 
            reference to Exhibit 2.1 to Form 10-Q For the Quarterly Period Ended
            September 30, 1997 of Waste Systems International, Inc.)

2.2         Certificate of Merger of BioSafe International, Inc., a Nevada 
            Corporation, with and into Waste Systems International, Inc., a 
            Delaware Corporation, filed October 24, 1997 and effective October 
            27, 1997. (Incorporated by reference to Exhibit 2.2 to Form 10-Q For
            the Quarterly Period Ended September 30, 1997 of Waste Systems 
            International, Inc.)

2.3         Agreement and Plan of Merger dated October 17, 1997 by and between 
            BioSafe International, Inc. a Nevada Corporation and Waste Systems 
            International, Inc. a Delaware Corporation. (Incorporated by 
            reference to Exhibit 2.3 to Form 10-Q For the Quarterly Period Ended
            September 30, 1997 of Waste Systems International, Inc.)

3(i).1     Second Amended and Restated Certificate of Incorporation of Waste 
           Systems International, Inc.  filed February 13, 1998.

3(i).2     Certificate of Designations of Series B Convertible Preferred Stock 
           of Waste Systems International, Inc. filed March 5, 1998.

3(i).3     Certificate of Corrections to the Second Amended and Restated 
           Certificate of Incorporation of Waste Systems International, Inc.  
           (as filed February 13, 1998),filed March 17, 1998.

3(ii).1     Bylaws of the Company, adopted and effective as of Octobe 27, 1997.

                                        48
<PAGE>                                  

4.1         Form of Placement Agent Warrant.(Incorporated by reference to 
            Exhibit No. 4.9 to the Registration Statement on Form S-1 of BioSafe
            International, Inc., No. 33-93966. As filed on June 26, 1995)

4.2         Form of Series F Warrant Certificate. (Incorporated by reference to 
            Exhibit No.4.10 to Form 10-K For the Fiscal Year Ended December 31, 
            1995 of BioSafe International, Inc.)

4.3         Series F Warrant Agreement. (Incorporated by reference to Exhibit 
            No. 4.10 to Form 10-K For the Fiscal Year Ended December 31, 1995 of
            BioSafe International, Inc.)

4.4         Certificate of Designation of Series A Convertible Preferred Stock 
            of Waste Systems International, Inc. filed October 20, 1997 (Refer 
            to Exhibit 3(i).3 above).

4.5         Certificate of Designation of Series B Convertible Preferred Stock 
            of Waste Systems International, Inc. filed October 20, 1997 (Refer 
            to Exhibit 3(i).2 above).

4.6         Amended and Restated Subscription Agreement dated as of June 30, 
            1997 (Incorporated by reference to Exhibit 4.2 to Form 10-Q for the 
            Quarterly Period Ended September 30, 1997 of Waste Systems 
            International, Inc.)

10.1        Amended and Restated Joint Venture Agreement between BioSafe, Inc. 
            and BioMed Environmental Systems, Inc., dated December 24, 1992.  
            (Incorporated by reference to Exhibit No. 10.1 to the Registration 
            Statement on Form S-1 of BioSafe International,
            Inc., No. 33-93966 as filed on June 26, 1995.)

10.2        Agreement between BioSafe, Inc. and the Town of Fairhaven, 
            Massachusetts, dated July 24, 1995. (Incorporated by reference to 
            Exhibit No.10.2 to the Registration Statement on Form S-1 of BioSafe
            International, Inc., No. 33-93966 as filed on June 26, 1995.)

10.3        Letter Agreement from the Town of Fairhaven to the Company, dated 
            June 20, 1995.  (Incorporated by reference to Exhibit No. 10.3 to 
            the Registration Statement on Form S-1 of BioSafe International, 
            Inc., No. 33-93966.as filed on June 26, 1995.)

10.4        Agreement and Plan of Merger dated as of March 17, 1995, among the  
            Company, Zoe Resources, Inc., certain stockholders of the Company 
            and BioSafe, Inc. (Incorporated by Reference to Exhibit 2.1 of the 
            Company's Current Report on Form 8-K, dated March 29, 1995.)

10.5        1995 Stock Option Plan (Incorporated by Reference to Exhibit 10.1 of
            the Company's Current Report on Form 8-K, dated March 29, 1995.)

10.6        Agreement between BioSafe, Inc. and the Town of South Hadley, 
            Massachusetts, dated August 22, 1995. (Incorporated by reference to 
            Exhibit No. 10.12 to the Registration Statement on Form S-1 of 
            BioSafe International, Inc., No. 33-93966 as filed on June 26 1995.)

10.7        Form of 10% Convertible, Redeemable, Subordinated Note Due 2000.    
            (Incorporated by reference to Exhibit No. 10.15 to the Registration 
            Statement on Form S-1 of BioSafe International, Inc., No. 33-93966.)

21.1        Schedule of Subsidiaries.





                                       49
<PAGE>                        




                                   SIGNATURES

         Pursuant to the  requirements of Section 13 of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                          WASTE SYSTEMS INTERNATIONAL, INC.


     Date:  March 25, 1998         By:   /s/ Philip Strauss
                                         __________________
                                         Philip Strauss
                                         Chairman, Chief Executive Officer and 
                                         President
                                         (Principal Executive Officer)

     Date: March 25, 1998          By:   /S/ Robert Rivkin
                                         __________________
                                         Robert Rivkin
                                         Vice President, Chief Financial 
                                         Officer, Treasurer and Secretary
                                         (Principal Financial and Accounting 
                                         Officer)

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


    Date: March 25, 1998           By:
                                         _____________________________
                                         Philip Strauss 
                                         Chairman, Chief Executive Officer and 
                                         President
                                         (Principal Executive Officer)


    Date: March 25, 1998           By:
                                         _____________________________
                                         Robert Rivkin - Vice President, Chief 
                                         Financial Officer, Treasurer and 
                                         Secretary
                                         (Principal Financial and Accounting 
                                         Officer)

    Date: March 25, 1998           By:
                                         _____________________________
                                         Jay J. Matulich - Director


    Date: March 25, 1998           By:
                                         ______________________________
                                         David J. Breazzano - Director


    Date: March 25, 1998           By:
                                         ______________________________
                                         Charles Johnston - Director


    Date: March 25, 1998           By:
                                         ______________________________
                                         Judy K. Mencher - Director


    Date: March 25, 1998           By:
                                         _______________________________
                                         William B. Philipbar - Director

                                   50
<PAGE>                          



Exhibit 3(i).1

                           SECOND AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                        WASTE SYSTEMS INTERNATIONAL, INC.


         Waste Systems International, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:

         1. The name of the Corporation is Waste Systems International, Inc. The
date of the  filing  of its  original  Certificate  of  Incorporation  with  the
Secretary of State of the State of Delaware was January 10, 1997. The name under
which the Corporation filed its original  Certificate of Incorporation was Waste
Systems International, Inc.

         2. This  Second  Amended  and  Restated  Certificate  of  Incorporation
amends, restates and integrates the provisions of the First Amended and Restated
Certificate  of  Incorporation  of the  Corporation  filed with the Secretary of
State of the  State of  Delaware  on  October  20,  1997  (the  "Certificate  of
Incorporation"),  and was duly adopt by the written consent of the  stockholders
of the Corporation, all in accordance with the applicable provisions of Sections
228, 242 and 245 of the General  Corporation  Law of the State of Delaware  (the
"DGCL").

         3. The text of the Certificate of  Incorporation  is hereby amended and
restated  in its  entirety  to provide  as herein  set forth in full;  provided,
however,  that the Certificate of Designation of Series A Convertible  Preferred
Stock filed with the  Secretary of State of the State of Delaware on October 20,
1997,  a copy of which is attached  hereto as  Appendix A, shall  remain in full
force and effect as if fully set forth herein.

                                    ARTICLE I

                                      NAME

         The name of the Corporation is Waste Systems International, Inc.

                                   ARTICLE II

                                REGISTERED OFFICE

         The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The  name of its  registered  agent at such  address  is The  Corporation  Trust
Company.

<PAGE>
  
                                 ARTICLE III

                                    PURPOSES

         The nature of the  business or purposes to be  conducted or promoted by
the  Corporation  is  to  engage  in  any  lawful  act  or  activity  for  which
corporations may be organized under the General Corporation Law of Delaware.

                                   ARTICLE IV

                                  CAPITAL STOCK

         As of 5:00 PM,  Eastern time, on the date on which this Second  Amended
and Restated  Certificate  of  Incorporation  is filed with the Secretary of the
State of Delaware (the "Effective Time"), each FIVE outstanding shares of common
stock par value  $.001  per share  ("Old  Common  Stock"),  shall  thereupon  be
reclassified  and  changed  into ONE share of common  stock,  par value $.01 per
share (the "Common Stock").  Upon such Effective Time, each holder of Old Common
Stock  shall  thereupon  automatically  be and become the holder of ONE share of
Common Stock for every FIVE shares of Old Common Stock held by such holder prior
thereto.  Upon such Effective Time,  each  Certificate  formerly  representing a
stated  number of shares of Old Common  Stock shall  thereupon be deemed for all
Corporate  purposes to evidence  ownership of Common Stock in the appropriately,
reduced  whole number of shares.  As soon as  practicable  after such  Effective
Time,  stockholders  as of the  date of the  reclassification  will be  notified
thereof and upon their delivery of their certificates of Old Common Stock to the
Company or its designated  agent, will be sent stock  certificates  representing
their shares of Common Stock, rounded down to the nearest whole number, together
with cash representing the fair value of such holder's  fractional shares of Old
Common Stock. No scrip or fractional share certificates for Common Stock will be
issued in connection with this revised stock split.

         As of the Effective  Time,  the total number of shares of capital stock
which the  Corporation  shall have the authority to issue is Thirty-One  Million
(31,000,000)  shares of which (i) Thirty  Million  (30,000,000)  shares shall be
Common Stock, par value $.01 per share, and (ii) One Million  (1,000,000) shares
shall be preferred stock, par value $.001 per share (the "Preferred Stock").

                               A. PREFERRED STOCK

         As set  forth  in this  Article  IV,  the  Board  of  Directors  or any
authorized  committee  thereof is authorized  from time to time to establish and
designate  one or more  series of  Preferred  Stock,  to fix and  determine  the
variations  in the  relative  rights and  preferences  as between the  different
series of Preferred  Stock in the manner  hereinafter  set forth in this Article
IV, and to fix or alter the number of shares  comprising any such series and the
designation thereof to the extent permitted by law.
<PAGE>

         The number of authorized  shares of the class of Preferred Stock may be
increased or decreased (but not below the number of shares  outstanding)  by the
affirmative  vote of the  holders of a majority of the Common  Stock,  without a
vote of the holders of the Preferred Stock.

         The   designations,   powers,   preferences  and  rights  of,  and  the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below.

         Subject to any limitations prescribed by law, the Board of Directors or
any  authorized  committee  thereof is expressly  authorized  to provide for the
issuance of the shares of  Preferred  Stock in one or more series of such stock,
and by filing a certificate pursuant to applicable law of the State of Delaware,
to  establish or change from time to time the number of shares to be included in
each such  series,  and to fix the  designations,  powers,  preferences  and the
relative, participating,  optional or other special rights of the shares of each
series and any qualifications,  limitations and restrictions thereof. Any action
by the Board of Directors or any authorized committee thereof under this Article
IV to fix the designations, powers, preferences and the relative, participating,
optional or other  special  rights of the shares of a series of Preferred  Stock
and any qualifications,  limitations and restrictions  thereof shall require the
affirmative  vote of a majority of the Directors then in office or a majority of
the  members  of such  committee.  The  Board  of  Directors  or any  authorized
committee  thereof  shall have the right to  determine or fix one or more of the
following with respect to each series of Preferred Stock to the extent permitted
by law:

                  (a)      The distinctive serial designation and the number of 
shares constituting such series;

                  (b) The  rights  in  respect  of  dividends  or the  amount of
dividends to be paid on the shares of such series,  whether  dividends  shall be
cumulative  and, if so, from which date or dates,  the payment date or dates for
dividends,  and the  participating  and other  rights,  if any,  with respect to
dividends;

                  (c)      The voting powers, full or limited, if any, of the 
shares of such series;

                  (d)      Whether the shares of such series shall be redeemable
and, if so, the price or prices at which, and the terms and conditions on which,
such shares may be redeemed;

                  (e) The  amount or  amounts  payable  upon the  shares of such
series  and any  preferences  applicable  thereto in the event of  voluntary  or
involuntary liquidation, dissolution or winding up of the Corporation;

                  (f) Whether the shares of such series shall be entitled to the
benefit  of a sinking  or  retirement  fund to be  applied  to the  purchase  or
redemption of such shares,  and if so entitled,  the amount of such fund and the
manner of its  application,  including  the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
<PAGE>

                  (g)  Whether the shares of such  series  shall be  convertible
into, or exchangeable  for, shares of any other class or classes or of any other
series of the same or any other  class or  classes  of stock of the  Corporation
and, if so convertible or exchangeable,  the conversion price or prices,  or the
rate or rates of exchange,  and the adjustments  thereof,  if any, at which such
conversion or exchange may be made,  and any other terms and  conditions of such
conversion or exchange;

                  (h)      The price or other consideration for which the shares
of such series shall be issued;

                  (in)  Whether the shares of such series  which are redeemed or
converted  shall have the status of authorized but unissued  shares of Preferred
Stock (or series  thereof)  and whether such shares may be reissued as shares of
the same or any other class or series of stock; and

                  (j) Such other powers,  preferences,  rights,  qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.

                                 B. COMMON STOCK

         1.       Voting.  Each holder of record shall be entitled to one vote 
for each share of Common Stock standing in his name on the books of the 
Corporation.

         2.  Dividends.  Subject to applicable  law, the holders of Common Stock
shall be entitled to receive dividends out of funds legally  available  therefor
at such times and in such amounts as the Board of Directors may determine in its
sole  discretion,  with each share of Common Stock  sharing  equally,  share for
share, in such dividends.

         3. Liquidation. Upon any liquidation,  dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), after the
payment or provision for payment of all debts and liabilities of the Corporation
and all  preferential  amounts  to which  the  holders  of  Preferred  Stock are
entitled with respect to the distribution of assets in liquidation,  the holders
of Common Stock shall be entitled to share  ratably in the  remaining  assets of
the Corporation available for distribution.

         4.       Notices.  In the event that the Corporation provides any 
notice, report or statement to any holder of Common Stock, the Corporation shall
at the same time provide a copy of any such notice, report or
statement to each holder of outstanding Common Stock.
<PAGE>

                                    ARTICLE V

                               BOARD OF DIRECTORS

         1.       General.  The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors except as otherwise 
provided herein or required by law.

         2.       Election of Directors.  Election of Directors need not be by 
written ballot unless the By-laws
of the Corporation shall so provide.

         3. Terms of Directors. The number of Directors of the Corporation shall
be fixed by resolution duly adopted from time to time by the Board of Directors.
The Directors of the Corporation  shall serve for one-year terms expiring on the
date of the  Corporation's  Annual Meeting and until such  Director's  successor
shall have been duly elected and qualified or until their earlier resignation or
removal.   At  each  succeeding  annual  meeting  of  the  Stockholders  of  the
Corporation,  the successors of the Directors whose term expires at that meeting
shall be elected by a plurality vote of all votes cast at such meeting.

         Notwithstanding the foregoing,  whenever, pursuant to the provisions of
Article IV of this Certificate of Incorporation,  the holders of any one or more
series of Preferred Stock shall have the right, voting separately as a series or
together with holders of other such series,  to elect  Directors at an annual or
special  meeting of  stockholders,  the  election,  term of  office,  filling of
vacancies  and other  features  of such  directorships  shall be governed by the
terms of this Certificate of  Incorporation  and any certificate of designations
applicable thereto.

         During any period  when the  holders of any series of  Preferred  Stock
have the right to elect  additional  Directors as provided for or fixed pursuant
to the  provisions  of  Article IV hereof,  then upon  commencement  and for the
duration  of the  period  during  which  such  right  continues:  (in)  the then
otherwise  total  authorized  number  of  Directors  of  the  Corporation  shall
automatically  be  increased  by such  specified  number of  Directors,  and the
holders  of such  Preferred  Stock  shall be  entitled  to elect the  additional
Directors so provided for or fixed  pursuant to said  provisions,  and (ii) each
such additional Director shall serve until such Director's  successor shall have
been duly elected and  qualified,  or until such  Director's  right to hold such
office terminates pursuant to said provisions, whichever occurs earlier, subject
to such  Director's  earlier  death,  disqualification,  resignation or removal.
Except as  otherwise  provided  by the Board in the  resolution  or  resolutions
establishing such series,  whenever the holders of any series of Preferred Stock
having  such right to elect  additional  Directors  are  divested  of such right
pursuant  to the  provisions  of such  stock,  the  terms of  office of all such
additional  Directors  elected by the holders of such stock,  or elected to fill
any vacancies resulting from the death, resignation, disqualification or removal
of such  additional  Directors,  shall  forthwith  terminate  and the  total and
authorized number of Directors of the Corporation shall be reduced accordingly.

         4.       Stockholder Nominations of Director Candidates.  Advance 
notice of nominations for the election of Directors, other than by the Board of 
Directors of a committee thereof, shall be given in the manner provided
in the By-laws.
<PAGE>

         5.  Vacancies.  Subject to the  rights,  if any,  of the holders of any
series of Preferred  Stock to elect Directors and to fill vacancies in the Board
of Directors relating thereto,  any and all vacancies in the Board of Directors,
however occurring,  including,  without limitation,  by reason of an increase in
size of the Board of Directors, or the death,  resignation,  disqualification or
removal  of a  Director,  shall be filled  solely by the  affirmative  vote of a
majority of the remaining  Directors then in office,  even if less than a quorum
of the  Board of  Directors.  Any  Director  appointed  in  accordance  with the
preceding  sentence  shall hold office for the remainder of the full term of the
created or vacated  directorship and until such Director's  successor shall have
been duly  elected  and  qualified  or until his or her earlier  resignation  or
removal.  Subject  to the  rights,  if any,  of the  holders  of any  series  of
Preferred Stock to elect Directors, no decrease in the number of Directors shall
shorten  the term of any  incumbent  Director.  In the event of a vacancy in the
Board of Directors,  the remaining  Directors,  except as otherwise  provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.

         6. Removal.  Subject to the rights,  if any, of any series of Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock  have the right to elect,  any  Director  (including  persons  elected  by
Directors  to fill  vacancies  in the Board of  Directors)  may be removed  from
office  (in) only with cause and (ii) only by the  affirmative  vote of at least
two-thirds of the total votes which would be eligible to be cast by stockholders
in the  election  of such  Director.  At least 30 days  prior to any  meeting of
stockholders  at which it is proposed  that any Director be removed from office,
written  notice of such  proposed  removal  shall be sent to the Director  whose
removal will be considered at the meeting.  For purposes of this  Certificate of
Incorporation,  "cause,"  with  respect  to the  removal of any  Director  shall
include (in) conviction of a felony,  (ii)  declaration of unsound mind by order
of court,  (iii)  gross  dereliction  of duty,  (iv)  commission  of any  action
involving  moral  turpitude,  or (v)  commission of an action which  constitutes
intentional  misconduct  or a knowing  violation of law if such action in either
event results both in an improper  substantial  personal  benefit and a material
injury to the Corporation.


                                   ARTICLE VI

                               STOCKHOLDER ACTION

         Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special  meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders  and
may not be taken or  effected  by a  written  consent  of  stockholders  in lieu
thereof.  Except as  otherwise  required by law and subject to the rights of the
holders of any series of preferred  stock,  special meetings of the stockholders
of the Corporation may be called only by (in) the Board of Directors pursuant to
a resolution  approved by the  affirmative  vote of a majority of the  Directors
then in office,  (ii) the Chairman of the Board, if one is elected, or (iii) the
President. Only those matters set forth in the notice of the special meeting may
be  considered  or  acted  upon at a  special  meeting  of  stockholders  of the
Corporation,  unless otherwise provided by law. Advance notice of any matters or
nominations which stockholder  intend to propose for action at an annual meeting
shall be given in the manner provided in the By-laws.
<PAGE>

                                   ARTICLE VII

                             LIMITATION OF LIABILITY

         A director of this  Corporation  shall not be personally  liable to the
Corporation  or its  stockholders  for monetary  damages for breach of fiduciary
duty as a director,  except to the extent that the  elimination or limitation of
liability is not  permitted  under the Delaware  General  Corporation  Law as in
effect  when  such  liability  is  determined.  No  amendment  or repeal of this
provision  shall  deprive a director of the benefits  hereof with respect to any
act or omission occurring prior to such amendment or repeal.

         Any repeal or  modification  of this  Article VII by either of (in) the
stockholders  of the  Corporation  or (ii) an amendment  to the DGCL,  shall not
adversely affect any right or protection  existing at the time of such repeal or
modification with respect to any acts or omissions  occurring before such repeal
or  modification of a person serving as a Director at the time of such repeal or
modification.

                                  ARTICLE VIII

                              AMENDMENT OF BY-LAWS

         1.       Amendment by Directors  Except as otherwise provided by law,
the By-laws of the Corporation may be amended or repealed by the Board of 
Directors.

         2. Amendment by  Stockholders.  The By-laws of the  Corporation  may be
amended or repealed at any annual meeting of stockholders, or special meeting of
stockholders  called  for  such  purpose,  by the  affirmative  vote of at least
two-thirds of the total votes eligible to be cast on such amendment or repeal by
holders of voting stock, voting together as a single class;  provided,  however,
that if the  Board  of  Directors  recommends  that  stockholders  approve  such
amendment or repeal at such meeting of  stockholders,  such  amendment or repeal
shall  only  require  the  affirmative  vote of a  majority  of the total  votes
eligible  to be cast on such  amendment  or repeal by holders  of voting  stock,
voting together as a single class.

                                   ARTICLE IX

                    AMENDMENT OF CERTIFICATE OF INCORPORATION

         The Corporation  reserves the right to amend or repeal this Certificate
of Incorporation  in the manner now or hereafter  prescribed by statute and this
Certificate of Incorporation,  and all rights conferred upon stockholders herein
are  granted  subject  to this  reservation.  No  amendment  or  repeal  of this
Certificate of Incorporation  shall be made unless the same is first approved by
the  Board  of  Directors  pursuant  to a  resolution  adopted  by the  Board of
Directors in accordance  with Section 242 of the DGCL,  and, except as otherwise
provided by law, thereafter  approved by the stockholders.  Whenever any vote of
the holders of voting stock is required to amend or repeal any provision of this
Certificate  of  Incorporation,  and in addition to any other vote of holders of
voting stock that is required by this Certificate of  Incorporation,  or by law,
the  affirmative  vote of a majority of the total  votes  eligible to be cast by
holders  of voting  stock  with  respect to such  amendment  or  repeal,  voting
together a single class, at a duly  constituted  meeting of stockholders  called
expressly for such purpose  shall be required to amend or repeal any  provisions
of this Certificate of Incorporation;  provided,  however,  that the affirmative
vote of not less than 80% of the total  votes  eligible to be cast by holders of
voting stock,  voting together as a single class,  shall be required to amend or
repeal any of the  provisions of Article VI or Article X of this  Certificate of
Incorporation.
<PAGE>

                                    ARTICLE X

                                 INDEMNIFICATION

         The Corporation  shall, to the fullest extent permitted by the Delaware
General Corporation Law, as amended from time to time, indemnify each person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed  action,  suit or  proceeding,  whether  civil,  administrative  or
investigative,  by reason of the fact that such  person is or was, or has agreed
to become,  a director or officer of the corporation,  or is or was serving,  or
has agreed to serve, at the request of the Corporation,  as a director,  officer
or  trustee  of,  or in a  similar  capacity  with,  another  corporation,  as a
director,  officer  or  trustee  of,  or in a  similar  capacity  with,  another
corporation,  partnership,  joint venture,  trust or other enterprise,  from and
against all expenses (including attorneys' fees),  judgments,  fines and amounts
paid in settlement  actually and reasonably incurred by such person or on his or
her behalf in connection  with such action,  suit or  proceeding  and any appeal
therefrom.

         Indemnification  may include  payment by the Corporation of expenses in
defending an action or  proceeding in advance of the final  disposition  of such
action or proceeding upon receipt of any  undertaking by the person  indemnified
to repay such  payment if it is  ultimately  determined  that such person in not
entitled  to  indemnification  under  this  Article,  which  undertaking  may be
accepted without  reference to the financial ability of such person to make such
payments.
         The   Corporation   shall  not  indemnify   any  such  person   seeking
indemnification  in connection with a proceeding (or part thereof)  initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the Corporation.

         The indemnification rights provided in this Article X (in) shall not be
deemed exclusive of any other rights to which those  indemnified may be entitled
under any law,  agreement or vote of stockholders or disinterested  directors or
otherwise,  and (ii) shall  inure to the  benefit of the  heirs,  executors  and
administrators  of such persons.  The Corporation may, to the extent  authorized
from time to time by its Board of  Directors,  grant  indemnification  rights to
other  employees  or agents of the  Corporation  or other  persons  serving  the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article.

         Any person seeking  indemnification  under this Article shall be deemed
to have met the standard of conduct required for such indemnification unless the
contrary shall be established.

         Any  amendment or repeal of the  provisions  of this Article  shall not
adversely  affect  any right or  protection  of a  director  or  officer  of the
Corporation  with  respect to any act or  omission  of such  director or officer
occurring prior to such amendment or repeal.

<PAGE>

                                   ARTICLE XI

                                      BOOKS

         The  books  of  this   Corporation   may  (subject  to  any   statutory
requirements)  be kept outside the State of Delaware as may be designated by the
Board of Directors or in the Bylaws.
                  [Remainder of page left intentionally blank]

                                  WASTE SYSTEMS INTERNATIONAL, INC.


                                   By:  /s/Philip Strauss
                                       -------------------------------
                                       Philip Strauss
                                       President


                                  By:    /s/Robert Rivkin
                                        -------------------------------
                                        Robert Rivkin
                                        Secretary




<PAGE>


Exhibit 3(i).2

                        WASTE SYSTEMS INTERNATIONAL, INC.

               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
                         OF A SERIES OF PREFERRED STOCK
                     (Series B Convertible Preferred Stock)


                     By Resolution of the Board of Directors





         We, Philip Strauss,  President, and Robert Rivkin,  Secretary, of Waste
Systems  International,  Inc., a corporation  organized  and existing  under the
General  Corporation  Law of the  State  of  Delaware  (the  "Corporation"),  in
accordance with Section 151 of the Delaware  General  Corporation Act, do hereby
certify:

         That,  pursuant to authority  conferred  upon the Board of Directors of
the  Corporation  by the  Articles  of  Incorporation  of said  Corporation,  as
amended,  and pursuant to the provisions of Section 151 of the Delaware  General
Business   Corporation  Act,  said  Board  of  Directors  on  December  5,  1997
unanimously adopted a resolution providing for the designations, preferences and
relative,  participating,  optional  or other  rights,  and the  qualifications,
limitations or restrictions thereof, including,  without limiting the generality
of  the  foregoing,  such  provisions  as  may  be  desired  concerning  voting,
redemption, dividends, dissolution or the distribution of assets, and conversion
or exchange, of a series of preferred stock, which resolution is as follows:

              RESOLVED,  that pursuant to the  authority  vested in the Board of
    Directors  of the  Corporation  in  accordance  with the  provisions  of the
    Articles of Incorporation of the Corporation, as amended, a series of
 preferred  stock of the  Corporation  known as Series B  Convertible  Preferred
 Stock  (the  "Series  B  Preferred  Stock")  be,  and it  hereby  is,  created,
 classified,  and authorized, and the issuance thereof is provided for, and that
 the  designation  and number of shares,  and relative  rights,  preferences and
 limitations thereof, shall be as set forth
                    in the form appended hereto as Exhibit A.

                                    EXHIBIT A

         .        Designation.  The shares of the series of Preferred Stock 
shall be designated as "Series B Convertible Preferred Stock," and the number of
shares constituting such series shall be 100,000.  The par value of the Series B
Convertible Preferred Stock shall be $.001 per share.
<PAGE>

         .  Dividends.  The  holders  of  outstanding  shares  of the  Series  B
Preferred  Stock shall be entitled to receive,  when,  as and if declared by the
Board of Directors, out of funds legally available for the payment of dividends,
dividends  at the  annual  rate of  $6.00  per  share.  All  dividends  shall be
cumulative  and shall be payable  annually in arrears on June 26th of each year,
commencing on June 26, 1998,  in preference to and with priority over  dividends
on the common stock of the  Corporation,  par value $.001 per share (the "Common
Stock").  Such dividends  shall be cumulative  and shall accrue  (whether or not
earned or  declared,  and  whether  or not there  are  funds  legally  available
therefor) without interest from the first day of the annual period in which such
dividend may be payable as herein provided or from the date of first issuance of
the Series B Preferred  Stock, if later.  Any dividends that accrue may be paid,
at the option and in the sole discretion of the Board of Directors,  in cash or,
in whole or in part, by issuing fully paid and non-assessable shares of Series B
Preferred  Stock,  valued for such purpose at $100 per share. All dividends paid
with respect to shares of the Series B Preferred  Stock pursuant to this Section
2 hereof shall be paid pro rata to the holders entitled thereto. Declaration and
payment of such dividends shall be made each year unless otherwise determined by
the Board of Directors with respect to a particular year.

         .        Liquidation, Dissolution or Winding Up.

                  () In the event of any liquidation,  dissolution or winding up
of the Corporation,  whether voluntary or involuntary,  holders of each share of
Series B  Preferred  Stock  outstanding  shall be entitled to be paid out of the
assets of the Corporation  available for distribution to  stockholders,  whether
such assets are capital, surplus, or earnings, an amount equal to $100 per share
of Series B  Preferred  Stock held plus any accrued  and unpaid  dividends  with
respect  thereto to which  holders of the Series B  Preferred  Stock have become
entitled  (the  "Liquidation   Preference");   provided,   however,   that  such
Liquidation  Preference is payable after any payment shall be made to holders of
the Series A Convertible Preferred Stock, par value $.001 per share, which shall
rank on  liquidation  senior to the  Series B  Preferred  Stock,  but before any
payment  shall be made to the  holders  of any class of  Common  Stock or of any
stock ranking on liquidation junior to the Series B Preferred Stock. If upon any
liquidation,  dissolution,  or winding up of the  Corporation,  the assets to be
distributed  to the holders of the Series B Preferred  Stock under the foregoing
sentence shall be  insufficient  to permit payment to such  shareholders  of the
full preferential  amounts aforesaid,  then all of the assets of the Corporation
available  for  distribution  to such  holders  under  such  sentence  shall  be
distributed to such holders pro rata, so that each holder  receives that portion
of the assets  available  for  distribution  as the number of shares of Series B
Preferred  Stock  held by such  holder  bears to the  total  number of shares of
Series B Preferred Stock then outstanding. After the payment of all preferential
amounts  required to be paid to the holders of the Series B Preferred Stock upon
the dissolution,  liquidation or winding up of the  Corporation,  the holders of
shares of Series B Preferred  Stock and shares of Common Stock then  outstanding
shall share ratably in the distribution of the remaining assets and funds of the
Corporation  in  proportion to the number of shares of Common Stock held by them
or issuable upon conversion of shares of Series B Preferred Stock held by them.
<PAGE>

                  () The  amount  per share set forth in  Section  3(a) shall be
appropriately adjusted for any stock split, stock combinations,  stock dividends
or similar recapitalizations with respect to the Series B Preferred Stock.

         .        Voting Power.

                  Except as otherwise  required by law, the holder of each share
of Series B Preferred Stock shall be entitled to vote on all matters. Each share
of Series B Preferred  Stock shall entitle the holder  thereof to such number of
votes per share as shall  equal the number of shares of Common  Stock into which
each share of Series B Preferred Stock is then convertible.  Except as otherwise
required by law,  the holders of shares of the Series B Preferred  Stock and the
Common Stock shall vote together as a single class on all matters.

         .        Conversion.  The holders of the Series B Preferred Stock shall
have the following conversion rights:

                  () Subject to and in  compliance  with the  provisions of this
Section 5, any shares of the Series B Preferred  Stock may, at the option of the
holder,  be  converted  at any time or from  time to time  into  fully-paid  and
non-assessable  shares of Common Stock.  The number of shares of Common Stock to
which a holder of the Series B Preferred Stock shall be entitled upon conversion
shall be the product  obtained by  multiplying  the Applicable  Conversion  Rate
(determined  as  provided  in Section  5(c)) by the number of shares of Series B
Preferred Stock being  converted.  For purposes of this Section 5, the number of
shares of Series B  Preferred  Stock being  converted  shall  include  shares of
Series B  Preferred  Stock that would be  issuable in payment of any accrued and
unpaid dividends at the time of conversion.

                  () () In the event  that,  at any time after the  issuance  of
shares  of  Series  B  Preferred   Stock,  the  average  closing  price  of  the
Corporation's  Common Stock on the Nasdaq SmallCap Market (or, in the event that
such security is not traded on the Nasdaq SmallCap  Market,  such other national
or regional  securities  exchange or automated  quotation system upon which such
security is listed and principally traded or, if no such price is available, the
per  share  market  value of the  Common  Stock as  determined  by a  nationally
recognized  investment  banking firm or other  nationally  recognized  financial
adviser  retained by the  Corporation  for such  purpose) is equal to or greater
than the Applicable Conversion Value over a period of any twenty (20) successive
trading  days,  the  Corporation  may,  at  its  option,  effect  the  automatic
conversion  of shares of Series B Preferred  Stock,  in whole or in part, at the
Applicable  Conversion  Rate;  provided that the Company's  option to effect the
automatic  conversion  under this Section  5(b) shall be  available  only if the
Corporation Common Stock does in fact trade on each day in the twenty days prior
to the  election  to  effect  the  automatic  conversion.  With  respect  to any
automatic  conversion  of fewer  than all the  outstanding  shares  of  Series B
Preferred Stock, the number of shares to be converted shall be determined by the
Board of Directors and the shares to be converted shall be selected pro rata. If
the foregoing  condition has been satisfied and the  Corporation  has elected to
effect the automatic  conversion of shares of Series B Preferred Stock, it shall
deliver a notice to that effect by overnight  delivery service to each holder of
shares of Series B Preferred  Stock.  The conversion  will be effective five (5)
days after the  delivery of such notice in  accordance  with the  provisions  of
Section 5(b)(ii) below.
<PAGE>

  ()       Upon the occurrence of the events specified in Section (5)(b)(i), the
outstanding shares of Series B Preferred Stock shall be converted  automatically
without any further  action by the holders of such shares and whether or not the
certificates  representing such shares are surrendered to the Corporation or its
transfer agent,  provided,  however, that the Corporation shall not be obligated
to issue  certificates  evidencing the shares of Common Stock issuable upon such
conversion unless certificates  evidencing such shares of the Series B Preferred
Stock being  converted are either  delivered to the  Corporation or any transfer
agent,  as hereinafter  provided,  or the holder notifies the Corporation or any
transfer agent as hereinafter  provided,  that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection therewith.

         Upon  the  occurrence  of  the  automatic  conversion  of  all  of  the
outstanding  Series B  Preferred  Stock,  the  holders of the Series B Preferred
Stock shall surrender the certificates representing such shares at the office of
the Corporation or of any transfer agent for the Common Stock. Thereupon,  there
shall be issued and  delivered to each such holder,  promptly at such office and
in his  name as  shown  on  such  surrendered  certificate  or  certificates,  a
certificate or certificates  for the number of shares of Common Stock into which
the shares of the Series B Preferred Stock  surrendered  were convertible on the
date on which such automatic conversion occurred.

                  () The conversion rate in effect at any time (the  "Applicable
Conversion  Rate")  shall equal the  quotient  obtained by dividing  $100 by the
Applicable Conversion Value, calculated as hereinafter provided.

                  ()       The Applicable Conversion Value in effect initially, 
and until first adjusted in accordance with Section 5(f) shall be $1.25.

                  () Upon the happening of an  Extraordinary  Common Stock Event
(as hereinafter defined), the Applicable Conversion Value shall,  simultaneously
with the  happening of such  Extraordinary  Common  Stock Event,  be adjusted by
dividing  the then  effective  Applicable  Conversion  Value by a fraction,  the
numerator  of which shall be the number of shares of Common Stock of all classes
outstanding  immediately  after such  Extraordinary  Common  Stock Event and the
denominator  of which  shall be the  number of  shares  of  Common  Stock of all
classes outstanding  immediately prior to such Extraordinary Common Stock Event,
and the  quotient so obtained  shall  thereafter  be the  Applicable  Conversion
Value. The Applicable  Conversion Value, as so adjusted,  shall be readjusted in
the same manner upon the happening of any successive  Extraordinary Common Stock
Event or Events.  "Extraordinary Common Stock Event" shall mean (i) the issue of
additional  shares  of the  Common  Stock of any  class as a  dividend  or other
distribution on outstanding Common Stock, (ii) subdivision of outstanding shares
of Common  Stock of any  class  into a  greater  number of shares of the  Common
Stock,  or (iii)  combination of  outstanding  shares of the Common Stock of any
class into a smaller number of shares of the Common Stock.
<PAGE>

                  () In the event the Corporation  shall make or issue, or fix a
record  date for the  determination  of  holders  of Common  Stock  entitled  to
receive,  a  dividend  or  other  distribution  payable  in  securities  of  the
Corporation  other  than  shares of Common  Stock,  then and in each such  event
lawful  and  adequate  provision  shall be made so that the  holders of Series B
Preferred Stock shall receive upon conversion  thereof in addition to the number
of shares of Common Stock receivable thereupon,  the number of securities of the
Corporation  which they would have  received had their Series B Preferred  Stock
been  converted  into  Common  Stock  on the  date of such  event  and had  they
thereafter,  during the period from the date of such event to and  including the
Conversion Date (as hereinafter defined), retained such securities receivable by
them as aforesaid  during such period,  giving  application  to all  adjustments
called for during such period under this Section 5 with respect to the rights of
the holders of the Series B Preferred Stock.

                  () If the Common Stock  issuable  upon the  conversion  of the
Series B Preferred  Stock shall be changed into the same or different  number of
shares  of any  class or  classes  of  stock,  whether  by  reclassification  or
otherwise,  then and in each  such  event the  holder of each  share of Series B
Preferred  Stock shall have the right  thereafter to convert such share into the
kind and amount of shares of stock and other securities and property  receivable
upon such  reorganization,  reclassification  or other change, by holders of the
number of shares of Common  Stock into which such  shares of Series B  Preferred
Stock  might  have  been  converted  immediately  prior to such  reorganization,
reclassification  or  change,  all  subject to further  adjustment  as  provided
herein.

                  () If at any  time or  from  time to  time  there  shall  be a
capital  reorganization  of the Common Stock or a merger or consolidation of the
Corporation with or into another Corporation or the sale of all or substantially
all of the Corporation's  properties and assets to any other person,  then, as a
part of and as a condition to the effectiveness of such reorganization,  merger,
consolidation or sale,  lawful and adequate  provision shall be made so that the
holders of the Series B Preferred Stock shall  thereafter be entitled to receive
upon conversion of the Series B Preferred Stock the number of shares of stock or
other securities or property of the Corporation or of the successor  Corporation
resulting from such merger or consolidation or sale, to which a holder of Common
Stock  deliverable  upon  conversion  would have been  entitled on such  capital
reorganization,  merger,  consolidation,  or sale. In any such case, appropriate
provisions shall be made with respect to the rights of the holders of the Series
B Preferred Stock after the reorganization, merger, consolidation or sale to the
end  that  the  provisions  of this  Section  5  (including  without  limitation
provisions for adjustment of the Applicable  Conversion  Value and the number of
shares  purchasable  upon  conversion  of the Series B  Preferred  Stock)  shall
thereafter  be  applicable,  as nearly as may be, with  respect to any shares of
stock,  securities or assets to be deliverable thereafter upon the conversion of
the Series B Preferred Stock.

         Each  holder of  Series B  Preferred  Stock  upon the  occurrence  of a
capital  reorganization,  merger or consolidation of the Corporation or the sale
of all or  substantially  all its assets and  properties as such events are more
fully set forth in the first  paragraph  of this  Section  5(h),  shall have the
option of (i) receiving the Liquidation Preference or (ii) electing treatment of
its shares of Series B Preferred  Stock under the  preceding  paragraph  of this
Section  5(h),  notice of which  election  shall be  submitted in writing to the
Corporation  at its  principal  offices no later  than ten (10) days  before the
effective date of such event.
<PAGE>

                  () In  each  case  of an  adjustment  or  readjustment  of the
Applicable Conversion Rate, the Corporation will furnish each holder of Series B
Preferred Stock with a certificate,  prepared by the chief financial  officer of
the Corporation,  showing such adjustment or readjustment, and stating in detail
the facts upon which such adjustment or readjustment is based.

                  () To exercise its conversion privilege as provided in Section
5(a) above, a holder of Series B Preferred Stock shall surrender the certificate
or  certificates  representing  the shares being converted to the Corporation at
its principal  office,  and shall give written notice to the Corporation at that
office that such holder  elects to convert such  shares.  Such notice shall also
state the name or names (with address or addresses) in which the  certificate or
certificates  for shares of Common Stock issuable upon such conversion  shall be
issued.  The certificate or certificates  for shares of Series B Preferred Stock
surrendered for conversion shall be accompanied by proper assignment  thereof to
the  Corporation  or in blank.  The date when such written notice is received by
the Corporation  together with the certificate or certificates  representing the
shares of Series B Preferred  Stock being  converted,  shall be the  "Conversion
Date." As promptly as  practicable  after the Conversion  Date, the  Corporation
shall issue and shall  deliver to the holder of the shares of Series B Preferred
Stock being converted, or on its written order, a certificate or certificates as
it may request for the number of full shares of Common Stock  issuable  upon the
conversion  of such shares of Series B Preferred  Stock in  accordance  with the
provisions of this Section 5 and cash as provided in Section 5(k), in respect of
any  fraction of a share of Common Stock  issuable  upon such  conversion.  Such
conversion shall be deemed to have been effected  immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted  shares of Series B Preferred  Stock shall cease and the
person or persons in whose name or names any  certificate  or  certificates  for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have  become  the  holder or  holders  of  record  of  shares  of  Common  Stock
represented thereby.

                  () No fractional shares of Common Stock or scrip  representing
fractional  shares shall be issued upon conversion of Series B Preferred  Stock.
Instead of any  fractional  shares of Common  Stock  which  would  otherwise  be
issuable upon conversion of Series B Preferred Stock, the Corporation  shall pay
to the holder of the shares of Series B Preferred  Stock which were  converted a
cash  adjustment  in respect  of such  fraction  in an amount  equal to the same
fraction of the market price per share of the Common Stock (as  determined  in a
manner  prescribed  by the Board of  Directors)  at the close of business on the
Conversion Date.

                  () In the  event  some but not all of the  shares  of Series B
Preferred Stock  represented by a certificate or  certificates  surrendered by a
holder are  converted,  the  Corporation  shall execute and deliver to or on the
order of the  holder,  at the  expense  of the  Corporation,  a new  certificate
representing  the number of shares of Series B  Preferred  Stock  which were not
converted.
<PAGE>

                  ()  The  Corporation  shall  at all  times  reserve  and  keep
available out of its authorized but unissued shares of Common Stock,  solely for
the purpose of effecting the  conversion of the shares of the Series B Preferred
Stock,  such number of its shares of Common  Stock as shall from time to time be
sufficient to effect the  conversion of all  outstanding  shares of the Series B
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be  sufficient  to effect the  conversion  of all then
outstanding  shares of the Series B Preferred Stock, the Corporation  shall take
such  corporate  action as may, in the opinion of its  counsel,  be necessary to
increase its  authorized  but unissued  shares of Common Stock to such number of
shares as shall be sufficient for such purpose.

         .        Redemption.

                  () Call Redemption.  If any shares of Series B Preferred Stock
shall be  outstanding  on October 6, 2000, the  Corporation  may redeem,  at the
option of the  Corporation  in its sole  discretion,  to the extent it has funds
legally  available  therefor,  at any time or from time to time,  in whole or in
part,  shares of Series B Preferred  Stock (a "Call  Redemption") at a price per
share equal to the Liquidation  Preference plus any accrued and unpaid dividends
with respect to such shares to which the holders of the Series B Preferred Stock
have  become  entitled  (the  "Redemption  Price").  With  respect  to any  Call
Redemption  of fewer than all of the  outstanding  shares of Series B  Preferred
Stock,  the number of shares to be redeemed  shall be determined by the Board of
Directors and the shares to be redeemed shall be selected pro rata.

                  () Notice of Call Redemption. Notice of any Call Redemption of
shares of Series B Preferred Stock,  specifying the time and place of redemption
and the  Redemption  Price (a "Redemption  Notice"),  shall be sent by overnight
delivery  service to each holder of Series B Preferred Stock to be redeemed,  at
the  address  for such holder  shown on the  Corporation's  record not more than
sixty  (60) nor less than  thirty  (30) days  prior to the  Redemption  Date (as
hereinafter  defined).  If less than all the shares of Series B Preferred  Stock
owned by such holder are then to be redeemed,  the Redemption  Notice shall also
specify the number of shares which are to be redeemed;  provided,  however, that
no failure to given such  Redemption  Notice nor any defect therein shall affect
the  validity  of the  procedure  for the  redemption  of any shares of Series B
Preferred  Stock to be redeemed  except as to the holder to whom the Corporation
has  failed to give said  Redemption  Notice  or except as to the  holder  whose
Redemption  Notice was defective.  Each such Redemption  Notice shall state: (i)
the Redemption  Date (as  hereinafter  defined);  (ii) the Redemption  Price (as
hereinafter defined);  (iii) the number of shares of Series B Preferred Stock to
be redeemed  and, if fewer than all the shares of Series B Preferred  Stock held
by a holder are to be redeemed, the number of shares thereof to be redeemed from
such holder; (iv) the manner and place or places at which payment for the shares
of Series B Preferred  Stock offered for redemption  will be made,  presentation
and surrender to the Corporation of the certificates evidencing the shares being
redeemed;  (v) that  dividends  on the shares of Series B Preferred  Stock being
redeemed  shall cease to accrue on the  Redemption  Date unless the  Corporation
defaults in the  payment of the  Redemption  Price;  and (vi) that the rights of
holders of Series B  Preferred  Stock as  stockholder  of the  Corporation  with
respect to shares  being  redeemed  shall  terminate as of the  Redemption  Date
unless the  Corporation  defaults in the payment of the Redemption  Price.  Upon
mailing any such Redemption  Notice,  the Corporation  shall become obligated to
redeem at the Redemption  Price on the applicable  Redemption Date all shares of
Series B Preferred Stock therein specified.
<PAGE>

                  ()       Redemption Date.  The Corporation shall fix the date 
for a Call Redemption (the "Redemption Date") no earlier than thirty (30) but 
not more than sixty (60) days after the Redemption Notice is sent as set forth 
in Section 6(b) hereof.

                  () Payment and  Surrender.  On any  Redemption  Date, the full
Redemption  Price  shall  become  payable  in cash for the  shares  of  Series B
Preferred  Stock  being  redeemed on such  Redemption  Date.  As a condition  of
payment of the Redemption  Price,  each holder of Series B Preferred  Stock must
surrender the  certificate or certificates  representing  the shares of Series B
Preferred Stock being redeemed to the Corporation in the manner and at the place
designated  in  the  Redemption  Notice  or in the  event  such  certificate  or
certificates  have been lost,  stolen or  destroyed,  must  execute an agreement
satisfactory  to the  Corporation  to indemnify  the  Corporation  from any loss
incurred by it in connection  therewith.  Each surrendered  certificate shall be
canceled and retired. All redemption payments will be made to the holders of the
shares being redeemed.

                  () Termination. On any Redemption Date, unless the Corporation
defaults in the payment in full of the Redemption Price, dividends on the Series
B Preferred Stock redeemed shall cease to accumulate,  and all rights of holders
of such  redeemed  shares shall  terminate,  except for the right to receive the
Redemption Price.

         .        Restrictions and Limitations.

                  (a) Corporate Action.  Except as expressly  provided herein or
as required by law,  so long as any shares of Series B  Preferred  Stock  remain
outstanding,  the Corporation  shall not without the approval by vote or written
consent (which written consent need not be unanimous) by the holders of at least
fifty-one  percent  (51%) of the then  outstanding  shares of Series B Preferred
Stock, voting as a separate class:

                          (i)     authorize or issue, or obligate itself to 
authorize or issue, any equity security  senior  to or on  parity  with  the  
Series  B  Preferred  Stock as to liquidation  preferences,  dividend rights,  
redemption  rights or voting rights (except for common stock as to voting 
rights); or

                          (ii)    amend, restate, modify or alter the by-laws of
the Corporation in any way which adversely affects the rights of the holders of 
the Series B Preferred Stock;

         . No Reissuance of Series B Preferred  Stock. No share or shares of the
Series B Preferred  Stock  acquired by the  Corporation by reason of redemption,
purchase,  conversion or otherwise shall be reissued,  and all such shares shall
be canceled, retired, and eliminated from the shares which the Corporation shall
be  authorized  to  issue.  The  Corporation  may from  time to time  take  such
appropriate corporate action as may be necessary to reduce the authorized number
of shares of the Series B Preferred Stock accordingly.
<PAGE>

         . Notices of Record Date. In the event (i) the Corporation  establishes
a record  date to  determine  the  holders  of any class of  securities  who are
entitled to receive any dividend or other distribution, or (ii) there occurs any
capital   reorganization   of   the   Corporation,   any   reclassification   or
recapitalization  of  the  capital  stock  of the  Corporation,  any  merger  or
consolidation of the Corporation,  and any transfer of all or substantially  all
of the assets of the Corporation to any other  Corporation,  or any other entity
or person, or any voluntary or involuntary  dissolution,  liquidation or winding
up of the  Corporation,  the  Corporation  shall mail to each holder of Series B
Preferred  Stock at least  twenty (20) days prior to the record  date  specified
therein, a notice specifying (a) the date of such record date for the purpose of
such  dividend  or   distribution   and  a  description   of  such  dividend  or
distribution,  (b) the date on which any such reorganization,  reclassification,
transfer,  consolidation,  merger,  dissolution,  liquidation  or  winding up is
expected to become effective,  and (c) the time, if any, that is to be fixed, as
to when the  holders of record of Common  Stock (or other  securities)  shall be
entitled to exchange  their  shares of Common  Stock (or other  securities)  for
securities   or   other   property   deliverable   upon   such   reorganization,
reclassification,  transfer, consolidation,  merger, dissolution, liquidation or
winding up.

         . Other Rights.  Except as otherwise  provided in this resolution or as
otherwise  may be  required by law,  each share of Series B Preferred  Stock and
each share of Common Stock shall be identical  in all  respects,  shall have the
same powers,  preferences  and rights,  without  preference of any such class or
share over any other such class or share, and shall be treated as a single class
of stock for all purposes. IN WITNESS WHEREOF, Waste Systems International, Inc.
has caused this  certificate  to be executed under seal by Philip  Strauss,  its
President,  and Robert  Rivkin,  its  Secretary,  as of the 3rd day of December,
1997.

                                   By:  /s/ Philip Strauss
                                        ------------------
                                        Philip Strauss
                                        President


                                   By:   /s/ Robert Rivkin
                                         -----------------
                                         Robert Rivkin
                                         Secretary




State of                            )
                                    ) ss:
County of                           )
                                    )

         On ___________________  personally appeared before me, a Notary Public,
Philip Strauss and Robert Rivkin,  who acknowledges that they executed the above
instrument.

<PAGE>


                                 Notary Public

                                 My commission expires:


(SEAL)



<PAGE>

Exhibit 3(i).3

                            CERTIFICATE OF CORRECTION
                       FILED TO CORRECT A CERTAIN ERROR IN
                         THE SECOND AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                        WASTE SYSTEMS INTERNATIONAL, INC.
                             FILED IN THE OFFICE OF
                       THE SECRETARY OF STATE OF DELAWARE
                                       ON
                                FEBRUARY 13, 1998


         Waste Systems International, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
         DOES HEREBY CERTIFY:
         . The name of the corporation is Waste Systems International, Inc.
         . That Seconded Amended and Restated  Certificate of Incorporation  was
filed by  Secretary  of State of  Delaware  on  February  13, 1998 and that said
Certificate  requires  correction  as  permitted  by Section  103 of the General
Corporation law of the State of Delaware.
         .        The inaccuracy or defect of said Certificate to be corrected 
is as follows:
         The Second Amended and Restated Certificate of Incorporation, page 1, 
recital paragraph 3 is hereby deleted in its entirety and replaced with the 
following:
         "The text of the  Certificate  of  Incorporation  is hereby amended and
restated  in its  entirety  to provide  as herein  set forth in full;  provided,
however,  that the Certificate of Designation of Series A Convertible  Preferred
Stock filed with the  Secretary of State of the State of Delaware on October 20,
1997,  a copy of which is attached  hereto as  Appendix A, shall  remain in full
force and effect as if fully set forth herein."
         IN WITNESS WHEREOF, said Waste Systems  International,  Inc. has caused
this Certificate to be signed by Mr. Robert Rivkin its Chief Financial  Officer,
this 13th day of March, 1998.
                                  Waste Systems International, Inc.



                                     By:  /s/ Robert Rivkin

                                          -----------------------
                                          Robert Rivkin
                                          Chief Financial Officer
<PAGE>


Exhibit 3(ii).1


                                     BYLAWS

                                       OF

                        WASTE SYSTEMS INTERNATIONAL, INC.


                                    ARTICLE I

                                  Stockholders

         SECTION 1. Annual Meeting.  The annual meeting of stockholders shall be
held at the hour,  date and place  within or without the United  States which is
fixed by the majority of the Board of Directors,  the Chairman of the Board,  if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors.  If no annual meeting has
been held for a period of thirteen  months after the  Corporation's  last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special  meeting shall have, for the purposes of these Bylaws or otherwise,  all
the force and effect of an annual meeting.  Any and all references  hereafter in
these  Bylaws to an annual  meeting or annual  meetings  also shall be deemed to
refer to any special meeting(s) in lieu thereof.

         SECTION 2. Matters to be Considered at Annual  Meetings.  At any annual
meeting of  stockholders  or any  special  meeting in lieu of annual  meeting of
stockholders (the "Annual Meeting"),  only such business shall be conducted, and
only such  proposals  shall be acted upon, as shall have been  properly  brought
before such Annual  Meeting.  To be  considered  as properly  brought  before an
Annual  Meeting,  business must be: (a) specified in the notice of meeting,  (b)
otherwise  properly  brought  before the meeting by, or at the direction of, the
Board of Directors,  or (c) otherwise properly brought before the meeting by any
holder of record  (both as of the time  notice of such  proposal is given by the
stockholder  as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation  entitled to vote
at such Annual  Meeting who  complies  with the  requirements  set forth in this
Section 2.

         In addition to any other  applicable  requirements,  for business to be
properly  brought  before an Annual  Meeting by a  stockholder  of record of any
shares  of  capital  stock  entitled  to  vote  at  such  Annual  Meeting,  such
stockholder  shall:  (i) give timely notice as required by this Section 2 to the
Secretary  of the  Corporation  and (ii) be present at such  meeting,  either in
person or by a representative.  For all Annual Meetings,  a stockholder's notice
shall be timely if delivered  to, or mailed to and received by, the  Corporation
at its principal  executive  office not less than 75 days nor more than 120 days
prior to the anniversary  date of the immediately  preceding Annual Meeting (the
"Anniversary Date"); provided,  however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary  Date or
more than 60 days after the Anniversary  Date, a  stockholder's  notice shall be
timely if delivered  to, or mailed to and received  by, the  Corporation  at its
principal  executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled  date of such Annual  Meeting or (B) the
15th day  following  the day on which  public  announcement  of the date of such
Annual Meeting is first made by the Corporation.
<PAGE>

         For purposes of these Bylaws,  "public  announcement"  shall mean:  (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly  with  the  Securities  and  Exchange  Commission  (including,  without
limitation,  a Form 8-K),  or (iii) a letter or report sent to  stockholders  of
record of the Corporation at the time of the mailing of such letter or report.

         A  stockholder's  notice  to the  Secretary  shall set forth as to each
matter proposed to be brought before an Annual Meeting:  (i) a brief description
of the business the stockholder  desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual  Meeting,  (ii) the name
and address,  as they appear on the  Corporation's  stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business,  (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation  registered in such  stockholder's name on such
books,  and the class and number of shares of the  Corporation's  capital  stock
beneficially  owned by such  beneficial  owners,  (v) the names and addresses of
other stockholders  known by the stockholder  proposing such business to support
such proposal,  and the class and number of shares of the Corporation's  capital
stock  beneficially  owned by such  other  stockholders,  and (vi) any  material
interest of the stockholder proposing to bring such business before such meeting
(or any  other  stockholders  known  to be  supporting  such  proposal)  in such
proposal.

         If the Board of Directors or a designated  committee thereof determines
that any  stockholder  proposal was not made in a timely  fashion in  accordance
with the  provisions  of this  Section 2 or that the  information  provided in a
stockholder's  notice  does not  satisfy the  information  requirements  of this
Section 2 in any material  respect,  such  proposal  shall not be presented  for
action at the Annual Meeting in question.  If neither the Board of Directors nor
such  committee  makes a  determination  as to the  validity of any  stockholder
proposal  in the manner set forth  above,  the  presiding  officer of the Annual
Meeting shall determine whether the stockholder  proposal was made in accordance
with the terms of this Section 2. If the presiding  officer  determines that any
stockholder  proposal was not made in a timely  fashion in  accordance  with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the  information  requirements  of this Section 2 in any
material respect,  such proposal shall not be presented for action at the Annual
Meeting in question.  If the Board of Directors,  a designated committee thereof
or the presiding  officer  determines  that a  stockholder  proposal was made in
accordance with the requirements of this Section 2, the presiding  officer shall
so declare at the Annual  Meeting and ballots  shall be provided  for use at the
meeting with respect to such proposal.
<PAGE>

         Notwithstanding  the foregoing  provisions of this Bylaw, a stockholder
shall also comply with all applicable  requirements  of the Securities  Exchange
Act of 1934,  as amended (the  "Exchange  Act"),  and the rules and  regulations
thereunder with respect to the matters set forth in this By-Law,  and nothing in
this  By-Law  shall be deemed to affect  any rights of  stockholders  to request
inclusion of proposals in the  Corporation's  proxy  statement  pursuant to Rule
14a-8 under the Exchange Act.

         SECTION 3. Special  Meetings.  Except as otherwise  required by law and
subject to the rights,  if any, of the holders of any series of Preferred  Stock
of the Corporation,  special meetings of the stockholders of the Corporation may
be called only by the Board of Directors  pursuant to a  resolution  approved by
the affirmative vote of a majority of the Directors then in office.

         SECTION 4. Matters to be  Considered  at Special  Meetings.  Only those
matters set forth in the notice of the  special  meeting  may be  considered  or
acted  upon at a special  meeting of  stockholders  of the  Corporation,  unless
otherwise provided by law.

         SECTION 5. Notice of Meetings;  Adjournments.  A written  notice of all
Annual  Meetings  stating the hour, date and place of such Annual Meetings shall
be given by the Secretary or an Assistant  Secretary (or other person authorized
by these  Bylaws or by law) not less  than 10 days nor more than 60 days  before
the Annual  Meeting,  to each  stockholder  entitled to vote thereat and to each
stockholder  who,  by law or under  the  Amended  and  Restated  Certificate  of
Incorporation  of the  Corporation  (as the same may hereafter be amended and/or
restated,  the "Certificate") or under these Bylaws, is entitled to such notice,
by delivering such notice to him or by mailing it, postage prepaid, addressed to
such  stockholder  at the  address  of such  stockholder  as it  appears  on the
Corporation's  stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed,  with
postage prepaid.

         Notice of all special  meetings of  stockholders  shall be given in the
same manner as provided for Annual  Meetings,  except that the written notice of
all special  meetings  shall state the purpose or purposes for which the meeting
has been called.

         Notice of an Annual Meeting or special meeting of stockholders need not
be given to a  stockholder  if a written  waiver  of notice is signed  before or
after such  meeting by such  stockholder  or if such  stockholder  attends  such
meeting,  unless such attendance was for the express purpose of objecting at the
beginning of the meeting to the transaction of any business  because the meeting
was not lawfully  called or convened.  Neither the business to be transacted at,
nor the purpose of, any Annual Meeting or special meeting of  stockholders  need
be specified in any written waiver of notice.
<PAGE>

         The Board of  Directors  may  postpone and  reschedule  any  previously
scheduled  Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made  pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise.  In no event shall the
public  announcement  of an  adjournment,  postponement  or  rescheduling of any
previously scheduled meeting of stockholders  commence a new time period for the
giving of a  stockholder's  notice under Section 2 of Article I and Section 3 of
Article II of these Bylaws.

         When any meeting is  convened,  the  presiding  officer may adjourn the
meeting if (a) no quorum is present for the  transaction  of  business,  (b) the
Board of Directors  determines  that  adjournment is necessary or appropriate to
enable  the  stockholders  to  consider  fully  information  which  the Board of
Directors  determines  has not been made  sufficiently  or timely  available  to
stockholders,  or (c) the Board of  Directors  determines  that  adjournment  is
otherwise in the best interests of the  Corporation.  When any Annual Meeting or
special  meeting of  stockholders  is adjourned to another hour,  date or place,
notice need not be given of the adjourned  meeting other than an announcement at
the  meeting at which the  adjournment  is taken of the hour,  date and place to
which the meeting is adjourned;  provided,  however,  that if the adjournment is
for more than 30 days,  or if after the  adjournment  a new record date is fixed
for the adjourned  meeting,  notice of the  adjourned  meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Certificate or these Bylaws, is entitled to such notice.

         SECTION 6. Quorum. The holders of shares of voting stock representing a
majority of the voting power of the  outstanding  shares of voting stock issued,
outstanding  and entitled to vote at a meeting of  stockholders,  represented in
person or by proxy at such meeting,  shall constitute a quorum; but if less than
a quorum is present at a meeting,  the holders of voting  stock  representing  a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time,  and the meeting may be held as adjourned
without  further  notice,  except as provided in Section 5 of this Article I. At
such  adjourned  meeting  at which a quorum  is  present,  any  business  may be
transacted  which  might  have been  transacted  at the  meeting  as  originally
noticed.  The stockholders present at a duly constituted meeting may continue to
transact business until  adjournment,  notwithstanding  the withdrawal of enough
stockholders to leave less than a quorum.

         SECTION 7.  Voting and  Proxies.  Stockholders  shall have one vote for
each share of stock  entitled to vote owned by them of record  according  to the
books  of  the  Corporation,   unless  otherwise  provided  by  law  or  by  the
Certificate.  Stockholders may vote either in person or by written proxy, but no
proxy shall be voted or acted upon after  three years from its date,  unless the
proxy provides for a longer period. Proxies shall be filed with the Secretary of
the meeting  before  being  voted.  Except as  otherwise  limited  therein or as
otherwise  provided by law, proxies shall entitle the persons authorized thereby
to vote at any  adjournment  of such meeting,  but they shall not be valid after
final  adjournment  of such  meeting.  A proxy with respect to stock held in the
name of two or more  persons  shall be valid if  executed by or on behalf of any
one of them  unless at or prior to the  exercise  of the  proxy the  Corporation
receives a specific written notice to the contrary from any one of them. A proxy
purporting  to be  executed  by or on  behalf of a  stockholder  shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
<PAGE>

         SECTION 8.  Action at  Meeting.  When a quorum is  present,  any matter
before any meeting of stockholders shall be decided by the vote of a majority of
the voting power of shares of voting stock,  present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these Bylaws.  Any election by
stockholders  shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the  Certificate  or by these  Bylaws.  The
Corporation  shall not directly or indirectly  vote any shares of its own stock;
provided,  however,  that the  Corporation  may vote shares  which it holds in a
fiduciary capacity to the extent permitted by law.

         SECTION 9. Action by Consent.  Any action  required or  permitted to be
taken by the Stockholders of the Corporation at any annual or special meeting of
stockholders  of the  Corporation  must be effected at a  duly-called  Annual or
Special  Meeting of  Stockholders  and may not be taken or effected by a written
consent of stockholders in lieu thereof.

         SECTION 10. Stockholder Lists. The Secretary or an Assistant  Secretary
(or the Corporation's  transfer agent or other person authorized by these Bylaws
or by law) shall prepare and make, at least 10 days before every Annual  Meeting
or special meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting,  arranged in alphabetical order, and showing the address
of each  stockholder  and the  number of shares  registered  in the name of each
stockholder.  Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days  prior to the  meeting,  either at a place  within  the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting,  or, if not so  specified,  at the place where the meeting is to be
held.  The list shall also be produced  and kept at the hour,  date and place of
the  meeting  during  the  whole  time  thereof,  and  may be  inspected  by any
stockholder who is present.

         SECTION 11.  Presiding  Officer.  The Chairman of the Board,  if one is
elected,  or if not  elected  or in his or her  absence,  the  President,  shall
preside at all Annual  Meetings or special  meetings of  stockholders  and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time,  subject  to  Sections  5 and 6 of this  Article  I. The  order of
business and all other  matters of procedure at any meeting of the  stockholders
shall be determined by the presiding officer.

         SECTION  12.  Voting  Procedures  and  Inspectors  of  Elections.   The
Corporation  shall,  in advance of any meeting of  stockholders,  appoint one or
more  inspectors to act at the meeting and make a written  report  thereof.  The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting  of  stockholders,  the  presiding  officer  shall  appoint  one or more
inspectors  to act at the  meeting.  Any  inspector  may,  but need  not,  be an
officer, employee or agent of the Corporation.  Each inspector,  before entering
upon the discharge of his or her duties,  shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her  ability.  The  inspectors  shall  perform such duties as are
required by the General  Corporation  Law of the State of  Delaware,  as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The  inspectors  may appoint or retain  other  persons or entities to assist the
inspectors in the  performance  of the duties of the  inspectors.  The presiding
officer may review all determinations made by the inspector(s),  and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion  and he or she shall not be bound by any  determinations  made by the
inspector(s).  All  determinations by the inspector(s)  and, if applicable,  the
presiding  officer shall be subject to further  review by any court of competent
jurisdiction.
<PAGE>

                                   ARTICLE II

                                    Directors

         SECTION 1.  Powers.  The business and affairs of the Corporation shall 
be managed by or under the direction of the Board of Directors except as 
otherwise provided by the Certificate or required by law.

         SECTION 2. Number and Terms. The number of Directors of the Corporation
shall be fixed by  resolution  duly  adopted  from  time to time by the Board of
Directors.  The  Directors  shall  hold  office in the  manner  provided  in the
Certificate.

         SECTION 3. Director Nominations. Nominations of candidates for election
as directors of the  Corporation  at any Annual Meeting may be made only (a) by,
or at the  direction  of, a  majority  of the Board of  Directors  or (b) by any
holder of record (both as of the time notice of such  nomination is given by the
stockholder  as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the  Corporation  entitled to
vote at such Annual  Meeting who  complies  with the timing,  informational  and
other requirements set forth in this Section 3. Any stockholder who has complied
with the timing,  informational and other requirements set forth in this Section
3 and who seeks to make such a  nomination,  or his, her or its  representative,
must be present in person at the  Annual  Meeting.  Only  persons  nominated  in
accordance with the procedures set forth in this Section 3 shall be eligible for
election as directors at an Annual Meeting.

         Nominations,  other  than those  made by, or at the  direction  of, the
Board of  Directors,  shall be made  pursuant to timely notice in writing to the
Secretary  of the  Corporation  as set  forth in this  Section  3. For the first
Annual  Meeting  following  the initial  public  offering of common stock of the
Corporation,  a stockholder's  notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal  executive office not later
than  the  close of  business  on the  later  of (A) the  75th day  prior to the
scheduled  date of such Annual  Meeting or (B) the 15th day following the day on
which public  announcement  of the date of such Annual  Meeting is first made by
the  Corporation.  For all subsequent  Annual Meetings,  a stockholder's  notice
shall be timely if delivered  to, or mailed to and received by, the  Corporation
at its principal  executive  office not less than 75 days nor more than 120 days
prior to the Anniversary Date; provided,  however,  that in the event the Annual
Meeting  is  scheduled  to be  held on a date  more  than  30  days  before  the
Anniversary   Date  or  more  than  60  days  after  the  Anniversary   Date,  a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the  Corporation at its principal  executive  office not later than the close of
business  on the later of (i) the 75th day prior to the  scheduled  date of such
Annual  Meeting  or  (ii)  the  15th  day  following  the  day on  which  public
announcement  of  the  date  of  such  Annual  Meeting  is  first  made  by  the
Corporation.
<PAGE>

         A  stockholder's  notice  to the  Secretary  shall set forth as to each
person whom the stockholder  proposes to nominate for election or re-election as
a director:  (i) the name, age,  business address and residence  address of such
person,  (ii) the principal  occupation or employment of such person,  (iii) the
class  and  number  of  shares  of the  Corporation's  capital  stock  which are
beneficially  owned by such person on the date of such stockholder  notice,  and
(iv)  the  consent  of each  nominee  to  serve  as a  director  if  elected.  A
stockholder's  notice  to  the  Secretary  shall  further  set  forth  as to the
stockholder giving such notice: (i) the name and address,  as they appear on the
Corporation's  stock transfer books,  of such  stockholder and of the beneficial
owners  (if  any)  of  the  Corporation's   capital  stock  registered  in  such
stockholder's  name and the name and address of other stockholders known by such
stockholder  to be  supporting  such  nominee(s),  (ii) the class and  number of
shares of the Corporation's capital stock which are held of record, beneficially
owned or represented by proxy by such stockholder and by any other  stockholders
known by such  stockholder to be supporting  such  nominee(s) on the record date
for the  Annual  Meeting  in  question  (if such date  shall then have been made
publicly  available) and on the date of such  stockholder's  notice, and (iii) a
description of all arrangements or  understandings  between such stockholder and
each  nominee and any other  person or persons  (naming  such person or persons)
pursuant  to  which  the  nomination  or  nominations  are to be  made  by  such
stockholder.

         If the Board of Directors or a designated  committee thereof determines
that any  stockholder  nomination  was not made in accordance  with the terms of
this Section 3 or that the information  provided in a stockholder's  notice does
not satisfy the  informational  requirements  of this  Section 3 in any material
respect,  then such nomination  shall not be considered at the Annual Meeting in
question.  If  neither  the  Board  of  Directors  nor  such  committee  makes a
determination  as to  whether  a  nomination  was  made in  accordance  with the
provisions of this Section 3, the presiding  officer of the Annual Meeting shall
determine  whether a nomination was made in accordance with such provisions.  If
the presiding officer determines that any stockholder nomination was not made in
accordance with the terms of this Section 3 or that the information  provided in
a stockholder's  notice does not satisfy the informational  requirements of this
Section 3 in any material respect,  then such nomination shall not be considered
at the Annual  Meeting in  question.  If the Board of  Directors,  a  designated
committee thereof or the presiding officer determines that a nomination was made
in accordance  with the terms of this Section 3, the presiding  officer shall so
declare at the Annual  Meeting  and  ballots  shall be  provided  for use at the
meeting with respect to such nominee.

         Notwithstanding  anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the  Corporation  is increased and there
is no public  announcement  by the  Corporation  naming all of the  nominees for
director or specifying the size of the increased  Board of Directors at least 75
days prior to the  Anniversary  Date, a  stockholder's  notice  required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions  created by such  increase,  if such notice shall be delivered
to, or mailed to and received by, the  Corporation  at its  principal  executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
<PAGE>

         No person  shall be elected by the  stockholders  as a Director  of the
Corporation unless nominated in accordance with the procedures set forth in this
Section.  Election of  Directors  at the annual  meeting  need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting.  If written ballots are to be used,  ballots bearing the
names of all the persons who have been  nominated  for  election as Directors at
the annual  meeting in accordance  with the procedures set forth in this Section
shall be provided for use at the annual meeting.

         SECTION 4.  Qualification.  No Director need be a stockholder of the 
Corporation.

         SECTION 5. Vacancies.  Subject to the rights, if any, of the holders of
any series of Preferred  Stock of the Corporation to elect Directors and to fill
vacancies in the Board of Directors  relating thereto,  any and all vacancies in
the Board of Directors,  however occurring,  including,  without limitation,  by
reason  of an  increase  in  size  of the  Board  of  Directors,  or the  death,
resignation,  disqualification or removal of a Director,  shall be filled solely
by the affirmative vote of a majority of the remaining Directors then in office,
even if less than a quorum of the Board of Directors.  Any Director appointed in
accordance  with the preceding  sentence  shall hold office for the remainder of
the full  term of the  class of  Directors  in which  the new  directorship  was
created or the vacancy  occurred and until such Director's  successor shall have
been duly  elected  and  qualified  or until his or her earlier  resignation  or
removal.  Subject  to the  rights,  if any,  of the  holders  of any  series  of
Preferred  Stock of the  Corporation  to elect  Directors,  when the  number  of
Directors is increased or decreased,  the Board of Directors shall determine the
class or classes to which the increased or decreased  number of Directors  shall
be apportioned;  provided,  however, that no decrease in the number of Directors
shall shorten the term of any incumbent  Director.  In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.

         SECTION 6.  Removal.  Directors may be removed from office in the 
manner provided in the Certificate.

         SECTION 7.  Resignation.  A Director may resign at any time by giving 
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary.  A resignation shall be effective upon receipt, unless the 
resignation otherwise provides.

         SECTION 8. Regular Meetings. The regular annual meeting of the Board of
Directors shall be held, without notice other than this By-Law, on the same date
and at the same place as the Annual  Meeting  following the close of such Annual
Meeting of Stockholders. Other regular meetings of the Board of Directors may be
held at such hour,  date and place as the Board of Directors  may by  resolution
from time to time determine without notice other than such resolution.
<PAGE>

         SECTION 9. Special Meetings. Special meetings of the Board of Directors
may be called,  orally or in writing,  by or at the request of a majority of the
Directors,  the Chairman of the Board, if one is elected, or the President.  The
person  calling any such special  meeting of the Board of Directors  may fix the
hour, date and place thereof.

         SECTION 10. Notice of Meetings.  Notice of the hour,  date and place of
all special  meetings of the Board of Directors  shall be given to each Director
by the Secretary or an Assistant  Secretary,  or in case of the death,  absence,
incapacity or refusal of such persons,  by the Chairman of the Board,  if one is
elected,  or the President or such other  officer  designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person,  by telephone,
or  by  telex,   telecopy,   telegram,  or  other  written  form  of  electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting,  or by written  notice  mailed to his or her business or
home address, at least 48 hours in advance of the meeting.  Such notice shall be
deemed  to be  delivered  when  hand  delivered  to such  address,  read to such
Director by telephone,  deposited in the mail so addressed, with postage thereon
prepaid if mailed,  dispatched or transmitted if telexed or telecopied,  or when
delivered to the telegraph company if sent by telegram.

         When any Board of  Directors  meeting,  either  regular or special,  is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting  adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which  such  adjournment  is taken of the  hour,  date and place to which the
meeting is adjourned.

         A  written  waiver  of notice  signed  before  or after a meeting  by a
Director  and  filed  with the  records  of the  meeting  shall be  deemed to be
equivalent to notice of the meeting.  The  attendance of a Director at a meeting
shall  constitute  a waiver of notice of such  meeting,  except where a Director
attends a meeting for the express  purpose of objecting at the  beginning of the
meeting to the transaction of any business  because such meeting is not lawfully
called or convened.  Except as otherwise  required by law, by the Certificate or
by these Bylaws,  neither the business to be transacted  at, nor the purpose of,
any meeting of the Board of Directors  need be specified in the notice or waiver
of notice of such meeting.

         SECTION  11.  Quorum.  At any  meeting  of the  Board of  Directors,  a
majority  of the  Directors  then in office  shall  constitute  a quorum for the
transaction  of business,  but if less than a quorum is present at a meeting,  a
majority of the Directors present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice,  except as provided
in Section 10 of this Article II. Any business which might have been  transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
<PAGE>

         SECTION 12. Action at Meeting. At any meeting of the Board of Directors
at which a quorum is present,  a majority of the Directors  present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these Bylaws.

         SECTION 13. Action by Consent.  Any action  required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors  consent thereto in writing.  Such written
consent  shall be  filed  with  the  records  of the  meetings  of the  Board of
Directors  and shall be treated  for all  purposes as a vote at a meeting of the
Board of Directors.

         SECTION 14.  Manner of  Participation.  Directors  may  participate  in
meetings of the Board of Directors by means of  conference  telephone or similar
communications  equipment by means of which all Directors  participating  in the
meeting  can hear each  other,  and  participation  in a meeting  in  accordance
herewith  shall  constitute  presence in person at such  meeting for purposes of
these Bylaws.

         SECTION 15. Committees.  The Board of Directors,  by vote of a majority
of the  Directors  then  in  office,  may  elect  from  its  number  one or more
committees,   including,   without  limitation,   an  Executive   Committee,   a
Compensation Committee, a Stock Option Committee and an Audit Committee, and may
delegate  thereto  some or all of its powers  except  those which by law, by the
Certificate  or by these  Bylaws  may not be  delegated.  Except as the Board of
Directors may  otherwise  determine,  any such  committee may make rules for the
conduct of its business, but unless otherwise provided by the Board of Directors
or in such rules, its business shall be conducted so far as possible in the same
manner as is provided by these Bylaws for the Board of Directors. All members of
such  committees  shall  hold  such  offices  at the  pleasure  of the  Board of
Directors.  The Board of Directors  may abolish any such  committee at any time.
Any  committee  to which the Board of Directors  delegates  any of its powers or
duties  shall keep  records of its  meetings  and shall report its action to the
Board of  Directors.  The Board of  Directors  shall have  power to rescind  any
action of any committee,  to the extent permitted by law, but no such rescission
shall have retroactive effect.

         SECTION 16.  Compensation  of Directors.  Directors  shall receive such
compensation  for their  services  as shall be  determined  by a majority of the
Board of Directors  provided that  Directors who are serving the  Corporation as
employees and who receive  compensation  for their  services as such,  shall not
receive any salary or other  compensation for their services as Directors of the
Corporation.

                                   ARTICLE III

                                    Officers

         SECTION 1.  Enumeration.  The officers of the Corporation shall consist
of a President,  a Treasurer,  a Secretary and such other  officers,  including,
without  limitation,  a Chairman of the Board of Directors  and one or more Vice
Presidents  (including  Executive  Vice  Presidents or Senior Vice  Presidents),
Assistant Vice Presidents,  Assistant Treasurers and Assistant  Secretaries,  as
the Board of Directors may determine.
<PAGE>

         SECTION  2.  Election.  At the  regular  annual  meeting  of the  Board
following the annual meeting of stockholders, the Board of Directors shall elect
the President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular  annual meeting of the Board of Directors
or at any other regular or special meeting.

         SECTION  3.  Qualification.  No  officer  need  be a  stockholder  or a
Director.  Any person may occupy more than one office of the  Corporation at any
time. Any officer may be required by the Board of Directors to give bond for the
faithful  performance of his or her duties in such amount and with such sureties
as the Board of Directors may determine.

         SECTION 4. Tenure.  Except as otherwise  provided by the Certificate or
by these Bylaws, each of the officers of the Corporation shall hold office until
the regular annual  meeting of the Board of Directors  following the next annual
meeting of stockholders  and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.

         SECTION 5. Resignation. Any officer may resign by delivering his or her
written  resignation  to  the  Corporation  addressed  to the  President  or the
Secretary,  and such  resignation  shall be effective  upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.

         SECTION 6.  Removal.  Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote 
of a majority of the Directors then in office.

         SECTION  7.  Absence  or  Disability.  In the event of the  absence  or
disability of any officer,  the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.

         SECTION 8.  Vacancies.  Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.

         SECTION  9.  President.  Unless  otherwise  provided  by the  Board  of
Directors or the Certificate, the President shall be the Chief Executive Officer
of the  Corporation  and  shall,  subject  to the  direction  of  the  Board  of
Directors,  have general supervision and control of the Corporation's  business.
If there is no  Chairman of the Board or if he or she is absent,  the  President
shall preside, when present, at all meetings of stockholders and of the Board of
Directors.  The  President  shall have such other  powers and perform such other
duties as the Board of Directors may from time to time designate.

         SECTION 10. Chairman of the Board. The Chairman of the Board, if one is
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of  Directors.  The Chairman of the Board shall have such other powers
and shall  perform such other duties as the Board of Directors  may from time to
time designate.
<PAGE>

         SECTION 11. Vice  Presidents  and Assistant Vice  Presidents.  Any Vice
President  (including any Executive Vice President or Senior Vice President) and
any  Assistant  Vice  President  shall have such powers and shall  perform  such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.

         SECTION 12.  Treasurer and Assistant  Treasurers.  The Treasurer shall,
subject to the  direction of the Board of  Directors  and except as the Board of
Directors or the Chief  Executive  Officer may otherwise  provide,  have general
charge of the financial  affairs of the  Corporation  and shall cause to be kept
accurate  books of  account.  The  Treasurer  shall  have  custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have such
other duties and powers as may be  designated  from time to time by the Board of
Directors or the Chief Executive Officer.

         Any Assistant  Treasurer shall have such powers and perform such duties
as the Board of Directors or the Chief  Executive  Officer may from time to time
designate.

         SECTION 13.  Secretary and Assistant  Secretaries.  The Secretary shall
record all the proceedings of the meetings of the  stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting,  a temporary  secretary  chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however,  be kept by any transfer or other agent of
the  Corporation).  The  Secretary  shall  have  custody  of  the  seal  of  the
Corporation,  and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument  requiring it, and, when so affixed,  the seal may
be attested  by his or her  signature  or that of an  Assistant  Secretary.  The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the  Secretary,  any  Assistant  Secretary  may perform his or her duties and
responsibilities.

         Any Assistant  Secretary shall have such powers and perform such duties
as the Board of Directors or the Chief  Executive  Officer may from time to time
designate.

         SECTION 14.  Other  Powers and Duties.  Subject to these  Bylaws and to
such limitations as the Board of Directors may from time to time prescribe,  the
officers of the Corporation  shall each have such powers and duties as generally
pertain to their respective  offices,  as well as such powers and duties as from
time to time may be conferred  by the Board of Directors or the Chief  Executive
Officer.

<PAGE>

                                   ARTICLE IV

                                  Capital Stock

         SECTION 1. Certificates of Stock. Each stockholder shall be entitled to
a certificate  of the capital stock of the  Corporation in such form as may from
time to time be prescribed by the Board of Directors.  Such certificate shall be
signed  by the  Chairman  of the Board of  Directors,  the  President  or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant  Secretary.  The  Corporation  seal and the  signatures by Corporation
officers,  the transfer  agent or the registrar may be  facsimiles.  In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been  placed on such  certificate  shall  have  ceased  to be such  officer,
transfer agent or registrar before such certificate is issued,  it may be issued
by the  Corporation  with the same  effect  as if he or she were  such  officer,
transfer  agent or registrar  at the time of its issue.  Every  certificate  for
shares of stock  which are  subject to any  restriction  on  transfer  and every
certificate  issued when the  Corporation  is  authorized to issue more than one
class or series of stock shall  contain such legend with  respect  thereto as is
required by law.

         SECTION 2.  Transfers.  Subject to any  restrictions  on  transfer  and
unless  otherwise  provided  by the Board of  Directors,  shares of stock may be
transferred  only  on the  books  of the  Corporation  by the  surrender  to the
Corporation  or its  transfer  agent  of the  certificate  theretofore  properly
endorsed or  accompanied by a written  assignment or power of attorney  properly
executed,  with transfer stamps (if necessary)  affixed,  and with such proof of
the  authenticity  of signature  as the  Corporation  or its transfer  agent may
reasonably require.

         SECTION 3. Record Holders.  Except as may otherwise be required by law,
by the  Certificate  or by these Bylaws,  the  Corporation  shall be entitled to
treat  the  record  holder  of stock as shown on its  books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such  stock,  until  the  shares  have  been  transferred  on the  books  of the
Corporation in accordance with the requirements of these Bylaws.

         It shall be the duty of each  stockholder to notify the  Corporation of
his or her post office address and any changes thereto.

         SECTION 4. Record Date. In order that the Corporation may determine the
stockholders  entitled to notice of or to vote at any meeting of stockholders or
any adjournment  thereof or entitled to receive payment of any dividend or other
distribution  or allotment of any rights,  or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action,  the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors,  and which record date: (1) in the case of
determination  of stockholders  entitled to vote at any meeting of stockholders,
shall,  unless  otherwise  required by law, not be more than sixty nor less than
ten days  before  the  date of such  meeting  and (2) in the  case of any  other
action,  shall not be more than sixty days  prior to such  other  action.  If no
record date is fixed: (1) the record date for determining  stockholders entitled
to notice of or to vote at a meeting  of  stockholders  shall be at the close of
business  on the day next  preceding  the day on which  notice is given,  or, if
notice is waived,  at the close of business on the day next preceding the day on
which the meeting is held and (2) the record date for  determining  stockholders
for any other  purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
<PAGE>

         SECTION 5.  Replacement of  Certificates.  In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be  issued in place  thereof,  upon such  terms as the  Board of  Directors  may
prescribe.

                                    ARTICLE V

                                 Indemnification

         SECTION 1.  Definitions.  For purposes of this  Article:  (a) "Officer"
means any  person  who  serves or has  served as a  Director  or  officer of the
Corporation  or in any other  office  filled by election or  appointment  by the
stockholders  or the  Board  of  Directors  of the  Corporation  and any  heirs,
executors,  administrators  or  personal  representatives  of such  person;  (b)
"Non-Officer  Employee" means any person who serves or has served as an employee
of the  Corporation,  but  who is not or was  not an  Officer,  and  any  heirs,
executors,  administrators  or  personal  representatives  of such  person;  (c)
"Proceeding"  means  any  threatened,  pending,  or  completed  action,  suit or
proceeding  (or  part  thereof),   whether  civil,   criminal,   administrative,
arbitrative or investigative,  any appeal of such an action, suit or proceeding,
and any inquiry or  investigation  which could lead to such an action,  suit, or
proceeding;  and (d) "Expenses" means any liability fixed by a judgment,  order,
decree or award in a Proceeding,  any amount  reasonably paid in settlement of a
Proceeding  and any  professional  fees and  other  expenses  and  disbursements
reasonably incurred in a Proceeding or in settlement of a Proceeding,  including
fines, taxes and penalties relating thereto.

         SECTION 2. Officers. Except as provided in Section 4 of this Article V,
each Officer of the  Corporation  shall be indemnified  and held harmless by the
Corporation to the fullest extent  authorized by the DGCL, as the same exists or
may hereafter be amended (but,  in the case of any such  amendment,  only to the
extent that such amendment  permits the  Corporation  to provide  broader rights
than said law permitted  the  Corporation  to provide  prior to such  amendment)
against any and all  Expenses  incurred by such Officer in  connection  with any
Proceeding  in which such  Officer is  involved as a result of serving or having
served (a) as an Officer or  employee  of the  Corporation,  (b) as a  director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation,  organization,  partnership, joint venture, trust or
other entity at the written request or direction of the  Corporation,  including
service with respect to employee or other benefit  plans,  and shall continue as
to an Officer after he or she has ceased to be an Officer and shall inure to the
benefit  of  his  or  her  heirs,   executors,   administrators   and   personal
representatives;  provided,  however,  that the Corporation  shall indemnify any
such Officer seeking  indemnification in connection with a Proceeding  initiated
by such Officer only if such Proceeding was authorized by the Board of Directors
of the Corporation.
<PAGE>

         SECTION 3.  Non-Officer  Employees.  Except as provided in Section 4 of
this  Article  V, each  Non-Officer  Employee  of the  Corporation  may,  in the
discretion of the Board of Directors,  be indemnified by the  Corporation to the
fullest  extent  authorized  by the DGCL, as the same exists or may hereafter be
amended  (but, in the case of any such  amendment,  only to the extent that such
amendment  permits  the  Corporation  to provide  broader  rights  than said law
permitted the Corporation to provide prior to such amendment) against any or all
Expenses incurred by such Non-Officer Employee in connection with any Proceeding
in which such Non-Officer  Employee is involved as a result of serving or having
served (a) as a  Non-Officer  Employee  of the  Corporation,  (b) as a director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation,  organization,  partnership, joint venture, trust or
other entity at the request or direction of the Corporation,  including  service
with  respect to employee or other  benefit  plans,  and shall  continue as to a
Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and
shall  inure  to the  benefit  of his or her  heirs,  personal  representatives,
executors  and  administrators;  provided,  however,  that the  Corporation  may
indemnify any such Non-Officer  Employee seeking  indemnification  in connection
with a Proceeding initiated by such Non-Officer Employee only if such Proceeding
was authorized by the Board of Directors of the Corporation.

         SECTION 4. Good Faith. No indemnification shall be provided pursuant to
this  Article V to an Officer or to a  Non-Officer  Employee  with  respect to a
matter as to which  such  person  shall  have been  finally  adjudicated  in any
Proceeding  not to have acted in good faith and in a manner he or she reasonably
believed  to be in, or not opposed to, the best  interests  of the  Corporation,
and, with respect to any criminal Proceeding, had no reasonable cause to believe
his or her conduct was unlawful.  In the event that a Proceeding is  compromised
or  settled  prior  to final  adjudication  so as to  impose  any  liability  or
obligation upon an Officer or Non-Officer  Employee, no indemnification shall be
provided pursuant to this Article V to said Officer or Non-Officer Employee with
respect to a matter if there be a determination that with respect to such matter
such  person  did not act in good  faith  and in a manner  he or she  reasonably
believed  to be in, or not opposed to, the best  interests  of the  Corporation,
and, with respect to any criminal Proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The determination contemplated by the preceding
sentence  shall be made by (i) a majority  vote of those  Directors  who are not
involved  in  such  Proceeding  (the  "Disinterested  Directors");  (ii)  by the
stockholders;  or (iii) if directed by a majority of Disinterested Directors, by
independent  legal counsel in a written opinion.  However,  if more than half of
the Directors are not Disinterested  Directors,  the determination shall be made
by (i) a majority vote of a committee of one or more  disinterested  Director(s)
chosen by the Disinterested Director(s) at a regular or special meeting; (ii) by
the  stockholders;  or (iii) by independent legal counsel chosen by the Board of
Directors in a written opinion.

         SECTION 5. Prior to Final Disposition.  Unless otherwise  determined by
(i) the Board of Directors, (ii) if more than half of the Directors are involved
in a Proceeding by a majority  vote of a committee of one or more  Disinterested
Director(s)  chosen in accordance with the procedures  specified in Section 4 of
this  Article or (iii) if directed  by the Board of  Directors,  by  independent
legal counsel in a written opinion,  any indemnification  extended to an Officer
or Non-Officer  Employee pursuant to this Article V shall include payment by the
Corporation  or a  subsidiary  of the  Corporation  of  Expenses as the same are
incurred in defending a Proceeding in advance of the final  disposition  of such
Proceeding  upon  receipt  of an  undertaking  by such  Officer  or  Non-Officer
Employee  seeking  indemnification  to repay  such  payment  if such  Officer or
Non-Officer  Employee  shall be  adjudicated or determined not to be entitled to
indemnification under this Article V.
<PAGE>

         SECTION 6. Contractual  Nature of Rights.  The foregoing  provisions of
this Article V shall be deemed to be a contract between the Corporation and each
Officer and  Non-Officer  Employee who serves in such capacity at any time while
this Article V is in effect,  and any repeal or  modification  thereof shall not
affect any rights or  obligations  then  existing  with  respect to any state of
facts then or theretofore  existing or any Proceeding  theretofore or thereafter
brought  based in whole or in part upon any such state of facts.  If a claim for
indemnification   or  advancement  of  expenses   hereunder  by  an  Officer  or
Non-Officer Employee is not paid in full by the Corporation within 60 days after
a written  claim for  indemnification  or  documentation  of  expenses  has been
received by the  Corporation,  such Officer or  Non-Officer  Employee may at any
time thereafter  bring suit against the Corporation to recover the unpaid amount
of the claim, and if successful in whole or in part, such Officer or Non-Officer
Employee  shall also be entitled to be paid the  expenses  of  prosecuting  such
claim.  The failure of the Corporation  (including its Board of Directors or any
committee  thereof,  independent  legal  counsel,  or  stockholders)  to  make a
determination   concerning  the   permissibility  of  such   indemnification  or
advancement  of  expenses  under  this  Article V shall not be a defense  to the
action  and  shall  not  create  a  presumption  that  such  indemnification  or
advancement is not permissible

         SECTION 7.  Non-Exclusivity  of Rights.  The  provisions  in respect of
indemnification  and the payment of expenses  incurred in defending a Proceeding
in advance  of its final  disposition  set forth in this  Article V shall not be
exclusive of any right which any person may have or hereafter  acquire under any
statute,  provision  of the  Certificate  or these  Bylaws,  agreement,  vote of
stockholders or disinterested directors or otherwise; provided, however, that in
the event the  provisions  of this  Article V in any respect  conflict  with the
terms of any agreement  between the Corporation or any of its  subsidiaries  and
any person entitled to indemnification  under this Article V, then the provision
which is more favorable to the relevant individual shall govern.

         SECTION 8. Insurance.  The Corporation may maintain  insurance,  at its
expense,  to protect itself and any Officer or Non-Officer  Employee against any
liability of any character  asserted  against or incurred by the  Corporation or
any such  Officer or  Non-Officer  Employee,  or arising out of any such status,
whether or not the  Corporation  would have the power to  indemnify  such person
against such liability under the DGCL or the provisions of this Article V.
<PAGE>

                                   ARTICLE VI

                            Miscellaneous Provisions

         SECTION 1.  Fiscal Year.  Except as otherwise determined by the Board 
of Directors, the fiscal year of the Corporation shall end on the last day of 
December of each year.

         SECTION 2.  Seal.  The Board of Directors shall have power to adopt and
alter the seal of the Corporation.

         SECTION 3.  Execution of  Instruments.  All deeds,  leases,  transfers,
contracts,  bonds,  notes  and  other  obligations  to be  entered  into  by the
Corporation in the ordinary course of its business  without  Director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer,  employee or agent
of the  Corporation  as the  Board  of  Directors  or  Executive  Committee  may
authorize.

         SECTION  4.  Voting  of  Securities.  Unless  the  Board  of  Directors
otherwise provides,  the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of this  Corporation,  or
appoint  another  person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any  meeting  of  stockholders  or  shareholders  of any  other  corporation  or
organization, any of whose securities are held by this Corporation.

         SECTION 5.  Resident Agent.  The Board of Directors may appoint a 
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.

         SECTION 6. Corporate  Records.  The original or attested  copies of the
Certificate,   Bylaws  and  records  of  all  meetings  of  the   incorporators,
stockholders  and the Board of Directors  and the stock  transfer  books,  which
shall  contain the names of all  stockholders,  their record  addresses  and the
amount of stock held by each,  may be kept  outside  the State of  Delaware  and
shall be kept at the principal office of the  Corporation,  at the office of its
counsel or at an office of its  transfer  agent or at such other place or places
as may be designated from time to time by the Board of Directors.

         SECTION 7.  Certificate.  All references in these Bylaws to the 
Certificate shall be deemed to refer to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.

         SECTION 8.  Amendment of Bylaws.

         (a)      Amendment by Directors.  Except as provided otherwise by law, 
these Bylaws may be amended or repealed by the Board of Directors.

         (b) Amendment by Stockholders.  These Bylaws may be amended or repealed
at any annual meeting of stockholders, or special meeting of stockholders called
for such purpose,  by the affirmative  vote of at least  two-thirds of the total
votes  eligible  to be cast on such  amendment  or repeal by  holders  of voting
stock, voting together as a single class;  provided,  however, that if the Board
of Directors  recommends that  stockholders  approve such amendment or repeal at
such meeting of  stockholders,  such  amendment or repeal shall only require the
affirmative  vote of a majority of the total  votes  eligible to be cast on such
amendment  or repeal by holders of voting  stock,  voting  together  as a single
class.

Adopted and effective as of ____________, 1997.
<PAGE>




                                  Exhibit 21.1
                            Schedule of Subsidiaries
                             As of December 31, 1997

Name and address:                                                        EIN

WSI Med-Waste Systems, Inc.                                           04-3377563
(Formerly Biosafe Medical Waste Technology, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Vermont Holdings, Inc.                                            03-0347845
(Formerly Waste Professionals of Vermont, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Moretown Landfill, Inc.                                           03-0355691
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Burlington Area Transfer Station, Inc.                            04-3374689
(Formerly Burlington Area Transfer Station, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Waitsfield Transfer Station, Inc.                                 04-3292469
(Formerly Waitsville Transfer Station, Inc.
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI of Vermont, Inc.                                                  03-0354296
(Formerly WPV Disposal, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Transportation, Inc.                                              04-3386989
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI of Massachusetts Holdings, Inc.                                   04-3301441
(Formerly Biosafe Buckland, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI of Farihaven, Inc.                                                04-3301442
(Formerly Biosafe Fairhaven, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

<PAGE>

WSI South Hadley, Inc.                                                04-3086959
(Formerly Biosafe, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Pennsylvania Holdings, Inc.                                       04-3301448
(Formerly Biosafe Mid-Atlantic, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Hopewell Landfill, Inc.                                           04-3301445
(Formerly Biosafe Pennsylvania, Inc.)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI of Pennsylvania, Inc.                                             04-3301449
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI of Pennsylvania Transportation, Inc.                              04-3301450
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

WSI Altoona Transfer Station, Inc.                                    04-3301447
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173

Biosafe Systems, Inc.                                                 36-4027808
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173
<PAGE>