<HTML>
<HEAD>
<TITLE>FORM 10-QSB/A FOR SEPTEMBER 30, 1999</TITLE>
</HEAD>
<BODY LINK="#0000ff" VLINK="#800080">

<P ALIGN="CENTER">U. S. SECURITIES AND EXCHANGE COMMISSION</P>
<P ALIGN="CENTER">Washington, D. C. 20549</P>
<P ALIGN="CENTER">_____________________________________________</P>
<B><P ALIGN="CENTER">FORM 10-QSB/A</P>
</B><P ALIGN="JUSTIFY">(Mark One)</P>
<P>[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</P>
<P ALIGN="CENTER">For the quarterly period ended September 30, 1999</P>
<P>[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</P>
<P ALIGN="CENTER">For the transition period from ________ to ________</P>
<P ALIGN="CENTER">Commission File Number 0-12914</P>
<P ALIGN="CENTER">_________________________________________________</P>
<B><P ALIGN="CENTER">WASTEMASTERS, INC.</P>
</B><P ALIGN="CENTER">(Exact name of small business issuer as specified in its charter)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=637>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P ALIGN="CENTER">Maryland</P>
<P ALIGN="CENTER">(State or other jurisdiction of incorporation or organization)</TD>
<TD WIDTH="53%" VALIGN="TOP">
<P ALIGN="CENTER">52-1507818</P>
<P ALIGN="CENTER">(IRS Employer Identification No.)</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER">205 S. Bickford Avenue, Oklahoma City, OK 73036</P>
<P ALIGN="CENTER">(Address of Principal Executive Offices)</P>
<P ALIGN="CENTER">(405) 262-0800</P>
<P ALIGN="CENTER">(Issuer's telephone number)</P>
<P ALIGN="CENTER">Not Applicable</P>
<P ALIGN="CENTER">(Former name, former address and former fiscal year, if changed since last report)</P>
<P ALIGN="JUSTIFY">Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.</P>
<P ALIGN="JUSTIFY">Yes No <U>X </P>
</U><P ALIGN="CENTER">APPLICABLE ONLY TO CORPORATE ISSUERS</P>
<P ALIGN="JUSTIFY">State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 153,329,250 shares of its Common Stock, $.01 par value, as of November 15, 1999.</P>
<P ALIGN="JUSTIFY">	</P>
<FONT FACE="Courier"><P> </P>
</FONT><B><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">FORM 10-QSB REPORT INDEX</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P> </TD>
<TD WIDTH="52%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">Page No.</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">PART I. FINANCIAL INFORMATION</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 1. Financial Statements (Unaudited)</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Consolidated Balance Sheet as of September 30, 1999</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">3</TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1999 and 1998</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">5</TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 1999</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">6</TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">7</TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Supplementary Disclosure of Non-cash Transactions</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">9</TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">Notes to Unaudited Consolidated Financial Statements for the Three Months Ended September 30, 1999</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">10</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">17</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">PART II OTHER INFORMATION</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 1. Legal Proceedings</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 2. Changes in Securities</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 3. Defaults on Senior Securities</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 4. Submission of Matters to a Vote of Security Holders</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 5. Other Information</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Item 6. Exhibits and Reports on Form 8-K</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">N/A</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="JUSTIFY">Signatures</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="CENTER">20</TD>
</TR>
</TABLE>

<FONT FACE="Courier"><P ALIGN="JUSTIFY"> </P>
<P> </P>
</FONT><B><P>PART I. FINANCIAL INFORMATION</P>
<P ALIGN="JUSTIFY">Item 1. Financial Statements (Unaudited)</P>
<P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED BALANCE SHEET</P>
<P ALIGN="CENTER">(Unaudited)</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=552>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P><B>ASSETS</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<B><P ALIGN="CENTER">September 30, 1999</B></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Current Assets:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Cash </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 27</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Accounts receivable, net of allowance for doubtful accounts</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">19,528</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total current assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">19,555</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Property, plant and equipment-net of depreciation</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">20,209</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Landfill facilities, net of amortization</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">1,153,800</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Net property, plant and equipment</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">1,175,009</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Other Assets:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Marketable securities, long-term</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">6,190,000</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Other assets-net of amortization</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">8,178</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total other assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">6,198,178</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$7,392,742</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<B><P>LIABILITIES AND STOCKHOLDERS EQUITY</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Current liabilities:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Accounts payable, accrued interest, and other liabilities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$7,377,264</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Short term notes payable</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">2,946,660</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total current liabilities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">10,323,924</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Accrued environmental and landfill costs</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">183,000</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total long-term and deferred items</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">183,000</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total liabilities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">10,506,924</TD>
</TR>
</TABLE>

<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<B><FONT FACE="Courier"><P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
</FONT><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED BALANCE SHEET-CONTINUED</P>
<P ALIGN="CENTER">(Unaudited)</P>
</B><FONT FACE="Courier"><P> </P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=552>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Stockholders' Equity:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Conv. preferred stock, 5,000,000 shares auth. & outstanding</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">50,000</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Common stock, $.01 par value; 495,000,000 shares</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Authorized; 153,329,250 shares issued and outstanding</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">1,533,293</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Additional paid-in capital</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">89,414,348</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Shares pending cancellation</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,117,458)</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Accumulated deficit</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(92,995,365)</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total stockholders' equity</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(3,115,183)</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>Total liabilities and stockholders' equity</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 7,392,742</U></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
</TR>
</TABLE>

<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="CENTER"> </P>
<B><P> </P>
<P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS</P>
<P ALIGN="CENTER">(Unaudited)</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Three Months ended September 30</B></TD>
<TD WIDTH="35%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Nine Months ended September 30</B></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1999</B></U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1998</P>
<P ALIGN="CENTER">(Restated)</B></U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1999</B></U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1998</P>
<P ALIGN="CENTER">(Restated)</B></U></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Revenues</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">$3,488,042</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 746,193</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">$7,455,215</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Expenses</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Cost of sales</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">2,499,686</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">592,012</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">6,718,378</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>SG and A</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">264,039</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">2,264,903</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">4,660,705</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">4,082,747</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Deprec. And amort.</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">261,831</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">173,529</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">1,205,044</U></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Loss from operations</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(264,039)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,538,378)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(4,680,053)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(4,550,954)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Other income (expense)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Interest expense, net</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">133</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(287,552)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(283,973)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(497,253)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Write-off cap. Loan cost</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(241,355)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(241,355)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Gain on sale of subs.</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">1,739,240</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">2,649,901</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Loss on sale of assets</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,169)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Loss on foreclosure</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(546,798)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Other inc. (expense), net</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">25</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(15,824)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Income tax benefit</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">9,000</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">9,000</U></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Total other expense</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">1,739,373</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(519,882)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">1,802,137</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">(729,608)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="15%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="20%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Loss from Cont. Oper.</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 1,475,334</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">$(2,058,260)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$(2,877,916)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">$(5,280,562)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Income Tax Benefits</TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><P ALIGN="CENTER"> </P>
</B><P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">8,903</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Discont. Operations</P>
<B><P>Net Loss</P>
</B><P>Loss per share: Continuing operations</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</P>
<P ALIGN="RIGHT">$ 1,475,334</P>
</U><P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$.01</TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(7,065,496)</P>
<P ALIGN="RIGHT">$(9,123,756)</P>
</U><P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$(.01)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</P>
<P ALIGN="RIGHT">$(2,877,916)</P>
</U><P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$(.02)</TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(7,065,496)</P>
<P ALIGN="RIGHT">$(12,337,155)</P>
</U><P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$(.05)</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Discontinued operations</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">.00</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(.06)</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(.00)</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(.07)</U></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<B><P>Net Loss Per Share</B></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$.01</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$(.07)</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$(.02)</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$(.12)</U></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP">
<P>Weighted average number of com shs outstanding</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">153,329,250</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">123,248,004</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">153,329,250</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="RIGHT">105,647,192</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER">The accompanying notes are in integral part of these financial statements.</P>
<B><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</P>
<P ALIGN="CENTER">Nine Months Ended September 30, 1999</P>
<P ALIGN="CENTER">(Unaudited)</P>
<P ALIGN="CENTER">Common and Preferred Stock</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=834>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><P ALIGN="CENTER">Common Shares <U>Outstanding</B></U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<B><P ALIGN="CENTER">Preferred Shares <U>Outstanding</B></U></TD>
<TD WIDTH="11%" VALIGN="TOP">
<B><P ALIGN="CENTER">Common Stock At <U>par</B></U></TD>
<TD WIDTH="10%" VALIGN="TOP">
<B><P ALIGN="CENTER">Preferred Stock At <U>par</B></U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<B><P ALIGN="CENTER">Additional Paid-in <U>Capital</B></U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><P ALIGN="CENTER">Total Accumulated <U>Deficit</B></U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<B><P ALIGN="CENTER">Stockholder <U>Equity</B></U></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<B><P>Balance at 12/ 31/98</B></TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">134,710,110</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">5,000,000</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P ALIGN="RIGHT">$1,347,101</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">$50,000</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">$86,371,714</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$(91,867,449)</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">$(4,098,634)</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P>Net loss for period</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">(2,877,916)</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">(2,877,916)</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P>Unrealized gain on marketable securities </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">1,750,000</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">1,750,000</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P>Settlement of debt</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">11,629,140</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P ALIGN="RIGHT">116,291</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">1,259,382</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">$1,375,673</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P>Shares issued as compensation</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">6,990,000</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P ALIGN="RIGHT">69,900</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">1,783,252</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">-0-</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">1,853,152</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="11%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="13%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="12%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP">
<B><P>Balance at 9/ 30/99</B></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">153,329,250</U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<U><P ALIGN="RIGHT">5,000,000</U></TD>
<TD WIDTH="11%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$1,533,292</U></TD>
<TD WIDTH="10%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$50,000</U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$89,414,348</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$(92,995,365)</U></TD>
<TD WIDTH="12%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$(1,997,725)</U></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<FONT FACE="Courier"><P ALIGN="CENTER"> </P>
<P> </P>
</FONT><B><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>
<P ALIGN="CENTER">Nine Months Ended September 30</P>
<P ALIGN="CENTER">(Unaudited)</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=624>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1999</B></U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">1998</P>
<P ALIGN="CENTER">(Restated)</B></U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<B><P>INCREASE (DECREASE) IN CASH</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<B><P>Cash flows:</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Net loss</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$(2,588,385)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$(12,337,155)</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Adjustments to reconcile net (loss) to net cash</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Provided by (used in) operating activities:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Depreciation and amortization</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">173,529</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">1,205,044</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Stock issued in lieu of cash payment</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">49,530</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">557,509</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Stk issued in lieu of cash pay for litigation settle.</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">209,250</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Accrual for landfill closure costs</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">387,570</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Write down of assets from disc. operations</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">7,065,496</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Changes in assets and liabilities:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Accounts receivable & prepaid expenses</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">349,687</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(333,938)</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Accts pay., accrued interest and other liabilities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(4,606,866)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">4,349,670</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Deferred income</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(58,282)</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Due to related parties</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(472,366)</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(432,946)</U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Net cash provided by (used in) operating activities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(7,094,871)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">612,218</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<B><P>Cash flow from investing activities:</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Purchase of property, plant and equipment</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,787,898)</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Landfill development</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(293,330)0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Deposits on acquisitions</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">447,371</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Business acquisitions</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">533,294</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Assets lost in foreclosure</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">1,947,628</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Sale of subsidiaries</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">6,139,240</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Purchase of plant property and equipment</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">0</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">71,938</U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Net cash provided by (used in) investing activities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">7,793,538</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(735,295)</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS-Continued</P>
<P ALIGN="CENTER">Nine Months Ended September 30</P>
<P ALIGN="CENTER">(Unaudited)</P>
</B><FONT FACE="Courier"><P> </P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=624>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<B><P>Cash flows from financing activities:</B></TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Repayment of loans</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(77,287)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(2,413,230)</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Proceeds from issuance of stock</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">3,179,294</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">2,191,500</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Investment in Global</P>
<P>Proceeds from loans</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(4,486,000)</P>
<U><P ALIGN="RIGHT">509,560 </U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">0</P>
<U><P ALIGN="RIGHT">429,623</U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Net cash provided by (used in) financing activities:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(874,433)</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">207,893</U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="19%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Net increase (decrease) in cash</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">(175,766)</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">84,816</TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Cash and cash equivalents at beginning of period</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">175,793</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">908</U></TD>
</TR>
<TR><TD WIDTH="58%" VALIGN="TOP">
<P>Cash and cash equivalents at end of period</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 27</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 85,724</U></TD>
</TR>
</TABLE>

<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<B><P ALIGN="CENTER"> </P>
<P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued</P>
<P ALIGN="CENTER">Nine Months Ended September 30</P>
<P ALIGN="CENTER">(Unaudited)</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD VALIGN="TOP" COLSPAN=3>
<P> </TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">1999</B></U></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">1998</U> </P>
<U><P ALIGN="RIGHT">(Restated)</B></U></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P>SUPPLEMENTARY DISCLOSURE OF NON-CASH TRANSACTIONS </P>
<P>Common stock issued in business acquisitions</TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$ 0</TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$25,577,927</TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P>Common stock issued for services and cancellation of liabilities, accrued interest and penalties</TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$3,228,824</TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT"> </P>
<P ALIGN="RIGHT">$13,551,708</TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P>Assets lost in foreclosure less depreciation </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT">$1,947,629</TD>
<TD WIDTH="24%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 0</TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
<TD WIDTH="24%" VALIGN="TOP">
<P> </TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER">	During the nine months ended September 30, 1998, the Company completed acquisitions of companies and/or assets in exchange for common stock of the Company. The assets acquired and liabilities assumed in connection with those
acquisitions were non-cash transactions and are therefore not included in the cash flow statement above.</P>
<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P> </P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these statements.</P>
<P ALIGN="CENTER"> </P>
<P> </P>
<P> </P>
<B><P ALIGN="CENTER">WasteMasters, Inc. and Subsidiaries</P>
<P ALIGN="CENTER">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">September 30, 1999 (Unaudited)</P>
</B><P>1. <U>Basis of Presentation</P>
</U><P>The accompanying unaudited financial statements have been prepared by WasteMasters, Inc. (the "Company" or "WasteMasters") pursuant to the rules and regulations of the U. S. Securities and Exchange Commission. Certain information and disclosures
normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures
necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. This Form 10-QSB Report should be read in conjunction with the Form 10-KSB Report of WasteMasters, Inc. for the
fiscal year ended December 31, 1998, as filed with the U. S. Securities and Exchange Commission.</P>
<P>The results of operations for the periods ended September 30, 1999 are not indicative of the results that may be expected for the full year. (See Results of Operations).</P>
<P>2. <U>Consolidated Statements</P>
</U><P>The consolidated financial statements include the accounts of WasteMasters, Inc. and its wholly owned subsidiaries: Sales Equipment Company, Inc., C.A.T. Recycling, Inc., Wood Management, Inc.; Mini-Max Enterprises, Inc.; Southeastern Research &
 Recovery, Inc.; C&D Recycling Corporation; American Recycling and Management Corporation; Tri-State Waste Disposal Company, Inc.; Atlantic Coast Demolition and Recycling, Inc.; and WasteMasters of Palm Beach, Inc. Significant inter-company
transactions have been eliminated in consolidation. </P>
<P>The Company's interest in Atlas and its subsidiaries are accounted for under the equity method rather than as consolidated subsidiaries. The accounts of Sales Equipment Company, Inc., C.A.T. Recycling, Inc., C&D Recycling, Inc. and American
Recycling and Management, Inc. are only included through September 30, 1999, the date of their disposition. The accounts of Wood Management, Inc.; Mini-Max Enterprises, Inc.; Southeastern Research & Recovery, Inc.; Tri-State Waste Disposal Company,
Inc. and Atlantic Coast Demolition and Recycling, Inc. are only included through March 30, 1999, the date of their disposition.</P>
<P>3. <U>Use of Estimates</P>
</U><P>The preparation of financial statements in conformity with generally accepted accounting principles 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.</P>
<P>4. <U>Disclosure Regarding Risk Factors and Forward Looking Statements</P>
</U><P>This Quarterly Report on Form 10-QSB includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Forward Looking Statements").
All statements other than statements of historical fact included in this report are Forward Looking Statements. In the normal course of its business, the Company, in an effort to help keep its shareholders and the public informed about the Company's
operations, may from time to time issue certain statements, either in writing or orally, that contain or may contain Forward Looking Statements. Although the Company believes that the expectations reflected in such Forward Looking Statements are
reasonable; it can give no assurance that such expectations will prove to have been correct. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies (past and
possible future), acquisitions and projected or anticipated benefits from acquisitions made by or to be made by the Company, or projections involving anticipated revenues, earnings, level of capital expenditures or other aspects of operating results.
Forward-looking statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. The Company disclaims any obligation to update or revise any
forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. All phases of the Company's operations are subject to a number of uncertainties, risks and other influences, many of which are outside the
control of the Company and any one of which, or a combination of which, could materially affect the results of the Company's proposed operations and whether Forward Looking Statements made by the Company ultimately prove to be accurate. Such important
risk factors ("Important Risk Factors") and other factors could cause actual results to differ materially from the Company's expectations. All prior and subsequent written and oral Forward Looking Statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by the Important Risk Factors described below that could cause actual results to differ materially from the Company's expectations as set forth in any Forward Looking Statement made by or on behalf
of the Company.</P>
<P>(a) <U>Ability to Manage Growth</P>
</U><P>The Company's objective is to grow by expanding its services in markets where it can operate profitably as a solid waste services company. Consequently, the Company may experience periods of rapid growth. Such growth, if it were to occur, could
place a significant strain on the Company's management and on its operational, financial and other resources. Any failure to expand its operational and financial systems and controls or to recruit appropriate personnel in an efficient manner at a pace
consistent with such growth would have a material adverse effect on the Company's business, financial condition and results of operations. The Company, under prior management, historically was not able to manage properly the companies it acquired,
resulting in significant losses from operations.</P>
<P>(b) <U>Ability to Identify, Acquire and Integrate Acquisition Targets</P>
</U><P>The Company's strategy envisions that a substantial part of the Company's future growth will come from acquiring and integrating independent solid waste collection, transfer and disposal operations. There can be no assurance that the Company will
be able to identify suitable acquisition candidates and, once identified, to negotiate successfully their acquisition at a price or on terms and conditions favorable to the Company, or to integrate the operations of such acquired businesses with the
Company. In addition, the Company competes for acquisition candidates with other entities which have greater financial resources than the Company. Failure by the Company to implement successfully its acquisition strategy would limit the Company's growth
potential.</P>
<P>The consolidation and integration activity in the solid waste industry in recent years, as well as the difficulties, uncertainties and expenses relating to the development and permitting of solid waste landfills and transfer stations, has increased
competition for the acquisition of existing solid waste collection, transfer and disposal operations. Increased competition for acquisition candidates may result in fewer acquisition opportunities being made available to the Company as well as less
advantageous acquisition terms, including increased purchase prices. The Company also believes that a significant factor in its ability to consummate acquisitions will be the relative attractiveness of shares of the Company's Common Stock as consideration
for potential acquisition candidates. This attractiveness may, in large part, be dependent upon the relative market price and capital appreciation prospects of the Company's Common Stock compared to the equity securities of the Company's competitors. If
the market price of the Company's Common Stock were to decline, the Company's acquisition program could be materially adversely affected.</P>
<P>(c) <U>Uncertain Ability to Finance the Company's Growth</P>
</U><P>The Company anticipates that any future business acquisitions will be financed through cash from operations, borrowings, issuing shares of the Company's Common Stock and/or seller financing. If acquisition candidates are unwilling to accept, or the
Company is unwilling to issue, shares of the Company's Common Stock as part of the consideration for such acquisitions, the Company would be required to utilize more of its available cash resources or potential borrowings in order to effect such
acquisitions. To the extent that cash from operations or borrowings is insufficient to fund such requirements, the Company will require additional equity and/or debt financing in order to provide the cash to effect such acquisitions. Additionally, growth
through the development or acquisition of new landfills, transfer stations or other facilities, as well as the ongoing maintenance of such landfills, transfer stations or other facilities, will require substantial capital expenditures. There can be no
assurance that the Company will have sufficient existing capital resources or will be able to raise sufficient additional capital resources on terms satisfactory to the Company, if at all, in order to meet any or all of the foregoing capital requirements.</P>
<P>In order to satisfy the liquidity needs of the Company for the following twelve months, the Company will be primarily dependent upon proceeds from the sale of the Company's capital stock. Historically, revenues from the existing operations have not
been adequate to fund the operations of the Company. If the Company is unable to obtain adequate funds from the sale of its stock in public offerings, private placements or alternative financing arrangements, it may be necessary to postpone any additional
acquisitions and continue to consolidate the operations of the acquisitions already completed and use cash flow for internal growth. Because of potential political, legal, bureaucratic, and other factors, there can be no assurance that the Company will be
able to accomplish any of its goals within a reasonable period of time.</P>
<P>(d) <U>Fluctuations in Quarterly Results; Potential Stock Price Volatility</P>
</U><P>The market price of the Company's Common Stock has been volatile and may continue to be volatile in the future. The trading price of the Company's Common Stock could be subject to wide fluctuations in response to quarter-to-quarter variations in
operating results, changes in revenue and earnings estimates by securities analysts, announcements by the Company or its competitors, developments in the Company's acquisition program, government regulatory action, challenges associated with integration
of businesses and other events or factors. Also, the market price of the Common Stock may be affected by factors affecting the waste management industry in which the Company competes. Due in part to the high level of public awareness of the business in
which the Company is engaged, regulatory enforcement proceedings or other potentially unfavorable developments involving the Company's operations or facilities, including those in the ordinary course of business, may be expected to engender publicity
which could, from time to time, have an adverse impact upon the market price for the Company's Common Stock. In addition, the stock market has from time to time experienced significant price and volume fluctuations.</P>
<P>The Company believes that period-to-period comparisons of its operating results should not be relied upon as an indication of future performance. Due to a variety of factors including general economic conditions, governmental regulatory action,
acquisitions, capital expenditures and other costs related to the expansion of operations and services and pricing changes (including the market prices of commodities such as recycled materials), it is possible that in some future quarter the Company's
operating results will be below the expectations of securities analysts and investors. In such event, the Company's Common Stock price could be materially adversely affected.</P>
<P>(e) <U>Highly Competitive Industry</P>
</U><P>The solid waste services industry is highly competitive and fragmented, and requires substantial labor and capital resources. Certain of the markets in which the Company competes or will likely compete are served by one or more of the large
national solid waste companies, as well as numerous regional and local solid waste companies of varying sizes and resources. The Company also competes with operators of alternative disposal facilities, including incinerators, and with counties,
municipalities, and solid waste districts that maintain their own waste collection and disposal operations. These counties, municipalities, and solid waste districts may have financial advantages due to the availability to them of user fees, similar
charges or tax revenues and the greater availability to them of tax-exempt financing. Intense competition exists not only to provide services to customers but also to acquire other businesses within each market. Many of the Company's competitors have
significantly greater financial and other resources than the Company. From time to time, these or other competitors may reduce the price of their services in an effort to expand market share or to win a competitively bid municipal contract. These
practices may either require the Company to reduce the pricing of its services or result in the Company's loss of business. Municipal contacts are subject to periodic competitive bidding. There can be no assurance that the Company will be the successful
bidder to obtain or retain such contracts. The Company's inability to compete with larger and better capitalized companies, or to replace municipal contracts lost through the competitive bidding process with comparable contracts or other revenue sources
within a reasonable time period, could have a material adverse effect on the Company's business, financial condition and results of operations.</P>
<P>Intense competition exists within the industry not only for collection, transportation and disposal volume, but also for acquisition candidates. The Company competes for acquisition candidates with numerous solid waste management companies, many of
which are significantly larger and have greater access to capital and greater financial, marketing or technical resources than the Company. </P>
<P>(f) <U>Economic Conditions</P>
</U><P>The Company's businesses may be affected by general economic conditions. There can be no assurance that an economic downturn would not result in a reduction in the volume of waste that might be disposed of at the Company's facilities and/or the
price that the Company would charge for its services.</P>
<P>(g) <U>Weather Conditions</P>
</U><P>Protracted periods of inclement weather may adversely affect the Company's existing and potential operations by interfering with collection and landfill operations, delaying the development of landfill capacity and/or reducing the volume of waste
generated by the Company's existing and potential customers. In addition, particularly harsh weather conditions may result in the temporary suspension of certain of the Company's existing and potential operations. The Forward Looking Statements do not
assume that such weather conditions will occur.</P>
<P>(h) <U>Influence of Government Regulation</P>
</U><P>The Company's existing and potential operations are and would be subject to and substantially affected by extensive federal, state and local laws, regulations, orders and permits, which govern environmental protection, health and safety, zoning and
other matters. These regulations may impose restrictions on operations that could adversely affect the Company's results, such as limitations on the expansion of disposal facilities, limitations on or the banning of disposal of out-of-state waste or
certain categories of waste or mandates regarding the disposal of solid waste. Because of heightened public concern, companies in the waste management business may become subject to judicial and administrative proceedings involving federal, state or local
agencies. These governmental agencies may seek to impose fines or to revoke or deny renewal of operating permits or licenses for violations of environmental laws or regulations or to require remediation of environmental problems at sites or nearby
properties, or resulting from transportation or predecessors' transportation and collection operations, all of which could have a material adverse effect on the Company. Liability may also arise from actions brought by individuals or community groups in
connection with the permitting or licensing of operations, any alleged violations of such permits and licenses or other matters. The Forward Looking Statements assume that there will be no materially negative impact on its operations due to governmental
regulation. </P>
<P>(i) <U>Potential Environmental Liability</P>
</U><P>The Company may incur liabilities for the deterioration of the environment as a result of its existing and potential operations. Any substantial liability for environmental damage could materially adversely affect the operating results and
financial condition of the Company. Due to the limited nature of insurance coverage of environmental liability, if the Company were to incur liability for environmental damage, its business and financial condition could be materially adversely affected.</P>
<P>(j) <U>Year 2000 (Y2K) Compliance</P>
</U><P>Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. These date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, computer systems and/or software used by many companies may need to be upgraded to comply with such Y2K requirements. The Company is currently in the process of evaluating its information technology infrastructure for Year 2000
compliance. The Company does not expect that the cost to modify its information technology infrastructure to be Y2K compliant will be material to its financial condition or results of operations. </P>
<P>(k) <U>History of Losses</P>
</U><P>The Company has incurred substantial net losses in the past and may continue to lose money as a result of the adverse effects of one or more of the risk factors discussed in this Note C.</P>
<P>(l) <U>Litigation Involving Company</P>
</U><P>The Company is a defendant in a considerable number of litigation matters, many of which have already resulted in judgments against the Company for material amounts. Substantially all of the judgments remain unsatisfied. The existence of the
judgments substantially impairs the Company's ability to continue as a going concern and to raise capital to resume normal operations. Unless the Company is able to raise funds to satisfy the judgments and/or negotiate settlements of the judgments for
amounts substantially less than the face amount of the judgments, the Company will not be able to continue in existence. </P>
<P>5. Sale of Subsidiaries to Third Party</P>
<P>During the quarter ended September 30, 1999, the Company sold Sales Equipment Company, Inc., C.A.T. Recycling, Inc., C&D Recycling Corporation and American Recycling and Management Corporation to an officer of the Company. All of these subsidiaries
had been placed in bankruptcy during 1999, did not conduct active operations, and were not able to conduct operations in the future due to legal claims against them. In addition, substantially all of the assets of the subsidiaries had been foreclosed
upon, sold by trustees in bankruptcy or repossessed by creditors. The Company recorded a gain on this sale of $1,739,240, which was the result of the elimination of liabilities in excess of assets of the subsidiaries from the Company's consolidated
financial statements. </P>
<P>6. Issuance of Common Stock for Services and in Settlement of Claims</P>
<P>On February 23, 1999, the Company filed a registration statement on Form S-8 to register up to 10,000,000 shares of common stock for issuance for services rendered or to be rendered the Company under the Company's 1999 Employees, Consultants and
Advisors Stock Compensation Plan (the "Plan"). On March 26, 1999, the Company amended the registration statement to increase the number of shares authorized for issuance under the Plan from 10,000,000 to 15,000,000. During the quarter ended September 30,
1999, the Company issued 2,250,000 shares of common stock under the Plan for consulting and brokerage services. </P>
<P>In addition, during the quarter ended September 30, 1999, the Company issued 100,000 shares of common stock to settle a judgment in the approximate amount of $20,000. The shares were issued in a private transaction pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and therefore were issued as "restricted securities" as such term is defined in Rule 144(a)(3) promulgated thereunder. </P>
<P>7.  Acquisition of Interest in Atlas Environmental, Inc.</P>
<P>During the quarter ended June 30, 1998, the Company acquired a 51% interest in Atlas Environmental, Inc. ("Atlas") in exchange for 342,591 shares of common stock of the Company. Prior to the Company's acquisition of an interest in Atlas, Atlas and its
subsidiaries had filed voluntary petitions for relief on January 14, 1997 under Chapter 11 of the U.S. Bankruptcy Code with the Bankruptcy Court for the Southern District of Florida. In November 1998, the Bankruptcy Court overseeing the Chapter 11
proceedings of Atlas and its subsidiaries appointed a Chapter 11 trustee, which eliminated any ability of the Company to control the management or affairs of Atlas and its subsidiaries. Prior to the appointment of the trustee for Atlas, the Company's
ability to control the management and affairs of Atlas and its subsidiaries was limited severely by the provisions of the Bankruptcy Code and various orders of the bankruptcy court which prevented Atlas from taking many actions without approval of the
bankruptcy court after notice to creditors and a hearing. Because of the Company's limited control over Atlas prior to the appointment of a trustee and its total loss of control over Atlas upon the appointment of the trustee, the Company has determined
that it lacked the necessary control over Atlas to consolidated the assets, liabilities and operating results of Atlas and its subsidiaries with those of the Company. In addition, audited financial statements for Atlas and its subsidiaries are not
available, both for the years prior to the time that the Company acquired an interest in Atlas as well as for fiscal 1998; therefore, it would be impossible for the Company to comply with its reporting obligations under the Securities Exchange Act of 1934
if it had to consolidate the assets, liabilities and operation results of Atlas and its subsidiaries with those of the Company. Accordingly, the Company has changed the method of accounting for its investment in Atlas on its 1998 financial statements. All
items in the financial statements for 1998 have been restated to report the Company's interest in Atlas and its subsidiaries as an investment, rather than as consolidated subsidiaries.</P>
<P>8.   Marketable Securities</P>
<P>As of September 30, 1999, the Company owned 1,200,000 shares of Global Eco-Logical Services, Inc. ("Global"), which were obtained upon conversion of promissory notes received from the sale to Global on March 30, 1999 of Atlantic Coast and Demolition,
Inc., Wood Management, Inc., Mini-Max Enterprises, Inc., Southeastern Research and Recovery, Inc., Tri-State Waste Disposal Company, Inc. and a landfill in Lisbon, Ohio. As of the quarter ended September 30, 1999, the shares are recorded on the Company's
balance sheet at $6,190,000, which is the value of such shares as of the date of their issuance, plus an unrealized gain of $1,750,000 which the Company recorded during the quarter ended June 30, 1999 as a result of a significant appreciation in the
market value of Global common stock during that quarter. The average cost of the Global common stock as reflected on the Company's financial statements is $5.16 as of September 30, 1999. Since September 30, 1999, the market price of Global common stock
has dropped considerably. As of December 2, 1999, Global common stock is quoted at $2.25 per share on the OTC Bulletin Board, which means that the market value of the Global common stock held by the Company is $2,700,000, or $3,490,000 less than the
amount at which such common stock is carried on the Company's financial statements. In addition, while Global has filed a Form 10-SB with the Securities and Exchange Commission in order to remain listed on the OTC Bulletin Board, it is likely that its
Form 10-SB will not be approved in time to avoid having its common stock removed from the OTC Bulletin Board for some period of time. If Global common stock is removed from the OTC Bulletin Board, its market price is likely to be negatively effected.
Furthermore, pursuant to an agreement with Global, such shares bear restrictions against transfer in excess of the restrictions imposed by SEC Rule 144. In connection with preparation of the Company's annual financial statements for the year ended
December 31, 1999, the Company plans to assess whether the drop in the market price of Global common stock represents a long-term impairment of its value, and may write down the value of such common stock to its market price, or less, at that time.</P>
<P>9.   Shares Issued to Acquire Sebring Landfill, Inc.</P>
<P>In 1998, the Company issued 1,560,834 shares of common stock to acquire Sebring Landfill, Inc., which was acquired from a person who was a former officer and director of Atlas Environmental, Inc. The value of Sebring Landfill, Inc. was recorded at
$1,117,458, based on the market price of the Company's common stock at the time of issuance. Later in 1998, the Bankruptcy Court overseeing the Chapter 11 proceedings of Atlas Environmental, Inc. and its subsidairies ruled that the person who sold Sebring
Landfill, Inc. to the Company did not have the requisite authority to transfer good title to that company based on a prior order of the Bankruptcy Court, and consequently set aside the sale of Sebring Landfill, Inc. to the Company. The Company has
demanded the return of the shares issued to acquire Sebring Landfill, Inc. for failure of the seller to deliver good title to the company, and has recorded the cost of that acquisition as an offset against stockholders' equity on its balance sheet. </P>
<B><P>Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.</P>
<U><P>Results of Operations</P>
</B></U><P>Overview</P>
<P>In September 1997, the Company began a significant effort to restructure the Company and arrange for capital for operations and expansion through acquisitions. The intention was to develop Company-owned waste processing facilities and to arrange
alliances or management contracts with independent waste processors, waste transporters, and waste generators to produce waste revenues for the Company. Therefore, the Company underwent an aggressive acquisition period during the first two quarters of 1998.</P>
<P>While the acquisitions strategy was a success, it was performed in a manner that was too aggressive for the Company's existing cash flow and its ability to raise capital from the sale of its common stock. In addition, the Company lacked the necessary
management structure to manage the acquired companies properly, and utilized revenues from the acquired companies to satisfy excessive general and administrative obligations, thus rendering the acquired companies unable to satisfy their own bills in the
ordinary course of business. Also, management did not anticipate the volume of litigation the Company experienced since September 1997, and found overwhelming the expense and time demands necessary to deal with and resolve those issues in addition to the
time demands of operating acquisitions. As a result, the Company disposed of a number of its 1998 acquisitions to Global in order to allow the Company to focus its time and resources on its remaining assets, being SECO and the 1998 acquisitions in Florida. </P>
<P>In January 1999, the Company voluntarily ceased its Florida operations due to chronic cash flow difficulties, repossessions and regulatory violations. Since terminating the Florida operations, the Company's efforts in Florida have focused on disposing
of non-core assets and attempting to refinance the secured indebtedness on its three remaining assets in Florida. In all three cases, the indebtedness has been accelerated and foreclosure actions filed. In one case, the asset has been foreclosed upon. In
the other two cases, the mortgage holders hold foreclosure judgments and are expected to foreclose in the near future. There can be no assurance that the Company will be able to restructure or refinance such indebtedness prior to a foreclosure sale of the
assets. </P>
<P>In May 1999, a Chapter 11 trustee was appointed for SECO. The trustee recently terminated operations at SECO and liquidated SECO's assets. </P>
<P>Finally, the Company has continued its efforts to settle the litigation claims against it, and other efforts to restructure its balance sheet, including the disposition of its interest in C.A.T. and SECO, which would eliminate significant liabilities
from the balance sheet of the Company. Furthermore, the Company has evaluated a number of potential acquisitions, and has identified several in the waste disposal industry which it believes are viable candidates. However, the acquisitions are subject to a
number of contingencies, including the negotiation and execution of definitive agreements, the resolution by the Company of certain of its litigation claims, and the resumption of trading of the Company's common stock on the NASDAQ Bulletin Board. </P>
<P>Results of Operations</P>
<P>Revenues for the three months ended September 30, 1999 were $0 as compared to $3,488,042 for the three months ended September 30, 1998. The dramatic decrease in revenue is the result of the sale of five subsidiaries and a landfill to Global on March
30, 1998, which were operated during the third quarter of 1998, the cessation of operations in Florida in the first quarter of 1999, and the cessation of operations at Sales Equipment Co., Inc. in the second quarter of 1999. Cost of revenues decreased
from $2,499,686 to $0 as a result of a significantly lower level of operations due to the aforementioned dispositions. Selling, general and administrative expenses ("SG&A") decreased during the third quarter of 1999 as compared to the third quarter of
1998 from $2,264,903 to $264,039 as a result of lower overhead expenses incurred in connection with the significantly lower level of operations during the period, which was offset somewhat by additional expenses incurred as a result of the settlement of
litigation claims against the Company through the issuance of common stock. The Company's net loss decreased during the third quarter of 1999 as compared to the third quarter of 1998 from $9,123,756 to a gain of $1,475,334 as a result of the
aforementioned factors and a gain recorded from the sale of four subsidiaries that were in bankruptcy. (See Note 5.) </P>
<P>As disclosed in the Notes to Financial Statements, all amounts for 1998 have been restated to eliminate the assets, liabilities and operating results of Atlas and its subsidiaries from the consolidated financial statement amounts of the Company, as a
result of the Company's decision to report its interest in Atlas and its subsidiaries as an investment, rather than as consolidated subsidiaries.</P>
<P>Liquidity and Sources of Capital</P>
<P>The Company's consolidated balance sheet as of September 30, 1999 reflects cash and equivalents of $27, total current assets of $19,555 at historical cost, total current liabilities of $10,323,924, and a working capital deficit of $10,304,369. All of
the Company's long-term indebtedness has been classified as a current liability due to defaults thereon. Management is attempting to fully restructure or eliminate this debt by refinancing the indebtedness, satisfaction of the debt by conversion to
equity, settlement of the debt in bankruptcy or the disposition of the subsidiary that is obligated on the debt. Assuming the Company is successful, the Company projects that current assets will approximately equal current liabilities. There can be no
assurance that the Company will be successful in its efforts to restructure its indebtedness.</P>
<P>At this time the Company is not engaged in active operations. Because the Company lacks active operations, the Company does not have any cash to satisfy routine administrative obligations. Consequently, the Company is currently dependent on the
issuance of its common stock for managerial and legal services, and depends on short-term loans from third parties, including its officers and directors, for the funds to satisfy miscellaneous expenses. For the foreseeable future, the Company expects that
it will be required to acquire necessary administrative services and satisfy its indebtedness by issuing shares of its common stock. However, the Company has identified a number of operating entities which it believes it can acquire in the event it is
able to reduce its litigation claims to an immaterial amount. The Company has been in active negotiations with one such entity, has entered into a letter of intent to acquire such entity, and has entered into an agreement to contribute management services
to such entity pending the completion of any such acquisition. The ability to complete such acquisition will be dependent on the negotiation and execution of a definitive acquisition agreement, the completion of due diligence by both the Company and the
company to be acquired, the Company's reaching agreements to settle substantially all of the litigation claims against the Company at a substantial discount to the amount claimed, and the Company's obtaining SEC approval of a registration statement to
register the shares of its common stock to be issued in connection with the acquisition. In addition, the Company is in negotiations to sell a controlling interest in the Company for equity capital to an investor. Any such agreement will be subject to the
negotiation and execution of a definitive investment agreement, the completion of due diligence by the investor, and the Company's reaching agreements to settle substantially all of the litigation claims against the Company at a substantial discount to
the amount claimed. </P>
<B><P ALIGN="CENTER">SIGNATURES</P>
</B><P>In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
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<P> </TD>
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<P>WASTEMASTERS, INC.</TD>
</TR>
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<P ALIGN="JUSTIFY">Date: December 3, 1999</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>/s/ Douglas Holsted</TD>
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<P> </TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>By: Douglas Holsted, President and Secretary</TD>
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