<PAGE>   1


                    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 September 30, 1995.

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

                         Commission File Number 1-10361

                         NDE ENVIRONMENTAL CORPORATION
       (Exact name of small business issuer as specified in its charter)

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

                8906 Wall Street, Suite 306, Austin, Texas 78754
                    (Address of Principal Executive offices)

         Issuer's telephone number, including area code (512) 719-4633


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 NOVEMBER 8, 1995
                 -----             -------------------------------
                                   
                 Common                       2,273,420

Transitional Small Business Disclosure Format (check one):  Yes       No  X
                                                               ------   ------
         This report consists of ______ sequentially numbered pages.



                                   Page 1

<PAGE>   2
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                                     INDEX
<TABLE>
<CAPTION>
                                                                                                           Page Number
       <S>                <C>                                                                                 <C>
       PART I             Financial Information
      
       ITEM 1             Financial Statements (Unaudited)..................................................
      
                          Condensed Consolidated Balance Sheet -
                          September 30, 1995 and December 31, 1994..........................................  3
      
                          Condensed Consolidated Statements of Operations -
                          Three Months Ended September 30, 1995 and 1994 ...................................  5
      
                          Condensed Consolidated Statements of Operations -
                          Nine Months Ended September 30, 1995 and 1994.....................................  6
      
                          Condensed Consolidated Statements of Cash Flows -
                          Nine Months Ended September 30, 1995 and 1994.....................................  7
      
                          Notes to Condensed Consolidated Financial Statements..............................  9
      
       ITEM 2             Management's Discussion and Analysis of Financial Condition and Results of
                          Operations........................................................................ 11
      
       PART II            Other Information
      
       ITEM 1             Legal Proceedings................................................................. 17
      
       ITEM 5             Other Information................................................................. 17
      
       ITEM 6             Exhibits and Reports on Form 8K.................................................. 18
      
                          Signatures....................................................................... 26
</TABLE>




                                     Page 2

<PAGE>   3
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEET

PART I   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 September 30, 1995        December 31, 1994
                                                                 ------------------        -----------------
                                                                     (Unaudited)                (Note)
<S>                                                                  <C>                        <C>
ASSETS                                                       
CURRENT ASSETS

    Cash                                                                $351,482                $244,491

    Trade accounts receivable, less allowance for
    doubtful accounts of $499,470 in 1995 and $425,077 in              
    1994                                                               1,970,417               1,459,631

    Inventories                                                          179,236                 128,032

    Prepaid expenses and other current assets                            180,979                 408,136
                                                                     -----------             -----------
TOTAL CURRENT ASSETS                                                   2,682,114               2,240,290

EQUIPMENT AND IMPROVEMENTS, net of accumulated
   depreciation of $5,556,569 in 1995 and $4,680,964
   in 1994                                                             4,342,871               5,110,632

INTANGIBLE ASSETS

   Patents, net of accumulated amortization of
   $220,768 in 1995 and $186,947 in 1994                                 165,627                 199,448

   License, net of accumulated amortization of
   $197,831 in 1995 and $143,971 in 1994                                 729,286                 779,621

   Other Intangibles, net of accumulated amortization
   of $118,307 in 1995 and $82,411 in 1994                                55,104                  90,225

   Deposits and other assets                                              76,624                  50,983
                                                                     -----------             -----------
                                                                      $8,051,626              $8,471,199
                                                                     ===========             ===========
</TABLE>

Note:  The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  See accompanying notes to condensed consolidated
financial statements.





                                     Page 3
<PAGE>   4
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                       September 30, 1995       December 31, 1994
                                                                       ------------------       -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY                                      (Unaudited)                (Note)
<S>                                                                        <C>                     <C>
CURRENT LIABILITIES

   Accounts payable                                                         $905,875                 $709,559

   Accrued liabilities                                                       708,295                  915,587

   Accrued payroll and payroll taxes                                         633,459                  521,489

    Current maturities of notes payable and
       long-term debt                                                      2,060,297                  530,807

    Current portion of capital lease obligation                               73,186                  100,321
                                                                       -------------            -------------
TOTAL CURRENT LIABILITIES                                                  4,381,112                2,777,763
                                                                    
LONG TERM DEBT (SEE NOTE 3)

    Notes payable and other long-term debt                                 3,342,930                4,301,589

    Other accrued liabilities                                                  8,550                   41,640
                                                                       -------------            -------------
TOTAL  LIABILITIES                                                         7,732,592                7,120,992
                                                                       -------------            -------------

STOCKHOLDERS' EQUITY  (SEE NOTE 2 )

    Series AAA Convertible Preferred Stock, $.0001  par
    value; authorized, 400 shares; issued and outstanding 1
    share at September 30, 1995, and 257.5 shares at
    December 31, 1994, stated at liquidation value of        
    $5,000 per share.                                                          5,000                1,287,500
                                                          
    Series BBB Convertible Preferred Stock, $.0001 par value;
    authorized, 253 shares; issued and outstanding 0 shares
    at September 30, 1995, 253 shares at December 31, 1994,
    100 shares stated at liquidation value of $5,000 per
    share, 153 shares stated at liquidation value of 
    $7,516.34 per share.                                                           -                1,650,000
    

    Series CCC Convertible Preferred Stock, $.0001 par value;
    authorized, issued and outstanding 0 shares at
    September 30, 1995, 60 shares at December 31, 1994,
    stated at liquidation value of $5,000 per share.                               -                  300,000

    Series DDD Convertible Preferred Stock, $.0001 par value;
    authorized, 300 shares; issued and outstanding, 210.7
    shares at September 30, 1995; 0 shares at  December 31,
    1994, stated at liquidation value of $5,000 per share.                 1,053,410                        -

    Common stock, $.0001 par value; authorized, 10,000,000
    shares; issued and outstanding 2,273,420 shares at
    September 30, 1995, and 1,462,420 December 31, 1994.                         227                      146

     Additional paid-in capital                                           25,133,216               21,883,298
                                                                       -------------            -------------
     Accumulated deficit                                                 (25,872,819)             (23,770,737)
                                                                       -------------            -------------
TOTAL STOCKHOLDERS' EQUITY                                                   319,034                1,350,207
                                                                       -------------            -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $8,051,626               $8,471,199
                                                                       =============            =============
</TABLE>

Note:  See note at bottom of page 5.


                                    Page 4

<PAGE>   5
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                    ----------------------------------------------
                                                                    September 30, 1995          September 30, 1994
                                                                    ------------------          ------------------

 <S>                                                                    <C>                         <C>
 REVENUES - Testing services                                            $2,976,560                  $2,929,629
          - Other                                                          173,400

 COSTS AND EXPENSES

     Cost of sales and testing services                                  1,859,656                   1,679,207

     Selling, general and administrative                                 1,649,497                   1,542,780

     Provision for doubtful accounts                                        83,332                      71,443
                                                                      ------------                ------------
         TOTAL COSTS AND EXPENSES                                        3,592,485                   3,293,430
                                                                      ------------                ------------
 OPERATING LOSS                                                           (442,525)                  ($363,801)

 Other income (expense):

      Interest income                                                            0                         418

      Interest expense                                                    (206,881)                   (149,985)
                                                                      ------------                ------------
 NET LOSS                                                                ($649,406)                  ($513,368)
                                                                      ============                ============
 NET LOSS PER SHARE                                                         ($0.29)                     ($0.39)
                                                                      ============                ============
 WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING -
 (See Note 2 )                                                           2,273,420                   1,309,333
                                                                      ============                ============
</TABLE>

Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for the
complete financial statements

See accompanying notes to condensed consolidated financial statements.





                                     Page 5
<PAGE>   6
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                                  -----------------------------------------------
                                                                  September 30, 1995          September 30, 1994
                                                                  ------------------          ------------------
<S>                                                                   <C>                         <C>
REVENUES - Testing services                                            $7,978,751                  $7,235,802
            Other                                                         257,510                      95,082

COSTS AND EXPENSES

    Cost of sales and testing services                                  5,153,481                   4,628,256

    Selling, general and administrative                                 4,373,181                   4,739,029

    Provision for doubtful accounts                                       198,665                     172,798
                                                                      -----------                ------------
        TOTAL COSTS AND EXPENSES                                        9,725,327                   9,540,083
                                                                      -----------                ------------
OPERATING LOSS                                                        ($1,489,066)                ($2,209,199)

Other income (expense):

     Interest income                                                          158                         880

     Interest expense                                                    (613,174)                   (364,660)
                                                                      -----------                ------------
NET LOSS                                                              ($2,102,082)                ($2,572,979)
                                                                      ===========                ============
NET LOSS PER SHARE                                                         ($1.11)                     ($2.05)
                                                                      ===========                ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
(See Note 2)                                                            1,898,651                   1,257,013
                                                                      ===========                ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.





                                     Page 6
<PAGE>   7
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                           -----------------------------------------------
                                                           September 30, 1995          September 30, 1994
                                                           ------------------          ------------------
<S>                                                        <C>                         <C>
OPERATING ACTIVITIES

Net loss                                                     ($2,102,082)                ($2,572,979)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:

     Depreciation                                              1,003,993                     990,179

     Amortization of discount on notes payable                   128,276                      67,606

     Amortization of intangibles                                 123,577                     218,529

     Provision for doubtful accounts                             204,556                     172,798
     Gain on sale of equipment                                  (182,231)                          -

CHANGES IN OPERATING ASSETS AND LIABILITIES:

     Trade receivables                                          (697,843)                   (684,088)

     Inventories                                                 (51,204)                     76,201

     Prepaid expenses                                            227,157                     102,708

     Deposits                                                    (25,641)                    (14,892)

     Accounts payable                                            196,316                      70,439

     Accrued liabilities                                         (19,607)                    (32,056)

     Accrued payroll and accrued payroll taxes                   111,970                     190,372
                                                           -------------               -------------
NET CASH USED IN OPERATING ACTIVITIES                         (1,082,763)                 (1,415,183)

</TABLE>


    See accompanying notes to condensed consolidated financial statements.





                                     Page 7
<PAGE>   8
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    Nine Months Ended
                                                       -----------------------------------------------
                                                       September 30, 1995          September 30, 1994
                                                       ------------------          ------------------
<S>                                                        <C>                         <C>
INVESTING ACTIVITIES

     Purchases of licenses                                    (4,300)                    ($32,169)

     Additions to equipment and improvements                (326,411)                    (287,166)

     Proceeds from sale of equipment                         272,410                            -
                                                          -----------                  -----------
     Net cash used in investing activities                   (58,301)                    (319,335)

FINANCING ACTIVITIES

     Proceeds from  Line of Credit                         1,055,210                      581,852

     Principal payments under note and
     capital lease payable                                  (628,770)                    (192,105)

     Proceeds from issuance of Preferred                     250,000                      300,000
     Stock
                                                                   -                      750,000
     Proceeds from Term Loan

     Proceeds from issuance of notes payable                 571,615                            -
                                                         -----------                  -----------
     Net cash provided by financing                      
     activities                                            1,248,055                    1,439,747

         NET (INCREASE) IN CASH                              106,991                     (294,771)
                                               
         CASH AND CASH EQUIVALENTS AT
         BEGINNING OF PERIOD                                 244,491                      295,077
                                                         -----------                  -----------
         CASH AND CASH EQUIVALENTS AT END OF
         PERIOD                                             $351,482                         $306
                                                         ===========                  ============
     Supplemental disclosure of cash flow
     information:

     Cash paid during the period for:

     Interest                                               $422,044                      $61,665
                                                         ===========                  ============
     Income taxes                                                 --                           --
                                                         ===========                  ============
</TABLE>

     See accompanying notes to condensed consolidated financial statemetns.




                                     Page 8
<PAGE>   9
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)

NOTE 1:      ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS

Basis of Presentation: The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and with the instructions
to Form 10-QSB.  Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements.

        In the opinion of management, the accompanying unaudited financial
statements for the nine months ended September 30, 1995 and 1994 contain all
adjustments, consisting of only normal recurring accruals, necessary to present
fairly the financial position of the Company as of September 30, 1995 and 1994
and the results of operations for the three and nine months then ended and cash
flows for the nine months then ended.

        For further information refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1994. The results of operations for the Company's
interim periods are not necessarily indicative of the results to be expected
for the entire year.

        Certain amounts shown in the 1994 financial statements have been
reclassified to conform to the 1995 presentation.

NOTE 2:      Stockholders' Equity

In June 1995, the Company reached an agreement with Proactive Partners, L.P.
("Proactive"), a significant shareholder, regarding a refinancing arrangement
(the "June Refinancing").  The June Refinancing includes the issuance of 210.7
share of Series DDD Preferred Stock at $5,000 per share (total proceeds of
$1,053,410) convertible at $0.21875 per share into 4,815,586 shares of Common
Stock.  The June refinancing also includes a $250,000 commitment to purchase
additional preferred stock convertible into 666,667 shares of common stock at
$0.375 per share.  The $1,053,410 in DDD Preferred Stock was issued as
consideration for the conversion of certain debt as well as for $250,000 cash.
See Note 3 to the Condensed Consolidated Financial Statements.

        In May 1995, 253 shares of the Series AAA Convertible Preferred Stock
with a liquidation value of  $1,260,000 were converted into an aggregate of
504,000 shares of Common Stock at a price per share of $2.50.  In September
1994 and January 1995, a total of 119 shares of Series AAA Preferred Stock with
liquidation value totaling $595,000 had been converted into a total of 238,000
shares of Common Stock at a price per share of $2.50.  At September 30, 1995
there remains outstanding 1 share of Series AAA Preferred Stock with a
liquidation value of $5,000.




                                    Page 9


<PAGE>   10
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

        Also in May 1995, all outstanding Series BBB Convertible Preferred Stock
and Series CCC Convertible Preferred Stock were converted into Common Stock. 
253 shares of The Series BBB Convertible Preferred Stock with a liquidation
value of $1,650,000 were converted into a total of 253,000 shares of Common
Stock at an average price per share of $6.52.  60 shares of the Series CCC
Convertible Preferred Stock with a liquidation value of $300,000 were converted
into 48,000 shares of Common Stock at a price per share of $6.25.

        On August 2, 1994, at the Company's annual shareholder's meeting,
stockholders approved the amendment of the Company's Certificate of
Incorporation to effect a 1 for 10 reverse stock split by converting and
reconstituting each outstanding share of Common Stock into one-tenth of one
share, and to have any resulting fractional shares rounded up to the nearest
whole share (the "Reverse Stock Split").  The Company is currently authorized to
issue 10,000,000 shares of Common Stock and 10,000 shares of Preferred Stock. 
All share and per share amounts included in these financial statements reflect
the Reverse Stock Split.

NOTE 3:     Debt

Financing Agreement

In September 1993, the Company entered into a Loan and Security Agreement (the
"Prior Agreement") with Silicon Valley Bank ("SVB") for borrowings up to a
maximum of $750,000.  In 1994, the Company amended this agreement to increase
the maximum borrowings to $1,500,000 and to extend the expiration date to May 5,
1995.  As of March 27, 1995, the Company entered into a new financing agreement
(the "Financing Agreement") with SVB that provided a line of credit up to
$1,000,000 based on eligible accounts receivable balances, as defined, not to
exceed 80% of gross receivable balances. The Financing Agreement expires on
April 30, 1996.  Advances under the Financing Agreement originally accrued
interest at 1.75% per month, plus an administrative fee of 0.5% per month.  A
reduction in rate to 1.5% per month became effective July 19, 1995.  The
administrative fee remains .50% per month. The initial advance under the
Financing Agreement was received in April 1995, and was used to pay off other
outstanding debt.  All borrowings under the Financing Agreement are due upon
demand.  On June 20, 1995, the borrowing limit under the Financing Agreement was
increased from $1,000,000 to $1,500,000.  The Financing Agreement expires in
March 1996.
        
        In addition, SVB provides the Company with a $750,000 term loan (the
"Term Loan").  The Term Loan bears interest at SVB's prime rate.  The principal
balance will be payable in full June 30, 1997 with payment guaranteed by
Proactive.
        
        In February 1995, the Company reached an agreement with Gilbarco, Inc.
("Gilbarco") to extend the due dates of the three payments due in 1995 on the
$2,450,000 note.  These three payments of $122,500 each have been rescheduled to
the end of the note payment period, or March 2000.





                                   Page 10
<PAGE>   11
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (CONTINUED) - UNAUDITED
                                 
June Refinancing

        In January and February 1995, the Company received $200,000 and
$300,000, respectively, pursuant to a promissory note agreement with Proactive
(the "Bridge Loan").  Interest on The Bridge Loan was at the rate of prime plus
4%. The Bridge Loan was originally due April 30, 1995;   Proactive extended the
due date of the Bridge Loan to June 30, 1995.  In June 1995, as part of the June
Refinancing, Proactive converted the Bridge Loan into shares of Series DDD
Preferred Stock.  Also converted into shares of Seried DDD Preferred Stock was a
note and accrued interest payable to Proactive in the amount of $277,766 (the
"Subordinated Debt").  See Note 2 to the condensed consolidated financial
statements.

Sale/Leaseback

        In April 1995, the Company entered into an agreement with Enterprise
Leasing Corporation ("Enterprise") whereby the Company sold to Enterprise 19 of
its testing vehicles for approximately $70,000.  The Company then leased back
the same vehicles under two-year capital lease agreements.

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULT OPERATIONS

Results of Operations

        The Company had a net loss of $649,407 for the three months ended
September 30, 1995, compared to a net loss of $513,368 for the three months
ended September 30, 1994.  The Company had a net loss of $2,102,082 for the nine
months ended September 30, 1995, compared to $2,572,979 for the nine months
ended September 30, 1994.  An explanation of the variances between periods for
each of the major categories follows.





                                     Page 11

<PAGE>   12
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Results of Operations - Continued:

        The following table reflects the percentage relationship to net sales of
certain items included in the company's statement of operations for the three
and nine month periods ended September 30, 1995 and 1994.

<TABLE>
<CAPTION>
                                                                      3 Months Ended
                                                      ----------------------------------------------
                                                      September 30, 1995         September 30, 1994
                                                      ------------------         ------------------
        <S>                                                 <C>                        <C>
        Revenues                                            100%                        100%

        Costs and Expenses
        
             Cost of Sales and Testing                       59%                         57%
        
             Selling, General and  Administrative            52%                         53%
        
             Provision for Doubtful Accounts                  3%                          2%
        
             Interest Expense                                 7%                          6%
                                                        -------                     -------
             Total Costs and Expenses                       121%                        118%
                                                        -------                     -------
        Net Loss                                            (21%)                       (18%)
                                                        =======                     =======
</TABLE>

<TABLE>
<CAPTION>
                                                                     9 Months Ended
                                                      ----------------------------------------------
                                                      September 30, 1995         September 30, 1994
                                                      ------------------         ------------------
        <S>                                                 <C>                        <C>
        Revenues                                            100%                        100%
        
        Costs and Expenses
        
             Cost of Sales and Testing                       63%                         63%
        
             Selling, General and Administrative            53%                         65%
        
             Provision for Doubtful Accounts                  2%                          2%
        
             Interest Expense                                 7%                          5%
                                                        -------                     -------
             Total Costs and Expenses                       125%                        135%
                                                        -------                     -------
        Net Loss                                            (25%)                       (35%)
                                                        =======                     =======
</TABLE>




                                     Page 12
<PAGE>   13
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Revenues

        Revenues for the three months ended September 30, 1995 were $3,149,960,
an increase of $220,331, or 8%, compared to the three months ended September 30,
1994.  Revenues for the nine months ended September 30, 1995 were $8,236,261, an
increase of $905,377, or 12%, compared to the nine months ended September 30,
1994.   Average revenue per van day (revenue from domestic UST testing and tank
management divided by van days worked) decreased from approximately $1,054 for
the three months ended September 30, 1994 to $1,050 for the three months ended
September 30, 1995.  Average revenue per van day was $1,033 for the nine months
ended September 30, 1995, a decrease of 4% from the approximately $1,076
achieved for the nine months ended September 30, 1994.  Total volume increased
by 12%, from 2,456 van days worked in the third quarter of 1994 to 2,744 in the
third quarter of 1995.  Total volume increased by 20% to 7,377 during the nine
months ended September 30, 1995 from approximately 6,142 van days for the nine
months ended September 30, 1994.

        The decrease in revenue per van day was due to a decrease in pricing. 
The decreased pricing is attributable to increased competitive pressures caused
by an increase in the number of smaller testing companies in the market.  NDE's
increased volume (van days sold) was due primarily to the increased capacity
obtained from the acquisition of GB ESD ("Gilbarco Environmental Services
Division") in April 1994.

        Also contributing to the increased volume in 1995 were growing
acceptance of the Company's proprietary UST test reporting and tank management
system and an increase in the number of Stage II vapor recovery tests.

        In July, the Company completed a transaction with a licensee in Malaysia
whereby the Company sold probes and related test equipment for a purchase price
of approximately $173,000.  The Company will also receive a processing fee on an
ongoing basis for test review and technical support services.

Cost of Sales and Testing Services 

        Cost of sales and testing services for the three months ended September
30, 1995 was $1,859,656 (59% of revenue), an increase of $180,449, or 10%,
compared to $1,679,207 (57% of revenue), for the three months ended September
30, 1994.  Cost of sales and testing services for the nine months ended
September 30, 1995 was $5,153,481 (63% of revenue), an increase of $525,225 or
11%, compared to $4,628,256 (63% of revenue) for the nine months ended September
30, 1994.  The increase in cost of sales was due primarily to the increase in
the number of van days sold.  The increase in the cost of sales as a percent of
revenue was due to a decrease in pricing.  The gross margin was $1,290,304 (41%
of revenue) for the three months ended September 30, 1995, compared to
$1,250,422 (43% of revenue) the three months ended September 30, 1994.




                                   Page 13

<PAGE>   14
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Cost of  Sales and  Testing Services - Continued

The gross margin was $3,082,780 (37% of revenue) for the nine months ended
September 30, 1995, compared to $2,702,628 for the nine months ended September
30, 1994 (37% of revenue).  The decreased margins were due to decreased
pricing.

Selling, General and Administrative

Selling, general and administrative expense for the three months ended
September 30, 1995 was $1,649,497 (52% of revenue), an increase of $106,717
or 7%, compared to the three months ended September 30, 1994.  Selling, general
and administrative expense for the nine months ended September 30, 1995 was,
$4,373,181 (53% of revenue), a decrease of $365,848 or 8% compared to the nine
months ended September 30, 1994.  The increase for the quarter was due to an
assessment from the Internal Revenue Service for payroll taxes relating to 1991
in the amount of approximately $190,000.  The improvement for the nine months
ending September 30, 1995 was due to the Company's assimilation of the GB ESD
fleet of 31 vehicles with the addition of only two non-field personnel and to
the implementation of more effective cost controls.

Provision for Doubtful Accounts

        The provision for doubtful accounts for the three months ended September
30, 1995 was $83,332, or 3% of sales, an increase of $11,889 compared to
$71,443 for the three months ended September 30, 1994, which was 2% of sales. 
The provision for doubtful accounts for the nine months ended September 30,
1995 was $198,665 (2% of sales), an increase of $25,867 compared to the nine
months ended September 30, 1994.  The increase was due to an increase in sales.

Interest Expense

        Interest expense for the three months ended September 30, 1995 was
$206,881, an increase of $56,896, or 38%, compared to the three months ended
September 30, 1994.  Interest expense for the nine months ended September 30,
1995 was $613,714, an increase of $248,514, or 68%, compared to the nine
months ended September 30, 1994.  The increase in interest expense was
attributable to the interest expense associated with increased borrowing under
the Financing Agreement with SVB, and notes issued in connection with the
acquisition of GB ESD.

Write-off of Goodwill

        During 1994, the Company wrote-off goodwill of $2,562,000 related to the
acquisition of certain of the tank testing assets of Kaneb Metering Corporation
in April, 1991.  Accordingly, there was no amortization expense associated with
the write-off of goodwill for the three or nine  months ended September  30,
1995.




                                   Page 14
<PAGE>   15
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Write-off of Goodwill - Continued

For the three and nine month periods ended September 30, 1994, amortization
expense associated with the write-off of goodwill amounted to $56,925 and
$170,775, respectively.

Payroll Tax Assessment

During the quarter the Company was notified by the Internal Revenue Service
that payroll taxes were refunded in error in 1992.  During the current quarter
the Company established an accrued liability of $190,000 in recognition of
this liability.

Net Loss

        For the three months ended September 30, 1995, the Company incurred a
net loss of $649,406, an increase of $136,038 or 26% compared to the net loss of
$513,368 for the three months ended September 30, 1994.  For the nine months
ended September 30, 1995, the Company incurred a net loss of $2,102,082, a
decrease of $470,897 or 18%, compared to the net loss of $2,572,979 for the nine
months ended September 30, 1994.  The decrease in the loss for the nine months
ended September 30, 1995 was due to increased volume coupled with better cost
controls, particularly in the Selling, General and Administrative expenses.

Liquidity and Capital Resources

         At September 30, 1995, the Company had a working capital deficit of
$1,698,998 compared to $537,473 at December 31, 1994.  The increase of
$1,161,525 comprises primarily an increase in the amount borrowed from SVB
under the Financing Agreement of approximately $1,055,000.  The working capital
deficit decreased by $376,356 from the quarter ended June 30, 1995 primarily
due to the extension of the due date of the $750,000 Term Loan from April 1996
to June 1997.

        On March 23, 1995 the Company entered into a financing agreement (the
"Financing Agreement") with SVB that will provide a line of credit up to
$1,000,000 based on qualified and eligible accounts receivable balances not to
exceed 80% of the gross receivable balance.  In June 1995, this limit was
increased to $1,500,000.  The initial advance under this Financing Agreement was
used to pay off the existing line of credit with SVB in the amount of
approximately $271,000 in April 1995 and to pay off the one year note to
Gilbarco in the amount of $400,000 due April 1995.  The Financing Agreement
expires in March 1996.





                                    Page 15

<PAGE>   16
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
                                       
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources - Continued

At September 30, 1995, the Company had outstanding long-term debt (including
current maturities) of $5,476,413, compared to $4,932,717 at December 31, 1994.
At September 30, 1995, the Company had promissory notes payable in the amount
of $467,365 to principal stockholder JLR and to Spears, Benzak, Soloman and
Farrell ("SBSF") due in five equal annual installments from 1996 through 2000.
Interest on the notes accrues at 8% per annum, and is payable quarterly.  The
Company also had outstanding notes payable of approximately $127,000 to Ford
Motor Credit and $68,000 to Enterprise Leasing Corporation at September 30,
1995.  The principal on these notes is payable monthly through 1998 and 1997
respectively.  Also at September 30, 1995, the Company had notes payable to the
former owners of Proeco, Inc.  Two notes totaling $80,920 are payable in two
equal installments of $40,460, due in January 1996 and 1997, plus interest at
the rate of 7.5%; and notes totaling $385,714 are payable in six equal
installments of $64,286, due in January 1996 through 2001, also plus interest
at the rate of 7.5%.

         In February 1995, the Company amended its note payable agreement with
Gilbarco to extend $367,500 of debt maturities previously scheduled to be paid
in 1995 to March 2000.  See Note 3 to the Condensed Consolidated Financial
Statements.

         In January and February 1995, the Company received loans of $200,000
and $300,000, respectively, from Proactive Partners in exchange for its
promissory note. In June 1995, the Company reached an agreement with Proactive
consisting of (i) an extension of Proactive's guaranty on the $750,000 term
loan with SVB through June 1997; (ii) the issuance of $1,053,410 of Series DDD
Preferred Stock, convertible at $0.21875 per share into 4,815,586 shares of
Common Stock; and (iii) a $250,000 irrevocable standby commitment to purchase
additional preferred stock convertible into Common Stock at $0.375 per share.
The issuance of the $1,053,410 of Series DDD Preferred Stock represents (i)
conversion of the $500,000 loan received from Proactive in January and February
1995 plus $25,644 of accrued interest; (ii) conversion of $273,038 of notes
payable to Proactive; and (iii) the purchase of $250,000 of Series DDD
Preferred Stock by Proactive for cash.

         At September 30, 1995, the Company has $2,133,483 of debt that matures
within the next twelve months, including the approximately $1,485,000 in the
SVB financing agreement.  Management of the Company expects that cash in
addition to Proactive's commitment to purchase an additional $250,000 worth of
Series DDD Preferred Stock may be required to fund the operations of the
Company.  Although management of the Company is devoting substantial effort to
the pursuit of funding sources, there is no assurance that such efforts will
continue to be successful.





                                    Page 16
<PAGE>   17
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources - Continued

        If the Company's cash flow from operations and other capital resources
are insufficient to meet its debt maturities, the Company may be required to
take other actions including cost reduction measures, dispositions of assets or
a combination of these and other actions which are not currently foreseeable.
Such other actions could have an adverse effect on the Company's financial
condition and results of operations.

PART II  OTHER INFORMATION

ITEM 1:     LEGAL PROCEEDINGS

        In February 1995, U.S. Test, Inc. brought suit against NDE Environmental
Corporation in the United States Federal District Court, Western District of
Louisiana.  The lawsuit is for a declaratory judgment that certain patents owned
by NDE are invalid, unenforceable and/or that certain U.S. Test tank testing
systems do not infringe such patents.  The relief U.S. Test is seeking includes
a final determination on the above issues, a preliminary injunction regarding
actions taken by NDE and attorneys' fees and costs.  In May, 1995 NDE filed a
counterclaim alleging that (1) the NDE patents are valid and enforceable, (2)
the U.S. Test tank testing systems are infringing upon such patents, and (3) NDE
is owed damages for such infringement.  The amount of damages owed by U.S. Test,
if any, has not been specifically alleged.  The patents at issue were
transferred from Gilbarco, Inc. in the 1994 acquisition by NDE of Gilbarco's
Environmental Services Division.  The parties have entered into a joint
scheduling order providing for a trial in 1996.  There have been no dispositive
rulings to date.

ITEM 5:     OTHER INFORMATION

Officer Changes

        In June 1995, A. Daniel Sharplin was named President and Chief Executive
Officer, replacing Jay Allen Chaffee, who remains Chairman of The Board.  Mr.
Sharplin previously was President and Chief Operating Officer of the Company.
Also in June 1995, Eric J. (Rick) Hopkins was named Vice President and Chief
Financial Officer, also replacing Mr. Chaffee.  Mr. Hopkins was previously Vice
President, Operations and Controller.





                                    Page 17
<PAGE>   18
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         OTHER INFORMATION (CONTINUED)

ITEM 5:  OTHER INFORMATION - CONTINUED

NASDAQ Delisting

         In July 1995, the Company was delisted from the NASDAQ Small-Cap Market
for failure to meet listing requirements.  These requirements include (1)
maintenance of a minimum bid price of $1.00 for 10 consecutive trading days, or
(2) maintenance of a minimum capital and surplus of $2,000,000.  The Company
now trades on the OTC Bulletin Board; the trading symbol remains NDEC.  The
Company expects to reapply for listing when it returns to the level of
eligibility.

ITEM 6:     EXHIBITS AND REPORTS ON FORM 8-K

(a)      The following exhibits are filed herewith or incorporated herein by
         reference:

 No.         Exhibit
------       -------

10.36        Rights Agreement, dated July 10, 1990, between NDE Testing and the
             Series A Purchasers (incorporated by reference from Exhibit 28.9
             to the July, 1990 8-K)

10.37        Registration Rights Agreement, dated July 10, 1990, between the
             registrant and the Series A Purchasers (incorporated by
             reference from Exhibit 28.10 to the July, 1990 8-K).

10.38        Stockholders Agreement, dated July 10, 1990, by and among the
             Registrant, John R. Mastandrea and the Series A Purchasers
             (incorporated by reference to Exhibit 28.11 to the July 1990 8-K).

10.39        Consulting and financial Advisory Agreement, dated July 10, 1990,
             between the Registrant and SBSF (incorporated by reference to
             Exhibit 28.12 to the July 1990 8-K).

10.40        Warrant Certificate, dated July 10, 1990,. issued by the
             Registrant in favor of SBSF (incorporated by reference to Exhibit
             28.13 to the July 1990 8-K).

10.41        Proprietary Rights and Secrecy Agreement, dated July 10, 1990,
             between the Registrant and John R. Mastandrea (incorporated by
             reference to Exhibit 28.14 to the July 1990 8-K).

10.42        Agreement of Merger, dated March 28, 1991, among the Registrant,
             NDE Testing, KMC Merger No. 1, Kaneb Metering Corporation and
             Kaneb Services, Inc. ("Kaneb") (incorporated by reference to
             Exhibit 10.42 to the 1990 10-K).





                                    Page 18

<PAGE>   19
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.43        Voting Agreement, dated March 28, 1991, between Kaneb and John R.
             Mastandrea (incorporated by reference to Exhibit 10.43 to the 1990
             10-K).

10.44        Voting Agreement, dated March 28, 1991, among the Registratn, NDE
             Testing and the holders of the Registrant's Series A Preferred
             Stock (including forms of warrants granted to such holders
             attached as exhibits thereto) (incorporated by reference to
             Exhibit 10.44 to the 1990 10-K).

10.45        Description of Purchase Rights granted by the Registrant to
             holders of record of the Registrant's Common Stock at April 12,
             1991 (incorporated by reference to Exhibit 10.45 to the 1990
             10-K).

10.46        Purchase Rights Option Agreement, dated March 28, 1991, between
             the Registrant and John R. Mastandrea (incorporated by reference
             to Exhibit 10.46 to the 1990 10-K).

10.47        Convertible Note Purchase Agreement, dated August 8, 1991, among
             the Registrant and the purchasers of the notes and warrants listed
             on Exhibit A thereto, together with exhibits including the forms
             of the notes and warrants issuable thereunder (incorporated by
             reference to Exhibit 1 to the Registrant's Quarterly Report on
             Form 10-Q for the quarter ended June 30, 1991 (the "June 1991
             10-Q")).

10.48        Executive Consulting Agreement, dated May 30, 1991, (the
             "Executive Consulting Agreement") between the Registrant and
             Bunker Hill, an affiliate of Jay Allen Chaffee, the President of
             the Registrant, together with the form of Stock Registration
             Agreement attached as an exhibit thereto (incorporated by
             reference to Exhibit 2 to the June 1991 10-Q).

10.49        Form of Promissory Note in the principal face amount of $250,000
             and warrant to purchase up to 25,000 shares of Common Stock, both
             dated September 6, 1991, issued to SBSF, together with Pledge  and
             guaranty of John R. Mastandrea securing the Note.  Substantially
             equivalent notes and warrants were issued to the Louis Marx, Jr.
             Trust, on September 30, 1991, and SBSF on October 2, 1991, in the
             respective amounts of $100,000 and 10,000 shares and $250,000 and
             25,000 shares, together with substantially equivalent pledges and
             guaranties (incorporated by reference to Exhibit 10.49 to the
             Registrant's annual report on Form 10-K for the year ended
             December 31, 1991 (the "1991 10-K").

10.50        Series B Convertible Preferred Stock Purchase Agreement, dated
             November 7, 1991 (incorporated by reference to Exhibit 19.01 to
             the September 1991 10-Q).

10.51        Financial Advisory Services Agreement, dated October 31, 1991
             (incorporated by reference to Exhibit 19.02 to the September 1991
             10-Q).




                                   Page 19

<PAGE>   20

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.52        Series AA Preferred Stock Holders Agreement, Waiver and Consent,
             dated November 7, 1991 (incorporated by reference to Exhibit 19.03
             to the September 1991 10-Q).

10.53        Amendment No. 2 to John R. Mastandrea's Employment Agreement, dated
             November 3, 1991 ("Mastandrea Amendment No. 2") (incorporated by
             reference to Exhibit 19.04 to the September 1991 10-Q).

10.54        Agreement to Vote, dated November 6, 1991, executed in connection
             with Mastandrea Amendment No. 2 (incorporated by reference to
             Exhibit 10.54 to the 1991 10-K).

10.55        1989 Stock Option Plan, as amended with the approval of the
             stockholders, together with a further amendment approved by the
             Board of Directors subject to stockholder approval at the 1992
             annual meeting (incorporated by reference to Exhibit 10.55 to the
             1991 10-K).

10.56        Employment Agreement between the Registrant and John T. Hanratty,
             dated December 31, 1991 (incorporated by reference to Exhibit
             10.56 to the 1991 10-K).

10.57        Termination Agreement between the Registrant and William H.
             Willenberg, dated April 8, 1992 (incorporated by reference to
             Exhibit 10.57 to the 1991 10-K).

10.59        Series AAA and BBB Preferred Stock and Secured Convertible Note
             Purchase Agreement (the "Purchase Agreement"), dated as of May 26,
             1992, among the Registrant, its subsidiary, JLR Holdings, Inc.
             ("JLR"), Spears Benzak Salomon & Farrell ("SBSF"), Proactive
             Partners, L.P. ("Proactive"), Lagunitas Partners, L.P.
             ("Lagunitas"), and other purchasers of the Initial Convertible
             Secured Notes issued by the Registrant pursuant to the Purchase
             Agreement (the "Purchasers"); and the Approval and Addendum, dated
             as of June 22, 1992, among the Registrant, and other Purchasers
             represented by it, Proactive, Lagunitas, JLR, Josephthal Lyon &
             Ross Incorporated ("Josephthal"), John R. Mastandrea, Kaneb
             Services, Inc. ("KSI"), and Kaneb Metering Corporation ("KMC");
             together with the following exhibits to that Purchase Agreement
             (incorporated by reference from Exhibit to the Registrants current
             report on Form 8-K filed July 17, 1992, the ("July 1992 8-K")).

10.60        Conversion and Exchange Agreement and Consent, dated as of May 26,
             1992, among the Registrant and holders of the Registrant's
             outstanding Series A Convertible Preferred Stock and Series B
             Convertible Preferred Stock (incorporated by reference from
             Exhibit 10.02 to the July 1992 8-K).





                                    Page 20
<PAGE>   21
                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.61        Voting Agreement, dated as of May 26, 1992, among the Registrant,
             RLR, Josephthal, SBSF, Proactive, Lagunitas, KSI, KMC and SBSF NDE
             Group, Limited Partnership; Cancellation of Voting Agreement and
             Release, dated May 26, 1992, among KSI, KMC and John R.
             Mastandrea; and Modification Agreement and Consent, dated as of
             May 26, 1992, among the Registrant, its subsidiary, KSI and KMC
             (incorporated by reference to Exhibit 10.03 from the July 1992
             8-K).

10.62        Settlement Agreement dated as of May 26, 1992, among the
             Registrant, its subsidiary and John R. Mastandrea; together with
             the following exhibits thereto (incorporated by reference to
             Exhibit 10.04 to the July 1992 8-K).

10.63        Non-Competition and Non-Solicitation Agreement, dated as of May
             26, 1992, among the Registrant, its subsidiary and John R.
             Mastandrea (incorporated by reference to Exhibit 10.05 to the July
             1992 8-K).

10.64        Consulting and Services Agreement, dated as of May 26, 1992, among
             the Registrant, John R. Mastandrea and Advanced Leak Detection
             Corporation ("LAD"); and Addendum to Consulting Services
             Agreement, dated as of June 4, 1992, among the Registrant, John R.
             Mastandrea and LAD (incorporated by reference to Exhibit 10.06 to
             the July 1992 8-K).

10.65        Third Amended and Restated Registration Rights Agreement, dated as
             of May 26, 1992, among the Registrant and certain holders of the
             Registrant's securities (incorporated by reference to Exhibit
             10.07 to the July 1992 8-K).

10.66        Security Agreement, dated as of May 26, 1992, among the
             Registrant, its subsidiary and the Purchasers (incorporated by
             reference to Exhibit 10.08 to the July 1992 8-K).

10.67        Form of Initial Convertible Secured Note of the Registrant
             (incorporated by reference to Exhibit 10.09 to the July 1992 8-K).

10.68        Form of Secured Convertible Note of the Registrant (incorporated
             by reference to Exhibit 10.10 to the July 1992 8-K).

10.69        Form of Warrant Certificate with respect to the warrants to be
             issued by the Registrant pursuant to the Purchase Agreement
             (incorporated by reference to Exhibit 10.11 to the July 1992
             8-K).





                                    Page 21

<PAGE>   22
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.70        1989 New Warrant Agreement, dated as of April 30, 1992, among the
             Registrant, Josephthal and other holders of warrants issued by the
             Registrant in connection with its initial public offering in 1989;
             together with (a) Exhibit A, the form of New Warrant Certificate
             for the warrants issued pursuant to the foregoing agreement; and
             (b) Exhibit B, Third Amended and Restated Registration Rights
             Agreement (incorporated by reference to Exhibit 10.12 to the July
             1992 8-K).

10.71        Form of BBB Convertible Secured Note issued by the Registrant
             pursuant to the Purchase Agreement; and BBB Security Agreement,
             dated as of May 26, 1992, among the Registrant, its subsidiary and
             the holders of the foregoing secured notes (incorporated by
             reference to Exhibit 10.13 to the July 1992 8-K).

10.72        Asset Purchase Agreement dated January 8, 1993 between the
             Registrant and ProEco.  The Registrant will furnish supplementally
             to the Commission upon request a copy of any omitted schedule or
             exhibit to this Exhibit 2.1 and Exhibits 2.2 and 2.3 (incorporated
             by reference to Exhibit 2.1 to the Registrant's current report on
             Form 8-K filed January 22, 1993, the ("January 1993 8-K")).

10.73        License Agreement dated January 8, 1993 between the Registrant and
             ProEco (incorporated by reference to Exhibit 2.2 to the January
             1993 8-K).

10.74        Form of Non competition Agreement dated January 8, 1993 entered
             into between the Registrant and each of ProEco, ProEco's
             stockholders and ProEco's affiliate, EcoAm, Inc. (incorporated by
             reference to Exhibit 2.3 to the January 1993 8-K).

10.75        Shareholder Rights Agreement dated January 8, 1993, between the
             Registrant and ProEco (incorporated by reference to Exhibit 28.2
             to the January 1993 8-K).

10.76        Stock Purchase Agreement, dated as of December 11, 1993, among the
             Registrant, Jim R. Clare and Donald Valverde

10.77        Loan and Security Agreement, dated September 27, 1993, between the
             Registrant and Silicon Valley Bank.

10.78        Amendment to Loan Agreement, dated April 7, 1994 between the
             Registrant and Silicon Valley Bank

10.79        Asset Purchase Agreement, dated as of February 24, 1994, between
             the Registrant and Silicon Valley Bank

10.80        Warrant Certificate to purchase 200,000 shares of the Registrant's
             Common Stock issued by the Registrant to Gilbarco Inc. on April
             11, 1994



                                   Page 22


<PAGE>   23
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.81        Non-Interest Bearing Promissory Note, dated April 11, 1994, issued
             by the Registrant to Gilbarco Inc. in the principal amount of
             $400,000

10.82        Irrevocable Standby Letter of Credit, dated April 11, 1994, issued
             by Silicon Valley Bank to Gilbarco Inc. securing payment of the
             Non-Interest Bearing Promissory Note attached hereto as
             Exhibit 10.81

10.83        Secured Promissory Note, dated April 11, 1994, issued by the
             Registrant to Gilbarco Inc. in the principal amount of $2,450,000

10.84        Security Agreement, dated as of April 11, 1994, between the
             Registrant and Gilbarco Inc. securing payment of the Secured
             Promissory Note attached hereto as Exhibit 10.83.

10.85        Sub license Agreement, dated as of April 11, 1994, between the
             Registrant and Gilbarco Inc.

10.86        Patent License Agreement, dated as of April 11, 1994, between the
             Registrant and Gilbarco Inc.

10.87        Amendment to Loan and Security Agreement, dated as of March 17,
             1995, between the Registrant and Silicon Valley Bank.

10.88        Third Amendment to NDE Environmental Corporation's Secured Notes,
             dated as of March 31, 1995, between the Registrant and Proactive
             Partners; Spears, Benzak, Salomon, & Farrell; Dan Purjes; Peter
             Sheib; Lawrence Rice; and Joan Taylor.

10.89        Second Amendment to NDE Environmental Corporation's Subordinated
             Note, dated as of March 31, 1995, between the Registrant and
             Spears, Benzak, Salomon, and Farrell.

10.90        First Amendment to NDE Environmental Corporation's Subordinated
             Secured Promissory Note, dated as of February 28, 1995, between
             the Registrant and Gilbarco, Inc.

10.91        Certificate of Designations, Preferences and Rights of Series CCC
             Preferred Stock of NDE Environmental Corporation

10.92        Proxy materials for August 2, 1994 annual meeting of the
             shareholders of NDE Environmental Corporation, including 1-for-10
             Reverse Stock Split and Conversion of Series AAA Preferred Stock

10.93        Lease agreements dated December 10, 1993, April 1, 1994 and
             April 20, 1994 between the registrant and MV Wall Street, LTD.




                                   Page 23

<PAGE>   24
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

             ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

10.94        Promissory note, dated as of January 17, 1995, between the
             Registrant and Proactive Partners, L.P.

10.95        Financing Agreement, dated as of March 27, 1995, between the
             registrant and Silicon Valley Financial Services.

10.96        First Amendment of "The Promissory Note dated January 17, 1995",
             Amendment dated April 30, 1995, between the registrant and the
             Proactive Partners L. P.

10.97        First Amendment of the Financing Agreement between the registrant
             and Silicon Valley Financial Services, dated June 20, 1995.

10.98        Notice of Conversion regarding Series AAA Preferred Stock between
             the registrant and Proactive Partners, L.P.; Lagunitas  Partners,
             L.P.; and A. Daniel Sharplin, dated as of April 17, 1995.

10.99        Notice of Conversion regarding Series BBB Preferred Stock between
             the registrant and Proactive Partners, L.P.; Lagunitas Partners,
             L.P.; and A. Daniel Sharplin, dated as of April 17, 1995.

10.100       Notice of Conversion regarding Series CCC Preferred Stock between
             the registrant and Proactive Partners, L.P.; Lagunitas Partners,
             L.P.; and A. Daniel Sharplin, dated as of April 17, 1995.

(b)          There were no reports filed on form 8-K for the quarter ended
             December 31, 1994.


Exhibit 21

SUBSIDIARIES OF REGISTRANT

        NDE Testing & Equipment, Inc., a Florida corporation, incorporated on
December 23, 1987, is a wholly owned subsidiary of NDE Environmental Corporation
and does business under the name NDE Testing & Equipment, Inc.

        NDE Environmental Canada Corporation was incorporated on May 21, 1993
under the Business Corporations Act of Alberta, is a wholly owned subsidiary 
of NDE Environmental Corporation and does business under the name NDE 
Environmental Canada Corporation.





                                    Page 24
<PAGE>   25
                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                     SUBSIDIARIES OF REGISTRANT - CONTINUED

Subsidiaries Of Registrant - Continued

        ProEco, Inc., a Delaware corporation, incorporated as Tank Testing
International, Inc. on March 19, 1990, changed its name to ProEco, Inc. on July
26, 1991, is a wholly owned subsidiary of NDE Environmental Corporation and does
business under the name ProEco, Inc.

        EcoAm, Inc., a Florida corporation, incorporated on July 15, 1991, is a
wholly owned subsidiary of NDE Environmental Corporation and does business under
the name EcoAm, Inc.

        ProEco, Ltd., a United Kingdom corporation, incorporated in October 16,
1992, as EcoAm, Ltd., is a wholly owned subsidiary of NDE Environmental
Corporation and does business under the name ProEco, Ltd.


Exhibit 27

FINANCIAL DATA SCHEDULE





                                    Page 25


<PAGE>   26



                NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                                   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.


                                      NDE ENVIRONMENTAL CORPORATION
                                             (Registrant)


Date: November 14, 1995
                                      -----------------------------------------
                                      A. Daniel Sharplin
                                      President and Chief Executive Officer





Date: November 14, 1995
                                      -----------------------------------------
                                      Rick J. Hopkins
                                      Vice President and Chief Financial Officer














                                    Page 26
<PAGE>   27

                              Index to Exhibits

Exhibit 27      Financial Data Schedule Ended September 30, 1995.