Tanknology-NDE International, Inc. and Subsidiaries


                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly  Report Under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 for the quarterly period ended March 31, 1998.

[ ]  Transition  Report Under to Section 13 or 15(d) of the Exchange Act for the
     transition period from  __________  to  __________ .



                         Commission File Number 1-10361


                       Tanknology-NDE International, Inc.
        (Exact name of small business issuer as specified in its charter)


         Delaware                                          95-3634420
 (State of Incorporation)                      (IRS Employer Identification No.)


              8900 Shoal Creek Blvd., Bldg. 200 Austin, Texas 78757
                    (Address of Principal Executive offices)


         Issuer's telephone number, including area code: (512) 451-6334





Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past ninety days.

                                    Yes [X]       No [ ]


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.







Class                   Outstanding at March 31, 1998
--------------       -----------------------------------

Common                           16,154,166




Transitional Small Business Disclosure Format (check one):    Yes [ ]    No [X]

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               Tanknology-NDE International, Inc. and Subsidiaries




                                      INDEX


                                                                     Page Number

PART I    Financial Information

     Item 1.  Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheet
                  March 31, 1998 (Unaudited) and December 31, 1997 ............3

              Condensed Consolidated Statements of Operations (Unaudited)
                  Three Months Ended March 31, 1998 and March 31, 1997.........4

              Condensed Consolidated  Statements of Cash Flows (Unaudited)
                  Three Months Ended March 31, 1998 and March 31, 1997.........5

              Notes To Condensed Consolidated Financial
                  Statements (Unaudited).......................................6

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



PART II       Other Information

     Item 6.  Exhibits and Reports on Form 8-K.................................9



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               Tanknology-NDE International, Inc. and Subsidiaries


PART I   Financial Information

Item 1.  Financial Statements (Unaudited)

                      Condensed Consolidated Balance Sheet

<TABLE>
<CAPTION>

                                                                                March 31, 1998   December 31, 1997
                                                                                --------------   -----------------
ASSETS                                                                           (Unaudited)
<S>                                                                             <C>              <C>         

     Cash and equivalents..................................................     $     -              $    193,627
     Trade accounts receivable, less allowance for doubtful accounts of
       $1,167,543 at March 31, 1998 and $1,066,331 at December 31, 1997....         9,709,052           9,856,826
     Inventories...........................................................           598,307             482,107
     Prepaid expenses and other current assets.............................           776,582           1,149,950
                                                                                --------------   -----------------
         Total Current Assets..............................................        11,083,941          11,682,510

     Restricted cash.......................................................         3,000,000           3,000,000

     Equipment and improvements, net of accumulated depreciation of $11,648,495 
       at March 31, 1998 and $11,052,586 at December 31, 1997..............         4,857,727           4,812,500
     Patents, licenses and other intangible assets, net of accumulated
       amortization of $1,264,024 at March 31, 1998 and $1,169,104 at
       December 31, 1997...................................................         1,509,274           1,604,194
     Deferred financing costs, net.........................................           738,414             649,614
                                                                                --------------   -----------------
         Total Assets......................................................     $  21,189,356   $      21,748,818
                                                                                ==============   =================

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT

     Accounts payable .....................................................     $   2,608,789   $       2,675,345
     Accrued liabilities...................................................         2,399,902           2,249,208
     Accrued payroll and payroll taxes.....................................         1,924,495           1,959,273
     Current portion of long-term debt.....................................         3,722,272           4,055,072
                                                                                --------------   -----------------
         Total Current Liabilities.........................................        10,655,458          10,938,898

     Long Term Debt, less current portion .................................        10,397,181          10,589,252

     Deferred License Revenue..............................................           479,167             525,000

     Redeemable Convertible Preferred Stock, at redemption value...........         1,500,000           1,500,000

     Stockholders' Deficit:
          Series AAA Convertible Preferred Stock, $.0001 par value;                     
            authorized,  400 shares; issued and outstanding 1 share stated 
            at liquidation value of $5,000.................................             5,000               5,000
          Common stock, $.0001 par value; authorized, 50,000,000 shares; 
            isssued and outstanding 16,154,166 shares at March 31, 1998, 
            and 15,978,610 shares at  December 31, 1997....................             1,598               1,598
          Warrants.........................................................           291,000             291,000
          Additional paid-in capital.......................................        27,540,946          27,578,446
          Accumulated deficit..............................................       (29,650,581)        (29,659,297)
          Cumulative foreign currency translation adjustment...............           (30,413)            (21,079)
                                                                                --------------   -----------------
                                                                                   (1,842,450)         (1,804,332)
                                                                                --------------   -----------------
               Total Liabilities, Redeemable Convertible Preferred Stock and    
                    Stockholders' Deficit..................................     $  21,189,356    $     21,748,818
                                                                                ==============   =================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

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               Tanknology-NDE International, Inc. and Subsidiaries


                 Condensed Consolidated Statements of Operations
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                       ---------------------------------

                                                       March 31, 1998     March 31, 1997
                                                       --------------     --------------
<S>                                                    <C>                <C>           

Revenues ...........................................   $  11,697,947     $    7,462,643

Cost of services....................................       9,005,243          5,602,108
                                                       --------------     --------------

     Gross Margin...................................       2,692,704          1,860,535

Selling, general and administrative.................       2,316,802          2,070,444

                                                       --------------     --------------
     Operating Income (Loss)........................   $     375,902     $     (209,909)

Other income (expense):............................. 
        Interest income.............................          32,020              -
        Interest expense............................        (395,517)          (845,146)
        Other income (expense), net.................             711              -
                                                       --------------     --------------

        Net Income (Loss) Before Provision for 
          Income Taxes..............................          13,116         (1,055,055)

 Provision for income taxes.........................          (4,400)           (25,300)
                                                       --------------     --------------

     Net Income (Loss)..............................           8,716         (1,080,355)

 Less - Preferred stock dividends...................         (37,500)             -

                                                       --------------     --------------
     Net Loss Available to Common Stockholders......   $     (28,784)     $  (1,080,355)
                                                       ==============     ==============

     Basic and Diluted Loss  per Share..............   $        -          $      (0.07)
                                                       ==============     ==============

     Weighted Average Number of Shares Outstanding..      16,044,166         15,978,610
                                                       ==============     ==============

<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


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               Tanknology-NDE International, Inc. and Subsidiaries


                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                Three Months Ended
                                                                        --------------------------------
                                                                        March 31, 1998    March 31, 1997
                                                                        --------------    --------------
<S>                                                                     <C>               <C>           

Cash Flows from Operating Activities

     Net income (loss)................................................. $       8,716     $  (1,080,355)

Adjustments to Reconcile Net Income (Loss) to Net Cash Used in
Operating Activities

     Depreciation and amortization.....................................       690,787           972,279
     Amortization of discounts and financing costs.....................        69,161           416,501
     Deferred license revenue earned...................................       (45,833)             -
     Gain on sale of equipment.........................................          -              (31,366)
     Other.............................................................        (9,334)             -

Changes in Operating Assets and Liabilities

     (Increase) decrease in trade accounts receivable..................       147,774          (944,847)
     Increase in inventories...........................................      (116,200)          (98,791)
     Decrease in prepaid expenses and other current assets.............       373,368           615,272
     Increase (decrease) in accounts payable...........................       (66,556)          102,254
     Increase (decrease) in accrued liabilities........................       150,694        (1,277,532)
     Increase (decrease) in accrued payroll and payroll taxes..........       (34,778)          176,073
                                                                        --------------    --------------
     Net cash provided by (used) in operating activities...............     1,167,799        (1,150,512)

Cash Flows from Investing Activities

     Proceeds from sale of Canadian licenses...........................          -            1,147,500
     Additions to equipment and improvements...........................      (641,094)         (424,633)
     Proceeds from sale of equipment...................................          -               50,000
                                                                        --------------    --------------
     Net cash provided by (used in) investing activities...............      (641,094)          772,867

Cash Flows from Financing Activities

     Net activity in revolving line of credit..........................       (42,667)             -
     Preferred stock dividends.........................................       (37,500)             -
     Payments on long-term debt........................................      (496,502)       (1,002,936)
     Deferred financing costs..........................................      (143,663)              -
                                                                        --------------    --------------
     Net cash used in financing activities.............................      (720,332)       (1,002,936)

     Net decrease in cash and equivalents..............................      (193,627)       (1,380,581)

     Cash and equivalents at beginning of period.......................       193,627         2,412,233
                                                                        --------------    --------------
     Cash and equivalents at end of period.............................          -            1,031,652
                                                                        ==============    ==============

</TABLE>


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               Tanknology-NDE International, Inc. and Subsidiaries


              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


     NOTE 1:      ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS

     Basis  of   Presentation:   The   consolidated   financial   statements  of
Tanknology-NDE International, Inc. and its subsidiaries (the "Company") included
herein have been prepared without audit pursuant to the rules and regulations of
the  Securities  and  Exchange  Commission,  and, in the opinion of  management,
reflect all  adjustments  necessary to present  fairly the results of operations
for such interim periods.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations;  however,  management believes that the disclosures are adequate to
make the  information  presented  not  misleading.  The  accompanying  unaudited
financial  statements for the three months ended March 31, 1998 and 1997 contain
all  adjustments,  consisting of only normal  recurring  accruals,  necessary to
present  fairly the  financial  position of the Company as of March 31, 1998 and
1997 and the  results of  operations  and cash flows for the three  months  then
ended.  The results of  operations  for the  Company's  interim  periods are not
necessarily  indicative of the results to be expected for the entire year. It is
suggested  that  these  financial  statements  be read in  conjunction  with the
audited financial  statements and notes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1997.


     NOTE 2:      COMMITMENTS AND CONTINGENCIES

     There have been no  material  changes  in the  information  reported  as of
December  31, 1997 as reported  on Form 10-KSB in Footnote 12  accompanying  the
audited financial statements.


     NOTE 3:      IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     None.




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               Tanknology-NDE International, Inc. and Subsidiaries


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

Results of Operations

     The following table reflects the percentage  relationship to net revenue of
certain items  included in the Company's  statements of operations for the three
month periods ended March 31, 1998 and 1997.  The results of operations  for the
three months ended March 31, 1997  include the results of  operations  of USTMAN
Industries ("USTMAN") which was sold in May 1997 and certain Canadian operations
("Canada") that were sold in February 1997.



                                                  Three Months Ended
                                          --------------------------------

                                          March 31, 1998    March 31, 1997
                                          --------------    --------------
Revenues...............................        100%              100%

Cost of Services.......................         77%               75%
                                          --------------    --------------

Gross Margin...........................         23%               25%

Selling, General and Administrative....         20%               28%

                                          --------------    --------------
Operating Income ( Loss)...............          3%               (3)%

Interest Expense.......................          3%               11%

Net Income (Loss)......................          -               (14)%
                                          ==============    ==============

Revenues

     Revenues  for the  three  months  ended  March 31,  1998  were  $11,697,947
compared to $7,462,643 in the 1997 period,  an increase of  $4,235,304,  or 57%.
Revenues in the first quarter of 1997 included  $105,787 of revenues from Canada
and  $1,461,665 of revenues  from USTMAN.  Excluding the revenues from these two
sold entities,  comparable  revenues for 1997 were  $5,895,191.  The increase in
comparable  revenues  of  $5,802,756  or 98% from 1997 is  primarily  due to the
following  factors;  i) revenues of  $1,786,724  generated  by the  Construction
Services  Division  which did not begin  operations  until the third  quarter of
1997,  ii)  continuation  of a large upgrade  program for a major  customer that
began in the  second  half of 1997 and iii) an over 300%  increase  in  cathodic
protection installation, maintenance, repair and inspection revenues.

Cost of  Services

     Cost services for the three months ended March 31, 1998 were  $9,005,243 or
77% of revenue  compared to $5,602,108 or 75% of revenue in 1997, an increase of
$3,403,135,  or 61%.  Gross  margin was  $2,692,704  or 23% of revenue for 1998,
compared to $1,860,535 or 25% of revenue for 1997.  The decrease in gross margin
percentage  is due to the  sale  of  USTMAN  and  Canada.  Adjusting  for  these
disposals, gross margin percentage increased by four percentage points to 25% in
the first  quarter of 1998 from 21% in 1997,  primarily  due to the  increase in
revenues.

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               Tanknology-NDE International, Inc. and Subsidiaries


Selling, General and Administrative

     Selling,  general,  and  administrative  expense for the three months ended
March 31, 1998 was  $2,316,802 or 20% of revenue  compared to $2,070,444 in 1997
or 28% of revenue,  an increase of $246,358 or 12%  compared to the three months
ended March 31,  1997.  The  increase in selling,  general,  and  administrative
expenses is due to the addition of additional sales and administrative resources
to support the growth in revenue and  varieties of services  offered.  Adjusting
for the  sales  of  USTMAN  and  Canada,  comparable  SG&A  expense  in 1997 was
$1,976,882 or 34% of comparable revenue. The decrease in the percentage of sales
from 34% to 20% is due primarily to the growth in revenue  without having to add
to SG&A expenses  proportionately and to a lesser extent reductions in insurance
and telecommunications costs.

Earnings before Depreciation, Amortization, Interest and Taxes (EBITDA)

     For the three months ended March 31, 1998,  EBITDA was  $1,066,689 or 9% of
revenues  compared to $762,470  or 10% of  revenues in 1997.  Adjusting  for the
disposals of USTMAN and Canada,  comparable  EBITDA in the first quarter of 1997
was  $58,960  or 1% of  revenues.  The  increase  in  EBITDA,  as  adjusted,  of
$1,007,729  was primarily due to the increased  revenues in the first quarter of
1998 compared to the first quarter of 1997.

Interest Expense

     Interest  expense for the three months ended March 31, 1998 was $395,517 or
3% of revenue  compared  to  $845,146  or 11% of revenue in 1997,  a decrease of
$449,629 or 53%. The decrease in interest  expense is due to; i) continued  pay-
down of long-term debt, ii) the  refinancing of subordinated  debt that occurred
in December 1997 reduced the accretion expense associated with this debt for the
first  quarter of 1998 by $145,000,  reduced the  interest  rate from 13% to 10%
which  reduced  interest  costs  compared  to  the  first  quarter  of  1997  by
approximately  $41,000,  and replaced  $1.5  million of the  previous  debt with
convertible redeemable preferred stock which eliminated approximately $48,000 of
interest  costs for the comparable  period,  iii) the retirement of the warrants
with put options which occurred as part of the December 1997  refinancing  which
eliminated  $200,250 of accretion expense associated with this instrument in the
first quarter of 1997.

Net Income (Loss)

     For the three months  ended March 31,  1998,  the Company had net income of
$8,716  before  preferred  stock  dividend  requirements  compared  to a loss of
$(1,080,355) in 1997, an improvement of $1,089,071.  Adjusting for the disposals
of USTMAN and Canada,  the  comparable net loss in the first quarter of 1997 was
$1,582,484  or 27% of  comparable  revenues.  The  decrease  in the net  loss of
$1,591,200  was primarily due to the increased  revenues in the first quarter of
1998  compared  to the  first  quarter  of 1997  and the debt  refinancing  that
occurred in December 1997.

Liquidity and Capital Resources

     At March 31, 1998, the Company had working capital of $428,483  compared to
working  capital of $743,612 at December  31, 1997.  Cash  provided by operating
activities of $1,167,799  for the three months ended March 31, 1998 increased by
$2,318,311  as compared to cash used in operating  activities  of  $1,150,512 in
1997.  The cash provided by operating  activities in the quarter ended March 31,
1998, was used to fund capital expenditures and debt repayments.

     Cash  used  in   investing   activities   (consisting   solely  of  capital
expenditures)  totaled  $641,094  for the three  months  ended  March  31,  1998
compared  to cash  provided  by  investing  activities  of  $772,867 in the 1997
period.  On  February  20,  1997,  the  Company  sold  substantially  all of the
operating assets of its Canadian  operation.  The Company  realized  proceeds of
$1,147,500  related to the sale of the  business  and  technology  licenses  and
$50,000 from the sale of the fixed assets of the Canadian operations.

     At March 31, 1998, the Company had  outstanding  long-term debt  (including
current maturities) of $14,119,453 compared to $14,644,324 at December 31, 1997.
Required term-loan principal  repayments of $300,000, a net $42,667 repayment on
the revolving credit line and other debt repayments of $182,204 were made during
the  quarter.  At March 31,  1998,  the Company  had  $3,065,000  available  for
additional borrowing under its revolving credit agreement. As of March 31, 1998,

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               Tanknology-NDE International, Inc. and Subsidiaries


the Company was in compliance  with the financial debt covenants  related to its
long-term financing agreements.

     This Form 10-Q contains  statements  which, to the extent that they are not
recitations of historical fact,  constitute  "forward looking statements" within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Act of 1934.  All  forward  looking  statements  involve  risks  and
uncertainties.  The forward looking  statements in this document are intended to
be subject to the safe harbor protection provided by Sections 27A and 21E. For a
discussion identifying some important factors that could cause actual results to
differ materially from those anticipated in the forward looking statements,  see
the Company's Form 10-KSB page 13  "Management  Discussion and Analysis" for the
fiscal year ended December 31, 1997.


PART II  Other Information

Item 6.  Exhibits and Reports on Form 8-K

               The following exhibits are filed herewith:
                    None.

               Reports on Form 8-K:
                    The Company filed one report on Form 8-K or 8-K/A during the
                    quarter ended March 31, 1998.

               On January 13,  1998,  the  Company  filed a Form 8-K to disclose
               that on  December  23,  1997,  it had  entered  into a  strategic
               alliance with Veeder-Root  Company,  issued a $6.5 million senior
               subordinated  note and $1.5  million of  redeemable,  convertible
               preferred  stock to  Danaher  Corporation,  Veeder-Root's  parent
               company,  and simultaneously  retired $8,000,000 of existing debt
               and  repurchased  warrants to  purchase 13 million  shares of the
               Company's common stock.


                                    SIGNATURE

     In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                     Tanknology-NDE International, Inc.
                                              (Registrant)


Date:    April 24, 1998                      /s/ DAVID G. OSOWSKI
       -------------------      ------------------------------------------------
                                David G. Osowski
                                Vice President and Chief Financial Officer


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