Tanknology-NDE International, Inc. and Subsidiaries


                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

[X]       Quarterly Report Under Section 13 or 15(d) of the Securities  Exchange
          Act of 1934 for the quarterly period ended June 30, 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 June 30, 1999
--------------       -----------------------------------
Common                           16,771,940




                                      - 1 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries




                                      INDEX


                                                                     Page Number

PART I    Financial Information

     Item 1.   Financial Statements (Unaudited)
          Condensed Consolidated Balance Sheets
                  June 30, 1999 (Unaudited) and December 31, 1998 .............3

          Condensed Consolidated Statements of Operations (Unaudited)
                  Three Months and Six Months Ended June 30, 1999
                  and June 30, 1998............................................4

          Condensed Consolidated  Statements of Cash Flows (Unaudited)
                           Six Months Ended June 30, 1999 and June 30, 1998....5

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

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


PART II   Other Information

     Item 6.  Exhibits and Reports on Form 8-K................................16

SIGNATURE.....................................................................16




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<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


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

Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                               June 30, 1999    December 31, 1998
                                                                             -----------------  -----------------
ASSETS                                                                         (Unaudited)
                                                                             -----------------  -----------------
<S>                                                                          <C>                <C>
         Cash and equivalents............................................... $         128,117  $         416,189
         Trade accounts receivable, less allowance for doubtful accounts of
                  $1,514,928 at June  30, 1999 and $1,798,044 at
                  December 31, 1998.........................................        12,408,316         18,071,273
         Inventories........................................................         1,237,085          1,218,271
         Prepaid expenses and other current assets..........................           547,615            521,909
                                                                             -----------------  -----------------
                  Total Current Assets......................................        14,321,133         20,227,642

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

         Equipment and improvements, net of accumulated depreciation of
                  $14,714,132 at June 30, 1999 and $13,470,663 at
                  December 31, 1998.........................................         7,828,890          8,109,097
         Goodwill, net of accumulated amortization of $207,767 at
                  June 30, 1999  and  $125,442 at December 31, 1998.........         2,318,790          2,401,115
         Patents, licenses and other intangible assets, net of accumulated
                  amortization of $1,590,111 at June 30, 1999 and
                  $1,527,761 at December 31, 1998...........................           708,096          1,070,446
         Deferred financing costs, net......................................           715,168            674,531
                                                                             -----------------  -----------------
                  Total Assets.............................................. $      25,892,077  $      35,482,831
                                                                             =================  =================

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT

         Accounts payable .................................................. $       1,722,020  $       4,874,180
         Accrued liabilities................................................         2,049,858          1,649,020
         Accrued payroll and payroll taxes..................................         2,412,607          4,363,312
         Current portion of long-term debt..................................         2,692,418          2,314,991
                  Total Current Liabilities.................................         8,876,903         13,201,503

         Long Term Debt, less current portion ..............................        15,565,974         18,271,743

         Deferred License Revenue...........................................           138,958            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 June 30, 1999,
                  and 16,735,040  shares at  December 31, 1998..............             1,677              1,674
              Warrants......................................................           321,000            321,000
              Additional paid-in capital....................................        27,662,401         27,733,366
              Accumulated deficit...........................................       (28,188,192)       (25,755,500)
              Cumulative foreign currency translation adjustment............            13,356              1,910
                                                                                      (189,758)         2,302,450
                  Total Liabilities, Redeemable Convertible Preferred Stock
                           and Stockholders' Deficit.......................  $      25,892,077  $      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                    Six Months Ended
                                                                 -------------------------------     -------------------------------
                                                                 June 30, 1999     June 30, 1998     June 30, 1999     June 30, 1998
                                                                 -------------     -------------     -------------     -------------

<S>                                                              <C>               <C>               <C>               <C>
Revenues ...................................................     $ 11,820,947      $ 15,409,481      $ 24,401,420      $ 27,107,429

Cost of services ...........................................       11,527,803        11,209,129        22,357,495        20,214,363
                                                                 -------------     -------------     -------------     -------------

         Gross Margin ......................................          293,144         4,200,352         2,043,925         6,893,066

Selling, general and administrative ........................        1,097,121         2,803,953         4,001,680         5,120,755

                                                                 -------------     -------------     -------------     -------------
         Operating Income (Loss) ...........................     $   (803,977)     $  1,396,399      $ (1,957,755)     $  1,772,311

Other income (expense):
        Interest income ....................................            1,852            29,776            31,187            61,796
        Interest expense ...................................         (396,661)         (400,822)         (861,373)         (796,339)
        Other income, net ..................................           11,199             4,194            64,615             4,905
                                                                 -------------     -------------     -------------     -------------

         Income (Loss) Before Provision for Income
         Taxes .............................................       (1,187,587)        1,029,547        (2,723,326)        1,042,673

 Benefit (Provision) for income taxes ......................          (62,580)          (29,497)          290,640           (33,897)
                                                                 -------------     -------------     -------------     -------------

         Net Income (Loss) .................................       (1,250,167)        1,000,050        (2,432,686)        1,008,776

 Less - Preferred stock dividends ..........................          (37,500)          (37,500)          (75,000)          (75,000)

         Net Income (Loss) Available to
                  Common Stockholders ......................     $ (1,287,667)     $    962,550      $ (2,507,686)     $    933,776
                                                                 =============     =============     =============     =============

         Basic income (loss)  per Share ....................     $      (0.08)     $       0.06      $      (0.15)     $       0.06
                                                                 =============     =============     =============     =============

         Diluted income (loss) per Share ...................     $      (0.08)     $       0.04      $      (0.15)     $       0.04
                                                                 =============     =============     =============     =============

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



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               Tanknology-NDE International, Inc. and Subsidiaries


                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                            Six Months Ended
                                                                     ------------------------------

                                                                     June 30, 1999    June 30, 1998
                                                                     -------------    -------------
Cash Flows from Operating Activities

<S>                                                                  <C>              <C>
         Net income (loss) .......................................   $  (2,432,686)   $   1,008,776

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

         Depreciation and amortization ...........................       1,544,894        1,435,403
         Amortization of discounts and financing costs ...........         114,666          138,698
         Deferred license revenue earned .........................         (68,177)         (91,666)
         Gain on sale of patent ..................................         (95,000)            --
         Other ...................................................          11,441            4,042

Changes in Operating Assets and Liabilities

         Trade accounts receivable ...............................       5,662,957       (1,746,573)
         Inventories .............................................         (18,814)        (140,340)
         Prepaid expenses and other current assets ...............         (25,706)         354,541
         Accounts payable ........................................      (3,152,161)         327,121
         Accrued liabilities .....................................         400,838          (45,846)
         Accrued payroll and payroll taxes .......................      (1,950,705)         385,241
                                                                     -------------    -------------
         Net cash provided by (used in) operating activities .....          (8,453)       1,629,397

Cash Flows from Investing Activities
         Additions to equipment and improvements .................      (1,025,012)      (1,872,022)
         Other ...................................................        (155,303)          (5,409)
                                                                     -------------    -------------
         Net cash used in investing activities ...................      (1,180,315)      (1,877,431)

Cash Flows from Financing Activities

         Net activity in revolving line of credit ................      (1,100,000)         807,333
         Preferred stock dividends ...............................         (75,000)         (75,000)
         Proceeds from issuance of common stock ..................           4,039             --
         Proceeds from long-term debt ............................         301,750          797,942
         Restricted cash .........................................       3,000,000             --
         Payments on long-term debt ..............................      (1,230,093)      (1,255,476)
         Deferred financing costs ................................            --           (143,663)
                                                                     -------------    -------------
         Net cash provided by (used in) financing activities .....         900,696          131,136

         Net decrease in cash and equivalents ....................        (288,072)        (116,898)

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

         Cash and equivalents at end of period ...................   $     128,117    $      76,729
                                                                     =============    =============
</TABLE>


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               Tanknology-NDE International, Inc. and Subsidiaries


              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


NOTE 1:   ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS

     Basis  of   Presentation:   The   consolidated   financial   statements  of
Tanknology-NDE International, Inc. and its subsidiaries (the "Company") included
herein have been prepared without audit pursuant to the rules and regulations of
the  Securities  and  Exchange  Commission,  and, in the opinion of  management,
reflect all  adjustments  necessary to present  fairly the results of operations
for such interim periods.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations;  however,  management believes that the disclosures are adequate to
make the  information  presented  not  misleading.  The  accompanying  unaudited
financial statements for the three months and six months ended June 30, 1999 and
1998 contain all  adjustments,  consisting  of only normal  recurring  accruals,
necessary to present fairly the financial position of the Company as of June 30,
1999 and 1998 and the results of operations and cash flows for the three and six
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:

<TABLE>
<CAPTION>

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

                                     June 30, 1999  June 30, 1998   June 30, 1999   June 30, 1998
                                     -------------  -------------   -------------   -------------
<S>                                  <C>            <C>             <C>             <C>
Numerator:
Net income (loss)                    $  (1,250,167) $   1,000,050   $  (2,432,686)  $   1,008,776
Preferred stock dividends                  (37,500)       (37,500)        (75,000)        (75,000)
                                     -------------  -------------   -------------   -------------
Numerator for basic income (loss)
per share -income available to
common shareholders                     (1,287,667)         962,550    (2,507,686)        933,776

Effect of dilutive securities -
preferred stock dividends                     --             37,500          --            75,000

Numerator for dilutive income
(loss) per share -income available
to common shareholders                  (1,287,667)       1,000,050    (2,507,686)      1,008,776

</TABLE>

                                      - 6 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries

<TABLE>
<CAPTION>

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

                                     June 30, 1999  June 30, 1998   June 30, 1999   June 30, 1998
                                     -------------  -------------   -------------   -------------
<S>                                  <C>            <C>             <C>             <C>
Denominator:
Denominator for basic income
(loss) per  share - weighted-
average shares                          16,771,940     16,154,166      16,755,636      16,150,286

Effect of dilutive securities:
Stock options                                 --        3,983,344            --         3,916,003
Warrants                                      --        3,288,687            --         3,251,433
Convertible preferred stock                   --        1,490,566            --         1,461,367
                                     -------------  -------------   -------------   -------------
Dilutive potential common shares              --        8,762,597            --         8,628,803

Denominator for diluted earnings
(loss) per share - adjusted
weighted- average shares and
assumed  conversions                    16,771,940     24,916,763      16,755,636      24,779,089
                                     =============  =============   =============   =============


Basic income (loss) per share
                                    $       (0.08) $        0.06    $      (0.15)   $       0.06
                                     =============  =============   =============   =============

Diluted income (loss) per share     $       (0.08)  $       0.04           (0.15)   $       0.04
                                     =============  =============   =============   =============
</TABLE>

     The effect of potentially dilutive securities has not been included for the
three and six month periods  ended June 30, 1999,  because their effect would be
anti-dilutive.


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 and six month
periods ended June 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>

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

                                    June 30, 1999    June 30, 1998    June 30, 1999    June 30, 1998
                                    --------------   --------------   --------------   --------------
<S>                                 <C>              <C>              <C>              <C>
Net income (loss)                   $   (1,250,167)  $    1,000,050   $   (2,432,686)  $    1,008,776
Foreign currency translation gain
(loss)                                     (25,557)          13,376           11,446            4,042
                                    --------------   --------------   --------------   --------------
Total comprehensive income (loss)   $   (1,275,724)  $    1,013,426   $   (2,421,240)  $    1,012,818
                                    ==============   ==============   ==============   ==============
</TABLE>





                                      - 7 -

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               Tanknology-NDE International, Inc. and Subsidiaries


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
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  three  and six  month
periods ended June 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>

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

                                    June 30, 1999    June 30, 1998    June 30, 1999    June 30, 1998
                                    --------------   --------------   --------------   --------------
<S>                                 <C>              <C>              <C>              <C>
Field Services:
   Segment revenues                 $   18,613,675   $   21,866,331   $    8,734,580   $   12,623,215
   Segment profit                        3,472,474        5,500,986        1,555,581        3,465,287
Management Services:
   Segment revenues                      6,271,885        5,431,158        3,360,045        2,960,092
   Segment profit                   $      164,636   $      984,787   $      246,308   $      540,313
</TABLE>


     A  reconciliation  of the Company's  segment revenues and segment profit to
the  corresponding  consolidated  amounts  as of and for the three and six month
periods ended June 30, 1999 and 1998 is as follows:


<TABLE>
<CAPTION>

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

                                    June 30, 1999    June 30, 1998    June 30, 1999    June 30, 1998
                                    --------------   --------------   --------------   --------------
<S>                                 <C>              <C>              <C>              <C>
Segment revenues:                   $   24,885,560   $   27,297,489   $   12,094,625   $   15,583,307
Field Services revenues
from Management
Services                                  (484,140)        (190,060)        (273,665)        (173,826)
                                    --------------   --------------   --------------   --------------
Consolidated revenues               $   24,401,420   $   27,107,429   $   11,820,960   $   15,409,481
                                    ==============   ==============   ==============   ==============
</TABLE>



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               Tanknology-NDE International, Inc. and Subsidiaries

<TABLE>
<CAPTION>


                                       Six Months Ended                           Three Months Ended
                            ---------------------------------------      -------------------------------------
                              June 30, 1999        June 30, 1998           June 30, 1999       June 30, 1998
                            ------------------   ------------------      -----------------   -----------------
<S>                         <C>                  <C>                     <C>                 <C>
Segment net profit:         $        3,637,110   $        6,485,773      $       1,801,889   $       4,005,600
Corporate expenses                 (4,049,971)          (3,278,059)            (1,938,962)         (1,864,585)
Depreciation and
amortization                (1,544,894)                 (1,435,403)              (792,064)           (744,616)
Interest income                         31,187               61,796                  1,852              29,776
Interest expense                     (861,373)            (796,339)              (396,661)           (400,822)
Other income/expense                    64,615                4,905                 11,199               4,194
Income taxes                           290,640             (33,897)               (62,580)            (29,497)
Extraordinary gain                          --                   --                     --                  --
                            ------------------   ------------------      -----------------   -----------------
Net Income (Loss)           $      (2,432,686)   $        1,008,776      $     (1,375,327)   $1,000,050
                            ==================   ==================      =================   =================
</TABLE>


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.  On July 22, 1999, the  arbitration  panel
entered an order  confirming  that the Company's  requested  interpretation  was
correct. This order effectively rejected one of Veeder-Root's counterclaims. The
remaining  Veeder-Root  claims are  pending  further  proceedings.  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 June
30, 1999, or the results of operations for the period ended June 30, 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
June 30,1999, or the results of operations for the period ended June 30, 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.

Revolving Line of Credit

     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.  This $3
million  increase in the  revolving  line of credit will not be effective  until
approved by DH Holdings Corp. which, as of the date of this filing, has not been
received.

     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.



                                      - 9 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


NOTE 6:   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     None.



                                     - 10 -

<PAGE>


               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 and six month periods ended June 30, 1999 and 1998.



<TABLE>
<CAPTION>


                                                 Six Months Ended                 Three Months Ended
                                         -------------------------------   -------------------------------
                                         June 30, 1999    June 30, 1998    June 30, 1999    June 30, 1998
                                         --------------   --------------   --------------   --------------

<S>                                      <C>              <C>              <C>              <C>
Revenues ..............................         100%             100%             100%             100%

Cost of Sales .........................          98%              73%              92%              74%
                                         --------------   --------------   --------------   --------------
Gross Margin ..........................           2%              27%               8%              26%

Selling, General and Administrative ...           9%              18%              16%              19%

                                         --------------   --------------   --------------   --------------
Operating Income (Loss) ...............         (7)%               9%             (8)%               7%

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

Net Income (Loss) Before Provision for         (10)%               6%            (11)%               4%
Income Taxes...........................

Provision for Income Taxes ............           0%               --               1%               --

Net Income (Loss) .....................        (10)%               6%            (10)%               4%
                                         ==============   ==============   ==============   ==============
</TABLE>

Revenues

     Revenues for the three months ended June 30, 1999 were $11,820,947 compared
to $15,409,481 in the 1998 period,  a decrease of $3,588,534 or 23%. For the six
months ended June 30, 1999, revenues were $24,401,420 compared to $27,107,429 in
the 1998 period, a decrease of $2,706,009, or 10%. The decrease in revenues from
1998 is primarily  due to the decrease in demand for the  Company's  Underground
Storage Tank (UST) services. These services were in great demand during 1998 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.  Most of
the carryover work associated  with the deadline was completed  during the first
quarter of 1999. In an effort to increase revenues,  the Company is now focusing
its efforts on  increasing  productivity  and sales in new and existing  service
areas..

Cost of  Services

     Cost of services for the three months ended June 30, 1999 were  $11,527,803
or 98 % of revenue  compared  to  $11,209,129  or 73 % of  revenue  in 1998,  an
increase of $ 318,674,  or 3%.  Gross  margin was $293,144 or 2 % of revenue for
1999,  compared to $4,200,352 or 27 % of revenue for 1998. The decrease in gross
margin  percentage  is largely  due to the 23% drop in  revenues  over the prior
period. The sharp decrease in revenues was caused by the drop in demand for the

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               Tanknology-NDE International, Inc. and Subsidiaries




Company's  Underground  Storage  Tank (UST)  services.  The  increase in cost of
services was primarily due to a change in product mix and under  utilization  of
fixed costs in the second quarter of 1999. The Company had brought more capacity
online  over the last six  months of 1998 to keep pace with the  demand  for the
Company's  Underground  Storage Tank (UST) which resulted in an increase in cost
of services.  The Company has implemented a plan during the quarter to cut fixed
costs and reduce day to day expenses.

     For  the  six  months  ended  June  30,  1999,  cost  of  services  totaled
$22,357,495 or 92% of revenues compared to $20,214,363 or 75% of revenues in the
1998 period, an increase of $2,143,132 or 11%. Gross margin was $2,043,925 or 8%
of revenue  in 1999,  compared  to  $6,893,066  or 25% of  revenue in 1998.  The
decrease in gross margin  percentage  is largely due to the 10% drop in revenues
over the prior  period  while Costs of Services  increased by 11% over the prior
period.  The  decrease  in  revenues  was the result of a drop in demand for the
Company's  Underground  Storage  Tank (UST)  services.  The  increase in cost of
services was primarily due to a change in product mix and under  utilization  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.  The Company has  implemented  a plan to cut fixed
costs and reduce day to day expenses.

Selling, General and Administrative

     Selling,  general,  and  administrative  expense for the three months ended
June 30 1999 was  $1,097,121  or 9% of revenue  compared to $2,803,953 or 18% of
revenue, a decrease of $1,706,832 or 61% compared to the three months ended June
30,  1998.  For the six  months  ended  June 30,  1999,  selling,  general,  and
administrative  expenses were 4,001,680 or 16% of revenue compared to $5,120,755
in 1998 or 19% of revenue,  a decrease of $1,119,075 or 22% compared to the 1998
period. The decrease in selling,  general, and administrative expenses is due to
the  on-going  effort of the  Company  to cut fixed  costs  and  reduce  overall
operational  costs.  Reduction in costs  included  reduction in  workforce,  the
closing of administrative  offices,  and renegotiation of contracts with vendors
and service providers.


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

     For the three months ended June 30, 1999,  EBITDA was  $(714) or 0% of
revenues  compared to  $2,141,016  or 14% of revenues in 1998.  The  decrease in
EBITDA,  was primarily due to the increased in cost of services and the decrease
in revenues in the 2nd quarter of 1999 compared to the 2nd 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.

     For the six months ended June 30, 1999,  EBITDA was  ($348,246)  or 1% of
revenues  compared to  $3,207,714  or 12% of revenues in 1998.  The  decrease in
EBITDA,  was primarily due to the increased in cost of services and the decrease
in revenues in the first half of 1999 compared to the first half of 1998.

                                     - 12 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


Interest Expense

     Interest  expense for the three  months ended June 30, 1999 was $396,661 or
3% of revenue  compared  to  $400,822  or 3% of revenue in 1998,  a decrease  of
$4,161 or 1%. The increase in interest  expense is due to to the increase in the
average amount outstanding on the line of credit compared to the same prior year
period.

     For the six months ended June 30, 1999, interest expense was $861,373 or 4%
of revenue compared to $796,339 or 3% of revenue in 1998, an increase of $65,034
or 8%.


Net Income (Loss)

     For the three  months  ended June 30,  1999,  the Company had a net loss of
($1,187,587)  before  preferred  stock dividend  requirements  compared to a net
income of $1,029,547 in 1998 for the same period, a decrease of $2,217,134.  The
decrease in net income was  primarily due to a 23% decrease in revenues over the
same prior period while cost of sales increased by 3% over the prior period.

     For the six  months  ended  June  30,  1999,  the  Company  had net loss of
($2,432,686)  before  preferred  stock dividend  requirements  compared to a net
income of  1,008,776  in 1998,  a  decrease  in net  income of  $3,441,462.  The
decrease in the net income was  primarily  due to the  decrease in revenues  and
increase in cost of sales in the first six months of 1999  compared to the first
six months of 1998. To mitigate increased losses in future quarters, the Company
has implemented  cost cutting programs to reduce operating costs. The Company is
also offering new and upgraded  services to its customers  which can potentially
generate future revenues.

Liquidity and Capital Resources

     At June 30, 1999, the Company had working capital of $5,444,230 compared to
working  capital of  $7,026,139  at December  31,  1998.  Cash used in operating
activities  totaled  $8,453 for the six months  ended June 30, 1999  compared to
cash provided by operating  activities of $1,629,397 in 1998.  The cash provided
by operating  activities for the six months ended June 30, 1999 decreased due to
the decrease in net income while  operating costs increased over the same period
of the prior year.

     Cash  used  in  investing  activities   (consisting  primarily  of  capital
expenditures) totaled $1,180,315 for the six months ended June 30, 1999 compared
to cash used in investing activities of $1,877,431 in the 1998 period.

     At June 30, 1999, the Company had  outstanding  long-term  debt  (including
current maturities) of $18,258,392 compared to $20,586,734 at December 31, 1998.
Required term-loan principal repayments of $600,000, a net $1,100,000 repayments
on the revolving credit line and net other debt repayments of $328,343 were made
during the first two  quarters of the year.  At June 30,  1999,  the Company had
$1,045,377  available  for  additional  borrowing  under  its  revolving  credit
agreement. As of June 30, 1999, the Company was in compliance with the financial
debt covenants related to its long-term financing agreements.


                                     - 13 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


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 September 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 June 30, 1999, it had completed  approximately 90%
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 10% of the  initiatives  are in process and expected to
be completed on or about September 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..........................     8/98-9/99          95%
Remediation and testing regarding
departmental system issues.....................    10/98-9/99          95%


                                     - 14 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


                                                                   PERCENT
YEAR 2000 INITIATIVE                               TIME FRAME      COMPLETE
-----------------------------------------------   -------------   -----------
Remediation and testing regarding tank
testing and truck equipment system issues......    11/98-9/99          75%
Remediation and testing regarding
telephone/PBX..................................    11/98-12/98        100%
Electronic data interchange trading
partner conversions............................    10/98-4/99         100%
Identification, assessment, remediation,
and testing regarding desktop and
individual system issues.......................    10/98-4/99         100%
Identification and assessment regarding
non-IT system issues...........................     8/98-9/99          95%
Remediation and testing regarding non-
IT system issues...............................    10/98-9/99          95%

     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  completed 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 been developed for dealing
with the most reasonably likely worst case scenarios.

     The  Company has engaged 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

                                     - 15 -

<PAGE>


               Tanknology-NDE International, Inc. and Subsidiaries


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.
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.


PART II   Other Information

Item 6.   Exhibits and Reports on Form 8-K

     The following exhibits are filed herewith:


                    No.          Exhibit
                    ---------    -----------------------------------------------
                    27.01        Selected Financial Data


                  Reports on Form 8-K:
                           None.





                                    SIGNATURE

     In accordance with the requirements of the Securities Exchange Act of 1934,
the  Registrant  has  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                      Tanknology-NDE International, Inc.
                                      (Registrant)
Date:     August 16, 1999                    /s/ T. PETER DeWEESE, JR.
                                      ------------------------------------------
                                      Vice President and Chief Financial Officer


                                     - 16 -