Tanknology-NDE International, Inc. and Subsidiaries


                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                 Amendment No. 1

(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, 1999.

 [ ]      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 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, 1999
               --------------       -----------------------------------

               Common                           16,774,940






                                      - 1 -

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               Tanknology-NDE International, Inc. and Subsidiaries


     The undersigned  registrant  hereby amends the following  items,  financial
statements,  Notes to Condensed Consolidated  Financial Statements  (Unaudited),
and Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  of its  Quarterly  Report on Form 10-Q for the fiscal  quarter ended
March 31, 1999 as set forth in the pages attached hereto:

          Condensed Consolidated Balance Sheet is hereby amended and replaced in
     its entirety to reflect a change of the period covered by the Goodwill, net
     of  accumulated  amortization  and Patents,  licenses and other  intangible
     assets, net of accumulated amortization.

          Condensed   Consolidated   Statements  of  Operations   and  Condensed
     Consolidated Statements of Cash Flows are hereby included in their entirety
     without change.

          Notes to Condensed  Consolidated  Financial Statements  (Unaudited) is
     hereby  amended and  replaced in its entirety to reflect a change in period
     of the  reconciliation of the Company's segment revenues and segment profit
     to the corresponding consolidated amounts and a correction of the effective
     date of the Note,  Preferred Stock and Warrant  Purchase  Agreement with DH
     Holdings Corp.

          Item 2-Management's Discussion and Analysis of Financial Condition and
     Results of  Operations  is hereby  amended and  replaced in its entirety to
     reflect changes in the paragraphs titled "Results of Operations",  "Cost of
     Services",  and "Selling,  General and  Administrative",  and to correct an
     error in the paragraph titled "Net Income (Loss)."







                                           TANKNOLOGY-NDE INTERNATIONAL, INC.
                                           (Registrant)

Date:     May 21, 1999                            /S/ A. DANIEL SHARPLIN
       -----------------                   -------------------------------------
                                           A. Daniel Sharplin
                                           President and Chief Financial Officer


<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries




                                      INDEX


                                                                     Page Number

PART I   Financial Information

Item 1.  Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheets
                  March 31, 1999 (Unaudited) and December 31, 1998 ............4

         Condensed Consolidated Statements of Operations (Unaudited)
                  Three Months Ended March 31, 1999 and March 31, 1998.........5

         Condensed Consolidated  Statements of Cash Flows (Unaudited)
                  Three Months Ended March 31, 1999 and March 31, 1998.........6

         Notes To Condensed Consolidated Financial Statements (Unaudited)......7

Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations ........................11










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               Tanknology-NDE International, Inc. and Subsidiaries


PART I    Financial Information
Item 1.   Financial Statements (Unaudited)

                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                           March 31, 1999   December 31, 1998
                                                                           --------------   -----------------
ASSETS                                                                         (Unaudited)
<S>                                                                        <C>              <C>

    Cash and equivalents...............................................    $      178,055   $        416,189
    Trade accounts receivable, less allowance for doubtful accounts of
             $1,374,699 at March 31, 1999 and
             $1,798,044 at December 31, 1998...........................        13,093,531         18,071,273
    Inventories........................................................         1,216,332          1,218,271
    Prepaid expenses and other current assets..........................           356,054            521,909
                                                                           --------------   -----------------
             Total Current Assets......................................        14,843,972         20,227,642

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

    Equipment and improvements, net of accumulated depreciation of
             $14,039,656 at March 31, 1999 and
             $13,470,663 at December 31, 1998..........................         7,983,012          8,109,097
    Goodwill, net of accumulated amortization of $166,605 at
             March 31, 1999  and  $125,442 at December 31, 1998........         2,359,953          2,401,115
    Patents, licenses and other intangible assets, net of accumulated
             amortization of $1,513,686 at March 31, 1999 and
             $1,527,761 at   December 31, 1998.........................           784,522          1,070,446
    Deferred financing costs, net......................................           617,198            674,531
                                                                           --------------   -----------------
             Total Assets..............................................    $   29,588,657   $     35,482,831
                                                                           ==============   =================

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT

    Accounts payable ..................................................    $    2,247,555   $      4,874,180
    Accrued liabilities................................................         1,508,067          1,649,020
    Accrued payroll and payroll taxes..................................         2,602,127          4,363,312
    Current portion of long-term debt..................................         2,746,773          2,314,991
                                                                           --------------   -----------------
             Total Current Liabilities.................................         9,104,522         13,201,503

    Long Term Debt, less current portion ..............................        17,687,623         18,271,743

    Deferred License Revenue...........................................           173,047            207,135

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

    Stockholders' Deficit:
         Common stock, $.0001 par value;  authorized  50,000,000 shares;  issued
             and outstanding 16,771,940 shares at March 31, 1999
             and 16,735,040  shares at  December 31, 1998..............             1,677              1,674
         Warrants......................................................           321,000            321,000
         Additional paid-in capital....................................        27,699,900         27,733,366
         Accumulated deficit...........................................       (26,938,025)       (25,755,500)
         Cumulative foreign currency translation adjustment............            38,913              1,910
                                                                           --------------   -----------------
                                                                                1,123,465          2,302,450
                                                                           --------------   -----------------
             Total Liabilities, Redeemable Convertible Preferred Stock
                   and Stockholders' Deficit............................   $   29,588,657   $     35,482,831
                                                                           ==============   =================
<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, 1999  March 31, 1998
                                                              --------------  --------------

<S>                                                           <C>             <C>
Revenues ..................................................   $ 12,580,473    $ 11,697,947

Cost of services ..........................................     10,829,692       9,005,243
                                                              --------------  --------------

         Gross Margin .....................................      1,750,781       2,692,704

Selling, general and administrative .......................      2,904,559       2,316,802

                                                              --------------  --------------
         Operating Income (Loss) ..........................   $ (1,153,778)   $    375,902

Other income (expense):
        Interest income ...................................         29,335          32,020
        Interest expense ..................................       (464,712)       (395,517)
        Other income (expense), net .......................         53,416             711
                                                              --------------  --------------

        Net Income (Loss) Before Provision for Income Taxes     (1,535,739)         13,116

 Benefit (Provision) for income taxes .....................        353,220          (4,400)
                                                              --------------  --------------

         Net Income (Loss) ................................     (1,182,519)          8,716

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


         Net Loss Available to Common Stockholders ........   $ (1,220,019)   $    (28,784)
                                                              ==============  ==============

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

         Weighted Average Number of Shares Outstanding ....     16,739,151      16,044,166
                                                              ==============  ==============


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



                                      - 4 -

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               Tanknology-NDE International, Inc. and Subsidiaries


                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>

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

                                                                     March 31, 1999 March 31, 1998
                                                                     -------------- --------------

<S>                                                                  <C>            <C>
Cash Flows from Operating Activities

         Net income (loss) .......................................   $(1,182,519)   $     8,716

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
          Operating Activities

         Depreciation and amortization ...........................       752,830        690,787
         Amortization of discounts and financing costs ...........        57,333         69,161
         Deferred license revenue earned .........................       (34,088)       (45,833)
         Gain on sale of patent ..................................       (95,000)          --
         Other ...................................................        37,003         (9,334)

Changes in Operating Assets and Liabilities

         Trade accounts receivable ...............................     4,977,742        147,774
         Inventories .............................................         1,937       (116,200)
         Prepaid expenses and other current assets ...............       165,855        373,368
         Accounts payable ........................................    (2,626,625)       (66,556)
         Accrued liabilities .....................................      (140,953)       150,694
         Accrued payroll and payroll taxes .......................    (1,761,185)       (34,778)
                                                                     -------------- --------------
         Net cash provided in operating activities ...............       152,330      1,167,799

Cash Flows from Investing Activities

         Additions to equipment and improvements .................      (504,657)      (641,094)
                                                                     -------------- --------------
         Net cash used in investing activities ...................      (504,657)      (641,094)

Cash Flows from Financing Activities

         Net activity in revolving line of credit ................       650,000        (42,667)
         Preferred stock dividends ...............................       (37,500)       (37,500)
         Proceeds from issuance of common stock ..................         4,031           --
         Proceeds from long-term debt ............................       141,949           --
         Payments on long-term debt ..............................      (644,287)      (496,502)
         Deferred financing costs ................................          --         (143,663)
                                                                     -------------- --------------
         Net cash provided by (used in) financing activities .....       114,193       (720,332)

         Net decrease in cash and equivalents ....................      (238,134)      (193,627)

         Cash and equivalents at beginning of period .............       416,189        193,627

         Cash and equivalents at end of period ...................       178,055           --
                                                                     ============== ==============
</TABLE>



                                      - 5 -

<PAGE>


               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, 1999 and 1998 contain
all  adjustments,  consisting of only normal  recurring  accruals,  necessary to
present  fairly the  financial  position of the Company as of March 31, 1999 and
1998 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, 1998. In 1999, the Company
is required to file Form 10-Q and Form 10-K in accordance  with  Regulation  S-X
under  the 1933 and 1934  Securities  Acts.  The  Company  no  longer  meets the
definition of a "Small  Business  Issuer" as defined in Regulation S-B under the
1933 and 1934 Acts.


NOTE 2:   INCOME (LOSS) PER SHARE CALCULATIONS

     The following  table sets forth the calculation of basic and diluted income
(loss) per share:


                                                        Three Months Ended
                                                 -------------------------------
                                                 March 31, 1999   March 31, 1998
                                                 --------------   --------------
Numerator:
         Net income (loss) ...................   $  (1,182,519)  $        8,716
         Preferred stock dividends ...........         (37,500)         (37,500)
                                                 --------------   --------------
         Numerator for basic income (loss) per
         share -income available to common
         shareholders ........................      (1,220,019)         (28,784)



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<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


                                                        Three Months Ended
                                                 -------------------------------
                                                 March 31, 1999   March 31, 1998
                                                 --------------   --------------
Denominator:
         Denominator for basic income (loss) per
         share - weighted-average shares .......     16,739,151       16,044,166

         Effect of dilutive securities:
         Stock options .........................          --                --
         Warrants ..............................          --                --
         Convertible preferred stock ...........          --                --
                                                 --------------   --------------
         Dilutive potential common shares ......          --                --

         Denominator for diluted earnings (loss)
         per share - adjusted weighted- average
         shares and assumed  conversions .......          --                --
                                                 ==============   ==============

         Basic income (loss) per share ......... $        (0.07)  $         --
                                                 ==============   ==============

         Diluted income (loss) per share ....... $        (0.07)  $         --
                                                 ==============   ==============



NOTE 3:   COMPREHENSIVE INCOME

     Total  non-stockholder  changes  in equity  include  all  changes in equity
during a period except those resulting from investments by and  distributions to
stockholders. Total comprehensive income for the three month periods ended March
31, 1999 and 1998 was as follows:


                                                  Three Months Ended
                                           -------------------------------
                                           March 31, 1999   March 31, 1998
                                           --------------   --------------

Net income (loss) ......................   $  (1,220,019)   $     (28,784)
Foreign currency translation gain (loss)          37,003           (9,334)
                                           --------------   --------------
Total comprehensive income (loss) ......   $  (1,183,016)   $     (38,118)
                                           ==============   ==============




NOTE 4:   SEGMENT INFORMATION

     The Company  manages its  business  segments  primarily  along two lines of
business,  Field Services and Management Services.  Field Services comprises all
services that are typically  performed out of the Company's  regional offices by
field  technicians   operating  from  the  Company's  fleet  of  rolling  stock.
Management Services comprises all Compliance Management Services, International,
Remote  Monitoring,  Maintenance  Management and  Construction  Services.  These
services are  primarily  "back  office"  functions  whereby the Company  manages
customers' information, oversees compliance or construction projects or performs

                                      - 7 -

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               Tanknology-NDE International, Inc. and Subsidiaries


technology  licensing.  These  services  are  primarily  performed  out  of  the
Company's corporate office in Texas (Compliance  Management,  Remote Monitoring,
International)  or offices in California  (Maintenance  Management)  and Georgia
(Construction Management).

     The accounting policies of the two segments are the same as those described
in the  "Summary  of  Significant  Accounting  Policies"  in Note 1 to the  1998
financial  statements.  The Company  evaluates the  performance  of its segments
based on segment  profit.  Segment  profit is defined as segment  revenues  less
those  direct  costs  associated  with  the  operations  and  does  not  include
depreciation,  amortization, interest expense, income taxes or certain corporate
expenses that are managed  outside the  reportable  segment such as the costs of
the finance, marketing,  information technology, legal, executive management and
national  sales  groups.  The Company does not allocate and manage its assets by
segment.  Accordingly,  the Company  considers all assets to be corporate assets
and as such no allocation of assets has been made.

     Summary  information  by segment as of and for the periods  ended March 31,
1999 and 1998 is as follows:


                                                  1999                 1998
                                           ----------------      ---------------
Field Services:
   Segment revenues ...................    $      9,879,106      $     9,243,113
   Segment profit .....................           1,916,892            2,035,691
Management Services:
   Segment revenues ...................           2,911,842            2,471,067
   Segment profit (loss) ..............    $        (81,676)     $       444,474


     A  reconciliation  of the Company's  segment revenues and segment profit to
the  corresponding  consolidated  amounts as of and for the quarters ended March
31, 1999 and 1998 is as follows:


                                                  1999                 1998
                                           ----------------      ---------------
Segment revenues: ......................   $    12,790,948       $   11,714,180
Field Services revenues  from
Management Services ....................          (210,475)             (16,233)
                                           ----------------      ---------------
Consolidated revenues ..................   $    12,580,473       $   11,697,947
                                           ================      ===============



                                                  1999                 1998
                                           ----------------      ---------------
Segment net profit: ...................... $     1,835,216       $    2,480,165
Corporate expenses .......................      (2,236,164)          (1,413,476)
Depreciation and amortization ............        (752,830)            (690,787)
Interest income ..........................          29,335               32,020
Interest expense .........................        (464,712)            (395,517)
Other income/expense .....................          53,416                  711
Income taxes .............................         353,220               (4,400)
Extraordinary gain .......................            --                   --
                                           ----------------      ---------------
Net Income ............................... $    (1,182,519)      $        8,716
                                           ================      ===============



                                      - 8 -

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               Tanknology-NDE International, Inc. and Subsidiaries


NOTE 5:   COMMITMENTS AND CONTINGENCIES

Veeder-Root Company and DH Holdings Corp.

     On February 8, 1999, the Company invoked the dispute  resolution  provision
of the Distribution,  Services and Marketing Agreement, dated as of December 23,
1997, by and between the Company and Veeder-Root  Company (the "DSM Agreement").
In response to the Company's notice, on February 12, 1999, Veeder-Root Company's
counsel advised the Company's  counsel that DH Holdings and Veeder-Root  Company
may have  certain  claims  against  the  Company  and that  Veeder-Root  Company
intended to invoke the dispute  resolution  provisions of the DSM Agreement.  On
April 14, 1999, the Company filed a demand for arbitration in which it sought an
interpretation  of the DSM. In response to the  Company's  filing,  Veeder- Root
Company filed an answer and counterclaims  regarding both declaratory  judgement
matters and  allegations  for damages.  The Company  believes that the result of
these  arbitration  proceedings  with  Veeder-  Root  Company  will  not  have a
significant  adverse  effect  on the  balance  sheet at March 31,  1999,  or the
results of operations for the period ended March 31, 1999.

     Additionally,  the Company  believes any potential claims DH Holdings Corp.
may have regarding the Note,  Preferred  Stock and Warrant  Purchase  Agreement,
dated as of December 23, 1997, and the associated Note Payable,  Preferred Stock
and Warrants will not have a significant  adverse effect on the balance sheet at
March 31,1999, or the results of operations for the period ended March 31, 1999.

Gilbarco Note

     In November 1995, in  consideration  of the assignment of certain  Gilbarco
patents, the Company entered into a note to pay Gilbarco an additional $300,000.
The $300,000  note was  outstanding  at December 31, 1998 and was due in October
2000.  In the first  quarter of 1999,  the Company  entered into an agreement to
reassign  the patents  back to Gilbarco in exchange for the note and the accrued
interest  thereon.  The  Company  recorded  a small  gain from the sale of these
patents in the first quarter 1999.

     There have been no  material  changes  in the  information  reported  as of
December 31, 1998,  as reported on Form 10-KSB in Footnote 11  accompanying  the
audited financial statements.


NOTE 6:   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     None.


NOTE 7:   SUBSEQUENT EVENTS

     During April 1999, the Company  renegotiated certain terms of the Revolving
Line of Credit to  increase  the  maximum  borrowings  from $9  million to $12.5
million. The expiration date of the facility is December 31, 2000.




                                      - 9 -

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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, 1999 and 1998.



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

                                                           March 31, 1999   March 31, 1998
                                                           --------------   --------------
<S>                                                        <C>              <C>
Revenues .................................................      100%             100%

Cost of Sales ............................................       86%              77%
                                                           --------------   --------------

Gross Margin .............................................       14%              23%

Selling, General and Administrative ......................       23%              20%

                                                           --------------   --------------
Operating Income ( Loss) .................................       (9)%              3%

Other Income (Expense) ...................................       (3)%             (3)%

Net Income (Loss) Before Provision for Income Taxes ......      (12)%             --

Provision for Income Taxes ...............................        3%              --

Net Income (Loss) ........................................       (9)%             --
                                                           ==============   ==============
</TABLE>


Revenues

     Revenues  for the  three  months  ended  March 31,  1999  were  $12,580,473
compared to $11,697,947 in the 1998 period, an increase of $882,526,  or 8%. The
increase in revenues from 1998 is primarily due to the  following  factors;  (i)
revenues of $373,246 generated by the Maintenace  Management  Division which did
not begin operations until the third quarter of 1998, (ii) an increase of 61% in
Compliance  Management  Services  revenue,  and  (iii) an over 42%  increase  in
cathodic protection installation, maintenance, repair and inspection revenues.

Cost of  Services

     Cost of services for the three months ended March 31, 1999 were $10,829,692
or 86% of revenue  compared to $9,005,243 or 77% of revenue in 1998, an increase
of  $1,824,449,  or 20%. Gross margin was $1,750,781 or 14% of revenue for 1998,
compared to $2,692,704 or 23% of revenue for 1998.  The decrease in gross margin
percentage is largely due to the increase in cost of services in 1998 which were
sustained  in the first  quarter of 1999.  During the first  quarter of 1999 the
company realized a 44% drop in revenues  compared to the fourth quarter of 1999.
Cost of services  decreased  disproportionately  by 29% in first quarter of 1999
when  compared to the fourth  quarter of 1998.  This was  primarily due to under
absorption of fixed costs in the first quarter of 1999, which had been increased
over the last six months of 1998 to keep pace with the demand for the  Company's
Underground Storage Tank (UST) services. These services were in great demand due
to the December 22, 1998  deadline set by the  Environmental  Protection  Agency
that  required  UST  facilities  to be  tested  and  upgraded  by the  deadline.
Management  has  implemented  a plan to cut fixed  costs and  reduce  day to day
expenses.


                                     - 10 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


Selling, General and Administrative

     Selling,  general,  and  administrative  expense for the three months ended
March 31, 1999 was $2,904,559 or 23% of revenue compared to $2,316,802 or 20% of
revenue, an increase of $587,757 or 25% compared to the three months ended March
31, 1998. The increase in selling,  general, and administrative  expenses is due
to the addition of sales and administrative resources to support the anticipated
growth in revenue  and to support  an  increase  in the  varieties  of  services
offered.

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

     For the three months ended March 31, 1999, EBITDA was $(347,532) or (3)% of
revenues  compared to  $1,066,689  or 9% of revenues  in 1998.  The  decrease in
EBITDA, was primarily due to the increased cost of services in the first quarter
of 1999 compared to the first quarter of 1998. The Company  believes that EBITDA
is an  important  measure of the  Company's  financial  performance  as it is an
indication  of the funds  generated by  operations  available  for debt service,
capital  expenditures  and payment of taxes.  It is commonly used to analyze and
compare companies on the basis of operating performance, leverage and liquidity.
However,  EBITDA is not  intended  to be a  performance  measure  that should be
regarded as an alternative to, or more meaningful than,  either operating income
or net  income as an  indicator  of  operating  performance  or cash  flows as a
measure of  liquidity,  as  determined in  accordance  with  generally  accepted
accounting  principles.  Also,  EBITDA,  as  computed  by  the  Company,  is not
necessarily comparable to similarly titled amounts of other companies.

Interest Expense

     Interest  expense for the three months ended March 31, 1999 was $464,712 or
4% of revenue  compared  to  $395,517  or 3% of revenue in 1998,  an increase of
$69,195 or 17%.  The  increase in interest  expense is due to to the increase in
the amount  outstanding  on the line of credit  compared  to the same prior year
period.

Net Income (Loss)

     For the three months  ended March 31,  1999,  the Company had a net loss of
$(1,182,519)  before  preferred  stock dividend  requirements  compared to a net
income of $8,716 in 1998 for the same period,  a decrease of  $(1,191,235).  The
decrease  in net income  (loss) was  primarily  due to the  increase  of cost of
services in the first  quarter of 1999 compared to the first quarter of 1998 and
to the lower than expected level of first quarter revenues.

Liquidity and Capital Resources

     At March 31, 1999, the Company had working  capital of $5,739,450  compared
to working  capital of  $7,026,139  at  December  31,  1998.  Cash  provided  by
operating  activities  of  $152,330  for the three  months  ended March 31, 1999
decreased by $1,015,469 as compared to Cash provided by operating  activities of
$1,167,799 in 1998. Collections on accounts receivables of $4,977,742 during the
first quarter were used to pay down accounts payable and accrued liabilities.

     Cash  used  in   investing   activities   (consisting   solely  of  capital
expenditures)  totaled  $504,657  for the three  months  ended  March  31,  1999
compared to cash used for capital expenditures of $641,094 in the 1998 period.

     At March 31, 1999, the Company had  outstanding  long-term debt  (including
current maturities) of $20,434,396 compared to $20,586,734 at December 31, 1998.
Required term-loan principal repayments of $300,000, a net $650,000 addition on

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               Tanknology-NDE International, Inc. and Subsidiaries


the  revolving  credit line and net other debt  repayments of $202,338 were made
during the quarter. At March 31, 1999, the Company had $1,525,000  available for
additional borrowing under its revolving credit agreement. As of March 31, 1999,
the Company was in compliance  with the financial debt covenants  related to its
long-term financing agreements.

Impact of Year 2000

     The Year 2000 issue is the result of computer  programs being written using
two  digits  rather  than four to define  the  applicable  year.  The  Company's
computer  equipment and software and devices with embedded  technology  that are
time-sensitive  may recognize a date using "00" as the year 1900 rather than the
year 2000.  This could  result in a system  failure or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send  invoices or engage in similar  normal  business
activities.

     Tanknology has undertaken various  initiatives  intended to ensure that its
computer  equipment and software will function properly with respect to dates in
the year 2000 and thereafter. For this purpose, the term "computer equipment and
software"   includes  systems  that  are  commonly  thought  of  as  information
technology  ("IT")  systems,   including   accounting,   data  processing,   and
telephone/PBX  systems,  scanning equipment and other miscellaneous  systems, as
well as systems  that are not commonly  thought of as IT systems,  such as alarm
systems, fax machines or other miscellaneous systems. Both IT and non-IT systems
may contain  imbedded  technology,  which  complicates  the Company's  Year 2000
identification,  assessment,  remediation  and testing  efforts.  Based upon its
identification and assessment efforts to date, the Company believes that certain
of  the  computer   equipment  and  software  it  currently  uses  will  require
replacement or  modification.  In addition,  in the ordinary course of replacing
computer  equipment and software,  the Company  attempts to obtain  replacements
that it believes are Year 2000  compliant.  Utilizing both internal and external
resources  to  identify  and assess  needed Year 2000  remediation,  the Company
currently   anticipates   that  its  Year   2000   identification,   assessment,
remediation,  and  testing  efforts,  which  began  in  February  1998,  will be
completed by June 30, 1999, and that such efforts will be completed prior to any
currently anticipated impact on its computer equipment and software. The Company
estimates that as of March 31, 1999, it had completed  approximately  30% of the
initiatives  that it believes will be necessary to fully address  potential Year
2000 issues  relating to its  computer  equipment  and  software.  The  projects
comprising the remaining 70% of the  initiatives  are in process and expected to
be completed on or about June 30, 1999.

     The company is currently evaluating field service equipment, test equipment
and gauges at remote sites for Year 2000  compliance.  The  company's  Year 2000
identification,  assessment,  remediation,  and testing efforts will include the
current and future evaluation of all products,  equipment and gauges used in the
field.

     The  Company's  primary  systems are at less risk of date related  problems
due,  primarily,  to the fact that the average age of the systems is less than 5
years and were developed to operate beyond the year 2000.


                                                                   PERCENT
        YEAR 2000 INITIATIVE                     TIME FRAME        COMPLETE
        --------------------------------------  ------------  ------------------
        Initial IT systems identification and
        assessment............................    2/98-12/98          100%
        Remediation and testing regarding
        central system issues.................    8/98-5/99            85%
        Remediation and testing regarding
        departmental system issues............   10/98-4/99            90%


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               Tanknology-NDE International, Inc. and Subsidiaries


                                                                   PERCENT
        YEAR 2000 INITIATIVE                     TIME FRAME        COMPLETE
        --------------------------------------  ------------  ------------------
        Remediation and testing regarding tank
        Testing and truck equipment system
        issues................................    11/98-6/99           45%
        Remediation and testing regarding
        telephone/PBX.........................    11/98-12/98         100%
        Electronic data interchange trading
        partner conversions...................    10/98-4/99           70%
        Identification, assessment, remediation,
        and testing regarding desktop and
        individual system issues..............    10/98-4/99           90%
        Identification and assessment regarding
        non-IT system issues..................     8/98-4/99           80%
        Remediation and testing regarding non-
        IT system issues......................    10/98-6/99           40%

     The Company has also mailed letters to its significant  vendors and service
providers and has verbally  communicated  with strategic  customers to determine
the extent to which  interfaces  with such entities are  vulnerable to Year 2000
issues and whether the products and services  purchased from or by such entities
are Year 2000 compliant.

     The  Company  believes  that  the  cost of its  Year  2000  identification,
assessment,  remediation and testing efforts,  as well as currently  anticipated
costs to be incurred by the  Company  with  respect to Year 2000 issues of third
parties,  will not  exceed  $150,000,  which  expenditures  will be funded  from
operating  cash  flows.  All of the  $150,000  relates  to  analysis,  repair or
replacement of existing software,  upgrades to existing software,  or evaluation
of  information  received  from  significant   vendors,   service  providers  or
customers. The Company presently believes that the Year 2000 issue will not pose
significant  operational  problems  for the Company.  However,  if all Year 2000
issues are not properly identified,  or assessment,  remediation and testing are
not effected  timely with  respect to Year 2000  problems  that are  identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's  results of  operations  or adversely  affect the Company's
relationships with customers, vendors or others.  Additionally,  there can be no
assurance  that the Year 2000 issues of other  entities will not have a material
adverse impact on the Company's systems or results of operations.

     The  Company  has not begun a  comprehensive  analysis  of the  operational
problems  that  would be  reasonably  likely to result  from the  failure by the
Company  and certain  third  parties to  complete  efforts to achieve  Year 2000
compliance on a timely  basis.  A  contingency  plan has not been  developed for
dealing with the most reasonably  likely worst case scenario,  and such scenario
has not yet been clearly  identified.  The Company  currently  plans to complete
such analysis and contingency planning by June 30, 1999.

     The Company  will engage an  independent  expert to evaluate  its Year 2000
identification, assessment, remediation, and testing efforts.

     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  Exchange 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.

                                     - 13 -

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               Tanknology-NDE International, Inc. and Subsidiaries


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 15 "Management's  Discussion and
Analysis or Result of Operations" for the fiscal year ended December 31, 1998.