NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB/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, 1997.

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



                         Commission File Number 1-10361


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


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


             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, 1997
--------------       -----------------------------------

Common                           15,978,610



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

                                      - 1 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES



     The undersigned  registrant  hereby amends the following  items,  financial
statements,  and management's Discussion and Analysis of Financial Condition and
Results of  Operations  of its  Quarterly  Report on Form  10-QSB for the fiscal
quarter ended March 31, 1997 as set forth in the pages attached hereto:

     Condensed  Consolidated Balance Sheet is hereby amended and replaced in its
     entirety  to reflect a  reclassification  between  Accumulated  Deficit and
     Cumulative foreign currency adjustment for the period ended March 31, 1997.

     Condensed  Consolidated  Statement  of  Operations  is hereby  amended  and
     replaced  in its  entirety  to correct  an error in  Selling,  general  and
     administrative  expenses  and  Provision  for  income  taxes for the period
     ending March 31, 1997.

     Condensed  Consolidated  Statement  of Cash  Flows is  hereby  amended  and
     replaced  in  its  entirety  to  reflect  the  changes  to  the   Condensed
     Consolidated Statement of Operations for the period ended March 31, 1997.

     Item  2-Management's  Discussion  and Analysis of Financial  Condition  and
     Results of  Operations  is hereby amended and  replaced in its  entirety to
     reflect  the  changes  noted  to Item 1,  and to  correct  an  error in the
     paragraph titled "Earnings before Depreciation,  Amortization, Interest and
     Taxes (EBITDA)" for the period ended March 31, 1997.




                                            NDE ENVIRONMENTAL CORPORATION
                                                      (Registrant)


Date:     August 7, 1997                           /s/ DAVID G. OSOWSKI
       ---------------------         ------------------------------------------
                                     David G. Osowski
                                     Vice President and Chief Financial Officer



                                      - 2 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


PART I        Financial Information

Item 1.  Financial Statements (Unaudited)

                      CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>


                                                                               March 31, 1997      December 31, 1996
                                                                             ------------------   -------------------
ASSETS                                                                           (Unaudited)

<S>                                                                           <C>                   <C>
Cash........................................................................   $  1,031,652         $   2,412,233
Trade accounts receivable, less allowance for doubtful accounts of
  $804,886 at March 31, 1997 and $837,480 at December 31, 1996 .............      6,680,397             5,735,550
Inventories ................................................................        466,153               367,362
Prepaid expenses and other current assets ..................................        962,825             1,578,097
                                                                               -------------        -------------
    Total Current Assets ...................................................      9,141,027            10,093,242

Equipment and improvements, net of accumulated depreciation of
  $8,384,549 at March 31, 1997 and $7,611,234 at December 31, 1996 .........      5,317,615             5,736,391
Goodwill, net of accumulated amortization of $138,088 at March 31, 1997
  and $55,122 at December 31, 1996 .........................................      4,845,107             4,922,617
Patents, licenses and other intangible assets, net of accumulated
  amortization of $1,828,687 at March 31, 1997 and $1,729,695 at
  December 31, 1996 ........................................................      1,985,090             3,374,962
Deferred financing costs ...................................................        866,939               922,424
                                                                               -------------        -------------
    Total Assets......................................................         $ 22,155,778         $  25,049,636
                                                                               =============        =============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable ..........................................................    $  1,775,724         $   1,673,470
Accrued liabilities .......................................................       3,607,728             4,885,260
Accrued payroll and payroll taxes .........................................       1,645,859             1,469,786
Current portion of long-term debt .........................................       2,272,223             1,963,564
                                                                               ------------          ------------
    Total Current Liabilities .............................................       9,301,534             9,992,080

Long Term Debt, less current portion ......................................      12,880,416            14,192,011

Warrants with put option ..................................................       1,800,250             1,600,000
                                                                               ------------          ------------
    Total Liabilities .....................................................      23,982,200            25,784,091
                                                                               ------------          ------------

Stockholders' Deficit

Series AAA Convertible Preferred Stock, $.0001 par value;  authorized, 400
  shares; issued and outstanding 1 share stated at liquidation value
  of $5,000................................................................           5,000                 5,000
Common stock, $.0001 par value; authorized, 50,000,000 shares; issued
  and outstanding 15,978,610 shares at March 31, 1997, and December
  31, 1996 ................................................................           1,598                 1,598
Additional paid-in capital ................................................      27,578,446            27,578,446
Accumulated deficit .......................................................     (29,382,729)          (28,302,374)
Cumulative foreign currency translation adjustment ........................         (28,737)              (17,125)
    Total Stockholders' Deficit ...........................................      (1,826,422)             (734,455)
                                                                               ------------          ------------
     Total Liabilities and Stockholders' Deficit......................         $ 22,155,778          $ 25,049,636
                                                                               ============          ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                      - 3 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




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

                                                     March 31, 1997   March 31, 1996
                                                     --------------   --------------

<S>                                                  <C>              <C>          
Revenues - Testing Services ......................   $   7,462,643    $   2,562,367

Cost of sales and testing services ...............       5,602,108        1,760,349
                                                     -------------    -------------

     Gross Margin ................................       1,860,535          802,018

Selling, general and administrative ..............       2,070,444        1,524,854
                                                     -------------    -------------

     Operating Loss ..............................   $    (209,909)   $    (722,836)

 Interest expense ................................        (845,146)        (179,163)
                                                     -------------    -------------

     Net Loss Before Provision for Income Taxes ..   $  (1,055,055)   $    (901,999)

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

     Net Loss ....................................   $  (1,080,355)   $    (901,999)
                                                     =============    =============

     Net Loss per Share ..........................   $       (0.07)   $       (0.38)
                                                     =============    =============

     Weighted Average Number of Shares Outstanding      15,978,610        2,403,722
                                                     =============    =============

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


                                      - 4 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



<TABLE>
<CAPTION>

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

                                                                  March 31, 1997  March 31, 1996
                                                                 ---------------  --------------

Cash Flows from Operating Activities

<S>                                                               <C>             <C>           
     Net loss .................................................   $  (1,080,355)  $    (901,999)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating
Activities

     Depreciation and amortization ............................         972,279         367,561
     Amortization of discounts and financing costs ............         416,501          34,814
     Gain on sale of equipment ................................         (31,366)       (143,690)

Changes in Operating Assets and Liabilities

     (Increase) decrease in trade accounts receivable .........        (944,847)        628,613
     Increase in inventories ..................................         (98,791)       (183,191)
     Decrease in prepaid expenses and other current assets ....         615,272          94,378
     Increase in accounts payable .............................         102,254         222,150
     Decrease in accrued liabilities ..........................      (1,277,532)       (246,505)
     Increase (decrease) in accrued payroll and payroll taxes .         176,073        (107,177)
                                                                   -------------  --------------
     Net cash used in operating activities ....................      (1,150,512)       (235,046)

Cash Flows from Investing Activities

     Proceeds from sale of Canadian licenses ..................       1,147,500            --
     Additions to equipment and improvements ..................        (424,633)       (131,576)
     Proceeds from sale of equipment ..........................          50,000         179,391
                                                                   -------------  --------------
     Net cash provided by investing activities ................         772,867          47,815

Cash Flows from Financing Activities

     Payments on line of credit ...............................            --          (346,908)
     Payments on long-term debt ...............................      (1,002,936)       (376,549)
     Proceeds from issuance of notes payable ..................            --           600,000
                                                                   -------------  --------------
     Net cash used in financing activities ....................      (1,002,936)       (123,457)

     Net decrease in cash .....................................      (1,380,581)       (310,688)

     Cash at beginning of period ..............................       2,412,233         327,035

                                                                   -------------  --------------
     Cash at end of period ....................................       1,031,652          16,347
                                                                   =============  ==============
</TABLE>



                                      - 5 -

<PAGE>

                 NDE ENVIRONMENTAL CORPORATION 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 sales of
certain items  included in the Company's  statement of operations  for the three
month periods ended March 31, 1997 and 1996.  The results of operations  for the
three months ended March 31, 1997 include the results of  operations  of the UST
Group  of  Companies  that  were  acquired  (the  "Acquisition")  from  TEI Inc.
(formerly Tanknology  Environmental,  Inc.) on October 25, 1996. The Acquisition
was accounted for as a purchase and accordingly the results of operations of the
Company  include the  operations  of the UST Group from the date of  acquisition
forward.

<TABLE>
<CAPTION>
                                                     Three Months Ended
                                             ---------------------------------
                                             March 31, 1997     March 31, 1996
                                             --------------     --------------
<S>                                          <C>               <C> 
Revenues....................................         100 %              100 %

Cost of Sales and Testing...................          75 %               69 %
                                             --------------     --------------

Gross Margin................................          25 %               31 %

Selling, General and Administrative.........          28 %               59 %

                                             --------------     --------------
Operating Loss..............................          (3)%              (28)%

Interest Expense............................          11 %                7 %

Net Loss....................................         (14)%              (35)%
                                             ==============     ==============
</TABLE>

Revenues

     Revenues for the three months ended March 31, 1997 were $7,462,643 compared
to $2,562,367 in the 1996 period, an increase of $4,900,276,  or 191%,  compared
to the three  months ended March 31,  1996.  The increase in revenues  over last
year is due to the  inclusion of the UST Group of Companies  acquired on October
25,  1996.  Revenues  in the first  quarter of 1997 also  included  $117,169  of
revenues from the Company's Canadian  operations which were sold on February 20,
1997.  Revenues of the UST Group,  excluding  Canada,  plus those of the Company
increased  from  $7,124,133  in the first  quarter of 1996 to  $7,354,474 in the
first quarter of 1997 primarily due to the sale of several SIR software licenses
by the Company's USTMAN subsidiary.

Cost of Sales and Testing Services

     Cost of sales and testing  services  for the three  months  ended March 31,
1997 was $5,602,108 (75% of revenue)  compared to $1,760,349 (69% of revenue) in
1996, an increase of $3,841,759,  or 218%.  Gross margin was $1,860,535  (25% of
revenue) for 1997,  compared to $802,018 (31% of revenue) for 1996. Gross margin
as a percentage of sales  decreased from 31% of sales in 1996 to 25% of sales in
1997.  This decrease was due primarily to the addition of fixed capacity  (e.g.,
employees,   vans,   equipment,   and  regional  offices)  from  the  UST  group
Acquisition,  and the addition of one significant  lower-margin  but high volume
customer in mid-1996.


                                      - 6 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES



Selling, General and Administrative
   
     Selling,  general,  and  administrative  expense for the three months ended
March 31, 1997 was  $2,070,444 or 28% of revenue  compared to $1,524,854 in 1996
or 60% of revenue,  an increase of $545,590 or 36%, compared to the three months
ended March 31,  1996.  The  increase in selling,  general,  and  administrative
expenses was due to the  Acquisition.  The decrease in the  percentage  of sales
from 60% to 28% is due to the cost  efficiencies  realized and the higher volume
of revenue in conjunction with the Acquisition.
    
Earnings before Depreciation, Amortization, Interest and Taxes (EBITDA)
   
     For the three months ended March 31, 1997,  EBITDA was a positive  $762,370
or 10% of revenues compared to a negative $320,461 or (13%) of revenues in 1996.
The  increase  in  EBITDA  of  $1,082,831  was due to the  Acquisition  and cost
efficiencies  realized as a result of combining the  operations of the UST Group
and NDE.
    
Interest Expense

     Interest  expense for the three  months  ended March 31, 1997 was  $845,179
(11% of revenue)  compared to $179,163  (7% of revenue) in 1996,  an increase of
$666,016 or 372%.  The increase was due to the interest on the  additional  debt
incurred to finance the Acquisition.

Net Loss
   
     For the three months ended March 31, 1997, the Company  incurred a net loss
of $1,080,355 compared to a loss of $901,999 in 1996, an increase of $178,832 or
20%. The net loss for the current period includes  $453,982 of non-cash  charges
directly  related to the Acquisition with no prior year  counterpart.  The major
cost  components  directly  attributable  to the  Acquisition  are:  $82,966  of
goodwill  amortization  expense,  $55,485 of amortization of deferred  financing
costs,  $105,281 of amortization of discount on  subordinated  debt,  $10,000 of
amortization of a noncompete  covenant,  and estimated accretion of the value of
the Warrants with Put Option of $200,250.  The Company is unable to determine if
the holder will ever  exercise the Put and what the  purchase  price would be at
that time;  therefore,  the amount  recognized as expense is an estimate.  Based
upon  projections  of future results of  operations,  an  independent  appraisal
obtained by the Company valued the warrants with put options at $1,600,000 as of
December  31,  1996.  The Company  recorded  the first  quarter  1997 expense to
accrete the  carrying  value of the warrants  with put option to such  estimated
redemption value as of December 31, 2001.
    
Liquidity and Capital Resources

     At March 31, 1997,  the Company had a working  capital  deficit of $160,507
compared to a working  capital  surplus of $101,162 at March 31, 1996. Cash used
in operating  activities of $1,099,912 for the three months ended March 31, 1997
increased by $864,866 as compared to $235,046 in 1996. The cash was used to fund
working capital and to pay acquisition-related liabilities of $580,417.

     Cash  provided by  investing  activities  was $722,867 for the three months
ended March 31, 1997  compared to $47,815 in the 1996  period.  On February  20,
1997, the Company sold substantially all of the operating assets of its Canadian
operation acquired as part of the Acquisition.  The Company realized proceeds of
$1,147,500  related to the sale of the  business  and  technology  licenses  and
$50,000  from  the sale of the  fixed  assets  of the  Canadian  operation.  The
proceeds  from  the  sale  of the  business  and  licenses  were  treated  as an
adjustment to the purchase price of the UST Group.  The Company  retained all of
the  working  capital  of the  Canadian  subsidiary  and is in  the  process  of
liquidating  this  working  capital  and  redirecting  these  funds  to its U.S.
operation.  In the first  quarter of 1997,  the  Company  invested  $272,714  in
computer hardware and software to support its ongoing operations.

     At March 31, 1997, the Company had  outstanding  long-term debt  (including
current maturities) of $15,152,639 compared to $16,155,575 at December 31, 1996.
Required  principal  pay-downs of $300,000,  a $500,000 paydown on the revolving
credit line from the proceeds of the sale of the Canadian  operation,  and other
debt repayments of $202,936 were  made  during  the  quarter.  The  Company  had

                                      - 7 -

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


$1,329,804  available  for  additional  borrowing  under  its  revolving  credit
agreement.  As of  March  31,  1997,  the  Company  was in  compliance  with the
financial debt covenants related to its long-term financing agreements.

      This Form 10Q contains  statements  which, to the extent that they are not
recitations of historical fact,  constitute  "forward looking statements" within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Act of 1934.  All  forward  looking  statements  involve  risks  and
uncertainties.  The forward looking  statements in this document are intended to
be subject to the safe harbor protection provided by Sections 27A and 21E. For a
discussion identifying some important factors that could cause actual results to
differ materially from those anticipated in the forward looking statements,  see
the Company's Form 10-KSB page 13  "Management  Discussion and Analysis" for the
fiscal year ended December 31, 1996.


                                      - 8 -