<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

               For the quarterly period ended September 30, 1996.

                                       OR

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

         For the transition period from            to
                                        ----------    -----------

                         Commission file number 0-21042
                                                -------

                          Molten Metal Technology, Inc.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                   52-1659959
            --------                                   ----------
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization)

        400-2 Totten Pond Road
              Waltham, MA                                     02154
              -----------                                     -----
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:       (617) 487-9700

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

                                    YES X  NO
                                       ---   ---
 
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

     Common Stock, $.01 par value                     23,533,040
     ----------------------------           --------------------------------
                 Class                      Outstanding at November 12, 1996


<PAGE>   2


<TABLE>

                          MOLTEN METAL TECHNOLOGY, INC.
                                      INDEX
<CAPTION>

                                                                                  PAGE NO.
                                                                                 --------
<S>                                                                               <C>  
PART I - FINANCIAL INFORMATION
------------------------------

Item 1. Financial Statements

        Consolidated Balance Sheet - September 30, 1996 and December 31, 1995         3

        Consolidated Statement of Operations for the quarters ended 
        September 30, 1996 and 1995 and for the nine months ended
        September 30, 1996 and 1995                                                   4

        Consolidated Statement of Cash Flows for the nine months ended
        September 30, 1996 and 1995                                                   5

        Notes to Consolidated Financial Statements                                  6-8

Item 2. Management's Discussion and Analysis of Results of Operations and
        Financial Condition                                                        9-13

PART II - OTHER INFORMATION
---------------------------

        Item 1. Legal Proceedings                                                     *
        Item 2. Changes in Securities                                                 *
        Item 3. Defaults Upon Senior Securities                                       *
        Item 4. Submission of Matters to a Vote of Security Holders                   *
        Item 5. Other Information                                                 14-15
        Item 6. Exhibits and Reports on Form 8-K                                     15

SIGNATURES                                                                           16
----------                                                                           
</TABLE>


* No information provided due to the inapplicability of item.


                                       2
<PAGE>   3

                 MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
                          CONSOLIDATED BALANCE SHEET

<CAPTION>
                                                         SEPTEMBER 30,       DECEMBER 31,
                                                             1996               1995
                                                         ------------        ------------
ASSETS
<S>                                                      <C>                 <C>         
Current assets:
  Cash and cash equivalents                              $ 39,841,221        $  6,644,856
  Short-term investments                                  147,362,020          79,631,394
  Accounts receivable                                       6,119,569           1,917,858
  Accounts receivable from affiliate                       27,244,118          15,412,196
  Prepaid expenses and other current assets                 6,217,995           2,309,398
                                                         ------------        ------------
          Total current assets                            226,784,923         105,915,702

Restricted cash and investments                             2,336,695           7,432,817
Fixed assets, net                                          57,491,094          34,679,390
Intangible assets, net                                      4,846,146           3,501,680
Investment in affiliate                                    16,099,594             834,794
Other assets                                                6,033,775             971,618
                                                         ------------        ------------
                                                         $313,592,227        $153,336,001
                                                         ============        ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt                      $    176,158        $    195,043
  Accounts payable                                          8,770,158           9,827,490
  Accrued expenses                                          4,512,870           1,713,557
  Accrued interest                                          3,610,034             789,455
  Deferred revenue from affiliate                                  --           4,083,334
                                                         ------------        ------------
          Total current liabilities                        17,069,220          16,608,879
                                                         ------------        ------------

Long-term debt                                            166,509,459          22,883,962
                                                         ------------        ------------
Due to related parties                                      1,385,889           1,474,586
                                                         ------------        ------------
Deferred income from affiliate                              6,894,870           2,459,918
                                                         ------------        ------------
Stockholders' equity:
  Preferred stock, $.01 par value, 3,000 shares
     authorized, no shares issued or outstanding                   --                  --
  Common stock, $.01 par value, 100,000,000 shares
     authorized; shares issued and outstanding:
     23,528,050 at September 30, 1996 and
     22,746,854 at December 31, 1995                          235,280             227,469
  Additional paid-in capital                              159,922,399         146,631,297
  Valuation allowance for short-term investments             (777,564)           (311,163)
  Accumulated deficit                                     (37,647,326)        (36,638,947)
                                                         ------------        ------------
          Total stockholders' equity                      121,732,789         109,908,656
                                                         ------------        ------------
                                                         $313,592,227        $153,336,001
                                                         ============        ============

</TABLE>


                       See notes to financial statements.

                                       3
<PAGE>   4

                 MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES

<TABLE>
                                       CONSOLIDATED STATEMENT OF OPERATIONS

<CAPTION>
                                                              QUARTER ENDED SEPTEMBER 30,       NINE MONTHS ENDED SEPTEMBER 30,
                                                             -----------------------------      -------------------------------
                                                                1996              1995              1996              1995
                                                             -----------       -----------      ------------       ------------ 
<S>                                                          <C>               <C>               <C>               <C>        
Revenue:
    Research and development ("R&D")                         $ 3,187,477       $ 3,310,951       $ 8,230,774       $ 9,987,616
    Construction, R&D and consulting from affiliate            6,785,972         7,164,173        37,062,935         9,084,747
    Technology transfer and success fees from affiliate        5,583,333         1,750,000        13,083,333         5,250,000
                                                             -----------       -----------       -----------       ----------- 
                                                              15,556,782        12,225,124        58,377,042        24,322,363
Operating expenses:
    Cost of revenue - R&D                                      3,187,646         3,286,477         8,090,929         9,963,142
    Cost of revenue - construction, R&D, consulting,
    technology transfer and success fees from affiliate        8,636,726         6,427,468        34,451,636         8,267,965
    R&D                                                        4,864,205         2,551,029        14,191,206         8,444,883
    Selling, general and administrative ("SG&A")               5,572,523           422,123        10,201,741         3,500,225
                                                             -----------       -----------       -----------       ----------- 
                                                              22,261,100        12,687,097        66,935,512        30,176,215
Equity income from affiliate                                   2,818,178           482,512         5,494,214           665,890
                                                             -----------       -----------       -----------       ----------- 
Income (loss) from operations                                 (3,886,140)           20,539        (3,064,256)       (5,187,962)

Other income (expense):
    Interest income                                            2,846,313         1,460,449         6,431,691         4,212,736
    Interest expense                                          (2,268,115)         (333,646)       (4,375,814)       (1,248,935)
                                                             -----------       -----------       -----------       ----------- 
Net income (loss)                                            $(3,307,942)      $ 1,147,342       $(1,008,379)      $(2,224,161)
                                                             ===========       ===========       ===========       =========== 

Net income (loss) per share                                  $     (0.14)      $      0.04       $     (0.04)      $     (0.10)
                                                             ===========       ===========       ===========       =========== 
Weighted average common and common equivalent
 shares outstanding                                           23,490,753        26,889,434        23,230,088        22,282,540
                                                             ===========       ===========       ===========       =========== 

</TABLE>




                       See notes to financial statements.

                                       4

<PAGE>   5

                 MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
                                 CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>

                                                               NINE MONTHS ENDED SEPTEMBER 30,
                                                               -------------------------------
                                                                   1996              1995
                                                               ------------       -----------
<S>                                                            <C>                <C>         
Cash flows from operating activities:
Net loss                                                       $ (1,008,379)      $(2,224,161)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
   Depreciation and amortization                                  4,301,200         3,494,646
   Equity income from affiliate                                  (5,494,214)         (665,890)
   Compensation expense related to common stock options             305,529            46,872
   Increase in accounts receivable                               (4,201,711)         (555,125)
   Increase in accounts receivable from affiliate               (11,831,922)       (7,314,209)
   Increase in prepaid expenses and other current assets         (3,908,597)       (1,113,886)
   Decrease (increase) in other assets                             (874,356)           67,543
   Increase (decrease) in accounts payable                       (1,057,332)        1,401,719
   Increase in accrued expenses                                   2,799,313         4,336,379
   Increase (decrease) in accrued interest                        2,820,579          (487,214)
   Increase (decrease) in deferred revenue                       (4,083,334)        1,300,001
   Increase in deferred income from affiliate                     4,434,952           718,839
                                                               ------------       -----------
       Net cash used in operating activities                    (17,798,272)         (994,486)
                                                               ------------       -----------
Cash flows from investing activities:
  Purchase of fixed assets                                      (26,718,793)      (12,455,671)
  Purchase of intangible assets                                  (1,515,203)         (913,632)
  Redemption (purchase) of short-term investments, net          (68,197,027)       24,877,150
  Decrease in restricted cash                                     5,096,122         2,531,913
                                                               ------------       -----------
      Net cash provided by (used in) investing activities       (91,334,901)       14,039,760
                                                               ------------       -----------
Cash flows from financing activities:
  Proceeds from issuances of common stock                         3,222,797         1,280,270
  Net proceeds from issuance of long-term debt                  139,338,826                --
  Payments to related parties                                       (88,697)               --
  Principal repayments of long-term debt                           (143,388)         (320,670)
                                                               ------------       -----------
      Net cash provided by financing activities                 142,329,538           959,600
                                                               ------------       -----------
Increase in cash and cash equivalents                            33,196,365        14,004,874
Cash and cash equivalents at beginning of period                  6,644,856        12,063,883
                                                               ------------       -----------
Cash and cash equivalents at end of period                     $ 39,841,221       $26,068,757
                                                               ============       ===========
Additional disclosure of non-cash investing and
financing activities 
  Issuance of common stock in exchange for investment 
  in affiliate                                                 $  9,770,587       $        --
                                                               ============       ===========
</TABLE>






                       See notes to financial statements.

                                       5
<PAGE>   6
                 MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Molten Metal Technology, Inc. (the "Company") is an environmental technology
company commercializing pollution prevention and waste recycling methods that
are broadly applicable to a wide variety of hazardous, non-hazardous and
radioactive wastes. The Company developed its core technology, Catalytic
Extraction Processing ("CEP"), to dissolve waste compounds to their constituent
elements in a molten metal bath and reconfigure the elements into useful raw
materials.

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Net income (loss) per share is determined by dividing net income (loss) by the
weighted average number of common and common equivalent shares outstanding
during the period. Common share equivalents consist of common stock which may be
issuable upon exercise of outstanding stock options and warrants. Common share
equivalents have been excluded from the weighted average number of common shares
in loss periods since their effect is anti-dilutive.

Certain reclassifications have been made for consistent presentation. The
reclassifications have no effect on the net loss for the periods ended September
30, 1995.

The information furnished is unaudited and reflects all adjustments (consisting
of only normal recurring adjustments) which, in the opinion of management, are
necessary for a fair presentation of the financial position and results of
operations for the interim periods. The accompanying financial statements should
be read in conjunction with the Company's audited financial statements and
related footnotes for the year ended December 31, 1995 which are included in the
Company's annual report on Form 10-K for the year ended December 31, 1995. The
results of operations for the periods ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.

NOTE 2. EQUITY TRANSACTIONS

During the quarter ended September 30, 1996, 60,574 shares of common stock were
issued upon the exercise of options.

In April 1996, the Company and Lockheed Martin Corporation ("LMC") closed an
agreement to expand their partnership (M4 Environmental L.P. or "M4") through
the acquisition by M4 of the Retech division of Lockheed Environmental Systems &
Technologies Co., an indirect wholly-owned subsidiary of LMC. The Retech
division 

                                       6
<PAGE>   7

designs and manufactures metallurgical equipment and waste processing systems
that utilize a plasma technology. Under this agreement, LMC contributed
approximately half of the assets of the Retech division to M4, and the Company
purchased substantially all of the remaining assets of the Retech division for
307,735 shares of its common stock, and then immediately contributed these
assets to M4. Pursuant to the agreement, the number of shares issued to LMC will
be adjusted when the value of net contributions from LMC to Retech is
determined.

NOTE 3. LICENSE AGREEMENT

In September 1996, the Company, LMC and M4 entered into an agreement which
expanded M4's CEP license to include the demilitarization of Japanese chemical
weapons. In return for the expansion of the license, the Company will receive a
$5 million initial payment. The Company also will receive an additional $3.5
million upon completion of a technical demonstration by the Company of the
processing of one or more munitions shells containing surrogates of Japanese
chemical weapons. In addition, the Company will receive an ongoing eight percent
royalty on gross revenues of M4 or any sublicensees from any activities related
to the demilitarization of Japanese chemical weapons, and will be paid other
fees for construction of CEP systems, spare parts, and training.

NOTE 4. INVESTMENT IN M4

The Company accounts for its investment in M4 using the equity method. The
Company recognized equity income from M4 of $2,818,000 and $5,494,000 for the
three months and nine months ended September 30, 1996, respectively, reflecting
the Company's share of revenue and other income earned by M4. Under the M4
limited partnership agreement, the Company and LMC share equally in M4's
revenues and other income and all expenses are allocated to LMC until the
capital accounts of the Company and LMC are equal. Thereafter, as long as the
capital accounts of the Company and LMC are equal, the Company and LMC will
share equally in the profits or losses of M4.

<TABLE>
Summarized income statement information of M4 for the periods ended September
30, 1996 is presented below:

<CAPTION>
                                      Quarter ended     Nine months ended
                                   September 30, 1996   September 30, 1996
                                   ------------------   ------------------

<S>                                    <C>                 <C>         
Revenue                                $  5,578,000        $ 10,388,000
Other income                                115,000             712,000
                                       ------------        ------------
  Total revenue and other income       $  5,693,000        $ 11,100,000
Expenses                               $(15,751,000)       $(36,482,000)
                                       ------------        ------------
Net loss                               $(10,058,000)       $(25,382,000)
                                       ============        ============
                                                      
The Company's share of M4's
  total revenue and other income       $  2,818,000        $  5,494,000
</TABLE>


                                       7
<PAGE>   8

NOTE 5. CONVERTIBLE DEBT

In May 1996, the Company issued $143,750,000 of Convertible Subordinated Notes
Due 2006 (the "Notes"). The Notes have a term of ten years and are payable in
full on May 1, 2006. The Notes bear interest at the rate of 5.50% per year
payable semi-annually. The Notes are convertible into shares of the Company's
common stock at a conversion price of $38.75 per share.

NOTE 6. NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, `Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of' ("FAS 121"). In accordance with this
standard, the Company periodically assesses whether any events or changes in
circumstances have occurred that would indicate that the carrying amount of a
long-lived asset may not be recoverable. If such an event or change in
circumstance occurs, the Company will evaluate whether the carrying amount of
such assets is recoverable by comparing the net book value of the assets to
estimated future undiscounted cash flows, excluding interest charges,
attributable to such assets. If it is determined that the carrying amount is not
recoverable, the Company will recognize an impairment loss equal to the excess
of the carrying amount of the asset over its fair value. Adoption of FAS 121 did
not have an impact on the Company's financial statements.


                                       8
<PAGE>   9


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS
<TABLE>

Revenues for the third quarter of 1996 increased to $15,557,000 from $12,225,000
in the third quarter of 1995 and increased to $58,377,000 for the nine months
ended September 30, 1996 from $24,322,000 for the nine months ended September
30, 1995. The following table compares sources of revenue for the periods ended
September 30, 1996 and 1995:

<CAPTION>
                                              Quarter ended September 30,
                                              ---------------------------
                                               1996                1995
                                               ----                ----
<S>                                         <C>                <C>        
Engineering and construction                $ 6,148,000        $ 6,755,000
R&D and consulting                            3,826,000          3,720,000
Technology transfer and success fees          5,583,000          1,750,000
                                            -----------        -----------
                                            $15,557,000        $12,225,000
                                            ===========        ===========

<CAPTION>
                                            Nine Months ended September 30,
                                            -------------------------------
                                               1996                1995
                                               ----                ----
Engineering and construction                $31,873,000        $ 8,376,000
R&D and consulting                           13,421,000         10,696,000
Technology transfer and success fees         13,083,000          5,250,000
                                            -----------        -----------
                                            $58,377,000        $24,322,000
                                            ===========        ===========
</TABLE>

Engineering and construction revenue is from services provided to M4 for the
engineering, design and construction of M4's Technology Center. The decrease for
the quarter ended September 30, 1996 over 1995 reflects a reduction of
construction activities as the Technology Center nears completion. The increase
for the nine months ended September 30, 1996 over 1995 is a result of billings
to M4 during the peak period of construction for the Technology Center. Overall,
the Company expects engineering and construction revenue to decline until it
executes definitive contracts to construct commercial CEP systems for customers
who will be financially liable, in whole or in part, for the construction of
such systems.

R&D and consulting revenue increased from 1995 due to billings under various
development contracts with M4. During the nine months ended September 30, 1996,
the Company recorded $8 million in revenue for the reimbursement of R&D costs
incurred under a cost sharing contract with the United States Department of
Energy (the "DOE") compared to approximately $10 million in the nine months
ended September 30, 1995. The decrease is a result of the Company reaching the
funded contract value during the third quarter of 1996 and not entering into any
arrangements providing for additional funding from the DOE. The Company
currently is in discussions with the DOE regarding additional funding which
could be provided directly to the Company, or to the Company as a subcontractor
to M4 or other third 


                                       9
<PAGE>   10

parties. Although the DOE reaffirmed its enthusiasm for the Company's CEP
technology in a statement issued in October 1996, there can be no assurances
that the Company will receive additional funding from the DOE, and the Company
does not anticipate receiving any such additional funding in 1996. The Company
expects to continue with planned research and development projects, some of
which will continue to be funded by M4 and some of which will be funded from the
Company's working capital. The Company will continue to seek alternative sources
of funding for these research and development efforts. The Company anticipates
that the amount of externally funded research and development will remain
constant over the next year, although it is expected to decline as a percentage
of revenue.

Technology transfer and success fees increased in the third quarter of 1996 over
1995 due to $5 million of revenue recognized for the sale of a license to M4 for
the Japanese chemical weapons market. During the third quarter of 1996, the
Company recognized the remaining $583,000 of the original $14 million license
fee from M4. This license fee was being recognized over a two year period that
began in August 1994. Also during 1996, the Company recognized $4 million of
plant start-up fees from M4. Under the terms of the M4 limited partnership
agreement, the Company was entitled to a fee of $2 million upon the start-up of
each of the first three CEP plants developed by M4. As of June 30, 1996, the
Company had earned each of these three success fees.

As commercial operations commence at the Company's facilities in Oak Ridge,
Tennessee and Bay City, Texas, the Company expects to generate revenue from
processing and recycling secondary materials and wastes. The Company expects
that revenue from plant operations will be a significant portion of its total
revenue in future periods. To date, however, the Company has not received any
revenue from plant operations. The existence and timing of the Company's
commercial sales and operations and related revenue will depend on a number of
factors, including the ability of the Company and its affiliates to successfully
market, permit and build CEP systems on a timely basis for their target markets,
customer acceptance of the technology, and competition from other companies in
the Company's target markets, and no assurances can be made in this regard.

Cost of revenues for the third quarter of 1996 increased to $11,824,000 from
$9,714,000 in the third quarter of 1995 and increased to $42,543,000 for the
nine months ended September 30, 1996 from $18,231,000 for the nine months ended
September 30, 1995. The increases are primarily attributable to an increase in
engineering and construction activities in connection with the development of
CEP systems for M4 and the deferral of income related to inter-company profit on
the sale of assets to M4, including the deferral of $2.5 million of the initial
$5 million payment for the Japanese chemical weapons market described above.

R&D expenses for the third quarter of 1996 increased to $4,864,000 from
$2,551,000 in the third quarter of 1995, and increased to $14,191,000 for the
nine months ended September 30, 1996 from $8,445,000 for the nine months ended
September 30, 1995. The 

                                       10
<PAGE>   11

increases reflect an increase in costs associated with the continued development
of CEP and internally funded CEP demonstrations. SG&A expenses for the third
quarter of 1996 increased to $5,573,000 from $422,000 in the third quarter of
1995, and increased to $10,202,000 for the nine months ended September 30, 1996
from $3,500,000 for the nine months ended September 30, 1995. The increase
reflects the hiring of additional personnel, the expansion of corporate
infrastructure and a lower absorption of SG&A expenses into cost of revenue due
to a reduction in cost reimbursement contracts. The Company is making efforts to
decrease SG&A expenses in future periods. See Item 5. Other Information - Recent
Developments - Restructuring. The classification of expenses between cost of
revenue, R&D and SG&A will depend on the number and amount of future cost
reimbursement contracts and the related absorption of R&D and SG&A expenses into
cost of revenue.

The Company accounts for its investment in M4 using the equity method. Equity
income from M4 for the third quarter of 1996 increased to $2,818,000 from
$483,000 in the third quarter of 1995 and increased to $5,494,000 for the nine
months ended September 30, 1996 from $666,000 for the nine months ended
September 30, 1995, reflecting the Company's share of revenue and other income
earned by M4. The increases in 1996 primarily are due to an increase in M4
revenue resulting from the inclusion of the Retech division's operations
subsequent to the acquisition of Retech by M4 in April 1996. Under the M4
limited partnership agreement, the Company and LMC share equally in M4's
revenues and other income and all expenses are allocated to LMC until the
capital accounts of the Company and LMC are equal. Thereafter, as long as the
capital accounts of the Company and LMC are equal, the Company and LMC will
share equally in the profits or losses of M4. The Company anticipates that its
capital account will become equal to LMC's capital account by the end of 1996.
Because M4 is anticipated to have losses for the foreseeable future, the
Company's equity in earnings of M4 could have a material adverse effect on
future results of operations of the Company.

Interest income for the third quarter of 1996 increased to $2,846,000 from
$1,460,000 in the third quarter of 1995 and increased to $6,432,000 for the nine
months ended September 30, 1996 from $4,213,000 for the nine months ended
September 30, 1995. The increases are due to interest earned on the net proceeds
from the issuance of convertible debt in May 1996. Interest expense for the
third quarter of 1996 increased to $2,268,000 from $334,000 in the third quarter
of 1995 and increased to $4,376,000 for the nine months ended September 30, 1996
from $1,249,000 for the nine months ended September 30, 1995. The increases are
due to interest on the convertible debt issued in May 1996.

FINANCIAL CONDITION

As of September 30, 1996, the Company's cash, cash equivalents and short-term
investments increased by approximately $100,927,000 from December 31, 1995. The
increase was primarily a result of the net proceeds from the issuance of the
Company's 5 1/2% Convertible Subordinated Notes Due 2006. The increase was
offset by cash used 


                                       11
<PAGE>   12

in operations and for the acquisition of fixed assets. For the remainder of 1996
and all of 1997, the Company expects to incur significant additional
expenditures related to the engineering, construction and start-up of commercial
CEP systems owned by itself and through joint ventures. The Company expects that
its total capital expenditures for 1996 will be approximately $85 million, and
for 1997 will be approximately $45 million.

During the third quarter, the Company signed a letter of intent to become full
owner of the waste-processing facility it jointly owns with Scientific Ecology
Group, Inc. (SEG) in Oak Ridge, Tennessee. SEG is a wholly-owned subsidiary of
Westinghouse Electric Corporation. The facility is designed to process certain
low-level radioactive waste from nuclear power plants. Under the terms of the
letter of intent, the Company is negotiating to acquire SEG's half of the
facility and certain associated waste-handling assets. The acquisition
contemplated by the letter of intent is subject to a number of conditions,
including the transfer of required permits and the negotiation and execution of
definitive agreements. There can be no assurances that the parties will be able
to negotiate mutually acceptable agreements to consummate the proposed
transaction.

The Company is currently constructing a CEP plant to process and recycle
secondary materials from chemical manufacturing operations at a facility owned
by Hoechst Celanese Chemical Group in Bay City, Texas.

The Company intends to seek debt financing to finance or re-finance a
substantial portion of the construction and related costs for its facilities in
Oak Ridge, Tennessee and Bay City, Texas. The amount, timing and effect on
liquidity of capital expenditures, including equity contributions to joint
ventures, to be made by the Company in connection with the development of
commercial CEP systems will depend on a number of factors, including the number
of systems to be developed, the timing of the development of such CEP systems,
the terms of the development arrangements with the Company's customers and
partners and the extent to which the Company is able to obtain financing for
such CEP systems.

As of September 30, 1996, accounts receivable and accounts receivable from
affiliate increased by approximately $16,034,000 from December 31, 1995 due to
amounts earned under contracts with M4 and the DOE. As of September 30, 1996,
total accounts receivable were $33,364,000. Of this amount, $6,719,000 was
unbilled at September 30, 1996.

As of September 30, 1996, other assets increased by approximately $5 million
from December 31, 1995 due to costs incurred for issuance of the Company's 
5 1/2% Convertible Subordinated Notes Due 2006. The Company's investment in M4
increased by approximately $15.3 million from December 31, 1995 due to the
recognition of the Company's share of M4's revenue and other income ($5.5
million) and the contribution of half of the assets of the Retech division ($9.8
million).

                                       12
<PAGE>   13

During 1996, the Company earned revenue from M4 relating to services provided
for the engineering and construction of CEP systems and from technology transfer
and success fees. For revenue amounts that are capitalized by M4, the portion of
the related gross profit that is allocable to the Company's ownership interest
in M4 has been deferred, and will be recognized over the period that the related
assets are depreciated by M4. As of September 30, 1996, the related deferred
income increased by $4,435,000 from December 31, 1995 due to billings under
license agreements and construction contracts with M4.

In September 1996, the Company entered into a seven year lease for additional
office space in Waltham, Massachusetts that will be used for future growth. The
lease term begins when the space is ready for occupancy (currently expected to
be February 1997). Rent under this lease will be approximately $138,000 per
month. The Company does not expect the lease commitment to have a material
effect on liquidity as the Company currently intends to sublease this space
until it is needed. There can be no assurances that the Company will be able to
locate subtenants for the space or enter into satisfactory subleases.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

Certain statements contained in this Form 10-Q regarding future events or the
future financial performance of the Company are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements include
statements concerning the receipt of research and development funding,
anticipated capital expenditures, decline of engineering and construction
revenues, the acquisition of assets from SEG, anticipated revenues from license
fees and commercial operations, future levels of SG&A expenses, formation of the
Japanese joint venture and expected sales of CEP Systems by that joint venture
over the next ten years, and expectations regarding the capital accounts of M4's
partners and the effect of expected future losses of M4. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, many of which are beyond the Company's
control. Accordingly, actual results could differ materially from those
contemplated by these forward-looking statements. These risks and uncertainties
include compliance with regulatory requirements, obtaining required permits,
customer acceptance of the Company's technology, successful negotiation and
performance of customer contracts and other agreements, costs of operation of
the Company's facilities, obtaining required funding, successful completion of
technology demonstrations, access to government funding, successful construction
and operation of facilities owned by the Company or its customers, receipt of
necessary approvals, and competition. Additional factors which may cause actual
results to differ are described in the Company's filings with the Securities and
Exchange Commission, including the Form 8-K filed by the Company on July 3,
1996.

                                       13
<PAGE>   14


PART II - OTHER INFORMATION

Item 5. OTHER INFORMATION

        Third Quarter Developments

     AWARD OF DOE MIXED WASTE CONTRACT. On August 12, 1996, M4 announced that it
had signed a $2.2 million contract with the DOE to conduct proof-of-process
studies using Q-CEP[Trademark] on two mixed hazardous and radioactive waste
streams. The tests will be conducted at M4's Technology Center. Under the terms
of the cost share contract, the DOE will pay 67% of the cost and M4 will pay the
remaining 33%.

     HANFORD TANKED WASTE CLEAN UP. On September 26, 1996, the Company announced
that the DOE had chosen a technical team led by LMC to employ Q-CEP for the
clean up of the tanked waste site in Hanford, Washington. The DOE awarded two
contracts for Phase I of the clean up. The LMC team includes Numatec, Fluor
Daniel, Duke Engineering and Services, Babcock & Wilcox, Nukem Nuclear
Technologies, Los Alamos Technical Associates, AEA Technology, OHM Remediation
Services, and M4. Phase IA of the program covers the first 20 months of the
program and includes a $27 million award to each team to prove the efficacy of
their processes. Phase IB covers waste processing of less than 10% of the
stockpile at Hanford over a five to seven year period.

        Recent Developments

     STOCK BUYBACK ANNOUNCEMENT. On October 22, 1996, the Company announced that
its board of directors had approved a stock repurchase program of up to two
million shares of the Company's common stock, or approximately 8.5% of its
common stock outstanding. Under the program, the Company may buy back stock from
time to time, subject to prevailing market conditions. Purchases may be made on
the open market or in privately negotiated transactions. The Company's goal is
to complete this repurchase program within one year. The Company intends to fund
these share repurchases from its working capital.

     JOINT VENTURE WITH NICHIMEN/NKP. On November 12, 1996, the Company
announced that it had signed a definitive agreement to form a joint venture (the
"JV") with two Japanese companies, Nichimen Corporation ("Nichimen") and NKK
Plant Engineering Corporation ("NKP"). Subject to final approval from the
Japanese government and the boards of Nichimen and NKP, the agreement secures
exclusive 


                                       14
<PAGE>   15

rights for the JV to introduce the Company's CEP technology to the Japanese
municipal incinerator ash market. Under the agreement, the Company will own 49%
of the JV, will receive a two percent royalty on all revenues, and will receive
a $12.5 million licensing fee, to be paid from profits of the JV. In accordance
with the agreement, the JV expects to purchase a minimum of 29 CEP systems from
the Company over the first ten years of the JV's operations, including an
initial CEP system to be delivered in the first quarter of 1998.

     RESTRUCTURING. On November 12, 1996, the Company also announced that as
part of a restructuring to more efficiently pursue opportunities in priority
markets, it would eliminate 58 (out of 480) positions, primarily at the
Company's corporate headquarters in Waltham, Massachusetts. Most of the
eliminations are staff positions from finance and administration, sales and
marketing, and government and regulatory affairs. The Company, however, will
continue hiring to fill positions that are critical to meeting the Company's
technology delivery schedule. Even after the streamlining initiative, the
Company's total workforce has increased by more than 50% since the beginning of
1996.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          10.1 Agreement for Expansion of License (Japanese Chemical Weapons)
               dated as of September 26, 1996 between the Company and M4.

          10.2 Lease dated as of September 16, 1996 for 400-1 Totten Pond Road,
               Waltham, Massachusetts.

          27   Financial Data Schedule

     (b)  Reports on Form 8-K - None.


                                       15
<PAGE>   16


                                   SIGNATURES

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



                                            MOLTEN METAL TECHNOLOGY, INC.
                                            -----------------------------

Date:  November 14, 1996               By:  /s/ Benjamin T. Downs
       -----------------                    ---------------------
                                            Benjamin T. Downs
                                            Executive Vice President of Finance
                                            and Administration, Treasurer
                                            (Principal Financial Officer and
                                            Authorized Signatory)


                                       16