SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

(Mark one)

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

                For the quarterly period ended September 30, 1999

                                       OR

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

               For the transition period from ________to________.


                           Commission File No. 0-23900


                             IDM ENVIRONMENTAL CORP.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


           New Jersey                                      22-2194790
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


               396 Whitehead Avenue, South River, New Jersey 08882
              -----------------------------------------------------
                    (Address of principal executive offices)


                                 (732) 390-9550
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


              -----------------------------------------------------
              (Former name, former address and formal fiscal year,
                          if changed since last report)


     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 8, 1999, 3,546,043 shares of Common Stock of the issuer were
outstanding.

<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   ------------------------------------------
                                      INDEX

                                                                       Page
                                                                       Number
                                                                      --------
PART I - FINANCIAL INFORMATION

    Item 1.  Financial Statements

             Consolidated Balance Sheets - September 30, 1999 and
             December 31, 1998..........................................    3

             Consolidated Statements of Operations - For the nine months
             ended September 30, 1999 and September 30, 1998............    4

             Consolidated Statements of Operations - For the three months
             ended September 30, 1999 and September 30, 1998............    5

             Consolidated Statements of Cash Flows - For the nine months
             ended September 30, 1999 and September 30, 1998 ...........    6

             Notes to Consolidated Financial Statements.................    8

    Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations..................................   12

    Item 3.  Quantitative and Qualitative Disclosures about Market Risk.   19

PART II - OTHER INFORMATION

    Item 2.  Changes in Securities......................................   20
    Item 6.  Exhibits and Reports on Form 8-K...........................   20

SIGNATURES .............................................................   21

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>

                                                                                    Unaudited
                                                                                  September 30,     December 31,
ASSETS                                                                                1999             1998
                                                                                  -------------    ------------
<S>                                                                              <C>              <C>

Current Assets:
     Cash and cash equivalents                                                  $    130,284    $    384,292
     Accounts receivable                                                           2,310,741       2,572,951
     Notes receivable - current                                                      141,198         367,198
     Inventory                                                                       -               582,517
     Costs and estimated earnings in excess of billings                               23,171       1,900,336
     Recoverable income taxes                                                      1,200,000         -
     Prepaid expenses and other current assets                                     1,083,530         906,137
                                                                                  ----------      ----------
         Total Current Assets                                                      4,888,924       6,713,431

Investments in and Advances to Unconsolidated Affiliates                           1,275,211       2,454,521
Investment in Affiliate, at cost                                                   1,853,125       1,853,125
Debt Discount and Issuance Costs                                                     -                16,124
Property, Plant and Equipment                                                      2,362,743       3,133,404
Deposit in Lieu of Bond                                                              200,000          -
Other Assets                                                                         979,925         979,925
                                                                                  ----------      ----------
                                                                                $ 11,559,928    $ 15,150,530
                                                                                  ==========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Current portion of long-term debt                                              $214,485       $ 622,794
     Accounts payable and accrued expenses                                         7,497,248       6,578,070
     Billings in excess of costs and estimated earnings                            1,222,224           -
     Due to Officers                                                                 248,686           -
                                                                                  ----------      ----------
         Total Current Liabilities                                                 9,182,643       7,200,864

Long-Term Debt                                                                        23,881          64,544
                                                                                  ----------      ----------
         Total Liabilities                                                         9,206,524       7,265,408
                                                                                  ----------      ----------
Commitments and Contingencies

Stockholders' Equity:
     Common stock, authorized 7,500,000 shares $.01 par value, issued
      and outstanding 3,424,520 in 1999 and 2,947,298 in 1998                         34,245          29,473
     Additional paid-in capital                                                   58,357,613      57,215,536
     Convertible preferred stock, authorized 1,000,000 shares $1.00 par value
       Series RR, Issued and outstanding 215 shares in 1998,
       stated at a conversion value of $1,000 per share                              -               215,000

     Retained earnings (deficit)                                                 (56,038,454)    (49,574,887)
                                                                                  ----------      ----------
                                                                                   2,353,404       7,885,122
                                                                                  ----------      ----------
                                                                                $ 11,559,928    $ 15,150,530
                                                                                  ==========      ==========

</TABLE>

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


                                       3
<PAGE>


                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>

                                                                       For the Nine Months Ended September 30,
                                                                               1999            1998
                                                                          -------------     ------------
<S>                                                                        <C>             <C>

Revenue:
     Contract income                                                        $7,556,608     $14,547,358
                                                                            ----------      ----------
                                                                             7,556,608      14,547,358
                                                                            ----------      ----------
Cost of Sales:
     Direct job costs                                                        9,008,924      15,843,676
       Write-down of inventory surplus                                         582,517               -
                                                                            ----------      ----------
                                                                             9,591,441      15,843,676
                                                                            ----------      ----------

Gross Profit (Loss)                                                         (2,034,833)    ( 1,296,318)
                                                                            ----------      ----------
Operating Expenses:
     General and administrative expenses                                     5,236,925       8,774,586
     Depreciation and amortization                                             268,098         483,328
     Equity in net loss of unconsolidated affiliates                            35,854           -
                                                                            ----------      ----------
                                                                             5,540,877       9,257,914
                                                                            ----------      ----------
Loss from Operations                                                        (7,575,710)    (10,554,232)

Other Income (Expense):
     Interest income (expense)                                               (  76,568)    ( 4,418,305)
                                                                            ----------      ----------
Loss before Provision (Credit)  for Income Taxes                            (7,652,278)    (14,972,537)

Provision (Credit) for Income Taxes                                         (1,200,000)    (   400,000)
                                                                            ----------      ----------
Net Loss                                                                   ( 6,452,278)   ( 14,572,537)

Preferred Stock Dividends including amortization of beneficial
     conversion feature of $ 0 in 1999 and $ 3,630,000 in 1998.                 11,289       3,798,966
                                                                            ----------      ----------
Net Loss on Common Stock                                                   $(6,463,567)   $(18,371,503)
                                                                            ==========      ==========
Loss per Share:
     Basic Loss per share                                                 $      (2.07)    $    (10.32)
                                                                            ==========      ==========
     Diluted Loss per share                                               $      (2.07)    $    (10.32)
                                                                            ==========      ==========
     Basic common shares outstanding                                         3,120,383       1,780,221
                                                                            ==========      ==========
     Diluted common shares outstanding                                       3,120,383       1,780,221
                                                                            ==========      ==========

</TABLE>


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


                                       4
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>

                                                                  For the Three Months Ended September 30,
                                                                          1999               1998
                                                                       ----------        ----------
<S>                                                                  <C>                <C>

Revenue:
     Contract income                                                   $ 2,980,792      $4,531,809
                                                                        ----------      ----------
                                                                         2,980,792       4,531,809
                                                                        ----------      ----------
Cost of Sales:
     Direct job costs                                                    3,867,164       4,349,328
     Write-down of inventory surplus                                       582,517            -
                                                                        ----------      ----------

                                                                         4,449,681       4,349,328
                                                                        ----------      ----------

Gross Profit (Loss)                                                     (1,468,889)        182,481
                                                                        ----------      ----------
Operating Expenses:
     General and administrative expenses                                 1,681,017       2,393,864
     Depreciation and amortization                                          40,659         165,082
     Equity in net loss of unconsolidated affiliates                        27,143            -
                                                                        ----------      ----------
                                                                         1,748,819       2,558,946
                                                                        ----------      ----------
Loss from Operations                                                    (3,217,708)     (2,376,465)

Other Income (Expense):
     Interest income (expense)                                             (31,395)        (95,621)
                                                                        ----------      ----------
Loss before Credit for Income Taxes                                     (3,249,103)     (2,472,086)

Credit for Income Taxes                                                 (1,200,000)           -
                                                                        ----------      ----------
Net Loss                                                                (2,049,103)     (2,472,086)

Preferred Stock Dividends including  amortization of beneficial
     conversion feature of $ 0 in 1999 and $300,000 in 1998.                 3,763         351,923
                                                                        ----------      ----------
Net Loss on Common Stock                                               $(2,052,866)    $(2,824,009)
                                                                        ==========      ==========
Loss per Share:
     Basic Loss per share                                              $      (.62)    $     (1.48)
                                                                        ==========      ==========
     Diluted Loss per share                                            $      (.62)    $     (1.48)
                                                                        ==========      ==========
     Basic common shares outstanding                                     3,288,689       1,913,213
                                                                        ==========      ==========
     Diluted common shares outstanding                                   3,288,689       1,913,213
                                                                        ==========      ==========
</TABLE>


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


                                       5
<PAGE>


                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>

                                                                              For the Nine Months Ended September 30,
                                                                                      1999            1998
                                                                                    --------        --------
<S>                                                                              <C>               <C>

Cash Flows from Operating Activities:
     Net loss on Common Stock                                                    $(6,463,567)   $(18,371,503)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Deferred income taxes                                                            -         (400,000)
         Depreciation and amortization                                               372,310         479,656
         Amortization of debt discount and beneficial conversion feature              16,124       7,987,013
         Amortization of beneficial conversion feature on issuance
            of restricted common stock                                               109,380          -
         Dividend on convertible preferred stock                                      11,289         168,966
              Compensation cost of consultant stock options                              -         1,871,400
         Equity in net loss of unconsolidated affiliates                              35,854           -

     Decrease (Increase) In:
           Accounts receivable                                                       262,210         101,470
            Notes receivable                                                         226,000           7,652
            Inventory                                                                582,517            -
            Costs and estimated earnings in excess of billings                     1,877,165        (249,579)
            Prepaid expenses and other current assets                               (177,393)        308,728
            Bonding deposits                                                           -               9,157
            Recoverable income taxes                                              (1,200,000)           -

     Increase (Decrease) In:
           Accounts payable and accrued expenses                                   1,091,286       1,404,361
           Billings in excess of costs and estimated earnings                      1,222,224           4,903
                                                                                  ----------      ----------
              Net cash used in operating activities                               (2,034,601)     (6,677,776)
                                                                                  ----------      ----------
Cash Flows from Investing Activities:
     Acquisition of property, plant and equipment                                     (1,944)       (472,328)
     Proceeds from disposal of property, plant and equipment                         400,295             -
     Investment in and advances from (to) unconsolidated affiliates                1,143,456         946,076
     Acquisition of other assets                                                      -             (178,125)
     Loans and advances from (to) officers                                           248,686        (112,331)
                                                                                  ----------      ----------
     Net cash provided by (used in)  in investing activities                       1,790,493         183,292
                                                                                  ----------      ----------
Cash Flows from Financing Activities:
     Net proceeds from convertible preferred stock issuance                              -         4,590,000
     Long term debt borrowing                                                            -           156,238
     Short term borrowing                                                            400,000             -
     Principal payments on long-term debt                                           (444,464)       (488,912)
     Proceeds from exercise of stock options and warrants                             34,564       2,119,535
                                                                                  ----------      ----------
     Net cash (used in) provided by financing activities                              (9,900)      6,376,861
                                                                                  ----------      ----------
Net Increase (Decrease) in Cash and Cash Equivalents                                (254,008)       (117,623)

Cash and Cash Equivalents, beginning of period                                       384,292         602,242
                                                                                  ----------      ----------
Cash and Cash Equivalents, end of period                                            $130,284        $484,619
                                                                                  ==========      ==========

</TABLE>


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


                                       6
<PAGE>


                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Continued)


<TABLE>

                                                                               For the Nine Months Ended September 30,
                                                                                       1999            1998
                                                                                     --------        --------
<S>                                                                               <C>              <C>

Supplemental Disclosures of Cash Flow Information:

 Cash paid during the year for:
  Interest                                                                          $ 64,321      $   249,648
                                                                                     =======        =========
  Income taxes                                                                      $      -      $         -
                                                                                     =======        =========
Supplemental Disclosure of Noncash Investing and Financing Activities:

  Repayment of stockholder's loan through issuance of common stock                  $265,122      $         -
                                                                                     =======        =========
  Conversion of convertible promissory notes to common stock                        $     -       $ 3,025,000
                                                                                     =======        =========
  Conversion of preferred stock to common stock                                     $215,000      $ 5,496,000
                                                                                     =======        =========
  Beneficial conversion feature of convertible preferred stock                      $     -       $ 3,830,000
                                                                                     =======        =========
  Beneficial conversion feature of issuance of restricted common stock              $109,380      $         -
                                                                                     =======        =========
  Issuance of restricted common stock for a deposit in lieu of bond                 $200,000      $         -
                                                                                     =======        =========
  Issuance of restricted common stock for debt                                      $322,784      $         -
                                                                                     =======        =========
</TABLE>



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


                                       7
<PAGE>


                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   INTERIM PRESENTATION

     The interim consolidated  financial statements are prepared pursuant to the
     requirements  for  reporting  on Form 10-Q.  These  statements  include the
     accounts  of IDM  Environmental  Corp.  and all of it's  wholly  owned  and
     majority owned  subsidiary  companies.  The December 31, 1998 balance sheet
     data was derived from audited financial statements but does not include all
     disclosures  required by  generally  accepted  accounting  principles.  The
     interim   financial   statements  and  notes  thereto  should  be  read  in
     conjunction  with  the  financial  statements  and  notes  included  in the
     Company's Form 10-K for the year ended December 31, 1998. In the opinion of
     management,  the interim financial  statements reflect all adjustments of a
     normal  recurring  nature necessary for a fair statement of the results for
     the interim periods presented. The current period results of operations are
     not necessarily indicative of results which ultimately will be reported for
     the full year ending December 31, 1999.

2.   CONTINGENCIES

     On August 15, 1996, the U.S.  Department of Labor,  Occupational Safety and
     Health Administration  ("OSHA") issued wilful citations and notification of
     penalty in the  aggregate  amount of $147,000 on the Company in  connection
     with  the  accidental  death  of  an  employee  of  one  of  the  Company's
     subcontractors on the United  Illuminating  Steel Point Project job site in
     Bridgeport,  Connecticut.  A complaint was filed against the Company by the
     Secretary of Labor,  United  States  Department  of Labor on September  30,
     1996. A hearing was  conducted in the matter in April,  1997. In June 1998,
     the Company  received a copy of the written decision filed by OSHA's Review
     Commission.  The Commission vacated the first alleged wilful citation,  but
     affirmed each of the second and third wilful citations,  imposing a penalty
     in the amount of $70,000 for each citation. The Company strongly objects to
     the  Commission's  finding  on the basis  that it cannot  be  sustained  as
     matters  of fact or law and has filed a timely  Notice  of Appeal  with the
     OSHA Review  Commission for Discretionary  Review,  which body has accepted
     jurisdiction  of the  matter  on  administrative  appeal.  The  Company  is
     contesting the Citations and Notification of Penalty.

     Also in connection with this accidental  death, the employee's estate filed
     a complaint for wrongful death against the subcontractor and the Company on
     February 11, 1997.  The estate seeks  damages in the amount of $45 million.
     The Company is being  defended  by the  subcontractor's  insurance  carrier
     pursuant to the  subcontractor's  obligation  to defend and  indemnify  the
     Company with respect to the actions of its (subcontractor's)  employees and
     agents.  The Company will be fully  indemnified for any liability,  if any,
     for any potential  judgement or  settlement in this matter and,  therefore,
     the action is not  expected to have any  material  effect on the  Company's
     consolidated financial statement.

     In July of 1998, the Company,  it's  subsidiary,  Global Waste & Energy and
     certain  affiliates and officers were named as  co-defendants in a cause of
     action styled  Kasterka  Vrtriebs GmbH v. IDM  Environmental  Corp., et al,
     filed in the  Court of  Queen's  Bench of  Alberta,  Judicial  District  of
     Calgary.  The  plaintiff,  Kasterka,  has alleged that the Company and it's
     affiliates  breached a marketing  agreement  that had been entered  between
     Kasterka and  Enviropower.  The plaintiff  has alleged that the  defendants
     failed to supply the  required  plans and  specifications  relating  to the
     gasification  technology originally developed by Enviropower and that, as a
     result, Kasterka was unable to manufacture and market gasification units in
     the  territories  designated  in  the  marketing  agreement.  Kasterka  has
     asserted  a variety  of  claims  for  damages  in the  aggregate  amount of
     approximately  $42 million.  The Company believes the suit is without merit
     and intends to vigorously contest the cause of action.

     In  September  of 1998,  the Company was named as a defendant in a cause of
     action styled Balerna  Concrete  Corporation,  et al. v. IDM  Environmental
     Corp.,  et al, filed in the United States  District Court of  Massachusetts
     (Case No.  98CV11883ML).  The  plaintiffs  alleged  that the  Company,  and
     others, engaged in a pattern of illegal

                                       8
<PAGE>


                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

2.   CONTINGENCIES (Continued)

     conduct to divert  funds from the  plaintiffs  through the  operation  of a
     concrete  finishing  business.  The plaintiffs have asserted various claims
     under RICO,  common law fraud,  conversion,  breach of contract  and others
     basis seeking damages in an amount expected to exceed $450,000. The Company
     believes the suit is without  merit and intends to  vigorously  contest the
     cause of action.

3.   CONVERTIBLE PREFERRED STOCK SERIES RR

     On  August  11,  1998,  the  Company  sold  1,500  shares  of  Series RR 6%
     Convertible  Preferred  Stock. The securities were issued to one accredited
     investor.  The aggregate  sales price of such  securities  was  $1,500,000.
     Commissions  totaling 10% were paid in connection  with the placement.  The
     securities  were offered  pursuant to  Regulation D. The offer was directed
     exclusively to a single accredited investor without general solicitation or
     advertising  and  based on  representations  from the  investor  that  such
     investor was acquiring for investment.

     The Series RR  Preferred  Shares are  convertible  into Common Stock at the
     lesser of (i) $22.50 per share or (ii) 75% of the average closing bid price
     of the Common Stock during the five trading days prior to  conversion.  The
     Preferred  Shares pay an annual dividend of 6% payable  semi-annually or on
     conversion  or at  redemption  in cash or Common  Stock,  at the  Company's
     option.  During the year ended December 31, 1998, 1,285 shares of Series RR
     Preferred Stock were converted into 359,981 shares of the Company's  common
     stock. Subsequent to December 31, 1998, demand for conversion or redemption
     of the  remaining  215  shares  of  Series  RR  Preferred  Stock  had  been
     submitted.  At the  annual  shareholders  meeting,  on June 10,  1999,  the
     shareholders  approved a proposal to authorize issuance of common shares in
     excess of 360,000 on the  conversion  of  outstanding  Series RR  Preferred
     Stock. On July 26, 1999, The Company  reached  agreement with the holder of
     the remaining 215 shares of Series RR Preferred  Stock to allow  conversion
     into  130,788  common  shares  in  full  and  final  settlement  of the 215
     Preferred RR Shares.

4.   EARNINGS PER SHARE

     The Company is calculating  earnings per share to comply with the SEC staff
     position on accounting for  securities  issued with  beneficial  conversion
     features.  This accounting requires that the Company reflect the difference
     between the market price of the Company's  common stock and the  applicable
     conversion  rate on the  convertible  preferred  stock (note  payable) as a
     dividend  (interest  expense) at the issue date and amortize from the issue
     date of the  convertible  security.  Earnings per share as reported for the
     period ended June 30, 1998 reflect the following:

     --   The beneficial  conversion feature of the Company's Series C Preferred
          Stock and related  warrants  was  $3,330,000  and was  amortized  as a
          dividend from February 13, 1998, the issue date, to June 22, 1998, the
          date the  Registration  Statement of the underlying stock was declared
          effective.  $104,000 was recorded for the three months ended March 31,
          1998, and $3,226,000 for the three months ended June 30, 1998.

     --   The beneficial conversion feature of the series RR preferred stock was
          $500,000  and is being  amortized  as a  dividend  from the issue date
          August 11,  1998,  to November  12,  1998,  the date the  Registration
          Statement of the underlying stock was declared effective. $300,000 was
          recorded for the three months ended September 30, 1998.


                                       9
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

5.   PLAN OF REORGANIZATION AND MERGER -- FUSION NETWORKS, INC.

     On August 18, 1999, the Company entered into a Plan of  Reorganization  and
     Merger  and an  Agreement  and Plan of Merger  (collectively,  the "Plan of
     Reorganization") with Fusion Networks,  Inc. ("Fusion Networks").  Pursuant
     to the terms of the Plan of  Reorganization,  the  Company  will form a new
     holding  company  (the  "Holding  Company").  The Company will merge with a
     wholly-owned subsidiary of the Holding Company with the shareholders of the
     Company receiving one share of common stock of the Holding Company for each
     share  of  common  stock  of the  Company  held  immediately  prior  to the
     reorganization.  Fusion  Networks  will  merge  into  another  wholly-owned
     subsidiary of the Holding Company with the  shareholders of Fusion Networks
     receiving  17.733  shares of common  stock of the Holding  Company for each
     share of common  stock of Fusion  Networks  held  immediately  prior to the
     reorganization.  Following  the  reorganization,  the  shareholders  of the
     Company are  expected to own  approximately  10% of the common stock of the
     Holding   Company  with  the   shareholders   of  Fusion   Networks  owning
     approximately 90% of the common stock of the Holding Company.

     Fusion Networks is a newly formed company,  based in Miami, Florida,  which
     is in the  process  of  building  a portal-  type web site with an  initial
     emphasis on Latin  America and the  Hispanic  market in the United  States.
     Fusion  Networks  launched its initial site,  on a pilot basis,  in Bogota,
     Colombia, in October, 1999.

     The proposed reorganization is subject to a number of conditions, including
     approval  by the  shareholders  of both the  Company  and Fusion  Networks,
     receipt by the Company's board of directors of a "fairness opinion" from an
     investment banking firm, the receipt of all necessary  regulatory approvals
     and the negotiation and execution of definitive documentation. There can be
     no assurance that the  reorganization  will be successfully  implemented or
     that there will not be modifications to the terms of the reorganization.

6.   STOCKHOLDERS' EQUITY

     Reverse Stock Split

     On March 11, 1999, the Company's  Board of Directors  authorized a 1 for 10
     reverse  stock  split of its  common  stock  effective  April 16,  1999 for
     shareholders  of  record  at the close of  business  on April 16,  1999 and
     amended the par value of the common stock to $.01. All shares and per-share
     amounts in the  accompanying  consolidated  financial  statements have been
     restated to give effect to the 1 for 10 reverse stock split.

     Reverse Split and Extension of Class A Warrants

     In April 1999,  the  Company's  Board of  Directors  authorized  a 1 for 10
     reverse split of the Company's outstanding Class A Warrants effective April
     16, 1999 and extended the term of those warrants to April 2000.

     Loans by Warrant Holders

     During  November,  1998,  the holders of certain $30.00  Warrants,  Lock-Up
     Warrants and Reload Warrants loaned $671,023 to the Company.  The loans may
     be credited  against the exercise price of those  Warrants.  As of December
     31, 1998, $265,122 was still outstanding. During March, 1999, 97,525 of the
     $30.00  warrants were  converted  into 97,525  shares of common stock.  The
     exercise price of the warrants paid in full the loan outstanding.


                                       10
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

     Issuance of Stock for Services and In Lieu of Bond

     During the three months ended September 30, 1999, the Company issued 79,133
     shares of common stock to certain  vendors in settlement of amounts owed to
     those vendors totaling  $322,784.  Additionally,  the Company issued 62,000
     shares of  common  stock as a  deposit  in lieu of a bond in the  amount of
     $200,000.

     Stock Options

     The exercise price of a consultant's  option for 112,500 shares was reduced
     from  $37.19 per share to $6.75 per share for  112,500  shares.  The market
     price of The Company's Common Stock at the date of this action was $1.156.

     In conjunction with the proposed Fusion Networks transaction,  the board of
     directors  approved an amendment'  to the Company's  1998 Stock Option Plan
     ("1998  Plan")  increasing  the shares  reserved  for issuance by 1,600,000
     shares. The amendment to the 1998 Plan is subject to shareholder approval.

     In  conjunction  with the  proposed  Fusion  Networks  transaction  and the
     amendment  of the 1998 Plan,  the board of directors  approved  grants of a
     total of 1,000,000 stock options at $1.156 per share vesting 10% in 90 days
     and 90% in 150 days. Of the options  granted,  400,000 were granted to each
     of the  Company's  Chairman and Chief  Operating  Officer and the Company's
     President and Chief Executive Officer, both vesting 100% in 150 days.

     In conjunction with the proposed Fusion Networks transaction,  the board of
     directors  approved  the grant of 400,000  options at $1.156 per share to a
     consultant.  This  option is not under any of the  Company's  stock  option
     plans.

7.   INVENTORY

     As a result of  continued  delays  in the  commencement  of  active  energy
     projects on which the Company  planned to deploy its  generator  inventory,
     coupled  with  continued  losses  and  limited  resources  to pursue  those
     projects,  during the quarter ended  September 30, 1999,  the Company wrote
     down the balance of its generator inventory in the amount of $582,517.

8.   RECOVERABLE INCOME TAXES

     The  Company  has been  notified  by the New  Jersey  Economic  Development
     Authority that its application to participate in the Technology Certificate
     Transfer  Program  was  approved.  As a result,  during the  quarter  ended
     September 30, 1999, the Company  recorded a $1,200,000 tax benefit relating
     to its New Jersey net operating losses ("NOL").


                                       11
<PAGE>

Item 2. Management's  Discussion and Analysis Of Financial Condition And Results
        Of Operations.

Certain Factors Affecting Future Operating Results

This Form 10-Q contains 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.  Actual  results  could differ  materially  from those set forth in the
forward-looking  statements.  Certain factors that might cause such a difference
include the following:  uncertainty with respect to the continued listing of our
Common  Stock on Nasdaq;  uncertainty  with  respect  to our  ability to finance
continued  operating  losses and future growth  initiatives  pursuant to "Vision
2000";  possible  fluctuations  in the  growth  and  demand for energy and waste
treatment  services in markets in which the Company may seek to establish energy
production and waste treatment operations; intense competition for establishment
of  energy  production,  waste  treatment  and  similar  operations  in  growing
economies;   currency,   economic,   financing  and  other  risks   inherent  in
establishing  operations in foreign markets;  uncertainty  regarding the rate of
growth in demand for nuclear  decommissioning and site revitalization  services;
continued  delays in awarding  and  commencing  contracts;  delays in payment on
contracts occasioned by dealings with governmental and foreign entities; changes
in accepted remediation  technologies and techniques;  fluctuations in operating
costs  associated with changes in project  specifications  and general  economic
conditions;  substantial  fluctuations in revenues resulting from completion and
replacement of contracts and delays in contracts;  economic conditions affecting
the ability of  prospective  customers  to finance  projects;  uncertainty  with
regard to the ultimate consummation of the combination with Fusion Networks; and
other factors generally affecting the timing and financing of projects.

Overview

Our business has evolved,  and  continues  to evolve,  to  capitalize  on market
opportunities.  We have added strategic  capabilities and resources  through the
years,  and  continued to do so during 1998, to move our business from its roots
as a  demolition  and  deconstruction  company to a full  service  environmental
remediation  company and plant  relocation  services company and, now, an energy
project developer and manager.  Our revenues were historically derived primarily
from (1) contract  decontamination and decommissioning services in a broad range
of industrial and environmentally sensitive settings, including, but not limited
to, plant  dismantlement and relocation  services,  asbestos abatement services,
and  remediation of  contaminated  soil and  groundwater;  and (2) equipment and
scrap sales. Our operations have been  characterized by fluctuations in revenues
and operating  profits as projects begin and end. With the  implementation  of a
strategic shift in our business in 1997, we expect to generate a growing base of
recurring  revenues  and  operating  profits  from  energy  and waste  treatment
projects  and  long-term  nuclear  facilities  decommissioning  and  remediation
projects  while  supplementing  such revenues and profits with revenues from our
traditional environmental services and plant relocation services projects.

Recent Developments

Due to continued difficult conditions in the environmental  services markets and
limited  resources,  we have  experienced a decline in the number of traditional
environmental  service  projects  on which we have  bid and  performed  services
during the first three  quarters of 1999.  In response to those  conditions,  we
have  concentrated  our  efforts on  securing  specialty  contracts,  efforts to
participate in nuclear remediation projects and efforts to finalize arrangements
and commence  services on our EWN project in Germany.  At September 30, 1999, we
had a backlog of  approximately  $3.5  million of signed  services  contracts as
compared to a backlog of  approximately  $8 million at December  31,  1998.  The
largest  project in our  backlog at  September  30,  1999,  was the Bound  Brook
project,  with an estimated value for the balance of services to be performed of
$3.0  million.  The Bound Brook project began in August 1999 and is scheduled to
be completed during the year 2002. However, the elapsed time from the award of a
contract to commencement of services, and completion of performance,  may be two
or more years.  The  backlog at  September  30,  1999 does not include  services
expected to be  rendered  under the EWN  project in  Germany.  The total  German
government  funding  for the EWN  project is  approximately  $3.65  billion.  We
anticipate  that we will  perform as much as $700 million of services at the EWN
site over a ten-year period. We expect to finalize a comprehensive agreement for
the  revitalization  of the  EWN  site,  and  to  begin  performing  remediation
services,  during the fourth quarter of 1999.  Because of the  uncertainty as to
the actual start date for  services at the EWN site,  no estimate can be made as
to the value of services expected to be rendered during 1999.


                                       12
<PAGE>

In addition to existing  contracts,  we are presently  bidding on, or propose to
bid on, numerous  projects in order to replace revenues from projects which will
be completed  during 1999 and to increase  the total  dollar  volume of projects
under  contract.  We anticipate  that efforts to bid on and secure new contracts
will focus on projects which can be readily  serviced from the regional  offices
as well as certain large  international  plant  relocation  projects and nuclear
decommissioning  projects  which we  intend to  pursue.  Our  regional  offices,
particularly the Oak Ridge,  Tennessee  offices,  are  strategically  located in
areas  having a high  concentration  of  prospective  governmental  and  private
remediation  sites.  While bidding to perform services at such sites is expected
to be highly  competitive,  we believe  that our  existing  presence on adjacent
projects  combined  with our proven  expertise  and  resources  will allow us to
successfully bid on and perform substantial additional projects based out of our
regional offices.

In  addition  to  remediation  and  plant  relocation  projects  on which we are
presently  bidding or  negotiating,  during  1997 and 1998 we entered the energy
production  and waste  treatment  services  market.  We  expect to begin  energy
production  and sales at our Georgia Power Project  during the fourth quarter of
1999 and expect to begin  operations  at, and to receive  revenues  from various
other energy and waste treatment projects and nuclear  decommissioning  projects
at various sites by as early as the end of 1999.

While we anticipate that entry into the energy  production,  waste treatment and
nuclear facilities  decommissioning and site revitalization  market will provide
significant  opportunities for sustainable growth in both revenues and operating
profits,  entry into those markets requires  substantial capital commitments and
involves  certain risks.  Undertaking  energy  production,  waste  treatment and
nuclear decommissioning projects can be expected to require capital expenditures
of as little as several  million  dollars to hundreds of millions of dollars per
project.  We do not currently have the necessary  capital resources to undertake
such ventures without third-party financing.  We anticipate that we will take on
equity  partners  and seek third  party debt  financing  to finance  substantial
portions  of the  projects  which we  expects to  undertake.  While we have been
successful in attracting  substantial partners in carrying out various phases of
the  EWN  nuclear  decommissioning/site   revitalization  project,  we  have  no
commitments from potential partners and financing sources to provide funding for
future  projects and there is no  assurance  that such  partners  and  financing
sources will be available, or will provide financing on acceptable terms, if and
when we commence future projects.

There is  substantial  uncertain  as to our  ability to continue to operate as a
result of continuing losses and a lack of currently  available resources to fund
future  operations.  In an effort to deal with these concerns,  we are presently
evaluating the sale or other  liquidation of various  long-term  assets which we
believe can provide adequate funding to support future  operations.  In March of
1999, we agreed to accept  $300,000 in full  settlement  of our note  receivable
from UPE relating to the sale of our surplus equipment  inventory.  $150,000 was
paid at closing  with the  balance  payable in monthly  installments  over eight
months. We are presently  evaluating the sale of properties in Poland as sources
of additional  funds. We believe that adequate funding will be provided from the
efforts described to support our operations for the foreseeable future. However,
in the absence of receipt of adequate funding from those, or other, sources, our
ability to continue to operate at the current level is in doubt.

In light of continued  uncertainty  effecting  our  operations at the end of the
third quarter of 1999,  management has evaluated  various options outside of its
traditional  businesses to return the company to  profitability  and to increase
shareholder  value.  Pursuant to those efforts,  in July 1999, we entered into a
letter  of  intent,  and  subsequently  a merger  agreement  to  acquire  Fusion
Networks,  Inc. in exchange for approximately 26 million shares of common stock.
Fusion  Networks is a newly formed company which is in the process of building a
portal-type web site with an initial  emphasis on Latin America and the Hispanic
market in the United States. The proposed  acquisition is subject to a number of
conditions,  including  approval of the acquisition by the  shareholders of both
the  Company  and  Fusion  Networks,  receipt  by our  board of  directors  of a
"fairness opinion" from an investment banking firm, the receipt of all necessary
regulatory   approvals   and  the   negotiation   and  execution  of  definitive
documentation.   There  can  be  no  assurance  that  the  acquisition  will  be
successfully  implemented  or  that  there  will  not  be  modifications  to the
acquisition terms.


                                       13
<PAGE>

During 1999, our principal  contract services have related to, and substantially
all of our  revenues  were  derived  from,  our East Dam  Project  and Oak Ridge
Project and a number of smaller projects. The Oak Ridge Project is a DOE managed
site and was our most significant  remediation  project during 1999.  During the
second  quarter of 1999, we completed work on the phase of the Oak Ridge Project
which was begun  during 1998.  Commencement  of  additional  services at the Oak
Ridge  Project has been delayed and future  services are in doubt as a result of
disputes  relating to two  contracts  at the Oak Ridge site.  The first  dispute
relates to an asset recovery contract, where the value of the equipment salvaged
pays for our cost of dismantling  and removing the equipment.  During the second
quarter of 1999, we became aware of several previously undisclosed problems that
reduced the value of the equipment and increased the costs to decontaminate  and
remove the equipment. During September 1999, we were terminated from the project
by the contractor.  We have filed a request for arbitration  which if successful
would  probably be determined  in December.  The second  dispute  relates to our
determination  during the second quarter of 1999 that the waste we were required
to dispose of had to be buried in a mixed  waste cell at a higher  cost than the
low-level  waste cell it was supposed to go to because the waste had undisclosed
PCB's.  Also, we were planning on  decontaminating  the steel and selling it for
scrap which would avoid disposal  costs.  Because the contractor  said we had to
remove all the paint from the steel before they would release it, it became more
cost effective to dispose of the steel in a low-level waste facility.  We intend
to pursue change orders  against the  contractor.  Because of these disputes and
because we have been  terminated  from the job,  our  revenues  at the Oak Ridge
Project have been curtailed and we have incurred losses on that project.

Revenues  recognized and jobs costs attributable to our contract services during
1998 were  adversely  affected  by  unforeseeable  developments  at the East Dam
Project and on our  project at the Boston  State  Hospital  (the  "Boston  State
Hospital Project").  On the East Dam Project, the scope of our services, and our
bid, was based on preliminary project specifications  established by the project
owner.  The amount  payable  with  respect to our  services on that  project was
subject to adjustment,  up or down, based on the actual conditions  encountered.
As a result of the  conditions  encountered,  the  actual  drill  footage of the
project  was  substantially  less than the  footage  initially  bid based on the
specifications  provided by the  project  owner.  At the same time,  we provided
substantial  additional services,  as called for by the contract, as a result of
change orders.  Pursuant to the contract,  compensation  payable with respect to
additional services resulting from change orders is subject to documentation and
negotiation at the end of the project.  The reduction in drill footage  resulted
in a decrease in estimated  project revenues (not giving effect to amounts owing
respect to change orders). As a result, estimated revenues to be recognized from
the East Dam Project were reduced from approximately $20 million to $15 million.
While total  project  revenues and 1998  revenues from the East Dam Project were
less than  anticipated as a result of the reduction in drill footage,  job costs
attributable thereto were substantially higher than originally  anticipated as a
result of the performance of additional  services  related to change orders.  We
submitted a claim for approximately $10.8 million as additional compensation and
cost reimbursement  attributable to change orders.  Pending payment for services
related to change orders,  during 1998, we recognized,  as additional job costs,
all  costs  attributable  to the  performance  of  those  services  but  did not
recognize  any revenues  which might be realized  from those  services.  We will
recognize as  additional  revenues,  without any  corresponding  job costs,  all
amounts  received,  if any,  with respect to change  orders at such time as such
amount is actually received. In July of 1999, we assigned our claim with respect
to the East Dam Project to our  contractor  for $650,000.  The  contractor  will
pursue the claim, paying all direct claim costs,  including costs of experts. In
the event the claim results in a payment to the contractor,  the payment will be
distributed  70% to the  contractor and 30% to us after  deducting  direct claim
costs and the $650,000 paid by the contractor.

On the Boston State Hospital Project,  we subcontracted  certain portions of the
project to Dockside Dismantling Corporation ("Dockside").  Dockside defaulted on
its  subcontract  and  abandoned  the work  for  which  it was  responsible.  In
addition,  we were notified of certain work deficiencies for which Dockside and,
derivatively,   the  Company  were  allegedly  responsible.   We  estimated  the
additional  costs to complete  and correct the work of Dockside at $1.2  million
and reflected  additional job costs in that amount.  We made a claim against the
bond ($500,000  performance and $500,000  payment) provided by Dockside's surety
company. The surety company disclaimed coverage and litigation to collect on the
bond was initiated.  In January of 1999, we settled our claim against Dockside's
surety  company  for  $375,000  for the  performance  bond of which we  received
$300,000  after legal  fees.  The  $500,000  payment  bond was paid  directly to
Dockside's  vendors and we received no funds from the payment bond.  The results
of the settlement were reflected in fourth quarter 1998 results.

                                       14
<PAGE>


In the  recurring  revenue  project  arena,  during 1998, we continued to invest
substantial resources in our efforts to acquire and/or build,  start-up, own and
operate  energy,  waste  treatment  and  other  similar  projects.  We  incurred
approximately  $4 million in direct  costs  during 1998 in  connection  with our
efforts to enter those markets. At December 31, 1998, we were in advanced levels
of  discussions  with  respect  to more  than a dozen  potential  energy,  waste
treatment  and similar  projects  and in February of 1999 we acquired  our first
operating energy facility,  a 42 MW hydroelectric power plant in the Republic of
Georgia.  We expect to begin recognizing  revenue from the Georgia Power Project
by the fourth  quarter of 1999.  Additionally,  we  continue  in our  efforts to
complete development of, and to begin realizing revenues from, one or more other
energy  and/or  waste   treatment   facilities.   However,   given  the  capital
requirements  and time  required to bring energy  projects  operational,  we are
exploring  various  options to minimize  our costs in pursuing  those  projects,
including  selling  substantial  equity  positions in our energy  projects while
retaining  smaller  minority  positions  or,  where  appropriate,   selling  our
positions   outright  in  exchange  for  recovery  of  our  investments  plus  a
development fee.

We performed no plant  relocation  projects during 1998 or the first nine months
of 1999. With the financial  crises in Asia and other lesser  developed  regions
and a dramatic  downturn  in the price of oil,  the demand for plant  relocation
services  was  curtailed  in 1998 and the first half of 1999 and is  expected to
continue to be curtailed until an improvement occurs in those regions.

In addition to our core  operations,  we have  entered into  selected  strategic
investments and  undertakings.  Those  investments and  undertakings,  as of the
third quarter of 1999,  include (1) an equity investment in Life  International,
(2) our formation of Seven Star to distribute  Life water  products in southeast
Asia and to pursue other  opportunities  in southeast  Asia, (3)  acquisition by
Seven Star of a license  covering the bottling  rights and  distribution  of the
Life  superoxygenation  process in southeast Asia, and (4) our acquisition of an
interest in Kortmann  Polonia.  During  1998,  we  invested  approximately  $1.1
million in these ventures. We did not recognize any revenues from those ventures
during 1998 but expect to begin realizing  revenues from the water  distribution
operations  of Seven Star and from the sale of certain  real estate  holdings of
Kortmann Polonia during 1999.

Results of Operations

Three and Nine Months ended September 30, 1999 and 1998

Revenues.  Our total revenues  decreased by approximately  34.2% from $4,532,000
for the quarter ended  September  30, 1998 to  $2,981,000  for the quarter ended
September  30,  1999.  Total  revenues  decreased  by  approximately  48.1% from
$14,547,000  for the nine months ended  September 30, 1998 to $7,557,000 for the
same  period in 1999.  The  decrease  in  contract  income in 1999 from 1998 was
primarily  attributable  to (1)  curtailment in services at the Oak Ridge office
which  accounted for $2,736,000 of revenues during the third quarter of 1998 and
$6,647,000  of  revenues  during the nine month  period in 1998 as  compared  to
$930,000 of revenues during the third quarter of 1999 and $3,120,000 of revenues
during the nine month period in 1999, and (2) a reduction in the number and size
of contracts  performed during the current period as compared to the same period
in 1998, including,  in particular,  the East Dam project which was completed in
1998 and which  produced  revenues of  approximately  $100,000  during the third
quarter of 1998 as compared to none for the third quarter of 1999.

Revenues for the 1999 nine month period included $1 million  associated with the
DOE project in Los Alamos,  New Mexico which was  completed in 1997 and $650,000
associated  with the East Dam project which was  completed in 1998.  The payment
for the Los Alamos DOE project was for full settlement of our change order claim
in the approximate amount of $2.8 million.  The payment for the East Dam project
was  consideration  for assignment to the contractor on the project of our claim
for additional  compensation  associated  with change orders in the  approximate
amount of $10 million.  The contractor will pursue the claim,  paying all direct
claim costs,  including  costs of experts.  In the event the claim  results in a
payment to the contractor, the payment will be distributed 70% to the contractor
and 30% to us after  deducting  direct claim costs and the $650,000  paid by the
contractor.


                                       15
<PAGE>


Cost of Sales. Direct job costs decreased by approximately 11.1% from $4,349,000
for the quarter ended  September  30, 1998 to $3,867,000  for the same period in
1999. Direct job costs decreased by approximately 43.1% from $15,844,000 for the
nine months ended  September 30, 1998 to $9,009,000 for the same period in 1999.
The decrease in job costs was primarily  attributable to completion  during 1998
of the East Dam project,  which reduction was partially offset by additional job
cost  charges  associated  with the two  disputed  contracts  in our Oak  Ridge,
Tennessee  office and  settlement  of the Boston State  Hospital  project.  As a
result of the unforseen  problems,  we recorded a negative  $1.1 million  dollar
gross margin on the Oak Ridge asset recovery  contract during the second quarter
of 1999.  Because we have been terminated from the job and have not been allowed
to salvage certain wire, we recorded  additional direct costs of $300,000 during
the third quarter of 1999. We recorded  negative $1.2 million of gross margin on
the Oak Ridge waste disposal contract during the second quarter of 1999. Because
of price increases from our subcontractor associated with the waste disposal, we
recorded  additional  direct costs of $400,000 during the third quarter of 1999.
We intend to aggressively  pursue contract change orders.  Any revenue  received
from the change order will be recorded  when  realized.  Subsequent to September
30, 1999, we settled disputes relating to our Boston State Hospital project.  As
a result of that  settlement,  we recorded  additional  direct costs of $300,000
during the third quarter of 1999.

In  addition  to direct job costs,  during the  quarter  and nine  months  ended
September 30, 1999,  our cost of sales  included the write down of our generator
inventory in the amount of $582,517.  The write down of that inventory  resulted
from continued  delays in the commencement of active energy projects on which we
planned to deploy the generator  inventory,  coupled with  continued  losses and
limited resources to pursue those projects.

General and Administrative Expenses. While total revenues decreased by 34.2% for
the quarter, general and administrative expenses decreased 29.8% from $2,394,000
during the quarter ended September 30, 1998 to $1,681,000 during the same period
in 1999.  General and  administrative  expenses  decreased 40.3% from $8,775,000
during the nine months ended  September 30, 1998 to  $5,237,000  during the same
period in 1999. The decrease in general and administrative expense was primarily
attributable to a decrease in variable overhead due to lower business levels and
to a $1.9  million  expense  recorded in February,  1998 for options  granted to
consultants  to purchase  122,000  shares of common stock at the market price of
our common stock at the date of the grant.

Depreciation and amortization.  Depreciation and amortization  expense decreased
by approximately  75.2% from $165,000 in the 1998 quarter to $41,000 in the 1999
quarter.  Depreciation and amortization expense decreased by approximately 44.5%
from $483,000  during the nine month period ended September 30, 1998 to $268,000
during the nine month period ended September 30, 1999. The decrease depreciation
and   amortization   expense  was  primarily   attributable  to  a  decrease  in
amortization of deferred issuance costs.

Interest Expense. In addition to its operating income and expenses,  we reported
net  interest  expense of $31,000 for the quarter  ended  September  30, 1999 as
compared to net  interest  expense of $96,000  for the same  period in 1998.  We
reported a decrease in net interest  expense from $4,418,000 for the nine months
ended  September  30, 1998 to $77,000  expense for the same period in 1999.  The
decrease in net  interest  expense for the quarter was  attributable  to foreign
exchange losses on a Canadian contract in the 1998 quarter.  The decrease in net
interest expense for the nine months was primarily attributable to $4,169,000 in
interest expense recorded on the convertible notes and related warrants in 1998.
This amount represented the amortization of the beneficial conversion feature of
the convertible notes and warrants.

Miscellaneous.  During the first nine months of 1998 and 1999,  no provision was
made for post retirement benefits subject to FAS 106.

Credit for Income  Taxes.  During the 1999 quarter and nine month  periods,  the
Company  reported a credit for income taxes of  $1,200,000  compared to a credit
for income  taxes of $400,000  for the 1998 nine month  period and no credit for
the quarter ended September 30, 1998. As a result of our continuing  losses,  we
have recorded no credit for federal  income taxes since 1998. The current period
credit for income taxes is attributable  to the tax benefit  relating to our New
Jersey net  operating  loss.  We applied  for  participation  in the  Technology
Certificate  Transfer Program  sponsored by the New Jersey Economic  Development
Authority and have been notified that our application has been approved.


                                       16
<PAGE>


Net loss.  As a result of the  foregoing,  we  reported  a loss  after  taxes of
$2,049,000 for the quarter ended September 30, 1999 as compared to a net loss of
$2,472,000  for the same  quarter in 1998.  We  reported  a loss after  taxes of
$6,452,000  for the nine months ended  September  30, 1999 as compared to a loss
after taxes of $14,573,000 for the same period in 1998.

Net loss attributable to common stock. The net loss attributable to common stock
was  increased by the  preferred  stock  dividends  totaling  $4,000 in the 1999
quarter and $52,000 in the 1998 quarter,  and an accounting "deemed dividend" of
$300,000 in the 1998 quarter  arising from the  amortization  of the  beneficial
conversion  feature of our Preferred Stock Series RR. The net loss  attributable
to common  stock was  increased  by $11,000  and  $169,000  in  preferred  stock
dividends  during the first  nine  months of 1999 and 1998 and by $0 in 1999 and
$3,630,000 in 1998 arising from the  amortization  of the beneficial  conversion
feature of the Series RR Preferred  Stock  ($300,000) and the Series C Preferred
Stock ($3,330,000).  We are calculating earning per share to comply with the SEC
staff position on accounting for securities  issued with  beneficial  conversion
features.  This accounting  required that we reflect the difference  between the
market  price of our  common  stock and the  applicable  conversion  rate on the
convertible  preferred  stock as a dividend  at the issue  date (the  beneficial
conversion  feature  totaled  $3,330,000  with respect to the Series C Preferred
Stock and $500,000  with  respect to the Series RR Preferred  Stock in 1998) and
amortized the dividend from the issue date for the Series C Preferred,  February
13, 1998 to June 22, 1998, the date the Registration Statement of the underlying
stock was declared  effective and from the issue date of the Series RR Preferred
Stock, August 11, 1998 to November 12, 1998, the date the Registration Statement
of the underlying stock was declared effective.

Liquidity and Capital Resources

At September 30, 1999, we had a working  capital deficit of  approximately  $4.3
million and a cash  balance of $130,000.  This  compares to a deficit in working
capital of $0.5 million and a cash balance of $0.4 million at December 31, 1998.
The  changes  in  working  capital  and cash were  primarily  attributable  to a
combination  of (1) the loss incurred  during 1999,  including the write down of
our generator  inventory,  (2) the effects of an increase in accounts payable of
$1.1 million and (3) an adverse change in costs and estimated expenses in excess
of billings of $3.1 million,  which were partially  offset by (1) cash flow from
the  investment and advances from an  unconsolidated  affiliate of $1.1 million,
(2) the issuance of stock to pay certain vendors and to pay a deposit in lieu of
a bond in the aggregate  amount of $523,000 and (3) a $1,200,000  credit for New
Jersey income tax.

Approximately  $23,000 of working  capital at  September  30, 1999  consisted of
unbilled  costs and  estimated  earnings on ongoing  projects.  Such amounts are
expected to be received  during 1999 as projects  progress with all such amounts
being  payable to us by the  completion  of such  projects.  Unbilled  costs and
estimated earnings at December 31, 1998 totaled $1.9 million. Billings in excess
of costs and  estimated  earnings  totaled $1.2 million at September 30, 1999 as
compared  to  $0  at  December  31,  1998.  The  adverse  change  was  primarily
attributable  to  unfavorable  developments  with  respect  to the two  disputed
contracts at the Oak Ridge project.

At  December  31,  1998,  we had  approximately  $30 million of  operating  loss
carry-forwards  that may be applied against future taxable income.  $2.3 million
of such  losses  expire in the year 2010,  $9.1  million in the year 2011,  $8.6
million in the year 2012 and the balance  ($10.0  million) the  following  year.
Based on our continuing  operating  losses, we wrote- off our deferred tax asset
during  1998.  During the third  quarter of 1999 we  recorded a  $1,200,000  tax
benefit  from the New Jersey NOL. We expect to realize  cash from our New Jersey
tax credit in early 2000.

We require substantial working capital to support our ongoing operations.  As is
common in the environmental services industry, payment for services rendered are
generally  received  pursuant to specific  draw  schedules  after  services  are
rendered.  Thus, pending the receipt of payments for services rendered,  we must
typically  fund  substantial  project  costs,  including  significant  labor and
bonding costs, from financing sources within and outside of the Company. Certain
contracts,  in particular those with United States  governmental  agencies,  may
provide for  payment  terms of up to 90 days or more and may require the posting
of  substantial  performance  bonds  which  are  generally  not  released  until
completion of a project.


                                       17
<PAGE>


Operations  were  historically  funded  through a combination  of operating cash
flow, term notes and bank lines of credit.  Since April of 1994, we have carried
no bank debt and have funded operations  principally  through the sale of equity
securities and securities  convertible into equity securities.  At September 30,
1999,  we had no bank debt and no  significant  long-term  debt and were funding
operations  entirely  through  cash on hand and  operating  cash flow  which was
supplemented by various borrowings and issuances of stock.

In order to meet working  capital needs during 1999, we have borrowed funds from
various parties, including officers, and have issued stock in payment of certain
trade payables.  At September 30, 1999, we owed a total of $249,000 primarily to
our two principal officers for funds advanced. There are no definitive repayment
terms  on such  amounts.  In June  1999,  we  borrowed  $400,000  from  existing
stockholders.  That loan was  repayable in August 1999 with interest at 6.5%. As
inducement for making that loan, we issued 125,000 shares of common stock to the
lenders.  $200,000  of the loan had been  repaid at  September  30, 1999 and the
balance  of that loan was paid  after the  quarter.  During  the  quarter  ended
September  30, 1999,  we issued  79,133  shares of common stock in settlement of
$323,000  of  accounts  payable  and  issued  62,000  shares of common  stock as
collateral to our surety in lieu of a $200,000 performance bond.

Other than funds provided by operations and the potential  receipt of funds from
the exercise of outstanding  warrants, we presently have no sources of financing
or commitments to provide  financing.  A total of  approximately  34,000 Class A
Warrants  (after  giving  effect  to the April  1999  reverse  split)  issued in
connection with our initial public offering were  outstanding and exercisable at
September  30, 1999.  Such  warrants are  exercisable  to purchase two shares of
common stock each for a price of $90.00,  or $45.00 per share. The warrants were
originally  exercisable until April of 1999 unless earlier called. We declared a
1-for-10 reverse split of our Common Stock and Class A Warrants  effective April
16,  1999  and  extended  the  term of the  Class A  Warrants  to April of 2000.
Exercise of the warrants  would provide  gross  proceeds of  approximately  $3.1
million and result in the issuance of  approximately  70,000 shares after giving
effect to the reverse split.  However,  given the current price of the Company's
Common Stock,  it is not expected that the Class A Warrants will be exercised in
the near future.

In  November  of 1998,  we paid  $600,000  to acquire a 49%  interest in Kortman
Polonia,  a Polish  company  with  substantial  real estate  holdings.  Kortmann
Polonia has initiated  discussions with various real estate developers and major
U.S.  retailers  with respect to the sale of various real estate  tracts and the
development and leasing of the remaining tracts.

In addition  to funding  requirements  to support  ongoing  operations,  we have
committed  substantial  capital  resources to  implementation  of the  strategic
initiative known as "Vision 2000." The focus of Vision 2000 is to position us as
a leading participant in the global energy and waste treatment market and in the
nuclear facility decommissioning and site revitalization market. The development
and initial  implementation of Vision 2000 initiatives have required substantial
capital  expenditures  and can be expected  to  continue to require  substantial
capital  expenditures in the future.  Direct investments in potential energy and
waste treatment projects undertaken under the Vision 2000 initiative,  excluding
corporate  overhead  allocable  to such  initiative,  totaled  approximately  $9
million at December 31, 1998.  Capital  expenditures  and other outlays to bring
proposed  projects  to an  operational  state are  expected  to far  exceed  the
investment to date. In particular,  the proposed El Salvador  Power Project,  is
expected  to  cost  approximately  $55  million  to  develop  and  will  require
substantial  funding beyond that which we can presently provide. We have entered
into discussions  with several  potential equity investors in, and have signed a
Memorandum of Understanding with a potential purchaser of, the El Salvador Power
Project. Similarly, in connection with our acquisition of a controlling interest
in the Georgia Power Project, we agreed to perform a technical evaluation on the
facility and,  depending on the results of that  evaluation,  to invest up to $9
million  over the life of the  facility  for  repairs  and  rehabilitation.  The
ability to successfully  bring the El Salvador Power Project,  and other similar
projects,  on line,  carry out any required  repairs and  rehabilitation  on the
Georgia  Power  Project  and  implement   other  Vision  2000   initiatives   is
substantially  dependent upon our ability to secure project  financing and other
financing.  While we believe that we will be able to attract adequate  financing
to develop the El Salvador Power Project and other anticipated projects, we have
no definitive  commitments to provide  financing for those projects and there is
no assurance that such  financing  will be available.  Other than funding Vision
2000  initiatives  and bonding  and other job costs,  we do not  anticipate  any
substantial  demands on our liquidity or capital  resources during the following
twelve months.


                                       18
<PAGE>

In  March of 1999,  our  management  appeared  before  a  Nasdaq  hearing  panel
regarding the possible  de-listing of our common stock for failure to maintain a
minimum  bid price of at least  $1.00.  In order to address  the  deficiency  in
minimum bid price, we proposed and have approved a 1-for-10 reverse split of our
common stock and warrants to be effective April 16, 1999. On May 7, 1999, NASDAQ
informed  us of their  decision  that  because of our failure to comply with the
minimum  $5,000,000  market  value of public float  requirement  for the past 37
consecutive  trading  days as of that  date,  that  effective  with  the open of
business of May 11, 1999,  our  securities  were  transferred  from the National
Market to the Small Cap Market, pursuant to the maintenance criteria.

We believe that our working capital, combined with the expected receipt of funds
from the  resolution of certain change orders and  litigation,  is sufficient to
meet our anticipated needs, other than project financing  requirements discussed
above,  for at least the following  twelve months,  including the performance of
all existing  contracts.  However,  as there is no assurance as to the timing or
amount of the receipt of funds from change orders,  litigation or other sources,
we may be required to seek new bank lines of credit or other  financing in order
to  facilitate  the  performance  of  jobs.  While  we  are  conducting  ongoing
discussions with various potential lenders with a view to establishing available
credit  facilities,  we  presently  have no  commitments  from any bank or other
lender to provide  financing  if such  financing  becomes  necessary  to support
operations.

Year 2000 Issue

We recognize the need to ensure that our  operations,  as well as those of third
parties with whom we conduct  business,  will not be adversely  impacted by Year
2000 software  failures.  Software failures due to processing errors potentially
arising  from  calculations  using the year 2000 date are a known  risk.  We are
addressing this risk to the availability and integrity of financial  systems and
the  reliability  of  operational  systems  through  a  combination  of  actions
including a review of all software applications,  desktop equipment network, and
telecommunications  products  used by the Company to  determine if they are Year
2000  compliant.  We will also send  questionnaires  to our major  customers and
suppliers to assess their Year 2000 readiness, review all contacts for year 2000
liability and will develop  remediation and contingency plans where appropriate.
We expect to complete this work by the end of the fourth quarter 1999.

The costs of achieving Year 2000  compliance to date have been immaterial to our
financial  position,  results of operations or cash flows.  We do not anticipate
that  additional  amounts  incurred in connection  with our Year 2000 compliance
program will be material to our financial condition or results of operations.

Due to the uncertainties involved, we cannot predict the impact of the Year 2000
on our operations.  Achieving Year 2000 compliance is dependent on many factors,
some of which are not within our  control,  including  without  limitation,  the
continuity  of service  provided by the  government,  utilities,  transportation
industry and other  service  providers.  Should one of these  systems  fail,  or
should our internal  systems or the internal  systems of one or more significant
vendors or  suppliers  fail to achieve  Year 2000  compliance,  our business and
results of operations could be adversely affected.

Impact of Inflation

Inflation has not been a major factor in our business since inception. There can
be no assurances that this will continue.  However,  it is anticipated  that any
increases in costs can be passed on to customers in the form of higher prices.

ITEM 3A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable



                                       19
<PAGE>

                            PART II-OTHER INFORMATION

ITEM 2.  Changes in Securities

     (a) On August 18, 1999, the Company established a reserve of 350,000 shares
of common stock for issuance to various vendors in payment for services provided
to the Company.  At various dates during the quarter  ended  September 30, 1999,
the Company  issued an aggregate of 141,133  shares of its common stock pursuant
to that reserve.

     (b) The securities were issued,  without an underwriter,  to a total of six
vendors of the Company and to one bonding company.

     (c) The securities  were issued in  satisfaction of amounts owed to vendors
of the  Company  totaling  $322,784  and as a deposit  in lieu of a bonding to a
bonding  company  in the  amount  of  $200,000.  No  commissions  were  paid  in
connection with the issuance of the securities

     (d) The securities were issued pursuant to the exemption from  registration
set  forth  in  Section  4(2) of the  Securities  Act of  1933.  The  securities
issuances were privately negotiated pursuant to settlement efforts with selected
vendors without any general  solicitation  or  advertising.  The securities bear
legends restricting the resale thereof.

ITEM 6.  Exhibits and Reports on Form 8-K

          (a) Exhibits

 Exhibit No.                            Description
-------------                          -------------

   2.1   Plan of Reorganization and Merger dated as of August 18, 1999 by and
         among the Company, IDM Merger Subsidiary and IDM/Fusion Holdings, Inc.
   2.2   Agreement and Plan of Merger dated as of August 18, 1999 by and among
         the Company, Fusion Networks, Inc., IDM/Fusion Holdings, Inc. and IDM/
         FNI
         Acquisition Corporation
   2.3   First Amendment to Agreement and Plan of Merger dated as of August 31,
         1999
   2.4   Second Amendment to Agreement and Plan of Merger dated as of September
         21, 1999
   2.5   Third Amendment to Agreement and Plan of Merger dated as of November 2,
         1999
   27.1  Financial Data Schedule

          (b) Reports on Form 8-K

                  None.


                                       20
<PAGE>

                                   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.

                                         IDM ENVIRONMENTAL CORP.


Dated:  November 22, 1999              By: /s/ Joel Freedman
                                           -------------------------------
                                           Joel Freedman, President


Dated: November 22, 1999               By: /s/ Michael Killeen
                                           -------------------------------
                                           Michael B. Killeen, Principal
                                           Financial and Accounting Officer


                                       21
<PAGE>