<PAGE>   1

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                                    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 31, 1999

                                       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) 754-5300
--------------------------------------------------------------------------------
               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 14, 1999:

     TITLE OF EACH CLASS OF COMMON STOCK                   NUMBER OUTSTANDING
     -----------------------------------                   ------------------
        Common Stock, $0.03 par value                       7,367,518 shares


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<PAGE>   2




                             THE CERPLEX GROUP, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                              PAGE
<S>            <C>                                                                                                             <C>
PART I.        FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Consolidated Balance Sheets as of  March 31, 1999 and September 30, 1998                                      4

                  Consolidated  Statements of  Operations  for the Three Months and the Six Months Ended March 31, 1999 and     5
                  March  28, 1998

                  Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1999 and March  31, 1998             6

                  Notes to Unaudited Consolidated Financial Statements                                                          7

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

Item 3.

PART II.       OTHER INFORMATION                                                                                               19

Signatures                                                                                                                     22

Index to Exhibits                                                                                                              23
</TABLE>




                                       2
<PAGE>   3






                             THE CERPLEX GROUP, INC.

                                     PART I

                              FINANCIAL INFORMATION




                                       3
<PAGE>   4



                             THE CERPLEX GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                              MARCH 31,       SEPTEMBER 30,
                                                                                1999             1998
                                                                          ---------------- ---------------

<S>                                                                          <C>               <C>      
                                                  ASSETS

      Current assets:
          Cash and cash equivalents                                          $    3,673        $  14,196
          Accounts Receivable, less allowance for doubtful accounts
            of $1,882 ($2,511 in September, 1998)                                13,970           12,416
          Inventories                                                             7,787            6,626
          Other current assets                                                    1,896            4,628
                                                                             ----------        ---------
      Total current assets                                                       27,326           37,866

      Goodwill                                                                   33,120           37,202
      Property, plant and equipment, net                                         23,740           25,021
      Intangible and other assets                                                   395              452
                                                                             ----------        ---------
                                                                             $   84,581        $ 100,541
                                                                             ==========        =========


                                   LIABILITIES AND STOCKHOLDERS' DEFICIT


      Current liabilities:
          Current portion of long-term debt                                  $   61,083        $  53,886
          Accounts payable                                                        9,891            9,903
          Accrued expenses                                                       10,728           14,165
          Accrued interest expense                                                1,133            1,424
          Current portion of reserve for discontinued operations                    800              154
          Income taxes payable                                                    1,267            1,271 
          Other current liabilities                                               7,866           12,478
                                                                             ----------        ---------
      Total current liabilities                                                  92,768           93,281

      Long-term debt                                                             26,577           25,782
      Reserve for discontinued operations                                           791            1,822
      Other long-term liabilities                                                 4,714            4,714

      Commitments and contingencies

      Redeemable convertible preferred stock, 216 shares issued (260 issued 
        at September 1998)                                                       29,734           34,150

      Stockholders' deficit:
          Preferred stock, 1,000 shares authorized, none issued                      --               --
          Common stock 75,000 shares authorized, 7,850 shares issued
            (7,601 issued at September, 1998)                                     2,270            2,262
          Additional paid-in capital                                            121,605          116,400
          Treasury stock, at cost,  483 shares                                  (16,675)         (16,675)
          Accumulated deficit                                                  (177,203)        (161,232)
          Cumulative translation adjustment                                           0               37
                                                                             ----------        ---------
      Total stockholders' deficit                                               (70,003)         (59,208)
                                                                             ----------        ---------

                                                                             $   84,581        $ 100,541
                                                                             ==========        =========
</TABLE>

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



                                       4
<PAGE>   5



                             THE CERPLEX GROUP, INC

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


<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                          SIX  MONTHS ENDED
                                                     -------------------------------            ---------------------------------
                                                     MARCH  31,           MARCH 31,              MARCH 31,             MARCH 31,
                                                        1999                1998                   1999                   1998
                                                    ------------      --------------            -----------           -----------
<S>                                                   <C>                 <C>                    <C>                    <C>      
Net revenues (loss)                                   $24,024             $ 8,871                $53,513                $17,194
Cost of sales                                          24,676               9,114                 52,492                 16,162
                                                      -------             -------                 ------                 ------
        Gross profit (loss)                              (652)               (243)                 1,021                  1,032

Selling, general and administrative expenses            5,738               5,549                 11,026                 10,671
Amortization of intangible assets                       2,158                  25                  4,308                     50
                                                      -------             -------                -------                -------
        Operating loss                                 (8,548)             (5,817)               (14,313)                (9,689)

Interest expense                                       (2,019)             (1,159)                (4,138)                (2,195)
Other income (expense), net                             2,812              (1,954)                 3,292                 (2,048)
                                                      -------             -------                -------                -------
    Loss before provision for
       income taxes                                    (7,755)             (8,930)               (15,159)               (13,932)
Provision for income taxes                                149                  --                     15                     --
                                                      -------             -------                -------                -------
               Net loss                               $(7,904)            $(8,930)              $(15,174)               (13,932)
                                                      =======             =======               ========                =======

Dividends on redeemable convertible preferred stock      (378)               (823)                  (797)                (1,634)
                                                      -------             -------                -------                -------
Net loss applicable to common stockholders            $(8,282)            $(9,753)              $(15,971)               (15,566)
                                                      ========            =======               ========                =======

Basic and diluted loss per common share               $ (1.15)            $ (1.42)              $  (2.21)                 (2.27)
                                                      =======             =======               ========                =======

Weighted average number of common shares  
outstanding                                             7,232               6,848                  7,232                  6,848
                                                      =======             =======               ========                =======   

</TABLE>

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



                                       5
<PAGE>   6


                             THE CERPLEX GROUP, INC.

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

<TABLE>
<CAPTION>
                                                                      SIX MONTHS ENDED
                                                              -------------------------------
                                                              MARCH 31, 1999    MARCH 31,1998
                                                              --------------    -------------

<S>                                                              <C>              <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                         $(15,174)        $(13,932)
   Adjustments  to  reconcile  net loss to net cash 
     used by operating activities.
        Depreciation and amortization                               6,073            1,714
        Non-cash interest expense                                      --            1,456
        Loss on disposition of assets                                  32              112
        Foreign Currency Translation                                  103              --
        Changes in assets and liabilities:
           Assets                                                      17             (955)
           Liabilities                                             (7,370)          (2,329)
                                                                 --------         --------
    Net cash flows used by operating activities:                  (16,319)         (13,934)
                                                                                       

CASH FLOWS FROM INVESTING ACTIVITIES:

    Acquisition of property, plant and equipment                     (685)             (97)
    Increase in other assets                                                           472
                                                                 --------         --------
    Net cash flows used by investing activities                      (685)             375
                                                                 --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments on debt                                                   --             (446)
    Sale of redeemable convertible preferred shares                    --            4,500
    Proceeds from promissory note                                   7,500               --
    Payment on capital leases                                        (100)              --
    Changes in borrowings under line of credit                       (919)          12,218
                                                                 --------         --------
Net cash flows from financing activities                            6,481           16,272
                                                                 --------         --------
Net change in cash and cash equivalents                           (10,523)           2,713
Cash and cash equivalents at beginning of period                   14,196              323
                                                                 --------         --------
Cash and cash equivalents at end of period                       $  3,673         $  3,036
                                                                 ========         ========
</TABLE>

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



                                       6
<PAGE>   7



                             THE CERPLEX GROUP, INC.
                                AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A. CURRENT FINANCIAL CONDITION

During the three and six months ended March 31, 1999 and the year ended
September 30, 1998, the Company experienced recurring operating losses. As a
result of these losses, at March 31, 1999 the Company had a deficit of $70.0
million in stockholders' equity and negative working capital of $66.2 million.
In addition, the Company has relied upon the financial support of its largest
stockholder, an investment fund managed by the investment firm of Welsh, Carson,
Anderson & Stowe ("WCAS") for additional capital and to maintain its existing
senior bank credit facilities. At March 31, 1999, the Company has approximately
$45.4 million in principal amount outstanding under its bank term debt and line
of credit (the "Greyrock Line of Credit"). The original maturity of the Greyrock
Line of Credit of April 30, 1999 was extended to May 21, 1999. The Company is
currently in discussions with its lender to extend the repayment date.
Furthermore, as of March 31, 1999, the Company had $12.5 million and $2.9
million outstanding related to its promissory notes to its largest stockholder
and a secured note payable to one of its customers, respectively. Of this $15.4
million, $7.9 million matures in fiscal 1999. The balance matures in fiscal
2000. Also, the Company has $15.6 million and $10.4 million related to a 10%
Senior Subordinated Debt Series A and 7-3/4% Debentures outstanding. Though the
Company intends to make efforts to increase revenues and decrease expenses to
improve operations and defer the maturity of the current portion of long term
debt, the Company's losses are expected to continue for the foreseeable future
and the Company will require additional funding and financial support from its
largest stockholder or another 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. In
addition, there can be no assurance that the Company will be successful in
extending the repayment date of the Greyrock Line of Credit. 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 1998 Annual Report on Form 10-K for The Cerplex
Group, Inc.

In the opinion of management, the accompanying consolidated balance sheets and
related interim 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.

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 1998 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 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 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 the diluted calculations as they
were considered to be anti-dilutive.

The Company's 7% Senior Cumulative Convertible Preferred Stock, 10% Series A
Senior Subordinated Notes due December 31, 2002, 2003, and 2004, 10% Series B
Senior Subordinated Debentures due December 31, 2004, were not common stock
equivalents at the time of issuance and are therefore not included in the
calculation of diluted earnings per share.


                                       7
<PAGE>   8


NOTE D  COMPREHENSIVE INCOME

    In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income", which establishes standards for
reporting and disclosure of comprehensive income and its components. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997 and requires
classification of financial statements for earlier periods to be provided for
comparative purposes. The Company has presented the information required by SFAS
No. 130 as follows:


<TABLE>
<CAPTION>
                                             For the Three Months Ended         For the Six Months Ended
                                                     March 31,                         March 31,       
                                                     ---------                         ---------
                                               1998             1999            1998                1999   
                                               ----             ----            ----                ----  
<S>                                           <C>              <C>              <C>                 <C>
               Net (loss)                     (8,930)          (7,904)          (15,566)            (15,970) 
               Change in cumulative               --             (140)               --                (140)
               translation adjustments
                                              ------           ------           -------             ------- 
               Comprehensive (loss)           (8,930)          (7,764)          (15,566)             16,110
                                              ======           ======           =======             =======
</TABLE>


Accumulated other comprehensive loss presented in the accompanying consolidated
balance sheets consists of cumulative translation adjustments.


                                       8
<PAGE>   9


NOTE F. INVENTORIES

    Inventories consisted of the following:

<TABLE>
<CAPTION>
                                          MARCH 31,       DECEMBER 31,
                                            1999             1998
                                          ---------       ------------
                                              (IN THOUSANDS)

<S>                                       <C>              <C>    
Spare and repair parts                    $  7,186         $ 6,649
Work in process                                 90             146
Finished goods and purchased product           511             167
                                          --------         -------
        Total inventories                 $  7,787         $ 6,962
                                          --------         -------
</TABLE>


NOTE G.  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 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 issued to WCAS and other stockholders prior to the Merger. 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 March 31, 1999, there
were 7,375,716 shares of the Company's Common Stock outstanding.

NOTE  H. DEBT

    The Company has borrowed the following amounts from WCAS, under a series of
10% unsecured promissory notes due one year from the date of the borrowing (the
"WCAS Notes").

<TABLE>
<CAPTION>
    Date  of Borrowing                      Amount
    ------------------                      ------
<S>                                         <C>         
    September 30, 1998                      $5.0 million
    December 9,1998                         $2.5 million
    January 27,1999                         $2.0 million
    February 26,1999                        $1.0 million
    March 25,1999                           $2.0 million
    April 21, 1999                          $2.0 million
</TABLE>

Under the terms of the WCAS Notes issued in 1998, payment of certain interest
amounts was due on March 31, 1999. As of May 10, 1999, approximately $380,000 of
accrued interest due on March 31, 1999 remained unpaid. WCAS has agreed to waive
the March 31, 1999 interest payment default and to defer such interest until
maturity of the notes.

During the quarter ended December 31, 1998 the Company and WCAS agreed to modify
the terms of the Series A 10% Senior subordinated debentures to increase the
principal amount by the amount of accrued but unpaid interest as of December 31,
1998. Accordingly, the total principal outstanding is $15.6 million at March 31,
1999. All other terms remain the same.

NOTE I SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

For the six month period ended March 31, 1999, cash paid for interest and income
taxes were $1,200,000 and $16,000 respectively.

Non-cash investing and financing activities for the six month period ended March
31, 1999 included the conversion of the redeemable convertible preferred stock
into common stock of approximately $5,200, accretion of dividends on the
redeemable convertible preferred stock of approximately $795 and conversion of
accrued interest into notes payable of approximately $1,500.


                                       9
<PAGE>   10


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

OVERVIEW

The Company provides repair and logistics services, and spare 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 two
principal subsidiaries, Cerplex, Inc. and Aurora Electronics Group, Inc., and
their subsidiaries. Based in Irvine, California, the Company has locations
across the United States, in France 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. The Company's most recent
acquisition was completed on April 30, 1998, when the Company, then known as
Aurora Electronics, Inc. acquired The Cerplex Group, Inc. ("Old Cerplex"). Prior
to the Merger with Old Cerplex which is discussed in more detail below, the
Company's business consisted primarily of two divisions, the Asset Recovery
Services Division (the "ARS Division") and the Parts Services Supply Division
(the "PSS Division"). The Merger was accounted for under the purchase method of
accounting and, as such, the operations of Old Cerplex are not included in the
Company's financial statements prior to April 30, 1998. The majority of the
Company's revenues subsequent to April 30, 1998 are attributable to the repair
operations of Old Cerplex acquired in the Merger. Due to this and the fact that
the Company's ARS and PSS Divisions experienced declining revenues from fiscal
1997 to fiscal 1998, the Company's historical results, especially as they relate
to the ARS and PSS Divisions, may not be indicative of future results.

    In the third quarter of the fiscal year ended September 30, 1995, the
Company completed a corporate reorganization, in which it: (a) exited the memory
upgrade manufacturing and supply business formerly known as the Premier
Division; and (b) substantially downsized its depot repair services operation
acquired in the FRS, Inc. acquisition, and refocused these operations to support
the Company's remaining spare parts distribution and electronic recycling
services business.

    In March 1996, the Company completed a recapitalization in which the Company
(a) acquired approximately 4,268,000 shares of its Common Stock, (b) issued
$40.0 million of convertible preferred stock and $10.0 million of subordinated
debt to WCAS, (c) established a $35.0 million credit facility, (d) repaid $26.0
million of senior bank debt and (e) redeemed approximately $9.3 million of
Senior Subordinated Notes.

    In October 1997, the Company completed the sale of the remainder of its
then-existing depot repair services operation and sold its Irvine, Scotland,
recovery processing facility. Losses from these transactions were accrued into
fiscal 1997 operating results.

    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 two wholly-owned subsidiaries,
Cerplex, Inc. and Aurora Electronics Group, Inc., and their subsidiaries.

    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 these
customers have declined from fiscal 1997 through the second quarter of fiscal
1999 on a pro forma basis. It is anticipated that revenues from Rank Xerox will
continue to decline in the future, 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.



                                       11
<PAGE>   11


COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
MARCH 31, 1998

    Net revenues for the second quarter of fiscal 1999 were $24.0 million, as
compared to $8.9 million in net revenues for the corresponding quarter in the
prior fiscal year. The Company's increase in revenues was due principally to the
acquisition of Old Cerplex. This increase was partially offset by a the
subsequent closing the Asset Recovery Division as well as the closure of
PowerSource operation and an overall decline in the prices and volumes of
computer repair parts.

    Gross loss for the first quarter of fiscal 1999 was $(0.7) million (2.7% of
net revenues), as compared to a gross loss of $0.2 million (2.7% of net 
revenues) for the corresponding quarter in the prior fiscal year. The decrease 
in gross profit was due primarily to increase in revenues discussed above and 
related cost of sales.

    Selling, general and administrative expenses for the second quarter of
fiscal 1999 were $5.7 million (23.9% of net revenues), as compared to $5.5
million (62.6% of net revenues) for the corresponding quarter in the prior
fiscal year. The decrease as a percentage of revenues was due to the increase in
revenues noted above. Amortization expense for the second quarter of fiscal 1999
was $2.2 million compared to $25,000 for the corresponding quarter in the prior
fiscal year. The increase was due to the amortization of goodwill in connection
with the merger of Aurora and Old Cerplex.

    Net interest expense for the second quarter of fiscal 1999 was $2.0 million,
or 8.3% of revenues, as compared to $1.2 million, or 13.1% of revenues, for the
corresponding quarter in the prior fiscal year. The increase in interest expense
is due to higher loan balances on the Company's revolving credit facility and
additional borrowings from the Company's major stockholder.

    Net loss applicable to common stockholders for the quarter was $8.3 million
as compared to net loss of $9.8 million for the corresponding quarter in the 
prior fiscal year.


COMPARATIVE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND
MARCH 31, 1998

    Net revenues for the first half of fiscal 1999 were $53.5 million, as
compared to $17.2 million in net revenues for the corresponding period in the
prior fiscal year. The Company's increase in revenues was due principally to the
acquisition of Old Cerplex offset by the subsequent closing of this segment of
the Asset Recovery Division as well as the closure of PowerSource operation and
an overall decline in the prices and volumes of computer repair parts.

    Gross profit for the first quarter of fiscal 1999 was $1.0 million (1.9% of
net revenues), as compared to a gross profit of $1.0 million (6.0% of net
revenues) for the corresponding period in the prior fiscal year. Gross profit
was affected primarily by the acquisition of Old Cerplex. The decrease in margin
percentages is primarily due to the lower historical margins of the Old Cerplex
operations and the impact of declining revenues in the Southern California
operations which generally have a higher margin.

    Selling, general and administrative expenses for the first half of fiscal
1999 were $11.0 million (20.6% of net revenues), as compared to $10.7 million
(62.1% of net revenues) for the corresponding period in the prior fiscal year.
The decrease as a percentage of revenues was due to the increase in revenues
noted above. Amortization expense for the first half of fiscal 1999 was $4.3
million compared to $50,000 for the corresponding period in the prior fiscal
year. The increase was due to the amortization of goodwill in connection with
the merger of Aurora and Old Cerplex.

    Net interest expense for the first half of fiscal 1999 was $4.1 million, or
7.7% of revenues, as compared to $2.2 million, or 12.8% of revenues, for the
corresponding period in the prior fiscal year. The increase in interest expense
is due to higher loan balances on the Company's revolving credit facility and
additional financing from the Company's major stockholder.

    Net loss applicable to common stockholders for the quarter was $16.0 
million as compared to net loss of $15.6 million for the corresponding period 
in the prior fiscal year.


                                       12
<PAGE>   12


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 $65.4 million as of March 31, 1999 as compared to a
working capital deficit of $55.4 million as of September 30, 1998. See Note A of
Notes to Unaudited Consolidated Financial Statements -- "Current Financial
Condition."

    The Company's most immediate liquidity concern is its ability to repay its
indebtedness under the Greyrock Line of Credit, which approximated $45.4 million
in principal amount as of March 31, 1999. All amounts owing Greyrock are due to
be repaid by May 21, 1999, and the Company's cash on hand and cash flow from
operations are anticipated to be insufficient to repay the amounts due by such
date. The Company is currently in discussions with Greyrock to extend the
repayment date of the Greyrock Line of Credit, however, there is no assurance
that the extension will be obtained or, if obtained, that the extension will
give the Company sufficient time to obtain replacement financing to repay
Greyrock. If satisfactory extension and/or additional funds are not obtained,
the Company will continue to experience severe liquidity problems. If the 
Greyrock Line of Credit is not repaid, Greyrock has foreclosure rights under 
the Greyrock Line of Credit. This matter raises substantial doubt as to the 
Company's ability to continue as a going concern. See Note A of Notes to 
Unaudited Consolidated Financial Statements -- "Current Financial Condition."

    Unless otherwise extended, in addition to the need for capital to repay
Greyrock, the Company will require substantial additional working capital during
fiscal 1999 to fund operations and to repay the BT promissory note and the WCAS
Notes of which $5 million is due in fiscal 1999. Management believes that the
Company will continue to experience operating losses and negative cash flow in
fiscal 1999. Because the Company does not have availability to borrow additional
amounts pursuant to the Greyrock Line of Credit, management anticipates that the
only potential source of additional working capital available to the Company
will be from WCAS, the Company's largest stockholder. There is no assurance,
however, that the Company will attain results that WCAS will regard as
sufficient to support the infusion of additional capital.

    In addition to the fact that the Company has limited access to additional 
working capital, the Company has limited ability to obtain working capital from
the operations of its Cerplex SAS subsidiary. The ability to obtain working
capital from Cerplex SAS is limited due to the internal capital needs of
Cerplex SAS and due to restrictions placed on Cerplex SAS in connection with
the Company's acquisition of Cerplex SAS from Rank Xerox in 1996. Under the
terms of the acquisition, future payments are owed to Rank Xerox and the
Company therefore agreed to certain financial covenants over a four-year period
that limit the amount of dividends and other payments Cerplex SAS can make to
the Company, and impose certain other financial restrictions on the Company and
Cerplex SAS. On March 30,1999 the Company paid interest to Cerplex SAS of
$221,000. Accordingly, of the Company's consolidated cash of $3.7 million at
March 31, 1999, the cash of Cerplex SAS of $3.2 million is generally not
available to the Company for financing operations outside of Cerplex SAS.

    The Company is highly leveraged, and has significant debt repayment
obligations and preferred stock redemption obligations. As of April 30, 1999,
the Company had approximately $90 million principal amount of indebtedness
outstanding, which consisted of: (i) $45.4 million indebtedness under the
Greyrock Line of Credit; (ii) $16.0 million indebtedness under the Company's 10%
Senior Subordinated Notes; (iii) $10.5 million indebtedness under the Company's
7 3/4% Convertible Subordinated Debentures; (iv) $14.5 million combined
indebtedness under WCAS Notes; (v) $3.0 million indebtedness under a promissory
note to BT; and (vi) $0.6 million of other indebtedness consisting primarily of
equipment leases. In addition, the Company also had as of March 31, 1999, $21.55
million outstanding (excluding accrued dividends) of its mandatorily redeemable
7% Convertible Preferred Stock. Set forth below is a summary of the terms of
such indebtedness, as well as redemption and other obligations of the Company's
outstanding preferred stock.

    Greyrock Line of Credit

    The Greyrock Line of Credit consists of a $36.0 million term loan and a
$10.0 million revolving line of credit. Borrowings under the revolver are
limited by, among other things, the value of the Company's assets that have been
pledged as collateral to support the facility. As of April 30, 1999, the entire
balance of the $36.0 million term loan was outstanding and $9.4 million of the
revolving line of credit was outstanding. Currently, no additional borrowings
are available.

    The Greyrock Line of Credit is secured by all of the Company's assets,
including the Company's interest in its wholly-owned subsidiary in the United
Kingdom and 65% of the Company's interest in its wholly-owned subsidiary in
France. Additionally, WCAS has guaranteed the repayment of $25 million of the
principal amount owing at any time under the Greyrock Line of Credit.



                                       13
<PAGE>   13

The outstanding balance of the Greyrock Line of Credit bears interest each month
at the highest London Interbank Offered Rate (LIBOR) in effect during such
month, plus 4.875% per annum on the line of credit and 4.50% per annum on the
term loan, provided that the interest rate in effect in each month shall not be
less than 9% per annum, and provided that the interest charged for each month is
a minimum of $25,000, regardless of the amount of the outstanding principal
balance. This line also prohibits the Company from paying out cash dividends.

    The Greyrock Line of Credit had an original maturity of April 30, 1999. As
of April 30, 1999, the Company had obtained an extension of the maturity of the
Greyrock Line of Credit to May 21, 1999. The Company is currently considering an
amendment that would extend the maturity of the loans from May 21, 1999 to
November 30, 2000. The proposed amendment would include a renewal and increase
of the WCAS guarantee from $25.0 million to $39.0 million. The amendment would
also provide for the release of all collateral associated with the Company's
operations in the United Kingdom and France. The amendment proposed has not been
agreed upon and there can be no assurance that an agreement will be reached or
that the amendment will be completed before May 21, 1999.

    10% Series A and Series B Senior Subordinated Notes.

    As of April 30, 1999, there was approximately $15.6 million principal amount
outstanding of the Company's 10% Senior Subordinated Notes, issued in two
series, Series A and Series B. Almost the entire amount of the principal of such
notes consists of Series A notes sold to WCAS, and the balance of the principal
amount consists of Series B notes sold to certain public stockholders. The terms
of the Series A and Series B notes, as described herein, are substantially
similar. The 10% 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% 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. During the quarter the Company and WCAS
agreed to modify the terms of the Series A 10% Senior subordinated debentures to
increase the principal amount by the amount of accrued but unpaid interest as of
both June 30, 1998 and December 31, 1998 ($244,000 and $743,000 respectively).
The 10% Senior Subordinated Notes mature in three equal annual installments
commencing on December 31, 2002. The 10% 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 30, 1999, there was approximately $10.5 million principal amount
outstanding of the Company's 7 3/4% Convertible Subordinated Debentures (the
"Debentures"). The Debentures 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. The Company
was required to make a partial sinking fund payment of $117,000 during April
1999 and is required to make another partial sinking fund payment of
approximately $2,516,000 in 2000 on the Debentures. The Debentures bear interest
at 7 3/4% payable on April 14 and October 14 of each year through maturity.

    10% WCAS Notes.

    As of April 30, 1999, there was $14.5 million aggregate principal amount
outstanding under the WCAS Notes evidencing recent loans by WCAS to the Company.
The notes were issued on September 30, 1998, December 9, 1998, January 27,
February 26, March 25 and April 21, 1999 in the respective principal amounts of
$5.0 million, $2.5 million, $2.0 million, $1.0 million, $2.0 million and $2.0
million. The principal amount of each note must be repaid in full on the  
anniversary of its issue date. The notes are general, unsecured obligations of
the Company and bear interest at 10% per annum, payable in arrears in cash
approximately six months after issue, with the balance at maturity. As of May
10, 1999, approximately $380,000 in accrued interest due as of March 31, 1999
was still unpaid. The Company is in the process of negotiating an extension for
this past due amount, but there can be no assurance that such extension will be
granted by WCAS.


    Secured Note Payable to BT.


    In July, 1994, Old Cerplex purchased the operating assets of BT Repair
Services for cash and a promissory note in the original principal amount of 2.5
million pounds sterling (the "BT Note"). The BT Note is non-interest bearing and
is secured by a lien on land and buildings purchased from BT at that time. As of
May 10, 1999, approximately $2.9 million principal amount was outstanding under
the BT Note.

    The BT Note matures on the earlier of (i) May 31, 1999 or (ii) the date
on which the cumulative revenues generated by the Company from the acquired BT
Repair Services business exceeds 78.0 million pounds sterling. As of March 31,
1999, the cumulative revenue threshold had not been reached. Management believes
that revenue generated by the Company prior to May 31, 1999 will not be
sufficient to exceed the threshold.

    The Company is currently in discussions with BT to arrange an extension of 
the maturity of the BT Note. If arranged, the maturity date is expected to be
extended for a one year. The note is expected to bear interest commencing on
June 1, 1999 should the maturity be extended. There can be no assurance that
both parties will agree on the terms of the BT Note extension.


                                       14
<PAGE>   14
    Other Debt.

    As of March 31, 1999, there was $0.6 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 1999.

    7% Senior Cumulative Convertible Preferred Stock.        
                                                             

    As of April 30, 1999, there was $21.55 million amount outstanding (excluding
accrued dividends) of the Company's 7% Convertible Preferred Stock (215,500
shares at $100 per share). 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 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 anti-dilution 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 is implementing a program intended to enable the Company to
become Year 2000 compliant. The Company is using 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
attempt to remedy such problems. The Company has purchased and is in the process
of installing certain software and hardware intended to upgrade its networked
personal computer system to be Year 2000 compliant. More significantly, the
Company is in discussions with its primary software vendor to obtain the source
code for the Company's main operating systems software so that the Company can
modify the software to be Year 2000 compliant. In addition, the Company has
begun discussing 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 will 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 anticipates that its
internal systems, equipment and processes will be substantially Year 2000
compliant by July 1999, and intends to complete the analysis and remediation of
potential Year 2000 problems with its significant suppliers and customers by
July 1999. The Company estimates that the total dollar amount that the Company
will spend to remediate its Year 2000 issues will not exceed $600,000. 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 delays in
the Company's remediation efforts, a failure to fully 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
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 not at this time established Year 2000 contingency plans in the
event 



                                       15
<PAGE>   15


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. The Company intends to consider contingency plans in the event that
its Year 2000 remediation efforts and those of such third parties appear to be
ineffective or unduly delayed.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") Nos. 130 and 131, "Reporting
Comprehensive Income" ("SFAS 130") and "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS"), respectively (collectively, the
"Statements"). the Statements are effective for fiscal years beginning after
December 15, 1997. SFAS 130 establishes standards for reporting of
comprehensive income and its components in annual financial statements. SFAS
131 establishes standards for reporting financial and descriptive information
about an enterprise's operating segments in its annual financial statements and
selected segment information in interim financial reports. Reclassification or
restatement of comparative financial statements or financial information for
earlier periods is required upon adoption of SFAS 130 and SFAS 131,
respectively, Application of the statement requirements did not have a material
impact on the Company's consolidated financial position, results of operations
or loss per share as currently reported.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for transactions
entered into after January 1, 2000. This statement requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. The Company is in the process of
determining the impact that the adoption of SFAS No. 133 will have on its
results of operations and financial position.

In March 1998, the FASB Emerging Issues Task Force ("EITF") announced a
consensus on Issue No. 98-1, "Valuation of Debt Assumed in a Purchase Business
Combination." This EITF reached a consensus that the amount assigned to debt
assumed in a purchase business combination should be its fair value. Quoted
market prices, if available, are the best evidence of the fair value of the
debt. If quoted market prices are not available, management's best estimate of
fair value may be based on the quoted market price of debt with similar
characteristics or on valuation techniques. Therefore, if a present value
technique is used, the estimated future cash flows should not ignore relevant
provisions of the debt agreement (for example, the right of the issuer to
prepay).

In May 1998, the FASB Emerging Issues Task Force ("EITF") announced issue No.
98-5, "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently adjustable Conversion Ratios." The EITF reached a
tentative conclusion that embedded beneficial conversion features present in
convertible securities should be separately valued at issuance. However, no
consensus was reached for this issue. Further discussion is expected at a
future meeting.

Honeylyn Chang

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:

UPDATE FOR RESTRUCTURING OF GRAYROCK                 
------------------------------------            

    Inability to Repay Greyrock Line of Credit; Threat to Status as a Going
Concern. As of May 10, 1999, the Company had outstanding $36.0 million in term
debt and $9.4 million in revolving debt under the Greyrock Line of Credit. No
additional borrowings are available under the Greyrock Line of Credit. WCAS has
guaranteed the repayment of $25.0 million of the principal amount owing by the
Company at any time under the Greyrock Line of Credit. All amounts owing under
the Greyrock Line of credit are due to be repaid by May 21, 1999. The Company's
cash flow from operations is anticipated to be insufficient to repay the amounts
due on the Greyrock Line of Credit by May 21, 1999. If the Company does not
repay the loan, Greyrock has the ability to foreclose on the loan. The Company
is currently engaged in discussions with Greyrock to extend the repayment date,
however, there is no assurance that the extension will be obtained, or, if
obtained, that the extension will give the Company sufficient time to obtain
replacement financing to repay Greyrock. If additional funds are not obtained,
the Company will experience severe liquidity problems. This matter raises
substantial doubt about the Company's ability to continue as a going concern.
See Note A to the Unaudited Consolidated Financial Statements -- "Current
Financial Condition."

    High Degree of Leverage; Future Capital Requirements. As of April 30,1999,
the Company had approximately $90.0 million principal amount of indebtedness
outstanding, which consisted of: (i) $45.4 million indebtedness under the
Greyrock Line of Credit; (ii) $26.5 million  combined indebtedness under the
Company's 10% Senior Subordinated Notes and 7 3/4% Convertible Subordinated
Debentures; (iii) $14.5 million combined indebtedness under the WCAS Notes;
(iv) $2.9 million indebtedness under the BT Note; and (v) $0.6 million of other
indebtedness consisting primarily of equipment leases. In addition, the Company
also had as of April 30, 1999, $21.55 million outstanding (excluding accrued
dividends) 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 its 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 its debt. 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 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 31, 1999, the
Company reported a net loss of $7.9 million and an operating loss of $8.5
million. As of March 31, 1999, the Company has a stockholders' deficit of $70.0
million. The Company is expecting to experience losses for the foreseeable
future, and will require additional funding and financial support. Continued
losses and/or the failure to obtain such additional funding and financial
support 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.


                                       16
<PAGE>   16


    Integration with Old Cerplex; New Management. The Company's success will
depend, to a large extent, upon whether the Company effectively integrates its
business with the business of Old Cerplex following the Merger with Old Cerplex
in April 1998. The Company is subject to the risks normally involved in the
integration of each company's operating, administrative, finance, sales and
marketing organizations, as well as each company's communication technologies
and the coordination of sales efforts and streamlining of facilities and back
office operations. In addition, following the Merger, certain key executives
left the management team and others joined. As a result, the Company became
dependent upon a new management group, some members of which had not been
previously involved in managing the Company. While the Company's key executives
have business experience, they are still in the process of familiarizing
themselves with the specific operations of the Company. There can be no
assurance that the Company will be able to successfully integrate with Old
Cerplex in a manner that will result in the synergies intended as a result of
the Merger. These difficulties could have a material adverse impact on the
Company's financial condition and results of operations.

    Control by WCAS. WCAS owns approximately 85% 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 31, 1999, Rank
Xerox and BT accounted for approximately 21.0% and 13.2% of the Company's
revenues, respectively. These revenues were almost entirely attributable to the
business of Old Cerplex. There can be no assurance that such customers 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 these customers do
business. Any such termination, change, reduction, or delay could have a
material adverse effect on the Company's business. It is anticipated that the
Company's contract with Rank Xerox will be phased out by June 2000. In addition,
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 these or new customers.  There can be no
assurance that the Company will be able to replace these declining volumes with
sales to either these or new customers.

    Competition. The Company competes with the in-house repair and service
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
capitalizations 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 31, 1999,
approximately 52% 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. Moreover,
it is anticipated that the Company's contract with Rank Xerox, which accounted
for approximately 21.0% of the Company's revenues for the quarter, will be
phased out by June 2000. 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.



                                       17
<PAGE>   17
    Reliance on Short Term Purchase Orders and Contracts. The Company generally
distributes spare 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 31, 1999, approximately
$33.1 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. However, management continues to
monitor goodwill in accordance with the provisions of Statement of Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long Lived Assets
and Long Lived Assets to be Disposed of." 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.

    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 $90 million principal amount of indebtedness at April
30, 1999, $45.4 million principal amount of such debt (which represents total
principal indebtedness on the Greyrock Line of Credit) bears interest at a rate
that fluctutes based on changes in the LIBOR rate. A 1% change in the 
underlying LIBOR rate would result in a $454,000 change in the annual amount of
interest payable on such debt.

        The Company's overseas subsidiaries operate in England and France. Both
the trade receivables and the trade payables for these units are denominated 
in the local currency. The Company does not hedge these balances. See Note O to
the Consolidated Financial Statements --"Foreign Operations and Major 
Customers" in the Company's annual report on form 10K.    


                                       18
<PAGE>   18





                             THE CERPLEX GROUP, INC.

                                     PART II

                                OTHER INFORMATION




                                       19
<PAGE>   19



                             THE CERPLEX GROUP, INC.

ITEM 1.       LEGAL PROCEEDINGS

              Inapplicable.

ITEM 2.       CHANGES IN SECURITIES

              Inapplicable.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              Inapplicable.

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

              At a Annual Meeting of Stockholders on March 23, 1999, holders of
              a majority of the capital stock of the Company entitled to vote
              approved the following matters:

              1. Appointment of Richard Stowe, Thomas McInerney and George
                 McTavish to the Board of Directors of the Company

              2. Ratification of KPMG LLP as the Company's Independent
                 Accountants



ITEM 5.       OTHER INFORMATION

              Inapplicable.

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 



                                       20
<PAGE>   20


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

                  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).

     10.1         10% Senior Subordinated Note for $5,000,000, due September 30,
                  1999, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee (incorporated by reference from Exhibit
                  10.3 of the Company's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1998 and filed on January 12,
                  1999).

     10.2         10% Senior Subordinated Note for $2,500,000, due December 9,
                  1999, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee (incorporated by reference from Exhibit
                  10.4 of the Company's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1998 and filed on January 12,
                  1999).

    *10.3         10% Senior Subordinated Note for $1,000,000, due February 26,
                  2000, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee.

    *10.4         10% Senior Subordinated Note for $1,000,000, due February 26,
                  2000, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee.

    *10.5         10% Senior Subordinated Note for $2,000,000, due March 25,
                  2000, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee.

    *10.6         10% Senior Subordinated Note for $2,000,000, due April 21,
                  2000, between the Company, Aurora Electronics Group, Inc. and
                  Cerplex, Inc. as payors and Welsh, Carson, Anderson & Stowe
                  VII, L.P. as payee.

    *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



                                       21
<PAGE>   21



                             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 22, 1999

                                        THE CERPLEX GROUP, INC.

                                        /s/  Richard Alston
                                        ----------------------------------------
                                        Richard Alston
                                        Executive Vice President of Finance and
                                        Chief Financial Officer
                                        (Principal Financial Officer)

                                        /s/  Anthony E. Palumbo
                                        ----------------------------------------
                                        Anthony E. Palumbo
                                        Corporate Controller
                                             (Controller)



                                       22
<PAGE>   22
                             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).

     10.1           10% Senior Subordinated Note for $5,000,000, due September
                    30, 1999, between the Company, Aurora Electronics Group,
                    Inc. and Cerplex, Inc. as payors and Welsh, Carson, Anderson
                    & Stowe VII, L.P. as payee (incorporated by reference from
                    Exhibit 10.3 of the Company's Annual Report on Form 10-K for
                    the fiscal year ended September 30, 1998 and filed on
                    January 12, 1999).

     10.2           10% Senior Subordinated Note for $2,500,000, due December 9,
                    1999, between the Company, Aurora Electronics Group, Inc.
                    and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
                    Stowe VII, L.P. as payee (incorporated by reference from
                    Exhibit 10.4 of the Company's Annual Report on Form 10-K for
                    the fiscal year ended September 30, 1998 and filed on
                    January 12, 1999).

    *10.3           10% Senior Subordinated Note for $2,000,000, due January 26,
                    2000, between the Company, Aurora Electronics Group, Inc.
                    and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
                    Stowe VII, L.P. as payee.

    *10.4           10% Senior Subordinated Note for $1,000,000, due 
                    February 26, 2000, between the Company, Aurora Electronics 
                    Group, Inc. and Cerplex, Inc. as payors and Welsh, Carson, 
                    Anderson & Stowe VII, L.P. as payee.

    *10.5           10% Senior Subordinated Note for $2,000,000, due March 25,
                    2000, between the Company, Aurora Electronics Group, Inc. 
                    and Cerplex, Inc. as payors and Welsh, Carson, Anderson & 
                    Stowe VII, L.P. as payee.

    *10.6           10% Senior Subordinated Note for $2,000,000, due April 21,
                    2000, between the Company, Aurora Electronics Group, Inc. 
                    and Cerplex, Inc. as payors and Welsh, Carson, Anderson & 
                    Stowe VII, L.P. as payee.

    *10.7           Lease of the Company's primary headquarters facility
                    located at 111 Pacifica Avenue, Suite 300, Irvine, CA 92618

    *11             Computation of Per Share Earnings.

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

------------

*        Filed herewith.



                                       23