CERPLEX GROUP INC/DE



              Filing Type:  10-Q
              Description:  Quarterly Report
              Filing Date:  May 15, 2000
               Period End:  Mar 25, 2000


         Primary Exchange:  Over the Counter Includes OTC and OTCBB
                   Ticker:  CPLX




<PAGE>





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

                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

          For the quarterly period ended March 25, 2000

                                       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: 1-8456

                             THE CERPLEX GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter.)

           Delaware                                             75-1539534
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization.)                              Identification No.)


            111 PACIFICA AVENUE, SUITE 300, IRVINE, CALIFORNIA 92618
--------------------------------------------------------------------------------
               (Address of principal executive office.) (Zip Code)


                                 (949) 754-5474

--------------------------------------------------------------------------------
               Registrant's telephone number, including area code.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicated  below  is the  number  of  shares  outstanding  of each  class of the
registrant's Common Stock, as of May 3, 2000:

TITLE OF EACH CLASS OF COMMON STOCK                        NUMBER OUTSTANDING
-----------------------------------                        ------------------
  Common Stock, $0.03 par value                             7,272,958 shares


================================================================================
<PAGE>



                             THE CERPLEX GROUP, INC.

                                TABLE OF CONTENTS

                                                                            PAGE

PART I.  FINANCIAL INFORMATION

Item 1.     Financial Statements

            Condensed Consolidated Balance Sheets as of  March 25, 2000
            and September 25, 1999                                             4

            Condensed Consolidated Statements of Operations for the Three
            Months and The Six Months Ended March 25, 2000
            and March 31, 1999                                                 5

            Condensed Consolidated Statements of Cash Flows for the Six
            Months Ended March 25, 2000 and March 31, 1999                     6

            Notes to Unaudited Condensed Consolidated Financial Statements     7

Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                             11


Item 3.     Quantitative and Qualitative Disclosures About Market Risk        20

PART II.  OTHER INFORMATION                                                   21

Signatures                                                                    24

Index to Exhibits                                                             25



                                        2
<PAGE>





                             THE CERPLEX GROUP, INC.


                                     PART I

                              FINANCIAL INFORMATION






                                        3
<PAGE>

                             THE CERPLEX GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                            (Unaudited)
                                                                              March 25,        SEPTEMBER 25,
                                                                                2000               1999
                                                                            -----------        -------------
<S>                                                                         <C>                <C>
                                     ASSETS

Current assets:
    Cash and cash equivalents                                                 $       6            $     382
    Accounts receivable, less allowance for doubtful accounts
      of $667 and $912                                                            7,208                9,234
    Inventories                                                                   4,773                5,375
    Other current assets                                                            872                1,191
                                                                              ---------            ---------
Total current assets                                                             12,959               16,182

Goodwill                                                                          9,236                9,406
Property, plant and equipment, net                                                8,475                9,560
Intangible and other assets                                                         361                  483
                                                                              ---------            ---------
                                                                              $  31,031            $  35,631
                                                                              =========            =========


                LIABILITIES AND STOCKHOLDERS' DEFICIT


Current liabilities:
    Current portion of long-term debt                                         $  41,154            $  39,406
    Accounts payable                                                              8,402                6,674
    Accrued expenses                                                              1,994                4,802
    Accrued interest expense                                                        577                  458
    Other current liabilities                                                     1,406                1,338
                                                                              ---------            ---------
Total current liabilities                                                        53,533               52,678

Long-term debt                                                                    3,813                   --
Commitments and contingencies
Redeemable convertible preferred stock, 1000 shares
    authorized and 216 shares issued                                             31,247               30,492

Stockholders' deficit:
    Series B senior cumulative preferred stock, 59 shares
            authorized and issued                                                61,721               59,669
    Common stock 75,000 shares authorized, 7,850 shares issued
            and outstanding                                                       2,270                2,270
    Additional paid-in capital                                                  121,601              121,601
    Treasury  stock, at cost, 474 shares                                        (16,675)             (16,675)
    Accumulated deficit                                                        (226,466)            (214,415)
    Accumulated other comprehensive income                                          (13)                  11
                                                                              ---------            ---------
Total stockholders' deficit                                                     (57,562)             (47,539)
                                                                              ---------            ---------

                                                                              $  31,031            $  35,631
                                                                              =========            =========
</TABLE>
         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.
                                        4

<PAGE>


                             THE CERPLEX GROUP, INC

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED           SIX MONTHS ENDED
                                         ---------------------------   ------------------------
                                           MARCH 25,     MARCH 31,       MARCH 25,      MARCH 31,
                                              2000          1999           2000,          1999
                                         ------------    ----------    ------------    ----------
<S>                                         <C>          <C>              <C>            <C>

Net revenues                                $ 13,163     $ 24,024         $27,308        $ 53,513
Cost of sales                                 14,091       24,676          28,009          52,492
                                             --------     --------         -------       --------
Gross profit                                    (928)         (652)           (701)          1,021

Selling, general and administrative
  expenses                                     3,896        5,738           7,568          11,026
Amortization of intangible assets                162        2,158             324           4,308
                                             --------     --------         -------       --------
Operating loss                                (4,986)      (8,548)         (8,593)        (14,313)

Interest expense                                 967        2,019           1,822           4,138
Other income (expense), net                       --        2,812              --           3,292
                                             --------     --------         -------       --------
Loss before provision for income taxes        (5,953)      (7,755)        (10,415)        (15,159)

Provision for income taxes                      (207)         149            (233)            (15)
                                              --------    --------         -------       --------
Net loss                                      (5,746)      (7,904)        (10,182)        (15,174)
Accrued dividends on preferred stock          (1,404)        (378)         (2,807)           (797)
                                              --------    --------         -------       --------
Net loss applicable to common stockholders   $(7,150)    $ (8,282)        $(12,989)      $(15,971)
                                              ========    ========         =======       ========
Basic and dilutive loss per common share     $ (0.98)    $  (1.15)        $  (1.79)      $  (2.21)
                                              ========    ========         =======       ========

Weighted average number of common
  shares outstanding                           7,270        7,232            7,269          7,232
                                              ========    ========         =======       ========


</TABLE>

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

                                        5

<PAGE>

                             THE CERPLEX GROUP, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              SIX MONTHS ENDED
                                                                     -------------------------------------
                                                                        MARCH 25,2000      MARCH 31, 1999
                                                                     -----------------    ----------------
<S>                                                                    <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                $(10,182)             $ (15,174)
   Adjustments to reconcile net loss to net cash used in
     continuing operations:
        Depreciation and amortization                                      1,392                  6,073
        Non-cash interest expense                                          1,127                     --
        Foreign currency translation                                          24                    103
        Loss on disposition of assets                                         --                     32
        Changes in assets and liabilities:
           Current assets                                                  2,970                     17
           Current liabilities                                              (628)                (7,370)
                                                                        --------               --------
    Net cash used in continuing operations                                (5,297)               (16,319)
    Net cash used in discontinued operations                                  --                     --
                                                                        --------               --------
Net cash used in operating activities                                     (5,297)               (16,319)
                                                                        --------               --------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Acquisition of property, plant and equipment                            (137)                  (685)
                                                                        --------               --------
    Net cash used in investing activities                                   (137)                  (685)
                                                                        --------               --------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Proceeds from promissory note                                             --                  7,500
    Payments on revolving line of credit                                 (13,056)                  (919)
    Payment on debt                                                       (2,871)                  (100)
    Proceeds from revolving line of credit                                16,879                     --
    Proceeds from debt                                                     4,106                     --
    Other                                                                     --
                                                                        --------               --------
Net cash provided by financing activities                                  5,058                  6,481
                                                                        --------               --------
Net change in cash and cash equivalents                                     (376)               (10,523)
                                                                        --------               --------
Cash and cash equivalents at beginning of period                             382                 14,196
                                                                        --------               --------
Cash and cash equivalents at end of period                              $      6               $  3,673
                                                                        ========               ========
</TABLE>

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

                                        6

<PAGE>




                             THE CERPLEX GROUP, INC.
                                AND SUBSIDIARIES

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A.  CURRENT FINANCIAL CONDITION

During the six months  ended  March 25,  2000 and the year ended  September  25,
1999, the Company  experienced  recurring operating losses. As a result of these
losses,  at March 25, 2000 the Company had a deficit of $57,562 in stockholders'
equity  and  negative   working   capital  of  $40,574.   In   addition,   since
recapitalization  of the Company in March 1996,  the Company has relied upon the
financial support of an investment fund managed by the investment firm of Welsh,
Carson,  Anderson  & Stowe  ("WCAS"),its  largest  stockholder,  for  additional
capital.  At March 25,  2000,  the Company had  approximately  $26.3  million in
principal  amount  outstanding  under its senior  secured term debt owed to WCAS
which  matures on April 1, 2001,  and $3.9 million and $3.8 million  outstanding
related to a senior secured line of credit with Congress  Financial  Corporation
(Western) ("Congress") and Burdale Financial Limited ("Burdale"),  respectively.
The Congress Line of Credit is due in February 2001. The  liquidation of Cerplex
S.A.S.  in October,  1999, as described  more fully in the 1999 Annual Report on
Form  10-K  for  The  Cerplex  Group,  Inc.,  may  cause  either  a  default  or
cross-default  under all the material debt  instruments  of the Company.  Unless
appropriate  waivers are obtained by the  Company,  the holders of such debt may
have the right to accelerate payment of principal  thereunder.  The acceleration
of such debt  would  have a  material  adverse  effect on the  Company.  In this
regard, the Company has obtained a default waiver from its senior lenders and is
currently  in  the  process  of  seeking  a  default  waiver  from  its  various
subordinated debt holders. On April 17, 2000, the Company was required to make a
sinking fund payment of approximately  $1.8 million against the principal on the
7 3/4%  convertible  subordinated  debentures and  approximately  $.4 million in
accrued interest.  Such payments were not made when due. The total amount of the
indebtedness was approximately $10.8 million at April 17, 2000.

During the three months ended March 25, 2000,  the Company was in default  under
several of its senior and  subordinated  debt  obligations.  With  regard to the
Congress Line of Credit and the WCAS Senior Secured Notes (collectively, "Senior
Securities"),  defaults exist due to, among other  reasons,  failure to maintain
minimum required adjusted net worth and a cross-default arising from the default
which occurred under the Company's 7 3/4% Convertible  Subordinated  Debentures.
On April 17, 2000, pursuant to the 7 3/4% Convertible  Subordinated  Debentures,
the  Company  was  required  to make a sinking  fund  payment  of  principal  of
approximately  $1.8 million and a payment of accrued  interest of  approximately
$0.4 million. The failure to make the sinking fund payment resulted in a default
under the terms of the Indenture  governing such  indebtedness.  The Company has
been  advised  by  the  Indenture  Trustee  that,  pending  further  discussions
regarding  the  default,  it will  forbear  actions  and  remedies  which may be
available to holders  under the  indenture  provided the Company  refrains  from
making payments other than in the ordinary course of business. Defaults existing
under the 7 3/4%  Convertible  Subordinated  Debentures  caused a cross  default
under the Company's 10% Senior  Subordinated Notes. At March 25, 2000, the total
indebtedness  owned  pursuant to the WCAS Senior Secured Notes and Congress Line
of Credit was  approximately  $26.3 million and $3.9 million,  respectively.  At
April 17, 2000, the total  indebtedness owned pursuant to the 7 3/4% Convertible
Subordinated  Debentures and the 10% Senior Subordinated Notes was approximately
$10.8 million and $0.4 million, respectively.

The Company is pursuing various financing  alternatives that may be available to
it,  although  there  can be no  assurance  that  the  Company  will  be able to
successfully  implement such  alternatives.  Though the Company  intends to make
efforts to increase  revenues to improve  operations,  the Company's  losses are
expected to continue  for the  foreseeable  future and the Company  will require
additional  funding and  financial  support from a third party.  There can be no
assurance that such additional  funding and financial  support will be available
on acceptable terms, or that such funds, if available,  would enable the Company
to continue  operating,  or that the Company will be  successful  in  increasing
revenues.  These matters raise  substantial doubt about the Company's ability to
continue as a going concern.

NOTE B.  BASIS OF PRESENTATION

The accounting policies followed by the Company are set forth in Note B "Summary
of  Significant   Accounting  Policies"  of  Notes  to  Consolidated   Financial
Statements  included  in the 1999  Annual  Report on Form  10-K for The  Cerplex
Group, Inc.

In the opinion of management,  the accompanying  condensed  consolidated balance
sheets and related interim condensed  consolidated  statements of operations and
cash flows include all adjustments  (consisting  only of normal recurring items)
necessary for their fair presentation.  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,
liabilities,  revenues,  and  expenses.  Actual  results could differ from those
estimates.  Interim results are not necessarily indicative of results for a full
year.
                                        7

<PAGE>

Certain  information  in footnote  disclosures  normally  included in  financial
statements  has been  condensed  or  omitted  in  accordance  with the rules and
regulations of the Securities and Exchange Commission.  The information included
in this Form 10-Q should be read in conjunction with Management's Discussion and
Analysis and financial  statements and notes thereto included in the 1999 Annual
Report on Form 10-K for The Cerplex Group, Inc.

NOTE C.  EARNINGS PER SHARE OF COMMON STOCK

Basic earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding after adding to loss
from  operations  cumulative  dividends to holders of the  Company's  redeemable
convertible preferred stock.

Diluted  earnings per share is computed by dividing net income (loss)  available
to  common  stockholders  by the sum of the  weighted  average  number of common
shares outstanding and dilutive stock options. For all periods presented, common
stock  equivalents  (stock options) were excluded from calculations as they were
considered to be antidilutive.

The Company's 7% Senior Cumulative  Convertible Preferred Stock and 10% Series B
Senior  Subordinated  Debentures  (which mature in three equal  installments  on
December 31, 2002, 2003 and 2004), were not common stock equivalents at the time
of  issuance  and are  therefore  not  included  in the  calculation  of diluted
earnings per share.

NOTE D.  INVENTORIES

Inventories consisted of the following:

                                            March 25,         September 25,
                                              2000               1999
                                           ------------      -------------
                                                   (IN THOUSANDS)

Spare and repair parts                        $5,284          $ 4,687
Work in process                                   92              493
Finished goods and purchased product             181              195
                                              ------           ------
        Total inventories                     $5,557           $5,375
                                              ======           ======

NOTE E.  CAPITALIZATION


On October 5, 1998, a majority of the  outstanding  capital stock of the Company
entitled  to vote,  voted at a  Special  Meeting  of  Stockholders  to  effect a
one-for-ten reverse stock split (the "One-for-Ten Reverse Split"), in which each
ten shares of the Company's  Common Stock were  converted  into one share of the
Company's Common Stock.  Stockholders who would have received  fractional shares
of Common Stock as a result of the One-for-Ten Reverse Split, were paid, in lieu
of  receiving  fractional  shares,  cash in an amount equal to $0.104 per share.
Unless  otherwise  stated,  figures  as to the  number  of  shares  outstanding,
earnings per share, exercise price to convert the 7% Convertible

                                        8

<PAGE>

Preferred  Stock and  other  per share  figures  included  herein,  reflect  the
One-for-Ten Reverse Split.  Immediately following the One-for-Ten Reverse Split,
the outstanding  capital stock of the Company  consisted of 215,500 shares of 7%
Convertible  Preferred  Stock,  44,000 shares of Series A Convertible  Preferred
Stock and  7,118,285  shares  of Common  Stock.  Subsequent  to the  One-for-Ten
Reverse  Split,  on November 19, 1998,  249,233  shares of the Company's  Common
Stock were issued as a result of the  conversion  of 44,000  shares of Preferred
Stock  of the  Company  that  had  been  previously  issued  to WCAS  and  other
stockholders. A majority of such Preferred Stock was held by WCAS. As a majority
holder of such Preferred Stock,  WCAS elected to cause all of the shares of such
Preferred Stock to be converted to the Common Stock of the Company. As of May 3,
2000, there were 7,272,958 shares of the Company's Common Stock outstanding.

NOTE F.  DEBT

On November  24, 1999 the Company  and its  subsidiary  entered  into a Loan and
Security  Agreement  ("Congress  Line of Credit") with Congress  providing for a
$13.0 million senior secured  revolving  credit  facility.  Concurrent with this
financing,  WCAS agreed to  subordinate  its security  interest in the Company's
assets.  The  Congress  Line of Credit,  which  matures in February  2001,  will
provide  additional  working  capital and financing  for the Company's  domestic
operations. As of April 22, 2000 the Company had $.1 million available to borrow
under this  facility.  Loans under the Congress  Line of Credit bear interest at
fluctuating  rates of  either  the  Prime  Rate,  as  defined,  plus 1/2% or the
Adjusted  Eurodollar  Rate,  as  defined,  plus 2 3/4%.  Borrowing  availability
pursuant to the Congress  Line of Credit is limited by the value,  as defined in
the  credit  agreement,  of  assets  pledged  as  collateral,   namely  accounts
receivable. The agreement also contains customary financial covenants and events
of default for financings of this type. The liquidation of Cerplex S.A.S. caused
a default and a cross-default  under the Congress loan. The Company has received
a waiver from Congress for an exception that covers this default.  Cerplex, Inc.
is the borrower under the Congress Line of Credit and the Company guarantees the
repayment of its obligations thereunder.

On  December  14,  1999,  Cerplex,  Ltd.  closed a financing  arrangement  ("the
"Burdale  Loans") with Burdale,  an affiliate of Congress.  The credit  facility
provides for advances to Cerplex Ltd. up to $2.9 million  under a line of credit
secured by accounts  receivable  and up to $3.5 million  under a loan secured by
real  estate.  This credit  facility was used to repay  indebtedness  to British
Telecommunications  plc ("BT")  and to  finance  the  working  capital  needs of
Cerplex Ltd. The Burdale Loans bear interest at fluctuating  rates of LIBOR plus
2%. The  Burdale  Loans are  covered by an  agreement  that  provides  customary
financial  covenants  and events of default for financing  arrangements  of this
type. Indebtedness under this agreement is guaranteed by the Company.

As of March 25, 2000 the Company had $3.9 million outstanding under the Congress
Line of Credit,  $3.8 million outstanding under the Burdale Loans, $26.2 million
outstanding  under the WCAS Senior Secured Notes,  and $0.4 million  outstanding
under the 10%  Series B Senior  Subordinated  Notes.  As of April  22,  2000 the
Company had $3.6 million  outstanding  under the Congress  Line of Credit,  $3.7
million outstanding under the Burdale Loans, $26.2 million outstanding under the
WCAS  Senior  Secured  Notes,  $10.4  million   outstanding  under  the  7  3/4%
Convertible  Subordinated  Debentures and $0.4 million outstanding under the 10%
Series B Senior Subordinated Notes.

During the quarter ended March 25, 2000,  the Company and Congress  agreed to an
amendment  to modify the terms of the Line of Credit to reduce the  Adjusted Net
Worth covenant  restrictions  in amounts  sufficient to reflect the write-off of
the Company's

                                        9

<PAGE>

investment in Cerplex S.A.S.  as of July 20, 1999.  Additionally,  the Amendment
included a waiver, to waive a notification default related to the liquidation of
Cerplex  S.A.S.  and a  cross-default  relating  to a  default  which  exists in
connection  with the Series B Notes.  All other  terms of the  Congress  Line of
Credit remain the same.

Losses from  operations  sustained by the Company during the quarter ended March
25, 2000 have resulted in an adjusted net worth, as defined in the Congress Line
of Credit,  to be less than that  required  pursuant  to the  covenant  therein.
Consequently, the Company is in default under the Congress Line of Credit. There
can be no assurance that the Company will receive  default waivers from Congress
or that future  earnings  would be  sufficient  to maintain  adjusted  net worth
requirements.

On April 17, 2000, pursuant to the 7 3/4% Convertible  Subordinated  Debentures,
the  Company  was  required  to make a sinking  fund  payment  of  principal  of
approximately  $1.8 million and a payment of accrued  interest of  approximately
$0.4 million. The failure to make the sinking fund payment resulted in a default
under the terms of the Indenture  governing such  indebtedness.  The Company has
been  advised  by  the  Indenture  Trustee  that,  pending  further  discussions
regarding  the  default,  it will  forbear  actions  and  remedies  which may be
available to holders  under the  indenture  provided the Company  refrains  from
making payments other than in the ordinary course of business. Defaults existing
under the 7 3/4%  Convertible  Subordinated  Debentures  caused a cross  default
under the Company's 10% Senior  Subordinated Notes. At March 25, 2000, the total
indebtedness owed pursuant to the WCAS Senior Secured Notes and Congress Line of
Credit was approximately $26.3 million and $3.9 million,  respectively. At April
17,  2000,  the  total  idebtedness  owed  pursuant  to the  7 3/4%  Convertible
Subordinated  Debentures and the 10% Senior Subordinated Notes was approximately
$10.8 million and $0.4 million, respectively.

NOTE G.  LOSS OF CONTROL OF SUBSIDIARY

On July 20, 1999, the management of Cerplex S.A.S.  ("SAS") requested assistance
from the  Commercial  Court of Lille,  France to  structure  a social plan for a
portion of the work force.  The  Commercial  Court  declared SAS insolvent as of
July 15, 1999 and opened bankruptcy  proceedings with respect to SAS. A judicial
administrator  was appointed by the Court to assist the management of SAS in all
its  activities   pending  the  Court's  decision  on  the  development  of  the
proceedings.  The terms of  assignment  of the judicial  administrator  included
reviewing SAS's condition and prospects and issuing a recommendation relating to
a plan of  reorganization  developed by SAS management.  While the administrator
was  overseeing  SAS's   operations,   the  Company  believed  that  a  plan  of
reorganization  would be adopted.  In the event that the administrator could not
support a plan of reorganization, it would become necessary to refer the case to
a liquidator pursuant to Commercial Court guidelines.

On October 12, 1999, the Commercial Court, acting upon the recommendation of the
judicial administrator,  ordered the liquidation of SAS. Prior to this decision,
management   believed  it  would  realize  its   investment  in  SAS  through  a
reorganization.  However,  after the liquidation of SAS was ordered, the Company
recognized that its investment in SAS was at significant risk of realization and
should  therefore be written off as of July 20,  1999,  the date  Cerplex,  Inc.
effectively   lost  control  of  SAS.  As  a  consequence  of  this  order,  SAS
discontinued its operations,  and the liquidator has laid off  substantially all
employees. As the Company effectively lost control of its subsidiary on July 20,
1999, the Company  deconsolidated  SAS from its financial  statements as of that
date. Based on Management's understanding and outside legal counsel's assessment
of the  situation  in  France,  the  Company  believes  there  is no  additional
financial  exposure  related  to  the  SAS  liquidation,  but  there  can  be no
assurances that a deficiency judgment will not be entered against Cerplex, Inc.,
the parent company.  This is described in the 1999 Annual Report on Form 10-K of
The Cerplex Group, Inc. under "European Operations".

The liquidator is responsible for selling the assets and paying off the debts of
SAS. As a result of the cost of laying-off all  employees,  the value of the SAS
assets may not exceed its  liabilities.  There can be no assurance that Cerplex,
Inc.,  as  shareholder,  will  receive any  liquidation  proceeds.  Accordingly,
Cerplex,  Inc. has written off its  investment in SAS which totaled $6.2 million
at July 20, 1999. The $6.2 million write-off was comprised of writing off assets
carried at $20.9 million,  liabilities carried at $13.8 million and intercompany
balances for SAS of $0.9 million.  For the second  quarter 1999 SAS had sales of
$9.9  million and a net loss of $.4 million.  These  amounts are included in the
Company's condensed  consolidated  financial  statements reported herein.  There
were no sales or  operations  from SAS reported in the second  quarter of fiscal
2000.

NOTE H.  BUSINESS SEGMENT AND FOREIGN OPERTIONS

The Company  currently  operates in one industry  segment,  the  outsourcing  of
services to the computer and  electronics  industry.  The  Company's  operations
outside  the  United  States  include a  manufacturing  facility  in the  United
Kingdom.

                                       10

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

The Company  provides  repair and  logistics  services,  and parts  sourcing and
service management for manufacturers of computer,  communications and electronic
office equipment.  In the computer  marketplace,  the Company primarily services
display terminals,  printed circuit boards,  laptops,  networking  equipment and
workstations.  In the  telecommunications  marketplace,  the  Company  primarily
services   switching   systems,    payphones,   video   conferencing   products,
multiplexers, mobile communications, transmission equipment, hubs and modems. In
the office automation marketplace,  the Company services printers, scanners, fax
machines and high value  products  such as copiers,  automatic  teller  machines
(ATMs) and other  paper-handling  equipment.  The Company  operates  through its
principal  subsidiary,  Cerplex,  Inc.,  and its  subsidiary.  Based in  Irvine,
California, the Company has locations across the United States and in the United
Kingdom.

The Company  entered the  computer  and  electronics  industry in 1992,  and has
expanded  its  operations  through the  acquisition  of  companies  that supply,
refurbish and recycle electronic parts and equipment.

In April 1998,  the Company  completed  the Merger with Old Cerplex,  in which a
wholly-owned subsidiary of the Company merged into Old Cerplex and each share of
Old Cerplex's  Common Stock was converted into 1.070167  shares of the Company's
Common Stock (or .1070167  shares after giving  effect to the  Company's  recent
One-for-Ten  Reverse  Split).  As a result of the Merger,  Old Cerplex  became a
wholly-owned  subsidiary  of the  Company.  The Company  changed its name to The
Cerplex  Group,  Inc.,  and Old Cerplex  changed its name to Cerplex,  Inc.  The
Company  now  conducts  its  operations  through  its  wholly-owned  subsidiary,
Cerplex, Inc. and its subsidiary, Cerplex, Ltd.

On June 25,  1999 the  Company  consented  to an  assignment  by Greyrock of its
rights and  interests  under the  Greyrock  Line of Credit to WCAS in return for
payment  in  full  of  all  outstanding   balances  of  principal  and  interest
thereunder.  WCAS repaid principal and interest  outstanding  under the Greyrock
Line of Credit  totaling $45.4 million.  Concurrent  with the  assignment,  WCAS
advanced to the Company an additional $4.6 million for working capital purposes,
resulting  in $50.0  million of total  indebtedness  outstanding  under the WCAS
Senior  Secured Notes as of June 25, 1999.  The terms of the WCAS Senior Secured
Notes are the same as those  under the  Greyrock  Line of Credit  except (i) the
interest rate was reduced to LIBOR plus 1 3/4%;  (ii) principal and interest are
due on April 1, 2001; (iii) collateral  consisting of the stock of the Company's
subsidiaries  in the UK and France that had secured the Greyrock  Line of Credit
was released;  (iv) the negative pledge agreements  covering assets owned by the
Company's  subsidiaries  in the UK and  France  were  terminated;  and  (v)  the
Company's  obligations  were no longer subject to minimum  collateral  borrowing
base requirements previously established in the Greyrock Line of Credit. On June
30, 1999 the Company  issued  approximately  58,643 shares of Series B Preferred
Stock at a price of $1,000 per share. The Series B Preferred Stock was issued as
repayment of various  obligations  owed to WCAS which  included $25.0 million of
principal  outstanding  under the WCAS Senior  Secured  Notes,  $16.5 million of
principal of the 10% unsecured  promissory notes ( "WCAS Notes"),  approximately
$15.6 million of principal of the 10% Series A Senior  Subordinated  Debentures,
and  approximately  $1.5  million of accrued  interest  owed to WCAS under these
obligations.   The  Series  B  Preferred   Stock   consist  of  7%   cumulative,
non-convertible  preferred  shares  that are  redeemable  by the  Company at its
option and redeemable by the holders upon a change of control of the Company.

As of April 30, 1998  following  the merger of Cerplex  and Aurora  Electronics,
Inc., the Company  recorded an excess of purchase price over net assets acquired
totaling  approximately  $40.6 million.  Since that time, the Company has closed
and consolidated several of its operations, exited certain lines of business and
has  revised  its  estimates  for  expected  future  cash flows from  continuing
operations.  Based on these  estimates  and the goodwill  ascribed to closed and
discontinued operations, the Company

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determined,  in the quarter ended June 30, 1999,  that an  impairment  charge of
approximately $18.4 million was necessary.  The carrying value of goodwill as of
June 30, 1999, after the impairment charge, was approximately $9.7 million.  The
blended average life of the goodwill  attributable to all operations  originally
acquired was five years.  However,  subsequent  to the  write-off of  terminated
operations, the remaining operations have a 15 year remaining useful life.

On July 20, 1999, the management of SAS requested assistance from the Commercial
Court of Lille,  France to  structure  a social  plan for a portion  of the work
force.  Upon review,  the Commercial Court declared SAS insolvent as of July 15,
1999  and  opened  bankruptcy  proceedings  with  respect  to  SAS.  A  judicial
administrator  was appointed by the Court to assist the management of SAS in all
its  activities   pending  the  Court's  decision  on  the  development  of  the
proceedings.  The terms of  assignment  of the judicial  administrator  included
reviewing SAS's condition and prospects and issuing a recommendation relating to
a plan of  reorganization  developed by SAS management.  While the administrator
was  overseeing  SAS's   operations,   the  Company  believed  that  a  plan  of
reorganization  would be adopted.  In the event that the administrator could not
support a plan of reorganization, it would become necessary to refer the case to
a liquidator pursuant to Commercial Court guidelines.

On October 12, 1999, the Commercial Court, acting upon the recommendation of the
judicial administrator,  ordered the liquidation of SAS. Prior to this decision,
management   believed  it  would  realize  its   investment  in  SAS  through  a
reorganization.  However,  after the liquidation of SAS was ordered, the Company
realized its  investment in SAS was lost and should  therefore be written off as
of July 20, 1999, the date Cerplex,  Inc. lost control of its  subsidiary.  As a
consequence of this order, the Company terminated the operations of SAS, and the
liquidator  has  laid  off  substantially  all  employees.   The  liquidator  is
responsible  for  selling  the assets  and  paying off the debts of SAS.  As the
result of the cost of laying-off all employees,  the value of the SAS assets may
not exceed the value of its liabilities. There can be no assurance that Cerplex,
Inc.,  as  shareholder,  will  receive any  liquidation  proceeds.  Accordingly,
Cerplex,  Inc. has written off its  investment in SAS which totaled $6.2 million
at July 20, 1999.

Since the Company  effectively lost management  control as of July 20, 1999, SAS
has been deconsolidated from the Company's financial statements as of that date.
Based on Management's  understanding  and outside legal counsel's  assessment of
the situation in France,  the Company believes there is no additional  financial
exposure related to the SAS  liquidation,  but there can be no assurances that a
deficiency  judgment  will not be  entered  against  Cerplex,  Inc.,  the parent
company.

The primary factors affecting the Company's repair business include, but are not
limited to, the pricing of the  Company's  services and the  utilization  of the
Company's  resources  that  constitute  fixed  costs.  Pricing in the  Company's
industry is very  competitive and price  discounting  could adversely affect the
Company's  operating  results.  In addition,  the Company has made a significant
investment  in  facilities,   equipment  and  personnel.   While  the  Company's
facilities have the capability of generating  significantly more repair services
volume  than  current  levels,  the  Company  has,  due to a variety of factors,
experienced  decreasing  revenues which have resulted in  significant  operating
losses.  In  particular,  BT and Rank Xerox  constituted  Old  Cerplex's and the
Company's  largest  customers  in the last fiscal  year.  Revenues  from BT have
declined  from  fiscal 1997  through the second  quarter of fiscal 2000 on a pro
forma basis and, with the  liquidation of SAS in 1999, the Company  generated no
revenues  from Rank Xerox during the second  quarter of fiscal 2000. As a result
of the liquidation of SAS the contract with Rank Xerox has been terminated,  and
there can be no assurance  that  revenues  from BT or other  customers  will not
decline in the future. The failure of the Company to develop additional business
from new and  existing  customers  could have a material  adverse  effect on the
Company's business.

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<PAGE>

During the three months ended March 25, 2000,  the Company was in default  under
several of its senior and  subordinated  debt  obligations.  With  regard to the
Congress Line of Credit and the WCAS Senior Secured Notes (collectively, "Senior
Securities"),  defaults exist due to, among other  reasons,  failure to maintain
minimum required adjusted net worth and a cross-default arising from the default
which occurred under the Company's 7 3/4% Convertible  Subordinated  Debentures.
On April 17, 2000, pursuant to the 7 3/4% Convertible  Subordinated  Debentures,
the  Company  was  required  to make a sinking  fund  payment  of  principal  of
approximately  $1.8 million and a payment of accrued  interest of  approximately
$0.4 million. The failure to make the sinking fund payment resulted in a default
under the terms of the Indenture  governing such  indebtedness.  The Company has
been  advised  by  the  Indenture  Trustee  that,  pending  further  discussions
regarding  the  default,  it will  forbear  actions  and  remedies  which may be
available to holders  under the  indenture  provided the Company  refrains  from
making payments other than in the ordinary course of business. Defaults existing
under the 7 3/4%  Convertible  Subordinated  Debentures  caused a cross  default
under the Company's 10% Senior  Subordinated Notes. At March 25, 2000, the total
indebtedness owed pursuant to the WCAS Senior Secured Notes and Congress Line of
Credit was approximately $26.3 million and $3.9 million,  respectively. At April
17,  2000,  the total  indebtedness  owed  pursuant  to the  7 3/4%  Convertible
Subordinated  Debentures and the 10% Senior Subordinated Notes was approximately
$10.8 million and $0.4 million, respectively.

COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 25, 2000
AND MARCH 31, 1999

Net  revenues  for the second  quarter of fiscal  2000 were  $13.2  million,  as
compared to $24.0 million in net revenues for the  corresponding  quarter in the
prior fiscal year. The Company's decrease in revenues was due principally to the
impact  of  the  deconsolidation  of  the  SAS  operation.   SAS  revenues  were
approximately  $7.1 million in the second quarter of fiscal 1999.  There were no
revenues  reported  from SAS in the second  quarter of fiscal 2000. In addition,
revenues  generated by the Company's North American Repairs and Parts operations
declined in the fiscal  quarter  ended  March 25, 2000 to $7.5  million and $1.6
million,  respectively  from $10.7  million and $1.8  million in the  comparable
fiscal 1999 quarter. UK revenues during the second fiscal 2000 quarter were $4.1
million  compared to $4.6 million in the same fiscal 1999  quarter.  The Company
had negative  gross  profit for the quarter  ended March 25, 2000 of $.9 million
(7.0% of net revenues), compared to a negative gross profit of $.7 million (2.9%
of net revenues) for the  corresponding  quarter of fiscal 1999. The decrease in
gross  profit was due  primarily  to gross  profit  declines  in  certain  North
American  repair  operations.  These  declines were  partially  offset by slight
reductions in the costs of the North American Parts operations during the second
fiscal quarter of 2000.  Selling,  general and  administrative  expenses for the
second  quarter of fiscal 2000 were $4.1  million  (30.0% of net  revenues),  as
compared to $7.7 million (32.1% of net revenues) for the  corresponding  quarter
in the prior fiscal year. SG&A expense reductions during the quarter ended March
25,  2000  were  primarily  attributable  to the  deconsolidation  of SAS  which
generated  approximately  $1.2 million of SG&A expenses during the second fiscal
quarter  of 1999 and the  reduction  of  expenses  within  the  Company's  North
American operations.  Amortization expense for the second quarter of fiscal 2000
was $0.3 million compared to $2.2 million for the  corresponding  quarter in the
prior fiscal year. The decrease was due to a goodwill impairment charge incurred
in the third fiscal 1999 quarter.

Net interest expense for the second quarter of fiscal 2000 was $1.0 million,  or
7.3% of revenues,  as compared to $2.0  million,  or 8.4% of  revenues,  for the
corresponding quarter in the prior fiscal year. The decrease in interest expense
is due to the  reduction  of  interest  bearing  debt  that  resulted  from  the
financial  restructuring that occurred on June 25, 1999 as described in the 1999
Annual  report  on Form  10-K of the  Cerplex  Group,  Inc.  As a result of such
restructuring,  approximately  $58.6 million of indebtedness owed by the Company
to WCAS was converted to Series B Preferred  Stock which carries a 7% cumulative
dividend.

Net loss to common  stockholders for the quarter was $7.2 million as compared to
net loss of $8.3 million for the corresponding quarter in the prior fiscal year.


COMPARATIVE  RESULTS OF  OPERATIONS  FOR THE SIX MONTHS ENDED MARCH 25, 2000 AND
MARCH 31, 1999

Net revenues for the first half of fiscal 2000 were $27.3  million,  as compared
to $53.5  million  in net  revenues  for the  corresponding  period in the prior
fiscal  year.  The  Company's  decrease in revenues was due  principally  to the
impact  of  the  deconsolidation  of  the  SAS  operation.   SAS  revenues  were
approximately  $17.0  million  in the first half of fiscal  1999.  There were no
revenues  reported  from SAS in the first  half of  fiscal  2000.  In  addition,
revenues  generated by the Company's North American Repairs and Parts operations
declined  in the first half of fiscal 2000 to $12.9  million  and $4.6  million,
respectively. The Company had negative gross profit for the first half of fiscal
2000 of $0.7 million (2.6% of net revenues),  compared to a gross profit of $1.0
million (1.9% of net revenues) for the corresponding  period of fiscal 1999. The
decrease in gross  profit of $2.2  million from the first half of fiscal 1999 to
the first half of fiscal 2000  primarily  attributable  to the  Company's  North
American Repair operations. Selling, general and administrative expenses for the
first half of fiscal 2000 were $7.9 million (29% of net  revenues),  as compared
to $11.0 million  (20.6% of net revenues)  for the  corresponding  period in the
prior fiscal year. SG&A expense  reductions during the first half of fiscal 2000
were  partially  attributable  to the  deconsolidation  of SAS  which  generated
approximately $2.4 million of SG&A expenses during the first half of fiscal 1999
and the reduction of expenses  within the Company's  North American  operations.
Amortization expense for the first half of fiscal 2000 was $0.6 million compared
to $4.3  million for the  corresponding  period in the prior  fiscal  year.  The
decrease was due to a goodwill  impairment  charge  incurred in the third fiscal
1999 quarter.

Net interest expense for the first half of fiscal 2000 was $1.8 million, or 6.7%
of  revenues,  as  compared  to  $4.1  million,  or 7.7%  of  revenues,  for the
corresponding  period in the prior fiscal year. The decrease in interest expense
is due to the  reduction  of  interest  bearing  debt  that  resulted  from  the
financial  restructuring that occurred on June 25, 1999 as described in the 1999
Annual  report  on Form  10-K of the  Cerplex  Group,  Inc.  As a result of such
restructuring,  approximately  $58.6 million of indebtedness owed by the Company
to WCAS was converted to Series B Preferred  Stock which carries a 7% cumulative
dividend.

Net loss to  common  stockholders  for the first  half of fiscal  2000 was $13.0
million as compared to net loss of $16.0 million for the corresponding period in
the prior fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  primary  requirements  for capital are  directly  related to its
levels of  accounts  receivable,  inventories,  additions  to its  property  and
equipment and required debt principal and interest  payments.  The Company had a
working  capital  deficit of $40.6 million as of March 25, 2000 as compared to a
working capital deficit of $36.5 million as of September 25, 1999. See Note A of
Notes to  Unaudited  Condensed  Consolidated  Financial  Statements  -- "Current
Financial Condition."

During the three months ended March 25, 2000,  the Company was in default  under
several of its senior and  subordinated  debt  obligations.  With  regard to the
Congress Line of Credit and the WCAS Senior Secured Notes (collectively, "Senior
Securities"),  defaults exist due to, among other  reasons,  failure to maintain
minimum required adjusted net worth and a cross-default arising from the default
which occurred under the Company's 7 3/4% Convertible  Subordinated  Debentures.
On April 17, 2000, pursuant to the 7 3/4% Convertible  Subordinated  Debentures,
the  Company  was  required  to make a sinking  fund  payment  of  principal  of
approximately  $1.8 million and a payment of accrued  interest of  approximately
$0.4 million. The failure to make the sinking fund payment resulted in a default
under the terms of the Indenture  governing such  indebtedness.  The Company has
been  advised  by  the  Indenture  Trustee  that,  pending  further  discussions
regarding the default,  that it will forbear  actions and remedies  which may be
available to holders  under the  indenture  provided the Company  refrains  from
making payments other than in the ordinary course of business. Defaults existing
under the 7 3/4%  Convertible  Subordinated  Debentures  caused a cross  default
under the Company's 10% Senior  Subordinated Notes. At March 25, 2000, the total
indebtedness owed pursuant to the WCAS Senior Secured Notes and Congress Line of
Credit was approximately $26.3 million and $3.9 million,  respectively. At April
17,  2000,  the  total  indebtedness  owed  pursuant  to the 7 3/4%  Convertible
Subordinated  Debentures and the 10% Senior Subordinated Notes was approximately
$10.8 million and $0.4 million, respectively. There can be no assurance that the
company  will be able to obtain  default  waivers from the holders of its Senior
Securities,  its 7 3/4%  Convertible  Subordinated  Debentures or its 10% Senior
Subordinated Notes. In the event that waivers are not obtained,  holders of such
securities  have  the  right,  among  others,  to  accelerate  maturity  of such
indebtedness.  Such  an  event  would  have a  material  adverse  effect  on the
Company's financial condition.


                                       13

<PAGE>

The Company will be seeking  waivers of defaults  relating to its  indebtedness.
However,  there can be no assurance  that  continued  operating  losses will not
cause a  default  in the  future.  See Note A of Notes  to  Unaudited  Condensed
Consolidated Financial Statements -- "Current Financial Condition."

In  addition  to not having  the  capital  necessary  to make the  sinking  fund
payment, management believes that the Company will likely continue to experience
operating  losses and negative  cash flow during part or all of the remainder of
fiscal 2000.

The Company is highly leveraged,  and has significant debt repayment obligations
and preferred stock  redemption  obligations.  As of March 25, 2000, the Company
had approximately  $44.9 million  principal amount of indebtedness  outstanding,
which consisted of: (i) $26.2 million  indebtedness under the WCAS secured loan;
(ii)  $0.4  million  indebtedness  under  the  Company's  10%  Series  B  Senior
Subordinated Notes; (iii) $10.4 million indebtedness under the Company's 7 3/4%
Convertible  Subordinated  Debentures plus accrued interest that was not paid at
April 17, 2000 of  approximately  $.4 million;  (iv) $3.8  million  indebtedness
under the Burdale Loans; (v) $3.9 million  indebtedness  under the Congress Line
of Credit; and (vi) $0.2 million of other indebtedness  consisting  primarily of
equipment leases. In addition,  the Company also had as of March 25, 2000, $21.6
million outstanding (par value only) of its mandatory  redeemable 7% Convertible
Preferred Stock.

Congress Line of Credit

On November  24, 1999 the Company  and its  subsidiary  entered  into a Loan and
Security Agreement providing for a $13.0 million senior secured revolving credit
facility (the "Congress Line of Credit").  Concurrent  with the financing,  WCAS
agreed with the Company and Congress to subordinate its security interest in the
Company's assets.  The Congress Line of Credit,  which matures in February 2001,
will provide  additional  working capital  financing for the Company's  domestic
operations. Loans under the Congress Line of Credit bear interest at fluctuating
rates of either the Prime Rate, as defined, plus 1/2% or the Adjusted Eurodollar
Rate, as defined, plus 2 3/4%.  Borrowing  availability pursuant to the Congress
Line of Credit is limited by the value as  defined in the credit  agreement,  of
assets  pledged as collateral,  namely  accounts  receivable and inventory.  The
agreement also contains customary  financial covenants and events of default for
lending  arrangements  of this type.  Cerplex,  Inc. is the  borrower  under the
Congress  Line of  Credit  and  the  Company  guarantees  the  repayment  of its
obligations thereunder.

Burdale Line of Credit.

On December 15, 1999,  Cerplex,  Ltd. closed the Burdale Loans with Burdale,  an
affiliate  of  Congress.  The Burdale  Loans  consist of a line of credit  which
matures in February  2001 and provide  for  advances to Cerplex  Ltd. up to $2.9


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<PAGE>

million  under a line of credit  secured by  accounts  receivable.  The  Burdale
Debenture, which matures in December 2003, provides for up to $3.5 million under
a loan secured by real estate.  The Burdale  Debenture  was used to repay the BT
Notes and the line of credit will be used to finance the working  capital  needs
of Cerplex Ltd. The Burdale  Loans bear interest at  fluctuating  rates of LIBOR
plus 2%. The Burdale Loans are covered by an agreement  that provides  customary
financial  covenants  and events of default for financing  arrangements  of this
type. Indebtedness under this agreement is guaranteed by the Company.

10% Series B Senior Subordinated Notes.

As of April 22, 2000,  there was  approximately  $0.4 million  principal  amount
outstanding of the Company's 10% Series B Senior Subordinated Notes. These notes
were sold to certain public  stockholders.  The 10% Series B Senior Subordinated
Notes are  subordinate  in right of  payment  to all bank debt and other  senior
indebtedness  of  Cerplex  but  rank  senior  to  all  outstanding  subordinated
indebtedness.  The 10% Series B Senior Subordinated Notes are general, unsecured
obligations  of the  Company  and  bear  interest  at  10%  per  annum,  payable
semi-annually  in  arrears  in cash on June  30 and  December  31 of each  year,
beginning on June 30, 1998. The 10% Series B Senior Subordinated Notes mature in
three equal annual installments  commencing on December 31, 2002. The 10% Series
B Senior  Subordinated  Notes may be  prepaid  at any time at the  option of the
Company in whole or in part,  upon not less than 20 or more than 60 days  notice
at the unpaid principal amount thereof plus accrued and unpaid interest.

7 3/4% Convertible Subordinated Debentures.

As of April 22, 2000,  there was  approximately  $10.4 million  principal amount
outstanding of the Company's 7 3/4%  Convertible  Subordinated  Debentures  (the
"Debentures").  The  Debentures  are  scheduled to mature April 15, 2001 and are
convertible into Common Stock of the Company at a conversion  price,  subject to
adjustment in certain  instances,  of  approximately  $116.60 per share, and are
redeemable  at the option of the  Company at face  value plus  accrued  interest
thereon.  However,  the Company did not make a required  sinking fund payment of
principal of approximately $1.8 million in April, 2000 on the Debentures causing
a default which gives holders the right, under certain conditions, to accelerate
the  maturity.  The  Debentures  bear  interest  at 7 3/4%  payable in April and
October of each year through maturity.

Other Debt

As of April 22,  2000,  there was $0.2  million  principal  amount of other debt
outstanding,  consisting  primarily of secured  equipment  financing and capital
lease obligations with interest rates ranging from 8.9% to 12.9%, due in monthly
installments through 2000.

7% Senior Cumulative Convertible Preferred Stock

As of April 22, 2000,  there was $21.6 million  outstanding  (excluding  accrued
dividends) of the Company's 7% Convertible  Preferred  Stock (215,500  shares at
$100 per share par value).  Holders of the 7%  Convertible  Preferred  Stock are
entitled  to receive  dividends  of $7.00 per share per annum (or 7% of the face
amount),  payable  when and as declared  by the  Company's  Board of  Directors.
Unpaid dividends are cumulative and accrue.  Accrued but unpaid dividends do not
bear


                                       15
<PAGE>

interest.  The 7% Convertible Preferred Stock must be redeemed by the Company in
equal  installments  on each of December 31, 2006 and 2007. In addition,  the 7%
Convertible  Preferred  Stock is redeemable at the option of the holders thereof
upon a change of control of the Company,  which includes the sale of 50% or more
of the voting  power of all  outstanding  shares of the Company to a party other
than  WCAS.  In the event of a  liquidation,  dissolution  or  winding up of the
affairs of the Company,  the holders of the 7% Convertible  Preferred  Stock are
entitled to receive a liquidation  preference in the amount of $100 per share of
the 7% Convertible  Preferred Stock, plus accrued and unpaid dividends  thereon,
prior and in preference to any  distribution  to holders of any class of capital
stock of the  Company  junior to such 7%  Convertible  Preferred  Stock.  The 7%
Convertible  Preferred Stock is convertible in whole or in part at the option of
the holders thereof. Each share of 7% Convertible Preferred Stock is convertible
into 40 shares of the  Company's  Common  Stock upon  payment of the  conversion
price of $2.50 (subject to antidilution adjustment under certain circumstances).

YEAR 2000 COMPLIANCE

The  Company  faces  Year  2000  risks  as  the  result  of  computer  programs,
microprocessors  and embedded date reliant  systems using two digits rather than
four to define the applicable year. If such programs or microprocessors  are not
corrected,  date data concerning the Year 2000 could cause many systems to fail,
lock up or generate  erroneous  results.  A computer  system is considered to be
"Year  2000  compliant"  if  the  system's  performance  and  functionality  are
unaffected by the  processing of dates prior to, during and after the Year 2000,
but only if all products (for example hardware, software and firmware) used with
the system properly exchange accurate date data with it.

The Company  implemented  a program  that was  intended to enable the Company to
become Year 2000  compliant.  The Company used  management  information  systems
(MIS)  personnel  knowledgeable  regarding  Year 2000  problems to determine the
extent of work  necessary  for the Company to become Year 2000  compliant and to
remedy such problems.  The Company  purchased and installed certain software and
hardware  intended to upgrade its networked  personal computer system to be Year
2000 compliant. More significantly, the Company obtained the source code for the
Company's main operating  systems  software that the Company modified to be Year
2000  compliant.  In addition,  the Company has discussed  Year 2000 issues with
certain of its  significant  suppliers and customers to evaluate their Year 2000
readiness,  and to  determine  whether  any Year 2000  issues  would  impede the
ability of such  suppliers  to  continue  to provide  goods and  services to the
Company,  and the ability of such  customers to continue to provide  business to
the Company.  The Company's  internal  systems,  equipment and processes are now
substantially  Year 2000  compliant.  The Company has completed the analysis and
remediation of potential Year 2000 problems with its  significant  suppliers and
customers. Despite the Company's efforts to become Year 2000 compliant, there is
no assurance that the Year 2000 issue will not pose significant problems.  There
may be a failure to identify all Year 2000 problems in the systems, equipment or
processes  of  the  Company  or  its  vendors  or  customers,  or  unanticipated
remediation  expenses,  all of which could have material adverse consequences on
the Company's financial position and results of operations.

The Company  believes  that the most likely worst case  scenario with respect to
Year 2000 problems would be that the Company or the third parties with whom


                                       16
<PAGE>

the Company does business  would fail to  successfully  complete their Year 2000
remediation  efforts,  in which case the Company would encounter  disruptions to
its business that could have a material adverse effect on its financial position
and results of operations. In addition to specific problems that the Company may
encounter  with its own  systems  and those of the third  parties  with whom the
Company does  business,  the Company may be  materially  impacted by  widespread
economic or  financial  market  disruptions  caused by Year 2000  problems.  The
Company has established Year 2000 contingency plans in the event that there is a
failure  of the  Company's  Year  2000  remediation  efforts  or the  Year  2000
remediation efforts of third parties with whom the Company does business.

Subsequent to January 1, 2000, the Company has encountered only minimal problems
related to Year 2000 issues. The cost of remediation has been immaterial and the
cost of future remediation efforts is expected to be immaterial.

OUTLOOK AND UNCERTAINTIES

The  following  is a  "safe  harbor"  statement  under  the  Private  Securities
Litigation Reform Act of 1995: the matters discussed in this Quarterly Report on
Form 10-Q contain statements that constitute  forward-looking  statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended.
The words "expect," "estimate,"  "anticipate," "predict," "believe," and similar
expressions  and  variations  thereof are  intended to identify  forward-looking
statements.  Such  statements  appear in a number  of  places in this  Quarterly
Report on Form 10-Q and  include  statements  regarding  the  intent,  belief or
current  expectations of the Company, its directors or its officers with respect
to, among other things: (i) trends affecting the Company's  financial  condition
or results of  operations;  (ii) the Company's  financing  plans;  and (iii) the
Company's  business  growth  strategies.  Readers  are  cautioned  that any such
forward-looking  statements are not guarantees of future performance and involve
risks and  uncertainties,  and that actual  results may differ  materially  from
those  projected  in the  forward-looking  statements  as a  result  of  various
factors.  These  risks and  uncertainties  include,  but are not limited to, the
following:

High Degree of Leverage; Future Capital Requirements.  As of April 22, 2000, the
Company  has  approximately  $44.7  million  principal  amount  of  indebtedness
outstanding,  which consisted of: (i) $26.2 million  indebtedness under the WCAS
secured loan; (ii) $10.5 million  indebtedness  under the Company's 10% Series B
Senior  Subordinated  Notes;  (iii) $3.7 million  indebtedness under the Burdale
Loans; (iv) $3.7 million indebtedness under the Congress Line of Credit; (v)$0.4
million indebtedness under the Company's 10% Series B Senior Subordinated Notes;
and (vi) $.2 million of other  indebtedness  consisting  primarily  of equipment
leases.  In addition,  the Company also has as of April 22, 2000,  $21.6 million
outstanding  (excluding  accrued  dividends of $9.3 million) of its  mandatorily
redeemable 7%  Convertible  Preferred  Stock.  The payment terms of the debt and
preferred  stock are  described  in Item 2 of this report  under,  "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Liquidity and Capital Resources."

It is anticipated that the Company's cash from operations will not be sufficient
to  enable  it  to  meet  all  debt  service  and  preferred  stock   redemption
requirements,  and the  Company  will be  required  to obtain  additional  funds
through equity or debt financings in order not to default on such  requirements.
In many cases,  if the Company  defaults on a particular  debt, the default will
cause  other  debts of the  Company  to be in default  and come due  early.  The
failure to pay principal  when due pursuant to the Company's 7 3/4%  Convertible
Subordinated  Debentures  may cause the  acceleration  of all the material  debt
instruments  of  the  Company,  either  because  it  triggers  a  default  or  a
cross-default under such instruments. Unless appropriate waivers are obtained by
the Company,  the acceleration of such debt would have a material adverse effect
on the Company.

                                       17
<PAGE>

In this  regard,  the  Company  will be seeking  default  waivers  from  various
creditors whose agreements were affected and wherein a default exists. There can
be no assurance that such default waivers will be obtained or, if obtained, that
the Company will remain in compliance with other material covenants.  The degree
to which the Company is leveraged could  adversely  affect its ability to obtain
additional financing and could make it more vulnerable to economic downturns and
competitive pressures. The terms of any equity financings have in the past been,
and may in the future be, dilutive to the Company's stockholders,  and the terms
of any debt financings are likely to contain  restrictive  covenants which limit
the  Company's  ability to pursue  certain  courses  of action.  There can be no
assurance that additional  funding will be available on acceptable  terms, if at
all. If adequate funds are not  available,  the Company will  experience  severe
liquidity  problems.  This matter raises  substantial  doubt about the Company's
ability to continue as a going concern.

Losses and  Accumulated  Deficit.  For the  quarter  ended March 25,  2000,  the
Company  reported  a net  loss of $7.2  million  and an  operating  loss of $5.0
million. As of March 25, 2000, the Company has a stockholders'  deficit of $57.6
million.  The Company is  expecting  to  experience  losses for the  foreseeable
future, and will require additional funding. Continued losses and/or the failure
to obtain such  additional  funding could  materially  and adversely  affect the
business and financial condition of the Company and the value of, and the market
for, the Company's equity and debt securities.

Control by WCAS.  WCAS owns  approximately  69% of the Company's  voting capital
stock, which consists of WCAS's ownership of shares of the Company's outstanding
Common Stock, and shares of the Company's 7% Convertible  Preferred Stock (which
give the  holders  thereof the right to vote on all matters on which the holders
of Common Stock are entitled to vote, as if the 7% Convertible  Preferred  Stock
had been  converted to Common Stock).  As a result,  WCAS is able to control all
matters requiring approval by the Company's stockholders, including the election
of  directors.  The  Company's  Board of  Directors  has the  authority to issue
additional  shares of preferred  stock in one or more series and fix the rights,
preferences,  privileges  and  restrictions  granted to or imposed upon any such
shares of preferred  stock.  The issuance of such preferred  stock may adversely
affect voting and dividend  rights,  rights upon liquidation and other rights of
holders  of  the  Company's  Common  Stock  and  may  result  in  immediate  and
substantial  dilution to the holders of the Common  Stock.  The issuance of such
preferred  stock and the control by WCAS of the Company may also have the effect
of delaying, deferring or preventing a change in control of the Company.

Dependence on Key Customers.  For the quarter ended March 25, 2000, BT accounted
for  approximately  20% of the Company's  revenues.  These  revenues were almost
entirely attributable to the business of Old Cerplex.  There can be no assurance
that this customer will not terminate any or all of their  arrangements with the
Company,  significantly  change,  reduce or delay the amount of services ordered
from the Company,  or significantly  change the terms upon which the Company and
this customer do business.  Any such termination,  change,  reduction,  or delay
could have a material  adverse  effect on the Company's  business.  Unit volumes
from BT have been  declining  and are  expected  to  continue to decline due to,
among other  things,  product  evolution.  The future  success of the  Company's
European operations is dependent upon replacing these declining volumes with new
revenue from either this  customer or new  customers.  There can be no assurance
that the Company  will be able to replace  this  declining  volume with sales to
either this or new customers.

Competition.  The Company  competes with the in-house repair and service


                                       18

<PAGE>

centers  of OEMs and TPMs.  There is no  indication  that these  companies  will
choose to outsource their repair and service needs. In certain instances,  these
companies  compete  directly with the Company to provide services to third party
OEMs  and  TPMs.  Moreover,  the  industry  in which  the  Company  operates  is
fragmented,   and  the  Company  faces  competition  from  a  variety  of  small
independent suppliers. Competition for business from OEM, TPM and MVSO customers
is based on a number of  factors,  including  breadth of services  provided  and
price.  Certain of the  Company's  competitors  have  greater  revenue or larger
capitalization than the Company. There can be no assurance that the Company will
be able to compete effectively in its target markets.

Reliance  on  International  Sales.  For  the  quarter  ended  March  25,  2000,
approximately  31% of the Company's  sales were outside of North America.  There
can be no assurance  that the Company will  continue to be able to  successfully
market,  sell,  and deliver its  products  and  services  in these  markets.  In
addition to the  uncertainty  as to the Company's  ability to maintain or expand
its international  presence,  there are certain risks inherent in doing business
on  an   international   level,   such  as  unexpected   changes  in  regulatory
requirements,   export   restrictions,   tariffs  and  other   trade   barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability, severance and
other costs  associated  with work force  reductions,  fluctuations  in currency
exchange rates,  and potentially  adverse tax  consequences,  any of which could
adversely impact the success of the Company's  international  operations.  There
can be no  assurance  that one or more of such  factors will not have a material
adverse effect on the Company's international  operations and, consequently,  on
the Company's business, operating results and financial condition.

Reliance on Short Term  Purchase  Orders and  Contracts.  The Company  generally
distributes  parts to, and  receives  its  recyclable  material  from  customers
pursuant to  non-exclusive  contracts that do not contain  guaranteed or minimum
quantities  and are subject to  cancellation  on short notice at the  customer's
discretion.  Similarly,  the Company's repair contracts are typically subject to
termination on short notice at the customer's  discretion,  and purchase  orders
under such contracts typically only cover services over a 90-day period.

Dependence on the Electronics and Computer  Industry.  The Company's  businesses
are  dependent  upon  the  growth,  viability  and  financial  stability  of its
customers and potential  customers in the electronics and the computer industry.
The  electronics  and  computer  industry  have  been   characterized  by  rapid
technological  change,  compressed  product  life  cycles and pricing and margin
pressures.  The factors  affecting  segments  of the  electronics  and  computer
industry in general,  and the Company's OEM customers in particular,  could have
an adverse  effect on the  Company's  business.  There can be no assurance  that
existing customers or future customers will not experience financial difficulty,
which could have a material adverse effect on the Company's business.

Risks  Associated with Intangible  Assets.  As of March 25, 2000,  approximately
$9.2 million of the Company's total assets consisted of intangible  assets.  The
intangible assets consist  primarily of goodwill  resulting from the Merger with
Old Cerplex.  The goodwill must be amortized over a number of years and deducted
from the Company's earnings,  even though the goodwill may not generate earnings
to  offset  such  deduction.  There  can be no  assurance  that the value of the
Company's  intangible assets will ever be realized by the Company,  particularly
in any sale or liquidation of the Company. Any significant decrease in the value
of such intangible assets or increase in the rate of amortization  thereof would
adversely affect the Company's financial condition and results of operations.


                                       19
<PAGE>

Limited  Trading  Market and Possible  Volatility of Stock Price.  The volume of
trading of the Company's  Common Stock has been very limited and there can be no
assurance of an active  trading  market for the Common  Stock in the future.  In
addition,  the trading price of the Company's  Common Stock has been, and in the
future could be, subject to significant  fluctuations  in response to variations
in quarterly  operating  results of the Company,  the depth and liquidity of the
market for the Company's  Common Stock,  investor  perception of the Company and
the  industry  within  which  it  competes,  the  gain or  loss  of  significant
contracts,  changes in  management  or new  products or services  offered by the
Company or any  competitors,  general trends in the industry and other events or
factors. In addition,  the stock market has experienced extreme price and volume
fluctuations,  which  have  particularly  affected  the  market  price  for many
companies  in similar  industries  and which have  often been  unrelated  to the
operating  performance of these companies.  These broad market  fluctuations may
adversely affect the market price of the Company's Common Stock.

Shares Available for Future Sale. No prediction can be made as to the effect, if
any, that future sales of shares,  or the availability of shares for future sale
by WCAS, will have on the market price of the Company's  Common Stock prevailing
from time to time.  Sales of  substantial  amounts  of Common  Stock  (including
shares issued upon the exercise of stock options and the conversion of preferred
stock),  or the  perception  that such sales could occur,  may adversely  affect
prevailing market prices for the Company's Common Stock.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The  Company is subject to market  risks with  respect to its  variable
note debt and its cash flows,  receivables  and payables  denominated in foreign
currencies.

         Of the Company's  $44.7 million  principal  amount of  indebtedness  at
April 22, 2000, $26.2 million  principal  amount of such debt (which  represents
total principal indebtedness under the WCAS Senior Secured Notes) bears interest
at a rate that fluctuates based on changes in the LIBOR rate. A 1% change in the
underlying  LIBOR  rate  would  result in $262  change in the  annual  amount of
interest payable on such debt.

         The Company's oversees subsidiary  operates in England.  Both the trade
receivables  and the trade  payables for this unit are  denominated in the local
currency.  The balance as of March 25, 2000 was $0.3  million.  The Company does
not hedge these balances. See Note O to the Consolidated Financial Statements --
"Business Segment and Foreign Operations" in the Company's annual report on Form
10-K.

                                       20

<PAGE>



                             THE CERPLEX GROUP, INC.





                                     PART II

                                OTHER INFORMATION






                                       21



<PAGE>


THE CERPLEX GROUP, INC.

ITEM 1.   LEGAL PROCEEDINGS

          Inapplicable.

ITEM 2.   CHANGES IN SECURITIES

          Inapplicable.

ITEM 3.   Defaults Upon Senior and Subordinated Securities

          During the three  months  ended  March 25,  2000,  the  Company was in
          default under several of its senior and subordinated debt obligations.
          With regard to the Congress Line of Credit and the WCAS Senior Secured
          Notes  (collectively,  "Senior  Securities"),  defaults  exist due to,
          among other reasons, failure to maintain minimum required adjusted net
          worth and a  cross-default  arising  from the default  which  occurred
          under the Company's 7 3/4%  Convertible  Subordinated  Debentures.  On
          April  17,  2000,  pursuant  to the  7 3/4%  Convertible  Subordinated
          Debentures, the Company was required to make a sinking fund payment of
          principal  of  approximately  $1.8  million  and a payment  of accrued
          interest  of  approximately  $0.4  million.  The  failure  to make the
          sinking  fund  payment  resulted  in a default  under the terms of the
          Indenture governing such indebtedness. The Company has been advised by
          the Indenture Trustee that, pending further discussions  regarding the
          default,  it will forbear  actions and remedies which may be available
          to holders  under the  indenture  provided the Company  refrains  from
          making  payments  other  than  in the  ordinary  course  of  business.
          Defaults existing under the 7 3/4% Convertible Subordinated Debentures
          caused a cross default  under the  Company's  10% Senior  Subordinated
          Notes. At March 25, 2000, the total  indebtedness owed pursuant to the
          WCAS  Senior   Secured   Notes  and   Congress   Line  of  Credit  was
          approximately $26.3 million and $3.9 million,  respectively.  At April
          17,  2000,  the  total   indebtedness  owed  pursuant  to  the  7 3/4%
          Convertible  Subordinated  Debentures and the 10% Senior  Subordinated
          Notes was approximately $10.8 million and $0.4 million, respectively.

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

At an Annual Meeting of Stockholders on April 5, 2000,  holders of a majority of
the  capital  stock of the  Company  entitled  to vote  approved  the  following
matters:
     1. Ratification of KPMG LLP as the Company's Independent Accountants

     2. Election of Larry McTavish,  Richard H. Stowe,  Thomas E. McInerney and
        Bruce K. Anderson as the Directors of the Company.


ITEM 5.   OTHER INFORMATION

          Inapplicable.




                                       22


<PAGE>



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a) Exhibits

 EXHIBIT
 NUMBER                       DESCRIPTION OF EXHIBITS
 -------                      -----------------------
  3.1.1    The Restated  Certificate of Incorporation of the Company, as amended
           (incorporated   by  reference  from  Exhibit  3.1  to  the  Company's
           Transition  Report  on Form  10-K  for  the  transition  period  from
           December 31, 1991 to September 30, 1992).

  3.1.2    The   Certificate  of  Amendment  to  the  Restated   Certificate  of
           Incorporation of the Company,  filed on April 28, 1998  (incorporated
           by  reference  from  Exhibit  4.1.1 of the  Company's  Post-Effective
           Amendment No. 2 to the Company's  Registration Statement on Form S-3,
           filed on May 13, 1998 (Registration No. 333-47973)).

  3.1.3    The   Certificate  of  Amendment  to  the  Restated   Certificate  of
           Incorporation of the Company,  filed on April 30, 1998  (incorporated
           by  reference  from  Exhibit  4.1.2 of the  Company's  Post-Effective
           Amendment No. 2 to the Company's  Registration Statement on Form S-3,
           filed on May 13, 1998 (Registration No. 333-47973)).

  3.1.4    Certificate  of  Amendment to  Certificate  of  Incorporation  of the
           Company  filed on October 6, 1998  (incorporated  by  reference  from
           Exhibit  3.1.4 of the  Company's  Annual  Report on Form 10-K for the
           fiscal year ended September 30, 1998 and filed on January 12, 1999).

  3.2.1    Bylaws of the Company, as amended (incorporated by reference from
           Exhibit 4.2 of the Company's Registration Statement on Form S-8
           (Registration No. 33-79426)).

  3.2.2    Resolutions  adopted  by the Board of  Directors  on April 30,  1998,
           amending the Bylaws of the Company  (incorporated  by reference  from
           Exhibit 4.2.1 of the Company's  Post-Effective Amendment No. 2 to the
           Company's  Registration  Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973).

  4.1      Certificate of  Designations,  Preferences  and Rights of Convertible
           Preferred Stock filed on November 19, 1998  eliminating the Series B,
           C and D Convertible  Preferred Stock  (incorporated by reference from
           Exhibit  4.18 of the  Company's  Annual  Report  on Form 10-K for the
           fiscal year ended September 30, 1998 and filed on January 12, 1999).

  4.2      Certificate of Elimination  of Convertible  Preferred  Stock filed on
           December 15, 1998 (incorporated by reference from Exhibit 4.19 of the
           Company's  Annual  Report  on Form  10-K for the  fiscal  year  ended
           September 30, 1998 and filed on January 12, 1999).

10.18      Loan and  Security  Agreement  dated  November  24, 1999 by and among
           Congress Financial Corporation (Western) as lender and Cerplex, Inc.,
           as borrower and The Cerplex Group, Inc. as Guarantor (incorporated by
           reference from Exhibit 10.18 of the Company's Report on Form 10-K for
           the year ended September 25, 1999 and filed on January 11, 2000).

10.19      Deed of Debenture  dated December 15, 1999 between Cerplex Limited as
           borrower and Burdale  Financial  Limited as lender  (incorporated  by
           reference from Exhibit 10.19 of the Company's Report on Form 10-K for
           the year ended September 25, 1999 and filed on January 11, 2000).

10.20      Guarantee and Indemnity agreement dated December 14, 1999 between The
           Cerplex Group,  Inc. as a guarantor and Burdale  Financial Limited as
           lender (incorporated by reference from Exhibit 10.20 of the Company's
           Report on Form 10-K for the year ended  September  25, 1999 and filed
           on January 11, 2000).

10.21      Facility Agreement dated December 14, 1999 between Cerplex Limited as
           borrower and Burdale  Financial  Limited as lender  (incorporated  by
           reference from Exhibit 10.21 of the Company's Report on Form 10-K for
           the year ended September 25, 1999 and filed on January 11, 2000).

*11        Computation of Per Share Earnings.
*27        Financial Data Schedule - Article 5 of Regulation S-X.

-----------
* Filed herewith.


           (b) Reports on Form 8-K

               None


                                       23

<PAGE>


                             THE CERPLEX GROUP, INC.

                                   SIGNATURES

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

Date: May 15, 2000

                                        THE CERPLEX GROUP, INC.

                                        /s/  Richard A. Alston
                                        ----------------------------------------
                                        Richard A. Alston
                                        President and Chief Operating Officer


                                        /s/  Robert M. Nelson
                                        ----------------------------------------
                                        Robert M. Nelson
                                        Corporate Controller
                                         (Controller)




                                       24

<PAGE>




                              THE CERPLEX GROUP, INC.

                                INDEX TO EXHIBITS

 EXHIBIT
 NUMBER                       DESCRIPTION OF EXHIBITS
 -------                      -----------------------

  3.1.1    The Restated  Certificate of Incorporation of the Company, as amended
           (incorporated   by  reference  from  Exhibit  3.1  to  the  Company's
           Transition  Report  on Form  10-K  for  the  transition  period  from
           December 31, 1991 to September 30, 1992).

  3.1.2    The   Certificate  of  Amendment  to  the  Restated   Certificate  of
           Incorporation of the Company,  filed on April 28, 1998  (incorporated
           by  reference  from  Exhibit  4.1.1 of the  Company's  Post-Effective
           Amendment No. 2 to the Company's  Registration Statement on Form S-3,
           filed on May 13, 1998 (Registration No. 333-47973)).

  3.1.3    The   Certificate  of  Amendment  to  the  Restated   Certificate  of
           Incorporation of the Company,  filed on April 30, 1998  (incorporated
           by  reference  from  Exhibit  4.1.2 of the  Company's  Post-Effective
           Amendment No. 2 to the Company's  Registration Statement on Form S-3,
           filed on May 13, 1998 (Registration No. 333-47973)).

  3.1.4    Certificate  of  Amendment to  Certificate  of  Incorporation  of the
           Company  filed on October 6, 1998  (incorporated  by  reference  from
           Exhibit  3.1.4 of the  Company's  Annual  Report on Form 10-K for the
           fiscal year ended September 30, 1998 and filed on January 12, 1999).

  3.2.1    Bylaws of the Company, as amended (incorporated by reference from
           Exhibit 4.2 of the Company's Registration Statement on Form S-8
           (Registration No. 33-79426).

  3.2.2    Resolutions  adopted  by the Board of  Directors  on April 30,  1998,
           amending the Bylaws of the Company  (incorporated  by reference  from
           Exhibit 4.2.1 of the Company's  Post-Effective Amendment No. 2 to the
           Company's  Registration  Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973).

  4.1      Certificate of  Designations,  Preferences  and Rights of Convertible
           Preferred Stock filed on November 19, 1998  eliminating the Series B,
           C and D Convertible  Preferred Stock  (incorporated by reference from
           Exhibit  4.18 of the  Company's  Annual  Report  on Form 10-K for the
           fiscal year ended September 30, 1998 and filed on January 12, 1999).

  4.2      Certificate of Elimination  of Convertible  Preferred  Stock filed on
           December 15, 1998 (incorporated by reference from Exhibit 4.19 of the
           Company's  Annual  Report  on Form  10-K for the  fiscal  year  ended
           September 30, 1998 and filed on January 12, 1999).

*11        Computation of Per Share Earnings.

*27        Financial Data Schedule - Article 5 of Regulation S-X.

-----------
* Filed herewith.