SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


   
                                   FORM 10-Q/A
                                Amendment No. 1
    


(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 30,1996

                                       OR

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


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


                           Commission File No. 0-23900


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


           New Jersey                                     22-2194790
--------------------------------------     -----------------------------------
(State or other jurisdiction of
incorporation or organization)             (IRS Employer Identification Number)


               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 November  14,  1996,  9,419,550  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, 1996
         and December 31, 1995............................................1

         Consolidated Statements of Operations - For the
         nine months ended September 30, 1996 and
         September 30, 1995...............................................2

         Consolidated Statements of Operations - For the
         three months ended September 30, 1996 and
         September 30, 1995...............................................3

         Consolidated  Statements  of Cash  Flows - For the  nine
         months  ended September 30, 1996 and September 30, 1995..........4

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

     Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations...............7

PART II - OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K...........................11

SIGNATURES...............................................................12
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM I - FINANCIAL STATEMENTS

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


                                               September 30,    December 31,
                                                   1996             1995
                                               -------------    ------------
ASSETS
Current Assets:
  Cash and cash equivalents                     $ 2,972,899     $    83,286
  Accounts receivable, net of allowance
   for doubtful accounts of $200,000              5,273,664       6,616,130
  Notes receivable - current                      1,876,428       1,596,559
  Inventory                                       1,482,517       1,482,517
  Costs and estimated earnings in excess
   of billings                                      465,360       3,634,052
  Prepaid expenses                                  607,362         710,706
  Bonding deposits                                        -         883,163
  Deferred income taxes                           1,816,992         652,600
  Recoverable income taxes                          154,983       1,114,442
  Due from officers                                 139,190         548,488
  Other current assets                               70,980          55,238
                                                 ----------      ----------
     Total Current Assets                        14,860,375      17,377,181
                                                 ----------      ----------
Notes Receivable - long term                      1,596,559       1,596,559
Deferred Issuance Costs, net                         40,415         506,586
Property, Plant and Equipment, net                2,923,774       2,547,406
Other Assets                                      1,768,160               -
                                                 ----------      ----------
                                                $21,189,283     $22,027,732
                                                ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion of long-term debt             $   368,155     $   327,974
  Accounts payable and accrued expenses           4,034,484       5,836,510
  Billings in excess of costs and
   estimated earnings                               154,517         919,575
                                                -----------     -----------
     Total Current Liabilities                    4,557,156       7,084,059
                                                -----------     -----------
Long-Term Debt                                      712,901       4,004,142
                                                -----------     -----------
Commitments and Contingencies
Stockholders' Equity:
  Common stock, authorized 20,000,000
   shares $.001 par value, issued and
   outstanding 9,229,167 in 1996 and
   5,783,334 in 1995                                  9,229           6,200
  Additional paid-in capital                     24,561,622      13,693,895
  Retained earnings (deficit)                    (8,651,625)     (2,760,564)
                                                 ----------      ----------
                                                 15,919,226      10,939,531
                                                 ----------      ----------
                                                $21,189,283     $22,027,732
                                                ===========     ===========


The accompanying notes are an integral part of these financial statements


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


                                              Nine Months Ended September 30,
                                                  1996            1995
                                              ------------    -------------
Revenue:
  Sale of equipment                           $   196,805      $ 5,089,903
  Contract income                              15,055,754       27,725,016
                                               ----------       ----------
                                               15,252,559       32,814,919
                                               ----------       ----------
Cost of Sales:
  Cost of equipment sales                          81,933        3,063,176
  Direct job costs                             15,768,793       25,043,163
                                               ----------       ----------
                                               15,850,726       28,106,339
                                               ----------       ----------

Gross Profit (loss)                              (598,167)       4,708,580
                                               ----------       ----------

Operating Expenses:
  General and administrative expenses           5,945,932        5,746,753
  Depreciation and amortization                   560,057          391,876
                                               ----------       ----------
                                                6,505,989        6,138,629
                                               ----------       ----------

Loss from Operations                           (7,104,156)      (1,430,049)

Other Income (Expense):
  Interest income(expense)                         23,095          223,493
                                               ----------       ----------

Loss before Credit for Income Taxes            (7,081,061)      (1,206,556)

Credit for Income Taxes                        (1,190,000)        (480,000)
                                               ----------       ----------

Net Loss                                      $(5,891,061)     $  (726,556)
                                               ==========       ==========

Loss per Share:
  Primary loss per share                           ($0.77)          ($0.13)
                                               ==========       ==========

  Fully diluted loss per share                     ($0.77)          ($0.13)
                                               ==========       ==========

  Primary common shares outstanding             7,635,416        5,779,310
                                               ==========       ==========

  Fully diluted common shares outstanding       7,635,416        5,779,310
                                               ==========       ==========


The accompanying notes are an integral part of these financial statements


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


                                              Three Months Ended September 30,
                                                   1996              1995
                                              --------------    --------------
Revenue:
  Sale of equipment                            $   44,005        $ 4,110,355
  Contract income                               3,976,763         10,119,627
                                                ---------         ----------
                                                4,020,768         14,229,982
                                                ---------         ----------
Cost of Sales:
  Cost of equipment sales                           9,089          2,675,122
  Direct job costs                              4,393,869          9,394,904
                                                ---------         ----------
                                                4,402,958         12,070,026
                                                ---------         ----------

Gross Profit (Loss)                              (382,190)         2,159,956
                                                ---------         ----------

Operating Expenses:
  General and administrative expenses           2,355,922          2,010,268
  Depreciation and amortization                   177,812            165,952
                                                ---------         ----------
                                                2,533,734          2,176,220
                                                ---------         ----------

Loss from Operations                           (2,915,924)           (16,264)

Other Income (Expense):
  Interest income(expense)                          7,224             45,244
                                                ---------         ----------

Income (Loss) before Provision (Credit)
 for Income Taxes                              (2,908,700)            28,980

Provision (Credit) for Income Taxes              (490,000)            10,000
                                                ---------         ----------

Net Income (Loss)                             $(2,418,700)       $    18,980
                                               ==========         ==========
Loss per Share:
  Primary loss per share                           ($0.27)             $0.00
                                               ==========         ==========

  Fully diluted loss per share                     ($0.27)             $0.00
                                               ==========         ==========

  Primary common shares outstanding             8,879,023          5,771,392
                                               ==========         ==========

  Fully diluted common shares outstanding       8,879,023          5,771,392
                                               ==========         ==========


The accompanying notes are an integral part of these financial statements


                                     -3-
<PAGE>
                      IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


                                                          For The
                                              Nine Months Ended September 30,
                                                 1996                 1995
                                              -------------     --------------
Cash Flows from Operating Activities:
  Net loss                                     $(5,891,061)       $ (726,556)
  Adjustments to reconcile net loss to
  net cash (used in) operating activities:
    Deferred Taxes                              (1,164,392)                -
    Depreciation and amortization                  560,058           391,876
    Decrease (Increase) In:
      Accounts receivable                        1,342,466        (5,530,440)
      Inventory                                          -         2,972,875
      Notes receivable                            (279,869)                -
      Costs and estimated earnings in
       excess of billings                        3,168,692        (2,297,267)
      Prepaid expenses                             103,344           235,514
      Bonding deposits                             883,163           478,625
      Recoverable income taxes                     959,459            24,037
      Other current assets                         (15,742)          (25,102)
    Increase (Decrease) In:
      Accounts payable and accrued expenses     (1,734,714)       (1,187,852)
      Billings in excess of costs and estimated
       earnings                                   (765,058)          245,635
      Income taxes payable                               -          (477,600)
                                                ----------        ----------
        Net cash (used in) operating activities (2,833,654)       (5,869,255)
                                                ----------        ----------
Cash Flows from Investing Activities:
  Acquisition of property, plant and equipment    (687,592)         (937,052)
  Acquisition of other assets                   (1,768,160)                -
  Increase (decrease) of officers loans           (261,282)         (244,668)
                                                ----------        ----------
    Net cash (used in) investing activities     (2,717,034)       (1,181,720)
                                                ----------        ----------
Cash Flows from Financing Activities:
  Net proceeds from convertible bond issuance            -         4,185,000
  Principal payments and current maturities of
   long-term debt                                 (272,998)         (127,885)
  Issuance of common stock upon exercise
   of stock options and warrants                 8,713,299                 -
                                                ----------        ----------
    Net cash provided by  financing activities   8,440,301         4,057,115
                                                ----------        ----------
Increase (Decrease) in Cash and Cash Equivalents 2,889,613        (3,020,860)
Cash and Cash Equivalents, beginning of period      83,286         5,068,325
                                                ----------        ----------
Cash and Cash Equivalents, end of period        $2,972,899        $2,047,465
                                                ==========        ==========
Supplementary Disclosures of Cash Flow
 Information:
Cash paid during the period for:
  Interest expense                              $   42,911        $   38,215
                                                ==========        ==========
  Income taxes                                           -                 -
                                                ==========        ==========
Supplemental Disclosure of Noncash Investing
 and Financing Activities:
  Property, plant and equipment financing       $  163,605        $        -
                                                ==========        ==========
  Conversion of convertible promissory
   notes to common stock                        $2,828,037                 -
                                                ==========        ==========


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.   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 its  majority  owned  subsidiary
     companies.  The  December  31, 1995  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, 1995.  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, 1996.

2.  On June 28, 1996 IDM granted to Arle L.  Pierro a non  qualified  option for
    50,000  shares of its  Common  Stock at  $3.23125  per share  pursuant  to a
    consulting agreement that expires on June 30,1997. Since the market value of
    the stock at June 28, 1996 was  $7.4375,  the market price less the exercise
    price  (3.23125) times the 50,000 shares results in $210,312 of compensation
    expense  that is being  expensed  over four  quarters at $52,578 per quarter
    beginning with the quarter ended September 30, 1996.

3.  On July 11, 1996,  effective  June 30,  1996,  IDM entered into an exclusive
    license agreement with LIFE INTERNATIONAL  PRODUCTS (Life) pursuant to which
    IDM shall  market  and  employ  Life's  patented  environmental  remediation
    technology  for  long  term  bio  remediation  of  contaminated  groundwater
    throughout  North America.  IDM also acquired a ten percent interest in Life
    for $1,250,000.

4.   On July 19, 1996 IDM, through a newly formed 90% owned  subsidiary,  Global
     Waste &  Energy  International,  Inc.  ("International"),  entered  into an
     agreement with Continental Waste Conversion, Inc. ("CWC") pursuant to which
     International  acquired,  in exchange for a 10% interest in  International,
     the exclusive  worldwide rights (excluding Canada) to the proprietary Kocee
     Gas Generator  waste  treatment  technology  that converts  municipal solid
     waste,  including  tires  and  plastics  into  electrical  energy.  IDM has
     committed  to  loan  up  to   $1,350,000   over  a  four  month  period  to
     International to carry on its waste-to-energy business. At closing IDM made
     an initial  loan of $600,000 to  International  repayable  upon demand with
     interest  at  9.25%.  On  August  15,  1996 and  October  4,  1996 IDM made
     additional  loans of  $250,000  (on each date)  repayable  upon demand with
     interest at 9.25%. In addition,  IDM, through a wholly-owned  subsidiary of
     International loaned $160,000 (Canadian) to CWC repayable in 18 consecutive
     installments commencing January 1, 1997 with interest at 7.5% per annum.

   
5.   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  especially on government  contracts because of the uncertainties
     inherent in the  estimation  process as it relates to long term  contracts.
     Losses  anticipated  on  government  contracts  and  commercial  contracts,
     excluding period costs, should be charged to operations as soon as they are
     evident.  Starting  in the first  quarter  of 1996 the  Company  recognized
     revenues  equivalent to its costs incurred on two  government  contracts in
     Los Alamos, New Mexico and Oak Ridge, Tennessee, based on unapproved change
     orders. In the case of the Los Alamos contract with the Los Alamos National
     Laboratory,  the Company  submitted 28 individual change orders (of which 7


                                      -5-
<PAGE>
     were  subsequently  approved).  A final  comprehensive  change order in the
     amount of  $2,798,000  was  submitted  in November of 1996.  Lab  personnel
     informally rejected our request and the Company reversed all revenues based
     on the unapproved  change orders in the fourth quarter of 1996. The Company
     is  aggressively  pursuing its claims.  Future  revenues will be recognized
     when  these  claims are  finally  settled.  The  Company  also  experienced
     significant  cost  overruns  on several  contracts  which  were  originally
     recognized  in the  third  and  fourth  quarters  based on a  change  in an
     accounting estimate principal.  Based on the Company's discussions with the
     SEC  accounting  staff,  the Company  has agreed to restate  its  quarterly
     financial  statements  for the year "because  recognizing  change orders as
     revenues  was  tantamount  to  recognizing  gain  contingencies   which  is
     expressly  prohibited by SFAS 5"; and,  "because the cost  overruns  should
     have been foreseeable and accrued in prior  quarters."   The amount for the
     year has not changed,  just the allocation to each quarter.  The disclosure
     requirements of the APB opinion number 20 of earnings (loss) per share, net
     income (loss), and income tax (credit) are as follows:
    

<TABLE>
<CAPTION>
                                                                      1996
                                      ------------------------------------------------------------------------
                                         First        Second          Third          Fourth  
                                       Quarter        Quarter        Quarter        Quarter           Year
                                      ----------     ----------     ----------     ----------     ------------
<S>                                   <C>            <C>            <C>            <C>             <C>
Income (Loss) before Provision
 (Credit) for Income Taxes             1,056,585          9,324     (4,370,625)    (7,693,128)    (10,997,844)
Change                                (3,698,413)    (1,539,857)     1,461,925      3,776,345               -
                                      ----------     ----------     ----------     ----------     -----------
Amount Restated                       (2,641,828)    (1,530,533)    (2,908,700)    (3,916,783)    (10,997,844)

Provision (Credit) for Income Taxes      210,000          2,000       (772,000)    (1,290,000)     (1,850,000)
Change                                  (650,000)      (262,000)       282,000        630,000               -
                                      ----------      ---------     ----------     ----------     -----------
Amount Restated                         (440,000)      (260,000)      (490,000)      (660,000)     (1,850,000)
                                  
Net Income (Loss)                        846,585          7,324     (3,598,625)    (6,403,128)     (9,147,844)
Change                                (3,048,413)    (1,277,857)     1,179,925      3,146,345               -
                                      ----------     ----------     ----------     ----------     -----------
Amount Restated                       (2,201,828)    (1,270,533)    (2,418,700)    (3,256,783)     (9,147,844)
                                      
Earning (Loss) Per Share                    0.13              -          (0.41)         (0.85)          (1.13)
Change                                     (0.46)         (0.17)          0.14           0.49               -
                                      ----------     ----------     ----------     ----------     -----------
Amount Restated                            (0.33)         (0.17)         (0.27)         (0.36)          (1.13)
                                        
</TABLE>


                                       -6-
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

MATERIAL CHANGES IN 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 1996 COMPARED WITH THIRD QUARTER OF 1995

   
The Company's total revenues  decreased by approximately  71.8% from $14,230,000
for the quarter ended  September  30, 1995 to  $4,021,000  for the quarter ended
September 30, 1996.  Contract  service  income  decreased  during the quarter by
60.7% from  $10,120,000  in 1995 to $3,977,000 in 1996. The decrease in contract
service income and total  revenues is  attributable  to expected  revenues being
delayed into future quarters at our Oak Ridge,  Los Alamos,  and Boston offices.
Also during the third quarter of 1995 the Company  recorded  approximately  $5.4
million in revenues  attributable to a major relocation project. The Company had
no relocation revenues in the third quarter of 1996. Surplus equipment and scrap
sales  revenues  decreased by 98.9% from  $4,110,000 in 1995 to $44,000 in 1996.
The decrease in surplus  equipment and scrap sales revenues was  attributable to
the sale of the Company's entire inventory of glass lined and process equipment,
for  $4  million,  to  Universal  Process  Equipment,  Inc.  and  the  Bethlehem
Corporation, ("UPE"), during the third quarter of 1995. The gross margin on this
sale was  $1,370,000.  This  represented  12.2% of the total  revenues  reported
through  the first  nine  months of 1995 and  29.1% of the  total  gross  profit
reported.  The purchase price of such equipment is payable from one third of the
net sales proceeds of such equipment received by UPE. Amounts not paid under the
agreement  shall be payable in full on September 29, 2000 including  interest at
the LIBOR  base  rate.  Management  does not  believe  there is a major  risk of
inventory  obsolescence  due to the fact that the design and  technology  of the
major  inventory  items has not changed  much over the years.  To the extent any
amounts are not repaid from the ultimate  sale of the inventory by September 29,
2000,  repayment will be dependent on the financial resources of UPE. Management
is not aware of any adverse factors which could adversely  impact the ability of
UPE to satisfy the notes.  Through September 30, 1996 UPE has paid $1,031,000 on
the note.

Direct  job costs  decreased  by  approximately  53.2% from  $9,395,000  for the
quarter ended  September 30, 1995 to $4,394,000 for the same period in 1996. The
primary  elements of such  decrease in job costs were job  salaries and material
and  supplies.  The  decrease in job costs was  attributable  to the decrease in
contract service revenues during the quarter.  The reason why contract  revenues
decreased  60.7% and direct job costs only 53.2% during the quarter is primarily
attributable to accruing the expected loss of approximately $300,000 on the PECO
contract. This contract started during the current quarter and will be completed
in the next quarter.  In accordance with revenue  recognition  principles of the
percentage of completion method of accounting, provision for estimated losses on
incomplete  contracts  are made in the  period in which  such  losses  are first
determined.  Cost of equipment sales decreased from $2,675,000 in 1995 to $9,000
in 1996.  The decrease in cost of equipment  sales was  attributable  to the UPE
sale mentioned above.

While  total  revenues   decreased  by  71.8%  for  the  quarter,   general  and
administrative  expenses  increased  14.7 % from  $2,010,000  during the quarter
ended  September  30, 1995 to  $2,356,000  during the same  period in 1996.  The
increase in general and  administrative  expense was primarily  attributable  to
$208,000 in expenses  recorded by the  Company's  90% owned  subsidiary,  Global
Waste & Energy Inc.
    


                                       -7-
<PAGE>
In addition to its  operating  income and  expenses,  the Company  reported  net
interest  income of $7,000 for the quarter ended  September 30, 1996 as compared
to net interest  income of $45,000 for the same period in 1995.  The decrease in
net interest  income/expense  was  attributable  to $10,000 in interest  expense
which accrued on $500,000 of indebtedness which remained  outstanding during the
quarter out of the $5,000,000 of  convertible  notes issued in the third quarter
of 1995 and an increase in interest  expense due to the  additional  $850,000 in
equipment financing compared to the same period last year.

   
As a result of the  foregoing,  the  Company  reported  a loss  before  taxes of
$2,909,000 and net loss of $2,419,000  for the quarter ended  September 30, 1996
as compared to income  before taxes of $29,000 and net income of $19,000 for the
same quarter in 1995.
    

Nine Months Ended September 30, 1996 Compared with Nine Months Ended September
30, 1995

   
Total revenues  decreased by  approximately  53.5% from $32,815,000 for the nine
months  ended  September  30, 1995 to  $15,253,000  for the same period in 1996.
Contract service income decreased during the period by 45.7% from $27,725,000 in
1995 to $15,056,000 in 1996.
    

The Company,  in a news release dated April 1996, stated that its expectation to
receive an  additional $2 to $3 million in revenue in March was not realized due
to an  administrative  delay.  The  Company  further  stated that it expected to
accrue  such  revenues  largely  in the  second  quarter  of  this  year.  These
statements relate to the Company's  previously  announced paper plant project in
the People's Republic of China.

The Company has entered a  Chinese-Foreign  Equity Joint  Venture  Contract with
China National Packaging and Materials Co. Xuzhou General Paper Mill ( a leading
Chinese  paper  manufacturer  located  in the  People's  Republic  of  China) to
acquire,  own,  and operate a paper mill to produce  liner board and other paper
products. IDM has also received a Letter of Intent from China National Packaging
to supply,  relocate,  construct, and start-up the paper mill plant. At the time
of the news release,  the Chinese  Design  Institute was reviewing the technical
aspects  of the  plant to be  relocated.  Subsequent  to that  time a series  of
discussions  have  taken  place  which  have led to the  current  status  of the
project.  During the fourth  quarter of 1996,  a group of  European  businessmen
(Temple Inland executives) are traveling to China to meet with the Chinese joint
venture partner to discuss the project. It is currently  anticipated that Temple
Inland will purchase a portion of the Company's interest in the joint venture so
that the  company  will  supply  the  equipment  and  remain a  minority  equity
participant.  The Company's  management did not consider recognizing any revenue
on the  project in the second or third  quarter as the  project has not yet been
consummated.

Surplus equipment  revenues  decreased 96.1% from $5,090,000 in 1995 to $197,000
in 1996. See the quarterly comparison for discussion of the factors contributing
to the decrease in surplus equipment and scrap sales revenues.

   
Direct job costs decreased by  approximately  27% from  $25,043,000 for the nine
months ended  September 30, 1995 to $15,769,000 for the same period in 1996. See
the quarterly  comparison  for a discussion of the factors  contributing  to the
decrease in direct job costs.
    

Cost of equipment  sales  decreased from  $3,063,000 in 1995 to $82,000 in 1996.
The decrease in cost of equipment sales was attributable to the UPE sale.

General and  administrative  expenses  increased 3.5% from $5,747,000 during the
nine months ended  September  30, 1995 to  $5,946,000  during the same period in
1996.  The increase was  primarily  attributable  to the $208,000 in expenses of
Global Waste & Energy Inc. mentioned earlier.


                                       -8-
<PAGE>
The Company reported a decrease in net interest  income/(expense)  from $223,000
for the nine months ended  September  30, 1995 to $23,000 for the same period in
1995. See the quarterly  comparison for a discussion of the factors contributing
to the decrease in net interest income/(expense).

   
As a result of the  foregoing,  the  Company  reported  a loss  before  taxes of
$7,081,000  and a net loss after tax of  $5,891,000  for the nine  months  ended
September  30, 1996 as compared to a loss before taxes of  $1,207,000  and a net
loss after taxes of $727,000 for the same period in 1995.
    

MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.

At November  17,  1996,  the Company had a backlog  totaling  approximately  $42
million  compared to a backlog of  approximately  $58 million at  September  30,
1995.  The largest  component of the Company's  backlog at November 17, 1996 was
$20 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 1996 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  $10,303,000,  including  cash  and cash
equivalents  balances of  $2,973,000  at September  30, 1996.  This  compares to
working  capital of  $10,293,000  and a cash  balance of $83,000 at December 31,
1995. The small increase in working  capital and cash is primarily  attributable
to the exercise of warrants and options totaling  $8,445,000  during the period,
less the pre tax loss of $7,081,000  during the period and the  acquisition of a
10% interest in Life on July 11, 1996 for $1,250,000.
    

Year-end  receivables  as  a  percentage  of  fourth  quarter  income  increased
substantially  from  53.0% in 1994 to  103.5%  in 1995.  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 its FJFC contract on December 23, 1994.
If this  payment had been  received  after year end, the ratio would have been a
more comparable 98.4%.

Of the $6,816,000 in gross accounts receivable at December 31, 1995,  $6,128,000
has been  collected to date.  $252,000 of the  $688,000  balance is retention on
contracts  that will be released when the contracts are  completed.  $291,000 is
due from three  customers that  management  believes will be realized this year.
The $200,000 reserve for doubtful accounts covers the balance of $145,000.

   
Unbilled revenue as a percentage of quarterly contract income has increased from
0% at December  31, 1993,  to 31% at December  31, 1994,  to 56% at December 31,
1995. It decreased to 12% at September  30, 1996.  Also,  accounts  payable have
constantly  decreased  since  1994 where as  accounts  receivable  and  unbilled
revenues have increased substantially during this period.
    


                                       -9-
<PAGE>
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.

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).

The inventory of $1,483,000 is unchanged from September 30, 1995. This inventory
consists of nineteen (19)  generator  sets with a total  electrical  capacity of
242,500 kilowatts per hour (KWH). The estimated selling price is fifteen million
seven hundred and seventy five thousand  dollars  ($15,775,000).  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 El Salvador Global  Energy's Waste to Energy  Project.  In
future projects,  the Company will try to use the balance of 15,000 KW generator
sets and the 12,500 KW and 33,000 KW sets.

The Company has  available  at December  31, 1995  approximately  $2,350,000  in
operating loss carry-forwards that may be applied against future taxable income.
They expire in the year 2010.  Based on the  reported  loss to date it will take
approximately  $5.3  million  dollars in future  taxable  income to recover  the
reported deferred tax asset.

At September 30, 1996,  the Company's only long term debt other than $500,000 of
convertible notes was $581,000 in installment debt secured by job equipment.

On July 11, 1996,  effective June 30, 1996,  the Company  acquired a ten percent
interest in Life International Products (Life) for $1,250,000.  The Company also
entered into a license  agreement  with Life whereby IDM shall market and employ
Life's  patented   environmental   remediation  technology  for  long  term  bio
remediation of contaminated groundwater throughout North America.

On July 19, 1996 IDM, through a newly formed 90% owned subsidiary,  Global Waste
& Energy International,  Inc. ("International"),  entered into an agreement with
Continental  Waste  Conversion,  Inc.  ("CWC")  pursuant to which  International
acquired,  in  exchange  for a 10%  interest  in  International,  the  exclusive
worldwide rights (excluding Canada) to the proprietary Kocee Gas Generator waste
treatment technology  that converts municipal  solid waste, including  tires and


                                       -10-
<PAGE>
plastics into electrical energy. IDM has committed to loan up to $1,350,000 over
a four month period to International to carry on its  waste-to-energy  business.
At closing IDM made an initial loan of $600,000 to International  repayable upon
demand with  interest at 9.25%.  On August 15, 1996 and on October 4, 1996,  the
Company made  additional  loans of $250,000 (on each date) repayable upon demand
with interest at 9.25%. In addition,  IDM, through a wholly-owned  subsidiary of
International  loaned  $160,000  (Canadian) to CWC  repayable in 18  consecutive
installments  commencing  January 1, 1997 with interest at 7.5% per annum. Other
than  funding the  Company's  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.

Management believes that the Company's working capital 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.


                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.  Exhibits

             None

         b.  Reports on Form 8-K

             None


                                      -11-
<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.


                                     /s/ Joel Freedman
                                     -------------------------------------------
                                     Joel Freedman, President
                                     September 30, 1997


                                     /s/ Michael B. Killeen
                                     -------------------------------------------
                                     Michael B. Killeen, Principal Financial
                                     and Accounting Officer
                                     September 30, 1997


                                      -12-