<PAGE>
                                
                                
                                
                                
                            FORM 10-Q
                                
               SECURITIES AND EXCHANGE COMMISSION
                                
                     WASHINGTON, D.C.  20549
                                


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

For the quarterly period ended January 31, 1997
                               -----------------  

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


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

                Commission File Number  033-17921
                                        ---------                               
                                
              Air & Water Technologies Corporation
   __________________________________________________________
     (Exact Name of Registrant as Specified in its Charter)
                                
                                
          Delaware                                   13-3418759
          --------                                   ---------- 
(State or other Jurisdiction of Corporation)   (I.R.S. Employer 
                                                Identification Number)
                                
                                
  U.S. Highway 22 West and Station Road, Branchburg, NJ  08876
  ------------------------------------------------------------
            (Address of Principal Executive Offices)
                                
                   Telephone:  (908) 685-4600
                                
                                
Indicate  by check mark whether the registrant (1) has filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  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         
       ---        ----

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of January 31, 1997.

Class A

$.001 Par Value Common Stock                        32,019,254
----------------------------              -----------------------------
     (Title of Class)                     (Number of Shares Outstanding)





<PAGE>

PART I.   FINANCIAL INFORMATION
ITEM I.   FINANCIAL STATEMENTS
                                
              AIR & WATER TECHNOLOGIES CORPORATION
              ------------------------------------
 CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 1997 AND OCTOBER 31, 1996
 -----------------------------------------------------------------------
               (in thousands , except share data)
                --------------------------------
<TABLE>
<CAPTION>
             ASSETS                                   1997       1996
             ------                                   ----       ----
                                                  (unaudited)
                                              
<S>                                               <C>        <C>
CURRENT ASSETS:
  Cash and cash equivalents                        $  9,441   $  12,667
  Accounts receivable, net                           89,233     100,933
  Costs and estimated earnings in excess of
      billings on uncompleted contracts              49,677      48,097
  Inventories                                        13,156      11,319
  Prepaid expenses and other current assets          11,147      12,027
                                                   --------    --------
      Total current assets                          172,654     185,043

PROPERTY, PLANT AND EQUIPMENT, net                   35,339      35,432
INVESTMENTS IN ENVIRONMENTAL TREATMENT FACILITIES    22,133      22,062
GOODWILL                                            263,810     265,860
OTHER ASSETS                                         29,285      29,873
                                                   --------    --------
      Total assets                                 $523,221    $538,270
                                                   ========    ========
           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current installments of long-term debt           $   384     $   378
  Accounts payable                                  69,438      73,951
  Accrued expenses                                  66,851      76,656
  Billings in excess of costs and estimated
    earnings on uncompleted contracts               29,262      23,995
  Income taxes payable                               2,239       2,507
                                                  --------    --------  
      Total current liabilities                    168,174     177,487
                                                  --------    --------

LONG-TERM DEBT                                     314,670     306,542
                                                  --------    --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Preferred stock, par value $.01 authorized,
    2,500,000 shares;issued 1,200,000 shares;
    liquidation value $60,000                           12          12
  Common stock par value $.001 authorized
    100,000,000 shares;issued 32,109,156 and
    32,107,906 shares                                   32          32
  Additional paid-in capital                        427,036    427,036
  Accumulated deficit                              (385,787)  (372,433)
  Common stock in treasury, at cost                    (108)      (108)
  Cumulative currency translation adjustment           (808)      (298)
                                                    --------   --------
      Total stockholders' equity                     40,377     54,241
                                                    --------   --------
      Total liabilities and stockholders' equity   $523,221   $538,270
                                                   ========   ========
The accompanying notes are an integral part of these statements.
</TABLE>
                                
                                
                                
                                
                                
                                
                                
                                
<PAGE>                                
              AIR & WATER TECHNOLOGIES CORPORATION
              ------------------------------------ 
             CONSOLIDATED STATEMENTS OF OPERATIONS
             -------------------------------------  
  FOR THE THREE MONTH PERIODS ENDING JANUARY 31, 1997 AND 1996
  ------------------------------------------------------------
                (in thousands, except share data)
                 ------------------------------- 
                           (unaudited)
                            ---------
                                          Three Months
                                       Ending January 31
                                       -----------------

                                         1997       1996
                                         ----       ----
<TABLE>
<CAPTION>

<S>                                    <C>        <C>
SALES                                   $146,959   $159,206

COST OF SALES                            122,755    128,424
                                        --------   --------
  
 Gross margin                             24,204     30,782

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                   25,194     22,990

DEPRECIATION AND AMORTIZATION              5,229      4,929
                                        --------   -------- 

 Operating income (loss)                  (6,219)     2,863

INTEREST EXPENSE                          (5,968)    (5,614)

INTEREST INCOME                              114        260

OTHER EXPENSE, NET                          (326)      (131)
                                        --------   -------- 

 Loss before income taxes
 and minority interest                   (12,399)    (2,622)

INCOME TAXES                                 131        323
                                        --------   --------

NET LOSS                                $(12,530)   $(2,945)
                                        ========   ========

LOSS PER COMMON SHARE
 (AFTER PREFERRED STOCK DIVIDENDS)          (.42)      (.12)
                                        ========   ========

 Weighted average number of shares
   outstanding                            32,019     32,018
                                        ========   ========

The accompanying notes are an integral part of these statements.
                                
</TABLE>
                                
                                
                                
                                                                
                                
<PAGE>                                
                                
              AIR & WATER TECHNOLOGIES CORPORATION
              ------------------------------------
              CONSOLIDATED STATEMENTS OF CASH FLOWS
              -------------------------------------  
  FOR THE THREE MONTH PERIODS ENDING JANUARY 31, 1997 AND 1996
  ------------------------------------------------------------
                         (in thousands)
                          ------------
                           (unaudited)
                            ---------

<TABLE>
<CAPTION>
                                                             1997        1996
                                                             ----        ----
<S>                                                        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                               $(12,530)  $(2,945)
     Adjustments to reconcile net loss to net cash 
         provided by (used for) continuing operations -
      Depreciation and amortization                           5,229      4,929
      Other, net                                                191        269

     Changes in assets and liabilities -
             (Increase) decrease in assets -
                 Accounts receivable                         11,700      4,077
                 Costs and estimated earnings in excess of
                     billings on uncompleted contracts       (1,580)     4,330
                 Inventories                                 (1,837)       403
                 Prepaid expenses and other current assets      301     (3,904)
                 Other assets                                  (121)        76
            Increase (decrease) in liabilities -
                 Accounts payable                            (4,596)    (2,307)
                 Accrued expenses                            (9,572)    (5,953)
                 Billings in excess of costs and estimated
                     earnings on uncompleted contracts        5,267       (255)
                 Income taxes                                  (265)        (9)
                                                            --------  -------- 
                 Net cash used for continuing operations     (7,813)    (1,289)
                 Net cash provided by
                    discontinued operations                     662        112
                                                            --------  --------
                 Net cash used for operating activities      (7,151)    (1,177)
                                                            --------  -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of business                              --      2,353
     Capital expenditures                                    (1,758)    (1,983)
     Investment in environmental treatment facilities            69        215
     Start up costs and other, net                           (1,182)    (2,052)
                                                           --------   --------
                 Net cash used for
                   investing activities                      (2,871)    (1,467)
                                                           --------   -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of notes payable and long-term debt                (66)       (68)
     Net borrowings under credit facilities                   8,200      4,500
     Cash dividends paid                                       (825)      (825)
     Other, net                                                (513)      (921)
                                                           --------   --------
               Net cash provided by financing activities      6,796      2,686
                                                           --------   --------
               Net increase (decrease) in cash and cash
                  equivalents                                (3,226)        42

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             12,667     11,168
                                                           --------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $ 9,441    $11,210
                                                           ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for interest               $ 8,106    $ 7,497
                                                           ========   ========
The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
        
             AIR & WATER TECHNOLOGIES CORPORATION
             ------------------------------------ 
       NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
       --------------------------------------------------
                        JANUARY 31, 1997
                        ----------------
                           (unaudited)
                            ---------    
                                
(1)  Basis of Presentation:
     ---------------------

     The interim consolidated financial statements and  the
     following notes should be read in conjunction with the notes
     to  the  consolidated financial statements of  Air  &  Water
     Technologies  Corporation and its consolidated  subsidiaries
     (the "Company") as included in its Form 10-K filed with  the
     Securities and Exchange Commission for the fiscal year ended
     October  31,  1996.   The interim information  reflects  all
     adjustments, including normal recurring accruals, which are,
     in   the  opinion  of  management,  necessary  for  a   fair
     presentation of the results for the interim period.  Results
     for  the  interim period are not necessarily  indicative  of
     results to be expected for the full year.

(2)  Commitments and Contingencies:
     -----------------------------

     The  Company  and  its subsidiaries are parties  to  various
     legal   actions  arising  in  the  normal  course  of  their
     businesses,  some  of which involve claims  for  substantial
     sums.   The  Company believes that the disposition  of  such
     actions, individually or in the aggregate, will not  have  a
     material   adverse  effect  on  the  consolidated  financial
     position or results of operations of the Company taken as  a
     whole.


(3)  Reclassifications:
     -----------------
     Certain reclassifications have been made to conform the 1996
     consolidated financial statements to the 1997 presentation.


<PAGE>

ITEM II.

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             ---------------------------------------
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS
          ---------------------------------------------
     
The  following information should be read in conjunction with the
unaudited interim consolidated financial statements and the notes
thereto  included  in  this Quarterly  Report   and  the  audited
financial statements and Management's Discussion and Analysis  of
Financial  Condition and Results of Operations contained  in  the
Company's  Form  10-K  filed  with the  Securities  and  Exchange
Commission for the fiscal year ended October 31, 1996.

Results of Operations
---------------------

Summarized below is certain financial information relating to the
core segments of the Company (in thousands):

[CAPTION]
<TABLE>
                                         Three Months Ended January 31
                                         -----------------------------
                                               1997        1996
                                               ----        ----
<S>                                        <C>        <C>
Sales:
     Professional Services Group             $ 62,588   $ 64,034
     Metcalf & Eddy                            44,591     47,138
     Research - Cottrell                       40,322     48,649
     Other and eliminations                      (542)      (615)
                                             --------   --------
                                             $146,959   $159,206
                                             ========   ========

Cost of Sales:
     Professional Services Group             $ 57,959   $ 56,676
     Metcalf & Eddy                            32,050     33,873
     Research - Cottrell                       33,288     38,490
     Other and eliminations                      (542)      (615)
                                             --------   --------
                                             $122,755   $128,424
                                             ========   ========

Selling, General and Administrative Expenses:
     Professional Services Group             $  3,821   $  3,478
     Metcalf & Eddy                            11,052      9,539
     Research - Cottrell                        8,252      8,320
     Other and eliminations                        --         --
     Corporate (unallocated)                    2,069      1,653
                                             --------   --------
                                             $ 25,194   $ 22,990
                                             ========   ========

Depreciation and Amortization:
     Professional Services Group             $  2,046   $  1,964
     Metcalf & Eddy                             1,712      1,464
     Research - Cottrell                        1,343      1,389
     Other and eliminations                        --         --
     Corporate (unallocated)                      128        112
                                             --------   --------
                                             $  5,229   $  4,929
                                             ========   ========

Operating Income (Loss):
     Professional Services Group             $ (1,238)  $  1,916
     Metcalf & Eddy                              (223)     2,262
     Research - Cottrell                       (2,561)       450
     Other and eliminations                        --         --
     Corporate (unallocated)                   (2,197)    (1,765)
                                             --------   --------
                                             $ (6,219)  $  2,863
                                             ========   ========
</TABLE>

<PAGE>

Professional Services Group
---------------------------
     
Additional  direct project costs required  under  the  PRASA
contract  and  costs associated with the U.S. Department  of
Justice  investigation  contributed  significantly  to   the
operating  loss of $1.2 million for the three  month  period
ended  January  31, 1997.  Also impacting the  results  were
lower  operating  margins on several other projects  due  to
higher  direct  costs  which  were  not  recovered  due   to
competitive  pricing pressures.

The  Company's sales have remained comparable to  the  prior
period  as  a result of the privatization market  developing
more slowly than anticipated.  Although the Company has been
successful  in  obtaining most of its contract  renewals  it
continues  to experience delays in negotiating  and  closing
new business opportunities.  Results are expected to improve
throughout  the year and be comparable to the  prior  period
results   due   to  potential  new  contracts  and   certain
contractual  incentive  clauses which  are  expected  to  be
realized later in the fiscal year.


Metcalf & Eddy
--------------

The $.2 million operating loss during the three month period
ended  January 31, 1997 was primarily due to a $1.7  million
charge related to a cancellation penalty for one of its high
cost  leased facilities.  Excluding this charge, the results
compared  to  the prior period were unfavorably impacted  by
lower  sales  volume due to delays in obtaining  task  order
releases on several of its government contracts.

The  results are expected to improve throughout the year and
be  comparable  to  the prior year due to the  seasonality
impacts and task order releases which could result in higher
sales  levels.   The  operating margins  may  also  decrease
compared  to  the  prior  period as  more  design-build  and
construction type projects are pursued.


Research-Cottrell
-----------------

An  operating loss of $2.6 million was sustained during  the
three  month  period ended January 31, 1997 which  was  $3.0
million worse than the comparable prior period.  The results
were  unfavorably impacted by lower sales volumes in certain
operations  and decreases in margin rates due to  delays  in
issuing  new  air  quality  standards  by  the  EPA,   price
pressures  from the highly competitive markets,  unfavorable
product  line  mix and project execution.   Lower  operating
margins  were reflected in REECO and Ecodyne ($1.0  and  $.7
million) due to lower sales volume as well as Custodis and R-
C  International ($.7 million and $.5 million) due to  sales
volume  and  lower margin rates.  Although the  results  are
expected  to  improve  slightly  throughout  the  year,  the
unfavorable trend compared to the prior periods  related  to
volume  and margin rates is expected to continue due to  the
aforementioned reasons.


Corporate and Other
-------------------

The unallocated corporate costs were $.4 million higher than
the   comparable  prior  period  due  to  increased  outside
services.   In addition, higher average borrowings  resulted
in increased interest expense.


Financial Condition
-------------------     
Cash  used  by  operations for the three month period  ended
January   31,  1997  amounted  to  $7.2  million   and   was
unfavorably  impacted  by  the net  loss  of  $12.5  million
including a $2.2 million cancellation penalty for  a  leased
facility.   The Company also utilized $2.8 million  of  cash
for   capital  expenditures,  investments  in  environmental
treatment   facilities   and  other  investment   activities
including  start  up  costs during the  period.  These  cash
requirements  were  funded  principally  through  borrowings
under the Company's credit facilities discussed below.  As a
result  of  the above, net financial debt (debt  less  cash)
increased  by  $11.4 million  during the three month  period
ended January 31, 1997.

<PAGE>

During  August, 1996 the Company entered into a  seven  year
$60  million unsecured revolving credit facility with  Anjou
International   Company   ("Anjou  Credit   Facility"),   an
affiliated company.  The borrowings under the facility  bear
interest  at LIBOR plus .6%.  In conjunction with  this  new
financing  the  Company  reduced  its  more  expensive  $130
million   Senior  Secured  Credit  Facility  ("Bank   Credit
Facility")  to  $50 million.  As of October  31,  1996,  the
Company's  outstanding  borrowings under  the  Anjou  Credit
Facility totaled $60 million.

The  Bank  Credit Facility is primarily designed to  finance
working capital requirements and provide for the issuance of
letters  of credit, both subject to limitations and  secured
by  a  first security interest in substantially all  of  the
assets  of the Company.  Of the total commitment, borrowings
are  limited to the sum of a percentage of certain  eligible
receivables, inventories, net property, plant and  equipment
and  costs and estimated earnings in excess of billings, and
bear  interest  at  LIBOR (5.5% at  January  31,  1997),  as
defined,  plus .875% or at a defined bank rate approximating
prime (8.25% at January 31, 1997).  The Bank Credit Facility
also  allows  for certain additional borrowings,  including,
among  other things, project financing and foreign borrowing
facilities,  subject  to limitations  and  contains  certain
financial and other restrictive covenants , including, among
other  things, the maintenance of certain financial  ratios,
and   restrictions   on   the   incurrence   of   additional
indebtedness, acquisitions, the sale of assets, the  payment
of  dividends and the repurchase of subordinated  debt.   In
addition, the related agreement requires CGE to maintain its
support  of the Company, including, a minimum 40%  ownership
interest  in  the  Company and its right  to  designate  its
proportionate share of the Company's Board of  Directors  as
well  as  the  Chief Executive Officer and  Chief  Financial
Officer.  The Company compensates CGE for its support in  an
amount equal to .95% per annum of the outstanding commitment
of its credit facilities.  Under the Bank Credit Facility at
January 31, 1997, the Company had outstanding borrowings  of
$9.5  million  (capacity of $27.5 million) and   outstanding
letters of credit of $22.5 million.

The businesses of the Company have not historically required
significant  ongoing  capital expenditures.  For  the  three
month  period  ended January 31, 1997, and the  years  ended
October  31,  1996 and 1995 total capital expenditures  were
$1.8  million,  $7.5 million and $7.9 million, respectively.
At October 31, 1996, the Company had no material outstanding
purchase  commitments  for  capital  expenditures.   As   of
February  20,  1997, the Company has borrowed an  additional
$3.5  million during the second quarter of fiscal 1997 under
its credit facilities.  Management believes that it will  be
able  to manage its near-term cash requirements through  its
remaining  Bank  Credit  Facility  capacity  ($14  million),
current cash balances and working capital reductions.


Statement Regarding Forward Looking Disclosures
-----------------------------------------------

Statements  contained in this report, including Management's
Discussion and Analysis, are forward looking statements that
involve a number of risks and uncertainties which may  cause
the  Company's actual operating results to differ materially
from  the  projected amounts.  Among the factors that  could
cause  actual results to differ materially are risk  factors
listed  from  time  to  time in the  Company's  SEC  reports
including:

       -    the Company's highly competitive marketplace,
       -    changes in as well as enforcement levels of
            federal, state  and local environmental legislation
            and  regulations that change demand for a significant
            portion of the Company's services,
       -    the ability to obtain new contracts (some  of
            which are significant) from existing and new clients,
       -    the execution of the expected new projects and
            those projects in backlog within the most recent
            cost estimates and
       -    the favorable resolution of existing
            claims arising in the ordinary course of business.

<PAGE>

PART II.  OTHER INFORMATION


ITEM  I.    Legal Proceedings


     In  connection with a broad investigation by  the  U.S.
     Department of Justice into alleged illegal payments  by
     various persons to members of the Houston City Council,
     the Company's subsidiary, PSG, received a federal grand
     jury  subpoena  on  May  31, 1996 requesting  documents
     regarding  certain PSG consultants and  representatives
     that had been retained by PSG to assist in advising the
     City  of  Houston  regarding the  benefits  that  could
     result  from the privatization of Houston's  water  and
     wastewater system.  PSG has cooperated and continues to
     cooperate   with  the  Justice  Department  which   has
     informed  the Company that it is reviewing transactions
     among  PSG  and its consultants.  The Company  promptly
     initiated its own independent investigation into  these
     matters  and  placed  PSG's  chief  executive  officer,
     Michael  M.  Stump, on administrative leave of  absence
     with  pay.   Mr. Stump, who has denied any  wrongdoing,
     resigned  from PSG on December 4, 1996.  In the  course
     of  its ongoing investigation, the Company became aware
     of   questionable  financial  transactions  with  third
     parties  and  payments to certain PSG  consultants  and
     other individuals, the nature of which requires further
     investigation.  The Company has brought  these  matters
     to  the  attention  of the Department  of  Justice  and
     continues to cooperate fully with its investigation.

     No  charges of wrongdoing have been brought against PSG
     or  any PSG executive or employee by any grand jury  or
     other   government  authority.   However,   since   the
     government's  investigation is still  underway  and  is
     conducted largely in secret, no assurance can be  given
     as   to   whether   the  government  authorities   will
     ultimately determine to bring charges or assert  claims
     resulting  from this investigation that could implicate
     or  reflect adversely upon or otherwise have a material
     adverse effect on the financial position or results  of
     operations of PSG or the Company taken as a whole.

     AWT  and its subsidiaries are parties to various  other
     legal  actions  arising in the normal course  of  their
     businesses,   some   of  which   involve   claims   for
     substantial sums.  AWT believes that the disposition of
     such various actions, individually or in the aggregate,
     will  not  have  a  material  adverse  effect  on   the
     consolidated   financial   position   or   results   of
     operations of AWT taken as a whole.

ITEM 2-5

     There are no reportable items under Part II, items 2
     through 5.


ITEM 6.    Exhibits and Reports on Form 8-K

(a)  Exhibits.

  Exhibit 11.  Computation of per share earnings.

  Exhibit 27.  Financial Data Supplement

<PAGE>


                                  
                              SIGNATURE
                              ---------                                  

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


                               AIR & WATER TECHNOLOGIES CORPORATION
                               ------------------------------------ 
                                              (registrant)



Date   February 21, 1997                           /s/ Alain Brunais
       -----------------                           ------------------ 
                                                   Alain Brunais
                                                   Chief Financial Officer