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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

|þ | QUARTERLY REPORT
    PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------
|  |                                                                                            
|  | For the Quarterly Period
    Ended September 30, 2004                                      
|  |                                                                                            
|  | or                                                                                         
|  |                                                                                            
|o | TRANSITION REPORT
    PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934
|  |                                                                                            
|  | For the transition
    period from to                                                      

Commission File Number: 000-25955

Waste Services, Inc.

(Successor registrant of Capital Environmental Resource Inc. now known
as Waste Services (CA) Inc.)

(Exact name of registrant as specified in its charter)

|Delaware                            | 01-0780204         
|----------------------------------- | -------------------
|(State or other
    jurisdiction of | (I.R.S. Employer   
|incorporation or
    organization)  | Identification No.)

1122 International Blvd., Suite 601, Burlington, Ontario, Canada L7L 6Z8(Address of principal executive offices and zip code)

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

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

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of Common Stock, $0.01 par value, of the
registrant outstanding at October 31, 2004 was 96,726,711 (assuming exchange of all
exchangeable shares not held by Waste Services).



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TABLE OF CONTENTS



PagePART I.
    FINANCIAL INFORMATIONItem 1.
    Financial
    Statements
    2Condensed
    Consolidated Balance Sheets as of September 30, 2004 (unaudited) and 
       December 31, 2003
    2Unaudited
    Condensed Consolidated Statements of Operations for the three months 
      and nine months ended September 30, 2004 and 2003
    3Unaudited Condensed
    Consolidated Statement of Shareholders Equity for the nine months 
      ended September 30, 2004
    4Unaudited
    Condensed Consolidated Statements of Cash Flows for the nine months 
      ended September 30, 2004 and 2003
    5Notes to
    Unaudited Condensed Consolidated Financial Statements
    6Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of Operations
    22Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk
    36Item 4.
    Controls and
    Procedures
    37PART II.
    OTHER INFORMATIONItem 1.
    Legal
    Proceedings
    38Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds
    38Item 3.
    Defaults
    upon Senior Securities
    38Item 4.
    Submission
    of Matters to a Vote of Security Holders
    38Item 5.
    Other
    Information
    38Item 6.
    Exhibits
    38Signatures
    39


1

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         | September
    30, |  | December
    31,
| | ------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------- | -------- | ------- | ----------- | ------- | ----------------- |  | ----------------
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         | 2004              |  | 2003            
| | ASSETS                                                        |                                                                                             |                                                                                      |         |          |         | (Unaudited) |         |                  
| | Current assets:                                               |                                                                                             |                                                                                      |         |          |         |             |        
| |                                                               | Cash
    and cash equivalents                                                               | $                                                                                    | 3,404   |          | $       | 21,062     
| |                                                               | Restricted cash                                                                             | -                                                                                    |         | 14,433  
| |                                                               | Accounts
    receivable (net of allowance for doubtful accounts                             |                                                                                      |         |          |         |            
| |                                                               |                                                                                             | of
    $2,442 and $620 as of September 30, 2004 and December 31, 2003, respectively) | 50,784  |          | 26,999 
| |                                                               | Prepaid expenses and
    other current assets                                               | 17,604                                                                               |         | 29,649  
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total
    current assets                                                             | 71,792  |          | 92,143 
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| | Property and
    equipment, net                               | 124,201                                                                                     |                                                                                      | 74,521 
| | Landfill
    sites, net                                       | 170,278                                                                                     |                                                                                      | 117,541
| | Deferred income
    taxes, net                                | 2,370                                                                                       |                                                                                      | 1,135  
| | Goodwill
    and other intangible assets, net                 | 326,173                                                                                     |                                                                                      | 163,380
| | Other assets                                                  | 22,994                                                                                      |                                                                                      | 22,278 
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total
    assets                                                                     | $       | 717,808  |         | $           | 470,998
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| | LIABILITIES
    AND SHAREHOLDERS' EQUITY                      |                                                                                             |                                                                                      |         |          |         |            
| | Current
    liabilities:                                      |                                                                                             |                                                                                      |         |          |         |            
| |                                                               | Accounts payable                                                                            | $                                                                                    | 32,308  |          | $       | 12,074     
| |                                                               | Accrued
    expenses and other current liabilities                                          | 36,754                                                                               |         | 25,401  
| |                                                               | Short-term financing
    and current portion of long-term debt                              | 1,163                                                                                |         | 172,280 
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total
    current liabilities                                                        | 70,225  |          | 209,755
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| | Long-term debt                                                | 275,507                                                                                     |                                                                                      | 3,130  
| | Accrued
    closure, post-closure and other obligations       | 9,327                                                                                       |                                                                                      | 8,791  
| | Cumulative
    mandatorily redeemable Preferred Stock (net of |                                                                                             |                                                                                      |         |          |        
| |                                                               | discount of $9,799
    and $13,558 as of September 30, 2004 and                             |                                                                                      |         |          |        
| |                                                               | December 31, 2003,
    respectively)                                                        | 60,455                                                                               |         | 48,205  
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total
    liabilities                                                                | 415,514 |          | 269,881
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| | Commitments and
    contingencies (See Note 10)               |                                                                                             |                                                                                      |         |          |         |            
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| | Shareholders'
    equity:                                     |                                                                                             |                                                                                      |         |          |         |            
| |                                                               | Common stock of Waste
    Services, Inc. $0.01 par value; 500,000,000 shares authorized;    |                                                                                      |         |         
| |                                                               |                                                                                             | 89,284,107 and nil
    shares issued and outstanding as of September 30, 2004        |         |          |        
| |                                                               |                                                                                             | and December 31, 2003,
    respectively                                              | 893     |          | -      
| |                                                               | Additional
    paid-in capital                                                              | 318,536                                                                              |         | -       
| |                                                               | Treasury stock of
    Waste Services, Inc. at cost, 500,000 shares as of September 30, 2004 |                                                                                      |         |         
| |                                                               |                                                                                             | and nil as of December
    31, 2003                                                  | (1,235) |          | -      
| |                                                               | Exchangeable
    shares of Waste Services (CA) Inc., no par value; 7,602,604 and            |                                                                                      |         |         
| |                                                               |                                                                                             | nil
    shares issued and outstanding as of September 30, 2004                       |         |          |         |            
| |                                                               |                                                                                             | and
    December 31, 2003, respectively                                              | 27,201  |          | -      
| |                                                               | Common stock of Waste
    Services (CA) Inc. no par value; nil and 68,338,828               |                                                                                      |         |         
| |                                                               |                                                                                             | shares issued and
    outstanding as of September 30, 2004 and December 31, 2003,    |         |          |        
| |                                                               |                                                                                             | respectively                                                                         | -       |          | 215,395
| |                                                               | Options,
    warrants and deferred stock-based compensation                                 | 27,727                                                                               |         | 25,828  
| |                                                               | Accumulated other
    comprehensive income                                                  | 20,298                                                                               |         | 15,952  
| |                                                               | Accumulated
    deficit                                                                     | (91,126)                                                                             |         | (56,058)
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total shareholders'
    equity                                                       | 302,294 |          | 201,117
| |                                                               |                                                                                             |                                                                                      |         |          |         |             |         |                   |  |                 
| |                                                               |                                                                                             | Total
    liabilities and shareholders' equity                                       | $       | 717,808  |         | $           | 470,998

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

2

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

| |                                                                           |                                                                          |                                                                  |          |        |          |          | Three
    Months Ended September 30, |         | Nine
    Months Ended September 30,
| | ------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ---------------------------------------------------------------- | -------- | ------ | -------- | -------- | ------------------------------------ | ------- | -----------------------------------
| |                                                                           |                                                                          |                                                                  |          |        |          |          | 2004                                 |         | 2003                               
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Revenue                                                                   | $                                                                        | 94,615                                                           |          | $      | 34,748   |          | $                                    | 217,558 |                                    
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Operating and other
    expenses:                                         |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           | Cost of operations                                                       | 68,427                                                           |          | 22,915 |          | 153,043  |                                      | 59,939 
| |                                                                           | Selling,
    general and administrative expense                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           |                                                                          | exclusive
    of stock-based compensation                        | 16,335   |        | 7,321    |          | 41,712                               |         | 18,842                             
| |                                                                           | Stock-based
    compensation expense (benefit)                           | 386                                                              |          | 1,462  |          | (648)    |                                      | 1,285  
| |                                                                           | Severance
    and other related costs                                    | 2,709                                                            |          | -      |          | 2,709    |                                      | -      
| |                                                                           | Settlement with
    sellers of Florida Recycling                         | (8,635)                                                          |          | -      |          | (8,635)  |                                      | -      
| |                                                                           | Depreciation,
    depletion and amortization                             | 9,712                                                            |          | 3,808  |          | 22,993   |                                      | 10,599 
| |                                                                           | Foreign exchange loss
    (gain) and other                               | 21                                                               |          | 83     |          | (352)    |                                      | 440    
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Income
    (loss) from operations                                         | 5,660                                                                    |                                                                  | (841)    |        | 6,736    |          | 205                                 
| | Interest expense                                                          | 5,681                                                                    |                                                                  | 1,514    |        | 24,263   |          | 4,501                               
| | Changes
    in fair value of warrants                                     | (532)                                                                    |                                                                  | -        |        | (111)    |          | -                                   
| | Cumulative mandatorily
    redeemable preferred stock dividends and       |                                                                          |                                                                  |          |        |          |          |                                     
| |                                                                           | amortization of issue
    costs                                          | 4,535                                                            |          | 3,858  |          | 12,844   |                                      | 6,056  
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Loss
    before income taxes                                              | (4,024)                                                                  |                                                                  | (6,213)  |        | (30,260) |          | (10,352)                            
| | Income tax provision                                                      | 1,695                                                                    |                                                                  | 908      |        | 5,033    |          | 574                                 
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Loss
    before cumulative effect of change in accounting principle       | (5,719)                                                                  |                                                                  | (7,121)  |        | (35,293) |          | (10,926)                            
| | Cumulative effect of
    change in accounting principle, net of provision |                                                                          |                                                                  |          |        |          |          |                                     
| |                                                                           | for income taxes of
    $132 and $256 for the nine months ended          |                                                                  |          |        |          |          |                                      |        
| |                                                                           | September 30, 2004 and
    2003, respectively                            | -                                                                |          | -      |          | 225      |                                      | 518    
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Net
    loss                                                              | (5,719)                                                                  |                                                                  | (7,121)  |        | (35,068) |          | (10,408)                            
| | Deemed dividend on
    Series 1 Preferred Stock                           | -                                                                        |                                                                  | (33,551) |        | -        |          | (54,572)                            
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Net
    loss attributable to Common Shareholders                          |                                                                          | $                                                                | (5,719)  |        | $        | (40,672) |                                      | $       | (35,068)                           
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| | Basic and diluted
    loss per share:                                     |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           | Basic and diluted loss
    per share attributable to common shareholders |                                                                  |          |        |          |          |                                      |        
| |                                                                           |                                                                          | before cumulative
    effect of change in accounting principle.. | $        | (0.06) |          | $        | (1.06)                               |         | $                                  
| |                                                                           | Cumulative
    effect of change in accounting principle                  | -                                                                |          | -      |          | -        |                                      | 0.01   
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           | Loss per share - basic
    and diluted                                   | $                                                                | (0.06)   |        | $        | (1.06)   |                                      | $       | (0.41)                             
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           | Weighted
    average common stock outstanding - basic and diluted        | 96,854                                                           |          | 38,447 |          | 85,484   |                                      | 37,181 
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    
| |                                                                           |                                                                          |                                                                  |          |        |          |          |                                      |         |                                    

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

3

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
For the Nine Months Ended September 30, 2004
(In thousands)

|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   |             |       |         |        |       
|------------------------------------------------ | ---------- | - | --------- | ------- | ---------------------------- | ------ | ------------------------ | - | ---------------------------- | - | ---------- | - | ------------------- | ------ | ----------- | - | ------------------- | - | ----------- | ------- | ---------------- | - | ----------- | ----- | ------- | ------ | ------
|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         | Options,         |   |             |       |         |        |       
|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         | Warrants
    and |   | Accumulated |       |         |        |       
|                                                 |            |   |           |         | Waste
    Services (CA) Inc. |        | Waste
    Services, Inc. |   | Waste
    Services (CA) Inc. |   |            |   |                     |        | Deferred    |   | Other               |   |             |         | Total           
|                                                 |            |   |           |         | Common
    Stock             |        | Common
    Stock         |   | Exchangeable
    Shares      |   | Additional |   | Treasury
    Shares |        | Stock-Based |   | Comprehensive       |   | Accumulated |         | Shareholders'   
|                                                 |            |   |           |         | Shares                       |        | Amount                   |   | Shares                       |   | Amount     |   | Shares              |        | Amount      |   | Paid in
    Capital |   | at Cost     |         | Compensation     |   | Income      |       | Deficit |        | Equity
|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   |             |       |         |        |       
|Balance,
    December 31, 2003                   | 68,339     |   | $         | 215,395 |                              | -      |                          | $ | -                            |   | -          |   | $                   | -      |             | $ | -                   |   | $           | -       |                  | $ | 25,828      |       | $       | 15,952 |       
|Sale of common shares
    and warrants           | 13,400     |   | 49,126    |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | -           |   | 2,552               |   | -           |         | -                |   | 51,678     
|Common
    shares and warrants issued            |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   | -          
|in
    acquisitions                              | 14,837     |   | 80,856    |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | -           |   | -                   |   | -           |         | -                |   | 80,856     
|Exercise of options
    and warrants             | 311        |   | 1,253     |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | -           |   | (212)               |   |             |         |                  |   | 1,041      
|Deferred
    stock-based compensation            | -          |   | -         |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | -           |   | (441)               |   | -           |         | -                |   | (441)      
|Migration transaction                            | (96,887)   |   | (346,630) |         | 87,657                       |        | 877                      |   | 9,230                        |   | 33,022     |   | 312,731             |        |             |   | -                   |   | -           |         | -                |   | -          
|Conversion
    of exchangeable shares            | -          |   | -         |         | 1,627                        |        | 16                       |   | (1,627)                      |   | (5,821)    |   | 5,805               |        | -           |   | -                   |   | -           |         | -                |   | -          
|Settlement with
    sellers of Florida Recycling | -          |   | -         |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | (1,235)     |   | -                   |   | -           |         | -                |   | (1,235)    
|Foreign
    currency translation                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   | -          
|                                                 | adjustment | - |           | -       |                              | -      |                          | - |                              | - |            | - |                     | -      |             | - |                     | - |             | 4,346   |                  | - |             | 4,346
|Net loss                                         | -          |   | -         |         | -                            |        | -                        |   | -                            |   | -          |   | -                   |        | -           |   | -                   |   | -           |         | (35,068)         |   | (35,068)   
|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   |             |       |         |        |       
|Balance,
    September 30, 2004                  | -          |   | $         | -       |                              | 89,284 |                          | $ | 893                          |   | 7,603      |   | $                   | 27,201 |             | $ | 318,536             |   | $           | (1,235) |                  | $ | 27,727      |       | $       | 20,298 |       
|                                                 |            |   |           |         |                              |        |                          |   |                              |   |            |   |                     |        |             |   |                     |   |             |         |                  |   |             |       |         |        |       

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

4

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  | Nine
    Months Ended September 30, | 
| | ---------------------------------------------------------------- | ------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------------------------- | -------- | -------- | ------- |  | ----------------------------------- | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  | 2004                                | 
| | Cash flows from
    operating activities:                        |                                                                           |                                                                        |                                                                                  |                                                    |          |          |        
| |                                                                  | Net
    loss                                                              | $                                                                      | (35,068)                                                                         |                                                    | $        | (10,408) |        
| |                                                                  | Adjustments to
    reconcile net loss to net cash flows                   |                                                                        |                                                                                  |                                                    |          |          |        
| |                                                                  |                                                                           | from operating
    activities -                                        |                                                                                  |                                                    |          |          |         |  |                                    
| |                                                                  |                                                                           |                                                                        | Depreciation,
    depletion, and amortization                                    | 22,993                                             |          | 10,599   |        
| |                                                                  |                                                                           |                                                                        | Non-cash
    component of settlement with sellers of Florida Recycling           | (1,235)                                            |          | -        |        
| |                                                                  |                                                                           |                                                                        | Cumulative mandatorily
    redeemable preferred stock dividends and amortization |                                                    |          |         
| |                                                                  |                                                                           |                                                                        |                                                                                  | of issue costs                                     | 12,844   |          | 6,056   | 
| |                                                                  |                                                                           |                                                                        | Amortization
    of debt issue costs                                             | 9,930                                              |          | 721      |        
| |                                                                  |                                                                           |                                                                        | Deferred income tax
    provision                                                | 5,033                                              |          | 574      |        
| |                                                                  |                                                                           |                                                                        | Foreign
    exchange loss (gain)                                                 | (72)                                               |          | 678      |        
| |                                                                  |                                                                           |                                                                        | Non-cash stock-based
    compensation (benefit)                                  | (648)                                              |          | 1,285    |        
| |                                                                  |                                                                           |                                                                        | Cumulative
    effect of change in accounting principle, net of tax              | (225)                                              |          | (518)    |        
| |                                                                  |                                                                           |                                                                        | Changes in fair value
    of warrants                                            | (111)                                              |          | -        |        
| |                                                                  |                                                                           |                                                                        | Other
    non-cash items                                                         | (48)                                               |          | 116      |        
| |                                                                  |                                                                           | Changes in operating
    assets and liabilities (excluding the effects |                                                                                  |                                                    |          |         
| |                                                                  |                                                                           |                                                                        | of acquisitions) -                                                               |                                                    |          |          |         |  |                                     | 
| |                                                                  |                                                                           |                                                                        |                                                                                  | Accounts receivable                                | (11,045) |          | (3,143) | 
| |                                                                  |                                                                           |                                                                        |                                                                                  | Prepaid
    expenses and other current assets      | (8,443)  |          | (864)   | 
| |                                                                  |                                                                           |                                                                        |                                                                                  | Accounts payable                                   | 10,665   |          | 2,846   | 
| |                                                                  |                                                                           |                                                                        |                                                                                  | Accrued
    expenses and other current liabilities | 6,122    |          | (4,077) | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  | 10,692                              | 
| | Cash flows from
    investing activities:                        |                                                                           |                                                                        |                                                                                  |                                                    |          |          |        
| |                                                                  | Cash
    used in business combinations and significant asset              |                                                                        |                                                                                  |                                                    |          |         
| |                                                                  |                                                                           | acquisitions,
    net of cash acquired                                 | (164,319)                                                                        |                                                    | (72,733) |         
| |                                                                  | Capital expenditures                                                      | (33,593)                                                               |                                                                                  | (12,677)                                           |         
| |                                                                  | Proceeds
    from business divestitures                                   | 9,939                                                                  |                                                                                  | -                                                  |         
| |                                                                  | Deposits for business
    acquisitions and other                          | (1,203)                                                                |                                                                                  | (7,989)                                            |         
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  | (189,176)                           | 
| | Cash flows from
    financing activities:                        |                                                                           |                                                                        |                                                                                  |                                                    |          |          |        
| |                                                                  | Proceeds
    from issuance of debt                                        | 280,000                                                                |                                                                                  | 8,801                                              |         
| |                                                                  | Principal repayments
    of debt                                          | (184,706)                                                              |                                                                                  | (11,042)                                           |         
| |                                                                  | Sale
    of common shares and warrants                                    | 53,600                                                                 |                                                                                  | -                                                  |         
| |                                                                  | Proceeds from release
    of restricted cash and release of collateral    |                                                                        |                                                                                  |                                                    |          |         
| |                                                                  |                                                                           | supporting letters of
    credit                                       | 24,101                                                                           |                                                    | -        |         
| |                                                                  | Proceeds
    from the issuance of Series 1 Preferred Shares               | -                                                                      |                                                                                  | 86,189                                             |         
| |                                                                  | Proceeds from the
    issuance of mandatorily redeemable Preferred Shares | -                                                                      |                                                                                  | 55,000                                             |         
| |                                                                  | Proceeds
    from the exercise of options and warrants                    | 1,041                                                                  |                                                                                  | 197                                                |         
| |                                                                  | Fees paid for
    financing transactions                                  | (13,472)                                                               |                                                                                  | (9,358)                                            |         
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  | 160,564                             | 
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| | Effect of exchange
    rate changes on cash and cash equivalents | 262                                                                       |                                                                        | 299                                                                              |                                                   
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| | Increase
    (decrease) in cash and cash equivalents             | (17,658)                                                                  |                                                                        | 40,552                                                                           |                                                   
| | Cash and cash
    equivalents, beginning of period               | 21,062                                                                    |                                                                        | 1,775                                                                            |                                                   
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 
| | Cash
    and cash equivalents, end of period                     | $                                                                         | 3,404                                                                  |                                                                                  | $                                                  | 42,327   |         
| |                                                                  |                                                                           |                                                                        |                                                                                  |                                                    |          |          |         |  |                                     | 

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

5

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization of Business and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
include the accounts of Waste Services, Inc. ("Waste Services"), successor to
Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.
("Capital" or the "Canadian operations") and its wholly owned
subsidiaries (collectively, "we," "us" or "our"). We are a
multi-regional, integrated solid waste services company, providing collection, transfer,
landfill disposal and recycling services for commercial, industrial and residential
customers in the United States and Canada. In 2003, we initiated a disposal-based growth
strategy to enter the United States solid waste market and establish leading, vertically
integrated market positions. Under this strategy, we enter geographic markets with
attractive growth or competitive characteristics by acquiring and developing landfill
disposal capacity, then acquiring and developing waste collection and transfer operations.
As part of our business strategy to expand into the United States, we entered into a
migration transaction, which was completed effective July 31, 2004. Under the migration
transaction, our corporate structure was reorganized so that Waste Services, a Delaware
company, is the ultimate parent company of our corporate group. Prior to the migration
transaction, Waste Services was a subsidiary of Capital. After the migration transaction,
Capital became Waste Services subsidiary. Effective with the completion of the
migration on July 31 2004, the historical equity balances of Capital were reclassified
into the equity of Waste Services. See Note 11 for a description of the migration
transaction.

These condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission. All
significant intercompany transactions and accounts have been eliminated. All figures are
presented in thousands of U.S. dollars, except share and per share data, or except where
expressly stated as being in Canadian dollars ("C$") or in millions. Certain
information related to our organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States has been condensed or
omitted. Except as disclosed in Note 2, the accounting policies followed in the
preparation of these interim condensed consolidated financial statements are consistent
with those followed in our annual consolidated financial statements for the year ended
December 31, 2003, as filed on Form 10-K. In the opinion of management, these unaudited
condensed consolidated financial statements contain all material adjustments, consisting
only of normal recurring adjustments, necessary to fairly state our financial position,
results of operations and cash flows for the periods presented and the presentations and
disclosures herein are adequate when read in conjunction with our Form 10-K for the year
ended December 31, 2003. Income taxes during these interim periods have been provided for
based upon our anticipated annual effective income tax rate. Certain reclassifications
have been made to the prior period financial statement amounts to conform to the current
presentation. Due to the seasonal nature of our business, operating results for interim
periods are not necessarily indicative of the results for full years. These interim
financial statements should be read in conjunction with our audited consolidated financial
statements and notes thereto appearing in our annual report on Form 10-K for the year
ended December 31, 2003.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include the allowance for doubtful
accounts, depletion of landfill development costs, intangible assets, goodwill,
liabilities for landfill capping, closure and post-closure obligations, insurance
reserves, liabilities for potential litigation and deferred taxes.

A portion of our operations are domiciled in Canada; as such, for each
reporting period, we translate the results of operations and financial condition of our
Canadian operations into U.S. dollars. Therefore, reported results of operations and
financial condition are subject to changes in the exchange relationship between the two
currencies. For example, as the relationship of the Canadian dollar strengthens against
the U.S. dollar, revenue is favorably affected and conversely expenses are unfavorably
affected. Assets and liabilities of Canadian operations have been translated from Canadian
dollars into U.S. dollars at the exchange rates in effect at the relevant balance sheet
dates, and revenue and expenses of Canadian operations have been translated from Canadian
dollars into U.S. dollars at the average exchange rates prevailing during the period.
Unrealized gains and losses on translation of the Canadian operations into U.S. dollars
are reported as a separate component of shareholders equity and are included in
comprehensive income (loss). Separately, monetary assets and liabilities denominated in
U.S. dollars held by our Canadian operations are re-measured from U.S. dollars into
Canadian dollars and then translated into U.S. dollars. The effects of re-measurement are
reported currently as a component of net income (loss). Currently, we do not hedge our
exposure to changes in foreign exchange rates.

6

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Basic earnings (loss) per share is calculated by dividing income (loss)
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is calculated based on the
weighted average shares of common stock outstanding during the period plus the dilutive
effect of common stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible
instruments using the if-converted method. Contingently issuable shares are included in
the computation of basic earnings (loss) per share when issuance of the shares is no
longer contingent. Due to the net losses attributable to common shareholders for the three
months and nine months ended September 30, 2004 and 2003, basic and diluted loss per share
were the same, as the effect of potentially dilutive securities would have been
anti-dilutive. Dilutive securities not included in the diluted loss per share calculation
are as follows (unaudited) (in thousands):

| |                                        |       |  |        |  |       | Three
    Months Ended September 30, |        | Nine
    Months Ended September 30, | 
| | -------------------------------------- | ----- |  | ------ |  | ----- | ------------------------------------ | ------ | ----------------------------------- | 
| |                                        |       |  |        |  |       | 2004                                 |        | 2003                                | 
| |                                        |       |  |        |  |       |                                      |        |                                     | 
| | Series 1 Preferred
    Shares          | -     |  | 20,006 |  | -     |                                      | 10,221 |                                    
| | Options
    to purchase common shares  | 67    |  | 875    |  | 915   |                                      | 486    |                                    
| | Warrants to purchase
    common shares | 2,636 |  | 4,417  |  | 5,194 |                                      | 2,240  |                                    
| |                                        |       |  |        |  |       |                                      |        |                                     | 
| | Dilutive
    securities                | 2,703 |  | 25,298 |  | 6,109 |                                      | 12,947 |                                    
| |                                        |       |  |        |  |       |                                      |        |                                     | 

2. Change in Accounting Principle

On January 1, 2003, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 143 "Accounting for Asset Retirement
Obligations." SFAS No. 143 required us to change our methodology used to record
liabilities related to capping, closure and post-closure of our landfill operations. Under
SFAS No. 143, we are required to recognize as an asset, the fair value of the liability
for an asset retirement obligation. The asset is then depleted, consistently with other
capitalized landfill costs, over the remaining useful life of the site based upon units of
consumption as airspace in the landfill is consumed. Upon adoption, the liability we
recognized represented the present value of the total estimated future asset retirement
obligation. The methodology we used to define the cost pool related to an obligating event
included total capping, closure and post-closure costs to be incurred, on a discounted
basis, over the remaining life of the site.

In connection with the opening of our JED Landfill in Florida in the
first quarter of 2004, we re-evaluated and changed the methodology used to define an
obligating event, and we segregated the cost pool for the obligation into closure and
post-closure obligations and landfill capping obligations. Effective January 1, 2004, we
recognize the fair value of the liability for the closure and post-closure obligation over
the life of the landfill as waste is placed in the site as opposed to the time at which
the landfill commences operations. Additionally, under our new method, we view landfill
capping events, which occur in phases throughout the life of a landfill, as discrete
activities that are recognized as asset retirement obligations separately from other
closure and post-closure obligations. These capping events occur generally during the
operating life of a landfill and can be associated with specific waste placed under an
area to be capped. As a result, we use a separate capping rate per ton to recognize the
principal amount of the retirement obligation and related asset associated with each
capping event. We deplete the asset recorded pursuant to this approach as waste volume
covered by the capping event is placed into the landfill.

We believe this method is preferable as it (i) provides a better
measure of the fair value of the asset retirement obligation by more precisely matching
the landfill obligating events with the recognition of the fair value of the asset
retirement obligation; (ii) is more consistent with our policies for the allocation of
purchase price in landfill acquisitions and the related valuation of assumed retirement
obligations; (iii) reflects a more accurate rate of accretion thereby creating a more
accurate value of our current and future retirement obligations and (iv) is the
predominant method used in our industry.

The effect of the change in methodology, had it been adopted January 1,
2003, would have been to increase net loss before cumulative effect of change in
accounting principle for the three and nine months ended September 30, 2003 by
approximately $0.1million and $0.3 million, respectively. The effect of this
change on basic or diluted loss per share for the three and nine months ended September
30, 2003 would have been de minimus.

7

---

**WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The following table summarizes the balance sheet impact of adopting the
accounting change on January 1, 2004:

| |                                                  |          |         |     |   |         |  |   |                       |  | Adjustment
    for |  |                     | 
| | ------------------------------------------------ | -------- | ------- | --- | - | ------- |  | - | --------------------- |  | ------------------ |  | ------------------- | 
| |                                                  |          |         |     |   |         |  |   |                       |  | Change
    in      |  |                     | 
| |                                                  |          |         |     |   |         |  |   | December
    31, 2003 |  | Accounting         |  | January
    1, 2004 | 
| | Landfill
    sites                               | $        | 128,044 |     | $ | (3,191) |  | $ | 124,853               | 
| | Accumulated depletion                            | (10,503) |         | 717 |   | (9,786) | 
| |                                                  |          |         |     |   |         |  |   |                       |  |                    |  |                     | 
| | Landfill
    sites, net                          | $        | 117,541 |     | $ | (2,474) |  | $ | 115,067               | 
| |                                                  |          |         |     |   |         |  |   |                       |  |                    |  |                     | 
| | Accrued closure and
    post-closure obligations | $        | 7,737   |     | $ | (2,831) |  | $ | 4,906                 | 
| |                                                  |          |         |     |   |         |  |   |                       |  |                    |  |                     | 
| | Deferred
    income tax asset (liability)        | $        | 3,727   |     | $ | (132)   |  | $ | 3,595                 | 
| |                                                  |          |         |     |   |         |  |   |                       |  |                    |  |                     | 

3. Business Combinations and Significant Asset Acquisitions

In November 2003, we entered into an agreement to acquire the assets of
Allied Waste Industries, Inc.s ("Allied") northern and central Florida
operations (the "Allied Assets") for a purchase price of approximately $120.0
million subject to an adjustment for working capital. The primary metropolitan areas
served by the Allied Assets are Tampa, Sarasota and Jacksonville, Florida. On December 31,
2003, we completed the first phase of the Allied Assets acquisition. During the first six
months of 2004, we completed the acquisition of the remaining Allied Assets.

In April 2004, we completed an exchange of the Nassau Landfill and
related assets, which were acquired from Allied in December 2003, for a collection
operation in the metropolitan Orlando area and cash proceeds of $10.0 million. As part of
this exchange, the new owner of the Nassau Landfill assumed responsibility for the closure
and post closure obligations related to the landfill. Proceeds in excess of net assets
exchanged reduced goodwill from the original Allied Assets acquisition by $8.6 million.

In April 2004, we completed the acquisition of the issued and
outstanding shares of Florida Recycling Services, Inc. ("Florida Recycling") for
an aggregate purchase price of approximately $99.0 million in cash, working capital of
approximately $2.2 million, and the issuance of 9,250,000 Common Shares valued at
approximately $51.4 million. Florida Recycling operations are based in central Florida,
primarily serving the Orlando, Daytona, Fort Myers, and Tampa markets. Since its
acquisition, the performance of the operations of Florida Recycling has been below our
expectations and we engaged an independent third party to conduct a review of Florida
Recyclings business in an effort to identify the factors contributing to the lower
than expected level of performance. Based on the results of this review, it appears that
the 2003 financial statements of Florida Recycling, provided by the sellers, contained
misstatements and could not be relied upon. These financial statements will be re-audited
by our independent auditors. On September 24, 2004, we reached an agreement with the
selling shareholders of Florida Recycling to adjust the purchase price paid for the shares
of Florida Recycling whereby, in October 2004, the selling shareholders paid us $7.5
million in cash and returned 500,000 shares of our common stock. The cash and the shares
received (valued at the quoted market price as of September 24, 2004) with a total value
of approximately $8.6 million, are recorded as income in accordance with SFAS No. 141. In
addition, upon completion of the 2,000 ton per day recycling and transfer facility under
construction in Orlando, Florida, we will receive title to the facility which will be
recorded at fair value at the date received.

In February 2004, we acquired a permitted undeveloped municipal solid
waste landfill in Fort Bend County, Texas (the "Fort Bend Regional Landfill").
The landfill commenced operations during August of 2004. The purchase price was comprised
of $5.1 million in cash, a seller financed promissory note of $5.0 million, which has
since been repaid, and the issuance of 4,375,000 common shares valued at approximately
$25.0 million. The landfill site, which serves the metropolitan Houston area, is
approximately 2,600 acres and has an initial permitted capacity of 47.6 million cubic
yards. In addition to the landfill, we acquired a leasehold interest in a fully permitted
transfer station site near Houston, which is presently under construction. In connection
with the acquisition of the Fort Bend Regional Landfill, we entered into a royalty
agreement, under which we are required to pay a royalty of $0.25 per ton of eligible
waste, as defined in the agreement received at the landfill, for the first five years
subsequent to the date of the royalty agreement and $0.35 per ton of eligible waste
thereafter.

During the first quarter of 2004, we acquired the assets of three
collection businesses in the metropolitan Phoenix area for aggregate cash consideration of
approximately $8.4 million plus the issuance of 949,800 Common Shares valued at
approximately $5.5 million. Separately, in January 2004, we acquired an
industrial-permitted waste landfill site in Saskatchewan, Canada. The purchase price was
comprised of $1.1 million in cash and the issuance of 12,000 Common Shares valued at
approximately $0.1 million.

8

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

During July 2003, we purchased Cactus Waste Systems, LLC for $0.6
million in cash and a $1.2 million option that we exercised in September 2003 to purchase
an 800-acre site in Pinal County, Arizona, which has been zoned to permit the development
of a landfill. During May 2004, we received the permits and authorizations necessary for
the operation of the landfill (the "Southeast Regional Landfill") and, as a
condition of the purchase, we issued 1,250,000 Common Shares valued at $5.5 million to the
sellers during the second quarter of 2004 which has been capitalized as a cost of the
landfill. The landfill began operations in July 2004. The sellers are entitled to
contingent payments based upon the landfill achieving certain defined average tons of
waste per day. Should the landfill achieve a maximum 5,000 tons per day, the total
contingent payments would not exceed $18.0 million. Additionally, we entered into a
royalty agreement whereby we will pay the sellers a royalty of $0.50 per ton on all waste
deposited at the Southeast Regional Landfill after the earlier to occur of July 2006 or
the receipt of 1,250 tons of waste per day at the landfill.

The following unaudited condensed consolidated pro forma statement of
operations data shows the results of our operations for the three and nine months ended
September 30, 2004 and 2003 as if recently completed business combinations had occurred at
the beginning of each period (in thousands except per share amounts):

|                                                 |                                         |         |  |        |          | Three
    Months Ended September 30, |   | Nine
    Months Ended September 30, | 
|------------------------------------------------ | --------------------------------------- | ------- |  | ------ | -------- | ------------------------------------ | - | ----------------------------------- | 
|                                                 |                                         |         |  |        |          | 2004                                 |   | 2003                                | 
|                                                 |                                         |         |  |        |          |                                      |   |                                     | 
|Revenue                                          | $                                       | 94,615  |  | $      | 82,416   |                                      | $ | 261,777                             | 
|Net
    loss attributable to common shareholders | $                                       | (5,719) |  | $      | (27,408) |                                      | $ | (40,046)                            | 
|Basic and diluted net
    loss per Common Share  | $                                       | (0.06)  |  | $      | (0.71)   |                                      | $ | (0.47)                              | 
|Basic
    and diluted pro forma weighted average |                                         |         |  |        |          |                                      |   |                                     | 
|                                                 | number
    of common shares outstanding | 96,854  |  | 38,447 |          | 85,484                               |   | 37,181                              | 
|                                                 |                                         |         |  |        |          |                                      |   |                                     | 

Due to the pending re-audit of the Florida Recycling financial
statements for each of the three years ended December 31, 2003, we have recast these
proforma disclosures using our best estimate of the actual historical results of Florida
Recycling. These estimates are subject to change pending the completion of the re-audit.

The operating results of acquired businesses are included in the
consolidated statements of operations from the dates of acquisition. The assets acquired
and liabilities assumed are recorded under the purchase method of accounting. Details of
the net assets acquired and cash used in business and significant asset acquisitions
during the first nine months of 2004 are as follows (unaudited):

9

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | ----------------------------------------- | -------------------------------------------- | --------------------------------------------- | ----------------------- | ------ | ------- | ------- | ------- | --------- | ------- | ------- | ------- | ------- | 
| |                                           |                                              |                                               |                         |        |         | Allied  |         | Florida   |         | All     |         |         | 
| |                                           |                                              |                                               |                         |        |         | Assets  |         | Recycling |         | Others  |         | Total   | 
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Purchase price:                           |                                              |                                               |                         |        |         |         |         |           |         |        
| |                                           | Cash                                         | $                                             | 45,854                  |        | $       | 103,962 |         | $         | 18,350  |         | $       | 168,166 | 
| |                                           | Seller
    financed note payable             | -                                             |                         | -      |         | 5,000   |         | 5,000     |        
| |                                           | Common stock and
    warrants                | -                                             |                         | 51,357 |         | 36,267  |         | 87,624    |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Total
    purchase price                  | 45,854                                       |                                               | 155,319                 |        | 59,617  |         | 260,790 |          
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Allocated as follows:                     |                                              |                                               |                         |        |         |         |         |           |        
| |                                           | Working capital
    assumed:                 |                                               |                         |        |         |         |         |           |         |        
| |                                           |                                              | Accounts receivable                           | 3,755                   |        | 7,426   |         | 889     |           | 12,070  |        
| |                                           |                                              | Prepaid
    expenses and other current assets | 258                     |        | 1,114   |         | 56      |           | 1,428   |        
| |                                           |                                              | Accounts payable                              | -                       |        | (8,444) |         | (835)   |           | (9,279) |        
| |                                           |                                              | Accrued
    expenses and other                |                         |        |         |         |         |           |         |         |        
| |                                           |                                              |                                               | current
    liabilities | (804)  |         | (4,246) |         | -         |         | (5,050) |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| |                                           |                                              | Net working capital                           | 3,209                   |        | (4,150) |         | 110     |           | (831)   |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| |                                           | Property
    and equipment                   | 10,542                                        |                         | 23,911 |         | 6,047   |         | 40,500    |        
| |                                           | Landfill sites                               | -                                             |                         | -      |         | 41,982  |         | 41,982    |        
| |                                           | Other
    assets                             | -                                             |                         | 278    |         | -       |         | 278       |        
| |                                           | Deferred taxes                               | -                                             |                         | -      |         | (334)   |         | (334)     |        
| |                                           | Accrued
    closures, post-closure and other |                                               |                         |        |         |         |         |           |        
| |                                           |                                              | obligations
    assumed                       | -                       |        | -       |         | (52)    |           | (52)    |        
| | Net book value of
    assets acquired and |                                              |                                               |                         |        |         |         |         |           |        
| |                                           | liabilities assumed                          | 13,751                                        |                         | 20,039 |         | 47,753  |         | 81,543    |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Excess
    purchase price to be allocated | $                                            | 32,103                                        |                         | $      | 135,280 |         | $       | 11,864    |         | $       | 179,247 |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Allocated as follows:                     |                                              |                                               |                         |        |         |         |         |           |        
| |                                           | Goodwill                                     | $                                             | 23,111                  |        | $       | 108,124 |         | $         | 11,840  |         | $       | 143,075 | 
| |                                           | Other intangible
    assets                  | 8,992                                         |                         | 27,156 |         | 24      |         | 36,172    |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 
| | Total
    allocated                       | $                                            | 32,103                                        |                         | $      | 135,280 |         | $       | 11,864    |         | $       | 179,247 |        
| |                                           |                                              |                                               |                         |        |         |         |         |           |         |         |         |         | 

The above table includes cash deposits and acquisition related costs of
$4.0 million and 1,000,000 common shares and warrants valued at $5.7 million, which relate
to the Florida Recycling acquisition that were paid or deposited during 2003 and have been
capitalized to the cost of the acquisition during 2004.

We allocate the purchase price of an acquired business, on a
preliminary basis, to the identified assets acquired based on their estimated fair values
at the dates of acquisition, with any residual amounts allocated to goodwill. The purchase
price allocations are considered preliminary until we have obtained all required
information to complete the allocation. Although the time required to obtain the necessary
information will vary with circumstances specific to an individual acquisition, the
allocation period for finalizing purchase price allocations generally does not exceed one
year from the date of consummation of an acquisition. Adjustments to the allocation of
purchase price may decrease those amounts allocated to goodwill and, as such, may increase
those amounts allocated to other tangible or intangible assets, which may result in higher
depreciation or amortization expense in future periods.

10

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

4. Property and Equipment

Property and equipment consist of the following:

| |                                                                            |                                    |          |        |          |        |  |  |  |  | September
    30, |  | December
    31, | 
| | -------------------------------------------------------------------------- | ---------------------------------- | -------- | ------ | -------- | ------ |  |  |  |  | ----------------- |  | ---------------- | 
| |                                                                            |                                    |          |        |          |        |  |  |  |  | 2004              |  | 2003             | 
| |                                                                            |                                    |          |        |          |        |  |  |  |  | (Unaudited)       |  |                  | 
| |                                                                            |                                    |          |        |          |        |  |  |  |  |                   |  |                  | 
| | Land
    and buildings                                                     | $                                  | 16,155   |        | $        | 6,132  | 
| | Vehicles                                                                   | 95,449                             |          | 62,182 |         
| | Containers,
    compactors, landfill and recycling equipment               | 57,194                             |          | 39,902 |         
| | Furniture, fixtures,
    other office equipment and leasehold improvements | 7,816                              |          | 5,927  |         
| |                                                                            |                                    |          |        |          |        |  |  |  |  |                   |  |                  | 
| |                                                                            | Total
    property and equipment   | 176,614  |        | 114,143  |       
| |                                                                            | Less: Accumulated
    depreciation | (52,413) |        | (39,622) |       
| |                                                                            |                                    |          |        |          |        |  |  |  |  |                   |  |                  | 
| | Property
    and equipment, net                                            | $                                  | 124,201  |        | $        | 74,521 | 
| |                                                                            |                                    |          |        |          |        |  |  |  |  |                   |  |                  | 

5. Landfill Sites, Accrued Closure, Post-Closure and Other Obligations

Landfill Sites

Landfill sites consist of the following:

| |                         |          |         |          |   |         |  |  |  |  | September
    30, |  | December
    31, | 
| | ----------------------- | -------- | ------- | -------- | - | ------- |  |  |  |  | ----------------- |  | ---------------- | 
| |                         |          |         |          |   |         |  |  |  |  | 2004              |  | 2003             | 
| |                         |          |         |          |   |         |  |  |  |  | (Unaudited)       |  |                  | 
| |                         |          |         |          |   |         |  |  |  |  |                   |  |                  | 
| | Landfill
    sites      | $        | 185,628 |          | $ | 128,044 | 
| | Accumulated depletion   | (15,350) |         | (10,503) |  
| |                         |          |         |          |   |         |  |  |  |  |                   |  |                  | 
| | Landfill
    sites, net | $        | 170,278 |          | $ | 117,541 | 
| |                         |          |         |          |   |         |  |  |  |  |                   |  |                  | 

The changes in landfill sites for the nine months ended September 30,
2004 and 2003 are as follows (unaudited):

| |                                  |                                                                  |         |  |         |         |  |  |  |  | Nine
    Months Ended September 30,
| | -------------------------------- | ---------------------------------------------------------------- | ------- |  | ------- | ------- |  |  |  |  | -----------------------------------
| |                                  |                                                                  |         |  |         |         |  |  |  |  | 2004                               
| |                                  |                                                                  |         |  |         |         |  |  |  |  |                                    
| | Balance,
    beginning of period | $                                                                | 117,541 |  | $       | 13,084  | 
| |                                  | Acquisitions                                                     | 41,982  |  | 89,447  |        
| |                                  | Additional
    landfill site costs                               | 11,555  |  | 4,343   |        
| |                                  | Additional asset
    retirement obligations                      | 534     |  | -       |        
| |                                  | Depletion                                                        | (5,166) |  | (3,361) |        
| |                                  | Divestitures                                                     | (154)   |  | -       |        
| |                                  | Capitalized
    interest                                         | 178     |  | -       |        
| |                                  | Purchase price
    allocation adjustments for prior acquisitions | 5,905   |  | -       |        
| |                                  | Effect
    of foreign exchange rate fluctuations                 | 377     |  | 2,618   |        
| |                                  | Change in accounting
    principle                               | (2,474) |  | 3,657   |        
| |                                  |                                                                  |         |  |         |         |  |  |  |  |                                    
| | Balance,
    end of period       | $                                                                | 170,278 |  | $       | 109,788 | 
| |                                  |                                                                  |         |  |         |         |  |  |  |  |                                    

11

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Accrued Closure, Post-Closure and Other Obligations

Accrued closure, post-closure and other obligations consist of the
following:

| |                                                  |       |       |     |   |       |  |  |  |  | September
    30, |       | December
    31, |  
| | ------------------------------------------------ | ----- | ----- | --- | - | ----- |  |  |  |  | ----------------- | ----- | ---------------- | -
| |                                                  |       |       |     |   |       |  |  |  |  | 2004              |       | 2003             |  
| |                                                  |       |       |     |   |       |  |  |  |  | (Unaudited)       |       |                  |  
| |                                                  |       |       |     |   |       |  |  |  |  |                   |       |                  |  
| | Accrued
    closure and post-closure obligations | $     | 5,728 |     | $ | 7,737 | 
| | Deferred income tax
    liability                | 2,847 |       | -   |  
| | Capital
    lease obligations                    | 536   |       | 911 |  
| | Other obligations                                | 216   |       | 143 |  
| |                                                  |       |       |     |   |       |  |  |  |  |                   |       |                  |  
| |                                                  |       |       |     |   |       |  |  |  |  | $                 | 9,327 |                  | $
| |                                                  |       |       |     |   |       |  |  |  |  |                   |       |                  |  

Accrued closure and post-closure obligations include costs associated
with obligations for closure and post-closure of our landfills. The anticipated timeframe
for paying these costs varies based on the remaining useful life of each landfill as well
as the duration of the post-closure monitoring period. The changes to accrued closure and
post-closure obligations for the nine months ended September 30, 2004 and 2003 are as
follows (unaudited):

| |                                  |                                                                  |         |  |       |       |  |  |  |  | Nine
    Months Ended September 30,
| | -------------------------------- | ---------------------------------------------------------------- | ------- |  | ----- | ----- |  |  |  |  | -----------------------------------
| |                                  |                                                                  |         |  |       |       |  |  |  |  | 2004                               
| |                                  |                                                                  |         |  |       |       |  |  |  |  |                                    
| | Balance,
    beginning of period | $                                                                | 7,737   |  | $     | 1,925 | 
| |                                  | Acquisitions                                                     | 52      |  | -     |      
| |                                  | Accretion                                                        | 342     |  | 334   |      
| |                                  | Additional asset
    retirement obligations                      | 536     |  | -     |      
| |                                  | Divestitures                                                     | (146)   |  | -     |      
| |                                  | Purchase price
    allocation adjustments for prior acquisitions | (92)    |  | -     |      
| |                                  | Effect
    of foreign exchange rate fluctuations                 | 130     |  | 746   |      
| |                                  | Change in accounting
    principle                               | (2,831) |  | 2,883 |      
| |                                  |                                                                  |         |  |       |       |  |  |  |  |                                    
| | Balance,
    end of period       | $                                                                | 5,728   |  | $     | 5,888 | 
| |                                  |                                                                  |         |  |       |       |  |  |  |  |                                    

6. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of the following:

| |                                                          |                                          |         |         |       |         |        |  |  |  | September
    30, | December
    31, |       
| | -------------------------------------------------------- | ---------------------------------------- | ------- | ------- | ----- | ------- | ------ |  |  |  | ----------------- | ---------------- | ------
| |                                                          |                                          |         |         |       |         |        |  |  |  | 2004              |                  | 2003  
| |                                                          |                                          |         |         |       |         |        |  |  |  | (Unaudited)       |                  |       
| |                                                          |                                          |         |         |       |         |        |  |  |  |                   |                  |       
| | Other intangible
    assets subject to amortization:     |                                          |         |         |       |         |        |  |  | 
| |                                                          | Customer relationships
    and contracts | $       | 53,652  |       | $       | 17,909 | 
| |                                                          | Non-competition
    agreements and other | 3,154   |         | 2,653 |        
| |                                                          |                                          |         |         |       |         |        |  |  |  |                   |                  |       
| |                                                          |                                          |         |         |       |         |        |  |  |  | 56,806            |                  | 20,562
| | Less: Accumulated
    amortization:                      |                                          |         |         |       |         |        |  |  |  |                  
| |                                                          | Customer
    relationships and contracts | (4,346) |         | (837) |        
| |                                                          | Non-competition
    agreements and other | (1,389) |         | (889) |        
| |                                                          |                                          |         |         |       |         |        |  |  |  |                   |                  |       
| | Other
    intangible assets subject to amortization, net | 51,071                                   |         | 18,836  |      
| | Goodwill                                                 | 275,102                                  |         | 144,544 |      
| |                                                          |                                          |         |         |       |         |        |  |  |  |                   |                  |       
| | Goodwill
    and other intangible assets, net            | $                                        | 326,173 |         | $     | 163,380 |       
| |                                                          |                                          |         |         |       |         |        |  |  |  |                   |                  |       

12

---



WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The changes in goodwill for the nine months ended September 30, 2004
and 2003 are as follows:

| |                                  |                                                                  |         |  |       |        | Nine
    Months Ended September 30, |  
| | -------------------------------- | ---------------------------------------------------------------- | ------- |  | ----- | ------ | ----------------------------------- | -
| |                                  |                                                                  |         |  |       |        | 2004                                |  
| |                                  |                                                                  |         |  |       |        | U.S.                                |  
| | Balance, beginning of
    period | $                                                                | 65,822  |  | $     | 78,722 |                                     | $
| |                                  | Acquisitions                                                     | 142,761 |  | 314   |        | 143,075                             |  
| |                                  | Divestitures                                                     | (8,599) |  | -     |        | (8,599)                             |  
| |                                  | Effect
    of foreign exchange rate fluctuations                 | -       |  | 2,190 |        | 2,190                               |  
| |                                  | Purchase price
    allocation adjustments for prior acquisitions | (6,108) |  | -     |        | (6,108)                             |  
| |                                  |                                                                  |         |  |       |        |                                     |  
| | Balance,
    end of period       | $                                                                | 193,876 |  | $     | 81,226 |                                     | $
| |                                  |                                                                  |         |  |       |        |                                     |  

7. Other Assets

Other assets consist of the following:

| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  | September
    30, | December
    31, |     
| | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | - | ------ |  | - | ----- |  |  |  | ----------------- | ---------------- | ----
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  | 2004              |                  | 2003
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  | (Unaudited)       |                  |     
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  |                   |                  |     
| | Debt and redeemable
    Preferred Stock issue costs, net of accumulated amortization |                                                                                       |   |        |  |   |      
| |                                                                                      | of $1,662 as of
    September 30, 2004 and $496 as of December 31, 2003, respectively | $ | 10,950 |  | $ | 2,096 | 
| | Acquisition
    deposits and deferred acquisition costs                              | 11,346                                                                                |   | 20,182 | 
| | Other assets                                                                         | 698                                                                                   |   | -      | 
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  |                   |                  |     
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  | $                 | 22,994           |     
| |                                                                                      |                                                                                       |   |        |  |   |       |  |  |  |                   |                  |     

8. Debt

Debt consists of the following:

| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  | September
    30, | December
    31, |        
| | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------- | --------- | - | ----- | - |  |  |  | ----------------- | ---------------- | -------
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  | 2004              |                  | 2003   
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  | (Unaudited)       |                  |        
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  |                   |                  |        
| | Senior Secured Credit
    Facilities:                                                     |                                                                                                        |         |           |   |       |   |  |  |  |                  
| |                                                                                           | Revolving credit
    facility, floating interest rate at 5.55% as of September 30, 2004 due April 2009 | $       | 14,000    |   | $     | - | 
| |                                                                                           | Term
    loan facility, floating interest rate at 4.92% as of September 30, 2004, due April 2011       | 99,500  |           | - |      
| | Senior Subordinated
    Notes fixed rate at 9.5% due 2014                                 | 160,000                                                                                                |         | -         |  
| | Other
    subordinated promissory notes payable, interest at 6.67%, due through June 2017 | 3,170                                                                                                  |         | 3,285     |  
| | 364-day Senior
    Secured Credit Facility (repaid in full on April 30, 2004)             | -                                                                                                      |         | 172,125   |  
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  |                   |                  |        
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  | 276,670           |                  | 175,410
| | Less: Current portion                                                                     | (1,163)                                                                                                |         | (172,280) |  
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  |                   |                  |        
| | Long-term
    portion                                                                     | $                                                                                                      | 275,507 |           | $ | 3,130 |  
| |                                                                                           |                                                                                                        |         |           |   |       |   |  |  |  |                   |                  |        

13

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Senior Secured Credit Facilities

On April 30, 2004, we entered into new Senior Secured Credit Facilities
(the "Credit Facilities") with a syndicate of lenders. The Credit Facilities
consist of a five-year revolving credit facility in the amount of $60.0 million, up to
$15.0 million of which is available for our Canadian operations, and a seven-year term
loan facility in the amount of $100.0 million. The Credit Facilities bear interest based
upon a spread over base rate or Eurodollar loans, as defined, at our option. The Credit
Facilities are secured by substantially all of the assets of our U.S. restricted
subsidiaries. Our Canadian operations guarantee and pledge all of their assets only in
support of the portion of the revolving credit facility available to them. Additionally,
65% of the common shares of Waste Services first tier foreign subsidiaries,
including Capital, are pledged to secure obligations under the Credit Facilities. As of
September 30, 2004, $12.6million of revolving credit facility capacity was used to
support outstanding letters of credit.

Our Credit Facilities, as amended, contain certain financial and other
covenants that restrict our ability to, among other things, make capital expenditures,
incur indebtedness, incur liens, dispose of property, repay debt, pay dividends,
repurchase shares and make certain acquisitions. Our financial covenants include (i)
minimum consolidated interest coverage; (ii) maximum total leverage and (iii) maximum
senior secured leverage.



As of June 30, 2004, we failed to meet certain of the financial
covenants contained in the Credit Facilities. On August 25, 2004, we entered into an
amendment and waiver agreement with the administrative agent for the lenders waiving
compliance with these financial covenants until October 5, 2004. On October 4, 2004, we
entered into an amendment to the credit agreement. The amendment includes changes to
certain of the financial and other covenants contained in the Credit Facilities and
increases the current interest rates payable on amounts outstanding by 125 basis points to
450 basis points over Euro dollar loans. Until we meet certain target leverage ratios, as
defined, availability under the amended facility is reduced to $50.0 million up to $12.5
million of which is available for our Canadian operations. In connection with the
amendment, we paid a fee of approximately $0.4 million to the lenders. We are now in
compliance with the financial covenants, as amended, at June 30, 2004 and at September 30,
2004 and we expect to continue to be in compliance in future periods. As such, we have
classified our borrowings under the Credit Facilities at September 30, 2004 as
non-current. The amendment also requires us to receive an equity infusion of at least $7.5
million prior to March 28, 2005. On September 30, 2004, we entered into a standby purchase
agreement with Michael G. DeGroote pursuant to which we may require Mr. DeGroote to
purchase shares of our common stock and warrants for a purchase price of $7.5 million on
or before March 28, 2005.

New Senior Subordinated Notes

On April 30, 2004, we completed a private offering of 9 1/2% Senior
Subordinated Notes ("Subordinated Notes") due 2014 for gross proceeds of $160.0
million. The Subordinated Notes mature on April 15, 2014. Interest on the Subordinated
Notes is payable semi annually commencing October 15, 2004. The Subordinated Notes are
redeemable, in whole or in part, at our option, on or after April 15, 2009, at a
redemption price of 104.75% of the principal amount, declining rateably in annual
increments to par on or after April 15, 2012, together with accrued interest to the
redemption date. In addition, prior to April 15, 2007, we may redeem up to 35.0% of the
aggregate principal amount of the Subordinated Notes with the proceeds of certain equity
offerings, at a redemption price equal to 109.5% of the principal amount. Upon a change of
control, as such term is defined in the Indenture, we are required to offer to repurchase
all the Subordinated Notes at 100.0% of the principal amount, together with accrued
interest and liquidated damages, if any, and obtain the consent of our senior lenders to
such payment or repay our indebtedness under our Credit Facilities.

The Subordinated Notes are unsecured and are subordinate to our
existing and future senior secured indebtedness, including our Credit Facilities,
structurally subordinated to existing and future indebtedness of our non-guarantor
subsidiaries, rank equally with any unsecured senior subordinated indebtedness and senior
to our existing and future subordinated indebtedness. Our obligations with respect to the
Subordinated Notes, including principal, interest, premium, if any, and liquidated
damages, if any, are fully and unconditionally guaranteed on an unsecured, senior
subordinated basis by all of our existing and future domestic restricted subsidiaries. Our
Canadian operations are not guarantors under the Subordinated Notes.

The Subordinated Notes contain certain covenants that, in certain
circumstances and subject to certain limitations and qualifications, restrict, among other
things (i) the incurrence of additional debt; (ii) the payment of dividends and
repurchases of stock; (iii) the issuance of preferred stock and the issuance of stock of
our subsidiaries; (iv) certain investments; (v) the repurchase of our Preferred Stock;
(vi) transactions with affiliates and (vii) certain sales of assets.

14

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

We also entered into a Registration Rights Agreement with the initial
purchasers of the Subordinated Notes in which we agreed to (i) file a registration
statement with respect to the Subordinated Notes within 120 days of the closing date of
the issuance of the notes (August 28, 2004), pursuant to which we will exchange the
Subordinated Notes for registered notes of Waste Services with terms identical to the
Subordinated Notes; (ii) have such registration statement declared effective within 210
days of the issuance date; (iii) maintain the effectiveness of such registration statement
for minimum periods specified in the agreement and (iv) file a shelf registration
statement in the circumstances and within the time periods specified in the agreement. To
date, we have not filed the registration statement with respect to the Subordinated Notes
and, therefore, we are required to pay liquidated damages, in cash, in an amount equal to
$0.05 per week per $1,000 in principal amount, of the unregistered Subordinated Notes, for
each week that the default continues for the first 90-days following default
(approximately $8,000 per week.) Thereafter, the amount of liquidated damages increases by
an additional $0.05 per week per $1,000 in principal amount of unregistered Subordinated
Notes for each subsequent 90-day period until all defaults have been cured, to a maximum
of $0.50 per week per $1,000 in principal amount of unregistered Subordinated Notes
outstanding. These liquidated damages are payable at the same time as interest payments
due under the Subordinated Notes.

364-day Senior Secured Credit Facility (Repaid in full on April 30,
2004)

On December 31, 2003, we entered into a $220.0 million 364-day Senior
Secured Credit Facility (the "364-day Facility") comprised of a $195.0 million
term loan and a $25.0 million revolving credit facility, which was secured by
substantially all of our current and future acquired assets. Initial borrowings under the
364-day Facility were used to finance the acquisition of certain of the Allied Assets and
to repay our prior senior credit facility in full. The 364-day Facility bore interest at
9.0% per annum and was repaid in April 2004 with the proceeds of the Credit Facilities,
Subordinated Notes and an equity private placement.

9. Cumulative Mandatorily Redeemable Preferred Stock

In May 2003, Waste Services issued 55,000 shares of redeemable
Preferred Stock (the "Waste Services Preferred Stock") to Kelso Investment
Associates VI, L.P. and KEP VI, LLC (collectively "Kelso"), pursuant to the
terms of an agreement dated as of May 6, 2003, as amended in February 2004, (the
"Waste Services Subscription Agreement"), at a price of $1,000 per share. Waste
Services also issued to Kelso 7,150,000 warrants to purchase shares of Common Stock (on a
one-for-one basis) of Waste Services for $3.00 per share. The warrants are exercisable at
any time until May 6, 2010. The issuance of the Waste Services Preferred Stock resulted in
proceeds of approximately $49.5 million, net of fees of approximately $5.5 million. The
shares of Waste Services Preferred stock are non-voting. The Waste Services Preferred
Stock entitles the holders to cash dividends of 17.75% per annum compounding and accruing
quarterly in arrears. The liquidation preference approximated $70.3 million as of
September 30, 2004. The Waste Services Preferred Stock entitles the holders to a
liquidation preference of $1,000 per share, adjusted for any stock dividend, stock split,
reclassification, recapitalization, consolidation or similar event affecting the Waste
Services Preferred Stock, plus the amount of any accrued but unpaid dividends on such
share as of any date of determination.

As we are not permitted to declare and pay cash dividends pursuant to
the terms of our Credit Facilities, the dividend payments will accrue. The Waste Services
Preferred Stock, including all accrued and unpaid dividends, must be redeemed in full by
no later than May 6, 2015. Until May 6, 2006, we may redeem all or any part of the Waste
Services Preferred Stock on payment of the sum of $1,000 per share plus accrued and unpaid
dividends calculated as if the Waste Services Preferred Stock were redeemed on May 6,
2006, or approximately $92.7 million. If we do not exercise our option to redeem all of
the Waste Services Preferred Stock by May 6, 2009, Kelso may require us to initiate a sale
of Waste Services or of its assets on terms acceptable to our board consistent with the
exercise of their fiduciary duties. Pursuant to an amendment to the Certificate of
Designations of Waste Services dated April 30, 2004, if Waste Services determines, after
conducting a sale process, that any such sale would not yield sufficient proceeds to repay
in full the indebtedness then outstanding under our Credit Facilities and the redemption
amount of our Subordinated Notes issued on April 30, 2004, or at least $320.0 million,
then Waste Services may elect to delay such sale. The sale date may be delayed until the
earliest to occur of (i) the final maturity date of the Subordinated Notes (April 15,
2014); (ii) the date on which our Credit Facilities and the Subordinated Notes are fully
repaid or otherwise satisfied or (iii) a sale of Waste Services. We refer to this date as
the delayed sale date. If we do not initiate and complete a sale of Waste Services or its
assets within 20 months of initiation of the sale process by the holders of Waste Services
Preferred Stock, then on notice from the holders of the Waste Services Preferred Stock,
all outstanding Waste Services Preferred Stock will become due and payable on the first
anniversary of the date on which the holders of Waste Services Preferred Stock gave notice
requiring the initiation of a sale process, for a liquidation amount of 1.20 times the
liquidation preference of $1,000 per share. If the sale day has been delayed, then Waste
Services is not required to pay this increased liquidation amount until the delayed sale
date.

15

---

WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Also pursuant to the Amended Certificate of Designations, if Waste
Services becomes subject to a liquidation or insolvency event (as such terms are defined
in our Amended and Restated Credit Agreement dated April 30, 2004) or in the event of a
change of control of Waste Services (as such term is defined in the Amended Certificate of
Designations), all payments and other distributions to holders of Waste Services Preferred
Stock will be subordinate to the repayment in full of our Credit Facilities. This
provision does not prohibit any accrual or increase in the dividend rate or in the
liquidation preference of the Waste Services Preferred Stock as provided for in the
Amended Certificate of Designations, or the distribution of additional shares or other
equity securities to the holders of Waste Services Preferred Stock, so long as such
additional shares or other equity securities are subject to at least equivalent
subordination provisions. In addition, the Amended Certificate of Designations prohibits
us from making any payment or distribution to the holders of Waste Services Preferred
Stock in the event of a sale of Waste Services or its assets, or the exercise by the
holders of Waste Services Preferred Stock of their right to require payment of the
liquidation amount of their shares as a result of the failure to consummate a sale of
Waste Services as described in the preceding paragraph, unless such payment or
distribution is expressly permitted pursuant to the terms of the agreement then governing
our Credit Facilities.

Separately, we paid Kelso & Company, L.P., an affiliate of Kelso,
an advisory services fee of $1.65 million in connection with the issuance of the Waste
Services Preferred Stock to Kelso. In February 2004, we also paid Kelso & Company,
L.P. a $0.5 million fee in connection with services related to the arrangement of our
previous credit facilities that were entered into on December 31, 2003. Two of our
directors, George E. Matelich and Michael B. Lazar, are Managing Directors of Kelso &
Company, L.P.

10. Commitments and Contingencies

Environmental Risks

We are subject to liability for environmental damage that our solid
waste facilities may cause, including damage to neighboring landowners or residents,
particularly as a result of the contamination of soil, groundwater or surface water,
including damage resulting from conditions existing prior to our acquisition of such
facilities. Pollutants or hazardous substances whose transportation, treatment, or
disposal was arranged by us or our predecessors, may also subject us to liability for any
off-site environmental contamination caused by these pollutants or hazardous substances.

Any substantial liability for environmental damage incurred by us could
have a material adverse effect on our financial condition, results of operations or cash
flows. As of the date of these condensed consolidated financial statements, we estimate
the range of reasonably possible losses related to environmental matters to be
insignificant and we are not aware of any such environmental liabilities that would be
material to our operations or financial condition.

Legal Proceedings

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

In addition, we may become party to various claims and suits for
alleged damages to persons and property, alleged violations of certain laws and alleged
liabilities arising out of matters occurring during the normal operation of a waste
management business. We are currently involved in pending litigation with Waste Management
of Canada Corporation (formerly Canadian Waste Services Inc.), one of our competitors,
which is more fully described in our financial statements for the year ended December 31,
2003, as filed on Form 10-K with the Securities and Exchange Commission. There have been
no material developments in these claims in the quarter.

16

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

In the District Court of Harris County, Texas, Waste Management, Inc.
filed a suit against our President and Chief Operating Officer, Charles A. Wilcox, for
breach of contract, including breach of a non-competition agreement, and for a temporary
and a permanent injunction. Mr. Wilcox is presently subject to a temporary order
restraining him from engaging in certain activities adverse to the interests of Waste
Management, Inc. Mr. Wilcox intends to vigorously defend this action.

Surety Bonds, Letters of Credit and Insurance

Municipal solid waste services contracts, permits and licenses to
operate transfer stations, landfills and recycling facilities may require performance or
surety bonds, letters of credit or other means of financial assurance to secure
contractual performance. As of September 30, 2004 and December 31, 2003, we had provided
customers and various regulatory authorities with such bonds and letters of credit
amounting to approximately $50.3 million and $10.3 million, respectively, to collateralize
our obligations. We also had an obligation to issue replacement bonds totaling
approximately $0.2 million as of September 30, 2004.

Our U.S.-based automobile, general liability and workers
compensation insurance coverage is subject to certain deductible limits. We retain up to
$0.5 million and $0.25 million of risk per claim, plus claims handling expense under our
workers compensation and our auto and general liability insurance programs,
respectively. Claims in excess of such deductible levels are fully insured subject to our
policy limits. However, we have a limited claims history for our U.S. operations and it is
reasonably possible that recorded reserves may not be adequate to cover future payments of
claims. Adjustments, if any, to our reserves will be reflected in the period in which the
adjustments are known. As of September 30, 2004 we have posted a letter of credit with our
U.S. insurer of approximately $2.3 million to cover the liability for losses within the
deductible limit.

Other Contractual Arrangements

During December 2003, we issued 600,000 Common Shares as part of the
purchase price of an acquisition. In connection with this acquisition, we entered into a
reimbursement agreement whereby for a period of one year after the second anniversary of
the closing date, we will reimburse the seller for the loss on sale of shares below $4.75
per share.

11.    Authorized Capital Stock and Migration
Transaction

Total Shares

Waste Services is authorized to issue a total of 505,000,000 shares of
capital stock consisting of:

 500,000,000 shares of common stock, par
    value US$0.01 per share; and

 5,000,000 shares of
    preferred stock, par value US$0.01 per share, of which 100,000 have been designated as
    Series A Preferred Stock and one has been designated as Special Voting Preferred Stock.

Preferred Stock

The "Series A Preferred Stock" with a par value of
US$0.01 per share and a liquidation preference of US$1,000.00 per share, have the powers,
preferences and other special rights and the qualifications, limitations and restrictions
that are set forth in the Certificate of Designations of Series A Preferred Stock as
amended. 55,000 shares of Series A Preferred Stock are currently outstanding. The Special
Voting Preferred Stock have the rights, preference, and limitations set forth in the
Certificate of Designation of Special Voting Preferred Stock. One share of Special Voting
Preferred Stock is presently outstanding.

17

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Common Stock

On April 30, 2004, we raised approximately $50.7 million, after
deducting expenses of approximately $2.9 million, from the sale of 13,400,000 Common
Shares and warrants to purchase 1,340,000 Common Shares in private placement transactions
to certain investors. The net proceeds were allocated to the Common Shares and warrants to
purchase Common Shares, based on the relative fair value of each security at the time of
issuance. Sanders Morris Harris Inc. acted as the placement agent for the issuance and was
paid a placement agent fee of approximately $2.7 million. Don A. Sanders, a director of
ours at the time of issuance, is a principal of Sanders Morris Harris Inc. We also entered
into an agreement with the investors in the private placement in which we agreed to file a
registration statement for the 13,400,000 Common Shares and the 1,340,000 Common Shares
issuable upon exercise of the warrants and have that registration statement declared
effective within 120 days from April 30, 2004. Due to the nature of certain financial
penalties within the registration rights agreement, the Common Shares, warrants and
related proceeds from the offering were classified outside of shareholders equity at
June 30, 2004 as the shares were not registered at such date. However, such amounts were
reclassified to permanent equity during the third quarter of 2004, as the shares became
fully registered in August 2004. The warrants, which had an initial carrying value of $2.6
million and were classified as a liability, have been remeasured to their fair value as of
September 30, 2004, resulting in a $0.1 million credit to earnings for the nine months
ended September 30, 2004.

Migration Transaction

As part of our business strategy to expand into the United States, we
entered into a migration transaction effective July 31, 2004. Under the migration
transaction, our corporate structure was reorganized so that Waste Services, a Delaware
company, is the ultimate parent company of our corporate group. Prior to the migration
transaction, Waste Services was a subsidiary of Capital, which is a company amalgamated
under the laws of the Province of Ontario, Canada. After the migration transaction,
Capital became Waste Services subsidiary.

The migration transaction occurred by way of a plan of arrangement
under Section 182 of the Business Corporations Act (Ontario) and consisted primarily of:
(1) the exchange of 87,657,035 common shares of Capital for 87,657,035 shares of common
stock of Waste Services and (2) the conversion of the remaining 9,229,676 common shares of
Capital held by non-US residents who elected to receive exchangeable shares into 9,229,676
exchangeable shares of Waste Services (CA) Inc. The transaction was approved by the
Ontario Superior Court of Justice July 30, 2004 and by our shareholders at a special
meeting held on July 27, 2004.

The terms of the exchangeable shares of Capital are the economic and
functional equivalent of the common stock of Waste Services. Holders of exchangeable
shares (1) will receive the same dividends as holders of shares of common stock of Waste
Services and (2) will be entitled to vote on the same matters as holders of shares of
common stock of Waste Services. Such voting is accomplished through the one (1) share of
Special Voting Preferred Stock held by Computershare Trust Company of Canada as trustee,
who will vote on the instructions of the holders of the exchangeable shares (one vote for
each exchangeable share). As such, the exchangeable shares have been classified as a
component of our common equity. Values assigned to the Waste Services common stock and the
exchangeable shares are based upon the historical book value per share allocated on a pro
rate basis as of July 31, 2004, the date the migration was completed.

Upon the occurrence of certain events, such as the liquidation of
Capital, or after the redemption date, our Canadian holding company, Capital Holdings will
have the right to purchase each exchangeable share for a share of common stock of Waste
Services, plus all declared and unpaid dividends on the exchangeable share. Unless certain
events occur, such redemption date will not be earlier than December 31, 2016. Holders of
exchangeable shares also have the right at any time at their option, to exchange their
exchangeable shares for shares of common stock of Waste Services.

18

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

12. Employee and Director Stock Option Plans and Option Grants

We have stock-based compensation plans accounted for under the
recognition and measurement principles of Accounting Principles Board Opinion
("APB") No. 25 "Accounting for Stock Issued to Employees," and related
interpretations. Pro forma information regarding the impact of stock-based compensation on
net income and earnings per share is required by SFAS No. 123 "Accounting for
Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." Such unaudited pro forma information,
determined as if we had accounted for our employee stock options under the fair value
recognition provisions of SFAS No. 123, is illustrated in the following table (unaudited):

|                                                             |                                          |         |         |   |          | Three
    Months Ended September | Nine
    Months Ended September 30,
|------------------------------------------------------------ | ---------------------------------------- | ------- | ------- | - | -------- | -------------------------------- | -----------------------------------
|                                                             |                                          |         |         |   |          | 2004                             |                                    
|                                                             |                                          |         |         |   |          |                                  |                                    
|Net
    loss attributable to Common Shareholders as reported | $                                        | (5,719) |         | $ | (40,672) |                                  | $                                  
|Stock-based employee
    compensation expense                |                                          |         |         |   |          |                                  |                                    
|                                                             | pursuant to SFAS No.
    123, net of tax |         | (2,853) |   |          | (1,023)                          |                                    
|Pro
    forma net loss attributable to Common Shareholders   | $                                        | (8,572) |         | $ | (41,695) |                                  | $                                  
|                                                             |                                          |         |         |   |          |                                  |                                    
|Basic and diluted loss
    per share:                        |                                          |         |         |   |          |                                  |                                    
|                                                             | As reported                              | $       | (0.06)  |   | $        | (1.06)                           |                                    
|                                                             | Pro
    forma                            | $       | (0.09)  |   | $        | (1.08)                           |                                    
|                                                             |                                          |         |         |   |          |                                  |                                    

The fair value of options granted to September 30, 2004, was estimated
using the Black-Scholes option pricing model using the following assumptions:

|                                           | Three Months EndedSeptember 30, | Nine months
    EndedSeptember 30,
|------------------------------------------ | ------------------------------- | ----------------------------------
|                                           | 2004                            | 2003                              
|Annual dividend yield                      |                                |                                   
|Weighted-average expected
    life (years) | 3 years                         |                                   
|Risk-free interest rate                    | 2.57                            | %                                 
|                                           | to 4.62                         | %                                 
|Volatility                                 | 71                              | %                                 

Compensation expense recognized for stock options subject to variable
accounting is based on the intrinsic value (the difference between the exercise price and
quoted market price) of the options at the end of each reporting period. Changes in the
intrinsic value are recognized until such options are exercised, forfeited or expire.

Details of our 1997 and 1999 Stock Option Plans are described in our
consolidated financial statements for the year ended December 31, 2003 filed on Form 10-K.
There are no options outstanding under the 1997 Stock Option Plan. Our options are
denominated in U.S. and Canadian dollars. During the nine months ended September 30, 2004,
options to purchase 5,439,500 Common Shares were granted. As of September 30, 2004, the
weighted average exercise price for options outstanding was $4.61 and C$6.47 for U.S. and
Canadian dollar denominated options, respectively. During the nine months ended September
30, 2004, 192,500 options were exercised and 375,735 options expired or were terminated.
As of September 30, 2004, the aggregate number of options outstanding entitled holders to
purchase 12,677,964 Common Shares at prices ranging from $3.12 to $12.00 and C$4.05 to
C$18.05 for U.S. and Canadian dollar denominated options, respectively.

19

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

13. Comprehensive Income (Loss)

Comprehensive income (loss) includes the effects of foreign currency
translation. Comprehensive income (loss) for the three months and nine months ended
September 30, 2004 and 2003 are as follows (unaudited):

| |                                             |       |         |    |   |         | Three
    Months Ended September 30, |        | Nine
    Months Ended September 30, | 
| | ------------------------------------------- | ----- | ------- | -- | - | ------- | ------------------------------------ | ------ | ----------------------------------- | 
| |                                             |       |         |    |   |         | 2004                                 |        | 2003                                | 
| |                                             |       |         |    |   |         |                                      |        |                                     | 
| | Net
    loss                                | $     | (5,719) |    | $ | (7,121) |                                      | $      | (35,068)                            | 
| | Foreign currency
    translation adjustment | 9,761 |         | 51 |   | 4,346   |                                      | 13,785 |                                    
| |                                             |       |         |    |   |         |                                      |        |                                     | 
| | Comprehensive
    income (loss)             | $     | 4,042   |    | $ | (7,070) |                                      | $      | (30,722)                            | 
| |                                             |       |         |    |   |         |                                      |        |                                     | 

14. Segment Information

We have determined our operating and reporting segments pursuant to the
requirements of SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". In making this determination, we considered our
organization/reporting structure and the information used by our chief operating decision
makers to make decisions about resource allocation and performance assessment. We are
organized along geographic locations or regions. The Canadian operations are organized
between two regions:  Eastern and Western Canada while the U.S. operations are in
Florida and the Southwest (primarily Arizona and Texas). We believe our Canadian and
United States geographic segments meet the "Aggregation Criteria" set forth in
SFAS No. 131 for the following reasons: (i) the nature of the service, waste collection
and disposal, is economically the same and transferable across locations; (ii) the type
and class of customer is consistent among regions/districts; (iii) the methods used to
deliver services are essentially the same (e.g. containers collect waste at market
locations and trucks collect and transfer waste to landfills) and (iv) the regulatory
environment is consistent within Canada and the United States.

The tables below present certain segment information on our geographic
segments as of, and for the three and nine months ended September 30, 2004 and 2003
(unaudited):

| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| | --------------------------------------------------------------- | ----------------------------------- | ------- | ------- | ------ | ----------- | ----------- | ------- | ------ |  | - | ------- | 
| | Three Months
    Ended September 30, 2004                       | Canada                              |         | U.S.    |        | Elimination |             | Total   |       
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| | Revenue                                                         | $                                   | 38,689  |         | $      | 55,926      |             | $       | -      |  | $ | 94,615  | 
| | Operating
    and other expenses                                | 36,016                              |         | 52,939  |        | -           |             | 88,955  |       
| | Income from operations                                          | 2,673                               |         | 2,987   |        | -           |             | 5,660   |       
| | Depreciation,
    depletion and amortization                    | 4,398                               |         | 5,314   |        | -           |             | 9,712   |       
| | Interest expense
    (income)                                   | 1,978                               |         | 3,936   |        | (233)       |             | 5,681   |       
| | Cumulative
    mandatorily redeemable preferred stock dividends |                                     |         |         |        |             |             |         |       
| |                                                                 | and
    amortization of issue costs | -       |         | 4,535  |             | -           |         | 4,535  | 
| | Total assets                                                    | 370,680                             |         | 513,271 |        | (166,143)   |             | 717,808 |       
| | Long-lived
    assets                                           | 338,862                             |         | 470,927 |        | (166,143)   |             | 643,646 |       
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| | Nine Months
    Ended September 30, 2004                        |                                     | Canada  |         | U.S.   |             | Elimination |         | Total  | 
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| | Revenue                                                         | $                                   | 103,401 |         | $      | 114,157     |             | $       | -      |  | $ | 217,558 | 
| | Operating
    and other expenses                                | 97,320                              |         | 113,502 |        | -           |             | 210,822 |       
| | Income from operations                                          | 6,081                               |         | 655     |        | -           |             | 6,736   |       
| | Depreciation,
    depletion and amortization                    | 11,520                              |         | 11,473  |        | -           |             | 22,993  |       
| | Interest expense
    (income)                                   | 190                                 |         | 25,110  |        | (1,037)     |             | 24,263  |       
| | Cumulative
    mandatorily redeemable preferred stock dividends |                                     |         |         |        |             |             |         |       
| |                                                                 | and
    amortization of issue costs | -       |         | 12,844 |             | -           |         | 12,844 | 
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 
| |                                                                 |                                     |         |         |        |             |             |         |        |  |   |         | 

20

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WASTE SERVICES, INC.
(Successor of Capital Environmental Resource Inc. now known as Waste Services (CA) Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

| |                                                                 |                                     |        |         |       |         |             |        |       |  |   |        | 
| | --------------------------------------------------------------- | ----------------------------------- | ------ | ------- | ----- | ------- | ----------- | ------ | ----- |  | - | ------ | 
| | Three Months
    Ended September 30, 2003                       |                                     | Canada |         | U.S.  |         | Elimination |        | Total | 
| | Revenue                                                         | $                                   | 34,161 |         | $     | 587     |             | $      | -     |  | $ | 34,748 | 
| | Operating
    and other expenses                                | 33,770                              |        | 1,819   |       | -       |             | 35,589 |      
| | Income (loss) from
    operations                               | 391                                 |        | (1,232) |       | -       |             | (841)  |      
| | Depreciation,
    depletion and amortization                    | 3,734                               |        | 74      |       | -       |             | 3,808  |      
| | Interest expense                                                | 1,425                               |        | 1,045   |       | (956)   |             | 1,514  |      
| | Cumulative
    mandatorily redeemable preferred stock dividends |                                     |        |         |       |         |             |        |      
| |                                                                 | and
    amortization of issue costs | -      |         | 3,858 |         | -           |        | 3,858 | 
| |                                                                 |                                     |        |         |       |         |             |        |       |  |   |        | 
| |                                                                 |                                     |        |         |       |         |             |        |       |  |   |        | 
| | Nine Months
    Ended September 30, 2003                        |                                     | Canada |         | U.S.  |         | Elimination |        | Total | 
| | Revenue                                                         | $                                   | 90,723 |         | $     | 587     |             | $      | -     |  | $ | 91,310 | 
| | Operating
    and other expenses                                | 89,024                              |        | 2,081   |       | -       |             | 91,105 |      
| | Income (loss) from
    operations                               | 1,699                               |        | (1,494) |       | -       |             | 205    |      
| | Depreciation,
    depletion and amortization                    | 10,525                              |        | 74      |       | -       |             | 10,599 |      
| | Interest expense                                                | 4,353                               |        | 1,463   |       | (1,315) |             | 4,501  |      
| | Cumulative
    mandatorily redeemable preferred stock dividends |                                     |        |         |       |         |             |        |      
| |                                                                 | and
    amortization of issue costs | -      |         | 6,056 |         | -           |        | 6,056 | 
| |                                                                 |                                     |        |         |       |         |             |        |       |  |   |        | 

21

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

The following discussion should be read in conjunction with the
Unaudited Condensed Consolidated Financial Statements and Notes thereto included elsewhere
herein as well as our annual report on Form 10-K, under the name of Capital Environmental
Resource Inc., (now known as Waste Services (CA) Inc.) for the year ended December 31,
2003, as filed with the Securities and Exchange Commission, including the factors set
forth in the section titled "Forward Looking Statements" under the heading
"Risk Factors" as well as our other filings made with the Securities and
Exchange Commission.

Overview

We are a multi-regional, integrated solid waste services company,
providing collection, transfer, landfill disposal and recycling services for commercial,
industrial and residential customers in the United States and Canada. In 2003, we
initiated a disposal-based growth strategy to enter the United States solid waste market
and establish leading, vertically integrated market positions. Under this strategy, we
enter geographic markets with attractive growth or competitive characteristics by
acquiring and developing landfill disposal capacity, then acquiring and developing waste
collection and transfer operations. As part of our business strategy to expand into the
United States, we entered into a migration transaction which was completed effective July
31, 2004. Under the migration transaction, our corporate structure was reorganized so that
Waste Services, a Delaware company, is the ultimate parent company of our corporate group.
Prior to the migration transaction, Waste Services was a subsidiary of Capital. After the
migration transaction, Capital became our subsidiary.

Sources of Revenue

Our revenue consists primarily of fees charged to customers for solid
waste collection, landfill disposal, transfer and recycling services.

We derive a substantial portion of our collection revenue from services
provided to commercial, industrial and residential customers that are generally performed
under service agreements or pursuant to contracts with municipalities. We recognize
revenue when services are rendered. Amounts billed to customers prior to providing the
related services are reflected as deferred revenue and reported as revenue in the periods
in which the services are rendered.

We provide collection services for commercial and industrial customers
generally under one to three year service agreements. We determine the fees we charge our
customers based on a variety of factors, including collection frequency, level of service,
route density, the type, volume and weight of the waste collected, type of equipment and
containers furnished, the distance to the disposal or processing facility, the cost of
disposal or processing and prices charged by competitors for similar services. Our
contracts with commercial and industrial customers typically allow us to pass on increased
costs resulting from variable items such as disposal and fuel costs and surcharges. Our
ability to pass on cost increases is sometimes limited by the terms of our contracts.

We provide residential waste collection services through a variety of
contractual arrangements, including contracts with municipalities, landlords and
homeowners associations or subscription arrangements with homeowners. Our contracts with
municipalities are typically for a term of up to five years and contain a formula,
generally based on a predetermined published price index, for automatic adjustments to
fees to cover increases in some, but not all, of our operating costs. Certain of our
contracts with municipalities contain renewal provisions. The fees we charge for
residential solid waste collection services provided on a subscription basis are based
primarily on route density, the frequency and level of service, the distance to the
disposal or processing facility, the cost of disposal or processing and prices we charge
in the market for similar services.

We charge our landfill and transfer station customers a tipping fee on
a per ton basis for disposing of their solid waste at our transfer stations and landfills.
We generally base our landfill tipping fees on market factors and the type and weight of,
or volume of the waste deposited. We generally base our transfer station tipping fees on
market factors and the cost of processing the waste deposited at the transfer station, the
cost of transporting the waste to a disposal facility and the cost of disposal.

Material recovery facilities generate revenue from the sale of
recyclable commodities. In an effort to reduce our exposure to commodity price
fluctuations on recycled materials, where competitive pressures permit, we charge
collection or processing fees for recycling volume collected from our customers.

Expense Structure

Our cost of operations primarily includes tipping fees and related
disposal costs, labor and related benefit costs, equipment maintenance, fuel, vehicle
insurance and landfill capping, closure and post-closure costs. Our strategy is to create
vertically integrated operations in each of our markets which will allow us to internalize
our own collection volume into our landfills and transfer stations.

22

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Internalization lowers our disposal costs by allowing us to eliminate
tipping fees otherwise paid to an independent landfill operator. We believe
internalization provides us with a competitive advantage by allowing us to be a low cost
provider in our markets. Historically our internalization has been relatively low, but as
a result of the recent opening of our landfills in Florida and Arizona we expect our
internalization will gradually increase over time as we develop our network of transfer
stations and maximize delivery of our collection volumes to these landfill sites.

In markets where we do not have our own landfills, we seek to secure
long-term disposal arrangements with municipalities or private owners of landfills or
transfer stations. In these markets, our ability to maintain competitive prices for our
collection services is generally dependent upon our ability to secure low cost disposal
pricing. If owners of third party disposal sites discontinue our arrangements, we would
have to seek alternative disposal sites which could impact our profitability and cash
flow. In addition, if third party disposal sites increase their tipping fees and we are
unable to pass these increases on to our collection customers, our profitability and cash
flow would be negatively impacted.

We believe the age and condition of a fleet has a significant impact on
operating costs including, but not limited to, repairs and maintenance, insurance and
driver training and retention costs. Through capital investment, we seek to maintain an
average fleet age of five to six years. We believe this enables us to minimize our repair
and maintenance costs, safety and insurance costs and employee turnover related costs.

Selling, general and administrative expense includes managerial costs,
information systems, sales force, administrative expenses and professional fees. We have
made a significant investment in information systems and in assembling our management team
to support our growth strategy. We expect selling, general and administrative expense to
decline as a percentage of revenue as we complete and integrate acquisitions and increase
volume at our new landfill sites.

Depreciation, depletion and amortization expense includes depreciation
of fixed assets over their estimated useful lives using the straight-line method,
depletion of landfill costs, including capping, closure and post-closure obligations using
the units-of-consumption method, and amortization of intangible assets including customer
relationships and contracts and covenants not-to-compete which are amortized over the
expected life of the benefit to be received by such intangibles. As further discussed in
Note 2 to the unaudited condensed consolidated financial statements, effective January 1,
2004, we changed our method of accounting for asset retirement obligations.

We capitalize certain third party costs related to pending acquisitions
or development projects. These costs remain deferred until we cease to be engaged on a
regular and ongoing basis with completion of the proposed acquisition, at which point they
are charged currently in earnings. In the event that the target is acquired, these costs
are incorporated in the cost of the acquired business. We expense indirect and internal
costs including executive salaries, overhead and travel costs related to acquisitions.

Recent Acquisitions

In November 2003, we entered into an agreement to acquire the assets of
Allied Waste Industries, Inc.s ("Allied") northern and central Florida
operations (the "Allied Assets") for a purchase price of approximately $120.0
million subject to an adjustment for working capital. The primary metropolitan areas
served by the Allied Assets are Tampa, Sarasota and Jacksonville, Florida. On December 31,
2003, we completed the first phase of the Allied Assets acquisition. During the first six
months of 2004, we completed the acquisition of the remaining Allied Assets.

In April 2004, we completed an exchange of the Nassau Landfill and
related assets, which were acquired from Allied in December 2003, for a collection
operation in the metropolitan Orlando area and cash proceeds of $10.0 million. As part of
this exchange, the new owner of the Nassau Landfill assumed responsibility for the closure
and post closure obligations related to the landfill. Proceeds in excess of net assets
exchanged reduced goodwill from the original Allied Assets acquisition by $8.6 million.

23

---

In April 2004, we also completed the acquisition of the issued and
outstanding shares of Florida Recycling Services, Inc. ("Florida Recycling") for
an aggregate purchase price of approximately $99.0 million in cash, working capital of
approximately $2.2 million, and the issuance of 9,250,000 Common Shares valued at
approximately $51.4 million. Florida Recycling operations are based in central Florida,
primarily serving the Orlando, Daytona, Fort Myers, and Tampa markets. Since its
acquisition, the performance of the operations of Florida Recycling has been below our
expectations and we engaged an independent third party to conduct a review of
Floridas Recycling business in an effort to identify the factors contributing to the
lower than expected level of performance. Based on the results of this review, it appears
that the 2003 financial statements of Florida Recycling, provided by the sellers,
contained misstatements and could not be relied upon. On September 24, 2004, we reached an
agreement with the selling shareholders of Florida Recycling to adjust the purchase price
paid for the shares of Florida Recycling whereby, in October 2004, the selling
shareholders paid us $7.5 million in cash and returned 500,000 shares of our common stock.
The cash and the shares received (valued at the quoted market price as of September 24,
2004), with a total value of approximately $8.6 million, are recorded as income in
accordance with SFAS No. 141. In addition, upon completion of the 2,000 ton per day
recycling and transfer facility under construction in Orlando, Florida, we will receive
title to the facility which will be recorded at fair value at the date received.

In February 2004, we acquired a permitted undeveloped municipal solid
waste landfill in Fort Bend County, Texas (the "Fort Bend Regional Landfill").
The landfill commenced operations during August of 2004. The purchase price was comprised
of $5.1 million in cash, a seller financed promissory note of $5.0 million which has since
been repaid and the issuance of 4,375,000 Common Shares valued at approximately $25.0
million. Fort Bend Regional Landfill, which serves the metropolitan Houston area, is
approximately 2,600 acres and has an initial permitted capacity of 47.6 million cubic
yards. In addition to the landfill, we acquired a leasehold interest in a fully permitted
transfer station site near Houston, which is presently under construction. In connection
with the acquisition of the Fort Bend Regional Landfill, we entered into a royalty
agreement, under which we will be required to pay a royalty of $0.25 per ton of eligible
waste, as defined in the agreement, received at the landfill after we commence operations
at the site and for the first five years subsequent to the date of the royalty agreement
and $0.35 per ton of eligible waste thereafter.

During the first quarter of 2004, we acquired the assets of three
collection businesses in the metropolitan Phoenix area for aggregate cash consideration of
approximately $8.4 million plus the issuance of 949,800 Common Shares valued at
approximately $5.5 million. Separately, in January 2004, we acquired an
industrial-permitted waste landfill site in Saskatchewan, Canada. The purchase price was
comprised of $1.1 million in cash and the issuance of 12,000 Common Shares valued at
approximately $0.1 million.

During July 2003, we purchased Cactus Waste Systems, LLC for $0.6
million in cash and a $1.2 million option that we exercised in September 2003 to purchase
an 800-acre site in Pinal County, Arizona, which has been zoned to permit the development
of a landfill. The landfill began operations July 2004. During May 2004, we received the
permits and authorizations necessary for the operation of the landfill (the
"Southeast Regional Landfill") and, as a condition of the purchase, we issued
1,250,000 Common Shares valued at $5.5 million to the sellers during the second quarter of
2004 which has been capitalized as a cost of the landfill. The sellers are entitled to
contingent payments based upon the landfill achieving certain defined average tons of
waste per day. Should the landfill achieve a maximum 5,000 tons per day, the total
contingent payments would not exceed $18.0 million. Additionally, we entered into a
royalty agreement whereby we will pay the sellers a royalty of $0.50 per ton on all waste
deposited at the Southeast Regional Landfill after the earlier to occur of July 2006 or
the receipt of 1,250 tons of waste per day at the landfill.

We expect to continue to make strategic acquisitions which we intend to
finance through cash on hand, our Senior Secured Credit Facilities subject to the
limitations on our investing activities set out in the Credit Facilities Agreement, as
amended, and/or the issuance of other debt and equity financings.

Factors that Might Affect Future Results

We have recently acquired and commenced operations at three large
municipal solid waste landfill sites in the United States that we believe will materially
affect our revenue, profitability and cash flow going forward.

The following summarizes our three recently acquired landfills:

>  JED Landfill  a municipal solid waste landfill with 24
>     million cubic yards of permitted capacity, located in Osceola County, Florida. The
>     landfill is located approximately 20 miles south of metropolitan Orlando and is well
>     positioned to serve the Orlando metropolitan area and the surrounding counties. The
>     facility opened for operation in the first quarter of 2004. Part of our strategy is to
>     maximize the internalization of waste volumes to our JED Landfill. The execution of this
>     strategy is dependent partly upon the opening of three transfer stations in central
>     Florida. We had expected that these transfer stations would be operational by the fourth
>     quarter of 2004. However, due to delays in completion we now expect them to begin
>     operations in the second and third quarters of 2005.
>     24
>      Southeast Regional Landfill  a municipal solid waste
>     landfill development with 224 million cubic yards of permitted capacity, located in Pinal
>     County, Arizona. The landfill is located between Phoenix and Tucson, Arizona and is
>     well-positioned to serve both markets. The facility opened for operation in the third
>     quarter of 2004. Also in the third quarter of 2004, we began operations at two of our
>     newly constructed transfer stations in the Phoenix market area.
>      Fort Bend Regional Landfill  a municipal solid waste
>     landfill development with 48 million cubic yards of permitted capacity, located in Fort
>     Bend County, Texas. The landfill is located approximately 15 miles southwest of
>     metropolitan Houston and is well-positioned to serve the Houston metropolitan area,
>     including Fort Bend County. The facility opened for operation in the third quarter of
>     2004. We are in the process of constructing a fully permitted transfer station in Houston.
>     We expect the transfer station to begin operations in the first quarter of 2005.

Results of Operations for the Three Months and Nine months Ended
September 30, 2004 and 2003

Certain of our operations are domiciled in Canada; as such, we
translate the results of operations and financial condition of our Canadian operations
into U.S. dollars. Therefore, reported results of operations and financial condition are
subject to changes in the exchange relationship between the two currencies. For example,
as the relationship of the Canadian dollar strengthens against the U.S. dollar, revenue is
favorably affected and conversely expenses are unfavorably affected. Assets and
liabilities of Canadian operations have been translated from Canadian dollars into U.S.
dollars at the exchange rates in effect at the relevant balance sheet dates, and revenue
and expenses of Canadian operations have been translated from Canadian dollars into U.S.
dollars at the average exchange rates prevailing during the period. Unrealized gains and
losses on translation of the Canadian operations into U.S. dollars are reported as a
separate component of shareholders equity and are included in comprehensive income
(loss). Separately, monetary assets and liabilities denominated in U.S. dollars held by
our Canadian operations are re-measured from U.S. dollars into Canadian dollars and then
translated into U.S. dollars. The effects of re-measurement are reported currently as a
component of net income (loss). Currently, we do not hedge our exposure to changes in
foreign exchange rates.

Our consolidated results of operations for the three and nine months
ended September 30, 2004 and 2003 by geographic segment is as follows (in thousands):

| |                            |                                                  |                            |       |                                      |       |  |         |        |        |        |         |        |        |       |        | 
| | -------------------------- | ------------------------------------------------ | -------------------------- | ----- | ------------------------------------ | ----- |  | ------- | ------ | ------ | ------ | ------- | ------ | ------ | ----- | ------ | 
| |                            |                                                  |                            |       | Three
    Months Ended September 30, |      
| |                            |                                                  |                            |       | 2004                                 |      
| |                            |                                                  |                            |       | Canada                               |       |  |         |        | U.S.   |        |         |        | Total  |       |        | 
| |                            |                                                  |                            |       |                                      |       |  |         |        |        |        |         |        |        |       |        | 
| | Revenue                    | $                                                | 38,689                     |       | 100.0%                               |       |  | $       | 55,926 |        | 100.0% |         | $      | 94,615 |       | 100.0% | 
| | Operating expenses:        |                                                  |                            |       |                                      |       |  |         |        |        |        |         |        |       
| |                            | Cost of operations                               | 25,728                     |       | 66.5%                                |       |  | 42,699  |        | 76.4%  |        | 68,427  |        | 72.3%  |      
| |                            | Selling,
    general and                         |                            |       |                                      |       |  |         |        |        |        |         |        |        |      
| |                            |                                                  | administrative
    expense | 5,311 |                                      | 13.7% |  |         | 11,024 |        | 19.7%  |         | 16,335 |        | 17.3% |       
| |                            | Stock-based
    compensation expense             | 386                        |       | 1.0%                                 |       |  | -       |        | -      |        | 386     |        | 0.4%   |      
| |                            | Severance
    and other related costs            | 172                        |       | 0.5%                                 |       |  | 2,537   |        | 4.5%   |        | 2,709   |        | 2.8%   |      
| |                            | Settlement
    with sellers of Florida Recycling | -                          |       | -                                    |       |  | (8,635) |        | -15.4% |        | (8,635) |        | -9.1%  |      
| |                            | Depreciation,
    depletion                      |                            |       |                                      |       |  |         |        |        |        |         |        |        |      
| |                            |                                                  | and
    amortization       | 4,398 |                                      | 11.4% |  |         | 5,314  |        | 9.5%   |         | 9,712  |        | 10.3% |       
| |                            | Foreign exchange loss                            |                            |       |                                      |       |  |         |        |        |        |         |        |        |      
| |                            |                                                  | and other                  | 21    |                                      | -     |  |         | -      |        | -      |         | 21     |        | -     |       
| |                            |                                                  |                            |       |                                      |       |  |         |        |        |        |         |        |        |       |        | 
| | Income
    from operations | $                                                | 2,673                      |       | 6.9%                                 |       |  | $       | 2,987  |        | 5.3%   |         | $      | 5,660  |       | 6.0%   | 
| |                            |                                                  |                            |       |                                      |       |  |         |        |        |        |         |        |        |       |        | 

25

---

| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 
| | --------------------------------- | ------------------------------------------------ | -------------------------- | ----- | ------------------------------------ | ----- |  | --- | ------- | ----- | ------- | ------ | ----- | ------ | ----- | ------ | 
| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 
| |                                   |                                                  |                            |       | Three
    Months Ended September 30, |      
| |                                   |                                                  |                            |       | 2003                                 |      
| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 
| |                                   |                                                  |                            |       | Canada                               |       |  |     |         | U.S.  |         |        |       | Total  |       |        | 
| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 
| | Revenue                           | $                                                | 34,161                     |       | 100.0%                               |       |  | $   | 587     |       | 100.0%  |        | $     | 34,748 |       | 100.0% | 
| | Operating expenses:               |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |       
| |                                   | Cost of operations                               | 22,476                     |       | 65.9%                                |       |  | 439 |         | 74.8% |         | 22,915 |       | 65.9%  |      
| |                                   | Selling,
    general and                         |                            |       |                                      |       |  |     |         |       |         |        |       |        |      
| |                                   |                                                  | administrative
    expense | 6,015 |                                      | 17.6% |  |     | 1,306   |       | 222.5%  |        | 7,321 |        | 21.1% |       
| |                                   | Stock-based
    compensation expense             | 1,462                      |       | 4.3%                                 |       |  | -   |         | -     |         | 1,462  |       | 4.2%   |      
| |                                   | Severance
    and other related costs            | -                          |       | -                                    |       |  | -   |         | -     |         | -      |       | -      |      
| |                                   | Settlement
    with sellers of Florida Recycling | -                          |       | -                                    |       |  | -   |         | -     |         | -      |       | -      |      
| |                                   | Depreciation,
    depletion                      |                            |       |                                      |       |  |     |         |       |         |        |       |        |      
| |                                   |                                                  | and
    amortization       | 3,734 |                                      | 10.9% |  |     | 74      |       | 12.6%   |        | 3,808 |        | 11.0% |       
| |                                   | Foreign exchange loss                            |                            |       |                                      |       |  |     |         |       |         |        |       |        |      
| |                                   |                                                  | and other                  | 83    |                                      | 0.2%  |  |     | -       |       | -       |        | 83    |        | 0.2%  |       
| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 
| | Income
    (loss) from operations | $                                                | 391                        |       | 1.1%                                 |       |  | $   | (1,232) |       | -209.9% |        | $     | (841)  |       | -2.4%  | 
| |                                   |                                                  |                            |       |                                      |       |  |     |         |       |         |        |       |        |       |        | 



| |                            |                                                  |                            |        |                                     |       |  |         |         |       |        |         |        |         |       |        | 
| | -------------------------- | ------------------------------------------------ | -------------------------- | ------ | ----------------------------------- | ----- |  | ------- | ------- | ----- | ------ | ------- | ------ | ------- | ----- | ------ | 
| |                            |                                                  |                            |        | Nine
    Months Ended September 30, |      
| |                            |                                                  |                            |        | 2004                                |      
| |                            |                                                  |                            |        | Canada                              |       |  |         |         | U.S.  |        |         |        | Total   |       |        | 
| |                            |                                                  |                            |        |                                     |       |  |         |         |       |        |         |        |         |       |        | 
| | Revenue                    | $                                                | 103,401                    |        | 100.0%                              |       |  | $       | 114,157 |       | 100.0% |         | $      | 217,558 |       | 100.0% | 
| | Operating expenses:        |                                                  |                            |        |                                     |       |  |         |         |       |        |         |        |        
| |                            | Cost of operations                               | 69,838                     |        | 67.5%                               |       |  | 83,205  |         | 72.9% |        | 153,043 |        | 70.3%   |      
| |                            | Selling,
    general and                         |                            |        |                                     |       |  |         |         |       |        |         |        |         |      
| |                            |                                                  | administrative
    expense | 16,816 |                                     | 16.3% |  |         | 24,896  |       | 21.8%  |         | 41,712 |         | 19.2% |       
| |                            | Stock-based
    compensation (benefit) loss      | (674)                      |        | -0.7%                               |       |  | 26      |         | -     |        | (648)   |        | -0.3%   |      
| |                            | Severance
    and other related costs            | 172                        |        | 0.2%                                |       |  | 2,537   |         | 2.2%  |        | 2,709   |        | 1.2%    |      
| |                            | Settlement
    with sellers of Florida Recycling | -                          |        | -                                   |       |  | (8,635) |         | -7.6% |        | (8,635) |        | -4.0%   |      
| |                            | Depreciation,
    depletion                      |                            |        |                                     |       |  |         |         |       |        |         |        |         |      
| |                            |                                                  | and
    amortization       | 11,520 |                                     | 11.1% |  |         | 11,473  |       | 10.1%  |         | 22,993 |         | 10.6% |       
| |                            | Foreign exchange gain                            |                            |        |                                     |       |  |         |         |       |        |         |        |         |      
| |                            |                                                  | and other                  | (352)  |                                     | -0.3% |  |         | -       |       | -      |         | (352)  |         | -0.1% |       
| |                            |                                                  |                            |        |                                     |       |  |         |         |       |        |         |        |         |       |        | 
| | Income
    from operations | $                                                | 6,081                      |        | 5.9%                                |       |  | $       | 655     |       | 0.6%   |         | $      | 6,736   |       | 3.1%   | 
| |                            |                                                  |                            |        |                                     |       |  |         |         |       |        |         |        |         |       |        | 

26

---

| |                                   |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |        |       |        | 
| | --------------------------------- | ------------------------------------ | -------------------------- | ------ | ----------------------------------- | ----- |  | --- | ------- | ----- | ------- | ------ | ------ | ------ | ----- | ------ | 
| |                                   |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |        |       |        | 
| |                                   |                                      |                            |        | Nine
    Months Ended September 30, |      
| |                                   |                                      |                            |        | 2003                                |      
| |                                   |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |        |       |        | 
| |                                   |                                      |                            |        | Canada                              |       |  |     |         | U.S.  |         |        |        | Total  |       |        | 
| |                                   |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |        |       |        | 
| | Revenue                           | $                                    | 90,723                     |        | 100.0%                              |       |  | $   | 587     |       | 100.0%  |        | $      | 91,310 |       | 100.0% | 
| | Operating expenses:               |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |       
| |                                   | Cost of operations                   | 59,500                     |        | 65.6%                               |       |  | 439 |         | 74.8% |         | 59,939 |        | 65.6%  |      
| |                                   | Selling,
    general and             |                            |        |                                     |       |  |     |         |       |         |        |        |        |      
| |                                   |                                      | administrative
    expense | 17,274 |                                     | 19.0% |  |     | 1,568   |       | 267.1%  |        | 18,842 |        | 20.7% |       
| |                                   | Stock-based
    compensation expense | 1,285                      |        | 1.4%                                |       |  | -   |         | -     |         | 1,285  |        | 1.4%   |      
| |                                   | Depreciation,
    depletion          |                            |        |                                     |       |  |     |         |       |         |        |        |        |      
| |                                   |                                      | and
    amortization       | 10,525 |                                     | 11.6% |  |     | 74      |       | 12.6%   |        | 10,599 |        | 11.6% |       
| |                                   | Foreign exchange loss                |                            |        |                                     |       |  |     |         |       |         |        |        |        |      
| |                                   |                                      | and other                  | 440    |                                     | 0.5%  |  |     | -       |       | -       |        | 440    |        | 0.5%  |       
| |                                   |                                      |                            |        |                                     |       |  |     |         |       |         |        |        |        |       |        | 
| | Income
    (loss) from operations | $                                    | 1,699                      |        | 1.9%                                |       |  | $   | (1,494) |       | -254.5% |        | $      | 205    |       | 0.2%   | 
| |                                   |                                      |                            |        |                                     |       |  |    

Revenue

A summary of our revenue for the three and nine months ended September
30, 2004 and 2003 is as follows (in thousands):

| |                                  |         |        |     |                                      |         |       |        |                                     |          |        |     |         |         |       |         |         |        |       |     
| | -------------------------------- | ------- | ------ | --- | ------------------------------------ | ------- | ----- | ------ | ----------------------------------- | -------- | ------ | --- | ------- | ------- | ----- | ------- | ------- | ------ | ----- | ----
| |                                  |         |        |     | Three
    Months Ended September 30, |         |       |        | Nine
    Months Ended September 30, |          |        |    
| |                                  |         |        |     | 2004                                 |         |       |        | 2003                                |          |        |     | 2004    |         |       |         | 2003    |        |       |     
| | Collection                       | $       | 81,135 |     | 80.4                                 | %       | $     | 27,821 |                                     | 72.5     | %      | $   | 182,622 |         | 78.9  | %       | $       | 74,536 |       | 74.1
| | Landfill
    disposal            | 7,453   |        | 7.4 |                                      | 3,686   |       | 9.6    |                                     | 16,481   |        | 7.1 |         | 9,221   |       | 9.2     |        
| | Transfer station                 | 8,200   |        | 8.1 |                                      | 4,897   |       | 12.8   |                                     | 19,375   |        | 8.4 |         | 12,431  |       | 12.4    |        
| | Material
    recovery facilities | 3,007   |        | 3.0 |                                      | 1,548   |       | 4.0    |                                     | 7,820    |        | 3.4 |         | 3,593   |       | 3.6     |        
| | Other specialized
    services   | 1,137   |        | 1.1 |                                      | 423     |       | 1.1    |                                     | 5,378    |        | 2.2 |         | 809     |       | 0.7     |        
| |                                  |         |        |     | 100,932                              |         | 100.0 | %      | 38,375                              |          | 100.0  | %   | 231,676 |         | 100.0 | %       | 100,590 |        | 100.0 | %   
| | Intercompany
    elimination     | (6,317) |        |     |                                      | (3,627) |       |        |                                     | (14,118) |        |     |         | (9,280) |       |         |        
| |                                  |         |        |     | $                                    | 94,615  |       |        |                                     | $        | 34,748 |     |         |         | $     | 217,558 |         |        |       | $   
| |                                  |         |        |     |                                      |         |       |        |                                     |          |        |     |         |         |       |         |         |        |       |     

Revenue was $94.6 million and $34.7 million for the three months ended
September 30, 2004 and 2003, respectively, an increase of $59.9 million or in excess of
100%. The increase in revenue for the three months ended September 30, 2004, as compared
to the same period in the prior year, is due to the following (in thousands):

|Acquisitions in the
    United States                  | $     | 47,138
|------------------------------------------------------ | ----- | ------
|Internal
    revenue growth due to volume increases    | 9,785
|Internal revenue
    growth due to price increases     | 607  
|Acquisitions
    in Canada                             | 222  
|Favorable effects of
    foreign exchange fluctuations | 2,115
|                                                       |       |       
|Increase
    in revenue                                | $     | 59,867
|                                                       |       |       

27

---

Revenue was $217.6 million and $91.3 million for the
nine months ended September 30, 2004 and 2003, respectively, an increase of $126.3 million
or in excess of 100%. The increase in revenue for the nine months ended September 30,
2004, as compared to the same period in the prior year, is due to the following (in
thousands):

|Acquisitions in the
    United States                  | $      | 101,070
|------------------------------------------------------ | ------ | -------
|Internal
    revenue growth due to volume increases    | 15,418
|Internal revenue
    growth due to price increases     | 1,934 
|Acquisitions
    in Canada                             | 702   
|Favorable effects of
    foreign exchange fluctuations | 7,124 
|                                                       |        |        
|Increase
    in revenue                                | $      | 126,248
|                                                       |        |        

Cost of Operations

Cost of operations was $68.4 million and $22.9 million for the three
months ended September 30, 2004 and 2003, respectively, an increase of $45.5 million or in
excess of 100%. As a percentage of revenue, cost of operations was 72.3% and 65.9% for the
three months ended September 30, 2004 and 2003, respectively. The increase in cost of
operations as a percentage of revenue is due to lower gross margins on our newly acquired
U.S. operations as compared to our Canadian operations. The increase in disposal,
subcontractor, and labor costs in aggregate dollars and as a percent of revenue due to
increased disposal volumes as well as higher transportation costs at our Canadian
operations. The increase in cost of operations for the three months ended September 30,
2004, as compared to the same period in the prior year, is due to the following (in
thousands):

|Acquisitions
    and new landfills in the United States  | $     | 42,260
|-------------------------------------------------------- | ----- | ------
|Disposal and
    subcontractor cost increases            | 755  
|Labor
    cost increases                                 | 694  
|Acquisitions in Canada                                   | 130  
|Other
    increases                                      | 332  
|Unfavorable effects of
    foreign exchange fluctuations | 1,341
|                                                         |       |       
|Increase
    in cost of operations                       | $     | 45,512
|                                                         |       |       

Cost of operations was $153.0 million and $59.9 million for the nine
months ended September 30, 2004 and 2003, respectively, an increase of $93.1 million or in
excess of 100%. As a percentage of revenue, cost of operations was 70.3% and 65.6% for the
nine months ended September 30, 2004 and 2003, respectively. The increase in cost of
operations as a percentage of revenue is due to lower margins on our newly acquired U.S.
operations as compared to our Canadian operations as well as higher costs of labor on
hauling contracts in our Canadian operations. The increase in disposal, subcontractor, and
labor costs in aggregate dollars and as a percent of revenue is due to increased disposal
volumes as well as higher transportation costs at our Canadian operations. The increase in
cost of operations for the nine months ended September 30, 2004, as compared to the same
period in the prior year, is due to the following (in thousands):

|Acquisitions
    and new landfills in the United States  | $     | 82,766
|-------------------------------------------------------- | ----- | ------
|Disposal and
    subcontractor cost increases            | 2,067
|Labor
    cost increases                                 | 2,499
|Acquisitions in Canada                                   | 416  
|Other
    increases                                      | 544  
|Unfavorable effects of
    foreign exchange fluctuations | 4,812
|                                                         |       |       
|Increase
    in cost of operations                       | $     | 93,104
|                                                         |       |       

Selling, general and administrative expense

Selling, general and administrative expense, excluding stock-based
compensation expense, was $16.3 million and $7.3 million for the three months ended
September 30, 2004 and 2003, respectively, an increase of $9.0 million or in excess of
100%. As a percentage of revenue, selling, general and administrative expense was 17.3%
and 21.1% for the three months ended September 30, 2004 and 2003, respectively. Selling,
general and administrative expense was $41.7 million and $18.8 million for the nine months
ended September 30, 2004 and 2003, respectively, an increase of $22.9 million or in excess
of 100%. As a percentage of revenue, selling, general and administrative expense was 19.2%
and 20.7% for the nine months ended September 30, 2004 and 2003, respectively. The overall
increase in selling, general and administrative expense is primarily due to acquisitions
in the U.S., increased salaries, systems and other overhead costs incurred in connection
with our expansion into the U.S. Overhead at our corporate offices was $6.1 million and
$3.7

28

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million for the three months ended September 30, 2004 and 2003,
respectively and $17.0 million and $10.3 million for the nine months ended September 30,
2004 and 2003, respectively. In connection with our previously defined migration
transaction we incurred legal and professional fees of $0.2 million and $0.9 million for
the three and nine months ended September 30, 2004. Concurrent with our bank amendment we
incurred approximately $0.8 million of legal and professional fees that were expensed
currently in the quarter. Separately, during the third quarter of 2004 and as part of our
cost reduction initiatives, we reduced our workforce by approximately 55 employees and
incurred approximately $2.7 million, of which $1.7 million related to our former
President, in severance charges and other related costs. As a result of the workforce
reduction, we expect an annual savings of $3.2 million in salary and related costs. The
unfavorable effects of foreign exchange movements increased selling, general and
administrative expense $0.4 million and $1.2 million for the three and nine months ended
September 30, 2004, respectively.

Stock-based compensation expense (benefit)

Stock-based compensation expense (benefit) relates to warrants issued
to an executive officer in 2001 for which variable accounting applies and options or
warrants issued to non-employees for services rendered. Stock-based compensation expense
(benefit), which is partially based on changes in our stock price, was $0.4 million and
$1.5 million for the three months ended September 30, 2004 and 2003, respectively, and
$(0.6) million and $1.3 million for the nine months ended September 30, 2004 and 2003,
respectively.

Depreciation, depletion and amortization

Depreciation, depletion and amortization was $9.7 million and $3.8
million for the three months ended September 30, 2004 and 2003, respectively, an increase
of $5.9 million or in excess of 100.0%. As a percentage of revenue depreciation, depletion
and amortization was 10.3% and 11.0% for the three months ended September 30, 2004 and
2003, respectively. The overall increase in depreciation, depletion and amortization for
the three months ended September 30, 2004, as compared to the same period in the prior
year, is due to the following (in thousands):

|Acquisitions
    in the United States                    | $   | 4,547
|-------------------------------------------------------- | --- | -----
|Increase in
    depreciation                             | 306
|Increase
    in depletion at our landfill operations     | 807
|Unfavorable effects of
    foreign exchange fluctuations | 244
|                                                         |     |      
|Increase
    in depreciation, depletion and amortization | $   | 5,904
|                                                         |     |      

Depreciation, depletion and amortization was $23.0 million and $10.6
million for the nine months ended September 30, 2004 and 2003, respectively, an increase
of $12.4 million or in excess of 100%. As a percentage of revenue depreciation, depletion
and amortization was 10.6% and 11.6% for the nine months ended September 30, 2004 and
2003, respectively. The overall increase in depreciation, depletion and amortization for
the nine months ended September 30, 2004 as compared to the same period in the prior year
is due to the following (in thousands):

|Acquisitions
    in the United States                    | $   | 9,810 
|-------------------------------------------------------- | --- | ------
|Increase in
    depreciation                             | 972
|Increase
    in depletion at our landfill operations     | 818
|Unfavorable effects of
    foreign exchange fluctuations | 794
|                                                         |     |       
|Increase
    in depreciation, depletion and amortization | $   | 12,394
|                                                         |     |       

The overall increase in depreciation, depletion and amortization is
primarily due to our U.S. acquisitions and the opening of our three newly developed
landfills. The decline in depreciation, depletion, and amortization as a percentage of
revenue is primarily due to the relative mix of landfill disposal revenue to total
revenue. The weighted average landfill depletion rate for our operating Canadian landfills
during the nine months ended September 30, 2004 and 2003 was C$10.18 per ton. The weighted
average landfill depletion rate for our operating U.S. landfills during the nine months
ended September 30, 2004 was $6.03 per ton.

29

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Foreign exchange loss (gain) and other

Foreign exchange (gain) loss and other was $(0.02) million and $0.08
million for the three months ended September 30, 2004 and 2003, respectively and $(0.4)
and $0.4 million for the nine months ended September 30, 2004 and 2003, respectively. The
foreign exchange loss and other relates primarily to the re-measuring of U.S. dollar
denominated cash balances into Canadian dollars.

Interest expense

The components of interest expense, including cumulative mandatorily
redeemable preferred stock dividends and amortization of issue costs, for the nine months
ended September 30, 2004 and 2003 are as follows:

|                                     |                                     |       |       |      | Three
    Months Ended September 30, |        | Nine
    Months Ended September 30, |      
|------------------------------------ | ----------------------------------- | ----- | ----- | ---- | ------------------------------------ | ------ | ----------------------------------- | -----
|                                     |                                     |       |       |      | 2004                                 |        | 2003                                |      
|Waste Services
    Preferred Stock   |                                     |       |       |      |                                      |        |                                     |      
|                                     | and amortization of
    issue costs | $     | 4,535 |      | 44.4                                 | %      | $                                   | 3,858
|Credit
    facility and Senior       |                                     |       |       |      |                                      |        |                                     |      
|                                     | Subordinated
    Note interest      | 5,192 |       | 50.8 |                                      | 1,007  |                                     | 18.7 
|Amortization of debt
    issue costs | 314                                 |       | 3.1   |      | 256                                  |        | 4.8                                 |      
|Capitalized
    interest             | -                                   |       | -     |      | -                                    |        | -                                   |      
|Other interest expense               | 175                                 |       | 1.7   |      | 251                                  |        | 4.7                                 |      
|                                     |                                     |       |       |      | $                                    | 10,216 |                                     | 100.0
|                                     |                                     |       |       |      |                                      |        |                                     |      

The increase in interest expense is due primarily to (i) increased
amortization of debt issue costs, which includes a $6.5 million charge for the remaining
unamortized debt issue costs associated with the repayment of our 364-day Credit Facility
in April 2004, (ii) increased interest expense relative to our senior credit facilities
and 9 1/2% Subordinated Notes and (iii) increased non-cash dividends and amortization of
issue costs relative to our cumulative mandatorily redeemable preferred stock. The
weighted average interest rate on credit facility borrowings was 5.03% and 6.9%, for the
three months ended September 30, 2004 and 2003, respectively, and 7.21% and 6.7% for the
nine months ended September 30, 2004 and 2003, respectively. We expect cash interest
expense to continue to be higher than 2003 due to increased debt balances coupled with
overall higher interest rates.

Changes in fair value of warrants pending registration

Due to the nature of certain financial penalties within the
registration rights agreement in our April 2004 private placement, the Common Shares,
warrants and related proceeds from the offering were classified outside of
shareholders equity until the registration was declared effective during August of
2004. Such amounts have been reclassified to permanent equity during the third quarter of
2004.

Income tax provision

The provision for income taxes was $1.7 million and $0.9 million for
the three months ended September 30, 2004 and 2003, respectively. The provision for income
taxes was $5.0 million and $0.6 million for the nine months ended September 30, 2004 and
2003, respectively. In 2004, we have recognized a provision for income taxes despite our
pre-tax loss due to the tax effect of the non-deductible dividends on the cumulative
mandatorily redeemable preferred stock, including the corresponding amortization of
discounts and debt issue costs, and the Canadian Large Corporations tax. Additionally, due
to the lack of operating history relative to our U.S. operations, we have provided a
valuation allowance for our net operating loss carryforwards generated in the U.S.

Liquidity and Capital Resources

Our principal capital requirements are to fund capital expenditures,
fund business and asset acquisitions and for debt service. Significant sources of
liquidity are cash on hand, working capital, borrowings from our Credit Facilities, our
ability to issue performance bonds and letters of credit and proceeds from debt and equity
issuances.

30

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Senior Secured Credit Facilities

On April 30, 2004, we entered into new Senior Secured Credit Facilities
(the "Credit Facilities") with a syndicate of lenders. The Credit Facilities
consist of a five-year revolving credit facility in the amount of $60.0 million, up to
$15.0 million of which is available to our Canadian operations, and a seven-year term loan
facility in the amount of $100.0 million. The Credit Facilities bear interest based upon a
spread over base rate or Eurodollar loans, as defined, at our option. The Credit
Facilities are secured by substantially all of the assets of our U.S. restricted
subsidiaries. Our Canadian operations guarantee and pledge all of their assets only in
support of the portion of the revolving credit facility available to them. Separately, 65%
of the common shares of Waste Services first tier foreign subsidiaries, including
Capital, are pledged to secure obligations under the Credit Facilities. As of September
30, 2004, $14.0 million was drawn under the revolving credit facility and $12.6 million
was used to support outstanding letters of credit.

As of June 30, 2004, we failed to meet certain of the financial
covenants contained in the Credit Facilities. On August 25, 2004, we entered into an
amendment and waiver agreement with the administrative agent for the lenders waiving
compliance with these financial covenants until October 5, 2004. On October 4, 2004, we
entered into an amendment to the credit agreement with the administrative agent for the
lenders. The amendment includes changes to certain of the financial and other covenants
contained in the credit facilities and increases the current interest rates payable on
amounts outstanding by 125 basis points to 450 basis points over Euro dollar loans. Until
we meet certain target leverage ratios, as defined, availability under the amended
facility is reduced to $50 million up to $12.5 million of which is available for our
Canadian operations. In connection with the amendment, we paid a fee of approximately $0.4
million to our lenders. We are now in compliance with the financial covenants, as amended,
at June 30, 2004 and at September 30, 2004 and we expect to continue to be in compliance
in future periods. As such, we have classified our borrowings under the Credit Facilities
at September 30, 2004 as non-current. The amendment also requires us to receive an equity
investment of at least $7.5 million prior to March 28, 2005. On September 30, 2004, we
entered into a standby purchase agreement with Michael G. DeGroote pursuant to which we
may require Mr. DeGroote to purchase shares of our common stock and warrants for a
purchase price of $7.5 million on or before March 28, 2005.

Our Credit Facilities, as amended, contain certain financial and other
covenants that restrict our ability to, among other things, make capital expenditures,
incur indebtedness, incur liens, dispose of property, repay debt, pay dividends,
repurchase shares and make certain acquisitions. Our financial covenants include: (i)
minimum consolidated interest coverage, (ii) maximum total leverage and (iii) maximum
senior secured leverage. The covenants and restrictions limit the manner in which we
conduct our operations and could adversely affect our ability to raise additional capital.

The following table sets forth our financial covenant levels for the
current and each of the next four quarters:

|Fiscal Quarter | Maximum
    ConsolidatedLeverage Ratio | Maximum
    Consolidated SeniorSecured Leverage Ratio | Minimum
    ConsolidatedInterest Coverage Ratio
|-------------- | -------------------------------------- | ----------------------------------------------------- | -----------------------------------------------
|FQ3 2004       | 7.50:1.00                              | 3.25:1.00                                             | 1.75:1.00                                      
|FQ4 2004       | 7.25:1.00                              | 3.25:1.00                                             | 1.75:1.00                                      
|FQ1 2005       | 7.00:1.00                              | 3.00:1.00                                             | 1.75:1.00                                      
|FQ2 2005       | 6.50:1.00                              | 2.75:1.00                                             | 1.75:1.00                                      
|FQ3 2005       | 5.75:1.00                              | 2.50:1.00                                             | 1.75:1.00                                      

Senior Subordinated Notes

On April 30, 2004, we completed a private offering of 9 1/2% Senior
Subordinated Notes ("Subordinated Notes") due 2014 for gross proceeds of $160.0
million. The Subordinated Notes mature on April 15, 2014. Interest on the Subordinated
Notes is payable semiannually commencing October 15, 2004. The Subordinated Notes are
redeemable, in whole or in part, at our option, on or after April 15, 2009, at a
redemption price of 104.75% of the principal amount, declining ratably in annual
increments to par on or after April 15, 2012, together with accrued interest to the
redemption date. In addition, prior to April 15, 2007, we may redeem up to 35.0% of the
aggregate principal amount of the Subordinated Notes with the proceeds of certain equity
offerings, at a redemption price equal to 109.5% of the principal amount. Upon a change of
control, as such term is defined in the Indenture, we are required to offer to repurchase
all the Subordinated Notes at 100.0% of the principal amount, together with accrued
interest and liquidated damages, if any, and obtain the consent of our senior lenders to
such payment or repay our indebtedness under our Credit Facilities.

31

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The Subordinated Notes are unsecured and are subordinate to our
existing and future senior secured indebtedness, including our Credit Facilities
structurally subordinated to existing and future indebtedness of our non-guarantor
subsidiaries, rank equally with any unsecured senior subordinated indebtedness and senior
to our existing and future subordinated indebtedness. Our obligations with respect to the
Subordinated Notes, including principal, interest, premium, if any, and liquidated
damages, if any, are fully and unconditionally guaranteed on an unsecured, senior
subordinated basis by all of our existing and future domestic restricted subsidiaries. The
Canadian operations are not guarantors under the Subordinated Notes.

The Subordinated Notes contain certain covenants that, in certain
circumstances and subject to certain limitations and qualifications, restrict, among other
things (i) the incurrence of additional debt; (ii) the payment of dividends and
repurchases of stock; (iii) the issuance of preferred stock and the issuance of stock of
our subsidiaries; (iv) certain investments; (v) the repurchase of our Preferred Stock;
(vi) transactions with affiliates and (vii) certain sales of assets.

We also entered into a Registration Rights Agreement with the initial
purchasers of the Subordinated Notes in which we agreed to (i) file a registration
statement with respect to the Subordinated Notes within 120 days of the closing date of
the issuance of the notes (August 28, 2004), pursuant to which we will exchange the
Subordinated Notes for registered notes of Waste Services with terms identical to the
Subordinated Notes; (ii) have such registration statement declared effective within 210
days of the issuance date; (iii) maintain the effectiveness of such registration statement
for minimum periods specified in the agreement and (iv) file a shelf registration
statement in the circumstances and within the time periods specified in the agreement. To
date, we have not filed the registration statement with respect to the Subordinated Notes
and, therefore, we are required to pay liquidated damages, in cash, in an amount equal to
$0.05 per week per $1,000 in principal amount, of the unregistered Subordinated Notes, for
each week that the default continues for the first 90-days following default
(approximately $8,000 per week.) Thereafter, the amount of liquidated damages increases by
an additional $0.05 per week per $1,000 in principal amount of unregistered Subordinated
Notes for each subsequent 90-day period until all defaults have been cured, to a maximum
of $0.50 per week per $1,000 in principal amount of unregistered Subordinated Notes
outstanding. These liquidated damages are payable at the same time as interest payments
due under the Subordinated Notes.

Equity Placement

On April 30, 2004, we raised approximately $50.7 million, after
deducting expenses of approximately $2.9 million, from the sale of 13,400,000 Common
Shares and warrants to purchase 1,340,000 Common Shares of Capital in private placement
transactions to certain investors. Sanders Morris Harris Inc. acted as the placement agent
for the issuance and was paid a placement agent fee of approximately $2.7 million. Don A.
Sanders, a director of ours at the time of such issuance, is a principal of Sanders Morris
Harris Inc.

Cumulative Mandatory Redeemable Preferred Stock

In May 2003, we issued 55,000 shares of redeemable Preferred Stock (the
"Waste Services Preferred Stock") to Kelso Investment Associates VI, L.P. and
KEP VI, LLC (collectively "Kelso"), pursuant to the terms of an agreement dated
as of May 6, 2003, as amended in February 2004, (the "Waste Services Subscription
Agreement"), at a price of $1,000 per share. Waste Services also issued to Kelso
7,150,000 warrants to purchase shares of Common Stock (on a one-for-one basis) of Waste
Services for $3.00 per share. The warrants are exercisable at any time until May 6, 2010.
The issuance of the Waste Services Preferred Stock resulted in proceeds of approximately
$49.5 million, net of fees of approximately $5.5 million. The shares of Waste Services
Preferred stock are non-voting. The Waste Services Preferred Stock entitles the holders to
cash dividends of 17.75% per annum compounding and accruing quarterly in arrears. The
liquidation preference approximated $70.3 million as of September 30, 2004. The Waste
Services Preferred Stock entitles the holders to a liquidation preference of $1,000 per
share, adjusted for any stock dividend, stock split, reclassification, recapitalization,
consolidation or similar event affecting the Waste Services Preferred Stock, plus the
amount of any accrued but unpaid dividends on such share as of any date of determination.

As we are not permitted to declare and pay cash dividends pursuant to
the terms of our Credit Facilities, the dividend payments will accrue. The Waste Services
Preferred Stock, including all accrued and unpaid dividends, must be redeemed in full by
no later than May 6, 2015. Until May 6, 2006, we may redeem all or any part of the Waste
Services Preferred Stock on payment of the sum of $1,000 per share plus accrued and unpaid
dividends calculated as if the Waste Services Preferred Stock were redeemed on May 6,
2006, or approximately $92.7 million. If we do not exercise our option to redeem all of
the Waste Services Preferred Stock by May 6, 2009, Kelso may require us to initiate a sale
of Waste Services or of its assets on terms acceptable to our board consistent with the
exercise of their fiduciary duties. Pursuant to an amendment to the Certificate of
Designations of Waste Services dated April 30, 2004, if Waste Services determines, after
conducting a sale process, that any such sale would not yield sufficient proceeds to repay
in full the indebtedness then outstanding under our Credit Facilities and the redemption
amount of our Subordinated Notes issued on April 30, 2004, or at least $320.0 million,
then Waste Services may elect to delay such sale. The sale date may be delayed until the
earliest to occur of (i) the final maturity date of the Subordinated Notes (April 15,
2014); (ii) the date on which our Credit Facilities and the Subordinated Notes are fully
repaid or otherwise satisfied or (iii) a sale of Waste Services. We refer to this date as
the delayed sale date. If we do not initiate and complete a sale of Waste Services or its
assets within 20 months of initiation of the sale process by the holders of Waste Services
Preferred Stock, then on notice from the holders of the Waste Services Preferred Stock,
all outstanding Waste Services Preferred Stock will become due and payable on the first
anniversary of the date on which the holders

32

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of Waste Services Preferred Stock gave notice requiring the initiation
of a sale process, for a liquidation amount of 1.20 times the liquidation preference of
$1,000 per share. If the sale day has been delayed, then Waste Services is not required to
pay this increased liquidation amount until the delayed sale date.

Also pursuant to the Amended Certificate of Designations, if Waste
Services becomes subject to a liquidation or insolvency event (as such terms are defined
in our Amended and Restated Credit Agreement dated April 30, 2004) or in the event of a
change of control of Waste Services (as such term is defined in the Amended Certificate of
Designations), all payments and other distributions to holders of Waste Services Preferred
Stock will be subordinate to the repayment in full of our Credit Facilities. This
provision does not prohibit any accrual or increase in the dividend rate or in the
liquidation preference of the Waste Services Preferred Stock as provided for in the
Amended Certificate of Designations, or the distribution of additional shares or other
equity securities to the holders of Waste Services Preferred Stock, so long as such
additional shares or other equity securities are subject to at least equivalent
subordination provisions. In addition, the Amended Certificate of Designations prohibits
us from making any payment or distribution to the holders of Waste Services Preferred
Stock in the event of a sale of Waste Services or its assets, or the exercise by the
holders of Waste Services Preferred Stock of their right to require payment of the
liquidation amount of their shares as a result of the failure to consummate a sale of
Waste Services as described in the preceding paragraph, unless such payment or
distribution is expressly permitted pursuant to the terms of the agreement then governing
our Credit Facilities.

Migration Transaction

As part of our business strategy to expand into the United States, we
entered into a migration transaction effective July 31, 2004. Under the migration
transaction, our corporate structure was reorganized so that Waste Services, a Delaware
company, is the ultimate parent company of our corporate group. Prior to the migration
transaction, Waste Services was a subsidiary of Capital, which is a company amalgamated
under the laws of the Province of Ontario, Canada. After the migration transaction,
Capital became Waste Services subsidiary.

The migration transaction occurred by way of a plan of arrangement
under the Business Corporations Act (Ontario) and consisted primarily of: (1) the exchange
of 87,657,035 common shares of Capital for 87,657,035 shares of common stock of Waste
Services; and (2) the conversion of the remaining 9,229,676 common shares of Capital held
by non-US residents who elected to receive exchangeable shares into 9,229,676 exchangeable
shares of Waste Services (CA) Inc. The transaction was approved by the Ontario Superior
Court of Justice on July 30, 2004 and by our shareholders at a special meeting held on
July 27, 2004.

The terms of the exchangeable shares of Capital are the economic and
functional equivalent of the common stock of Waste Services. Holders of exchangeable
shares (1) will receive the same dividends as holders of shares of common stock of Waste
Services and (2) will be entitled to vote on the same matters as holders of shares of
common stock of Waste Services. Such voting is accomplished through the one (1) share of
Special Voting Preferred Stock held by Computershare Trust Company of Canada as trustee,
who will vote on the instructions of the holders of the exchangeable shares (one vote for
each exchangeable share). As such, the exchangeable shares have been classified as a
component of our common equity. Values assigned to the Waste Services common stock and the
exchangeable shares are based upon the historical book value per share allocated on a pro
rate basis as of July 31, 2004, the date the migration was completed.

Upon the occurrence of certain events, such as the liquidation of
Capital, or after the redemption date, our Canadian holding company, Capital Holdings will
have the right to purchase each exchangeable share for a share of common stock of Waste
Services, plus all declared and unpaid dividends on the exchangeable share. Unless certain
events occur, such redemption date will not be earlier than December 31, 2016. Holders of
exchangeable shares also have the right at any anytime at their option, to exchange their
exchangeable shares for shares of common stock of Waste Services.

33

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Surety Bonds, Letters of Credit and Insurance

Municipal solid waste services contracts, permits and licenses to
operate transfer stations, landfills and recycling facilities may require performance or
surety bonds, letters of credit or other means of financial assurance to secure
contractual performance. As of September 30, 2004 and December 31, 2003, we had provided
customers and various regulatory authorities with such bonds and letters of credit
amounting to approximately $50.3 million and $10.3 million respectively to collateralize
our obligations. We also had an obligation to issue replacement bonds totaling
approximately $0.2 million as of September 30, 2004.

Our U.S.-based automobile, general liability and workers
compensation insurance coverage is subject to certain deductible limits. We retain up to
$0.5 million and $0.25 million of risk per claim, plus claims handling expense under our
workers compensation and our auto and general liability insurance programs,
respectively. Claims in excess of such deductible levels are fully insured subject to our
policy limits. However, we have a limited claims history for our U.S. operations and it is
reasonably possible that recorded reserves may not be adequate to cover future payments of
claims. Adjustments, if any, to our reserves will be reflected in the period in which the
adjustments are known. As of September 30, 2004 we have posted a letter of credit with our
U.S. insurer of approximately $2.3 million to cover the liability for losses within the
deductible limit.

Cash Flows

The following discussion relates to the major components of the changes
in cash flows for the nine months ended September 30, 2004 and 2003.

> Cash Flows from Operating Activities
>   Cash flows provided by operating activities was $10.7 million
>   and $3.9 million for the nine months ended September 30, 2004 and 2003, respectively. The
>   increase in cash provided by operating activities is primarily due to cash generated from
>   our U.S. acquisitions as well as improvements in working capital.
>   Cash Flows used in Investing Activities
>   Cash flows used in investing activities was $189.2 million and
>   $93.4 million for the nine months ended September 30, 2004 and 2003, respectively. The
>   increase in cash used in investing activities is primarily due to the various business
>   acquisitions we completed during the first nine months of 2004 and increased capital
>   expenditures. We intend to finance capital expenditures and business acquisitions through
>   operating cash flow, borrowings under our Credit Facilities, subject to the limitations on
>   our investing activities set out in the Credit Facilities Agreement, and the issuance of
>   additional debt and/or equity securities. Capital expenditures were $33.6 million for the
>   nine months ended September 30, 2004. We expect our capital expenditures to range from
>   $47.0 to $49.0 million for all of 2004.
>   Cash Flows from Financing Activities
>   Cash flows provided by financing activities was $160.6 million
>   and $129.8 million for the nine months ended September 30, 2004 and 2003, respectively.
>   The increase in cash flows from financing activities is due to our borrowings under our
>   new senior credit facilities, the offering of Senior Subordinated Notes and the sale of
>   common shares and warrants of Capital previously discussed.

Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations, other than
our letters of credit and performance and surety bonds discussed previously, which are not
debt. We have no transactions or obligations with related parties that are not disclosed,
consolidated into or reflected in our reported results of operations or financial
position. We do not guarantee any third party debt. Capital has entered into a put or pay
disposal agreement with RCI Environment Inc., Centres de Transbordement et de Valorisation
Nord Sud Inc., RCM Environment Inc. (collectively the "RCI Companies") and
Intersan Inc. pursuant to which we have posted a letter of credit for C$4.0 million to
secure our obligations and those of the RCI Companies to Intersan Inc. Concurrently with
the put or pay disposal agreement with the RCI Companies, Capital entered into a three
year agreement with Waste Management of Canada Corporation (formerly Canadian Waste
Services Inc.) to allow us to deliver non-hazardous solid waste to their landfill in
Michigan. Details of these agreement are further described in our annual financial
statements for the year ended December 31, 2003, as filed on Form 10-K with the Securities
and Exchange Commission.

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Landfill Sites

The following table summarizes the changes in our operating landfill
capacity for the nine months ended September 30, 2004 (in thousands of cubic yards):

|              |                                 |        |  | Balance,  |  |           |  |           |  |              |          |          |           | Balance,
|------------- | ------------------------------- | ------ |  | --------- |  | --------- |  | --------- |  | ------------ | -------- | -------- | --------- | --------
|              |                                 |        |  | Beginning |  | Landfills |  | Landfills |  | Landfills    |          | Airspace |           | End     
|              |                                 |        |  | of Period |  | Acquired  |  | Divested  |  | Expanded (1) | Consumed |          | of Period
|Canada        |                                 |        |  |           |  |           |  |           |  |              |          |          |          
|              | Permitted capacity              | 10,871 |  | 1,430     |  | -         |  | -         |  | (412)        |          | 11,889  
|              | Probable
    expansion capacity | -      |  | -         |  | -         |  | -         |  | -            |          | -       
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Total available
    airspace    | 10,871 |  | 1,430     |  | -         |  | -         |  | (412)        |          | 11,889  
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Number
    of sites             | 2      |  | 1         |  | -         |  | -         |  |              |          | 3       
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|United States |                                 |        |  |           |  |           |  |           |  |              |          |          |          
|              | Permitted capacity              | 26,084 |  | -         |  | (83)      |  | 272,000   |  | (466)        |          | 297,535 
|              | Probable
    expansion capacity | 18,300 |  | -         |  | -         |  | -         |  | -            |          | 18,300  
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Total available
    airspace    | 44,384 |  | -         |  | (83)      |  | 272,000   |  | (466)        |          | 315,835 
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Number
    of sites             | 3      |  | -         |  | (1)       |  | 2         |  |              |          | 4       
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|Total         |                                 |        |  |           |  |           |  |           |  |              |          |          |          
|              | Permitted capacity              | 36,955 |  | 1,430     |  | (83)      |  | 272,000   |  | (878)        |          | 309,424 
|              | Probable
    expansion capacity | 18,300 |  | -         |  | -         |  | -         |  | -            |          | 18,300  
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Total available
    airspace    | 55,255 |  | 1,430     |  | (83)      |  | 272,000   |  | (878)        |          | 327,724 
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         
|              | Number
    of sites             | 5      |  | 1         |  | (1)       |  | 2         |  |              |          | 7       
|              |                                 |        |  |           |  |           |  |           |  |              |          |          |           |         

> (1) Includes our Southeast Regional Landfill in Arizona and Fort Bend
>   Regional Landfill in Texas, both of which were opened in the third quarter of 2004 and
>   have initial permitted capacities of 224 million and 48 million cubic yards, respectively.

Trend Information

Seasonality

We expect the results of our Canadian operations to vary seasonally,
with revenue typically lowest in the first quarter of the year, higher in the second and
third quarters, and lower in the fourth quarter than in the third quarter. The seasonality
is attributable to a number of factors. First, less solid waste is generated during the
late fall, winter and early spring because of decreased construction and demolition
activity. Second, certain operating costs are higher in the winter months because winter
weather conditions slow waste collection activities, resulting in higher labor costs, and
rain and snow increase the weight of collected waste, resulting in higher disposal costs,
which are calculated on a per ton basis. Also, during the summer months, there are more
tourists and part-time residents in some of our service areas, resulting in more
residential and commercial collection. Consequently, we expect operating income to be
generally lower during the winter. The effect of seasonality on our results of operations
from our U.S. operations, which are located in warmer climates than our Canadian
operations, is less significant than that of our Canadian operations.

35

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Disclosure Regarding Forward-Looking Statements

This Form 10-Q contains certain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, or the Exchange
Act. Some of these forward-looking statements include forward-looking phrases such as
"anticipates," "believes," "could," "estimates,"
"expects," "foresees," "intends," "may,"
"should" or "will continue," or similar expressions or the negatives
thereof or other variations on these expressions, or similar terminology, or discussions
of strategy, plans or intentions. These statements also include descriptions in connection
with, among other things:

>  our anticipated revenues, capital expenditures, future cash
>     flows and financing requirements, and those of companies or assets we acquire;
>      the implementation of our business strategy;
>      descriptions of the expected effects of our competitive
>     strategies; and
>      the impact of actions taken by our competitors and other third
>     parties, including courts and other governmental authorities.

Such statements reflect our current views regarding future events and
are subject to certain risks, uncertainties and assumptions. Many factors could cause the
actual results, performance or achievements to be materially different from any future
results, performance or achievements that forward-looking statements may express or imply,
including, among others:

>  changes in inflation;
>      changes in regulations affecting our business and costs of
>     compliance;
>      revocation of existing permits and licenses or the refusal to
>     renew or grant new permits and licenses, which are required to enable us to operate our
>     business or implement our growth strategy;
>      our ability to successfully implement our corporate strategy and
>     integrate any acquisitions we undertake;
>      the outcome of pending legal claims against us;
>      changes in general business and economic conditions and in the
>     financial markets; and
>      changes in accounting standards or pronouncements.
>      construction, equipment delivery or permitting delays for our
>     transfer stations or landfills.

Some of these factors are discussed in more detail in our annual report
on Form 10-K, as filed with the Securities and Exchange Commission for the year ended
December 31, 2003, included under Item 1. of the annual report, "Business  Risk
Factors" as well as set forth in our Form S-3/A as filed on August 3, 2004. If one or
more of these risks or uncertainties affects future events and circumstances, or if
underlying assumptions do not materialize, actual results may vary materially from those
described in this Form 10-Q and our annual report as anticipated, believed, estimated or
expected, and this could have a material adverse effect on our business, financial
condition and the results of our operations. Further, any forward-looking statement speaks
only as of the date on which it is made, and except as required by law we undertake no
obligation to update any forward-looking statement to reflect events or circumstances
after the date on which it is made or to reflect the occurrence of anticipated or
unanticipated events or circumstances.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

A portion of our operations are domiciled in Canada; as such, we
translate the results of our operations and financial condition of our Canadian operations
into U.S. dollars. Therefore, our reported results of operations and financial condition
are subject to changes in the exchange relationship between the two currencies. For
example, as the relationship of the Canadian dollar strengthens against the U.S. dollar
our revenue is favorably affected and conversely our expenses are unfavorably affected.
Assets and liabilities of Canadian operations have been translated from Canadian dollars
into U.S. dollars at the exchange rates in effect at the relevant balance sheet date, and
revenue and expenses of Canadian operations have been translated from Canadian dollars
into U.S. dollars at the average exchange rates prevailing during the period. Unrealized
gains and losses on translation of the Canadian operations into U.S. dollars are reported
as a separate component of shareholders equity and are included in comprehensive
income (loss). Separately, monetary assets and liabilities denominated in U.S. dollars
held by our Canadian operation are re-measured from U.S. dollars into Canadian dollars and
then translated into U.S. dollars. The effects of re-measurement are reported currently as
a component of net income (loss). Currently, we do

36

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not hedge our exposure to changes in foreign exchange rates. For the
three and nine months ended September 30, 2004 and 2003 we estimate that a 5.0% increase
or decrease in the relationship of the Canadian dollar to the U.S. dollar would increase
or decrease operating profit from our Canadian operations by less than $0.1 million and
$0.3 million for the three and nine months ended September 30, 2004, respectively.

As of September 30, 2004, we were exposed to variable interest rates
under our Credit Facilities, as amended. The interest rates payable on our revolving and
term facilities are based on a spread over base Eurodollar loans as defined. A 25 basis
point increase in base interest rates would increase cash interest expense by
approximately $0.3 million.

Item 4.Controls and Procedures

Disclosure Controls and Procedures/Evaluation of Disclosure Controls
and Procedures

As of the end of the period covered by this report, we carried out an
evaluation under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the
Securities Exchange Act of 1934, or the Exchange Act. Based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures were adequate and effective and designed to ensure that material
information relating to us (including our consolidated subsidiaries) required to be
disclosed by us in the reports we file under the Exchange Act is recorded, processed,
summarized and reported within the required time periods.

Changes in Internal Controls

During the period covered by this filing, there have been no changes in
our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

37

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

Information regarding our legal proceedings may be found under the
"Legal Proceedings" section of Note 10, "Commitments and
Contingencies" to our unaudited condensed consolidated financial statements contained
herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.Defaults upon Senior Securities

None

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

On July 27, 2004, we held a special meeting of our
shareholders. At the meeting, shareholders holding 64.47% of the then outstanding common
shares of Capital voted in favor of a resolution to approve the arrangement resolution in
the form annexed to the Proxy Statement dated June 28, 2004. The number of votes cast for
or against or withheld are as follows:

For
    Against
    Withheld60,970,694
    7,300
    16,400


There were no abstentions or broker non-votes.

Item 5.Other Information

None.

Item 6.Exhibits

|Exhibit 31.1 - Section 302
    Certification of David Sutherland  Yoest, Chairman and Chief Executive Officer        
|----------------------------------------------------------------------------------------------------------------------
|                                                                                                                      
|Exhibit 31.2 - Section 302
    Certification of Ronald L. Rubin, Executive Vice President and Chief Financial Officer 
|                                                                                                                      
|Exhibit 32.1 - Section 1350
    Certification of David Sutherland  Yoest, Chairman and Chief Executive Officer       
|                                                                                                                      
|Exhibit 32.2 - Section 1350
    Certification of Ronald L. Rubin, Executive Vice President and Chief Financial Officer

38

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SIGNATURES

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

Date: November 12, 2004

|By: | /s/ DAVID SUTHERLAND-YOEST               
|--- | -----------------------------------------
|    | David Sutherland-Yoest                   
|    | Chairman of the Board,                   
|    | Chief Executive Officer,
    and Director
|    |                                          
|By: | /s/ RONALD L. RUBIN                      
|    | Ronald L. Rubin                          
|    | Executive Vice President
    and         
|    | Chief Financial Officer                  

39

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EXHIBIT INDEX

|Exhibit No.  |   | Description                                                                                            
|------------ | - | -------------------------------------------------------------------------------------------------------
|Exhibit 31.1 | - | Section 302
    Certification of David Sutherland-Yoest, Chairman and Chief Executive Officer          
|             |   |                                                                                                        
|Exhibit 31.2 | - | Section 302
    Certification of Ronald L. Rubin, Executive Vice President and Chief Financial Officer 
|             |   |                                                                                                        
|Exhibit 32.1 | - | Section 1350
    Certification of David Sutherland-Yoest, Chairman and Chief Executive Officer         
|             |   |                                                                                                        
|Exhibit 32.2 | - | Section 1350
    Certification of Ronald L. Rubin, Executive Vice President and Chief Financial Officer

40

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Exhibit 31.1

CERTIFICATION

I, David Sutherland-Yoest, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Waste
Services, Inc. (Successor of Capital Environmental Resource Inc. now known as Waste
Services (CA) Inc.);

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4. The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

> (a) Designed such disclosure controls and procedures, or caused such
>   disclosure controls and procedures to be designed under our supervision, to ensure that
>   material information relating to the registrant, including its consolidated subsidiaries,
>   is made known to us by others within those entities, particularly during the period in
>   which this report is being prepared;
>   (b) Evaluated the effectiveness of the registrants disclosure
>   controls and procedures and presented in this report our conclusions about the
>   effectiveness of the disclosure controls and procedures, as of the end of the period
>   covered by this report based on such evaluation; and
>   (c) Disclosed in this report any change in the registrants
>   internal control over financial reporting that occurred during the registrants most
>   recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
>   annual report) that has materially affected, or is reasonably likely to materially affect,
>   the registrants internal control over financial reporting; and

5. The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions):

> (a) All significant deficiencies and material weaknesses in the design
>   or operation of internal control over financial reporting which are reasonably likely to
>   adversely affect the registrants ability to record, process, summarize and report
>   financial information; and
>   (b) Any fraud, whether or not material, that involves management or
>   other employees who have a significant role in the registrants internal control over
>   financial reporting.

| | By: | /s/ DAVID SUTHERLAND-YOEST                   
| | --- | ---------------------------------------------
| |     | David Sutherland-Yoest                       
| |     | Chairman of the Board and
    Chief Executive
| |     | Officer (Principal Executive
    Director)   

Date: November 12, 2004

41

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Exhibit 31.2

CERTIFICATION

I, Ronald L. Rubin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Waste
Services, Inc. (Successor of Capital Environmental Resource Inc. now known as Waste
Services (CA) Inc.);

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4. The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

> (a) Designed such disclosure controls and procedures, or caused such
>   disclosure controls and procedures to be designed under our supervision, to ensure that
>   material information relating to the registrant, including its consolidated subsidiaries,
>   is made known to us by others within those entities, particularly during the period in
>   which this report is being prepared;
>   (b) Evaluated the effectiveness of the registrants disclosure
>   controls and procedures and presented in this report our conclusions about the
>   effectiveness of the disclosure controls and procedures, as of the end of the period
>   covered by this report based on such evaluation; and
>   (c) Disclosed in this report any change in the registrants
>   internal control over financial reporting that occurred during the registrants most
>   recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
>   annual report) that has materially affected, or is reasonably likely to materially affect,
>   the registrants internal control over financial reporting; and

5. The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions):

> (a) All significant deficiencies and material weaknesses in the design
>   or operation of internal control over financial reporting which are reasonably likely to
>   adversely affect the registrants ability to record, process, summarize and report
>   financial information; and
>   (b) Any fraud, whether or not material, that involves management or
>   other employees who have a significant role in the registrants internal control over
>   financial reporting.

| | By: | /s/ RONALD L. RUBIN                    
| | --- | ---------------------------------------
| |     | Name: Ronald L. Rubin                  
| |     | Title: Executive Vice
    President and
| |     | Chief Financial Officer                

Date: November 12, 2004

42

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Waste Services, Inc.
("Waste Services") (Successor of Capital Environmental Resource Inc. now known
as Waste Services (CA) Inc.) on Form 10-Q for the period ended September 30, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, David Sutherland-Yoest, Chief Executive Officer, certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge:

> (1) The Report fully complies with the requirements of Section 13(a) or
>   15(d) of the Securities Exchange Act of 1934, as amended; and
>   (2) The information contained in the Report fairly presents, in all
>   material respects, the financial condition and results of operations of Waste Services.

| | By: | /s/ DAVID SUTHERLAND-YOEST               
| | --- | -----------------------------------------
| |     | Name: David Sutherland-Yoest             
| |     | Title: Chairman of the
    Board,        
| |     | Chief Executive Officer, and
    Director

Date: November 12, 2004

43

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Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Waste Services,
Inc.("Waste Services") (Successor of Capital Environmental Resource Inc. now
known as Waste Services (CA) Inc.) on Form 10-Q for the period ended September 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Ronald L. Rubin, Executive Vice President and Chief Financial
Officer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

> (1) The Report fully complies with the requirements of Section 13(a) or
>   15(d) of the Securities Exchange Act of 1934, as amended; and
>   (2) The information contained in the Report fairly presents, in all
>   material respects, the financial condition and results of operations of Waste Services.

| | By: | /s/ RONALD L. RUBIN                    
| | --- | ---------------------------------------
| |     | Name: Ronald L.
    Rubin              
| |     | Title: Executive
    Vice President and
| |     | Chief Financial
    Officer            

Date: November 12, 2004

44

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