<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 July 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 July 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 JULY 31, 1997 AND OCTOBER 31, 1996
 --------------------------------------------------------------------
               (in thousands , except share data)
               ----------------------------------
[CAPTION]
<TABLE>
                              ASSETS                           1997       1996
                              ------                          -----       ----
                                                           (unaudited)
                                                            ---------
<S>                                                      <C>         <C>
CURRENT ASSETS:
  Cash and cash equivalents                               $  13,635   $ 12,667
  Accounts receivable, net                                   93,377    100,933
  Costs and estimated earnings in excess of
      billings on uncompleted contracts                      40,425     48,097
  Inventories                                                10,667     11,319
  Prepaid expenses and other current assets                   9,998     12,027
                                                           --------   -------
      Total current assets                                  168,102    185,043

PROPERTY, PLANT AND EQUIPMENT, net                           29,315     35,432
INVESTMENTS  IN  ENVIRONMENTAL TREATMENT FACILITIES          21,960     22,062
GOODWILL                                                    242,179    265,860
OTHER ASSETS                                                 22,528     29,873
                                                           --------    ------- 
      Total assets                                         $484,084   $538,270
                                                           ========   ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------

CURRENT LIABILITIES:
   Short-term  borrowings and current installments
     oflong-term debt                                      $ 14,391   $    378
  Accounts payable                                           88,009     73,951
  Accrued expenses                                           79,840     76,656
  Billings in excess of costs and estimated earnings on
      uncompleted contracts                                  25,637     23,995
  Income taxes payable                                        2,055      2,507
                                                           --------   --------
      Total current liabilities                             209,932    177,487
                                                           --------   --------

LONG-TERM DEBT                                              304,922    306,542
                                                           --------   --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
  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 shares                             32         32
  Additional paid-in capital                                427,036    427,036
  Accumulated deficit                                      (456,214)  (372,433)
  Common stock in treasury, at cost                            (108)      (108)
  Cumulative currency translation adjustment                 (1,528)      (298)
                                                           --------    -------
    Total stockholders' equity (deficit)                    (30,770)    54,241
                                                            --------    -------
    Total liabilities and stockholders' equity (deficit)    $484,084   $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 AND NINE MONTH PERIODS ENDED JULY 31, 1997 AND 1996
   -----------------------------------------------------------------
              (in thousands, except per share data)
               -----------------------------------
                           (unaudited)
                            ---------
<TABLE>
<CAPTION>
                                          Three Months          Nine Months
                                         Ended July 31         Ended July 31
                                         -------------         -------------

                                          1997      1996       1997      1996
                                          ----      ----       ----      ----

<S>                                   <C>       <C>         <C>      <C>
SALES                                  $158,939  $177,164    $454,17  $503,861

COST OF SALES                           131,065   143,050     390,416  404,974
                                       --------   -------     -------  -------
 Gross margin                            27,874    34,114      63,757   98,887

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                  20,804    23,032      83,559   70,079

DEPRECIATION AND AMORTIZATION             4,861     4,730      16,889   14,806

IMPAIRMENT CHARGES                            -         -      25,000        -
                                        -------   -------     -------  -------
 Operating income (loss)                  2,209     6,352     (61,691)  14,002

INTEREST EXPENSE                         (6,264)   (5,732)    (18,217) (16,964)

INTEREST INCOME                             111       106         346      700

OTHER EXPENSE, NET                         (499)     (832)       (964)  (1,445)
                                        -------    -------    -------  -------
 Loss before income taxes                (4,443)     (106)    (80,526)  (3,707)

INCOME TAXES                                347       352         780    1,001
                                        -------    ------     -------  -------
NET LOSS                                $(4,790)  $  (458)   $(81,306) $(4,708)
                                        =======    ======     =======   ======

LOSS PER COMMON SHARE
 (AFTER PREFERRED STOCK DIVIDENDS)      $  (.18)  $  (.04)  $  (2.62)  $  (.22)
                                         ======   =======   ========   =======
 Weighted average number of shares
   outstanding                           32,019    32,018     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 NINE MONTH PERIODS ENDED JULY 31, 1997 AND 1996
     -------------------------------------------------------
                         (in thousands)
                         -------------
                           (unaudited)
                           ----------
<TABLE>
<CAPTION>
                                                             1997        1996
                                                             ----        ----
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                 $(81,306)   $(4,708)
  Adjustments to reconcile net loss to net cash
      provided by (used for) continuing operations -
        Depreciation and amortization                        16,889     14,806
        Impairment Charges and Other, net                    27,732        621

  Changes in assets and liabilities -
       (Increase) decrease in assets -
          Accounts receivable, net                            7,432      3,837
          Costs and estimated earnings in excess of
             billings on uncompleted contracts                7,067     (1,635)
          Inventories                                          (812)      (828)
          Prepaid expenses and other current assets           1,952     (2,362)
          Other assets                                        8,342        755
       Increase (decrease) in liabilities -
          Accounts payable                                   14,037        (52)
          Accrued expenses                                   (1,173)   (13,319)
          Billings in excess of costs and estimated
            earnings on uncompleted contracts                 1,642        572
          Income taxes payable                                 (449)        49
                                                            -------    -------
          Net cash provided by (used for) continuing
             operations                                       1,353     (2,264)
          Net cash provided by discontinued operations          945        149
                                                            -------    -------
          Net cash provided by (used for) operating
             activities                                       2,298     (2,115)
                                                            -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of business                           1,545      2,353
     Capital expenditures                                    (5,129)    (5,281)
     Investment in environmental treatment facilities           102        582
     Other, net                                              (6,092)    (8,835)
                                                            -------    -------
             Net cash used for investing activities          (9,574)   (11,181)
                                                            -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of notes payable and long-term debt               (307)      (295)
     Net borrowings under credit facilities                  12,700     16,000
     Cash dividends paid                                     (2,475)    (2,475)
     Other, net                                              (1,674)    (1,008)
                                                           --------    -------
             Net cash provided by financing activities        8,244     12,222
                                                           --------    -------
Net increase (decrease) in cash and cash equivalents            968     (1,074)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             12,667     11,168
                                                           --------    -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $13,635    $10,094
                                                           ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for interest               $19,877    $18,869
                                                            =======    =======
The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>

              AIR & WATER TECHNOLOGIES CORPORATION
              -------------------------------------
       NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
       --------------------------------------------------
                          JULY 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" or "AWT") 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:
     -----------------------------

     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,  Professional Services  Group  (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.

     The  City  of  Bremerton, Washington brought a  contribution
     action   against  Metcalf  &  Eddy  Services,   Inc.   ("M&E
     Services"),   the   operator  of  a  City-owned   wastewater
     treatment plant from 1987 until late 1995.  The contribution
     action  arises from two prior lawsuits against the city  for
     alleged  odor nuisances brought by two groups of  homeowners
     neighboring the plant.

     In the first homeowners' suit, the City paid $4.3 million in
     cash   and   approximately  $5  million  for  odor   control
     technology to settle the case.  M&E Services understands the
     odor control measures generally have been successful and the
     odors have been reduced as a result.  M&E Services was not a
     party  to  the  first  homeowner's  suit,  which   has  been
     dismissed with prejudice as to all parties.

     In  the settlement of the second homeowners' case, the  City
     of  Bremerton  paid  the homeowners $2.9  million,  and  M&E
     Services  contributed $.6 million to the settlement  without
     admitting liability.  All claims raised by the homeowners in
     the  second  suit  (except for two recalcitrant  homeowners)
     were  resolved.  All claims by and between M&E Services  and
     the  City  in  the  second homeowner's suit  were  expressly
     reserved  and  will  be tried after the City's  contribution
     action,  which  is currently scheduled for  trial  in  March
     1998.

<PAGE>

     The  City  is seeking to recover the amounts it expended  on
     the  two  settlements,  damages for  M&E  Services'  alleged
     substandard  operation of the plant,  and  attorneys'  fees.
     M&E  Services denies any liability to the City and  believes
     it  has  meritorious  defenses to the  claim.   However,  no
     assurances can be given that an adverse judgment  would  not
     have a material adverse effect on the financial position  or
     results  of operations of M&E Services or the Company  taken
     as a whole.

     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.

(4)  Recently Issued Accouting Pronouncements:
     ----------------------------------------

     Statement  128:   "Earnings  Per  Share"  -  This  statement
     requires  that  the  Company begin  to  report  "basic"  and
     "diluted"  earnings per share which would replace  "primary"
     and "fully diluted" earnings per share as currently reported
     by the Company.  The key difference is that "basic" earnings
     per  share  does  not  adjust for common stock  equivalents.
     Statement  128  is effective for the Company beginning  with
     the  first  quarter of fiscal 1998 (the three  month  period
     ending  January  31, 1998) and requires restatement  of  all
     prior-period   earnings  per  share   data.    Adoption   of
     Statement 128 is not expected to have a material effect.

(5)  Recent Developments:
     ------------------- 

     Due  to its highly leveraged condition, the Company has  been  considering 
     ways to restructure its debt or otherwise  effect  a recapitalization.
     This has been exacerbated by deteriorating operating results.
     In  June  1997,  the Company  established a special committee of its
     independent directors (the "Special Committee") to
     receive and negotiate the  terms
     of  any  proposal made by Compagnie Generale  des  Eaux
     ("CGE"),  the  Company's largest shareholder.   The  Special
     Committee and CGE have been holding discussions regarding  a
     range of possible alternatives but to date no agreement has been reached.
     No assurance can be given that the Special Committee and CGE
     will agree on the terms of a possible debt restructuring  or
     other  recapitalization transaction.  The  Company  believes
     that  the  failure  to restructure is likely to  have  a  material
     adverse  effect  on  its  business prospects  and  financial
     condition.

     In  August 1997, United States Fidelity and Guaranty Company
     and certain of its affiliates ("USF&G") notified the Company
     that  it  would suspend the renewal and issuance of new  bid
     and  performance bonds as of  September 30, 1997, due to the
     Company's   current  operating  performance  and   resulting
     financial condition, unless it receives indemnification from
     CGE  or Anjou International Company ("Anjou"), an affiliated
     company,   for   at  least  20%  of all future bond requests
     including renewals.

     A  bid bond guarantees that AWT will enter into the contract
     under consideration at the price bid and a performance  bond
     guarantees performance of the contract.  In order to procure
     new  contracts and maintain its existing contracts,  AWT  is
     often  required to provide such bonds to its  clients.   CGE
     has informed USF&G and the Company that, pending the outcome
     of  its  discussions with the Special Committee, it  is  not
     prepared   at   this   time   to   provide   the   requested
     indemnification support.  If new bonds are  not  issued,  it
     will  be  difficult for Professional Services Group  and
     AWT's  other  segments,  to a lesser  extent,  to  obtain  new
     contracts,  and if existing bonds are not renewed,  AWT  may
     lose a material portion of its existing Professional Services
     Group  contracts within the next twelve months.  The Company
     believes  that its inability to obtain such bonds is  likely
     to  have a material adverse effect on its ability to conduct
     its businesses and on its financial condition.  No assurance
     can  be  given that the Company will be able to procure  new
     bonds  for  new  projects or renewal of bonds  for  existing
     projects from USF&G or any other surety.

<PAGE>

(6)  Significant Operating Charges:
     ----------------------------- 

     The  operating  loss  sustained  by  the  Professional
     Services  Group during the nine month period ended July  31,
     1997   was  primarily  the  result  of  the  prior   quarter
     provisions  and  asset  write-offs which  approximated  $9.3
     million.   These charges were primarily related  to  revised
     estimates  of direct project costs of $2.8 million  required
     under  the PRASA contract; professional fees of $5.3 million
     related  to  marketing consultants, the U.S.  Department  of
     Justice  investigation and certain litigation  matters;  and
     provisions   of  $1.2  million  for  revised  collectibility
     estimates for certain non-current note receivables.

     The  operating loss sustained by Metcalf & Eddy during
     the  nine month period ended July 31, 1997 was primarily the
     result  of  the  $19.4 million of charges reflected  in  the
     prior   quarters,  including  $5.4  million  of   provisions
     required in order to properly reflect the Company's  revised
     estimates  for  the  collectibility of  certain  receivables
     based   on   recent   adverse   developments   in   contract
     negotiations  and  collection  efforts,  $6.3   million   of
     increases  to  its  reserves  for  litigation,  professional
     liability  and certain project contingencies due to  revised
     estimates of the expected outcome of certain unasserted  and
     asserted claims and litigation incurred in the normal course
     of  business, $3.4 million of equipment write-offs,  a  $1.7
     million charge related to a cancellation penalty for a  high
     cost leased facility and other direct and indirect costs  of
     $2.6 million.

     The  operating  loss  sustained  by  Research-Cottrell
     during  the  nine  month period ended  July  31,  1997  were
     primarily  the  result of the second quarter  $25.0  million
     impairment   charge  discussed  in  the  "Revised   Business
     Strategy"  section below, and other receivable and  warranty
     provisions  of  $4.0  million related  to  its  Ecodyne  and
     Custodis  operations due to recent adverse  developments  on
     two  specific  projects.   In addition,  the  third  quarter
     results were impacted by higher than anticipated costs on  a
     specific  APCD  project  by  $1.0  million,  receivable  and
     warranty  provisions  of $2.3 million  related  to  the  R-C
     International  operations and partially off-set  by  revised
     estimates   of   $1.0   million   of   previously    accrued
     discretionary and self insured employee benefits.

(7)  Revised Business Strategy:
     -------------------------

     During the second quarter the Company completed a review  of
     its  operations'  three year business  plans.   These  plans
     included   a   detailed   analysis   of   markets,    growth
     opportunities  and forecasted three year operating  results,
     cash  flows and return on capital employed for each business
     segment.

     As a result of this review, management continues to consider
     the  actions necessary to redeploy its capital to  its  core
     water  business (Professional Services Group and  Metcalf  &
     Eddy).   This  approach reflects management's assessment  of
     the  greater  market opportunities and growth  potential  in
     these  sectors compared to the air pollution markets.  Among
     other factors contributing to this approach were recent  tax
     law  changes  which may expand the duration  of  operations,
     maintenance  and management contracts and create  additional
     opportunities  within  the  water and  wastewater  treatment
     markets  which  are  the  primary markets  for  Professional
     Services   Group   and  Metcalf  &  Eddy.   These   enhanced
     opportunities  are  in  contrast to  the  air  sector  where
     continuing  delays in issuing new air quality  standards  by
     the  EPA  and lack of enforcement of existing standards  are
     expected  to limit the growth opportunities within  the  air
     pollution control markets targeted by Research-Cottrell.

     Furthermore,  the  returns on capital  employed  within  the
     Professional Services Group and Metcalf & Eddy segments  are
     forecasted to be greater than the returns for the  Research-
     Cottrell segment.  From a competitive standpoint, management
     also  believes  that  the  Company has  greater  competitive
     advantages  and market penetration through its  Professional
     Services  Group and Metcalf & Eddy businesses than what  has
     been achieved by its Research-Cottrell operations.

<PAGE>

     As a result of the above, management continues to assess the
     impact  of  de-emphasizing  the  Research-Cottrell  business
     segment  and  redeploying its capital  to  its  Professional
     Services  Group  and  Metcalf & Eddy segments.  A  financial
     advisor has been retained to assist the Company in exploring
     strategic  alternatives related to this  redeployment.   The
     successful  implementation of a redeployment  program  could
     include the divestiture of portions or substantially all  of
     the  Research-Cottrell segment, although no such  definitive
     decision  to divest has been made by the Company's Board  of
     Directors  at  this  time.   The  Company  is  currently  in
     discussions  with  several parties regarding  the  potential
     divestiture of this business.

     Based on the recent downturn in the operating performance of
     certain  of  the Research-Cottrell businesses,  the  Company
     reviewed  the expected future cash flows of these businesses
     and  reassessed their fair value.  In connection  with  this
     review,  the  Company reflected a $25.0  million  impairment
     charge  including  a  goodwill writedown  of  $17.4  million
     related   to  the  Ecodyne  (sold  during  July   1997   for
     approximately  $2.0 million) and KVB businesses  during  the
     second   quarter   of  fiscal  1997.   The  impairment   was
     determined   in  accordance  with  Statement  of   Financial
     Accounting  Standards No. 121 by taking  into  consideration
     the  operations' fair values based on expected  future  cash
     flows  discounted  at  a rate commensurate  with  the  risks
     involved.

     The  realizability of goodwill and  other  long  lived
     assets  is the result of an estimate based on the underlying
     assets remaining estimated useful lives, projected operating
     cash flows and ultimate disposition assumption (held for use
     or  held  for  sale).  It is reasonably possible  that  this
     estimate  will  change in the near term as a consequence  of
     further  deterioration  in market conditions  and  operating
     results  or the divestiture of all or part of the  Research-
     Cottrell  segment.   The  effect  of  the  change  would  be
     material  to  the financial statements since  a  significant
     additional  charge  may  be required.   At  July  31,  1997,
     Research-Cottrell's total assets and net carrying value  was
     $136.5  million  and  $84.4 million,  including  unamortized
     goodwill of  $76.6 million

(8)  Financial Condition:
     -------------------

     The  Company  maintains a $60.0 million unsecured  revolving
     credit  facility  with Anjou ("Anjou Credit  Facility"),  an
     affiliated  company.  The borrowings under the Anjou  Credit
     Facility bear interest at LIBOR plus .6%.  The Company  also
     maintains  a   Senior Secured Credit Facility ("Bank  Credit
     Facility")  which  was increased by $20.0 million  to  $70.0
     million  as  of  April 28, 1997.  As of July 31,  1997,  the
     Company's  outstanding  borrowings under  the  Anjou  Credit
     Facility  totaled $60.0 million and the Bank Credit Facility
     totaled  $14.0  million (unused capacity of $32.3  million).
     Outstanding letters of credit under the Bank Credit Facility
     totaled $23.7 million on July 31, 1997.

     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 lesser of $50 million or 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
     (5.7%  at  July 31, 1997), as defined, plus  1.0%  or  at  a
     defined  bank  rate approximating prime (8.5%  at  July  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 representatives on the Company's Board  of
     Directors proportionate to its ownership in AWT as  well  as
     to  appoint the Chief Executive Officer and Chief  Financial
     Officer  of  the Company.  The Bank Credit Facility  expires
     March  31,  1998.   The Company will need  to  replace  this
     facility at that time.

<PAGE>

     The businesses of the Company have not historically required
     significant ongoing capital expenditures. For the nine month
     period ended July 31, 1997, and the years ended October  31,
     1996  and 1995 total capital expenditures were $5.1 million,
     $7.5  million and $7.9 million, respectively.  At  July  31,
     1997,  the  Company  had  no material  outstanding  purchase
     commitments  for capital expenditures.  As of September  12,
     1997,   the   Company  reduced  its  Bank  Credit   Facility
     borrowings  by  $4.0 million during the  fourth  quarter  of
     fiscal 1997.  Current cash flow forecasts reflect additional
     borrowing  requirements of approximately  $6.0  million  and
     additional  letters of credit requirements of $10.0  million
     during  the  fourth quarter of this fiscal  year,  which  is
     within   the  Company's  credit  capacity.   Management   is
     addressing its on-going cash requirements through  a  series
     of  programs,  for which there is no assurance  of  success,
     directed at improving working capital management by focusing
     on, among other things, collection of unreimbursed costs  on
     certain  significant contracts, including the PRASA contract
     ($24.2  million),  Metcalf  &  Eddy  past  due  receivables,
     increased   emphasis  on  capital  redeployment  and   asset
     divestitures and the restructuring and strengthening of  its
     current capital structure.

     The  Company's forecasts indicate that it  may  be  in
     violation of several covenants at October 31, 1997 and, as a
     result, will need to obtain an amendment of the Bank  Credit
     Facility or a waiver.  In the absence of a waiver, the Banks
     would  have  the right to refuse any further  extensions  of
     credit   and  the  right  to  accelerate  payment   of   all
     outstanding  amounts  under the Bank  Credit  Facility.   In
     addition, substantially all of the Company's long-term  debt
     and  or  obligations contain cross default  or  acceleration
     provisions.  To obtain the waivers, the Company expects that
     the  Banks would request additional credit support from  CGE
     and  certain other changes to the Bank Credit Facility.  CGE
     has  informed  the Company that pending the outcome  of  its
     discussions   with  the  Special  Committee  regarding   the
     proposed debt restructuring or other recapitalization, it is
     not  prepared  at  this  time to provide  additional  credit
     support  to the Company.  As a result, no assurance  can  be
     given whether the necessary waivers from the Company's Banks
     would  be  obtained.  In the event the Company were required
     to  repay  accelerated outstanding amounts  under  the  Bank
     Credit  Facility and other agreements, the Company does  not
     believe  that it will have financial resources  adequate  to
     repay  such  amounts  and  to satisfy  its  ongoing  working
     capital   requirements.   The  Company  believes  that   its
     inability  to  obtain waivers from the Banks  would  have  a
     material  adverse effect on its business prospects  and  its
     financial condition.

(9)  Convertible Debenture Delisting:
     -------------------------------

     On August 13, 1997 AWT's 8% Convertible debentures were
     delisted from the NASDAQ SmallCap Market as a consequence of
     AWT's capital and surplus not meeting the requirements of
     the Marketplace Rule 4310 (c) (03).

















<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):

<TABLE>
<CAPTION>
                                     Three Months Ended      Nine Months Ended
                                             July 31                July 31
                                     -------------------     -----------------
                                          1997      1996        1997      1996
                                          ----      ----        ----      ----
<S>                                  <C>       <C>         <C>       <C>
Sales:
 Professional Services Group          $ 65,656  $ 68,167    $195,383  $195,474
 Metcalf & Eddy                         45,609    52,561     132,108   150,663
 Research - Cottrell                    48,111    57,640     128,077   160,615
 Other and eliminations                   (437)   (1,204)     (1,395)   (2,891)
                                      --------  --------    --------   -------
                                      $158,939  $177,164    $454,173  $503,861
                                      ========  ========    ========  ========

Cost of Sales:
 Professional Services Group          $ 56,908  $ 60,859    $177,697  $172,871
 Metcalf & Eddy                         32,986    37,443     103,731   106,758
 Research - Cottrell                    41,608    45,952     110,383   128,236
 Other and eliminations                   (437)   (1,204)     (1,395)   (2,891)
                                      --------  --------    --------   -------
                                      $131,065  $143,050    $390,416  $404,974
                                      ========  ========    ========  ========

Selling, General and Administrative Expenses:
 Professional Services Group          $  3,473  $  3,535    $ 16,601  $ 10,753
 Metcalf & Eddy                          8,311     9,370      37,437    29,646
 Research - Cottrell                     7,789     8,416      24,315    24,506
 Corporate (unallocated)                 1,231     1,711       5,206     5,174
                                      --------  --------    -------   --------
                                      $ 20,804  $ 23,032    $ 83,559  $ 70,079
                                      ========  ========    ========  ========

Depreciation and Amortization:
 Professional Services Group          $  1,935  $  1,667    $ 6,028   $  5,710
 Metcalf & Eddy                          1,583     1,514      6,546      4,489
 Research - Cottrell                     1,216     1,451      3,930      4,283
 Corporate (unallocated)                   127        98        385        324
                                      --------  --------   --------   --------
                                      $  4,861  $  4,730   $ 16,889   $ 14,806
                                      ========  ========   ========   ========

Impairment Charges:
 Research-Cottrell                    $     -   $     -    $ 25,000   $     -
                                      =======  ========    ========   ========

Operating Income (Loss):
 Professional  Services  Group        $  3,340  $  2,106   $ (4,943)  $ 6,140
 Metcalf & Eddy                          2,729     4,234    (15,606)    9,770
 Research - Cottrell                    (2,502)    1,821    (35,551)    3,590
 Corporate (unallocated)                (1,358)   (1,809)    (5,591)   (5,498)
                                      --------   -------   --------   --------
                                      $  2,209  $  6,352   $(61,691)  $ 14,002
                                      ========  ========   =========  ========

</TABLE>
<PAGE>

Recent Developments
-------------------

Due  to its highly leveraged condition, the Company has  been  considering  ways
to  restructure  its  debt  or otherwise  effect  a recapitalization.  This
has been exacerbated by deteriorating operating results.
In  June  1997,  the Company  established a special committee of
its  independent directors  (the "Special Committee")
to receive and negotiate 
the terms of any  proposal  made by Compagnie Generale  des  Eaux
("CGE"),  the  Company's largest shareholder.   The  Special
Committee and CGE have been holding discussions regarding  a
range of possible alternatives but to date no agreement has been
reached.  No assurance can be given that the Special Committee and CGE
will agree on the terms of a possible debt restructuring  or
other  recapitalization transaction.  The  Company  believes
that  the  failure  to restructure is likely to  have  a  material
adverse  effect  on  its  business prospects  and  financial
condition.

In  August 1997, United States Fidelity and Guaranty Company
and certain of its affiliates ("USF&G") notified the Company
that  it  would suspend the renewal and issuance of new  bid
and  performance bonds as of  September 30, 1997, due to the
Company's   current  operating  performance  and   resulting
financial condition, unless it receives indemnification from
CGE  or Anjou International Company ("Anjou"), an affiliated
company,   for   at  least  20%  of all future bond requests
including renewals.

A  bid bond guarantees that AWT will enter into the contract
under consideration at the price bid and a performance  bond
guarantees performance of the contract.  In order to procure
new  contracts and maintain its existing contracts,  AWT  is
often  required to provide such bonds to its  clients.   CGE
has informed USF&G and the Company that, pending the outcome
of  its  discussions with the Special Committee, it  is  not
prepared   at   this   time   to   provide   the   requested
indemnification support.  If new bonds are  not  issued,  it
will  be  difficult for Professional Services Group  and
AWT's  other  segments,  to a lesser  extent,  to  obtain  new
contracts,  and if existing bonds are not renewed,  AWT  may
lose a material portion of its existing Professional Services
Group  contracts within the next twelve months.  The Company
believes  that its inability to obtain such bonds is  likely
to  have a material adverse effect on its ability to conduct
its businesses and on its financial condition.  No assurance
can  be  given that the Company will be able to procure  new
bonds  for  new  projects or renewal of bonds  for  existing
projects from USF&G or any other surety.

Professional Services Group
---------------------------
     
The  operating loss sustained during the nine  month  period
ended  July 31, 1997 was primarily the result of  the  prior
quarter  provisions and asset write-offs which  approximated
$9.3  million.   These  charges were  primarily  related  to
revised  estimates of direct project costs of  $2.8  million
required under the PRASA contract; professional fees of $5.3
million   related   to  marketing  consultants,   the   U.S.
Department  of Justice investigation and certain  litigation
matters;   and  provisions  of  $1.2  million  for   revised
collectibility   estimates  for  certain  non-current   note
receivables.  The operating income was $3.3 million during the
three month period ended July 31, 1997.

Excluding  the  effect  of the aforementioned  charges,  the
operating results were $1.2 million higher and $1.8  million
lower than the three and nine month comparable prior periods
ended  July 31, 1996 due to additional direct project  costs
including  certain  higher non-recoverable  costs  resulting
from  competitive  pricing pressures and timing  of  certain
contractual  incentive  clauses for the  PRASA  project  and
revised estimates for self insured employee benefits  during
the current third quarter.

The  Company's sales have remained comparable to  the  prior
periods  as a result of the privatization market  developing
more slowly than anticipated.  Although the Company has been
successful  in obtaining contract renewals, it continues  to
experience  delays in negotiating and closing  new  business
opportunities   due  to  municipal  clients'  implementation
schedules.   Results  are  expected  to  improve  moderately
during  the fourth quarter from the most recent three  month
period   due   to  new  contracts  and  certain  contractual
incentive clauses which are expected to be realized.

<PAGE>




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

The  operating loss sustained during the nine  month  period
ended  July 31, 1997 was primarily the result of  the  $19.4
million   of  charges  reflected  in  the  prior   quarters,
including  $5.4 million of provisions required in  order  to
properly  reflect  the Company's revised estimates  for  the
collectibility  of  certain  receivables  based  on   recent
adverse developments in contract negotiations and collection
efforts,  $6.3  million of increases  to  its  reserves  for
litigation,  professional  liability  and  certain   project
contingencies  due  to  revised estimates  of  the  expected
outcome  of  certain  unasserted  and  asserted  claims  and
litigation  incurred in the normal course of business,  $3.4
million  of  equipment  write-offs, a  $1.7  million  charge
related  to  a cancellation penalty for a high  cost  leased
facility  and  other  direct  and  indirect  costs  of  $2.6
million.  The operating income was $2.7 million during the
three month period ended July 31, 1997.

In  addition  to  the effect of the aforementioned  charges,
lower  sales volume, gross margin rates and selling, general
and administration expenses reduced the operating results by
$1.5  million and $6.0 million in the three and  nine  month
comparable  prior periods ended July 31,  1996.   The  lower
sales  volume of $7.0 million and $18.6 million  during  the
periods  reduced the operating results by $2.0  million  and
$5.4  million due to delays in obtaining task order releases
primarily  within  the hazardous waste  remediation  service
lines,  several contracts which were awarded to  competitors
and  delayed  procurement in international markets.   Delays
are increasing due to funding and administrative issues with
certain  government agencies (e.g. Environmental  Protection
Agency  "EPA" and Department of Defense).  The  lower  gross
margin  rates reduced the operating results by  $.5  million
and  $2.1  million  during  the  periods  primarily  due  to
favorable   pricing  adjustments  reflected  in  the   prior
periods,  pricing pressures and a business  mix  shift  from
self-performed  work to subcontracted work.  Partially  off-
setting  the  lower  margins  were  selling,  general,   and
administrative expense reductions of $1.0 million  and  $2.3
million  during the three and nine month periods as compared
to  the prior periods as a result of lower personnel related
costs  including  certain employee benefit  costs  discussed
below.

The fourth quarter results are expected to be lower than the
most recent three month period due to the $1.4 million third
quarter  effect  of revised estimates of previously  accrued
discretionary and self insured employee benefit costs.  Full
year sales levels are expected to be approximately 15% below
the comparable prior year period due to continuing delays in
work releases.

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

The  operating loss sustained during the nine  month  period
ended  July 31, 1997 were primarily the result of the second
quarter  $25.0  million impairment charge discussed  in  the
"Revised   Business  Strategy"  section  below,  and   other
receivable  and warranty provisions of $4.0 million  related
to its Ecodyne and Custodis operations due to recent adverse
developments  on  two specific projects.  In  addition,  the
third   quarter  results  were  impacted  by   higher   than
anticipated  costs  on  a  specific  APCD  project  by  $1.0
million, receivable and warranty provisions of $2.3  million
related  to  the R-C International operations and  partially
off-set  by  revised estimates of $1.0 million of previously
accrued  discretionary and self insured  employee  benefits.
In  addition  to  the effect of the aforementioned  charges,
lower  sales  volume and reduced margin rates, to  a  lesser
extent,  contributed  to the operating  results  being  $1.0
million and $6.8 million lower than the three and nine month
comparable  prior  period ended July 31,  1996.   The  lower
sales  volume of $9.5 million and $32.5 million  during  the
aforementioned periods reduced the operating income by  $1.9
million  and  $6.6 million, respectively.  The  lower  sales
volumes were reflected primarily in the REECO, Ecodyne, APCD
and KVB operations which approximated 74% of the variance in
the  nine month period and substantially all of the variance
in   the   three   month  period.   These   operations   are
experiencing  reduced  volume  as  a  result  of  fewer  bid
opportunities  due  to  delays in issuing  new  air  quality
standards  by  the  EPA,  lack of  enforcement  of  existing
standards   and  price  pressures  from  highly  competitive
markets.  The gross margin rates adjusted for the previously
mentioned  charges, have also decreased  by  2.6%  and  2.3%
($1.3  million and $2.9 million) during the three  and  nine
month   periods,  respectively,  due  to  price   pressures,
unfavorable  product  line mix and project  execution.  The
operating loss was $2.5 million during the three month
period ended July 31, 1997.   The unfavorable trend compared
to the prior periods  related  to volume  and margin rates is
expected to continue due to  the reasons previously stated. 

<PAGE>



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

The  unallocated corporate costs were $.4 million lower than
the  comparable  three  month prior period  due  to  revised
estimates  of  previously  accrued discretionary  and  self-
insured  employee  benefits.  In  addition,  higher  average
borrowings resulted in increased interest expense.

Revised Business Strategy
-------------------------

During the second quarter the Company completed a review  of
its  operations'  three year business  plans.   These  plans
included   a   detailed   analysis   of   markets,    growth
opportunities  and forecasted three year operating  results,
cash  flows and return on capital employed for each business
segment.

As a result of this review, management continues to consider
the  actions necessary to redeploy its capital to  its  core
water  business (Professional Services Group and  Metcalf  &
Eddy).   This  approach reflects management's assessment  of
the  greater  market opportunities and growth  potential  in
these  sectors compared to the air pollution markets.  Among
other factors contributing to this approach were recent  tax
law  changes  which may expand the duration  of  operations,
maintenance  and management contracts and create  additional
opportunities  within  the  water and  wastewater  treatment
markets  which  are  the  primary markets  for  Professional
Services   Group   and  Metcalf  &  Eddy.   These   enhanced
opportunities  are  in  contrast to  the  air  sector  where
continuing  delays in issuing new air quality  standards  by
the  EPA  and lack of enforcement of existing standards  are
expected  to limit the growth opportunities within  the  air
pollution control markets targeted by Research-Cottrell.

Furthermore,  the  returns on capital  employed  within  the
Professional Services Group and Metcalf & Eddy segments  are
forecasted to be greater than the returns for the  Research-
Cottrell segment.  From a competitive standpoint, management
also  believes  that  the  Company has  greater  competitive
advantages  and market penetration through its  Professional
Services  Group and Metcalf & Eddy businesses than what  has
been achieved by its Research-Cottrell operations.

As a result of the above, management continues to assess the
impact  of  de-emphasizing  the  Research-Cottrell  business
segment  and  redeploying its capital  to  its  Professional
Services  Group  and  Metcalf & Eddy segments.  A  financial
advisor has been retained to assist the Company in exploring
strategic  alternatives related to this  redeployment.   The
successful  implementation of a redeployment  program  could
include the divestiture of portions or substantially all  of
the  Research-Cottrell segment, although no such  definitive
decision  to divest has been made by the Company's Board  of
Directors  at  this  time.   The  Company  is  currently  in
discussions  with  several parties regarding  the  potential
divestiture of this business.

Based on the recent downturn in the operating performance of
certain  of  the Research-Cottrell businesses,  the  Company
reviewed  the expected future cash flows of these businesses
and  reassessed their fair value.  In connection  with  this
review,  the  Company reflected a $25.0  million  impairment
charge  including  a  goodwill writedown  of  $17.4  million
related   to  the  Ecodyne  (sold  during  July   1997   for
approximately  $2.0 million) and KVB businesses  during  the
second   quarter   of  fiscal  1997.   The  impairment   was
determined   in  accordance  with  Statement  of   Financial
Accounting  Standards No. 121 by taking  into  consideration
the  operations' fair values based on expected  future  cash
flows  discounted  at  a rate commensurate  with  the  risks
involved.

The realizability of goodwill and other long lived assets is
the  result  of  an estimate based on the underlying  assets
remaining  estimated useful lives, projected operating  cash
flows  and ultimate disposition assumption (held for use  or
held  for  sale).   It  is  reasonably  possible  that  this
estimate  will  change in the near term as a consequence  of
further  deterioration  in market conditions  and  operating
results  or the divestiture of all or part of the  Research-
Cottrell  segment.   The  effect  of  the  change  would  be
material  to  the financial statements since  a  significant
additional  charge  may  be required.   At  July  31,  1997,
Research-Cottrell's total assets and net carrying value  was
$136.5  million  and  $84.4 million,  including  unamortized
goodwill of  $76.6 million.

<PAGE>


Financial Condition
------------------- 
    
Net  financial  debt  (debt less cash)  increased  by  $11.4
million  during the nine month period ended July  31,  1997.
In  addition to the preferred stock dividend payment of $2.5
million,  the  Company utilized $11.1 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.

The  Company  maintains a $60.0 million unsecured  revolving
credit  facility  with Anjou ("Anjou Credit  Facility"),  an
affiliated  company.  The borrowings under the Anjou  Credit
Facility bear interest at LIBOR plus .6%.  The Company  also
maintains  a   Senior Secured Credit Facility ("Bank  Credit
Facility")  which  was increased by $20.0 million  to  $70.0
million  as  of  April 28, 1997.  As of July 31,  1997,  the
Company's  outstanding  borrowings under  the  Anjou  Credit
Facility  totaled $60.0 million and the Bank Credit Facility
totaled  $14.0  million (unused capacity of $32.3  million).
Outstanding letters of credit under the Bank Credit Facility
totaled $23.7 million on July 31, 1997.

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 lesser of $50 million or 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
(5.7%  at  July 31, 1997), as defined, plus  1.0%  or  at  a
defined  bank  rate approximating prime (8.5%  at  July  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 representatives on the Company's Board  of
Directors proportionate to its ownership in AWT as  well  as
to  appoint the Chief Executive Officer and Chief  Financial
Officer  of  the Company.  The Bank Credit Facility  expires
March  31,  1998.   The Company will need  to  replace  this
facility at that time.

The businesses of the Company have not historically required
significant ongoing capital expenditures. For the nine month
period ended July 31, 1997, and the years ended October  31,
1996  and 1995 total capital expenditures were $5.1 million,
$7.5  million and $7.9 million, respectively.  At  July  31,
1997,  the  Company  had  no material  outstanding  purchase
commitments  for capital expenditures.  As of September  12,
1997,   the   Company  reduced  its  Bank  Credit   Facility
borrowings  by  $4.0 million during the  fourth  quarter  of
fiscal 1997.  Current cash flow forecasts reflect additional
borrowing  requirements of approximately  $6.0  million  and
additional  letters of credit requirements of $10.0  million
during  the  fourth quarter of this fiscal  year,  which  is
within   the  Company's  credit  capacity.   Management   is
addressing its on-going cash requirements through  a  series
of  programs,  for which there is no assurance  of  success,
directed at improving working capital management by focusing
on, among other things, collection of unreimbursed costs  on
certain  significant contracts, including the PRASA contract
($24.2  million),  Metcalf  &  Eddy  past  due  receivables,
increased   emphasis  on  capital  redeployment  and   asset
divestitures and the restructuring and strengthening of  its
current capital structure.

The Company's forecasts indicate that it may be in violation
of  several covenants at October 31, 1997 and, as a  result,
will need to obtain an amendment of the Bank Credit Facility
or  a  waiver.  In the absence of a waiver, the Banks  would
have  the  right to refuse any further extensions of  credit
and  the  right  to  accelerate payment of  all  outstanding
amounts  under  the  Bank  Credit  Facility.   In  addition,
substantially  all of the Company's long-term  debt  and  or
obligations    contain   cross   default   or   acceleration
provisions.  To obtain the waivers, the Company expects that
the  Banks would request additional credit support from  CGE
and  certain other changes to the Bank Credit Facility.  CGE
has  informed  the Company that pending the outcome  of  its
discussions   with  the  Special  Committee  regarding   the
proposed debt restructuring or other recapitalization, it is
not prepared at this time to provide additional credit
support  to the Company.  As a result, no assurance  can  be
given whether the necessary waivers from the Company's Banks
would  be  obtained.  In the event the Company were required
to  repay  accelerated outstanding amounts  under  the  Bank
Credit  Facility and other agreements, the Company does  not
believe  that it will have financial resources  adequate  to
repay  such  amounts  and  to satisfy  its  ongoing  working
capital   requirements.   The  Company  believes  that   its
inability  to  obtain waivers from the Banks  would  have  a
material  adverse effect on its business prospects  and  its
financial condition.

<PAGE>


Convertible Debenture Delisting
-------------------------------

On August 13, 1997 AWT's 8% Convertible debentures were
delisted from the NASDAQ SmallCap Market as a consequence of
AWT's capital and surplus not meeting the requirements of
the Marketplace Rule 4310 (c) (03).


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,
       -  the  resolution of existing claims  and
          litigation   arising  in  the  ordinary   course   of
          business and
       -  the ability to restructure its debt and
          recapitalize.

<PAGE>

PART II.  OTHER INFORMATION

ITEM  1.    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, Professional Services  Group
     (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.

     The   City   of   Bremerton,   Washington   brought   a
     contribution  action against Metcalf &  Eddy  Services,
     Inc.  ("M&E  Services"), the operator of  a  City-owned
     wastewater  treatment plant from 1987 until late  1995.
     The  contribution action arises from two prior lawsuits
     against the city for alleged odor nuisances brought  by
     two groups of homeowners neighboring the plant.

     In  the  first  homeowners' suit, the  City  paid  $4.3
     million  in cash and approximately $5 million for  odor
     control  technology to settle the case.   M&E  Services
     understands  the odor control measures  generally  have
     been  successful and the odors have been reduced  as  a
     result.   M&E  Services was not a party  to  the  first
     homeowner's  suit,  which   has  been  dismissed   with
     prejudice as to all parties.

     In  the settlement of the second homeowners' case,  the
     City of Bremerton paid the homeowners $2.9 million, and
     M&E  Services contributed $.6 million to the settlement
     without admitting liability.  All claims raised by  the
     homeowners   in  the  second  suit  (except   for   two
     recalcitrant homeowners) were resolved.  All claims  by
     and  between  M&E Services and the City in  the  second
     homeowner's  suit were expressly reserved and  will  be
     tried  after the City's contribution action,  which  is
     currently scheduled for trial in March 1998.

     The  City is seeking to recover the amounts it expended
     on  the  two  settlements, damages  for  M&E  Services'
     alleged   substandard  operation  of  the  plant,   and
     attorneys' fees.  M&E Services denies any liability  to
     the  City  and believes it has meritorious defenses  to
     the claim.  However, no assurances can be given that an
     adverse  judgment  would not have  a  material  adverse
     effect   on  the  financial  position  or  results   of
     operations  of M&E Services or the Company taken  as  a
     whole.

     The Company 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.   The  Company  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 the Company taken as a whole.

<PAGE>

ITEMS 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

(b)   On July 18, 1997, the Company filed a report on Form 8-K 
      reporting preliminary discussions relating to a proposed
      recapitalization of the Company.


<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   September 15, 1997                              /s/ Alain Brunais
       ------------------                             ------------------
                                                      Alain Brunais
                                                      Chief Financial Officer