ION

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
       of 1934 for the quarterly period ended September 30, 1997.

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



                                     1-10361
                             Commission File Number


                       TANKNOLOGY-NDE INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)


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


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



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

                  (Former name NDE Environmental Corporation)


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 September 30, 1997
------------------      ---------------------------------------------
      Common                             15,978,610


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



                                     Page 1

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.





                                      INDEX



                                                                           Page
                                                                          Number
                                                                          ------

PART I   FINANCIAL INFORMATION.............................................  3

   Item 1. Financial Statements (Unaudited)................................  3

           Condensed Consolidated Balance Sheets
           September 30, 1997 and December 31, 1996........................  3

           Condensed Consolidated Statements of Operations
           Three Months and Nine Months Ended September 30, 1997 and 1996..  4

           Condensed Consolidated Statements of Cash Flows
           Nine Months Ended September 30, 1997 and 1996...................  5

           Notes to Condensed Consolidated Financial ......................  6


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


PART II  OTHER INFORMATION................................................. 11

  Item 6.  Exhibits and Reports on Form 8-K................................ 11


SIGNATURES................................................................. 12


                                     Page 2

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


                      CONDENSED CONSOLIDATED BALANCE SHEETS

PART I                     FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
<CAPTION>

                                                                       September 30, 1997   December 31, 1996
                                                                        ----------------     ---------------
ASSETS                                                                     (Unaudited)

<S>                                                                     <C>                  <C>          
     Cash ...........................................................   $      148,537       $   2,412,233
     Restricted cash ................................................        3,000,000                --
     Trade accounts receivable, less allowance for doubtful
         accounts of $944,808 in 1997 and $837,480 in 1996 ..........        8,835,576           5,735,550
     Inventories ....................................................          622,023             367,362
     Prepaid expenses and other current assets ......................        1,328,344           1,578,097
                                                                        ----------------     ---------------
         Total Current Assets .......................................       13,934,480          10,093,242

     Equipment and improvements, net of accumulated
         depreciation of $8,629,294 in 1997 and $7,611,234 in 1996 ..        4,585,910           5,736,391
     Goodwill, net of accumulated amortization of $55,122 in 1996 ...             --             4,922,617
     Patents licenses and other intangible assets, net of accumulated
         amortization of $1,070,113  in 1997 and $773,140 in 1996 ...        1,703,185           3,374,962
     Deferred  financing costs ......................................          755,969             922,424
                                                                        ----------------     ---------------
         Total Assets ...............................................   $   20,979,544       $  25,049,636
                                                                        ================     ===============

LIABILITIES AND STOCKHOLDERS' DEFICIT

     Accounts payable ...............................................   $    2,511,110       $   1,673,470
     Accrued liabilities ............................................        2,681,808           4,885,260
     Accrued payroll and payroll taxes ..............................        1,411,447           1,469,786
     Current portion of long-term debt ..............................        4,497,982           1,963,564
                                                                        ----------------     ---------------
         Total Current Liabilities ..................................       11,102,347           9,992,080

     Long term debt, less current portion ...........................       10,070,238          14,192,011

     Deferred license revenue .......................................          570,836                --

     Warrants with put option .......................................        2,200,750           1,600,000
                                                                        ----------------     ---------------
         Total Liabilities ..........................................       23,944,171          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 per share............            5,000               5,000

     Common stock, $.0001 par value;  authorized,  50,000,000 shares; 
          issued and outstanding 15,978,610 shares at September 30,
          1997, and December 31, 1996................................            1,598               1,598

     Additional paid-in capital......................................       27,578,446          27,578,446
     Accumulated deficit.............................................      (30,519,334)        (28,302,374)
     Cumulative foreign currency translation adjustment..............          (30,337)            (17,125)
                                                                        ----------------     ---------------
     Total Stockholders' Deficit.....................................       (2,964,627)           (734,455)
                                                                        ----------------     ---------------

Total Liabilities and Stockholders' Deficit..........................   $   20,979,544    $     25,049,636
                                                                        ================     ===============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                     Page 3

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                                     Three Months Ended                Nine Months Ended
                                                                ----------------------------    ----------------------------
                                                                September 30,   September 30,   September 30,   September, 30
                                                                    1997            1996            1997             1996
                                                                ------------    ------------    ------------    ------------

<S>                                                             <C>             <C>             <C>             <C>         
Revenues ....................................................   $  9,889,309    $  3,097,897    $ 25,407,707    $  8,638,503

Cost of sales ...............................................      7,410,762       1,915,355      19,211,475       5,447,412
                                                                ------------    ------------    ------------    ------------

     Gross Margin ...........................................      2,478,547       1,182,542       6,196,232       3,191,091

Selling, general and administrative .........................      1,853,215       1,729,720       5,971,560       4,702,238

Impairment of long-lived assets .............................           --           833,321            --           833,321

                                                                ------------    ------------    ------------    ------------
     Operating Profit ( Loss) ...............................        625,332      (1,380,499)        224,672      (2,344,468)

Other income (expense):

 Interest income ............................................         66,202            --            66,202              37

 Interest expense ...........................................       (810,570)       (225,808)     (2,481,934)       (593,285)
                                                                ------------    ------------    ------------    ------------


Net loss before Extraordinary Item ..........................       (119,036)     (1,606,307)     (2,191,060)     (2,937,716)

 Extraordinary gain .........................................           --         1,813,149            --         1,813,149

                                                                ------------    ------------    ------------    ------------
     Net income (loss) before Provision
     for income taxes .......................................       (119,036)        206,842      (2,191,060)     (1,124,567)

Provision for income taxes ..................................            600            --            25,900            --
                                                                ------------    ------------    ------------    ------------

     Net income (loss) ......................................   $   (119,636)   $    206,842    $ (2,216,960)   $ (1,124,567)
                                                                ============    ============    ============    ============


     Net loss per share before
     extraordinary item .....................................   $      (0.01)   $      (0.20)   $      (0.14)   $      (0.64)

          Extraordinary item, per share .....................           --              0.23            --              0.40

                                                                ------------    ------------    ------------    ------------
          Net income (loss ) per share ......................   $      (0.01)   $       0.03    $      (0.14)   $      (0.24)

     Weighted average number of
     shares outstanding .....................................     15,978,610       7,978,610      15,978,610       4,558,601
                                                                ============    ============    ============    ============

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

                                     Page 4

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                         ----------------------------------------
                                                                         September 30, 1997    September 30, 1996
                                                                         ------------------    ------------------

Cash Flows from Operating Activities

<S>                                                                        <C>                   <C>            
     Net loss ........................................................     $    (2,216,960)      $   (1,124,567)

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

     Extraordinary gain ..............................................                --             (1,813,149)
     Depreciation  and amortization ..................................           2,933,932            1,116,044
     Amortization of discounts and financing costs ...................           1,101,222               82,679
     Gain on sale of assets ..........................................             (75,589)            (199,711)
     Write down of assets ............................................              16,396              833,321
     Other ...........................................................             (13,212)             (12,380)

Changes in Operating Assets and Liabilities:

     (Increase) decrease in trade accounts receivable ................          (3,100,026)             447,636
     Increase in inventories .........................................            (254,661)            (167,572)
     Decrease in prepaid expenses and other current assets ...........             331,476              111,933
     Increase  in accounts payable ...................................             837,640              481,659
     Decrease in accrued liabilities .................................          (2,386,785)            (236,300)
     Decrease in accrued payroll and
         payroll taxes ...............................................             (58,339)            (147,436)
                                                                         ------------------    ------------------
     Net cash used in operating activities ...........................          (2,884,906)            (627,843)

Cash Flows from Investing Activities

     Proceeds from sale of USTMAN ....................................           5,250,000                 --
     Proceeds from sale of licenses ..................................           1,947,500                 --
     Additions to equipment and improvements .........................          (1,729,250)            (458,597)
     Proceeds from sale of equipment .................................              79,758              253,590
     Other ...........................................................              (4,095)                --
                                                                         ------------------    ------------------
     Net cash provided by(used in) investing
         activities ..................................................           5,543,913             (205,007)

Cash Flows from Financing Activities

     Net proceeds from line of credit ................................                --                244,384
     Proceeds from long-term debt ....................................           2,840,688                 --
     Payments on long-term debt ......................................          (4,763,391)            (717,994)
     Proceeds from issuance of notes payable .........................                --              1,000,000
                                                                         ------------------    ------------------
     Net cash provided by (used in) financing
         activities ..................................................          (1,922,703)             526,390

     Net increase (decrease) in cash .................................             736,304             (306,460)

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

     Cash (including restricted cash) at end of period ...............     $     3,148,537       $       20,575
                                                                         ==================    ==================

</TABLE>
                                     Page 5
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1:   ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS

     Basis  of  Presentation:   The  financial   statements  of   Tanknology-NDE
International,   Inc.   (formerly,   NDE  Environmental   Corporation)  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 and
nine month  periods ended  September 30, 1997 and 1996 contain all  adjustments,
consisting of only normal  recurring  accruals,  necessary to present fairly the
financial  position  of the  Company as of  September  30, 1997 and 1996 and the
results of operations and cash flows for the periods 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/A for the year ended December 31, 1996.

     Certain   amounts  shown  in  the  1996  financial   statements  have  been
reclassified to conform to the 1997 presentation.


NOTE 2:   COMMITMENTS AND CONTINGENCIES

     There have been no  material  changes  in the  information  reported  as of
December 31, 1996 as reported on Form 10- KSB/A in Footnote 11 accompanying  the
audited financial statements.


NOTE 3:   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In February 1997, the Financial  Accounting  Standards  Board (FASB) issued
Statement of  Financial  Accounting  Standards  128  "Earnings  per Share" (SFAS
128"),  effective for financial statements for periods ending after December 15,
1997. SFAS 128 primarily substitutes a somewhat different  calculation,  labeled
"Basic"  earnings per share,  for the  previously  issued  statistic,  "Primary"
earnings  per share.  The  Company  believes  that the future  adoption  of this
pronouncement will not have a significant impact on disclosures for earnings per
share for the periods presented.

     In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments of
an  Enterprise  and  Related   Information"  ("SFAS  No.  131").  SFAS  No.  131
establishes  standards  for the way  that  public  business  enterprises  report
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports issued to shareholders.  It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers.  SFAS No. 131 is effective for financial  statements for fiscal years
beginning  after December 15, 1997. The adoption of SFAS 131 will have no impact
on the Company's consolidated results of operations,  financial position or cash
flows.


NOTE 4:   RESTRICTED CASH

     As a condition of approval for the sale of USTMAN by the  company's  senior
bank and  subordinated  debt holder,  $3,000,000  of the cash proceeds have been
placed in a  restricted  account with the  Company's  senior bank and is held as
collateral against  outstanding loans until the Company  identifies  appropriate
investment opportunities.

                                     Page 6

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


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 revenues of
certain items  included in the company's  statement of operations  for the three
month and nine month periods ended September 30, 1997 and 1996. The 1997 results
of  operations  include the results of  operations of the UST Group of Companies
that were acquired (the "Acquisition") from TEI Inc. (formerly  Tanknology 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 that date forward.


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

                                           September       September      September      September
                                            30, 1997        30, 1996       30, 1997       30, 1996
                                        --------------  --------------  -------------  --------------

<S>                                          <C>             <C>            <C>            <C> 
Revenues                                     100%            100%           100%           100%
Cost of Sales                                 75%             62%            76%            63%
                                        --------------  --------------  -------------  --------------
Gross Margin                                  25%             38%            24%            37%
Selling, General and  Admin.                  19%             56%            23%            54%
Non-recurring charge                           -              27%             -             10%
                                        --------------  --------------  -------------  --------------
Operating Profit ( Loss)                       6%            (45)%            1%           (27)%
Other Income  (Expense)                       (7)%            (7)%          (10)%           (7)%
                                        --------------  --------------  -------------  --------------
Net loss before Extraordinary Item            (1)%           (52)%           (9)%          (34)%
Extraordinary Item                             -              59%             -             21%
Net Loss                                      (1)%             7%            (9)%          (13)%
                                        ==============  ==============  =============  ==============
</TABLE>


Revenues

     Revenues  for the three  months ended  September  30, 1997 were  $9,889,309
compared to  $3,097,897  in the 1996 period,  an increase of $6,791,412 or 219%.
The increase in revenues over last year is primarily due to the inclusion of the
UST Group of Companies acquired on October 25, 1996, the  "Acquisition".  In the
third  quarter,  revenues  were also  favorably  impacted  by the  addition of a
construction  management group which generated over $1,000,000 of revenue in its
first quarter of operation.

     For the nine months ended September 30, 1997,  revenues totaled $25,407,707
compared to $8,638,503 in the 1996 period,  an increase of  $16,769,204  or 194%
Revenues for the nine-month  period ended  September 30, 1997 included  $117,169
and  $1,884,361 of revenues from the Company's  Canadian  operations and USTMAN,
respectively, both of which were sold in 1997.



                                     Page 7

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


Cost of  Sales

     Cost of sales for the three months ended  September 30, 1997 was $7,410,762
(75% of revenue)  compared to  $1,915,355  (62% of revenue) for the three months
ended September 30, 1996, an increase of $5,495,407 , or 287%.  Gross margin was
$2,478,547  (25% of revenue) for 1997,  compared to $1,182,542  (38% of revenue)
for 1996.  Gross margin as a percentage of sales  decreased from 38% of revenues
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.

     For the nine  months  ended  September  30,  1997,  cost of  sales  totaled
$19,211,475   compared  to  $5,447,412  in  the  1996  period,  an  increase  of
$13,764,063 or 253%. Gross margin as a percentage of sales decreased from 37% of
revenues in 1996 to 24% of sales in 1997.


Selling, General and Administrative

     Selling,  general and  administrative  expense for the three  months  ended
September 30, 1997 was  $1,853,215 or 19% of revenues  compared to $1,729,720 in
1996 or 56% of revenue,  an increase of $123,495 or 7%. The increase in selling,
general, and administrative expenses was due to the Acquisition. The decrease in
the percentage of sales from 56% to 19% is due to the cost  efficiencies and the
higher overall volume of revenues realized as a result of the Acquisition.

     For the  nine  months  ended  September  30,  1997,  selling,  general  and
administrative  expense  totaled  $5,971,560  compared to $4,702,238 in the 1996
period, an increase of $1,269,322 or 27%. The increase in selling,  general, and
administrative  expenses  was  due  to  the  Acquisition.  The  decrease  in the
percentage of sales from 54% to 23% is due to the cost efficiencies realized and
the higher overall volume of revenues in conjunction with the Acquisition.

1996 Impairment of Long-lived Assets and Extraordinary Gain

     In the third quarter of 1996, the Company recorded an extraordinary gain of
$1,813,149 related to the retirement of a note payable in the original principle
amount of  $2,450,000.  The note was  incurred  in 1994 and was  related  to the
purchase of assets from a third party.  Also in the third  quarter,  the Company
recorded  a  non-recurring  write  down  of the  assets  purchased  in the  1994
transaction  in the amount of $833,321 The Company  incurred  this write down in
value due to its  determination  that there had been a permanent  decline in the
value of these assets.


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

     For the three months ended September 30, 1997 EBITDA, was $1,537,458 or 16%
of revenues  compared to negative  EBITDA  (excluding  the impact in 1996 of the
non-recurring  asset  write  down and the  extraordinary  gain  noted  above) of
$164,967 or 5% of revenues in 1996. For the nine months ended September 30, 1997
EBITDA  was  $3,156,858,  or  12%  of  revenues,  compared  to  negative  EBITDA
(excluding  the  impact in 1996 of the  non-recurring  asset  write down and the
extraordinary  gain noted above) of $395,103,  or 5% of revenues,  in 1996.  The
increase in EBITDA in both periods (as adjusted) of $1,702,425  and  $3,551,961,
respectively, was due to the cost efficiencies realized as a result of combining
the operations of the UST Group and Tanknology-NDE  International,  Inc. USTMAN,
which was sold on May 22, 1997, contributed  approximately $618,000 of EBITDA in
the nine-months ended September 30, 1997.

Interest Income

     Interest  income for the three and nine-month  periods ended  September 30,
1997 was $66,202 (1% of  revenues)  compared  to $37 for the  nine-month  period
ended  September 30, 1996.  The increase in income in both periods for 1997 from
the prior year was due to interest income on the restricted cash balance.


                                     Page 8

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


Interest Expense

     Interest  expense for the three and nine-month  periods ended September 30,
1997 was $810,570 (8% of revenues) and $2,481,934 (10% of revenue) respectively,
compared to $225,808  (7% of  revenues)  and  $593,285  (7% of revenue)  for the
respective three and nine-month periods in 1996. The increase in expense in both
periods  of 1997 from the prior  year was due to  interest  on  additional  debt
incurred to finance the Acquisition.


Net Loss

     For the three months ended  September 30, 1997, the Company  incurred a net
loss of $119,636 a decrease  of  $326,478 or 158%  compared to the net profit of
$206,842  for the three  months ended  September  30, 1996.  The 1996 period was
impacted by the non-recurring  write down of assets and the  extraordinary  gain
noted above.  Excluding both of these unusual items,  the net loss for the three
months ended September 30, 1996 was $772,986 compared to the current period loss
of $119,636 a decrease of $653,350 or 85%.  The net loss for the current  period
also includes  amortization  costs of $383,244  with no prior year  counterpart.
Components directly attributable to the Acquisition are: $55,485 of amortization
of  deferred   financing   costs,   $117,509  of  amortization  of  discount  of
subordinated  debt,  $10,000 of  amortization  of a  non-compete  covenant,  and
estimated accretion of the value of the Warrants with Put Option of $200,250.

     For the nine-months  ended  September 30, 1997, the Company  incurred a net
loss of $2,216,960  an increase of $1,092,393 or 97%,  compared to a net loss of
$1,124,567  for the nine-month  period ended  September  30,1996.  Excluding the
impact of the non-recurring write down of assets and the extraordinary gain, the
net loss for the nine months ended September 30, 1996 was $2,104,395 compared to
the current year net loss of $2,216,960,  an increase of $112,565 or 5%. The net
loss for the current period also includes  amortization costs of $1,255,454 with
no prior year counterpart.  Components directly  attributable to the Acquisition
are:  $124,232 of goodwill  amortization  expense,  $166,455 of  amortization of
deferred  financing costs,  $334,017 of amortization of discount of subordinated
debt, $30,000 of amortization of a non-compete covenant, and estimated accretion
of the value of the  Warrants  with Put Option of $600,750.  USTMAN  contributed
approximately $332,000 of net income in 1997.


Liquidity and Capital Resources

     At  September  30,  1997,  the Company had  working  capital of  $2,832,133
compared to working capital of $101,162 at December 31, 1996.

     Cash used in operating  activities was $2,884,906 for the nine months ended
September 30, 1997 and was used primarily to fund an increase in receivables and
payments of accrued liabilities of $2,386,785  including payments of acquisition
related liabilities of approximately $1,291,000.

     Cash provided by investing  activities  was  $5,543,913 for the nine months
ended  September  30, 1997  compared  to cash used in  investing  activities  of
$205,007  in  the  1996  period.   On  February  20,  1997,   the  Company  sold
substantially  all of the operating  assets of its Canadian  operation  that had
been acquired as part of the Acquisition in 1996. 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 Company
retained  all  of the  working  capital  of  the  Canadian  subsidiary  and  has
substantially  liquidated this working capital and redirected these funds to its
U.S.  operation.  For the nine months  ended  September  30,  1997,  the Company
expended  $1,729,250  for  capital  expenditures  compared  to  $458,597  in the
comparable 1996 period. The increase in capital  expenditures is a result of the
Company's  plan to increase its investment for upgrading and adding to its fleet
of  vehicles  and to  invest  substantially  in data  processing  equipment  and
software to improve the  efficiency of its  operation.  The Company  anticipates
that these investments will result in cost efficiencies, better customer service
and additional capacity to take advantage of additional business opportunities.


                                     Page 9

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


     On May 22,1997,  the Company sold USTMAN for  $5,250,000  in cash and an 8%
note for  $500,000  (the  "Note")  due in one  year.  All cash on hand at USTMAN
immediately  prior to the closing of the  transaction  was also  retained by the
Company.  The sale agreement also provides for a further  payment to the Company
relating  to a  post-closing  adjustment  based  upon  certain  working  capital
calculations.  As a  condition  of  approval  of  the  sale  transaction  by the
Company's  senior bank and  subordinated  debt  holder,  three  million  dollars
($3,000,000) of the cash proceeds have been placed in a restricted  account with
the  Company's  senior bank and will be held as collateral  against  outstanding
loans until the Company identifies  appropriate  investment  opportunities.  The
Note is also pledged to the bank and subordinated debt holder as collateral. The
remaining $2,250,000 of cash proceeds from the sale was used to pay down amounts
due under it's revolving  credit line. The Company did not recognize any gain or
loss on the  transaction  as the  excess  of the  purchase  price  over  the net
tangible  assets  sold  was  used  to  reduce   goodwill   associated  with  the
Acquisition.

     At  September  30,  1997,  the  Company  had  outstanding   long-term  debt
(including  current  maturities)  of  $14,568,220  compared  to  $16,155,575  at
December 31,  1996.  The decrease of  $1,587,355  was due  primarily to required
principle  payments on bank term debt of $900,000 and the $2,250,000 pay down on
the revolving credit line from the proceeds of the sale of USTMAN.  At September
30, 1997 the Company had $1,450,000  outstanding under its revolving credit line
and had $2,500,000 available for additional borrowing under its revolving credit
agreement.  As of  September  30,1997,  the Company was in  compliance  with the
financial debt covenants related to its long-term financing agreements.

     The Company believes that cash on hand, funds from operations and available
bank credit will be  sufficient to fund  operations,  including  scheduled  debt
repayments and capital expenditures for the foreseeable future.

     This Form 10QSB 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 10KSB page 13  "Management  Discussion and Analysis" for the
fiscal year ended December 31, 1996.



                                     Page 10

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.


PART II           OTHER INFORMATION

Item 4. Submission of Matters to a vote of Security Holders

     The 1997  annual  meeting of the  stockholders  of the  Company was held on
August 14, 1997. The following directors were elected at the meeting:  Jay Allen
Chaffee; Charles C. McGettigan; A. Daniel Sharplin;  Michael S. Taylor; Myron A.
Wick III; and Mark A. Bober

The following matters were voted on at the meeting:

1. Proposal to amend the  Certificate of  Incorporation  to change the Company's
name to Tanknology-NDE International, Inc.

             For            Against          Abstain
        ------------     ------------     ------------
         15,105,996          640                45

2. Election of Directors:
                                              For            Withheld
                                           ----------       ----------
         Jay Allen Chaffee                 15,091,581         15,100
         Charles C. McGettigan             15,106,591             90
         A. Daniel Sharplin                15,106,581            100
         Michael S. Taylor                 15,106,591            130
         Myron A. Wick III                 15,106,591             90
         Mark A. Bober                     15,106,591             90

3.  Proposal  to amend  and  restate  the  Company's  1989  Stock  Option  Plan,
increasing the number of shares reserved thereunder from 2,500,000 to 6,000,000.


             For            Against          Abstain          Not Voted
        ------------     ------------     ------------      ------------
         15,065,372         16,580            3,073            21,386

4.  Proposal  to  ratify  selection  of Ernst & Young  L.L.P.  as the  Company's
independent public accountants for 1997:


             For            Against          Abstain
        ------------     ------------     ------------
        15,106,041           240               400


Item 6.  Exhibits and Reports on Form 8-K

     None


                                     Page 11

<PAGE>


                       TANKNOLOGY-NDE INTERNATIONAL, INC.



                                   SIGNATURES

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



                                   TANKNOLOGY-NDE INTERNATIONAL, INC.
                                             (Registrant)

Date:  November 17, 1997               /s/ DAVID G. OSOWSKI
                                   ---------------------------------------------
                                   David G. Osowski
                                   Vice President and Chief Financial Officer



                                     Page 12