<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q

(Mark One)

          /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
          
               for the quarterly period ended September 30, 1997
          
                                       or
          
            Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
                        
                         Commission file number 0-20993

                                DTM CORPORATION
             (Exact name of registrant as specified in its charter)


          Texas                                        74-2487065
(State or other jurisdiction                        (I.R.S. Employer
of incorporation or organization)                  Identification No.)


                        1611 Headway Circle, Building 2
                              Austin, Texas 78754
                    (Address of principal executive offices)
                                   (Zip code)

                                  512-339-2922
              (Registrant's telephone number, including area code)

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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                   Yes /X/  No  /  /
                                                       ---      ---
The number of outstanding shares of common stock was 6,283,082 as of September
30, 1997.

                                       1
<PAGE>
 
Part 1.  Financial Information
------------------------------

Item 1.  Financial Statements
-----------------------------

                                DTM CORPORATION
                                ---------------
                                        
          Condensed Consolidated Statements of Operations (unaudited)
          -----------------------------------------------------------
                   (In thousands, except per share amounts)
                   ----------------------------------------


<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED            NINE MONTHS ENDED
                                           SEPTEMBER 30,                SEPTEMBER 30,
                                    ------------------------     --------------------------
                                       1996           1997          1996            1997
                                    ----------     ---------     ---------      -----------
<S>                                 <C>           <C>           <C>             <C>
Revenue:                            
      Products                      $    3,040    $    2,214    $   13,418       $   15,647
      Service and Support                  736           638         1,704            2,027
                                    ----------    ----------    ----------       ----------
                                         3,776         2,852        15,122           17,674
                                                                                 
Cost of sales:                                                                   
      Products                           1,757         1,139         7,948            8,699
      Service and Support                  428           575         1,048            1,607
                                    ----------    ----------    ----------       ----------
                                         2,185         1,714         8,996           10,306
                                    ----------    ----------    ----------       ----------
                                                                                 
Gross Profit                             1,591         1,138         6,126            7,368
Operating Expenses:                                                              
      Selling, general and                                                       
        administrative                   2,526         2,266         6,836            8,289
      Research and development           1,198         1,203         3,096            3,596
      Stock compensation (EAP)               -             -             -            2,927
                                    ----------    ----------    ----------       ----------
                                         3,724         3,469         9,932           14,812
                                    ----------    ----------    ----------       ----------
Operating loss                          (2,133)       (2,331)       (3,806)          (7,444)
                                                                                 
      Other income                           5            56            19               96
      Interest expense                    (262)          (17)         (743)            (418)
                                    ----------    ----------    ----------       ----------
                                                                                 
      Loss before income taxes          (2,390)       (2,292)       (4,530)          (7,766)
                                                                                 
Income tax benefit (expense)               781           (29)        1,454              478
                                    ----------    ----------    ----------       ----------
Net Loss                            $   (1,609)   $   (2,321)   $   (3,076)      $   (7,288)
                                    ==========    ==========    ==========       ==========
  Net loss per share                $     (.45)   $     (.36)   $     (.85)      $    (1.38)
                                    ==========    ==========    ==========       ==========
  Number of shares used              3,609,211     6,525,882     3,609,211        5,272,352
                                    ==========    ==========    ==========       ==========
</TABLE>

            See notes to condensed consolidated financial statements

                                       2
<PAGE>
 
                                DTM CORPORATION

               Condensed Consolidated Balance Sheets (unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                               DECEMBER 31,      SEPTEMBER 30,
                                                  1996               1997
                                               -----------       -------------
<S>                                            <C>               <C>
ASSETS                                                        
Current Assets:                                               
   Cash and cash equivalents                    $    329            $  2,006
   Accounts receivable, net                        7,205               3,394
   Inventory                                       4,835               7,900
   Prepaid expenses and other                        595                 287
                                                --------            --------
     Total current assets                         12,964              13,587
   Furniture and equipment, net                    3,057               2,569
   Capitalized development costs, net                848                 776
   Patent and license fees, net                      791               1,059
   Other noncurrent assets                           237                 171
                                                --------            --------
     Total assets                               $ 17,897            $ 18,162
                                                ========            ========
                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY                               
Current liabilities                                                  
   Accounts payable                             $  5,845            $  4,470
   Due to BFGoodrich                                 614               1,269
   Deferred revenues                               1,474               1,384
   Accrued expenses and other liabilities          2,640               1,574
   Short-term borrowings                             769                 175
                                                --------            --------
     Total current liabilities                    11,342               8,872
   Borrowings under line of credit from                             
     BFGoodrich                                    4,000                   -
   Notes payable                                  11,040                   -
                                                                    
Shareholders' equity (deficit):                                     
   Preferred stock, $.001 par value,                                
    3,000,000 shares authorized, no                                 
    shares issued and outstanding                      -                   -
   Common stock, $.0002 par value,                                  
    60,000,000 shares authorized;                                   
    6,283,082 shares issued and                                     
    outstanding (3,243,391 at                                       
    December 31, 1996)                                 1                   1
Additional paid-in capital                        28,019              50,225
Stock options outstanding                              -               2,927
Accumulated deficit                              (36,469)            (43,756)
Cumulative translation adjustment                    (36)               (107)
                                                --------            --------
Total shareholders' equity (deficit)              (8,485)              9,290
                                                --------            --------
Total liabilities and shareholders' equity      $ 17,897            $ 18,162
                                                ========            ========
</TABLE>                                                                      
                                                                            
            See notes to condensed consolidated financial statements        

                                       3
<PAGE>
 
                                DTM CORPORATION                       
                                                                      
          Condensed Consolidated Statements of Cash Flows (unaudited)
                                 (In thousands)                       
                                                                      
                                                                      
<TABLE>                                                               
<CAPTION>                                                             
                                                     NINE MONTHS ENDED SEPT. 30,
                                                     ---------------------------
                                                         1996            1997
                                                     -----------     -----------
<S>                                                     <C>            <C>
OPERATING ACTIVITIES
  Net loss                                              $ (3,076)      $ (7,288)
  Adjustments to reconcile net loss to net                             
   cash used in operating activities:                                  
   Depreciation and amortization                           1,573          1,795
   Stock compensation (EAP) expense                            -          2,927
   Changes in assets and liabilities:                                 
    Accounts receivable                                     (890)         3,811
    Inventory                                             (3,905)        (3,065)
    Due to/from BFGoodrich                                   827            655
    Prepaid expenses and other assets                       (519)           308
    Accounts payable                                       2,415         (1,375)
    Deferred revenues                                        238            (90)
    Other, net                                              (640)        (1,011)
                                                        --------       --------
                                                                       
  Net cash used in operating activities                   (3,977)        (3,333)
                                                                       
INVESTING ACTIVITIES                                                   
  Purchases of furniture and equipment                    (1,778)          (752)
  Capitalized software development costs                    (318)          (200)
  Patent and license expenditures                           (419)          (539)
                                                        --------       --------
                                                                        
  Net cash used in investing activities                   (2,515)        (1,491)
                                                                       
FINANCING ACTIVITIES                                                   
  Proceeds from issuance of stock                              -         20,706
  Proceeds from notes payable                              1,700              -
  Proceeds from short-term borrowings                      2,851            371
  Repayments of short-term borrowings                     (2,499)          (965)
  Draws (repayments) on line of credit from BFGoodrich     3,800         (2,500)
  Repayments of notes payable                                  -        (11,040)
                                                        --------       --------
  Net cash provided by financing activities                5,852          6,572
  Effect of foreign exchange rate changes on cash            (89)           (71)
                                                        --------       --------
  Increase (decrease) in cash and cash equivalents          (729)         1,677
  Cash and cash equivalents at beginning of period           756            329
                                                        --------       --------
  Cash and cash equivalents at end of period            $     27       $  2,006
                                                        ========       ========
</TABLE>


            See notes to condensed consolidated financial statements

                                       4
<PAGE>
 
                                DTM CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)


1.   BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of DTM
Corporation ("DTM" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months and nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and related footnotes of the Company for the year ended
December 31, 1996 as disclosed in the Prospectus dated May 2, 1997 (the
"Prospectus").

2.   INVENTORY

Inventory consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                     DECEMBER 31,      SEPTEMBER 30,
                                        1996               1997
                                     ------------      -------------
     
<S>                                 <C>                <C>
                                                           
     Raw materials and purchased    
      parts                             $3,187            $5,088
     Finished goods                      1,648             2,812
                                        ------            ------ 
                                        $4,835            $7,900
                                        ======            ======
</TABLE>


3.   SHORT-TERM BORROWINGS

During the nine-month period ended September 30, 1997, DTM borrowed $371,000 and
repaid $965,000 under the terms of financing arrangements with a third party. At
September 30, 1997, the Company had a total of $175,000 of short-term borrowings
outstanding, comprised of one loan, bearing an annual interest rate of
approximately 15 percent. The borrowings are collateralized by certain
equipment.

4.   LINE OF CREDIT FROM BFGOODRICH

The Company had a line of credit agreement with The BFGoodrich Company
("BFGoodrich") under which the Company could borrow up to $4.0 million, which
was settled in full in connection with an initial public offering in May 1997
(the "IPO").

                                       5
<PAGE>
 
                                DTM CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)

5.   NOTES PAYABLE

At December 31, 1996, DTM had lines of credit with three banks under unsecured
promissory notes. Total available borrowings from the three banks were $12.2
million and the outstanding balances subsequent to the IPO were repaid.

The Company's line of credit with Texas Commerce Bank (as amended) provides for
borrowings up to $2.0 million through June 1, 1998. Borrowings under the line of
credit agreement are guaranteed by BFGoodrich. 

Interest paid in connection with all of the above financing arrangements was
approximately $796,000 and $569,000 for the nine months ended September 30, 1996
and 1997, respectively.

6.   INCOME TAXES

For periods prior to the IPO, DTM was included in the consolidated federal tax
return of BFGoodrich. Accordingly, for such periods, the Company has recorded
the tax benefit allocated to it by BFGoodrich, which credited the Company with a
tax benefit approximating the benefit that BFGoodrich derived from the use of
the Company's tax losses. For periods subsequent to the IPO, the Company is no
longer entitled to the benefit of the tax allocation agreement between the
Company and BFGoodrich.

7.   SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED
                                                    SEPTEMBER 30,
                                              --------------------------
                                                 1996              1997 
                                              ---------         --------
<S>                                           <C>               <C>
                                         
Noncash investing and financing          
 transactions:                           
Stock issued upon conversion of note by  
 majority Shareholder                         $    -             $1,500
Stock options outstanding                          -              2,927

</TABLE>

                                       6
<PAGE>
 
                                DTM CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)    
    
8.   SUPPLEMENTAL EARNINGS PER SHARE

The supplemental earnings per share are computed on a stand alone basis, without
allocation of income tax benefit from BFGoodrich. Both computations reflect the
shares of common stock issuable to employees related to exercisable options that
are outstanding under the Company's Equity Appreciation Plan, less shares
presumed to be repurchased using the treasury stock method. The 1997 as adjusted
computation assumes that the IPO took place at the beginning of the period and
reflects elimination of historically incurred interest expenses related to debt
repaid with proceeds from the IPO, along with the number of shares offered, the
net proceeds of which were used to fund debt repayment.


<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                  ---------------------------
                                                                      1997
                                                      1997        AS ADJUSTED
                                                  -----------    -------------
<S>                                               <C>              <C>
Pro forma net loss                                $   (7,766)      $   (7,766)
    Plus interest on debt repaid with                              
     proceeds from offering                                -              406
Pro forma net loss as adjusted                    $   (7,766)      $   (7,360)
                                                  ==========       ==========
Shares:                                                            
    Weighted average number of shares                              
     outstanding                                   4,935,820        6,283,082
    Dilutive effect of options issued                336,532          336,532
                                                  ----------       ----------
    Total shares used in computing pro                             
     forma  net loss per share                     5,272,352        6,619,614
                                                  ==========       ==========
Pro forma net loss per share                                       
  (primary and fully dilutived)                   $    (1.47)      $    (1.11)
                                                  ==========       ==========
</TABLE>
 
9.    RECENTLY ISSUED ACCOUNTING STANDARD

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS No.
128 replaces the presentation of primary earnings per share ("EPS") under
Accounting Principles Board Opinion No. 15 and related Interpretations, with the
presentation of basic EPS (which gives effect only to common shares actually
outstanding) and requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures. The
Company is required to adopt SFAS No.128 during the fourth quarter of 1997. The
Company has not completed its evaluation of the potential impact of this new
standard on EPS in future periods. However, based on the equity instruments
currently outstanding under existing stock compensation plans, this new standard
is not currently expected to have a material impact on EPS in future periods.

                                       7
<PAGE>
 
                                DTM CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)

10.    OTHER EVENTS

    In May 1997, the Company completed the IPO. The net proceeds received by the
Company have been used to repay substantially all of the Company's bank debt and
other short-term borrowings. The Company intends to use the remaining net
proceeds for general corporate purposes, including the funding of working
capital requirements.

    The Company has a phantom stock appreciation rights plan whereby all phantom
stock appreciation rights outstanding upon the IPO were converted into
immediately exercisable options to acquire shares of the Company's common stock.
Such conversion resulted in a non-recurring, non-cash, compensation expense of
approximately $2.9 million in the second quarter of 1997.

                                       8
<PAGE>
 
Item 2.
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  The following discussion and analysis should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the Notes thereto
included in Item 1 of this Quarterly Report and the Prospectus. This discussion
and analysis contains forward-looking statements. Such statements are subject to
certain risks and uncertainties, including those discussed below or in the
Prospectus, that could cause actual results to differ materially from the
Company's expectations. Readers are cautioned not to place undue reliance on any
forward-looking statements, as they reflect management's analysis only as of the
date hereof. The Company undertakes no obligation to publicly release any
revision to these forward looking statements which may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

RESULTS OF OPERATIONS

  The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support revenues.


<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                          SEPTEMBER 30,          SEPTEMBER 30,
                                        -------------------    ------------------
                                         1996       1997       1996        1997
                                        -------------------    -------    -------
<S>                                       <C>       <C>       <C>         <C>   
Revenue:                               
   Products                                80.5%      77.6%      88.7%       88.5%
   Service and Support                     19.5       22.4       11.3        11.5
                                        -------    -------    -------      ------
                                          100.0      100.0      100.0       100.0
                                                                           
Cost of sales:                                                             
   Products                                57.8       51.4       59.2        55.6
   Service and Support                     58.2       90.2       61.5        79.3
                                        -------    -------    -------      ------
                                           57.9       60.1       59.5        58.3
                                        -------    -------    -------      ------
                                                                           
Gross Profit                               42.1       39.9       40.5        41.7
Operating Expenses:                                                        
   Selling, general and administrative     66.9       79.5       45.2        46.9
   Research and development                31.7       42.2       20.5        20.3
   Stock compensation (EAP)                   -          -          -        16.6
                                        -------    -------    -------      ------
                                           98.6      121.6       65.7        83.8
                                        -------    -------    -------      ------
Operating loss                            (56.5)     (81.8)     (25.2)      (42.1)
                                                                           
   Other income                              .1        2.0         .1          .5
   Interest expense                        (6.9)       (.6)      (4.9)       (2.4)
                                        -------    -------    -------      ------
                                                                           
   Loss before income taxes               (63.3)     (80.4)     (30.0)      (43.9)
Income tax benefit (expense)               20.7       (1.0)       9.6         2.7
                                        -------    -------    -------      ------
Net Loss                                  (42.6)%    (81.4)%    (20.3)%     (41.2)%
                                        =======    =======    =======      ======
</TABLE>

                                       9
<PAGE>
 
Comparison of the Quarters Ended September 30, 1997 and September 30, 1996

The Company's operating results have varied substantially from year to year and
quarter to quarter. A sale by the Company of one of its selective laser
sintering systems ("Systems") can be material to the operating results for any
one quarter. Furthermore, new product introductions, seasonality of customer
buying patterns and other factors can cause fluctuations in operating results.

Revenues. Revenues for the third quarter of 1997 were $2.9 million, a decrease
of 24.5 percent, compared to revenues of $3.8 million for the third quarter of
1996. The Company's 1997 third quarter revenues of $2.9 million resulted
primarily from sales of SLS(R) systems. 

Product sales revenue for the third quarter of 1997 was $2.2 million, a decrease
of 27.2 percent, compared to product sales revenue of $3.0 million for the third
quarter of 1996. Revenues in the third quarter of 1997 were negatively impacted
primarily because the Company experienced a reduction in sales volume from what
it had anticipated consistent with prior seasonal slowdowns in Europe and the
Pacific Rim, as well as continuing softness in North American market demand.

Service and support revenue for the third quarter of 1997 was $638,000, a
decrease of 13.3 percent, compared to service and support revenue of $736,000
for the same period in 1996. Service and support revenue decreased primarily as
a result of a decrease in other revenue, such as training, consulting and other
customer support.

Gross Profit. The Company has historically experienced significant fluctuations
in its gross profits. Gross profit for the third quarter of 1997 was $1.1
million, a decrease of 28.5 percent, compared to gross profit of $1.6 million
for the third quarter of 1996. As a percentage of revenue, gross profit for the
quarter ended September 30, 1997 decreased to 39.9 percent from 42.1 percent for
the same period in 1996.

Gross profit attributable to product sales for the third quarter of 1997 was
$1.1 million, a decrease of 16.2 percent, compared to gross profit attributable
to product sales of $1.3 million for the third quarter of 1996. As a percentage
of product sales revenue, gross profit attributable to product sales increased
to 48.6 percent during the period, compared to 42.2 percent for the same period
in 1996. The increase in gross profit attributable to product sales as a
percentage of product sales revenue resulted primarily from a favorable product
mix of Sinterstation(R) 2500 and 2000 Systems.

Gross profit attributable to service and support revenues for the third quarter
of 1997 was $63,000, a decrease of 79.5 percent, compared to gross profit
attributable to service and support revenues of $308,000 for the third quarter
of 1996. As a percentage of service and support revenue, gross profit
attributable to service and support revenues was 9.9 percent and 41.8 percent
for the third quarter of 1997 and 1996, respectively. The decrease in profit
percentage is due to the decrease in other revenues, as well as the increase in
international service and maintenance costs.

Selling, General and Administrative Expense. Selling, general and administrative
expense includes payroll and fringe benefits, advertising and promotion expenses
and other general expenses. Selling, general and administrative expense for the
third quarter 

                                       10
<PAGE>
 
of 1997 was $2.3 million, a decrease of 10.3 percent, compared to selling,
general and administrative expense of $2.5 million for the third quarter of
1996. A reduction in employee commissions and relocation expenses of $261,000
from 1996 costs was offset by an increase in payroll and benefits of $77,000 due
to a slightly larger work force. Agent commissions and currency transaction
losses increased by $65,000 and $83,000, respectively, over 1996 costs due to
increased activity internationally. Selling, general and administrative expense
in the third quarter of 1997 was impacted by a decrease in travel, office and
support costs of approximately $285,000. As a percentage of revenue, selling,
general and administrative expense increased to 79.5 percent in the third
quarter of 1997 from 66.9 percent in the third quarter of 1996.

Research and Development Expense. Research and development expense for the third
quarter of 1997 was $1.2 million, which remained flat compared to the third
quarter of 1996. As a percentage of revenue, research and development expense
increased to 42.2 percent for the third quarter of 1997 from 31.7 percent for
the third quarter of 1996, which is due to the decline in sales previously
discussed.

Interest Expense. Interest expense for the third quarter of 1997 was $17,000, a
decrease of $245,000 compared to interest expense of $262,000 for the third
quarter of 1996. The decrease reflects the repayment of the company's bank debt
and other short-term borrowings following the IPO.

Income Taxes. Due to a change in BFGoodrich ownership percentage resulting from
the IPO, for periods subsequent to the IPO, the Company no longer has the
benefit from the tax allocation agreement with BFGoodrich. As a result, the
Company was not allocated an income tax benefit in the third quarter of 1997. In
the third quarter of 1996, the Company's benefit was $781,000. The Company did
incur $29,000 in income tax expense in the third quarter of 1997 from its
operations in Germany.

Comparison of the Nine Months Ended September 30, 1997 and September 30, 1996

Revenues. Revenues for the first nine months of 1997 were $17.7 million, an
increase of 16.9 percent, compared to revenues of $15.1 million for the first
nine months of 1996. The Company's 1997 first nine months revenues of $17.7
million resulted primarily from sales of SLS Systems. From time to time, the
Company will allow existing customers to "trade-up" from a SLS 2000 System to a
SLS 2500 System.

Product sales revenue for the first nine months of 1997 was $15.6 million, an
increase of 16.6 percent, compared to product sales revenue of $13.4 million for
the first nine months of 1996. The increase was primarily attributable to
greater sales of SLS Systems and powdered materials. Revenues from powdered
materials sales increased as a result of a larger number of installed SLS
Systems. Revenues in the third quarter of 1997 were negatively impacted
primarily because the Company experienced a reduction in sales volume from what 
it had anticipated consistent with prior seasonal slowdowns in Europe and the
Pacific Rim, as well as continuing softness in North American market demand.

Service and support revenue for the first nine months of 1997 was $2.0 million,
an increase of 19.0 percent, compared to service and support revenue of $1.7
million for the same period in 1996. Service and support revenue increased
primarily as a result of the recognition of deferred warranty and maintenance
revenue associated with the larger number of installed SLS Systems, which was
offset to some degree by the factors affecting the third quarter of 1997
described above.

                                       11
<PAGE>
 
Gross Profit. The Company has historically experienced significant fluctuations
in its gross profits. Gross profit for the first nine months of 1997 was $7.4
million, an increase of 20.3 percent, compared to gross profit of $6.1 million
for the first nine months of 1996. As a percentage of revenue, gross profit for
the nine months ended September 30, 1997 increased to 41.7 percent from 40.5
percent for the same period in 1996.

Gross profit attributable to product sales for the first nine months of 1997 was
$6.9 million, an increase of 27.0 percent, compared to gross profit attributable
to product sales of $5.5 million for the first nine months of 1996. As a
percentage of product sales revenue, gross profit attributable to product sales
increased to 44.4 percent during the period, compared to 40.8 percent for the
same period in 1996. The increase in gross profit attributable to product sales
as a percentage of product sales revenue resulted primarily from a favorable
product mix of Sinterstation 2500 and 2000 Systems.

Gross profit attributable to service and support revenues for the first nine
months of 1997 was $420,000, a decrease of 36.0 percent, compared to gross
profit of $656,000 for the first nine months of 1996. As a percentage of service
and support revenue, gross profit attributable to service and support revenues
was 20.7 percent and 38.5 percent for the first nine months of 1997 and 1996,
respectively. The decrease in profit percentage is due to a decrease in
training, consulting and other customer support revenues, and an increase in
international service and maintenance costs.

Selling, General and Administrative Expense. Selling, general and administrative
expense includes payroll and fringe benefits, advertising and promotion expenses
and other general expenses. Selling, general and administrative expense for the
first nine months of 1997 was $8.3 million, an increase of 21.3 percent,
compared to selling, general and administrative expense of $6.8 million for the
first nine months of 1996. A larger work force in the first nine months of 1997
resulted in compensation and fringe benefits increasing more than $339,000 over
1996 costs. Agent commissions increased by approximately $480,000 over 1996
costs due to increased activity internationally. Selling, general and
administrative expense in the first nine months of 1997 was impacted by an
increase in travel, office and support costs of approximately $648,000. As a
percentage of revenue, selling, general and administrative expense increased to
46.9 percent in the first nine months of 1997 from 45.2 percent in the first
nine months of 1996.

Research and Development Expense. Research and development expense for the first
nine months of 1997 was $3.6 million, an increase of 16.1 percent, compared to
research and development expense of $3.1 million for the first nine months of
1996. As a percentage of revenue, research and development expense decreased to
20.3 percent for the first nine months of 1997 from 20.5 percent for the first
nine months of 1996.

Interest Expense. Interest expense for the first nine months of 1997 was
$418,000, a decrease of $325,000 compared to interest expense of $743,000 for
the first nine months of 1996. The decrease reflects the repayment of the
Company's bank debt and other short-term borrowings following the IPO.

                                       12
<PAGE>
 
Income Taxes.  As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $507,000 in the first nine
months of 1997 compared to $1.5 million in the first nine months of 1996.  Due
to a change in BFGoodrich ownership percentage resulting from the IPO, for
periods subsequent to the IPO, the Company no longer has the benefit from the
tax allocation agreement with BFGoodrich.  The Company did incur $29,000 in
income tax expense as a result of its operations in Germany.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, cash used by the Company for operations and investing
activities has exceeded cash generated by the Company. The Company generally has
financed its cash needs through transactions with BFGoodrich and borrowings from
commercial banks and other short-term sources, and more recently, from the
proceeds of the IPO.

Net cash used in operating activities was approximately $4.0 million and $3.3
million in the first nine months of 1996 and 1997, respectively. Net cash used
in operating activities of $3.3 million for the first nine months of 1997
resulted from the net loss of $7.3 million adjusted for non-cash charges for
depreciation and amortization of $1.8 million and stock compensation (EAP)
expense of $2.9 million. In addition, decreases in accounts receivable and
prepaid expenses of $3.8 million and $308,000, respectively, and increases in
amounts due to/from BFGoodrich of $655,000 were offset by increases in inventory
and deferred revenues of $3.1 million and $90,000, respectively, as well as
decreases in accrued expenses of $1.0 million and accounts payable of $2.4
million. For the nine months ended September 30, 1996 and 1997, BFGoodrich
allocated to the Company approximately $781,000 and $507,000, respectively, for
tax benefits resulting from inclusion of the Company in the consolidated income
tax return of BFGoodrich. Such amounts are included in "Due to/from BFGoodrich"
in changes in assets and liabilities used in calculating cash used in operating
activities in the Condensed Statements of Cash Flows.

The Company's investing activities included expenditures for patents and
licenses, capitalized software costs and furniture and equipment. Net cash used
in investing activities was approximately $2.5 million and $1.5 million in the
first nine months of 1996 and 1997, respectively.

The existence of the tax benefit allocation from BFGoodrich reduced the
Company's net loss for years 1994 through May 2, 1997. The Company expects that
the loss of the tax benefit allocation will materially adversely affect its
financial results and cash flows in any period in which the Company generates a
loss. The benefits of utilizing future tax loss carryforwards might be realized,
however, should sufficient profits be generated prior to the expiration of the
tax loss carryforwards.

Total indebtedness of the Company was approximately $16.0 million as of May 2,
1997, consisting primarily of notes payable to commercial banks under existing
lines of credit, short-term borrowings from other financing sources 

                                       13
<PAGE>
 
and a line of credit extended to the Company by BFGoodrich under which the
Company had $4.0 million in outstanding borrowings. The Company retired
approximately $14.3 million of the debt with proceeds from the IPO, and $1.5
million under the BFGoodrich line of credit was converted to equity. In the
past, BFGoodrich assisted the Company in obtaining loans from commercial banks.

In October 1997, the Company amended the revolving line of credit ("amended
line") with Texas Commerce Bank. The amended line is limited to the principal
dollar amount of $2.0 million which is guaranteed by BFGoodrich. The covenants
of the revolving line of credit agreement executed in August 1997 have been
waived through June 1, 1998. The amended line bears interest at the bank's prime
interest rate minus one and one-half percent. In addition, the agreement
specifies that the bank has the option to terminate the obligation to make
further advances under the line of credit on 30 days notice if employment of the
chief executive officer of the Company terminates and a qualified successor is
not appointed by the Company and approved by Texas Commerce Bank within a
specified period of time.

On October 28, 1997, the Company and John Murchison entered into a severance 
agreement that will take effect in the event that Mr. Murchison's employment 
should ever be terminated without cause by the Company. In such event, the
severance agreement provides that the Company will continue to pay Mr.
Murchison's base salary for one year after the date of the termination of his
employment. Furthermore, the severance agreement provides that Mr. Murchison
shall not compete with the Company for a period of one year after the date of
the termination of his employment.

OTHER FACTORS AFFECTING FUTURE OPERATIONS

Seasonality; Market Conditions. The Company's revenues are affected by capital
budgeting and spending patterns in the world wide market and shortened selling
periods in certain international markets. Due to these seasonal factors, the
Company typically experiences slowdowns in sales of SLS Systems during the first
quarter as a result of capital spending patterns in the North American market
and during the third quarter as a result of shortened selling periods in certain
international markets. Revenues in the third quarter of 1997 were negatively
impacted primarily because the Company experienced a reduction in sales volume
from what it anticipated consistent with prior seasonal slowdowns in Europe and
the Pacific Rim, as well as continuing softness in North American market demand.
The Company is unable to assess if these conditions will continue through future
periods.

Foreign Operations. The Company competes on an international basis through its
wholly owned subsidiary located in Germany and through export sales derived from
its United States sales operations (principally to the Pacific Rim). Sales to
customers outside of the United States constitute a significant portion of DTM's
revenues. International sales are generally priced in U.S. dollars. However,
European sales prices are sometimes negotiated in either Deutsche marks or the
local currency. The Company does not engage in hedging to mitigate the effects
of foreign currency exchange rate risk. The Company incurred approximately
$297,000 in transaction losses for the nine months ended September 30, 1997.

Equity Appreciation Plan. The Company has a phantom stock appreciation rights
plan whereby all phantom stock appreciation rights outstanding upon the IPO were
converted into immediately exercisable options to acquire shares of the
Company's common stock. Such conversion resulted in a non-recurring, non-cash,
compensation expense of approximately $2.9 million in the second quarter of
1997. Refer to the Prospectus for additional information.

Intellectual Property and Proprietary Rights. In pursuing protection for
its proprietary rights in its SLS Systems, materials and related technology, the
Company currently relies on a combination of patent, copyright, trademark and
trade secret rights, as well as contractual provisions. The Company typically
seeks patent protection for its selective laser sintering technology, including,
where deemed appropriate, the selective laser 

                                       14
<PAGE>
 
sintering process, the SLS Systems and the materials used in the SLS Systems.
However, patent protection may not always be available. There can be no
assurance that patents will be issued under any or all of the patent
applications to which the Company has rights. In addition, the laws of various
countries in which the Company's products may be sold may not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States. Refer to the Prospectus for additional details
regarding intellectual property and litigation.

A Wisconsin federal court has granted partial summary judgement ending patent
infringement charges brought by the Company against Midwest Composite
Technologies, Inc. of Hartland Wisconsin which does not dispose of counterclaims
brought by the defendant or the Company's breach of contract claim against
Midwest. The Company intends to vigorously pursue its rights and remedies, but
cannot predict the impact, if any, this will have on the Company's ongoing
business activities.

Quarterly Fluctuations in Operating Results.  The Company's revenues and
operating results have varied substantially from quarter to quarter and may
continue to do so. The Company's revenues are earned unevenly throughout the
quarter and are typically skewed to the latter end of the quarter.  DTM
typically experiences a relatively long lead time to complete an SLS System sale
and has historically experienced little or no backlog. Furthermore, new product
introductions, seasonality of customer buying patterns and other factors can
cause fluctuations in quarterly results. The failure of the Company to complete
a particular SLS System sale in any given quarter can have a material adverse
effect on the Company's business and financial performance for that quarter.

                                       15
<PAGE>
 
Dependence on Third-Party Suppliers. The Company subcontracts for manufacture of
SLS System components, powdered sintering materials and accessories from single-
source, third-party suppliers. A disruption in supply or failure of a supplier
to remain competitive in functionality or price could have a material adverse
effect on the Company's sales or reputation for timely delivery, and hence, on
the Company's business and financial performance.

New Products; Engineering Testing Delays. The Company's ability to achieve and
maintain a significant market share may depend heavily on its ability to improve
its existing products, as well as to introduce new and innovative products that
facilitate increased use and more specialized applications of existing products.
DTM cannot predict with any certainty the degree to which its ongoing research
and development efforts in the areas of SLS System and materials enhancements
will be successful or, if so, when. In addition, the Company can provide no
assurance of its future success in selecting, developing, manufacturing and
marketing new products. When the Company or its competitors announce new
products with capabilities or technologies that have the potential to replace
the Company's existing product offerings, customers may defer or forego
purchases of existing Company products. This could materially adversely affect
the Company's business, including revenues and financial performance. While the
Company performs extensive testing prior to releasing new product designs or
product enhancements, products may contain unforeseen errors or performance
problems. The correction of errors and problems in new products could cause
delays in product introductions or shipments, require design modifications to
previously shipped products or cause adverse publicity, any of which could
adversely affect the Company's business and financial performance.

Competition. The market for rapid prototyping systems is highly competitive. In
marketing its SLS Systems, the Company experiences competition from many
sources. Certain of the Company's competitors may be better known and may have
greater financial, research and development, production and marketing resources
than DTM. Competition could increase as a result of the introduction of new
products or product enhancements by these competitors or the entry into the
industry by other companies. Increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company's business and financial results.

SAFE HARBOR STATEMENT

Investors are cautioned that forward-looking statements contained in this 10-Q
involve risks and uncertainties including without limitation the matters
described in "Other factors affecting future operations" and the following: (i)
the Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of management and the Board of
Directors; (ii) the Company's plans and results of operations will be affected
by the Company's ability to manage its working capital; and (iii) the Company's
business is highly competitive and the entrance of new competitors or the
expansion of the operations by existing competitors in the Company's markets
could adversely affect the Company's plans and results of operations.

                                       16
<PAGE>
 
Part 2.  Other Information

Item 1.  Legal Proceedings

A Wisconsin federal court has granted partial summary judgement ending patent
infringement charges brought by the Company against Midwest Composite
Technologies, Inc. of Hartland, Wisconsin, which does not dispose of
counterclaims brought by the defendant or the Company's breach of contract claim
against Midwest. The Company intends to vigorously pursue its rights and
remedies, but cannot predict the impact, if any, this will have on the Company's
ongoing business activities.

Item 6.  Exhibits and Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended September 30, 1997.

Exhibit 10.1 - First Amendment to Credit Agreement and Note

Exhibit 10.2 - Severance Agreement

Exhibit 11 -  Statement of computation of per share earnings is filed as part of
              this report.

Exhibit 27 -  Financial Data Schedule

                                   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.

Dated:  November 13, 1997


                              DTM CORPORATION
                              (Registrant)


                              /s/ John S. Murchison, III
                              ----------------------------
                              John S. Murchison, III
                              President and Chief Executive Officer



                              /s/ Thomas A. Beck
                              ----------------------------
                              Thomas A. Beck
                              Corporate Controller
                               (Principal Financial and Accounting Officer)

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