CET ENVIRONMENTAL SERVICES INC, 10-Q, 1999-11-19

CET ENVIRONMENTAL SERVICES INC
10-Q, 1999-11-19
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<PAGE> 1
================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.

For the quarterly period ended SEPTEMBER 30, 1999

( ) 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 1-13852

CET ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)

CALIFORNIA 33-0285964
<S> <C>
(State or other jurisdiction of incorporation or (IRS Employer Identification No.)
organization)

7032 SOUTH REVERE PARKWAY, ENGLEWOOD, COLORADO 80112
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (720) 875-9115

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---

As of November 10, 1999, 6,284,288 shares of common stock, no par value per
share, were outstanding.

================================================================================
<PAGE> 2

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CET ENVIRONMENTAL SERVICES, INC.

CONDENSED BALANCE SHEETS
(in thousands)

ASSETS

SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------------ ------------------

<S> <C> <C>
CURRENT ASSETS:
Cash .......................................................... $ 714 $ 25

Accounts receivable, less allowance for doubtful accounts of
$447 and $722 in 1999 and 1998, respectively .................. 6,917 11,781

Contracts in process, less allowance for doubtful accounts of
$119 and $284 in 1999 and 1998, respectively .............. 5,332 10,154

Prepaid expenses and other current assets ..................... 3,431 4,710
------------------ ------------------

Total current assets ................................. 16,394 26,670

EQUIPMENT AND IMPROVEMENTS, NET ........................................ 3,345 3,480

OTHER ASSETS ........................................................... 43 52
------------------ ------------------

$ 19,782 $ 30,202
================== ==================
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 3

CET ENVIRONMENTAL SERVICES, INC.

CONDENSED BALANCE SHEETS
(in thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY

SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
---------- ----------

<S> <C> <C>
Cash overdraft ............................................... $ 681 $ 1,937

Accounts payable ............................................. 6,163 11,383

Accrued expenses ............................................. 1,677 3,249

Accrued restructuring ........................................ 641 --

Current portion of long-term debt and capital lease
obligations .............................................. 883 1,067

Line of credit ............................................... 3,571 1,040

Other current liabilities .................................... -- 159
---------- ----------

Total current liabilities ........................... 13,616 18,835

DEFERRED INCOME TAXES ................................................. -- --

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS .......................... 283 251

COMMITMENTS AND CONTINGENT LIABILITIES ................................ -- --

STOCKHOLDERS' EQUITY

Common stock (no par value) - authorized 20.0 million shares;
issued and outstanding 6.3 million and 6.1 million shares
in 1999 and 1998, respectively ........................... 8,671 8,540

4% convertible Preferred Stock (no par value) - authorized 5.0
..million shares; -0- and 1,710 shares issued and outstanding
in 1999 and 1998, respectively ........................... -- 1,589

Paid-in capital .............................................. 105 574

Retained earnings (deficit) .................................. (2,893) 413
---------- ----------

Total stockholders' equity .......................... 5,883 11,116
---------- ----------

$ 19,782 $ 30,202
========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 4

CET ENVIRONMENTAL SERVICES, INC.

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

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- ------------- -------------- -------------

<S> <C> <C> <C> <C>
PROJECT REVENUE ....................................... $ 13,939 $ 17,125 $ 35,387 $ 44,585

PROJECT COSTS
Direct ....................................... 12,426 16,260 28,201 38,787
Indirect ..................................... 1,371 1,952 5,184 5,469
------------- ------------- ------------- -------------
13,797 18,212 33,385 44,256

Gross profit ........................ 142 (1,087) 2,002 329

OPERATING EXPENSES
Selling ...................................... 560 431 1,272 1,364
General and administrative ................... 910 729 2,556 2,032
Restructuring ................................ 913 -- 913 --
------------- ------------- ------------- -------------
2,383 1,160 4,741 3,396
------------- ------------- ------------- -------------

Operating income (loss) ............ (2,241) (2,247) (2,739) (3,067)

OTHER INCOME (EXPENSE), NET ........................... (133) (356) (562) (798)
------------- ------------- ------------- -------------

Income (loss) before income taxes ... (2,374) (2,603) (3,301) (3,865)

Provision (credit) for income taxes.. -- -- -- --
------------- ------------- ------------- -------------

NET INCOME (LOSS) ..................................... $ (2,374) $ (2,603) $ (3,301) $ (3,865)
============= ============= ============= =============

Earnings (loss) per common share ...................... $ (0.38) $ (0.45) $ (0.53) $ (0.67)
============= ============= ============= =============
Earnings (loss) per common share-assuming dilution .... $ (0.38) $ (0.45) $ (0.53) $ (0.67)
============= ============= ============= =============
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 5

CET ENVIRONMENTAL SERVICES, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
1999 1998
---------------- ---------------

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $ (3,301) $ (3,865)
Adjustments to reconcile net income to net cash provided by (used in)
Operating activities:
Depreciation and amortization................................. 558 1,149
Restructuring charge.......................................... 913 -
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable........... 4,864 (4,192)
Decrease (Increase) in contracts in process.......... 4,823 4,609
Decrease (Increase) in prepaid expenses and other assets 857 38
(Decrease) Increase in accounts payable and
accrued expenses................................. (7,371) (1,232)
Other................................................ (158) (3)
---------------- ---------------
Net cash provided by (used in) operating activities.. 1,185 (3,496)
---------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment.................................................. (691) (1,251)
Purchase of subsidiary................................................. - (691)
Proceeds on sale of regions........................................... 50 -
Proceeds from sale of subsidiary....................................... 1,250 -
---------------- ---------------
Net cash provided by (used in) investing activities.. 609 (1,942)
---------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of subordinated debt............................ - 7,115
Proceeds from private placement equity offering........................ - 1,890
Payments on debt and capital lease obligations......................... (467) (395)
Proceeds from exercise of Employee Stock Options....................... - 17
Preferred Stock dividends.............................................. (5) -
Preferred Stock redemption............................................. (1,928) -
Net borrowings on line of credit....................................... 2,531 781
Proceeds on loans from shareholders.................................... - 825
Payments on loans from shareholders.................................... - (300)
Payments on loan to related party...................................... 20 -
Bank overdraft......................................................... (1,256) -
---------------- ---------------
Net cash provided by (used in) financing activities........... (1,105) 9,933
---------------- ---------------

INCREASE (DECREASE) IN CASH............................................ 689 4,495

Cash at the beginning period........................................... 25 344
---------------- ---------------

Cash at end of period.................................................. $ 714 $ 4,839
================ ===============
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 6

CET ENVIRONMENTAL SERVICES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999

NOTE 1. BASIS OF PRESENTATION. The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting
principles for condensed interim financial statements and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have
been included. Certain amounts in the 1998 financial statements have been
reclassified to conform to the 1999 presentation. Management does not
believe the effect of such reclassifications is material. Operating results
for the quarter and nine months ended September 30, 1999 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1999. For further information, refer to the audited financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

NOTE 2. EARNINGS PER SHARE. The Financial Accounting Standards Board recently
issued Statement of Financial Accounting Standards No. 128, Earnings Per
Share ("SFAS 128"). SFAS 128 requires the presentation of basic earnings
per share ("EPS") and, for companies with potentially dilutive securities
such as convertible debt, options and warrants, diluted EPS.

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):

Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------

<S> <C> <C> <C> <C>
Numerator
Net Income (loss) $ (2,374) $ (2,603) $ (3,301) $ (3,865)
Preferred Stock dividends -- -- (5) --
------------- ------------- ------------- -------------
Numerator for basic earnings per share -
income available to common stockholders (2,374) (2,603) (3,306) (3,865)
Effect of dilutive securities:
Preferred Stock dividends -- -- -- --
Numerator for diluted earnings per share -
income available to common stockholders $ (2,374) $ (2,603) $ (3,306) $ (3,865)
after assumed conversions ============= ============= ============= =============

Denominator:
Denominator for basic earnings per share -
weighted average shares outstanding 6,284 5,809 6,282 5,809
Effect of dilutive securities:
Warrants -- -- -- --
Convertible Preferred Stock -- -- -- --
Stock options -- -- -- --
Dilutive potential common shares ------------- ------------- ------------- -------------
-- -- -- --
------------- ------------- ------------- -------------
Denominator for diluted earnings per share -
adjusted weighted average share and
assumed conversion 6,284 5,809 6,282 5,809
============= ============= ============= =============
Basic earnings (loss) per share $ (0.38) $ (0.45) $ (0.53) $ (0.67)
============= ============= ============= =============
Diluted earnings (loss) per share $ (0.38) $ (0.45) $ (0.53) $ (0.67)
============= ============= ============= =============
</TABLE>

5
<PAGE> 7

CET ENVIRONMENTAL SERVICES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS - CONTINUED

NOTE 3. SALE OF SUBSIDIARY. Effective December 1, 1998, the Company sold all
of the outstanding shares of its subsidiary, Water Quality Management
Corporation ("WQM") for a sale price of $12.5 million plus an
adjustment for net working capital of WQM at November 30, 1998. The
Company received $11.3 million at the date of sale and in the first
quarter of 1999 received an additional $1.2 million. As of September
30, 1999, the Company has included in other receivables remaining
amounts due on the sale of WQM.

NOTE 4. LINE OF CREDIT AND LONG TERM DEBT. In May 1997, the Company entered
into a financing agreement (the "Agreement") with National Bank of
Canada. The Agreement originally provided for a line of credit (the
"Credit Facility"), a term loan, and a $0.5 million stand-by letter of
credit which in total would not exceed the lesser of $7.5 million or a
percentage of eligible receivables (the "Maximum Loan Availability").
Interest was originally payable under the Agreement at the Bank's
Reference Rate plus .25%. The Agreement had an expiration date of May
30, 1999 upon which amounts outstanding under the Credit Facility and
term loan were due and payable.

Pursuant to subsequent amendments to the Agreement (collectively the
"Amendments"), the maturity date of the Agreement has been extended to
January 6, 2000 and National Bank of Canada has agreed to advance the
Company necessary funds on a discretionary basis. Additional terms
under the Agreement which are amended include:

(i) reduction of Maximum Loan Availability under the Agreement to
the lesser of (a) $3.5 million as of November 5, 1999 (gradually
reduced bi-monthly to zero through January 6, 2000) less required
reductions or (b) a percentage of eligible receivables (as
defined by the Agreement and subsequently amended) reduced by
outstanding equipment loans, credit facility and letter of
credit;

(ii) extension of the maturity date of the term loans to November
29, 1999 and exclusion from the receipt of further equipment
loans;

(iii) amendment of the interest rate to the Bank's Reference Rate
plus 2% and the letter of credit fee to 3.5% per annum; and

(iv) addition of certain covenants to include periodic reporting
of collateral and financial projections, restricted use of
proceeds on the Company's sale of assets and required
reimbursement of certain professional fees incurred by the Bank.

As of September 30, 1999, the Company's debt under its Agreement with
National Bank of Canada consisted of $3.6 million outstanding under
its credit facility and $0.6 million in equipment loans outstanding.
Beginning September 1, 1999 interest is payable under the Agreement at
Bank's Reference Rate plus 2% (10.25% at September 30, 1999).
Additionally, the Agreement and subsequent Amendments provide for
certain financial covenants which must be maintained. As of September
30, 1999, the Company was not in compliance with certain of these
covenants.

NOTE 5. STOCKHOLDERS' EQUITY. In July 1998, the Company completed a private
placement of 2,000 shares of 4% convertible Preferred Stock (the
"Preferred Stock") providing net proceeds of approximately $1.9
million. The Preferred Stock is convertible into shares of common
stock based on the stated value of $1,000 per share of Preferred Stock
divided by conversion price on the conversion date. The conversion
price is equal to 85% of the lowest closing price of the common stock
during the six days immediately preceding the conversion date, not to
exceed $3.35. A total of 290 shares of Preferred Stock were converted
into 317,786 shares of common stock in 1998 and a total of 140 shares
of Preferred Stock were converted into 155,017 shares of common stock
in 1999.

6
<PAGE> 8

Additionally, in January 1999, the Company redeemed the remaining
shares of Preferred Stock for approximately $1.9 million. Warrants
totaling 35,000 issued to the placement agent in the offering remain
outstanding.

NOTE 6. CONTINGENCIES. On August 10, 1999, the Company received a notice of
suspension, pending further review, from the Environmental Protection
Agency ("EPA"). The suspension resulted from EPA allegations that the
Company engaged in intentional misconduct with respect to billing for
services provided under various EPA contracts. Under the suspension,
the Company was prohibited from receiving additional government
contracts under the provisions of 48 C.F.R Subpart 9.4 of the Federal
Acquisitions Regulations. The suspension did however allow the Company
to continue performance on existing government contracts.

In November 1999, following consideration of certain information
provided by the Company to the EPA, the EPA's suspension was
terminated and an Administrative Agreement ("Administrative
Agreement") between the EPA and the Company was executed. Upon
execution of the Administrative Agreement, the Company became
immediately eligible to bid for, receive, and perform any Federal
contract or subcontract, or participate in any assistance, loan or
benefit without restriction. In the Administrative Agreement, the
Company agreed to cooperate in full with further investigations into
the EPA allegations including access to records, availability of
Company personnel, certain reporting requirements, audit of EPA
billing prior to submission and certain restrictions of Company assets
without notification to the EPA. In addition, the Administrative
Agreement provides for a financial reserve of $0.7 million. Management
has been advised that this reserve relates to the resolution of claims
filed against the Company related to the Company's Subcontractor
Agreement with Environmental Chemical Corporation ("ECC") in which
work was performed under an EPA contract (See also Item 1. Legal
Proceedings). The financial reserve shall be established by funds
withheld by the EPA from current and future EPA invoices, estimated
base fee and determined award fees. During the year ended December 31,
1998 the Company recorded sufficient reserves for the ECC's claims.

In certain circumstances of non-compliance, the EPA has the right
under the Administrative Agreement to terminate the agreement and
reinstate the Company's suspension. In addition, as defined in the
Administrative Agreement, in the case of misconduct by the Company
during the EPA's continued investigation the EPA may immediately
terminate EPA contracts, subcontracts or further award fees.

EPA revenue represents approximately 71% and 66%, respectively, of the
Company's revenue during the quarter and nine months ended September
30, 1999. Following the notice of suspension, the Company initiated a
Restructuring Plan which downsized its operations as a decline in
revenues occurred. The Restructuring Plan includes the sale of certain
regional offices, regional office downsizing, and closure of certain
regional offices. See also Note 7 to the Company's Condensed Financial
Statements. Following completion of the Restructuring Plan, the
Company will maintain offices in Houston, San Antonio, Denver,
Seattle, Tustin and Richmond, CA.

After review of available information and consultation with its legal
counsel, management believes that the allegations brought against the
Company did not warrant suspension. Additionally management intends to
cooperate in full but also vigorously defend itself in the EPA's
further investigation into the allegations. However, there can be no
assurance that further suspension will not occur or that the Company
will prevail in this matter. If further suspension occurs, it will
have a material effect on the Company's financial position, results of
operations and liquidity.

The Company filed a Complaint and Jury Demand against AquaSource
Services and Technologies, Inc. ("AquaSource"), a Texas corporation,
on July 15, 1999 for additional amounts due under the Water Quality
Management Stock Purchase Agreement. The Company believes AquaSource
owes $2.8 million attributable to Net Working Capital and an
additional $0.2 million related to expense reimbursements agreed to by
the parties. AquaSource filed a Motion to Dismiss the Complaint but
has not yet filed an Answer to the Complaint. In view of this
litigation, CET's management believes it has adequately provided for
potential uncollectable amounts related to this dispute.

7
<PAGE> 9

collection costs, is approximately $2.1 million. In August 1998 the
Oregon court determined that the venue for the United States District
Court action should be in Utah, and venue for the action was changed
accordingly. Road Runner also filed a claim in this action against the
Company for breach of contract seeking unspecified damages. The
Company has also filed mechanic's liens on certain equipment at the
site and against Road Runner's rights in the oil field. The Default
Judgments against Road Runner have been awarded in the Tribal Court
and Utah state court, and foreclosure proceedings and corresponding
asset investigation are in progress. The Company has written off this
account receivable.

In 1998, Environmental Chemical Corporation ("ECC") filed for
arbitration against the Company for various claims related to the
Company's Subcontractor Agreement under an EPA contract. As discussed
above, in November 1999, the Company executed an Administrative
Agreement which provides for a financial reserve of $0.7 million.
Management has been advised that this reserve relates to the
resolution of the claims filed by ECC. The financial reserve shall be
established by funds withheld by the EPA from current and future EPA
invoices, estimated base fee and determined award fees.

In 1998, the Company initiated a lawsuit in the U.S. District Court
for the Southern District of Texas - Houston Division against PTS
Properties, Inc., the building owner, Allchem Industries, Inc. and
Fertilizers and Chemicals, Ltd., the chemical owners, and Aqua-Pak,
Inc. for collection of an outstanding receivable of $0.4 million from
performance of an emergency response in 1997 for Aqua-Pak, Inc. The
Company has written off this account receivable. In 1999, two of the
defendants settled with the Company for a total received by the
Company of $0.2 million. Efforts are being pursued for settlement with
the remaining defendant prior to court proceedings.

The Company is party to various legal actions arising out of the
normal course of its business. Management believes that the ultimate
resolution of such actions, except as previously disclosed, will not
have a material adverse effect on the Company's financial position,
results of operations and liquidity of the Company. For a discussion
of certain legal proceedings to which the Company is party, see Part I
- Item 3. "Legal Proceedings" in the Company's Annual Report on Form
10-K for the year ended December 31, 1998.

NOTE 7. RESTRUCTURING. In August 1999, following the EPA suspension discussed
in Note 6 "Contingencies" above, the Company initiated a restructuring
plan ("Restructuring Plan") to reduce operating costs and gain
efficiencies through sale, downsizing and closure of regional offices.
In September 1999, under the Restructuring Plan, the Company sold
substantially all its assets in the Mobile and Jackson regions for
proceeds totaling $0.5 million. Also under the Restructuring Plan, in
October 1999, the Company closed its regional office located in New
Orleans and downsized its regional office in Houston. As a result, the
Company recorded a total restructuring charge of approximately $0.9
million, including a $0.3 million non-cash charge for loss on sale of
regional offices, in the quarter and nine months ended September 30,
1999.

Included in the Restructuring Plan is a reserve for personnel
reduction and facility reduction costs totaling $0.6 million.
Personnel reduction costs totaling $0.2 million include severance
payments, retention bonuses, fringe benefits and taxes related to
employee termination. Additionally personnel reduction costs include
incremental professional fees to develop and implement the
Restructuring Plan. Facility reduction costs totaling $0.4 million
consist of the cost of fulfilling or buying out existing lease
commitments on regional facilities, related costs for equipment leases
and facility closure expenses. Facility reduction costs resulting in
non-cash charges consist principally of the estimated loss on
disposition of operating assets.

The balance of accrued restructuring at September 30, 1999 includes
future cash expenditures of $0.4 million and non-cash expenditures of
$0.2 million. The Company estimates that future cash expenditures
relating to the Restructuring Plan will be made during the quarter
ended December 31, 1999. The Company further believes it has adequate
reserves and liquidity as of September 30, 1999 to meet future
expenditures related to the Restructuring Plan.

NOTE 8. SUBSEQUENT EVENTS. In October 1999, the Company entered into an asset
purchase and assignment agreement (the "Purchase Agreement") with IT
Corporation to sell or assign substantially all of the assets in the
Company's Seattle Regional office. The Purchase Agreement provides for
the assignment of the Company's remaining EPA contract dated January
9, 1997 (the "EPA Contract") and the sale of certain assets and the
assumption of certain

8
<PAGE> 10

liabilities and obligations used in, directly associated with and
necessary in the performance of the EPA Contract for a sale price of
$1.3 million. Closing of the Purchase Agreement is contingent upon the
execution of a novation agreement by and between the Company, IT
Corporation and the EPA consenting to the assignment of the EPA
Contract. As stated in Note 6, EPA revenue represents approximately
71% and 66%, respectively, of the Company's revenue during the quarter
and nine months ended September 30, 1999. Upon novation of the EPA
contract, CET would receive no further EPA revenue. However, there can
be no assurance that approval of the novation will be received from
the EPA or that the subsequent closing of the Purchase Agreement will
occur.

9
<PAGE> 11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1998

PROJECT REVENUE. Project revenue decreased $3.2 million or 19%, from
$17.1 million in the quarter ended September 30, 1998 to $13.9 million in the
quarter ended September 30, 1999. The decrease results primarily from (i) a $2.2
million decrease in project revenue resulting from the sale of WQM in December
1998 (see also Note 3 to the Company's Condensed Financial Statements) and (ii)
a decline of $1.3 million in commercial contract revenue as a result of an
overall decrease in the Company's commercial business in 1999. Additionally, in
the quarter ended September 30, 1999 the Company experienced an increase of $1.2
million in revenue provided by EPA contracts as a result of delays in project
commencement in the second quarter of 1999. This increase in EPA revenue is
offset by a $1.0 million reduction in other government contract revenue provided
to the Company in 1998 under a Preplaced Remedial Action Contract ("PRAC") with
the US Army Corp of Engineers.

DIRECT COSTS. Direct costs decreased $3.9 million or 24%, from $16.3
million or 95% of project revenue in the quarter ended September 30, 1998 to
$12.4 million or 89% of project revenue in the quarter ended September 30, 1999.
The improvement in direct costs as a percentage of project revenue in 1999
results primarily from cost overruns incurred in 1998 on one project in the
State of Kansas. The net effect of this project on the results for the quarter
ended September 30, 1998 was a negative margin of $0.5 million or 5.4% of
revenue.

INDIRECT COSTS. Indirect costs decreased $0.6 million or 30%, from $2.0
million in the quarter ended September 30, 1998 to $1.4 million in the quarter
ended September 30, 1999. Additionally, indirect cost is 11% of project revenue
in the quarter ended September 30, 1998 and 10% of project revenue in the
quarter ended September 30, 1999. Therefore the decrease in indirect costs can
be attributed primarily to the decrease in project revenue described above.

GROSS PROFIT. Gross profit improved $1.2 million, from $(1.1) million
or a gross margin of (6)% in the quarter ended September 30, 1998 to $0.1
million or a gross margin of 1% in the quarter ended September 30, 1999. As
described above, the improvement in gross margin results primarily from the
decline in project costs as a percentage of project revenue from a total of 106%
of project revenue in 1998 to 99% of project revenue in 1999.

RESTRUCTURING. Following the EPA suspension discussed in Note 6 to the
Company's Condensed Financial Statements, the Company initiated a Restructuring
Plan to reduce operating costs and gain efficiencies through sale, downsizing
and closure of regional offices. As a result, during the quarter ended September
30, 1999 the Company recorded a restructuring charge totaling $0.9 million,
including a $0.3 million non-cash charge for loss on sale of regional offices.
See also Note 7 to the Company's Condensed Financial Statements.

NET INCOME (LOSS). The Company's net loss improved slightly by $0.2
million, from a net loss of $2.6 million in the quarter ended September 30, 1998
to a net loss of $2.4 million in the quarter ended September 30, 1999. As
described above, the improvement in net loss is due to a $1.2 million
improvement in gross profit resulting from a reduction of project costs as a
percentage of project revenue. In addition, the improved gross profit is offset
by the $0.9 million restructuring charge recorded by the Company during the
quarter ended September 30, 1999.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

PROJECT REVENUE. Project revenue decreased $9.2 million or 21%, from
$44.6 million in the nine months ended September 30, 1998 to $35.4 million in
the nine months ended September 30, 1999. The decrease results primarily from
(i) a $7.0 million decrease in project revenue resulting from the sale of WQM in
December 1998 (see also Note 3 to the Company's Condensed Financial Statements);
(ii) a decline of $3.2 million in commercial contract revenue as a result of an
overall decrease in the Company's commercial business in 1999; and (iii) a $2.6
million reduction of other government contract revenue as a result of revenue
provided to the Company in 1998 under a Preplaced Remedial Action Contract
("PRAC") with the US Army Corp of Engineers. These declines in project revenue
are offset by an increase of $3.6 million in revenue provided by EPA contracts.

10
<PAGE> 12

DIRECT COSTS. Direct costs decreased $10.6 million or 27%, from $38.8
million or 87% of project revenue in the nine months ended September 30, 1998 to
$28.2 million or 80% of project revenue in the nine months ended September 30,
1999. The improvement in direct costs as a percentage of project revenue in 1999
results primarily from cost overruns incurred in 1998 on projects in the State
of Kansas and the State of Washington.

GROSS PROFIT. Gross profit improved $1.7 million, from $0.3 million or
a gross margin of 1% in the nine months ended September 30, 1998 to $2.0 million
or a gross margin of 6% in the nine months ended September 30, 1999. As
described above, the improvement in gross margin results primarily from the
decline in project costs as a percentage of project revenue from a total of 99%
of project revenue in 1998 to 94% of project revenue in 1999.

RESTRUCTURING. Following the EPA suspension discussed in Note 6 to the
Company's Condensed Financial Statements, the Company initiated a Restructuring
Plan to reduce operating costs and gain efficiencies through sale, downsizing
and closure of regional offices. As a result, during the nine months ended
September 30, 1999 the Company recorded a restructuring charge totaling $0.9
million, including a $0.3 million non-cash charge for loss on sale of regional
offices. See also Note 7 to the Company's Condensed Financial Statements.

NET INCOME (LOSS). The Company's net loss improved slightly by $0.6
million, from a net loss of $3.9 million in the nine months ended September 30,
1998 to a net loss of $3.3 million in the nine months ended September 30, 1999.
As described above, the improvement in net loss is due to a $1.7 million
improvement in gross profit resulting from a reduction of direct costs as a
percentage of project revenue. The improved gross profit is offset by the $0.9
million restructuring charge recorded by the Company during the nine months
ended September 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital declined $5.0 million from $7.8 million
as of December 31, 1998 to $2.8 million as of September 30, 1999. The change in
working capital results from a decrease in current assets of $10.3 million
compared to a decrease in current liabilities of $5.2 million. The decrease in
current assets results from a continued reduction in combined receivables of
$9.7 million and a decrease in other current assets of $1.3 million resulting
from the collection of $1.3 million on the sale of business. The decrease in
current liabilities results primarily from a reduction of accounts payable and
accrued liabilities of $6.8 million offset by a $0.6 million restructure reserve
recorded by the Company during the quarter and nine months ended September 30,
1999.

The Company's financial position has declined in 1999 as a result of
the increase in the Company's current obligations and a decline in equity
resulting from losses incurred during the quarters ended June 30, 1999 and
September 30, 1999. The Company's total obligations have decreased $5.2 million
from $19.1 million at December 31, 1998 to $13.9 million at September 30, 1999.
However, the Company's shareholders equity has declined $13.1 million. The
Company has continued to reduce its combined receivables $9.7 million, from
$21.9 million or 120 days sales outstanding at December 31, 1998 to $12.2
million or 80 days sales outstanding at September 30, 1999.

The Company's cash and cash equivalents increased $0.7 million, from
$0.03 million at December 31, 1998 to $0.7 million at September 30, 1999. The
increase in cash and cash equivalents results from cash provided to operating
activities and investing activities of $1.2 million and $0.6 million,
respectively. The cash provided by operating and investing activities is offset
by cash used in financing activities of $1.1 million. Cash provided by operating
activities of $1.2 million results primarily from a decrease in combined
receivables of $9.7 million. This increase in cash is offset by a reduction of
accounts payable and accrued expenses of $7.4 million. Cash provided by
investing activities of $0.6 million results from the receipt of $1.3 million
additional proceeds on the sale of WQM offset by a $0.7 million purchase of
assets during the nine months ended September 30, 1999. Cash used in financing
activities of $1.1 million results primarily from a payment of $1.9 million for
the redemption of the Company's preferred stock (see also Note 5 to the
Company's Condensed Financial Statements) and a reduction of $1.3 million in the
Company's cash overdraft. This use of cash in financing activities is offset of
by net borrowings of $2.5 million on the Company's line of credit.

DEBT. As of September 30, 1999, the Company's debt obligations included
a financing agreement with National Bank of Canada consisting of $3.6 million
outstanding under its credit facility and $0.6 million in equipment loans
outstanding. The Agreement had an original maturity date of May 30, 1999 upon
which amounts outstanding under the Credit Facility and term loans became
immediately due and payable. Pursuant to Amendments to the Agreement, the
maturity date of the Agreement has been extended to January 6, 2000 and National
Bank of Canada has agreed to

11
<PAGE> 13

advance the Company necessary funds on a discretionary basis. Additional
amendments include (i) gradual reduction of the Maximum Loan Availability from
$3.5 million as of November 5, 1999 to zero on January 6, 2000; (ii) extension
of the maturity date of the term loans to November 29, 1999 and exclusion from
the receipt of further equipment loans; (iii) adjustment of the interest rate to
Bank's Reference Rate plus 2% and the letter of credit fee to 3.5% per annum;
and (iv) the addition of certain covenants including periodic reporting of
collateral and financial projections and restricted use of proceeds on the
Company's sale of assets. See also Note 4 to the Company's Condensed Financial
Statements.

The Company is seeking alternate financing sources for use in future
operating activities and strategic alternatives. However, under its current
financing agreement with National Bank of Canada, the Bank may discontinue
advancing funds on the loans at any time. Management believes that it will be
successful in obtaining alternate sources of financing and that future cash
flows from operations and funds available under these financing arrangements
will be sufficient to fund the Company's immediate needs for working capital.
However, there can be no assurance that funds available under the current
Agreement will not be discontinued or that alternate financing sources can be
successfully negotiated both of which could have a material effect on the
Company's financial position, operating activities and liquidity.

CONTINGENCIES. On August 10, 1999, the Company received a notice of
suspension, pending further review, from the Environmental Protection Agency
("EPA"). The suspension resulted from EPA allegations that the Company engaged
in intentional misconduct with respect to billing for services provided under
various EPA contracts. Under the suspension, the Company was prohibited from
receiving additional government contracts under the provisions of 48 C.F.R
Subpart 9.4 of the Federal Acquisitions Regulations. The suspension did however
allow the Company to continue performance on existing government contracts.

In November 1999, following consideration of certain information
provided by the Company to the EPA, the EPA's suspension was terminated and an
Administrative Agreement between the EPA and the Company was executed. Upon
execution of the Administrative Agreement, the Company became immediately
eligible to bid for, receive, and perform any Federal contract or subcontract,
or participate in any assistance, loan or benefit without restriction. In the
Administrative Agreement, the Company agreed to cooperate in full with further
investigations into the EPA allegations including access to records,
availability of Company personnel, certain reporting requirements, audit of EPA
billing prior to submission and certain restrictions of Company assets without
notification to the EPA. In addition, the Administrative Agreement provides for
a financial reserve of $0.7 million. Management has been advised that this
reserve relates to the resolution of claims filed against the Company related to
the Company's Subcontractor Agreement with Environmental Chemical Corporation
("ECC") in which work was performed under an EPA contract (See also Item 1.
Legal Proceedings). The financial reserve shall be established by funds withheld
by the EPA from current and future EPA invoices, estimated base fee and
determined award fees. During the year ended December 31, 1998 the Company
recorded sufficient reserves for the ECC's claims.

In certain circumstances of non-compliance, the EPA has the right under
the Administrative Agreement to terminate the agreement and reinstate the
Company's suspension. In addition, as defined in the Administrative Agreement,
in the case of misconduct by the Company during the EPA's continued
investigation the EPA may immediately terminate EPA contracts, subcontracts or
further award fees.

EPA revenue represents approximately 71% and 66%, respectively, of the
Company's revenue during the quarter and nine months ended September 30, 1999.
Following the notice of suspension, the Company initiated a Restructuring Plan
which downsized its operations as a decline in revenues occurred. The
Restructuring Plan includes the sale of certain regional offices, regional
office downsizing, and closure of certain regional offices. See also Note 7 to
the Company's Condensed Financial Statements. Following completion of the
Restructuring Plan, the Company will maintain offices in Houston, San Antonio,
Denver, Seattle, Tustin and Richmond, CA.

After review of available information and consultation with its legal
counsel, management believes that the allegations brought against the Company
did not warrant suspension. Additionally management intends to cooperate in full
but also vigorously defend itself in the EPA's further investigation into the
allegations. However, there can be no assurance that further suspension will not
occur or that the Company will prevail in this matter. If further suspension
occurs, it will have a material effect on the Company's financial position,
results of operations and liquidity.

12
<PAGE> 14

In October 1999, the Company entered into an asset purchase and
assignment agreement (the "Purchase Agreement") with IT Corporation to sell or
assign substantially all of the assets in the Company's Seattle Regional office.
The Purchase Agreement provides for the assignment of the Company's remaining
EPA contract dated January 9, 1997 (the "EPA Contract") and the sale of certain
assets and the assumption of certain liabilities and obligations used in,
directly associated with and necessary in the performance of the EPA Contract
for a sale price of $1.3 million. Closing of the Purchase Agreement is
contingent upon the execution of a novation agreement by and between the
Company, IT Corporation and the EPA consenting to the assignment of the EPA
Contract. EPA revenue represents approximately 71% and 66%, respectively, of the
Company's revenue during the quarter and nine months ended September 30, 1999.
Upon novation of the EPA contract, CET would receive no further EPA revenue.
However, there can be no assurance that approval of the novation will be
received from the EPA or that the subsequent closing of the Purchase Agreement
will occur.

CAPITAL COMMITMENTS. As of September 30, 1999, the Company did not have
any material commitments for capital expenditures. The Company has entered into
leases for its existing facilities with such leases expiring at various dates
through 2004. During the nine months ended September 30, 1999, capital
expenditures totaled approximately $0.7 million.

YEAR 2000 COMPLIANCE

The Company has assessed the Year 2000 compliance problem and has
determined that it has potential for exposure regarding Year 2000 compliance in
three areas of its internal and external business activities. These areas
include (1) its own internal hardware, software systems, and the
telecommunications systems which are utilized to process and provide the
Company's accounting, operational information, and communications, (2) the
vulnerability of the Company to the failure of other companies to be Year 2000
compliant, and (3) the Year 2000 Compliance efforts of the Environmental
Protection Agency (EPA), a significant client of the Company, on its daily
tracking & billing system. The following discusses management's assessment and
solutions of those risks and the steps that are being taken to minimize them.

Internal Hardware, Software and Telecommunications. During the past
nine months, the Company has been and is replacing or adding new equipment to
its inventory of network and systems computers. The Company has committed
approximately $350,000 for this hardware/software replacement, which has been
financed with its cash resources and with lease financing. The hardware includes
the Company's organization-wide network systems and servers, telephone systems,
and personal computer equipment. The Company tested Year 2000 compliance on the
new hardware/software as it was accepted. In addition, the Company is upgrading
its current financial application software. The Vendor has warranted that the
software is Year 2000 compliant. System design is substantially complete,
desktop computers have been tested, and the Company is in the process of
correcting any problems that are encountered. In addition, the Company reviewed
its telecommunications systems, analyzed various options, and purchased a new
central telecommunication system that provides increased functionality
associated with multiple office communication requirements. The new system is
Year 2000 compliant, and installation was completed during the second quarter
1999. The cost associated with a new telecommunications system was approximately
$33,000.

In addition to the above activities, the Company is in the final
process of completing a full inventory and assessment of its computer hardware,
software, and equipment with embedded devices. It is anticipated that this
process will be completed by November 1999. Management intends to identify any
remaining remedial efforts that may be required to ensure its internal hardware
and software systems are Year 2000 complaint.

Year 2000 Compliance of Other Companies. Although the Company expects
its internal systems to be Year 2000 compliant, the failure of any of its
significant vendors or clients to correct a material Year 2000 problem could
result in an interruption in certain normal business activities and operations.
To date, the Company has received various inquires from its clients and
significant vendors to provide information on Year 2000 compliance or to inform
the Company of their Year 2000 compliance. The Company has been responding to
these requests and notices. Management is not aware of any claims by any client
to provide remedial services under any warranty agreement (stated or implied)
for systems it may have provided, nor is it aware of any system that may have
been provided that may be in violation of any Year 2000 compliance. To the
extent any such claims may be made, the Company intends to address these issues
on a case by case basis.

13
<PAGE> 15

The Year 2000 problem is not limited to computer hardware and software.
It can affect a multitude of other day-to-day business activities. Any type of
equipment with a microchip that stores and processes dates can be affected. The
company is diligently identifying and addressing these issues so that its
ability to conduct business as usual is not compromised as it moves into the
21st century. The Company is identifying mission-critical business functions
that rely upon date-sensitive equipment, software, or hardware. The Company is
requesting Year 2000 verification in these areas by performance testing or
certifications that use various types of testing for compliance, i.e., century
byte, hardware clock rollover, hardware clock leap year, BIOS rollover, BIOS
leap year, power-on rollover, and power-on leap year. Due to the general
uncertainty inherent in the Year 2000 problem, the Company at this time is
unable to completely determine if any adverse impact will be experienced by the
Company from other companies' Year 2000 failures.

EPA Year 2000 Compliance. The Company has been working with the EPA on
their efforts to bring their daily tracking & billing system (RCMS) to Year 2000
compliance. The EPA utilizes a DOS-based RCMS which, based on EPA
representation, will be Year 2000 compliant.

While the Company may be vulnerable to other companies' Year 2000
compliance failures, the Company believes that it is well positioned to minimize
the Year 2000 impact. The Company believes that with the implementation of its
new hardware, software, up-grades to our office equipment, and completion of its
assessment of vendors and clients, the possibility of significant interruptions
of normal operations has been greatly reduced.

14
<PAGE> 16

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On August 10, 1999, the Company received a notice of suspension,
pending further review, from the Environmental Protection Agency
("EPA"). The suspension resulted from EPA allegations that the Company
engaged in intentional misconduct with respect to billing for services
provided under various EPA contracts. Under the suspension, the Company
was prohibited from receiving additional government contracts under the
provisions of 48 C.F.R Subpart 9.4 of the Federal Acquisitions
Regulations. The suspension did however allow the Company to continue
performance on existing government contracts.

In November 1999, following consideration of certain information
provided by the Company to the EPA, the EPA's suspension was terminated
and an Administrative Agreement between the EPA and the Company was
executed. Upon execution of the Administrative Agreement, the Company
became immediately eligible to bid for, receive, and perform any
Federal contract or subcontract, or participate in any assistance, loan
or benefit without restriction. In certain circumstances of
non-compliance, the EPA has the right under the Administrative
Agreement to terminate the agreement and reinstate the Company's
suspension. In addition, as defined in the Administrative Agreement, in
the case of misconduct by the Company during the EPA's continued
investigation the EPA may immediately terminate EPA contracts,
subcontracts or further award fees. EPA revenue represents
approximately 71% and 66%, respectively, of the Company's revenue
during the quarter and nine months ended September 30, 1999. Following
the notice of suspension, the Company initiated a Restructuring Plan
which downsized its operations as a decline in revenues occurred.

After review of available information and consultation with its legal
counsel, management believes that the allegations brought against the
Company did not warrant suspension. Additionally management intends to
cooperate in full but also vigorously defend itself in the EPA's
further investigation into the allegations. However, there can be no
assurance that further suspension will not occur or that the Company
will prevail in this matter. If further suspension occurs, it will have
a material effect on the Company's financial position, results of
operations and liquidity. See also Note 6 and 7 to the Company's
Condensed Financial Statements.

The Company filed a Complaint and Jury Demand against AquaSource
Services and Technologies, Inc. ("AquaSource"), a Texas corporation, on
July 15, 1999 for additional amounts due under the Water Quality
Management Stock Purchase Agreement. The Company believes AquaSource
owes $2.8 million attributable to Net Working Capital and an additional
$238,000 related to expense reimbursements agreed to by the parties.
AquaSource filed a Motion to Dismiss the Complaint but has not yet
filed an Answer to the Complaint. See also Note 3 to the Company's
Condensed Financial Statements.

On February 13, 1998, the Company filed suit in the United States
District Court for the District of Oregon against Road Runner Oil, Inc.
and Bernard J. Roscoe, alleging breach of contract for non-payment of
services performed by the Company at an oil field in Utah. The amount
of unpaid invoices, including interest and collection costs, is
approximately $2.1 million. In August 1998 the Oregon court determined
that the venue for the United States District Court action should be in
Utah, and venue for the action was changed accordingly. Road Runner
also filed a claim in this action against the Company for breach of
contract seeking unspecified damages. The Company has also filed
mechanic's liens on certain equipment at the site and against Road
Runner's rights in the oil field. The Default Judgments against Road
Runner have been awarded in the Tribal Court and Utah state court, and
foreclosure proceedings and corresponding asset investigation are in
progress. The Company has written off this account receivable.

In 1998, Environmental Chemical Corporation ("ECC") filed for
arbitration against the Company for various claims related to the
Company's Subcontractor Agreement under an EPA contract. As discussed

15
<PAGE> 17

above, in November 1999, the Company executed an Administrative
Agreement which provides for a financial reserve of $0.7 million.
Management has been advised that this reserve relates to the resolution
of the claims filed by ECC. The financial reserve shall be established
by funds withheld by the EPA from current and future EPA invoices,
estimated base fee and determined award fees. See also Note 6 to the
Company's Condensed Financial Statements.

In 1998, the Company initiated a lawsuit in the U.S. District Court for
the Southern District of Texas - Houston Division against PTS
Properties, Inc., the building owner, Allchem Industries, Inc. and
Fertilizers and Chemicals, Ltd., the chemical owners, and Aqua-Pak,
Inc. for collection of an outstanding receivable of $0.4 million from
performance of an emergency response in 1997 for Aqua-Pak, Inc. In
1999, two of the defendants settled with the Company for a total
received by the Company of $0.2 million. Efforts are being pursued for
settlement with the remaining defendant prior to court proceedings.

The Company is party to various legal actions arising out of the normal
course of its business. Management believes that the ultimate
resolution of such actions, except as previously disclosed, will not
have a material adverse effect on the Company's financial position,
results of operations and liquidity of the Company. For a discussion of
certain legal proceedings to which the Company is party, see Part I -
Item 3. "Legal Proceedings" in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1* Administrative Agreement between United States Environmental
Protection Agency ("EPA") and the Registrant.

10.2* Seventh Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.3* Ninth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.4* Eleventh Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

16
<PAGE> 18

10.5* Thirteenth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.6* Fourteenth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

27* Financial Data Schedule

*Filed Herewith Electronically

(b) Reports on Form 8-K

None.

17
<PAGE> 19

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

CET ENVIRONMENTAL SERVICES, INC.

Dated: November 18, 1999 By: /s/ Steven H. Davis
--------------------------------------
Steven H. Davis, President and
Chief Executive Officer

By: /s/ Dale W. Bleck
-------------------------------------
Dale W. Bleck, Interim Chief
Financial Officer

18
<PAGE> 20

EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

<S> <C>
10.1* Administrative Agreement between United States Environmental
Protection Agency ("EPA") and the Registrant.

10.2* Seventh Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.3* Ninth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.4* Eleventh Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.5* Thirteenth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

10.6* Fourteenth Amendment to Loan and Security Agreement and Loan
Documents between National Bank of Canada and the Registrant.

27* Financial Data Schedule
</TABLE>

*Filed Herewith Electronically

<PAGE> 1
ADMINISTRATIVE AGREEMENT

between
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY (EPA)
and
CET ENVIRONMENTAL SERVICES, INCORPORATED (CET)

EPA Case No. 99-0077-00

PURPOSE

This agreement is being made between the EPA and CET in order to provide
EPA with certain assurances during the course of a Federal investigation
concerning CET's claims for costs associated with the performance of services
on various EPA contracts.

This agreement describes the conditions under which EPA will terminate its
suspension of CET, and what assurances CET will provide to protect the
Government's interests on an interim basis, pending development and definition
of the investigation(s) and/or audits that form the bases for EPA's August 10,
1999 suspension of CET.

It is understood by EPA and CET that this agreement is not a final
resolution of any issue involved in this matter. Nor does this constitute a
resolution of matters that may be pending before any other government agency. At
any time if the information available to the Debarring Official, or the
circumstances, change, the Debarring Official may reinstate CET's suspension.

Nothing in this agreement is to be construed as a finding by the Debarring
Official or an admission by CET that any amounts in question under CET's
contracts with EPA are due the Agency, or that CET has engaged in misconduct for
which criminal prosecution, civil recovery, or administrative debarment action
is warranted. This agreement recognizes that the allegations that constitute the
bases for EPA's suspension are subject to further definition and factual
development during the ongoing investigation, or are yet to be resolved by audit
resolution. By signing and abiding by this agreement, CET wishes to
affirmatively demonstrate its willingness to cooperate with the audits and
investigation, and to secure important Government business interests pending
resolution of the matters so as to obviate EPA's need to impose suspension to
protect those interests.

<PAGE> 2

RECITALS

On July 30, 1999, the EPA Suspension and Debarment Division (SDD) filed a
request for suspension of CET alleging that CET had engaged in intentional
misconduct with respect to billing EPA for services provided under various EPA
contracts. The SDD made other allegations with respect to CET's billing and
accounting system, and CET's lack of cooperation with Federal authorities
during the course of the audits and investigation.

On August 10, 1999, the EPA Debarring Official suspended CET, having made
an initial finding that the information presented by the SDD constituted
adequate evidence that a cause for debarment may exist and that immediate action
was necessary to protect procurement and assistance interests of the Federal
Government.

The United States Attorney's Office for the Western District of Washington
requested that the Debarring Official not engage in fact-finding as to disputed
material facts pursuant to 40 CFR Section 32.412(b)(l)(ii).

On September 13, 1999, CET's President and Controller personally appeared
with counsel and presented matters in opposition to the suspension before the
EPA Debarring Official at proceedings conducted by EPA Hearing Officer, Mr.
Stanley Stocker-Edwards.

As part of its presentation in opposition to the suspension, CET provided
relevant information concerning the SDD's allegations, and made certain
assurances(1) and other offers to protect the Government's interests. After
considering all information in the suspension record available at this time, the
Debarring Official has determined that it is appropriate to terminate CET's
suspension upon CET's willingness to adhere to its offers and cooperate fully
with all Federal and other authorities investigating the matter(2), and to take
other actions described in this agreement.

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

(1) As part of its presentation, CET stated that it would not use the
services of its former Vice President, Mr. John Hopkins, as either a CET
employee or contract consultant on any Government contract until allegations
concerning his conduct in the matter have been resolved and addressed.

(2) During final submissions, SDD counsel raised questions concerning
certain filings made by CET to the Internal Revenue Service (IRS) and the
Securities and Exchange Commission (SEC). Although the Debarring Official finds
no evidence in the record to conclude impropriety on the part of CET, CET has
agreed to cooperate fully with the IRS and SEC in any inquiry those agencies may
conduct concerning those issues.

<PAGE> 3
3

TERMS

1. COOPERATION. CET agrees to cooperate fully with any Federal, State or other
government officials investigating, auditing, or otherwise reconciling
claims involved in this matter. Cooperation includes providing immediate
access to CET facilities, documents or other information (regardless of how
such information was recorded, stored, reported or translated), at
reasonable times and in reasonable business settings so as to assist
government officials in ascertaining CET's costs, accounting, billing or
other business policies and practices related to the issues forming the
bases of CET's August 10th suspension. This provision includes records
related to appeals under the disputes clause, or settlement of any claims
under the contract(s) concerned, whether or not those claims have been
finally resolved.

2. ACCESS TO RECORDS. CET agrees to provide immediate access to, records and
information it has, controls, or is responsible for, without the
government having to issue subpoenas or other compulsory process to obtain
information and data. CET will ensure that any documents or other forms of
information requested by a government office or official are delivered and
received in accordance with the request. CET understands that this includes
giving the government access to its software for government officials to
obtain, inspect and interpret data within CET's computer files, if legally
permissible.

3. EMPLOYEE INTERVIEWS. CET agrees to provide the government with unrestricted
access to its current employees for interviews, and will not impede access
to former employees. Nothing in this obligation shall be deemed to require
CET to take any action beyond that of providing reasonable access to
employees, and CET will not advise, direct or otherwise influence any
current or former employee with respect to any statement made, or to be
made, to the government, except as may be legally appropriate in order to
provide legal representation to CET.

4. SUBCONTRACTS. While under the obligations of this agreement, CET agrees to
include the obligations in paragraphs 1-3 above, in any of its future
subcontracts that are cost-reimbursement, incentive, time and materials, or
labor-hour type contracts (or any combination of these) that require data
for submission into the financial and technical progress reports.

5. FINANCIAL RESERVE. CET agrees that OAM may establish a reserve amount of
SEVEN HUNDRED THOUSAND DOLLARS ($700,000.00), pending completion of the
investigation and/or resolution of the audits concerning this matter. Such
amount shall consist of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) from
current and future EPA invoices that are otherwise due and payable but have
not yet been paid and a FIFTEEN PERCENT (15%) withholding of the estimated
base fee and determined award fee. Should the AM Director determine the
current invoices plus the 15 percent withholding

<PAGE> 4

to be insufficient to cover the total reserve amount under this paragraph,
the OAM Director must notify CET of any deficiency, and CET agrees to
retain in its own books of account a set-aside of such sums from its
earnings and profits, sale of assets, other income realized, restructure of
its debts, or deferred payment of dividends or compensation, in order to
fund the reserve balance as security against potential claims arising from
the investigation and/or audits that formed the bases for CET's suspension.
If at any time during the investigation and/or pending resolution of the
audits in this matter, the OAM Director determines that a greater or lesser
reserve is necessary, the OAM Director, after consulting with the Debarring
Official, shall notify CET and the reserve amount under this paragraph
shall be adjusted accordingly. If CET is required to retain a set-aside to
meet an adjusted total reserve under this paragraph, and if that total
reserve is subsequently decreased, in determining any balance due CET, such
balance shall be satisfied first from the CET set-aside. Any remaining
balance due CET may be paid to CET with interest due according to
applicable rates as determined by the U.S. Department of the Treasury. In
no event shall any amount retained by OAM as part of the reserve under this
paragraph, or held by CET as a set-aside to meet the adjusted total
reserve, be regarded as a failure by the Government to comply with the
requirements of the Prompt Payment Act, and interest penalties will not
accrue on any part of the total reserve retained by OAM or set-aside by
CET.

6. DAILY REPORTS. CET agrees to comply with any directive or other guidance
issued by EPA after the effective date of this agreement to clarify CET's
obligations to submit estimated or actual daily usage and cost information
on any Emergency Response contract.

7. SUBMISSION OF INVOICES. CET shall generate invoices only from its job cost
accounting system. CET shall submit all EPA contract invoices for audit
review and approval by the cognizant Defense Contract Audit Agency office
prior to submission for payment by EPA. The terms of such reviews are
subject to specifications as defined by the EPA Financial Administrative
Contracting Officer responsible for negotiation of CET's indirect cost
rates.

8. ASSURANCE AGAINST DIVERSION OF INCOME/ASSETS. From the date of this
agreement until relieved of this obligation by the Debarring Official, CET
shall not transfer income or assets of the corporation, delay the
recognition or realization of any income, incur unnecessary debt to any
officer or director, or make other payment of dividends or pay excessive
compensation to any officer, director, manager or their relatives with the
intent to place corporate assets or income beyond the reach of the Federal
Government to satisfy potential claims that may arise from the
investigation or audits that are the subject of EPA's suspension. Any
such action that results in the inability of the EPA to satisfy its
contract claims for reimbursement of losses against CET's assets and
income may be regarded by the EPA and CET as an ultra vires act for which
EPA or the United States may seek contribution from CET's corporate
officers and directors. CET shall notify the EPA Debarring Official in
the event it plans to reorganize itself, transfer or sell any of its
assets, or increase compensation or fringe benefit payments to its
officers or directors, declare unusual dividends, or take other action that
will significantly change the value of assets available to satisfy
potential claims under this

<PAGE> 5
5

paragraph. CET shall inform any potential purchaser of its assets, or any
portion of its assets, of the existence of this agreement, and that any
such sale/purchase is subject to the terms of this agreement.

9. TERMINATION OF FUTURE CONTRACTS, SUBCONTRACTS OR OTHER AWARDS. If EPA
determines that any serious misconduct occurs within CET in its accounting
and/or submission of invoices, or services provided to any Federal agency
or other person during performance of duties under a Government-funded
contract or assistance award during the existence of this agreement, CET's
contract, subcontract or award may be immediately terminated for cause, and
without cost to the Government, its contractor, or any assistance
participant.

10. FAILURE TO ADHERE TO THIS AGREEMENT. If CET fails to comply with its
obligations under this agreement in any material respect, the EPA Debarring
Official may unilaterally terminate the agreement and reinstate CET's
suspension upon the original cause(s) for action, and for material breach
of the provisions of this agreement. In such event, the EPA Debarring
Official will provide CET with appropriate notice and an opportunity to
contest the action in accordance with 40 CFR Part 32.

11. TERMINATION OF CET'S SUSPENSION. Upon execution of this agreement by the
EPA Debarring Official and CET's representative(s), EPA shall immediately
terminate CET's suspension and notify the General Services Administration
(GSA) to remove CET's name, address and entry from the GSA List of Parties
Excluded from Federal Procurement and Non-procurement Programs. Upon
execution of this agreement by the parties, CET shall be eligible to bid
for, receive, and perform any Federal contract or subcontract, or
participate in any assistance, loan or benefit without restriction, except
as may be required by law or regulation, this agreement, or the terms of a
particular contract, subcontract or nonprocurement award or transaction.

12. RELEASE. CET agrees to release and hold harmless any agency of the United
States, or officials acting on its behalf in their official or personal
capacity, from any damages and claims CET may otherwise believe it is
entitled to pursue as a result of its suspension by EPA.

13. MODIFICATION OR TERMINATION OF THIS AGREEMENT. The terms of this agreement
may be modified by CET and the EPA Debarring Official at any time in
accordance with information developed during the Government's
investigation and/or audits. If at any time, CET desires to conclude the
administrative suspension/debarment matters as part of a comprehensive
settlement, CET may apply to the Debarring Official for termination,
modification or other adjustment of this agreement as a final settlement in
accordance with a comprehensive resolution under 40 CFR Section 32.315.

14. COMPLIANCE REVIEW. At any time during this agreement, EPA may review CET's
compliance with its obligations under this agreement. Such review may
include an

<PAGE> 6
6

examination of CET's books and records, employee interviews, or submission
of documentation as may be appropriate. In the event a compliance review
under this paragraph is to be conducted which will necessitate a site visit
by EPA employees, the EPA Debarring Official shall notify CET of EPA's
intent to conduct a review at least five (5) working days prior to such
review.

15. INCORPORATION BY REFERENCE. CET agrees that OAM may unilaterally modify EPA
Contract No. 68-W7-0016 to incorporate by reference any or all of the
requirements contained in this agreement as it deems appropriate to the
administration of that contract.

- ------------------------------------ --------------------------------
Robert F. Meunier Date
Debarring Official

- ------------------------------------ --------------------------------
Steven Davis, President Date
CET Environmental Services, Inc.

We, the undersigned officers and directors of CET, hereby sign this
agreement as our acknowledgment of our obligations contained in paragraph 8 of
this agreement. (Add others as appropriate)

- ------------------------------------ --------------------------------
Name and Title Date

<PAGE> 7
7

- -------------------------------------- --------------------------------
Robert F. Meunier Date
Debarring Official

/s/ STEVEN H. DAVIS November 4, 1999
- -------------------------------------- --------------------------------
Steven H. Davis, President Date
CET Environmental Services, Inc.

We, the undersigned officers and directors of CET, hereby sign this
agreement as our acknowledgment of our obligations contained in paragraph 8 of
this agreement.

/s/ CRAIG C. BARTO November 4, 1999
- -------------------------------------- --------------------------------
Craig C. Barto, Director Date

/s/ DALE W. BLECK November 4, 1999
- -------------------------------------- --------------------------------
Dale W. Bleck, Interim Chief Financial Date
Officer, Assistant Secretary

/s/ DOUGLAS W. COTTON November 4, 1999
- -------------------------------------- --------------------------------
Douglas W. Cotton, Executive Vice Date
President, Director

/s/ STEVEN H. DAVIS November 4, 1999
- -------------------------------------- --------------------------------
Steven H. Davis, President, Chief Date
Executive Officer, Secretary,
Director

<PAGE> 8
8

/s/ GEORGE PRATT November 4, 1999
- -------------------------------------- --------------------------------
George Pratt, Director Date

/s/ ROBERT A. TAYLOR November 4, 1999
- -------------------------------------- --------------------------------
Robert A. Taylor, Director Date

<PAGE> 1
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LOAN DOCUMENTS

THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS (this
"Amendment"), dated as of August 13, 1999, is between NATIONAL BANK OF CANADA, a
Canadian chartered bank ("Lender"), and CET ENVIRONMENTAL SERVICES, INC., a
California corporation ("Borrower").

Recitals

A. Lender and Borrower entered into a Loan and Security Agreement dated May
29, 1997, as amended by an Amendment to Loan and Security Agreement and
Loan Documents dated as of August 29, 1997 and as further amended by a
Second Amendment to Loan and Security Agreement and Loan Documents dated
as of April 10, 1998 and as further amended by a Third Amendment to Loan
and Security Agreement and Loan Documents dated as of January 8, 1999,
and as further amended by a Fourth Amendment to Loan and Security
Agreement and Loan Documents dated as of May 21, 1999, and as further
amended by a Fifth Amendment to Loan and Security Agreement and Loan
Documents dated as of June 18, 1999 and as further amended by a Sixth
Amendment to Loan and Security Agreement and Loan Documents dated as of
July 30, 1999 (as amended, the "Loan Agreement"), providing for the
Revolving Loans, Equipment Loans, a Term Loan and Letters of Credit in
the aggregate amended maximum available amount not to exceed $7,500,000.
Defined terms used herein and not defined herein shall have the meaning
set forth in the Loan Agreement.

B. The Loans are secured by the Collateral.

C. Pursuant to a Notice of Suspension (the "Notice of Suspension") dated
August 10, 1999 from the United States Environmental Protection Agency
(the "EPA"), the EPA suspended Borrower under 40 C.F.R. Part 32.

D. The Borrower and Lender desire to enter into this Amendment in order to,
among other things, (i) reduce the Maximum Loan Availability from
$7,500,000 to $6,000,000, and (ii) extend the Maturity Date from August
13, 1999 to August 20, 1999.

Agreement

IN CONSIDERATION of the foregoing and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

1. Extension of Maturity Date. In order to extend the Maturity Date of the
Loans, Section 1(t) of the Loan Agreement is hereby revised by
substituting the date "August 20, 1999" for the date "August 13, 1999"
in Subsection (i) in the second line of the Section.

- 1 -

<PAGE> 2

2. Maximum Loan Availability. In order to decrease the Maximum Loan
Availability, Section 1(u) of the Loan Agreement is revised by
replacing the phrase "Seven Million Five Hundred Thousand Dollars
($7,500,000) with the phrase "Six Million Dollars ($6,000,000)".

3. Advances. Without limiting in any way Lender's discretion or other
rights under the Loan Agreement, Borrower acknowledges and agrees that
advances to Borrower under the Loan Agreement are discretionary, and
Borrower understands and agrees that Lender may, in Lender's sole and
absolute discretion, discontinue the advancing of funds under Section 4
of the Loan Agreement at any time. Lender's advancing funds on the
Loans from or after the date hereof shall not act as a waiver of
Lender's right to discontinue making advances at any time.

4. Loan Documents.

a. Lender and Borrower agree that any and all notes or other
documents executed in connection with the Loans (collectively,
the "Loan Documents") are hereby amended to reflect the
amendments set forth herein and that no further amendments to
any Loan Documents are required to reflect the foregoing.

b. All references in any document to the Loan Agreement or any
other Loan Document shall refer to the Loan Agreement or such
Loan Document as amended pursuant to this Amendment.

5. Representations and Warranties. Borrower hereby certifies to the Lender
that as of the date of this Amendment (taking into consideration the
transactions contemplated by this Amendment), all of Borrower's
representations and warranties contained in the Loan Agreement and all
Loan Documents are true, accurate and complete in all material
respects, and no Event of Default (other than an Event of Default which
may arise out of the Notice of Suspension) or event that with notice or
the passage of time or both would constitute an Event of Default has
occurred under the Loan Agreement or any Loan Document. Without
limiting the generality of the foregoing, Borrower represents and
warrants that the execution and delivery of this Amendment has been
authorized by all necessary action on the part of Borrower, that the
person executing this Amendment on behalf of Borrower is duly
authorized to do so and that this Amendment constitutes the legal,
valid, binding and enforceable obligation of Borrower.

6. Additional Documents. Borrower shall execute and deliver to Lender at
any time and from time to time such additional amendments to the Loan
Agreement and the Loan Documents as the Lender may request to confirm
and carry out the transactions contemplated hereby or to confirm,
correct and clarify the security for the Loan.

- 2 -

<PAGE> 3

7. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents
shall remain in full force and effect, and if there is a conflict
between the terms of this Amendment and those of the Loan Agreement or
the Loan Documents, the terms of this Amendment shall control.

8. Miscellaneous.

a. This Amendment shall be governed by and construed under the
laws of the State of Colorado and shall be binding upon and
inure to the benefit of the parties hereto and their
successors and permissible assigns.

b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which
together shall constitute one instrument.

c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.

d. This Amendment constitutes the entire agreement between
Borrower and the Lender concerning the subject matter of this
Amendment. This Amendment may not be amended or modified
orally, but only by a written agreement executed by Borrower
and the Lender and designated as an amendment or modification
of the Loan Agreement as amended by this Amendment.

e. Execution of this Amendment is not intended to and shall not
constitute a waiver by the Lender of any Event of Default or
event that with notice or the passage of time, or both, would
constitute an Event of Default, including, without limitation,
any Event of Default which may arise as a result of the Notice
of Suspension.

- 3 -

<PAGE> 4

EXECUTED as of the date first set forth above.

BORROWER:

CET ENVIRONMENTAL SERVICES,
INC., a California corporation

By:
-----------------------------
Name:
---------------------------
Title:
--------------------------

LENDER:

NATIONAL BANK OF CANADA, a
Canadian chartered bank

By:
-----------------------------
Andrew M. Conneen, Jr.
Vice President

- 4 -

<PAGE> 1
NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LOAN DOCUMENTS

THIS NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS (this
"Amendment"), dated as of August 27, 1999, is between NATIONAL BANK OF CANADA, a
Canadian chartered bank ("Lender"), and CET ENVIRONMENTAL SERVICES, INC., a
California corporation ("Borrower").

Recitals

A. Lender and Borrower entered into a Loan and Security Agreement dated
May 29, 1997, as amended by an Amendment to Loan and Security Agreement
and Loan Documents dated as of August 29, 1997 and as further amended
by a Second Amendment to Loan and Security Agreement and Loan Documents
dated as of April 10, 1998 and as further amended by a Third Amendment
to Loan and Security Agreement and Loan Documents dated as of January
8, 1999, and as further amended by a Fourth Amendment to Loan and
Security Agreement and Loan Documents dated as of May 21, 1999, and as
further amended by a Fifth Amendment to Loan and Security Agreement and
Loan Documents dated as of June 18, 1999 and as further amended by a
Sixth Amendment to Loan and Security Agreement and Loan Documents dated
as of July 30, 1999 and as further amended by a Seventh Amendment to
Loan and Security Agreement and Loan Documents dated as of August 13,
1999, and as further amended by an Eighth Amendment to Loan and
Security Agreement and Loan Documents dated as of August 20, 1999 (as
amended, the "Loan Agreement"), providing for the Revolving Loans,
Equipment Loans, a Term Loan and Letters of Credit in the aggregate
amended maximum available amount not to exceed $6,000,000. Defined
terms used herein and not defined herein shall have the meaning set
forth in the Loan Agreement.

B. The Loans are secured by the Collateral.

D. The Borrower and Lender desire to enter into this Amendment in order to
(i) extend the Maturity Date from August 27, 1999 to September 3, 1999,
and (ii) amend the interest rate on all Loans.

Agreement

IN CONSIDERATION of the foregoing and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

- 1 -

<PAGE> 2

1. Extension of Maturity Date. In order to extend the Maturity Date of the
Loans, Section 1(t) of the Loan Agreement is hereby revised by
substituting the date "September 3, 1999" for the date "August 27,
1999" in Subsection (i) in the second line of the Section.

2. Interest Rate. From and after September 1, 1999, all Loans shall bear
interest at a rate equal to the Reference Rate plus 2.00%.

4. Loan Documents.

b. All references in any document to the Loan Agreement or any
other Loan Document shall refer to the Loan Agreement or such
Loan Document as amended pursuant to this Amendment.

6. Additional Documents. Borrower shall execute and deliver to Lender at
any time and from time to time such additional amendments to the Loan
Agreement and the Loan

- 2 -

<PAGE> 3

Documents as the Lender may request to confirm and carry out the
transactions contemplated hereby or to confirm, correct and clarify the
security for the Loan.

7. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents
(as previously amended) shall remain in full force and effect, and if
there is a conflict between the terms of this Amendment and those of
the Loan Agreement or the Loan Documents (as previously amended), the
terms of this Amendment shall control.

8. Miscellaneous.

b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which
together shall constitute one instrument.

c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.

- 3 -

<PAGE> 4

EXECUTED as of the date first set forth above.

BORROWER:

CET ENVIRONMENTAL SERVICES,
INC., a California corporation

By:
------------------------------
Name:
----------------------------
Title:
---------------------------

LENDER:

NATIONAL BANK OF CANADA, a
Canadian chartered bank

By:
------------------------------
Andrew M. Conneen, Jr.
Vice President

- 4 -

<PAGE> 1
ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LOAN DOCUMENTS

THIS ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS (this
"Amendment"), dated as of September 10, 1999, is between NATIONAL BANK OF
CANADA, a Canadian chartered bank ("Lender"), and CET ENVIRONMENTAL SERVICES,
INC., a California corporation ("Borrower").

Recitals

A. Lender and Borrower entered into a Loan and Security Agreement dated
May 29, 1997, as amended by an Amendment to Loan and Security Agreement
and Loan Documents dated as of August 29, 1997 and as further amended
by a Second Amendment to Loan and Security Agreement and Loan Documents
dated as of April 10, 1998 and as further amended by a Third Amendment
to Loan and Security Agreement and Loan Documents dated as of January
8, 1999, and as further amended by a Fourth Amendment to Loan and
Security Agreement and Loan Documents dated as of May 21, 1999, and as
further amended by a Fifth Amendment to Loan and Security Agreement and
Loan Documents dated as of June 18, 1999 and as further amended by a
Sixth Amendment to Loan and Security Agreement and Loan Documents dated
as of July 30, 1999 and as further amended by a Seventh Amendment to
Loan and Security Agreement and Loan Documents dated as of August 13,
1999, and as further amended by an Eighth Amendment to Loan and
Security Agreement and Loan Documents dated as of August 20, 1999, and
as further amended by a Ninth Amendment to Loan and Security Agreement
and Loan Documents dated as of August 27, 1999, and as further amended
by a Tenth Amendment to Loan and Security Agreement and Loan Documents
dated as of September 3, 1999 (as amended, the "Loan Agreement").
Defined terms used herein and not defined herein shall have the meaning
set forth in the Loan Agreement.

B. The Loans are secured by the Collateral.

D. The Borrower and Lender desire to enter into this Amendment in order
to, among other things, (i) reduce the Maximum Loan Availability from
$6,000,000 to $5,500,000, and (ii) extend the Maturity Date from
September 10, 1999 to September 17, 1999.

Agreement

IN CONSIDERATION of the foregoing and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

- 1 -

<PAGE> 2

1. Extension of Maturity Date. In order to extend the Maturity Date of the
Loans, Section 1(t) of the Loan Agreement is hereby revised by
substituting the date "September 17, 1999" for the date "September 10,
1999" in Subsection (i) in the second line of the Section.

2. Equipment Loans. The parties hereby agree that Borrower shall no longer
have the right to any Equipment Loans pursuant to paragraph 2(b) of the
Loan Agreement.

3. Collateral Reports Section 9(a) of the Loan Agreement is hereby amended
by amending and restating the first sentence of such section to read as
follows:

Borrower shall deliver to Lender, on a weekly basis, on or
before Tuesday of each week for the prior week, a collateral
report (the "Collateral Report") describing the aging of the
Accounts, all Eligible Accounts created or acquired by
Borrower subsequent to the immediately preceding Collateral
Report, information in connection with any Account which has
ceased to be an Eligible Account since the most recent
Collateral Report, and information on all amounts collected by
Borrower on Accounts subsequent to the immediately preceding
Collateral Report; provided that Lender reserves the right to
require such report on a more frequent basis at any time
requested by Lender.

4. Maximum Loan Availability. In order to decrease the Maximum Loan
Availability, Section 1(u) of the Loan Agreement is revised effective
as of September 15, 1999 by replacing the phrase "Six Million Dollars
($6,000,000)" with the phrase "Five Million Five Hundred Thousand
Dollars ($5,500,000)".

5. Letter of Credit Fee. From and after September 15, 1999, the letter of
credit fee set forth in Section 3(b) of the Loan Agreement shall be
equal to three and one-half percent (3.5%) per annum (computed on the
basis of a year of three hundred sixty (360) days for the actual number
of days elapsed) of the average undrawn face amount of the Letters of
Credit, payable monthly in arrears within 10 days after the end of each
month.

6. Advances. Without limiting in any way Lender's discretion or other
rights under the Loan Agreement, Borrower acknowledges and agrees that
advances to Borrower under the Loan Agreement are discretionary, and
Borrower understands and agrees that Lender may, in Lender's sole and
absolute discretion, discontinue the advancing of funds under Section 4
of the Loan Agreement at any time. Lender's advancing funds on the
Loans from or after the date hereof shall not act as a waiver of
Lender's right to discontinue making advances at any time.

7. Additional Reporting Requirements. In addition to all reporting
requirements set forth in the Loan Agreement (as amended by this
Amendment), Borrower covenants and agrees that Borrower shall provide
to Lender no later than September 16, 1999, a projected

- 2 -

<PAGE> 3

income statement and balance sheet of Borrower for each of the months
of September, October, November, and December, 1999.

8. Loan Documents.

b. All references in any document to the Loan Agreement or any
other Loan Document shall refer to the Loan Agreement or such
Loan Document as amended pursuant to this Amendment.

9. Representations and Warranties. Borrower hereby certifies to the Lender
that as of the date of this Amendment (taking into consideration the
transactions contemplated by this Amendment), all of Borrower's
representations and warranties contained in the Loan Agreement and all
Loan Documents are true, accurate and complete in all material
respects, and no Event of Default (other than an Event of Default which
may arise out of the Notice of Suspension) or event that with notice or
the passage of time or both would constitute an Event of Default has
occurred under the Loan Agreement or any Loan Document. Without
limiting the generality of the foregoing, Borrower represents and
warrants that the execution and delivery of this Amendment has been
authorized by all necessary action on the part of Borrower, that the
person executing this Amendment on behalf of Borrower is duly
authorized to do so and that this Amendment constitutes the legal,
valid, binding and enforceable obligation of Borrower.

10. Additional Documents. Borrower shall execute and deliver to Lender at
any time and from time to time such additional amendments to the Loan
Agreement and the Loan Documents as the Lender may request to confirm
and carry out the transactions contemplated hereby or to confirm,
correct and clarify the security for the Loan.

11. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents
(as previously amended) shall remain in full force and effect, and if
there is a conflict between the terms of this Amendment and those of
the Loan Agreement or the Loan Documents (as previously amended), the
terms of this Amendment shall control.

12. Miscellaneous.

- 3 -

<PAGE> 4

b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which
together shall constitute one instrument.

c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.

EXECUTED as of the date first set forth above.

BORROWER:

CET ENVIRONMENTAL SERVICES,
INC., a California corporation

By:
---------------------------
Name:
-------------------------
Title:
------------------------

LENDER:

NATIONAL BANK OF CANADA, a
Canadian chartered bank

By:
---------------------------
Andrew M. Conneen, Jr.
Vice President

- 4 -

<PAGE> 1

THIRTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LOAN DOCUMENTS

THIS THIRTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
(this "Amendment"), dated as of October 4,1999, is between NATIONAL BANK OF
CANADA, a Canadian chartered bank ("Lender"), and CET ENVIRONMENTAL
SERVICES, INC., a California corporation ("Borrower").

Recitals

A. Lender and Borrower entered into a Loan and Security Agreement dated
May 29, 1997, as amended by the first through twelfth amendments (as
amended, the "Loan Agreement"). Defined terms used herein and not
defined herein shall have the meaning set forth in the Loan
Agreement.

B. The Loans are secured by the Collateral.

C. Pursuant to a letter from Lender to Borrower dated September 21, 1999,
Lender notified Borrower of numerous Events of Default under the Loan
Agreement, and in connection therewith, Lender provided to Borrower a
forbearance letter dated September 23, 1999 (the "Forbearance
Letter").

D. The Borrower and Lender desire to enter into this Amendment in order
to make certain other revisions to the Loan Agreement.

Agreement

IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender and Borrower agree as follows:

1. Maximum Loan Availability. Without in any way limiting the rights of
the Lender under this Agreement or the Forbearance Letter, or the sole
discretion of Lender to elect whether or not to make Advances,
Section 1(u) of the Loan Agreement is hereby amended by replacing the
phrase "Five Million Five Hundred Thousand Dollars ($5,500,000)" as
follows:

a. From the date hereof up to and including October 21, 1999, with
the phrase "Four Million Five Hundred Thousand Dollars
(S4,500,000)";

b. From October 22, 1999 through October 31, 1999, with the phrase
"Four Million Dollars ($4,000,000)"; and

<PAGE> 2

c. From November 1, 1999 up to and including the Maturity Date, with
the phrase "Three Million Five Hundred Thousand Dollars
($3,500,000)".

On October 22, 1999, Borrower shall pay to Lender the amount by which
the outstanding amount of the Revolving Loan plus the aggregate
undrawn face-amount of all Letters of Credit exceeds the lesser of
S4,000,000 or the Revolving Loan Availability.

On November 1, 1999, Borrower shall pay to Lender the amount by which
the outstanding amount of the Revolving Loan plus the aggregate
undrawn face amount of all Letters of Credit exceeds the lesser of
$3,500,000 or the Revolving Loan Availability.

2. Eligible Accounts. The definition of "Eligible Accounts" is hereby
amended by amending and restating Section 1(i) in its entirety to
read as follows:

(i) "Eligible Accounts" shall mean those Accounts of Borrower which
are unpaid less than ninety (90) days from invoice date, and
which Lender, in its sole discretion determines to be eligible.
Without limiting Lender's discretion, unless otherwise agreed by
Lender, the following Accounts of Borrower are not Eligible
Accounts: (i) all Accounts owing by a single Account Debtor,
including currently scheduled Accounts, if twenty-five percent
(25%) or more of the balance owing by such Account Debtor to
Borrower is unpaid more than ninety (90) days from the invoice
date or is ineligible under clauses (iv) or (v) below; (ii)
Accounts with respect to which the Account Debtor is an officer,
director, employee, Subsidiary or Affiliate of Borrower; (iii)
Accounts with respect to which the Account Debtor is not a
resident of the United States unless the Account Debtor has
supplied Borrower with an irrevocable letter of credit, in form
and substance satisfactory to Lender, issued by a U.S. financial
institution satisfactory to Lender, to cover the full amount of
such Account, and such letter of credit is assigned and delivered
to Lender; (iv) Accounts in dispute or with respect to which the
Account Debtor asserted a counterclaim or has asserted a right of
setoff; (v) Accounts with respect to which the prospect of
payment or performance by the Account Debtor is or will be
impaired, as determined by Lender in the exercise of its sole
discretion; (vi) Accounts with respect to which Lender does not
have a first and valid fully perfected security interest; (vii)
Accounts with respect to which the Account Debtor is the subject
of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been
conveyed to a receiver or trustee; (viii) Accounts with respect
to which the Account Debtor's obligation to pay the Account is
conditional upon the Account Debtor's approval or is otherwise
subject to any prepurchase obligation or return right, as with
sales made on a bill-and-hold, guaranteed sale, sale-or-return,
sale on approval or consignment basis; (ix) Accounts to the
extent that the Account Debtor's indebtedness to Borrower exceeds
a credit limit determined by Lender in Lender's discretion; (x)
Accounts with respect to which the Account Debtor is

-2-
<PAGE> 3

located in New Jersey or Minnesota unless Borrower (a) with
respect to each such state, has received a certificate of
authority to do business and is in good standing in such state,
or (b) has filed a Notice of Business Activities Report with the
New Jersey Division of Taxation or the Minnesota Department of
Revenue, as applicable, for the then current year; (xi) Accounts
which arise out of sales not made in the ordinary course of
Borrower's business, including, without limitation, any Accounts
arising out of the sale of any assets of Borrower other than
Inventory; (xii) Accounts with respect to which the Account
Debtor has returned to Borrower any portion of the Inventory the
sale of which gave rise to such Accounts; (xiii) Accounts with
respect to which any document or agreement executed or delivered
in connection therewith, or any procedure used in connection with
any such document or agreement, fails in any material respect to
comply with the requirements of applicable law; (xiv) Accounts
which arise out of sales generated by or under the control or
supervision of, or services performed by or under the control or
supervision of offices of Borrower which have been sold or
closed, if such Accounts remain outstanding 45 days after such
office's closing date, even if such Accounts would otherwise be
deemed eligible; and (xv) bonded accounts.

3. Eligible Unbilled Accounts. The definition of "Eligible Unbilled Accounts"
in Section 1(j) is hereby deleted in its entirety. In addition, any
reference to Eligible Unbilled Accounts in the Loan Agreement is hereby
deleted in its entirety.

4. Revolving Loan Availability. The definition of "Revolving Loan
Availability" is hereby amended by amending and restating Section 1(cc) in
its entirety to read as follows:

(cc) Revolving Loan Availability" shall mean at any time, up to eighty
percent (80%) of the face amount (less maximum discounts, credits and
allowances which may be taken by or granted to Account Debtors in
connection therewith) then outstanding under existing Eligible
Accounts at such time, less such reserves as Lender in its sole
discretion elects to establish.

Lender may at any time and from time to time in its sole discretion
change the advance percentage as set forth above.

5. Fees and Charges. Section 3(d) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

(d)

Borrower shall pay to Lender all audit fees, travel and other
out-of-pocket expenses, in connection with any audit of Borrower
conducted by Lender or any agent of Lender, including, without
limitation, those fees required to continually test Accounts for
eligibility and prepare the cash flow schedules and any other reports
required by the Lender.

-3-
<PAGE> 4

6. Additional Covenants of Borrower. Section 12 of the Loan Agreement is
hereby amended by amending and restating Section 12(q) in its entirety and
by adding a new Section 12(v) and 12(w) to read as follows:

(q) Borrower shall reimburse Lender for all costs and expenses, including,
without limitation, (1) legal expenses and attorney's fees, incurred
by Lender in connection with documentation and consummation of this
transaction and any other transactions between Borrower and Lender,
including, without limitation, Uniform Commercial Code and other
public record searches, lien filings, Federal Express or other similar
express or messenger delivery, (2) appraisal costs, surveys, title
insurance and environmental audit or review costs, (3) all costs
incurred by Lender from accountants, auditors, consultants, or other
financial advisors of Lender in connection with the Loans, Lender's
administration of the Loans or the Collateral (whether before, during
or after an Event of Default), any default or any workout of the
Loans, and (4) in seeking to administer, collect, protect or enforce
any rights in or to the Collateral or incurred by Lender in seeking to
collect any Liabilities and to administer, participate, assign and/or
enforce any of Lender's rights under this Agreement and the Other
Agreements. All such costs, expenses and charges shall constitute
Revolving Loans hereunder, shall be payable by Borrower to Lender on
demand, and, until paid, shall bear interest at the rate then
applicable to Loans hereunder.

(v) Immediately upon the receipt of any proceeds derived from the sale of
any assets of Borrower other than Inventory, Borrower shall pay such
proceeds to Lender to be applied first to any unpaid principal or
interest (in such order as Lender shall determine) on the Tern Loan,
and, upon full satisfaction of the Tern Loan, to be applied to the
Revolving Loan as permanent reductions to the Maximum Loan
Availability. Such reductions to the Maximum Loan Availability shall
be in addition to the scheduled reductions described in Section 1(u)
above.

(w) The reporting requirements set forth in Sections 4(a), 4(b) and 4(e)
of the Forbearance Letter are hereinafter incorporated by reference
into the Loan Agreement.

7. Loan Documents.

a. Lender and Borrower agree that any and all notes or other documents
executed in connection with the Loans (collectively, the "Loan
Documents") are hereby amended to reflect the amendments set forth
herein and that no further amendments to any Loan Documents are
required to reflect the foregoing.

-4-
<PAGE> 5

b. All references in any document to the Loan Agreement or any other Loan
Document shall refer to the Loan Agreement or such Loan Document as
amended pursuant to this Amendment.

8. Representations and Warranties. Borrower hereby certifies to the Lender
that as of the date of this Amendment (taking into consideration the
transactions contemplated by this Amendment), all of Borrower's
representations and warranties contained in the Loan Agreement and all Loan
Documents are true, accurate and complete in all material respects, and no
Event of Default (other than as set forth in the Forbearance Letter) or
event that with notice or the passage of time or both would constitute an
Event of Default has occurred under the Loan Agreement or any Loan
Document. Without limiting the generality of the foregoing, Borrower
represents and warrants that the execution and delivery of this Amendment
has been authorized by all necessary action on the part of Borrower, that
the person executing this Amendment on behalf of Borrower is duly
authorized to do so and that this Amendment constitutes the legal, valid,
binding and enforceable obligation of Borrower.

9. Additional Documents. Borrower shall execute and deliver to Lender at any
time and from time to time such additional amendments to the Loan Agreement
and the Loan Documents as the Lender may request to confirm and carry out
the transactions contemplated hereby or to confirm, correct and clarify the
security for the Loan.

10. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents (as
previously amended) shall remain in full force and effect, and if there is
a conflict between the terms of this Amendment and those of the Loan
Agreement or the Loan Documents (as previously amended), the terms of this
Amendment shall control.

11. Miscellaneous.

a. This Amendment shall be governed by and construed under the laws of
the State of Colorado and shall be binding upon and inure to the
benefit of the parties hereto and their successors and permissible
assigns.

b. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall
constitute one instrument.

c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.

-5-
<PAGE> 6

d. This Amendment constitutes the entire agreement between Borrower and
the Lender concerning the subject matter of this Amendment. This
Amendment may not be amended or modified orally, but only by a written
agreement executed by Borrower and the Lender and designated as an
amendment or modification of the Loan Agreement as amended by this
Amendment.

e. Execution of this Amendment is not intended to and shall not
constitute a waiver by the Lender of any Event of Default or event
that with notice or the passage of time, or both, would constitute an
Event of Default, including, without limitation, any Events of Default
set forth in the Forbearance Letter.

EXECUTED as of the date first set forth above.

BORROWER:

CET ENVIRONMENTAL SERVICES,
INC., a California corporation

By: /s/ DALE W. BLECK
-------------------------------
Name: Dale W. Bleck
------------------------------
Title: CFO
-----------------------------

LENDER:

NATIONAL BANK OF CANADA, a
Canadian chartered bank

By:
-------------------------------
Alan C. Balk
Vice President

-6-

<PAGE> 1
FOURTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LOAN DOCUMENTS

THIS FOURTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
(this "Amendment"), dated as of November 5, 1999, is between NATIONAL BANK OF
CANADA, a Canadian chartered bank ("Lender"), and CET ENVIRONMENTAL SERVICES,
INC., a California corporation ("Borrower").

Recitals

A. Lender and Borrower entered into a Loan and Security Agreement dated
May 29, 1997, as amended by the first through thirteenth amendments (as
amended, the "Loan Agreement"). Defined terms used herein and not
defined herein shall have the meaning set forth in the Loan Agreement.

B. The Loans are secured by the Collateral.

D. The Borrower and Lender desire to enter into this Amendment in order to
make certain other revisions to the Loan Agreement.

Agreement

IN CONSIDERATION of the foregoing and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

1. Maximum Loan Availability. Without in any way limiting the rights of
the Lender under this Agreement or the Forbearance Letter, or the sole
discretion of Lender to elect whether or not to make Advances, Section
1(u) of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:

"Maximum Loan Availability" shall mean (1) the lesser of (a)
$3,500,000 minus the Required Reductions or (b) the Revolving
Loan Availability minus (2) the sum of (a) the outstanding
principal amount of all Equipment Loans, (b) the aggregate
undrawn face amount of all Letters of Credit and (c) the
aggregate amount of all Revolver Reductions.

- 1 -

<PAGE> 2

On each date that the Maximum Loan Availability is determined,
Borrower shall pay to Lender the amount by which the
outstanding amount of the Revolving Loan plus the aggregate
undrawn face amount of all Letters of Credits exceeds the
revised Maximum Loan Availability.

2. Additional Definitions. Section 1 of the Loan Agreement is hereby
further amended by adding a new section 1(hh), 1(ii), and 1(jj) to read
as follows:

1(hh) "Required Reductions" shall mean the greater of (a)
the Set Reduction Amount, or (b) the Collection
Reduction Amount.

1(ii) "Set Reduction Amount" shall mean the following
amounts for the periods opposite such figures:

<TABLE>
<S> <C>
- ---------------------------------------------------------------
November 5, 1999 through $0
November 14, 1999
- ---------------------------------------------------------------
November 15, 1999 through $500,000
November 28, 1999
- ---------------------------------------------------------------
November 29, 1999 through $1,250,000
December 11, 1999
- ---------------------------------------------------------------
December 12, 1999 through $2,000,000
December 25, 1999
- ---------------------------------------------------------------
December 26, 1999 through $2,750,000
January 5, 2000
- ---------------------------------------------------------------
</TABLE>

1(jj) "Collection Reduction Amount" shall mean an amount
equal to 15% of the amount of Accounts collected or
payments received on Accounts from November 5, 1999
up to and including the business day prior to the
date such amount is determined.

3. Collateral Reports Section 9(a) of the Loan Agreement is hereby amended
by amending and restating the first sentence of such section to read as
follows:

Borrower shall deliver to Lender, (a) from November 5, 1999
through November 30, 1999, on a bi-weekly basis, on Tuesday
and Friday of each week, for the period from the prior
reporting date to the day prior to the current reporting date,
and (b) from December 1, 1999 and thereafter, on a daily
basis, for the prior day, a collateral report (the "Collateral
Report") describing the aging of the Accounts, all Eligible
Accounts created or acquired by Borrower subsequent to

- 2 -

<PAGE> 3

the immediately preceding Collateral Report, information in
connection with any Account which has ceased to be an Eligible
Account since the most recent Collateral Report, and
information on all amounts collected by Borrower on Accounts
subsequent to the immediately preceding Collateral Report;
provided that Lender reserves the right to require such report
on a more frequent basis at any time requested by Lender.

4. Additional Covenants of Borrower. Section 12 of the Loan Agreement is
hereby amended by amending and restating Section 12(v) in its entirety
to read as follows:

(v) Immediately upon the receipt of any proceeds derived from the
sale of any assets of Borrower other than Inventory, Borrower
shall pay such proceeds to Lender to be applied first to any
unpaid principal or interest (in such order as Lender shall
determine) on the Term Loan, and, upon full satisfaction of
the Term Loan, to be applied to the Revolving Loan as
permanent reductions ("Revolver Reductions") to the Maximum
Loan Availability. Such Revolver Reductions shall be in
addition to the other scheduled reductions described in
Section 1(u) above. Notwithstanding the foregoing, Borrower
shall pay all outstanding amounts due under the Term Loan on
or before November 22, 1999, regardless of whether Borrower
receives adequate proceeds from the sale of assets to do so.

5. Loan Documents.

b. All references in any document to the Loan Agreement or any
other Loan Document shall refer to the Loan Agreement or such
Loan Document as amended pursuant to this Amendment.

6. Representations and Warranties. Borrower hereby certifies to the Lender
that as of the date of this Amendment (taking into consideration the
transactions contemplated by this Amendment), all of Borrower's
representations and warranties contained in the Loan Agreement and all
Loan Documents are true, accurate and complete in all material
respects, and no Event of Default (other than as set forth in the
Forbearance Letter) or event that with notice or the passage of time or
both would constitute an Event of Default has occurred under the Loan
Agreement or any Loan Document. Without limiting the generality of the
foregoing, Borrower represents and warrants that the execution and
delivery of this Amendment has been authorized by all necessary action
on the part of Borrower, that the person executing this Amendment on
behalf of Borrower is duly

- 3 -

<PAGE> 4

authorized to do so and that this Amendment constitutes the legal,
valid, binding and enforceable obligation of Borrower.

7. Additional Documents. Borrower shall execute and deliver to Lender at
any time and from time to time such additional amendments to the Loan
Agreement and the Loan Documents as the Lender may request to confirm
and carry out the transactions contemplated hereby or to confirm,
correct and clarify the security for the Loan.

8. Continuation of the Loan Agreement, Etc. Except as specified in this
Amendment, the provisions of the Loan Agreement and the Loan Documents
(as previously amended) shall remain in full force and effect, and if
there is a conflict between the terms of this Amendment and those of
the Loan Agreement or the Loan Documents (as previously amended), the
terms of this Amendment shall control.

9. Miscellaneous.

b. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original and all of which
together shall constitute one instrument.

c. This Amendment and all documents to be executed and delivered
hereunder may be delivered in the form of a facsimile copy,
subsequently confirmed by delivery of the originally executed
document.

- 4 -

<PAGE> 5

EXECUTED as of the date first set forth above.

BORROWER:

CET ENVIRONMENTAL SERVICES,
INC., a California corporation

By:
-----------------------------
Name:
---------------------------
Title:
--------------------------

LENDER:

NATIONAL BANK OF CANADA, a
Canadian chartered bank

By:
-----------------------------
Allen C. Balk
Vice President

By:
-----------------------------
Name:
----------------------
Title:
---------------------

- 5 -

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF THE COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 714
<SECURITIES> 0
<RECEIVABLES> 12,815
<ALLOWANCES> 566
<INVENTORY> 182
<CURRENT-ASSETS> 16,394
<PP&E> 6,147
<DEPRECIATION> 2,802
<TOTAL-ASSETS> 19,782
<CURRENT-LIABILITIES> 13,616
<BONDS> 283
0
0
<COMMON> 8,671
<OTHER-SE> 105
<TOTAL-LIABILITY-AND-EQUITY> 19,782
<SALES> 0
<TOTAL-REVENUES> 35,387
<CGS> 33,385
<TOTAL-COSTS> 33,385
<OTHER-EXPENSES> 4,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 387
<INCOME-PRETAX> (3,301)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,301)
<EPS-BASIC> $ (0.53)
<EPS-DILUTED> $ (0.53)

</TABLE>