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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-K/A

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

                       FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

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

                   FOR THE TRANSITION PERIOD FROM           TO         .

                         COMMISSION FILE NUMBER 0-21054

                           SYNAGRO TECHNOLOGIES, INC.
             (Exact name of Registrant as Specified in its Charter)

                DELAWARE                                      76-0511324
      (State or other jurisdiction                         (I.R.S. employer
   of incorporation or organization)                      identification no.)

     1800 BERING DRIVE, SUITE 1000                               77057
             HOUSTON, TEXAS                                   (Zip Code)
(Address of principal executive offices)

  Internet Website -- www.synagro.com

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (713) 369-1700

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          Common Stock, $.002 par value
                         Preferred Stock Purchase Rights
                              (Title of each class)

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. | |

      Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Securities Exchange Act of 1934 Rule 12b-2).Yes | | No |X|.

      The number of shares outstanding of the Registrant's Common Stock as of
June 28, 2002, was 19,476,781. The aggregate market value of the 14,995,502
shares of Registrant's Common Stock held by nonaffiliates of the Registrant,
based on the market price of the Common Stock of $3.20 per share as of June 28,
2002, was approximately $47,985,606.

      The number of shares outstanding of the Registrant's Common Stock as of
March 6, 2003, was 19,775,821. The aggregate market value of the 18,440,140
shares of the Registrant's Common Stock held by nonaffiliates of the Registrant,
based on the market price of the Common Stock of $2.25 per share as of March 6,
2003, was approximately $41,490,315.

                       DOCUMENTS INCORPORATED BY REFERENCE

      The Proxy Statement for the 2003 Annual Meeting of Stockholders of the
Registrant (Sections entitled "Election of Directors," "Management
Stockholdings," "Principal Stockholders," "Executive Compensation," "Option
Exercises and Year End Values," "Employment Agreements," "Equity Compensation
Plans," "Compensation Committee Report," "Common Stock Performance Graph" and
"Certain Transactions") is incorporated by reference in Part III of this Report.

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Explanatory Note

      This Amendment Number 1 on Form 10-K/A amends the Company's Form 10-K for
the fiscal year ended December 31, 2002 filed on March 28, 2003 (the "2002
Form 10-K"). The Company is refiling Part I to correct an error contained in
Part I of the 2002 Form 10-K. Other than as set forth in the preceding
sentence, the Company has made no changes to the 2002 Form 10-K. This
amendment does not reflect events occurring after the filing of the 2002
Form 10-K. In accordance with Section 906 of the Sarbanes-Oxley Act of 2002,
the Company has filed new certifications as exhibits 99.1 and 99.2.


                                     PART I

ITEM 1. BUSINESS

BUSINESS OVERVIEW

      We are a national water and wastewater residuals management company
serving more than 1,000 municipal and industrial wastewater treatment plants and
have operations in 35 states and the District of Columbia. We offer many
services that focus on the beneficial reuse of organic nonhazardous residuals
resulting from the wastewater treatment process. We believe that the services we
offer are compelling to our customers because they allow our customers to avoid
the significant capital and operating costs that they would have to incur if
they internally managed their wastewater residuals.

      We provide a broad range of services, including facility operations,
facility cleanout services, regulatory compliance, dewatering, collection and
transportation, composting, drying and pelletization, product marketing,
incineration, alkaline stabilization, and land application. We currently operate
four heat-drying facilities, four composting facilities, three incineration
facilities, one manure-to-energy facility, 27 permanent and 24 mobile dewatering
units, and over 200 small wastewater treatment plants (ranging from 500 gallons
per day to 500,000 gallons per day).

      Approximately 80 percent of our 2002 revenue was generated through more
than 400 contracts that range from one to twenty-five years in length. These
contracts have an estimated remaining contract value, which we call backlog, of
approximately $2 billion, which represents more than seven times our 2002
revenue (see "-- Backlog" for a more detailed discussion). In general, our
contracts contain provisions for inflation-related annual price increases,
renewal provisions, and broad force majeure clauses. Our top ten customers and
merchant facilities have an average of ten years remaining on their current
contracts, including renewal options. In 2002, we experienced a contract
retention rate (both renewals and rebids) of approximately 87 percent.

      We benefit from significant customer diversification, with our single
largest customer accounting for 15 percent of our 2002 annual revenues, and our
top ten customers and merchant facilities accounting for approximately 35
percent of our 2002 revenues. For the year ended December 31, 2002, our
municipal and industrial customers accounted for approximately 88 percent and 6
percent, respectively, of our revenues.

INDUSTRY OVERVIEW

HISTORY

      Most residential, commercial, and industrial wastewater is collected
through an extensive network of sewers and transported to wastewater treatment
plants, which are known as publicly owned treatment works ("POTWs"). When
wastewater is treated at POTWs or at industrial wastewater pre-treatment
facilities, the process separates the liquid portion of the wastewater from the
solids (or wastewater residuals) portion. The water is treated for ultimate
discharge, typically into a river or other surface water. Prior to the
promulgation of the 40 CFR Part 503 Regulations by the Environmental Protection
Agency ("EPA") pursuant to the Clean Water Act ("Part 503 Regulations") in 1993,
most POTWs simply disposed of untreated wastewater residuals through surface
water dumping, incineration, and landfilling. The Part 503 Regulations began a
phase out of surface water dumping of wastewater residuals and, after one of the
EPA's most thorough risk assessments, encouraged their beneficial reuse. This
created significant growth for the wastewater residuals management industry. To
establish beneficial reuse as an option for wastewater generators, the EPA
established a classification methodology for the wastewater residuals that is
based on how the wastewater residuals are processed. Now, in most cases, the
POTW further processes the wastewater residuals and produces a semisolid,
nutrient-rich by-product known as biosolids. We use the term "wastewater
residuals" to include both solids that have been treated pursuant to the Part
503 Regulations and those that have not. Biosolids, as a subset of wastewater
residuals, is intended to refer to wastewater solids that meet either the Class
A or Class B standard as defined in the Part 503 Regulations.

CLASSES OF BIOSOLIDS

      When treated and processed according to the Part 503 Regulations,
biosolids can be beneficially reused and applied to crop land to improve soil
quality and productivity due to the nutrients and organic matter that they
contain. Biosolids applied to agricultural land, forest, public contact sites,
or reclamation sites must meet either Class A or Class B bacteria, or pathogen
and insect and rodent attraction, or vector attraction reduction requirements
contained in the Part 503 Regulations. This classification is determined by the


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level of processing the biosolids have undergone. Pursuant to the Part 503
Regulations, there are specific methods available to achieve Class A standards
and other specific methods available to achieve Class B standards, otherwise the
biosolids are considered Sub-Class B. Each alternative for Class A requires that
the resulting biosolids be essentially pathogen free. In general, Class A
biosolids are generated by more capital intensive processes, such as composting,
heat drying, heat treatment, high temperature digestion and alkaline
stabilization. Class A biosolids have the highest market value, are sold as
fertilizer, and can be applied to any type of land or crop.

      Class B biosolids are treated to a lesser degree by processes such as
digestion or alkaline stabilization. These biosolids are typically land applied
on farmland by professional farmers or agronomists and are monitored to comply
with associated federal and state reporting requirements. The Part 503
Regulations, however, regulate the type of agricultural crops for which Class B
biosolids may be used.

      Finally, in some cases, the POTW does not treat its wastewater residuals
to either Class A or Class B standards and such residuals are considered
Sub-Class B. These residuals can either be processed to Class A standards or
Class B standards by an outside service provider or disposed of through
incineration or landfilling.

MARKET SIZE/FRAGMENTATION

      According to the EPA's 1999 study entitled Biosolids Generation, Use, and
Disposal in the United States, the quantity of municipal biosolids produced in
the United States was projected to be approximately 7.1 million dry tons in
2000, processed through approximately 16,000 POTWs. It is estimated that 8.2
million dry tons of biosolids will be generated in 2010, and that an additional
3,000 POTWs will be built by 2012. It is also estimated that 63 percent of these
biosolids volumes are currently beneficially reused, growing to 70 percent by
2010. An independent 2000 study by the Water Infrastructure Network, entitled
Clean & Safe Water for the 21st Century, estimates that municipalities spend
more than $22 billion per year on the operations and maintenance of wastewater
treatment plants. We estimate that, based on conversations with consulting
engineers, up to 40 percent of those annual costs, or $8.8 billion, are
associated with the management of municipal wastewater residuals.

      Industry sources estimate that industrial generators of wastewater (such
as food and beverage processors and pulp and paper manufacturers) spend
approximately $7 billion per year on operations and maintenance. Assuming that,
as is the case with POTWs, 40 percent of these expenditures are associated with
the management of residuals, related annual costs represent approximately $2.8
billion. Therefore, we estimate the total size of the combined municipal and
industrial wastewater residuals market to be $11.6 billion.

      An emerging component of the industrial market with significant potential
that we are monitoring closely involves the residuals generated by large
Concentrated Animal Feeding Operations ("CAFOs"). According to the EPA,
agriculture is a contributor to the pollution found in rivers, streams, and
lakes in the United States. The EPA estimates that 376,000 livestock operations
confine animals and generate approximately 64 million tons of manure annually.
Under proposed federal regulations, the largest CAFOs will be required to apply
waste management practices similar to those currently used by municipal and
industrial wastewater generators. We believe that our wastewater residuals
management capabilities will provide us with significant growth opportunities as
this market develops.

      We believe that the management of wastewater residuals is a highly
fragmented industry and that we are the only dedicated provider of a full range
of services on a national scale. Historically, POTWs performed the necessary
wastewater residuals management services, but this function is increasingly
being performed by private contractors in an effort to lower cost, increase
efficiency and comply with stricter regulations.

MARKET GROWTH

      We believe the estimated $11.6 billion wastewater residuals industry will
grow at four to five percent annually over the next decade. The growth in the
underlying volumes of wastewater residuals generated by the municipal and
industrial markets is driven by a number of factors. These factors include:

            Population Growth and Population Served. As the population grows,
      the amount of biosolids produced by municipal POTWs is expected to
      increase proportionately. In addition to population growth, the amount of
      residuals available for reuse should also grow as more of the population
      is served by municipal sewer networks. As urban sprawl continues and the
      desire of cities to annex surrounding areas increases, POTWs will treat
      more wastewater. It is expected that the amount of wastewater managed on a
      daily


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      basis by municipal wastewater treatment plants will increase more than 40
      percent by 2012, which should significantly increase the amount of
      municipal residuals generated.

            Pressures To Better Manage Wastewater. There is tremendous pressure
      from many stakeholders, including environmentalists, land owners, and
      politicians, being applied to municipal and industrial wastewater
      generators to better manage the wastewater treatment process. The costs
      (such as regulatory penalties and litigation exposure) of not applying the
      best available technology to properly manage waste streams have now grown
      to material levels. This trend should continue to drive the growth of more
      wastewater treatment facilities with better separation technologies, which
      increase the amount of residuals ultimately produced.

            Stricter Regulations. If the trend continues and laws and
      regulations that govern the quality of the effluent from wastewater
      treatment plants become stricter, POTWs and industrial wastewater
      treatment facilities will be forced to remove more and more residuals from
      the wastewater, thereby increasing the amount of residuals needing to be
      properly managed. With respect to industrial generators in the
      agricultural sector, such as livestock growers and processors, the pending
      CAFO regulations being promulgated by the EPA will have a material impact
      on how these operations manage their large production of wastewater. Under
      proposed federal regulations, the largest CAFOs will be required to apply
      waste management practices similar to those currently used by municipal
      and other industrial wastewater generators, thereby significantly
      increasing the size of the industrial residuals market.

            Advances in Technology. The total amount of residuals produced
      annually continues to increase due to advancements in municipal and
      industrial wastewater treatment technology. In addition to improvements in
      secondary and tertiary treatment methods, which can increase the quantity
      of residuals produced at a wastewater treatment plant, segregation
      technologies, such as microfiltration, also result in more residuals being
      separated from the wastewater.

MARKET TRENDS

      In addition to the growth of the underlying volumes of wastewater
residuals, there is a trend of municipalities converting from Sub-Class B and
Class B processes to Class A processes. There are numerous reasons for this
trend, including:

            Decaying Infrastructure. Many municipal POTWs operate aging and
      decaying wastewater infrastructure. According to the Water Infrastructure
      Network's 2000 study, municipalities will need to spend more than $900
      billion over the next 20 years to upgrade these systems. As this effort is
      rolled out and POTWs undergo design changes and new construction,
      opportunities will exist to also upgrade wastewater residuals treatment
      processes. We expect that the trend toward more facility-based approaches,
      such as drying and pelletization, will increase with this infrastructure
      spending. In addition, the need to provide capital for these expenditures
      should create pressures for more outsourcing opportunities.

            Shrinking Agricultural Base and Urbanization. As population density
      increases, the availability of nearby farmland for land application of
      Class B biosolids becomes diminished. Under these circumstances, the
      transportation costs associated with a Class B program may increase to
      such an extent that the higher upfront processing costs of Class A
      programs may become attractive to generators. Production of Class A
      pellets offers significant volume reduction, greatly reduced
      transportation costs, and the enhanced value of pellets allows, in many
      cases, revenue realization from product sales.

            Public Sentiment. While the Part 503 Regulations provide equal
      levels of public safety in the distribution of Class A and Class B
      biosolids, the public sometimes perceives a greater risk from the
      application of Class B biosolids. This is particularly true in heavily
      populated areas. Municipalities are responding to these public and
      political pressures by upgrading their programs to the Class A level.
      Certain municipalities and wastewater agencies have industry leadership
      mindsets where they endeavor to provide their constituents with the
      highest level, most advanced treatment technologies available. These
      municipalities and agencies will typically fulfill at least a portion of
      their residuals management needs with Class A technologies.

            Regulatory Stringency. With the promulgation of the Part 503
      Regulations, the EPA and, subsequently, state regulatory agencies have
      made the distribution of Class A biosolids products largely unrestricted.
      Utilization requirements for Class B biosolids are significantly more
      onerous. Based on this, municipalities are moving to Class A programs to
      avoid the governmental permitting, public hearings, compliance and
      enforcement bureaucracy associated with Class B programs. This regulatory
      support to reduce and recycle residuals, and to increase the quality of
      the biosolids, works in our favor.


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COMPETITIVE STRENGTHS

      We believe that we benefit from the following competitive strengths:

BROAD SERVICE OFFERING

      We provide our customers with complete, vertically-integrated services and
capabilities, including facility operations, facility cleanout services,
regulatory compliance, dewatering, collection and transportation, composting,
drying and pelletization, product marketing, incineration, alkaline
stabilization, and land application. Advantages to our customers include:

            Significant Land Base. We have a large land base available for the
      land application of wastewater residuals. We currently maintain permits
      and registration or licensing agreements on more than 950,000 acres of
      land in 29 states. We feel that this land base provides us with an
      important advantage when bidding new work and retaining existing business.

            Large Range of Processing Capabilities and Product Marketing
      Experience. We are one of the most experienced firms in treating
      wastewater residuals to meet the EPA's Class A standards. We have numerous
      capabilities to achieve Class A standards, and we currently operate four
      heat-drying facilities and four composting facilities. In addition, we are
      the leader in marketing Class A biosolids either generated by us or by
      others. In 2002, we marketed approximately 61 percent of the heat-dried
      pellets produced in the United States, produced either by us or by
      municipally owned facilities.

            Regulatory Compliance and Reporting. An important element for the
      long-term success of a wastewater residuals management program is the
      certainty of compliance with local, state and federal regulations.
      Accurate and timely documentation of regulatory compliance is mandatory.
      We provide this service, as part of our turn-key operations, through a
      proprietary integrated data management system (the Residuals Management
      System) that has been designed to store, manage and report information
      about our clients' wastewater residuals programs. We believe that our
      regulatory compliance and reporting capabilities provide us with an
      important competitive advantage when presented to the municipal and
      industrial wastewater generators.

LARGEST IN SCALE

      We are the only national company focused exclusively on wastewater
residuals management services. We believe that our leading market position
provides us with more operating leverage and a unique competitive advantage in
attracting and retaining customers and employees as compared to our regional and
local competitors. We believe the advantages of scale include:

            Knowledgeable Sales Force. We have a large sales force dedicated to
      the wastewater residuals market. We market our services via a multi-tiered
      sales force, utilizing a combination of more than 60 experienced business
      developers, engineering support staff, and seasoned operations directors.
      This group of individuals is responsible for maintaining our existing
      business and identifying new wastewater residuals management
      opportunities. On average, these individuals have in excess of ten years
      of industry experience. We believe that their unique knowledge and
      longstanding customer relationships gives us a competitive advantage in
      identifying and successfully securing new business.

            Bonding Capacity. Commercial, federal, state and municipal projects
      often require operators to post performance and, in some cases, payment
      bonds at the execution of a contract. The amount of bonding capacity
      offered by sureties is a function of financial health of the company
      requesting the bonding. Operators without adequate bonding may be
      ineligible to bid or negotiate on many projects. We have strong bonding
      relationships with large national sureties. As of March 6, 2003, we had a
      bonding capacity of approximately $182 million with approximately $127
      million utilized as of that date. We believe the existing capacity is
      sufficient to meet bonding needs for the foreseeable future. To date, no
      payments have been made by any bonding company for bonds issued on our
      behalf.

            Financial Stability. With assets of $488 million and total
      capitalization of $417 million as of December 31, 2002, we believe we have
      a degree of financial stability greater than our local and regional
      competitors, which makes us an attractive, long-term partner for municipal
      and industrial customers.

BUSINESS STRATEGY

      Our goals are to strengthen our position as the only national company
exclusively focused on wastewater residuals management and to continuously
improve our margins. Components of our strategy to achieve these goals include:


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INTERNAL GROWTH BASED ON OUTSOURCING

      We believe that we have the opportunity to expand our business by
providing services for new customers who currently perform their own wastewater
residuals management and by increasing the range of services that our existing
customers outsource to us.

            Developing New Customers. We estimate that a majority of the
      wastewater treatment facilities located in the United States perform their
      own wastewater residuals management services. In many cases, we believe
      that we can provide the customer with better service at a cost that is
      lower than what it costs to provide the service internally. We take a
      collaborative approach with potential customers where our sales force
      consults with potential customers and positions us as a solution provider.

            Expanding Services to Existing Customers. We have the opportunity to
      provide many of our existing customers with additional services as part of
      a complete residuals management program. We endeavor to educate these
      existing customers about the benefits of a complete residuals management
      solution and offer other services where the value is compelling. These
      opportunities may provide us with long-term contracts, increased barriers
      to entry, and better relationships with our customers. For example, we
      have made a concerted effort to provide in-plant dewatering services to
      our customers because we believe we can typically provide this necessary
      service below the customer's internal operating costs. As a result, we now
      operate more than 24 mobile and 27 permanent dewatering facilities
      throughout the United States.

IMPROVE MARGINS

      We actively work to improve our margins by increasing revenues while
leveraging our operating infrastructure in the field and our corporate overhead.
This strategy encompasses increasing revenues by providing additional services
to our existing customer base, targeting new work in specific market segments
that have historically generated the highest returns for us, and prospective
marketing initiatives with both industrial and municipal clients to
strategically position us for success in securing new business.

SELECTIVELY SEEK COMPLEMENTARY ACQUISITIONS

      We selectively seek strategic opportunities to acquire businesses that
profitably expand our service offerings, increase our geographic coverage, or
increase our customer base. We believe that strategic acquisitions can enable us
to gain efficiencies in our existing operations.

SERVICES AND OPERATIONS

      Today, generators of municipal and industrial residuals must provide sound
environmental management practices with limited economic resources. For help
with these challenges, municipal and industrial generators throughout the United
States have turned to us for solutions.

      We partner with our clients to develop cost-effective, environmentally
sound solutions to their residuals processing and beneficial use requirements.
We provide the flexibility and comprehensive services that generators need, with
negotiated pricing, regulatory compliance, and operational performance. We work
with our clients to find new and better solutions to their wastewater residuals
management challenges. In addition, because we do not manufacture equipment, we
are able to provide unbiased solutions to our customers' needs. We provide our
customers with complete, vertically integrated services and capabilities,
including design/build services, facility operations, facility cleanout
services, regulatory compliance, dewatering, collection and transportation,
composting, drying and pelletization, product marketing, incineration, alkaline
stabilization, and land application.


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      1. Design and Build Services. We designed, built, and operate four heat
drying and pelletization facilities and four composting facilities. We currently
have three new drying facilities under permit and construction that we will
operate when they are completed. We operate three incineration facilities, two
of which we significantly upgraded and one that we built. Lastly, we have
designed, built, and operate over 20 biosolids dewatering facilities. All of our
facility design, construction and operating experience is with biosolids
projects.

      2. Facility Operations. Our facility operations and maintenance group
provides contract operations to customers that desire to outsource the overall
management of their wastewater treatment facilities. Our operations and
maintenance personnel are experienced in many different types of treatment
processes. Our staff members have operated wastewater treatment plants ranging
in size from 127 million gallons per day down to facilities that serve
individual homes. They have managed processes including activated sludge,
rotating biological contactors, membrane separation, biological nutrient removal
and chemical precipitation. Our maintenance staff provides maintenance and
repair services to municipal and industrial wastewater treatment systems,
including automated instrumentation and controls. Our certified laboratories
provide analytical data that our customers need for regulatory compliance
monitoring. We currently operate over 200 small wastewater treatment plants
(ranging from 500 gallons per day to over 500,000 gallons per day).

      3. Facility Cleanout Services. Our facility cleanout services focus on the
cleaning and maintenance of the digesters at municipal and industrial wastewater
facilities. Digester cleaning involves complex operational and safety
considerations. Our self-contained pumping systems and agitation equipment
remove a high percentage of biosolids without the addition of large quantities
of dilution water. This method provides our customers a low, bottom-line cost
per dry ton of solids removed. Solids removed from the digesters can either be
recycled through our ongoing agricultural land application programs or
landfilled.


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      4. Regulatory Compliance. An important element for the long-term success
of a wastewater residuals management program is the certainty of compliance with
local, state and federal regulations. Accurate and timely documentation of
regulatory compliance is mandatory. We provide this service through our
proprietary Residuals Management System ("RMS").

      RMS is an integrated data management system that has been designed to
store, manage and report information about our clients' wastewater residuals
programs. Every time our professional operations or technical staff performs
activities relating to a particular project, RMS is updated to record the
characteristics of the material, how much material was moved, when it was moved,
who moved it and where it went. In addition to basic operational information,
laboratory analyses are input in order to monitor both annual and cumulative
loading rates for metals and nutrients. This loading information is coupled with
field identification to provide current information for agronomic application
rate computations.

      This information is used in two ways. First and foremost, it provides a
database for regulatory reporting and provides the information required for
monthly and annual technical reports that are sent to the EPA and state
regulatory agencies. Second, information entered into RMS is used as an
important part of the invoicing process. This check and balance system provides
a link between our operational, technical and accounting departments to ensure
correct accounting and regulatory compliance.

      RMS is a tool that gives our clients timely access to information
regarding their wastewater residuals management program. We continue to dedicate
resources to the continuous improvement of RMS. We believe that our regulatory
compliance and reporting capabilities provide us with a competitive advantage
when presented to the municipal and industrial wastewater generators.

      5. Dewatering. We provide residuals dewatering services for wastewater
treatment facilities on either a permanent, temporary or emergency basis. These
services include design, procurement, and operations. We provide the staffing to
operate and maintain these facilities to ensure satisfactory operation and
regulatory compliance of the residuals management program. We currently operate
27 permanent and 24 mobile dewatering facilities.

      6. Collection and Transportation. For our liquid residuals operations, a
combination of mixers, dredges and/or pumps are used to load our tanker
trailers. These tankers transport the residuals to either a land application
site or one of our residuals processing facilities. For our dewatered residuals
operations, the dewatered residuals are loaded into trailers by either front end
loaders or conveyors. These trailers are then transported to either land
application sites or to one of our residuals processing facilities.

      7. Composting. For composting projects, we provide a comprehensive range
of technologies, operations services and end product marketing through our
various divisions and regional offices. All of our composting alternatives
provide high-quality Class A products that we market to landscapers, nurseries,
farms and fertilizer companies through our Organic Product Marketing Group
("OPMG") described below. In some cases, fertilizer companies package the
product and resell it for home consumer use. We utilize three different types of
composting methodologies: aerated static pile, in-vessel, and open windrow. When
a totally enclosed facility is not required, aerated static pile composting
offers economic advantages. In-vessel composting uses an automated, enclosed
system that mechanically agitates and aerates blended organic materials in
concrete bays. We also offer the windrow method of composting to clients with
favorable climatic conditions. In areas with a hot, dry climate, the windrow
method lends itself to the efficient evaporation of excess water from dewatered
residuals. This makes it possible to minimize or eliminate any need for bulking
agents other than recycled compost. We currently operate four composting
facilities and one manure-to-energy facility.

      8. Drying and Pelletizing. The heat drying process utilizes a
recirculating system to evaporate water from wastewater residuals and create
pea-sized pellets. A critical aspect of any drying technology is its ability to
produce a consistent and high quality Class A end product that is marketable to
identified end-users. This requires the system to manufacture pellets that meet
certain criteria with respect to size, dryness, dust elimination,
microbiological cleanliness, and durability. We market heat-dried biosolids
products to the agricultural and fertilizer industries through our Organic
Product Marketing Group described below.

      We built and currently operate three drying and pelletization facilities
with municipalities, including two in Baltimore, Maryland, and one in New York,
New York. In addition, we operate one pelletizing plant in Hagerstown, Maryland.
We are currently in the permitting and construction phases of three drying and
pelletization facilities for Pinellas County, Florida; Honolulu, Hawaii; and
Sacramento, California, which we will operate when the facilities are completed.

      9. Product Marketing. In 1992, we formed the OPMG to market composted and
pelletized biosolids from our own facilities as well as municipally owned
facilities. OPMG currently markets in excess of 1,000,000 cubic yards of compost
and 158,000 tons of pelletized biosolids annually. OPMG markets a majority of
its biosolids products under the trade names Granulite(TM) and AllGro(TM). Based
on our experience, OPMG is capable of marketing biosolids products to the
highest paying markets. We are the leader in


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marketing end-use wastewater residuals products, such as compost and heat-dried
pellets used for fertilizers, and in 2002 we marketed approximately 61 percent
of the heat-dried pellets produced in the United States.

      10. Incineration. In the Northeast, we economically and effectively
process wastewater residuals through the utilization of the proven thermal
processing technologies of multiple-hearth and fluid bed incineration. In
multiple-hearth processing, residuals are fed into the top of the incinerator
and then mechanically passed down to the hearths below. The heat from the
burning residuals in the middle of the incinerator dries the residuals coming
down from the top until they begin to burn. Since residuals have approximately
the same British thermal unit value as wood chips, very little additional fuel
is needed to make the residuals start to burn. The resulting ash by-product is
nontoxic and inert, and can be beneficially used as alternative daily cover for
landfills. In fluid bed processing, residuals are pumped directly into a boiling
mass of super heated sand and air (the fluid bed) that vaporizes the residuals
on contact. The top of the fluid bed burns off any remaining compounds resulting
in very low air emissions and very little ash by-product. Computerized control
of the entire process makes this modern technology fuel efficient, easy to
operate, and an environmentally friendly disposal method. We currently operate
three incineration facilities.

      11. Alkaline Stabilization. We provide alkaline stabilization services by
using lime to treat Sub-Class B biosolids to Class-B standards. Lime chemically
reacts with the residuals and creates a Class B product. We offer this treatment
process through our BIO*FIX process. Due to its very low capital cost, BIO*FIX
is used in interim and emergency applications as well as long-term programs. The
BIO*FIX process is designed to effectively inactivate pathogenic microorganisms
and to prevent vector attraction and odor. The BIO*FIX process combines specific
high-alkalinity materials with residuals at minimal cost. During the past
several years, our engineers have developed and improved the BIO*FIX chemical
formulations, and the material handling and instrumentation and control systems
in concert with clients, federal and state regulators, consulting engineers and
academic researchers.

      12. Land Application. The beneficial reuse of municipal and industrial
biosolids through land application has been successfully performed in the United
States for more than 100 years. Direct agricultural land application has the
proven benefits of fertilization and organic matter addition to the soil.
Agricultural communities throughout the country are well acquainted with the
practice of land application of biosolids and have first hand experience with
the associated agricultural and environmental benefits. Currently, we recycle
Class B biosolids through agricultural land application programs in 29 states.
Our revenues from land application services are the highest among our service
offerings.

CONTRACTS

      Approximately 80 percent of our 2002 revenue was generated through more
than 400 contracts with original terms that range from one to twenty-five years
in length. These contracts have a backlog of approximately $2 billion, of which
we estimate approximately $205 million will be realized in 2003. Our December
31, 2002, backlog represents more than seven times our 2002 revenue. In general,
our contracts contain provisions for inflation-related annual price increases,
renewal provisions, and broad force majeure clauses. Our top ten customers and
merchant facilities have an average of ten years remaining on their current
contracts, including renewal options. In addition, we have experienced a
historical contract renewal rate of approximately 87 percent (see "-- Backlog"
for a more detailed discussion).

      Although we have a standard form of agreement, terms may vary depending
upon the customer's service requirements and the volume of residuals generated
and, in some situations, requirements imposed by statute or regulation.
Contracts associated with our land application business are typically two- to
four-year exclusive arrangements excluding renewal options. Contracts associated
with drying and pelletizing, incineration or composting are typically longer
term contracts, from five to twenty years, excluding renewal options, and
typically include provisions such as put-or-pay arrangements and estimated
adjustments for changes in the consumer price index for contracts that contain
price indexing. Other services such as cleanout and dewatering typically may or
may not be under long-term contract depending on the circumstances.

      The majority of our contracts are with municipal entities. Typically, a
municipality will advertise a request for proposal and numerous entities will
bid to perform the services requested. Often the municipality will choose the
best qualified bid by weighing multiple factors, including range of services
provided, experience, financial capability and lowest cost. The successful
bidder then enters into contract negotiations with the municipality.

      Contracts typically include provisions relating to the allocation of risk,
insurance, certification of the material, force majeure conditions, change of
law situations, frequency of collection, pricing, form and extent of treatment,
and documentation for tracking purposes. Many of our agreements with
municipalities and water districts provide options for extension without the
necessity of going to bid. In addition, many contracts have termination
provisions that the customer can exercise; however, in most cases, such
terminations create obligations to our customers to compensate us for lost
profits.


                                       9
<PAGE>

      Our largest contract is with the New York Department of Environmental
Protection. The contract relates to the New York Organic Fertilizer Company
dryer and pelletizer facility and was assumed in connection with the Bio Gro
acquisition in 1999. The contract provides for the removal, transport and
processing of wastewater residuals into Class A product that is transported,
marketed and sold to the fertilizer industry for beneficial reuse. The contract
has a term of 15 years and expires in June 2013. The contract includes
provisions relating to the allocation of risk, insurance, certification of the
material, force majeure conditions, change of law situations, frequency of
collection, pricing, form and extent treatment, and documentation for tracking
purposes. In addition, the contract includes a provision that allows for the New
York Department of Environmental Protection to terminate the contract. If,
however, the New York Department of Environmental Protection terminates the
contract within the first five years, the New York Department of Environmental
Protection would be required to pay liquidated damages to us.

BACKLOG

      At December 31, 2002, our estimated remaining contract value, which we
call backlog, was $2 billion. In determining backlog, we calculate the expected
payments remaining under the current terms of our contracts, assuming the
renewal of contracts in accordance with their renewal provisions, no increase in
the level of services during the remaining term, and estimated adjustments for
changes in the consumer price index for contracts that contain price indexing.
However, on the same basis, except assuming the renewal provisions are not
exercised, we estimate our backlog at December 31, 2002, would have been $1.4
billion. These estimates are based on our operating experience, and we believe
them to be reasonable. However, there can be no assurance that our backlog will
be realized as contract revenue or earnings.

SALES AND MARKETING

      We have a sales and marketing group that has developed, and is
implementing, a comprehensive internal growth strategy to expand our business by
providing services for new customers who currently perform their own wastewater
residuals management and by increasing the range of services that our existing
customers outsource to us.

      In addition, to maintain our existing market base, we endeavor to achieve
a 100 percent renewal rate on expiring service contracts. For 2002, we achieved
a renewal rate of approximately 87 percent. We believe that the ability to renew
existing contracts is a direct indication of the level of customer satisfaction
with our operations. Although we value our current customer base, our focus is
to increase revenues that generate long-term, stable income at acceptable
margins rather than simply increasing market share.

      Our sales and marketing group also works with our operations staff, which
typically responds to requests to proposals for routine work that is awarded to
the lowest cost bidder. This allows our sales and marketing group to focus on
prospective, rather than reactive, marketing activities. Our sales and marketing
group is focused on developing new business from specific market segments that
have historically netted the highest returns. These are segments where we
believe we should have an enhanced competitive advantage due to the complexity
of the job, the proximity of the work to our existing business, or a unique
technology or facility that we are able to offer. We seek to maximize profit
potential by focusing on negotiated versus low-bid procurements, long-term
versus short-term contracts and projects with multiple services. In addition, we
are focusing on the rapidly growing Class A market. Our sales incentive program
is designed to reward the sales force for success in these target markets.

      We proactively approach municipal market segments, as well as new
industrial segments, through professional services contracts. We are in a unique
industry position to successfully market through professional services contracts
because we are an operations company that is solution and technology neutral as
we offer virtually every type of proven service category marketed in the
industry today. This means we can customize a wastewater residuals management
program for a client with no technology or service category bias.

ACQUISITIONS HISTORY

      In August 2002, we purchased Earthwise Organics, Inc. and Earthwise
Trucking (collectively, "Earthwise"), a Class A biosolids and manure composting
and marketing company that serves the Western United States market.
Historically, acquisitions have been an important part of our growth strategy.
We completed 17 acquisitions from 1998 through 2002, highlighted by our
acquisition in August 2000 of Waste Management's Bio Gro Division. Bio Gro had
been the one of the largest providers of wastewater residuals management
services in the United States, with 1999 annual revenues of $118 million. Bio
Gro provided wastewater residuals management services in 24 states and was the
market leader in thermal drying and pelletization. Other acquisitions from 1998
to the present include the following:


                                       10
<PAGE>

<TABLE>
<CAPTION>
      COMPANY                                                     DATE ACQUIRED      U.S. MARKET SERVED     CAPABILITIES ACQUIRED
      -------                                                     -------------      ------------------     ---------------------
<S>                                                               <C>                <C>                    <C>
      A&J Cartage, Inc. ..................................        June 1998          Midwest                Land Application
      Recyc, Inc. ........................................        July 1998          West                   Composting
      Environmental Waste Recycling, Inc. ................        November 1998      Southeast              Land Application
      National Resource Recovery, Inc. ...................        March 1999         Midwest                Land Application
      Anti-Pollution Associates ..........................        April 1999         Florida Keys           Facility Operations
      D&D Pumping, Inc. ..................................        April 1999         Florida Keys           Land Application
      Vital Cycle, Inc. ..................................        April 1999         Southwest              Product Marketing
      AMSCO, Inc. ........................................        May 1999           Southeast              Land Application
      Residual Technologies, LP ..........................        January 2000       Northeast              Incineration
      Davis Water Analysis, Inc. .........................        February 2000      Florida Keys           Facility Operations
      AKH Water Management, Inc. .........................        February 2000      Florida Keys           Facility Operations
      Ecosystematics, Inc ................................        February 2000      Florida Keys           Facility Operations
      Rehbein, Inc .......................................        March 2000         Midwest                Land Application
      Whiteford Construction Company .....................        March 2000         Mid-Atlantic           Cleanouts
      Environmental Protection & Improvement Co. .........        March 2000         Mid-Atlantic           Rail Transportation
</TABLE>

With the Bio Gro acquisition in August 2000, we substantially grew our service
offerings and geographic coverage. As a result, we have shifted our focus to
internal growth. We will continue to selectively seek acquisitions, such as
Earthwise, if strategically and economically attractive.

COMPETITION

      We provide a variety of services relating to the transportation and
treatment of wastewater residuals. We are not aware of another company focused
exclusively on the management of wastewater residuals from a national
perspective. We have several types of direct competitors. These include small
local companies, regional residuals management companies, and national and
international water and wastewater operations privatization companies.

      We compete with these competitors in several ways, including providing
quality services at competitive prices, partnering with technology providers to
offer proprietary processing systems, and utilizing strategic land application
sites. Municipalities often structure bids for large projects based on the best
qualified bid, weighing multiple factors, including experience, financial
capability and cost. We also believe that the full range of wastewater residuals
management services we offer provide a competitive advantage over other entities
offering a lesser complement of services.

      In many cases, municipalities and industries choose not to outsource their
residuals management needs. In the municipal market, we estimate that up to 60
percent of the POTW plants are not privatized. We are actively reaching out to
this segment to persuade them to explore the benefits of outsourcing these
services to us. For these generators, we can offer increased value through
numerous areas, including lower cost, ease of management, technical expertise,
liability assumption/risk management, access to capital or technology and
performance guarantees.

FEDERAL, STATE AND LOCAL GOVERNMENT REGULATION

      Federal and state environmental authorities regulate the activities of the
municipal and industrial wastewater generators and enforce standards for the
discharge from wastewater treatment plants (effluent wastewater) with permits
issued under the authority of the Clean Water Act, as amended, and state water
quality control acts. The treatment of wastewater produces an effluent and
wastewater solids. The treatment of these solids produces biosolids. To the
extent demand for our residuals treatment methods is created by the need to
comply with the environmental laws and regulations, any modification of the
standards created by such laws and regulations may reduce the demand for our
residuals treatment methods. Changes in these laws or regulations, or in their
enforcement, may also adversely affect our operations by imposing additional
regulatory compliance costs on us, requiring the modification of and/or
adversely affecting the market for our wastewater residuals management services.

      The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") generally imposes strict joint and several liability for cleanup
costs upon: (1) present owners and operators of facilities at which hazardous
substances were disposed;


                                       11
<PAGE>

(2) past owners and operators at the time of disposal; (3) generators of
hazardous substances that were disposed at such facilities; and (4) parties who
arranged for the disposal of hazardous substances at such facilities. CERCLA
Section 107 liability extends to cleanup costs necessitated by a release or
threat of release of a hazardous substance. However, the definition of "release"
under CERCLA excludes the "normal application of fertilizer." The EPA
regulations regard biosolids applied to land as a fertilizer substitute or soil
conditioner. The EPA has indicated in a published document that it considers
biosolids applied to land in compliance with the applicable regulations not to
constitute a "release." However, the land application of biosolids that do not
comply with Part 503 Regulations could be considered a release and lead to
CERCLA liability. Monitoring as required under Part 503 Regulations is thus very
important. Although the biosolids and alkaline waste products may contain
limited quantities or concentrations of hazardous substances (as defined under
CERCLA), we have developed plans to manage the risk of CERCLA liability,
including training of operators, regular testing of the biosolids and the
alkaline admixtures to be used in treatment methods and reviewing incineration
and other permits held by the entities from which alkaline admixtures are
obtained.

PERMITTING PROCESS

      We operate in a highly regulated environment and the wastewater treatment
plants and other plants at which our biosolids management services may be
provided are usually required to have permits, registrations and/or approvals
from federal, state and/or local governments for the operation of such
facilities.

      Many states, municipalities and counties have regulations, guidelines or
ordinances covering the land application of Class B biosolids, many of which set
either a maximum allowable concentration or maximum pollutant-loading rate for
at least one pollutant. The Part 503 Regulations also require monitoring Class B
biosolids to ensure that certain pollutants or pathogens are below thresholds.
The EPA has considered increasing these thresholds or adding new thresholds for
different substances, which could increase our compliance costs. In addition,
some states have established management practices for land application of Class
B biosolids. In some jurisdictions, state and/or local authorities have imposed
permit requirements for, or have prohibited, the land application or
agricultural use of Class B biosolids. There can be no assurance that any such
permits will be issued or that any further attempts to require permits for, or
to prohibit, the land application or agricultural use of Class B biosolids
products will not be successful.

      Any of the permits, registrations or approvals noted above, or
applications therefore may be subject to denial, revocation or modification
under various circumstances. In addition, if new environmental legislation or
regulations are enacted or existing legislation or regulations are amended or
are enforced differently, we may be required to obtain additional, or modify
existing, operating permits, registrations or approvals. The process of
obtaining or renewing a required permit, registration or approval can be lengthy
and expensive and the issuance of such permit or the obtaining of such approval
may be subject to public opposition or challenge. Much of this public opposition
or challenge, as well as related complaints, relates to odor issues, even when
we are in compliance with odor requirements and even though we have worked hard
to minimize odor from our operations. There can be no assurances that we will be
able to meet applicable regulatory requirements or that further attempts by
state or local authorities to prohibit, or public opposition or challenge to,
the land application, agricultural use of biosolids, thermal processing or
biosolids composting will not be successful.

PATENTS AND PROPRIETARY RIGHTS

      We have several patents and licenses relating to the treatment and
processing of biosolids. Our patents have durations from 2008 to 2020. While
there is no single patent that is material to our business, we believe that our
aggregate patents are important to our prospects for future success. However, we
cannot be certain that future patent applications will be issued as patents or
that any issued patents will give us a competitive advantage. It is also
possible that our patents could be successfully challenged or circumvented by
competition or other parties. In addition, we cannot assure that our treatment
processes do not infringe patents or other proprietary rights of other parties.

      In addition, we make use of our trade secrets or "know-how" developed in
the course of our experience in the marketing of our services. To the extent
that we rely upon trade secrets, unpatented know-how and the development of
improvements in establishing and maintaining a competitive advantage in the
market for our services, we can provide no assurances that such proprietary
technology will remain a trade secret or that others will not develop
substantially equivalent or superior technologies to compete with our services.

EMPLOYEES

      As of March 6, 2003, we had approximately 960 full-time employees. These
employees include: 6 executive officers,


                                       12
<PAGE>

11 nonexecutive officers, 112 operations managers, 65 environmental specialists,
51 maintenance personnel, 175 drivers and transportation personnel, 90 land
application specialists, 302 general operation specialists, 42 sales employees
and 106 financial and administrative employees. Additionally, we use contract
labor for various operating functions, including hauling and spreading services,
when it is economically advantageous.

      Although we have 35 union employees, our employees are generally not
represented by a labor union or covered by a collective bargaining agreement. We
believe we have good relations with our employees. We provide our employees with
certain benefits, including health, life, dental, and accidental death and
disability insurance and 401(k) benefits.

POTENTIAL LIABILITY AND INSURANCE

      The wastewater residuals management industry involves potential liability
risks of statutory, contractual, tort, environmental and common law liability
claims. Potential liability claims could involve, for example:

      -     personal injury;

      -     damage to the environment;

      -     violations of environmental permits;

      -     transportation matters;

      -     employee matters;

      -     contractual matters;

      -     property damage; and

      -     alleged negligence or professional errors or omissions in the
            planning or performance of work.

      We could also be subject to fines or penalties in connection with
violations of regulatory requirements.

      We carry $51 million of liability insurance (including umbrella coverage),
and under a separate policy, $10 million of aggregate pollution legal liability
insurance ($10 million each loss) subject to retroactive dates, which we
consider sufficient to meet regulatory and customer requirements and to protect
our employees, assets and operations. There can be no assurance that we will not
face claims under CERCLA or similar state laws resulting in substantial
liability for which we are uninsured and which could have a material adverse
effect on our business.

      Our insurance programs utilize large deductible/self-insured retention
plans offered by a commercial insurance company. Large deductible/self-insured
retention plans allow us the benefits of cost-effective risk financing while
protecting us from catastrophic risk with specific stop-loss insurance limiting
the amount of self-funded exposure for any one loss and aggregate stop-loss
insurance limiting the self-funded exposure for health insurance for any one
year.

ITEM 2. PROPERTIES

      We currently lease approximately 11,300 square feet of office space at our
principal place of business located in Houston, Texas. We also lease regional
operational facilities in: Houston, Texas; Sacramento, California; Denville, New
Jersey; Millersville, Maryland; Baltimore, Maryland, and have 16 district
offices throughout the United States.

      We own and operate three drying and pelletization facilities; one located
in New York, New York, and two in Baltimore, Maryland. We also operate one
pelletizing plant in Hagerstown, Maryland, and three incineration facilities
located in Woonsocket, Rhode Island; Waterbury, Connecticut; and New Haven,
Connecticut. Additionally, we own property in Salome, Arizona; Maysville,
Arkansas; Lancaster, California; King George, Virginia; and Wicomico County,
Maryland. These properties are utilized for composting, storage or land
application.

      We maintain permits, registrations or licensing agreements on more than
950,000 acres of land in 29 states for applications of


                                       13
<PAGE>

biosolids.

ITEM 3. LEGAL PROCEEDINGS

      Our business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting our business activities, we become involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. We believe that these matters will not have a material
adverse effect on our business, financial condition and results of operations.
However, the outcome of any particular proceeding cannot be predicted with
certainty. We are required, under various regulations, to procure licenses and
permits to conduct our operations. These licenses and permits are subject to
periodic renewal without which our operations could be adversely affected. There
can be no assurance that regulatory requirements will not change to the extent
that it would materially affect our consolidated financial statements.

MARSHALL CASE

      In January 2002, we settled a lawsuit that was filed in Rockingham County
Superior Court, New Hampshire, in November 1998. The plaintiff claimed that the
death of an individual was allegedly caused by exposure to certain biosolids
land applied by one of our wholly owned subsidiaries. The plaintiff in the
settlement represented that there was no scientific support to the allegations
as previously alleged.

RIVERSIDE COUNTY

      The Company leases land and operates a composting facility in Riverside
County, California, under a conditional use permit ("CUP") that expires on
January 1, 2010. The CUP allows for a reduction in material intake and CUP term
in the event of noncompliance with the CUP's terms and conditions. In response
to alleged noncompliance due to excessive odor, on or about June 22, 1999, the
Riverside County Board of Supervisors attempted to reduce the Company's intake
of biosolids from 500 tons per day to 250 tons per day. The Company believes
that this was not an authorized action by the Board of Supervisors. On September
15, 1999, the Company was granted a preliminary injunction restraining and
enjoining the County of Riverside ("County") from restricting the Company's
intake of biosolids at its Riverside composting facility.

      In the lawsuit that the Company filed in the Superior Court of California,
County of Riverside, the Company has also complained that the County's treatment
of the Company is in violation of its civil rights under U.S.C. Section 1983 and
that its due process rights were being affected because the County was
improperly administering the odor protocol, as well as other terms in the CUP.
The County alleges that the odor "violations," as well as the Company's actions
in not reducing intake, could reduce the term of the CUP. The Company disagrees
and has challenged the County's position in the lawsuit.

      No trial date has been set at this time. The Company continues to operate
under the existing CUP while the parties explore settlement. The next status
conference before the Court is scheduled for July 7, 2003. Proposed terms of
settlement set forth in an expired Memorandum of Understanding with the County
serve as the basis for continuing settlement discussions, which terms include a
plan to relocate the compost facility to a piece of land owned by the County or
other acceptable sites. While the County has rejected the Company's most recent
offer to relocate, on October 22, 2002, the County approved a request by the
Santa Ana Watershed Project Authority ("SAWPA") to take over the process of
finding a new site and competitively negotiating with a company to operate the
site. This action provided the basis for a stay of the litigation which the
County approved on January 7, 2003. The stay is for six months, until July 7,
2003. During this time, the County has asked that SAWPA show progress in
developing a new facility. If SAWPA shows progress toward a replacement
operation, the County and the Company will begin discussions toward a
settlement, which will allow operations to continue at the existing facility
until such time as a new SAWPA-owned or endorsed facility becomes operational.
Development of the SAWPA facility will take approximately three years.

      Whether or not the parties reach settlement based on the terms of the
expired Memorandum of Understanding or otherwise, the site may be closed. The
Company may incur additional costs related to contractual agreements, relocation
and site closure, as well as the need to obtain new permits (including some from
the County) at a new site. The Company has incurred approximately $645,000 of
project costs in connection with a new facility, which is included in property
at December 31, 2002. If the Company is unsuccessful in its efforts to either
settle or prosecute the litigation, goodwill and certain assets may be impaired.
Total goodwill associated with the reporting unit is approximately $20.6 million
at December 31, 2002. The financial impact associated with site closure prior to
the expiration of our CUP cannot be reasonably estimated at this time. Although
the Company feels that its case is meritorious, the ultimate outcome of the
litigation cannot be determined at this time.


                                       14
<PAGE>

RELIANCE INSURANCE

      For the 24 months ended October 31, 2000 (the "Reliance Coverage Period"),
the Company insured certain risks, including automobile, general liability, and
worker's compensation, with Reliance National Indemnity Company ("Reliance")
through policies totaling $26 million in annual coverage. On May 29, 2001, the
Commonwealth Court of Pennsylvania entered an order appointing the Pennsylvania
Insurance Commissioner as Rehabilitator and directing the Rehabilitator to take
immediate possession of Reliance's assets and business. On June 11, 2001,
Reliance's ultimate parent, Reliance Group Holdings, Inc., filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code of 1978, as amended. On
October 3, 2001, the Pennsylvania Insurance Commissioner removed Reliance from
rehabilitation and placed it into liquidation.

      Claims have been asserted and/or brought against the Company and its
affiliates related to alleged acts or omissions occurring during the Reliance
Coverage period. It is possible, depending on the outcome of possible claims
made with various state insurance guaranty funds, that the Company will have no,
or insufficient, insurance funds available to pay any potential losses. There
are uncertainties relating to the Company's ultimate liability, if any, for
damages arising during the Reliance Coverage Period, the availability of the
insurance coverage, and possible recovery for state insurance guaranty funds.

      In June 2002, the Company settled one such claim that was pending in
Jackson County, Texas. The full amount of the settlement was paid by insurance
proceeds; however, as part of the settlement, the Company agreed to reimburse
the Texas Property and Casualty Insurance Guaranty Association an amount ranging
from $625,000 to $2,500,000 depending on future circumstances. The Company
estimated its exposure at approximately $1.9 million for the potential
reimbursement to the Texas Property and Casualty Insurance Guaranty Association
for costs associated with the settlement of this case and for unpaid insurance
claims and other costs for which coverage may not be available due to the
pending liquidation of Reliance. The Company previously recorded a special
charge of $2.2 million in its December 31, 2001, financial statements to record
the estimated exposure for this matter and related legal expenses. The Company
believes remaining accruals of approximately $1 million as of December 31, 2002,
are adequate to provide for its exposures. The final resolution of these
exposures could be substantially different from the amount recorded.

AON

      On October 4, 2001, the Company filed suit in the 24th Judicial District
Court of Jackson County, Texas, against our insurance broker, AON Risk Services
of Texas, Inc. ("AON"), and the several insurance companies that reinsured the
policies issued by Reliance (the "Reinsurers") (the "AON Suit"). In the AON
Suit, Synagro is seeking a judgment against AON for any and all sums that it may
become liable for as a result of any settlement of, or the entry of any judgment
in, the Lopez Suit, and any and all costs associated with defense thereof, as a
result of the Company's assertion of negligence by AON in placing the entirety
of the Company's insurance coverage with Reliance and AON's failure to obtain
"cut through endorsements" to the Reliance policies, which would enable the
Company to proceed directly against the Reinsurers. Synagro is also seeking a
declaratory judgment against the Reinsurers declaring that the Reinsurers owe
Synagro a duty of defense and indemnity in the Lopez Suit as a result of the
Reinsurers' participation in the investigation, evaluation, and handling of the
Lopez Suit, as a result of any "cut through endorsements" that may have been
obtained by AON, and by virtue of a "fronting arrangement" whereby most or all
of certain Reliance policies were reinsured. The AON Suit is at an early stage,
and the ultimate outcome of this litigation, including amounts, if any, that may
be recovered by the Company, cannot be determined at this time.

OTHER

      There are various other lawsuits and claims pending against the Company
that have arisen in the normal course of business and relate mainly to matters
of environmental, personal injury and property damage. The outcome of these
matters is not presently determinable but, in the opinion of our management, the
ultimate resolution of these matters will not have a material adverse effect on
the consolidated financial condition, results of operations or cash flows of the
Company.

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

      None.


                                       15
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a) Financial Statements and Exhibits:

      1. Financial Statements:

      The Financial Statements were included in the Company's annual report on
Form 10-K filed on March 28, 2003.

      2. Financial Schedules:

      None.

      3. Exhibits:

<TABLE>
<S>                           <C>
                99.1*   --    Certification of Chief Executive Officer

                99.2*   --    Certification of Chief Financial Officer
</TABLE>

-----------

*  Filed with this Form 10-K/A

      (b)  Reports on Form 8-K

      None.




                                       16
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            SYNAGRO TECHNOLOGIES, INC.
                                            (Registrant)


                                            By:         /s/ ROSS M. PATTEN
                                               ---------------------------------
                                                          Ross M. Patten
                                                    Chairman of the Board and
                                                     Chief Executive Officer

Date: April 14, 2003

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

<TABLE>
<CAPTION>
                 SIGNATURE                                         TITLE                                      DATE
                 ---------                                         -----                                      ----
<S>                                                  <C>                                                 <C>
           /s/ ROSS M. PATTEN                         Chairman of the Board and Chief                    April 14, 2003
---------------------------------------                Executive Officer and Director
             Ross M. Patten                            (Principal Executive Officer)

           /s/ J. PAUL WITHROW                       Chief Financial Officer (Principal                  April 14, 2003
---------------------------------------                     Accounting Officer)
             J. Paul Withrow

            /s/ GENE MEREDITH                                     Director                               April 14, 2003
---------------------------------------
              Gene Meredith

       /s/ KENNETH CHUAN-KAI LEUNG                                Director                               April 14, 2003
---------------------------------------
         Kenneth Chuan-kai Leung

          /s/ ALFRED TYLER, 2ND                                   Director                               April 14, 2003
---------------------------------------
            Alfred Tyler, 2nd

          /s/ DAVID A. DONNINI                                    Director                               April 14, 2003
---------------------------------------
            David A. Donnini

          /s/ VINCENT J. HEMMER                                   Director                               April 14, 2003
---------------------------------------
            Vincent J. Hemmer
</TABLE>


                                       17
<PAGE>

                                  CERTIFICATION

I, Ross M. Patten , certify that:

1.    I have reviewed this Amendment Number 1 to annual report on Form 10-K/A
      of Synagro Technologies, Inc.;

2.    Based on my knowledge, this annual 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 annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual 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 annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a.    designed such disclosure controls and procedures 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 annual
            report is being prepared;

      b.    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c.    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of the registrant's board of directors (or persons performing
      the equivalent function):

      a.    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b.    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: April 14, 2003                                /s/ Ross M. Patten
      --------------                       ------------------------------------
                                            Chairman and Chief Executive Officer


                                       18
<PAGE>

                                  CERTIFICATION

I, J. Paul Withrow , certify that:

1.    I have reviewed this Amendment Number 1 to annual report on Form 10-K/A
      of Synagro Technologies, Inc.;

2.    Based on my knowledge, this annual 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 annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual 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 annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a.    designed such disclosure controls and procedures 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 annual
            report is being prepared;

      b.    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c.    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of the registrant's board of directors (or persons performing
      the equivalent function):

      a.    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b.    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: April 14 , 2003                                /s/ J. Paul Withrow
      ---------------                      ------------------------------------
                                                   Chief Financial Officer


                                       19
<PAGE>
                                 EXHIBIT INDEX


<TABLE>
<S>                           <C>
                 99.1*  --    Certification of Chief Executive Officer

                 99.2*  --    Certification of Chief Financial Officer
</TABLE>

----------
* Filed with this Form 10-K/A.