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, 1997

                                       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)


                                 (908) 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 October 31,  1997,  14,279,701  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, 1997 and
          December 31, 1996.............................................   1

          Consolidated Statements of Operations - For the nine
          months ended September 30, 1997 and September 30, 1996........   2

          Consolidated Statements of Operations - For the three
          months ended September 30, 1997 and September 30, 1996........   3

          Consolidated Statements of Cash Flows - For the nine
          months ended September  30, 1997 and September 30, 1996.......   4

          Notes to Consolidated Financial Statements....................   5

     Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations.......................   8

     Item 3.  Quantitative and Qualitative Disclosures about
              Market Risk...............................................  11

PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings.........................................  12

     Item 6.  Exhibits and Reports on Form 8-K..........................  12

SIGNATURES..............................................................  13

<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM I - FINANCIAL STATEMENTS

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                                              (Unaudited)
                                                                                  September 30,               December 31,
ASSETS                                                                                 1997                       1996
                                                                             ========================    ==================
<S>                                                                          <C>                         <C>
Current Assets:
  Cash and cash equivalents                                                                $5,248,370            $1,001,254
  Accounts receivable, net of allowance for doubtful accounts of $200,000                   6,589,390             5,626,208
  Stock subscription receivable                                                               784,483               775,862
  Notes receivable - current                                                                1,279,553             1,274,773
  Inventory                                                                                 1,182,517             1,182,517
  Costs and estimated earnings in excess of billings                                          647,431             2,595,107
  Bonding deposits                                                                              8,998                55,472

  Deferred income taxes                                                                     3,609,000             2,609,000
  Due from officers                                                                           251,769               208,676
  Prepaid expenses and other current assets                                                 1,017,373               945,624
     Total Current Assets                                                                  20,618,884            16,274,493

Investment in Affiliate, at cost                                                            1,300,000             1,300,000
Notes Receivable - long term                                                                1,597,851             1,572,238
Unamortized Debt Discount                                                                   4,511,901                     -
Deferred Issuance Costs, net                                                                  444,318                     -
Property, Plant and Equipment, net                                                          2,358,482             2,742,650
Other Assets                                                                                  660,880               313,246
                                                                             ------------------------    ------------------
                                                                                          $31,492,316           $22,202,627
                                                                             ========================    ==================
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Current portion of long-term debt                                                          $589,362              $351,127
  Accounts payable and accrued expenses                                                     4,328,631             7,105,827
  Billings in excess of costs and estimated earnings                                          160,064                86,496
                                                                             ------------------------    ------------------
     Total Current Liabilities                                                              5,078,057             7,543,450

Long-Term Debt                                                                                389,992               164,034
7% Convertible Note                                                                         3,025,000                     -

Minority Interest                                                                           1,034,483             1,034,483
                                                                             ------------------------    ------------------
      Total Liabilities                                                                     9,527,532             8,741,967
                                                                             ------------------------    ------------------
Commitments and Contingencies

Stockholders' Equity:
  Convertible  preferred  stock,  authorized  1,000,000  shares
   $1.00 par value, issued and outstanding 270 shares in 1997
   stated at conversion value of $10,000 per share                                          2,700,000                     -

  Common stock, authorized 20,000,000 shares $.001 par value, issued
   and outstanding 13,946,254                                                                  13,946                 9,603
  Additional paid-in capital                                                               37,165,906            25,359,465
  Retained earnings (deficit)                                                            (17,915,068)          (11,908,408)
                                                                                           21,964,784            13,460,660

                                                                                          $31,492,316           $22,202,627
                                                                             ========================    ==================
</TABLE>


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


                                                                               1
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   For the Nine Months Ended September 30,
                                                   ---------------------------------------
                                                         1997                    1996
                                                   ---------------          -------------
<S>                                                <C>                       <C>
Revenue:
  Contract Income                                      $13,163,032            $15,055,754
  Sale of Equipment                                         28,550                196,805
                                                        13,191,582             15,252,559
                                                   ---------------          -------------
Cost of Sales:
  Direct job costs                                      12,311,445             15,768,793
  Cost of equipment sales                                   22,413                 81,933
                                                        12,333,858             15,850,726
                                                   ---------------          -------------
Gross Profit (Loss)                                        857,724              (598,167)
                                                   ---------------          -------------
Operating Expenses:
  General and administrative expenses                    5,835,451              5,945,932
  Depreciation and amortization                            539,412                560,057
                                                         6,374,863              6,505,989
                                                   ---------------          -------------
Income (Loss) from Operations                          (5,517,139)            (7,104,156)

Other Income:
  Interest income (expense)                              (252,674)                 23,095
                                                   ---------------          -------------
Income (Loss) before Provision (Credit)
 for Income Taxes                                      (5,769,813)            (7,081,061)

Provision (Credit) for Income Taxes                    (1,000,000)            (1,190,000)
                                                   ---------------          -------------
Net Income (Loss)                                      (4,769,813)            (5,891,061)

Preferred Stock Dividends including
 amortization of beneficial conversion
 feature of $1,109,589 being amortized
 over 180 days                                           1,236,847                      -
                                                   ---------------          -------------
Net Income (Loss) on Common Stock                     ($6,006,660)           ($5,891,061)
                                                   ===============          =============
Earnings (Loss) per Share:
  Primary earnings (loss) per share                        ($0.59)                ($0.77)
                                                   ===============          =============
  Fully diluted earnings (loss) per share                  ($0.59)                ($0.77)
                                                   ===============          =============
  Primary common shares outstanding                     10,173,582              7,635,416
                                                   ===============          =============
  Fully diluted common shares outstanding               10,173,582              7,635,416
                                                   ===============          =============
</TABLE>


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


                                                                               2
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                 For the Three Months Ended September 30,
                                                 ----------------------------------------
                                                       1997                     1996
                                                 ----------------          --------------
<S>                                              <C>                       <C>
Revenue:
  Contract Income                                      $5,368,831             $3,976,763
  Sale of equipment                                             -                 44,005
                                                        5,368,831              4,020,768
                                                 ----------------          -------------
Cost of Sales:
  Direct job costs                                      4,931,358              4,393,869
  Cost of equipment sales                                       -                  9,089
                                                        4,931,358              4,402,958
                                                 ----------------          -------------

Gross Profit (loss)                                       437,473               (382,190)
                                                 ----------------          -------------

Operating Expenses:
  General and administrative expenses                   1,804,723              2,355,922
  Depreciation and amortization                           163,571                177,812
                                                        1,968,294              2,533,734
                                                 ----------------          -------------

(Loss) from Operations                                (1,530,821)            (2,915,924)

Other Income (Expense):
  Interest income (expense)                             (290,208)                  7,224
                                                 ----------------          -------------

Income (Loss) before Provision (Credit)
 for Income Taxes                                     (1,821,029)            (2,908,700)

Provision  (Credit) for Income Taxes                    (320,000)              (490,000)
                                                 ----------------          -------------

Net Income (Loss)                                     (1,501,029)            (2,418,700)

Preferred Stock Dividends including
 $265,068 amortization of beneficial
 conversion feature of $1,109,589
 being amortized over 180 days                            312,785                      -
                                                 ----------------          -------------

Net Income (Loss) on Common Stock                    ($1,813,814)           ($2,418,700)
                                                 ================          =============

Earnings (Loss) per Share:
  Primary earnings (loss) per share                       ($0.16)                ($0.27)
                                                 ================          =============

  Fully diluted earnings (loss) per share                 ($0.16)                ($0.27)
                                                 ================          =============

  Primary common shares outstanding                    11,296,671              8,879,023
                                                 ================          =============

  Fully diluted common shares outstanding              11,296,671              8,879,023
                                                 ================          =============
</TABLE>


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


                                                                               3
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      For the Nine Months Ended September 30,
                                                      ---------------------------------------
                                                            1997                    1996
                                                      ----------------          -------------
<S>                                                    <C>                      <C>
Cash Flows from Operating Activities:
  Net Income (Loss)                                       ($4,769,813)          ($5,891,061)
  Adjustments to reconcile net income (loss)
   to net cash used in operating activities:
      Deferred Taxes                                       (1,000,000)           (1,164,392)
      Depreciation and amortization                           539,412               560,058
      Decrease (Increase) In:
        Accounts receivable                                  (963,182)           (1,342,466)
        Inventory                                                   -                     -
        Notes receivable                                      (39,014)             (279,869)
        Costs and estimated earnings in excess
         of billings                                        1,947,676             3,168,692
        Prepaid expenses                                     (150,446)              103,344
        Bonding Deposits                                       46,474               883,163
        Recoverable income taxes                                    -               959,459
        Other current assets                                 (347,634)              (15,742)
        Debt Discount                                         206,849                     -
      Increase (Decrease) In:
        Accounts payable and accrued expenses              (2,768,679)           (1,734,714)
        Billings in excess of costs and
         estimated earnings                                    73,568              (765,058)
                                                        --------------          -----------
          Net cash (used in) operating
           activities                                      (7,224,789)           (2,833,654)
                                                        --------------          -----------
Cash Flows from Investing Activities:
  Acquisition of property, plant and equipment                (39,820)             (687,592)
  Proceeds from disposal of property, plant
   and equipment                                               22,368                     -
  Acquisition of other assets                                        -           (1,768,160)
  Increase (decrease) of loans and advances
   to officers                                                (43,093)             (261,282)
                                                        -------------           -----------
      Net cash (used in) investing activities                 (60,545)           (2,717,034)
                                                        -------------           ----------
Cash Flows from Financing Activities:
  Preferred stock dividends                                  (127,258)                    -
  Long-term debt borrowing                                    938,993                     -
  Net proceeds from convertible notes issuance              2,780,000                     -
  Net proceeds from convertible preferred
   stock issuance                                           2,722,500                     -
  Principal payments and current maturities
   of long-term debt                                         (474,800)             (272,998)
  Proceeds from exercise of stock options
   and warrants                                             5,693,015             8,713,299
                                                        -------------           -----------
      Net cash provided by financing activities            11,532,450             8,440,301
                                                        -------------           -----------
Increase (Decrease) in Cash and Cash Equivalents            4,247,116             2,889,613
Cash and Cash Equivalents, beginning of period              1,001,254                83,286
                                                        -------------           -----------
Cash and Cash Equivalents, end of period                   $5,248,370            $2,972,899
                                                        =============           ===========
Supplementary Disclosures of Cash Flow
 Information:
Cash paid during the period for:
  Interest expense                                            $231,707              $42,911
                                                        ==============          ===========
  Income taxes                                                       -                    -
                                                        ==============          ===========
 Supplemental Disclosure of Noncash Investing
  and Financing Activities:
  Property, plant and equipment financing                            -             $163,605
                                                        ==============          ===========
  Conversion of convertible notes to common stock             $300,000           $2,828,037
                                                        ==============          ===========
  Beneficial conversion feature-debt discount               $4,718,750                    -
                                                        ==============          ===========
</TABLE>

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

                                                                               4
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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 its  wholly  owned  and
     majority owned  subsidiary  companies.  The December 31, 1996 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, 1996. 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, 1997.

2.   CONTINGENCIES

     On August 15, 1996, the U.S.  Department of Labor,  Occupational Safety and
     Health  Administration  ("OSHA") issued a willful citation and notification
     of penalty in the 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. The Company
     is contesting the Citations and Notification of Penalty.

     In November of 1996, a shareholder filed a class action lawsuit against the
     Company and certain directors and officers of the Company.  The suit, filed
     in the Superior  Court of New Jersey,  Middlesex  County,  alleges that the
     Company  disseminated  false and  misleading  financial  information to the
     investing  public  between  March 27, 1996 and  November 18, 1996 and seeks
     damages in an unspecified amount to compensate  investors who purchased the
     Company's  common  stock  between  the  indicated  dates  as  well  as  the
     disgorgement  of profits  allegedly  received by the individual  defendants
     from sales of common stock during that period.  The Company  believes  this
     action is without merit and intends to vigorously contest this matter.

     On February  11,  1997 the  Company  was served  with a lawsuit  naming the
     Company as a  co-defendant  in a wrongful death cause of action arising out
     of the accidental death of an employee of a subcontractor.  The suit, filed
     in the Federal  District  Court for the  Northern  District of Indiana,  is
     based on the same facts as gave rise to the  aforementioned  administrative
     proceeding  instituted  by OSHA.  Management  believes that the suit, as it
     relates to the Company, is without merit, and intends to vigorously contest
     this claim.  In addition  the  Company  has  insurance  in place to protect
     against such events.

3.   EARNINGS PER SHARE

     The Company is calculating earnings per share to comply with the recent 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 as a dividend
     at the issue date (the  beneficial  conversion  feature was $1,109,589) and
     was  amortized as a dividend  over a 180 day period from February 12, 1997,
     the issue date of the convertible preferred stock.

4.   CONVERTIBLE NOTES

     On August 13, 1997, the Company completed a private placement of $3,025,000
     of 7% Convertible Notes (the "Convertible  Notes") and 2,675,000 three year
     Warrants (the "Three Year Warrants").

     The Convertible  Notes are  convertible  into Common Stock at the lesser of
     (i)  $2.75 per share or (ii) 75% of the  average  closing  bid price of the
     Common Stock during the five  trading days prior to  conversion.  The Three
     Year  Warrants  are  exercisable  for a three year  period at the lesser of
     $3.00 per share or the lowest  conversion  price of the Convertible  Notes.
     Conversion of the Convertible Notes and exercise of the Three Year Warrants
     was  subject to  the issuance  of a maximum of  1,997,130  shares of Common


                                                                               5
<PAGE>
     Stock  on  conversion  unless  the  shareholders  of the  Company  approved
     issuances  beyond  that  level upon  conversion.  Shareholder  approval  of
     issuances  beyond  1,997,130  shares  was  received  on  November  4, 1997.
     Further,  the Company has the right, upon notice to the holders,  to redeem
     any Convertible  Notes submitted for conversion at a price of $2.75 or less
     at 125% of the principal amount of such Convertible  Notes. The Convertible
     Notes  pay  interest  at 7%  payable  quarterly  and  on  conversion  or at
     redemption in cash or Common Stock, at the Company's  option.  In the event
     that  a  registration   statement   covering  the  shares   underlying  the
     Convertible  Notes has not been  declared  effective  within 90 days or 180
     days after the issuance of the Convertible  Notes, the interest rate on the
     Convertible  Notes shall be  increased to 18% and 24%,  respectively,  from
     those dates until such a registration statement becomes effective.

     The value, totaling $4,718,750, of the discounted conversion feature on the
     notes and the value of the warrants has been  accounted  for as  additional
     interest via a debit to debt discount and a credit to paid-in-capital.  The
     debt discount has been  calculated as the fixed discount from the market at
     the date of sale  based  upon the common  stock's  trading  price of $4 per
     share on August 13th.  This interest is being amortized over the three year
     life of the debt.  During the third  quarter  $206,849  was  amortized  and
     recorded as interest expense.

5.   REVENUE RECOGNITION AND USE OF ESTIMATES

     The  consolidated  financial  statements have been prepared on the basis of
     the  percentage  of  completion  method of  accounting.  Under this  method
     contract revenue is determined by applying to the total estimated income on
     each contract,  a percentage  which is equal to the ratio of contract costs
     incurred to date to the most recent estimate of total costs which will have
     been  incurred upon the  completion  of the  contract.  Costs and estimated
     earnings  in  excess  of  billings  represents   additional  earnings  over
     billings,  based upon percentage completed,  as outlined above.  Similarly,
     billings  in excess of costs and  estimated  earnings  represent  excess of
     amounts billed over income  recognized.  Actual results can differ from the
     estimates. Losses anticipated on contracts,  excluding period costs, should
     be charged to operations as soon as they are evident.  In the first quarter
     of 1997, the Company recognized  revenues  equivalent to its costs incurred
     on its  Davy  contract  based  on  approximately  one  million  dollars  in
     unapproved change orders. The Company originally reversed these revenues in
     the second quarter when it became aware that the change orders had not been
     approved.  The Company is aggressively pursuing its claims. Future revenues
     will be recognized when this claim is finally  settled.  Also, in the first
     quarter the Company  recorded  revenue of $3.5 million dollars for the sale
     of four generators on a sale agreement  dated March 28, 1997.  Based on the
     Company's discussions with the SEC accounting staff, the Company has agreed
     to restate its quarterly  financial  statements  for the first two quarters
     "because   recognizing   change  orders  as  revenues  was   tantamount  to
     recognizing gain  contingencies  which is expressly  prohibited by SFAS 5";
     and,  "because the revenue on the sale of the four generators should not be
     recognized until the period they are shipped." The disclosure  requirements
     of the APB  opinion  number 20 of  earnings  (loss) per  share,  net income
     (loss), and income tax (credit) are as follows:


                                                                               6
<PAGE>
<TABLE>
<CAPTION>
                                                                              1997
                                                  ------------------------------------------------------------
                                                      First                 Second                  Six
                                                     Quarter                Quarter                Months
                                                  --------------       -----------------      ----------------
<S>                                               <C>                  <C>                    <C>
Income (Loss) before Provision (Credit)
 for Income Taxes                                     1,722,311             (1,936,487)             (214,176)
Change                                               (4,306,608)               572,000            (3,734,608)
                                                  --------------       -----------------      ----------------
Amount Restated                                      (2,584,297)            (1,364,487)           (3,948,784)

Provision (Credit) for Income Taxes                     300,000               (340,000)              (40,000)
Change                                                 (750,000)               110,000              (640,000)
                                                  --------------       -----------------      ----------------
Amount Restated                                        (450,000)              (230,000)             (680,000)

Net Income (Loss)                                     1,422,311             (1,596,487)             (174,176)
Change                                               (3,556,608)               462,000            (3,094,608)
                                                  --------------       -----------------      ----------------
Amount Restated                                      (2,134,297)            (1,134,487)           (3,268,784)

Net Income (Loss) on Common Stock                     1,105,544             (2,203,782)           (1,098,238)
Change                                               (3,556,608)               462,000            (3,094,608)
                                                  --------------       -----------------      ----------------
Amount Restated                                      (2,451,064)            (1,741,782)           (4,192,846)

Earning (Loss) Per Share                                  $0.12                 ($0.23)               ($0.11)
Change                                                   ($0.38)                 $0.05                ($0.34)
                                                  --------------       -----------------      ----------------
Amount Restated                                          ($0.26)                ($0.18)               ($0.45)
</TABLE>

Also, the Company has or will take the following steps to improve its accounting
controls for contract revenue and cost reporting.

1.   The Company will not recognize any revenues on unapproved change orders.

2.   The  Company  will add another  CPA to its  accounting  staff to manage the
     contract revenue and cost reporting systems.

3.   The Company  has  implemented  a new  contract  revenue and cost  reporting
     system  whereby  standardized  reports on detail job costs incurred to date
     and revenues billed are provided to project  directors for all contracts on
     a weekly basis.  Additionally,  standardized  contract  cost  summaries are
     being prepared weekly by project  directors which include costs incurred to
     date and estimated  costs to completion . These reports will be reviewed at
     weekly meetings.

4.   The  Company's  Audit  Committee  has  requested  our  independent   public
     accountants  to review the  Company's  current  contract  revenue  and cost
     reporting systems and to make recommendations to improve the systems and to
     assist in implementing those recommendations.  The accountants started this
     review the week ended  November 14th and anticipate  completion  before the
     end of the year.

     The  Company  provided  a  reserve  of  $350,000  for  the  current  period
     associated   with  accounting  for  potential  cost  overruns  on  existing
     contracts.   The  Company  is  currently  reviewing  with  its  independent
     accountants various methods to modify its present method of recording costs
     under the percentage of completion  method to report on a more conservative
     basis.  It is anticipated  that the final agreed upon method will recognize
     little if any gross margin early in the job until  sufficient  progress has
     been made to verify the probable accuracy of cost estimates prepared during
     the bidding  process.  A contingency  factor based on total estimated costs
     will be provided. The Company anticipates that probably half of this factor
     would be reversed  after the  contract is 75% complete and the balance when
     the contract is completed.

     The Company's management believes that the successful implementation of all
     of the  procedures  above  will  improve  the  accuracy  of  the  financial
     reporting and help to eliminate  the prior  problem of cost overruns  being
     reported late in a contract's life cycle.


                                                                               7
<PAGE>
Item 2. Management's  Discussion and Analysis Of Financial Condition And Results
        Of Operations.

This report contains  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of Securities  Exchange Act of
1934.  Actual  results  could  differ  materially  from those  projected  in the
forward-looking  statements  as a result of the risk  factors  set forth in this
report.

Third Quarter of 1997 Compared with Third Quarter of 1996

The Company's total revenues  increased by  approximately  33.5% from $4,021,000
for the quarter ended  September  30, 1996 to  $5,369,000  for the quarter ended
September 30, 1997.  Contract  service  income  increased  during the quarter by
35.0% from  $3,977,000 in 1996 to  $5,369,000 in 1997.  The increase in contract
service  income and total  revenues  is  attributable  to lower  volume in 1996.
Surplus equipment revenues decreased 100% from $44,000 in 1996 to none in 1997.

Direct  job costs  increased  by  approximately  12.2% from  $4,394,000  for the
quarter ended  September 30, 1996 to $4,931,000 for the same period in 1997. The
primary  elements of such  increase in job costs were job  salaries and material
and  supplies.  The  increase in job costs was  attributable  to the increase in
contract service revenues during the quarter.  Cost of equipment sales decreased
from $9,000 in 1996 to none in 1997.

General and administrative  expenses decreased 23.4 % from $2,356,000 during the
quarter ended  September 30, 1996 to $1,805,000  during the same period in 1997.
The decrease in general and  administrative  expense was  attributable  to audit
refunds on workers compensation insurance.

In addition to its  operating  income and  expenses,  the Company  reported  net
interest income/(expense) of ($290,000) for the quarter ended September 30, 1997
as compared  to net  interest  income/(expense)of  $7,000 for the same period in
1996. The decrease in net interest  income/(expense) was primarily  attributable
to  $206,000  in  interest  expense  for  the  amortization  of  the  beneficial
conversion feature on the convertible notes which is being treated as additional
interest over the life of the debt.

As a result of the  foregoing,  the  Company  reported  a loss  before  taxes of
$1,821,000 and a net loss of $1,501,000 for the quarter ended September 30, 1997
as compared to a loss before taxes of  $2,909,000  and a net loss of  $2,419,000
for the same  quarter in 1996.  The net loss  attributable  to common  stock was
increased by the preferred stock dividends  ($48,000) and an accounting  "deemed
dividend" ($265,000) arising from the amortization of the beneficial  conversion
feature of the Company's  Series B Preferred  Stock.  The Company is calculating
earning per share to comply with the recent 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 as a  dividend  at the issue  date (the  beneficial  conversion
feature  totaling  $1,109,589)  and has  amortized  the dividend  over a 180 day
period from  February  12,  1997,  the issue date of the  convertible  preferred
stock.

Nine Months Ended  September 30, 1997 Compared with Nine Months Ended  September
30, 1996

Total revenues  decreased by  approximately  13.5% from $15,253,000 for the nine
months  ended  September  30, 1996 to  $13,192,000  for the same period in 1997.
Contract service income decreased during the period by 12.6% from $15,056,000 in
1996 to $13,163,000 in 1997 due to lower volume in the first half of 1997.

Surplus equipment  revenues  decreased 85.3% from $197,000 in 1996 to $29,000 in
1997 on lower volume.

Direct job costs decreased by  approximately  22% from  $15,769,000 for the nine
months ended  September 30, 1996 to $12,311,000 for the same period in 1997. The
decrease  was  attributable  to lower volume and the primary  elements  were job
salaries and materials and supplies.

Cost of  equipment  sales  decreased  from $82,000 in 1996 to $22,000 in 1997 on
lower volume.

General and  administrative  expenses  decreased 1.9% from $5,946,000 during the
nine months ended  September  30, 1996 to  $5,835,000  during the same period in
1997.  The  decrease  was  primarily  attributable  to audit  refunds on workers
compensation insurance.


                                                                               8
<PAGE>
The Company  reported a decrease in net interest  income/(expense)  from $23,000
for the nine months ended  September 30, 1996 to ($253,000)  for the same period
in  1997.  See  the  quarterly  comparison  for  the  discussion  of the  factor
contributing to the decrease.

As a result of the  foregoing,  the  Company  reported  a loss  before  taxes of
$5,770,000  and a net loss after tax of  $4,770,000  for the nine  months  ended
September  30, 1997 as compared to a loss before taxes of  $7,081,000  and a net
loss after taxes of $5,891,000 for the same period in 1996.

The net loss attributable to common stock was increased by $127,000 in preferred
stock  dividends  and  $1,110,000  amortization  of  the  beneficial  conversion
feature.

Material Changes in Financial Condition, Liquidity and Capital Resources.

At September  30, 1997,  the Company had a backlog  totaling  approximately  $43
million  compared to a backlog of  approximately  $42 million at  September  30,
1996. The largest  component of the Company's  backlog at September 30, 1997 was
$15 million for the East Dam project.

In addition to its existing  backlog,  the Company is presently  bidding on, and
intends to bid on numerous projects to replace revenues from projects which will
be completed  during 1997 and to increase  the total  dollar  volume of projects
under contract.  Management anticipates that the Company's efforts to bid on and
secure new contracts will focus on projects  which can be readily  serviced from
the three  regional  offices  opened by the  Company  during  1994 and 1995.  In
addition,  the Company has submitted  proposals on several  large  international
plant relocation projects. The Company's regional offices,  particularly the Oak
Ridge, Tennessee, Los Alamos, New Mexico, and Boston,  Massachusetts offices are
strategically located in areas having a high concentration of prospective public
and private  remediation  sites. While bidding to perform services at such sites
is expected to be highly  competitive,  management  believes  that the Company's
existing  presence  on  projects  at these  locations  combined  with its proven
expertise  and  resources  will enhance the  Company's  chances of  successfully
bidding on substantial new projects.

The  Company  had  working  capital  of  $15,541,000,  including  cash  and cash
equivalents  balances of  $5,248,000  at September  30, 1997.  This  compares to
working  capital of $8,731,000  and a cash balance of $1,001,000 at December 31,
1996. The increase in working capital is primarily  attributable to $5.7 million
in proceeds  from  exercise of stock  options and  warrants,  $3 million sale of
Series B  Convertible  Preferred  Stock in  February  1997,  the $3.025  million
issuance of convertible  notes in August 1997, less the $4.8 milion net loss for
the nine months.

Quarter-end  receivables as a percentage of third quarter  revenue was 122.7% in
1997 compared to 134.9% in the same period of 1996.  Year-end  receivables  as a
percentage of fourth quarter revenue increased  substantially from 53.0% in 1994
to 103.5% in 1995 and 157% in 1996. This ratio was 82% at December 31, 1993. The
ratio  dropped to 53% at  December  31,  1994  because  the  Company  received a
$4,184,000 payment on a major contract on December 23, 1994. If this payment had
been received after year end, the ratio would have been a more comparable 98.4%.

Unbilled revenue as a percentage of quarterly contract income was 0% at December
31,  1993,  31% at December  31,  1994,  56% at December  31,  1995,  and 27% at
December 31, 1996 and 12% at September  30, 1997.  Also,  accounts  payable have
constantly  decreased  since  1994  whereas  accounts  receivable  and  unbilled
revenues have increased  substantially during this period. Prior to going public
in April 1994,  most of the  Company's  revenues  were  generated in the private
sector.  Many of these contracts had substantial initial  mobilization  payments
and generated positive cash flow during the life of the contract. Since then the
company has been successful,  as a result of its growth strategy, in obtaining a
number of government  contracts at major  Department of Energy and Department of
Defense  sites.  This work was obtained as a direct  result of opening three new
regional  offices.  The experience  with these  contracts has been negative cash
flows until we near contract completion.  This is due to the requirement that we
submit a schedule and a schedule of values at the  beginning of the job and bill
according  to the percent  complete of each item in the schedule of values - not
the costs we have  incurred.  Our jobs of any size are at a risk of being  front
end cost loaded when there is little  progress to report  (i.e.,  we cannot bill
until the structure is demolished).  The Company is aware of this problem and is
trying to remedy it by maximizing  mobilization costs in the schedule of values,
requiring  subcontractors to bill on the same basis and aggressively negotiating
better (less front end cost loaded) schedule of values.


                                                                               9
<PAGE>
Initially the Company tried to increase  payment terms to vendors by paying them
after the Company  received  our  payment.  This method was  unsuccessful.  Many
vendors put the Company on a COD basis and its D&B rating weakened because D&B's
file showed  "increased  slowness in the company's  payment  record." This lower
rating  hurt the  Company in attempts  to  establish  credit  with new  vendors.
Because IDM is a growing company and trying to establish good relationships with
its vendors,  the company is now paying its vendors within terms to fifteen days
late and attempting to improve its D&B "paydex  rating." The paydex rating of 60
is much worse than the  average of the lower  quartile  for the  industry  of 68
(median for the industry is 75).

Inventory of $1,182,000 at September  30, 1997 remains  unchanged  from December
31, 1996.

The Company's  inventory  consists of nineteen (19)  generator sets with a total
electrical  capacity of 242,500  kilowatts per hour (KWH).  The estimated market
price of the Company's  generator  inventory is twelve million  dollars.  Twelve
(12) of the generators are steam driven and range in size from 12,500  kilowatts
to 33,000  kilowatts  (KW).  Seven (7) of the  generators  are diesel driven and
range in size from 1,000 to 9,000  kilowatts  (KW).  These generator sets should
not be  considered  as  obsolete  or  outdated  inventory  since its  design and
technology  has not changed  much over the years.  They are very long lead items
(15-18 months),  experience and project  specific and as such they are not to be
compared with disposable  items.  It is the Company's  intent to incorporate two
(2) 15,000 KW generator sets (steam driven) in the Company's pending El Salvador
waste to energy  project.  In future  projects,  the Company will try to use the
balance  of the 15,000 KW  generator  sets and the 12,500 KW and 33,000 KW sets.

The Company had  available at December 31, 1996,  approximately  $11,575,000  of
operating loss carry-forwards that may be applied against future taxable income.
$2,350,000  of such losses expire in the year 2010 and the balance the following
year.  Based  on the  reported  loss to date it will  take  approximately  $10.6
million  dollars in future taxable  income to recover the reported  deferred tax
asset.

At  September  30,  1997,  the  Company's  only long term debt was  $390,000  in
installment debt secured by job equipment.

During the quarter ended September 30, 1997, the Company made  additional  loans
of $370,000  repayable  upon demand with interest at 9.25% to its ninety percent
owned subsidiary,  Global Waste & Energy, Inc. ("Global Delaware"). In addition,
IDM,  through a wholly-owned  subsidiary of Global Delaware  ("Global  Alberta")
loaned  $160,000  (Canadian)  to  Continental  Waste  Conversion,  Inc.  ("CWC")
repayable  in 18  consecutive  installments  commencing  January  1,  1997  with
interest  at 7.5%  per  annum.  As of the date of this  report,  CWC has made no
payment and the loan is  delinquent.  On April 1, 1997 CWC commenced  litigation
against the  Company and two of its  subsidiaries,  Global  Delaware  and Global
Alberta,  and the two principal officers of Global Alberta. CWC alleges that the
agreements  entered  into whereby CWC granted to Global  Delaware the  exclusive
world wide rights  (excluding  Canada) to the  proprietary  Kocee Gas  Generator
waste  treatment  technology  in exchange for a 10% interest in Global  Delaware
should  be  voided  because  amongst  other  claims  CWC did not  obtain  proper
approvals and the transaction was not consummated on an arms length basis. Their
claim  alleges  the loss of  revenues  estimated  at $30  million.  The  Company
believes  this claim is without  merit and intends to  vigorously  contest  this
claim.  On September 19, 1997,  the Company was awarded  interim  judgement with
regard to the CWC claims.

Other than funding the Company's power  generating  projects,  bonding and other
job costs  the  Company  does not  anticipate  any  substantial  demands  on the
liquidity  or capital  resources  of the  Company  during the  following  twelve
months.

Since 1994,  the Company has  consistently  generated  negative  operating  cash
flows.  The  primary  reason  for  this  was  due to  the  Company's  policy  of
successfully bidding new work at lower than normal margins in order to penetrate
strategic markets serviced by the Company's newly opened regional  offices.  Now
that the Company is established  in these markets,  the Company has been bidding
work at normal margins. Management of the Company believes, based on the current
backlog of work and expected work to be awarded based on bids outstanding,  that
future operating cash flows will be positive.


                                                                              10
<PAGE>
As a result of the Company's  negative  operating  cash flows,  the Company has,
from time to time, sought additional  capital to support  operations and growth.
During  the  first  half of 1997,  the  Company  sold  300  shares  of  Series B
Convertible  Preferred  Stock for $3.0 million.  The Series B Preferred Stock is
convertible  into Common Stock at a price based on the lesser of a predetermined
percentage  of the market  price at closing or a  predetermined  discount to the
market  price of the Common  Stock over the five  trading-day  period  preceding
conversion.  The current conversion price of the Series B Preferred Stock is the
lesser of $2.225 or 73% of the average  closing  price of the Common  Stock over
the five trading-day period preceding  conversion.  The Series B Preferred Stock
pays a 7% dividend  payable on  conversion  or at  redemption  in cash or Common
Stock, at the Company's  option.  Conversions are subject to the Company's right
to redeem at  $12,200  per share any Series B  Preferred  Shares  submitted  for
conversion at a price of $1.80 per share or less. In  conjunction  with the sale
of the Series B Preferred  Stock,  the Company  undertook to file a registration
statement  covering the resale by the holders of Common Stock issuable  pursuant
to the terms of the  Series B  Preferred  Stock.  Pursuant  to the terms of such
undertaking,  the Company is  obligated to pay to the holders two percent of the
face  amount of the  preferred  stock per  month,  payable  in cash or in Common
Stock,  commencing  approximately  May 15, 1997 until the required  registration
statement becomes effective. As of November 19, 1997, the registration statement
had not yet been declared effective.

On August 13, 1997, the Company  completed a private  placement of $3,025,000 of
7% Convertible Notes (the "Convertible Notes") and 2,675,000 three year Warrants
(the "Three Year Warrants").  The Convertible  Notes are convertible into Common
Stock at the  lesser of (i) $2.75 per share or (ii) 75% of the  average  closing
bid price of the Common Stock during the five trading days prior to  conversion.
The Three Year Warrants are exercisable for a three year period at the lesser of
$3.00  per  share  or the  lowest  conversion  price of the  Convertible  Notes.
Conversion of the Convertible  Notes and exercise of the Three Year Warrants was
subject to the  issuance  of a maximum of  1,997,130  shares of Common  Stock on
conversion  unless the shareholders of the Company approved issuance beyond that
level upon conversion.  At a special  shareholders' meeting on November 4, 1997,
the  shareholders  approved  the  issuance  of shares  in  excess of  1,997,130.
Further,  the Company has the right,  upon notice to the holders,  to redeem any
Convertible  Notes  submitted for conversion at a price of $2.75 or less at 125%
of the principal  amount of such Convertible  Notes.  The Convertible  Notes pay
interest at 7% on conversion  or at  redemption in cash or Common Stock,  at the
Company's option. In the event that a registration statement covering the shares
underlying the Convertible Notes has not been declared  effective within 90 days
or 180 days after the issuance of the  Convertible  Notes,  the interest rate on
the  Convertible  Notes shall be  increased to 18% and 24%,  respectively,  from
those  dates  until  such a  registration  statement  becomes  effective.  As of
November  19,  1997,  the  registration  statement  had  not yet  been  declared
effective.

Management believes that the Company's working capital following its August 1997
Convertible Note placement is sufficient to meet the Company's anticipated needs
for at least the  following  twelve  months,  including the  performance  of all
existing contracts of the Company. However, as the Company is presently pursuing
bids on multiple  large  projects,  the Company may be required to seek new bank
lines of credit or other  financing in order to facilitate  the  performance  of
jobs if the volume and size of projects being performed by the Company increases
substantially.  While the Company is conducting ongoing discussions with various
potential lenders with a view to establishing  available bank lines of credit if
and  when  needed  to  support  future  growth,  the  Company  presently  has no
commitments from any bank or other lender to provide financing if such financing
becomes necessary to support growth.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     Not Applicable.


                                                                              11
<PAGE>
Item 1. Legal Proceedings

     On April 1, 1997  Continental  Waste  Conversion,  Inc.  ("CWC")  commenced
     litigation against the Company and two of its subsidiaries,  Global Waste &
     Energy,  Inc., Delaware and Global Waste & Energy,  Inc., Alberta,  and the
     two principal  officers of Global Alberta.  CWC alleges that the agreements
     entered into whereby CWC granted to Global  Delaware  the  exclusive  world
     wide rights (excluding Canada) to the proprietary Kocee Gas Generator waste
     treatment  technology  in exchange  for a 10%  interest in Global  Delaware
     should be voided  because  amongst  other claims CWC did not obtain  proper
     approvals and the  transaction was not consummated on an arms length basis.
     Their claim  alleges  the loss of revenues  estimated  at $30  million.  On
     September  19,  1997,  the Company was awarded an interim  injunction  with
     regard to CWC.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

          27.1 Financial Data Schedule

     (b)  Reports on Form 8-K

          None.


                                                                              12
<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 19, 1997               By: /s/ Joel Freedman
                                            ------------------------------------
                                            Joel Freedman, President


Dated:   November 19, 1997               By: /s/ Michael B. Killeen
                                            ------------------------------------
                                             Michael B. Killeen, Principal
                                             Financial and Accounting Officer


                                                                              13