U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)

[X]  Quarterly  Report Under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 for the quarterly period ended June 30, 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 June 30, 1997
------------------      ---------------------------------------------
      Common                             15,978,610


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



                                     Page 1

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES





                                      INDEX



                                                                            Page
                                                                            ----


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

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

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

                Condensed Consolidated Statements of Operations
                Three Months and Six Months Ended June 30, 1997 and 1996...    4

                Condensed Consolidated Statements of Cash Flows
                Six Months Ended June 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..........................................    9

       Item 6.  Exhibits and Reports on Form 8-K...........................    9


SIGNATURES.................................................................   10



                                     Page 2

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                      CONDENSED CONSOLIDATED BALANCE SHEETS

PART I   FINANCIAL INFORMATION

Item 1.   Financial Statements
<TABLE>
<CAPTION>

                                                                                June 30, 1997   December 31, 1996
                                                                                -------------   -----------------
                                                                                 (Unaudited)

ASSETS

<S>                                                                             <C>               <C>         
     Cash ...................................................................   $    422,983      $  2,412,233
     Restricted cash ........................................................      3,000,000              --
     Trade accounts receivable, less allowance for doubtful
         accounts of $844,155 in 1997 and $837,480 in 1996 ..................      6,476,013         5,735,550
     Inventories ............................................................        502,251           367,362
     Prepaid expenses and other current assets ..............................      1,649,361         1,578,097
                                                                                ------------      ------------
Total Current Assets ........................................................     12,050,608        10,093,242

     Equipment and improvements, net of accumulated
         depreciation of $7,814,413 in 1997 and $7,611,234 in 1996 ..........      4,508,764         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 $971,122 in 1997 and $773,140 in 1996 ..............      1,802,176         3,374,962
     Deferred  financing costs ..............................................        811,454           922,424
                                                                                ------------      ------------
         Total Assets .......................................................   $ 19,173,002      $ 25,049,636
                                                                                ============      ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

     Accounts payable .......................................................   $  1,465,163      $  1,673,470
     Accrued liabilities ....................................................      3,198,724         4,885,260
     Accrued payroll and payroll taxes ......................................      1,375,503         1,469,786
     Current portion of long-term debt ......................................      2,636,460         1,963,564
                                                                                ------------      ------------
         Total Current Liabilities ..........................................      8,675,850         9,992,080
  
     Long term debt, less current portion ...................................     11,345,534        14,192,011

     Warrants with put option ...............................................      2,000,500         1,600,000
                                                                                ------------      ------------
         Total Liabilities ..................................................     22,021,884        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 June 30, 1997, and December 31,
         1996  ..............................................................          1,598             1,598
     Additional paid-in capital .............................................     27,578,446        27,578,446
     Accumulated deficit ....................................................    (30,399,698)      (28,302,374)
     Cumulative foreign currency translation adjustment .....................        (34,228)          (17,125)
                                                                                ------------      ------------
     Total Stockholders' Deficit ............................................     (2,848,882)         (734,455)
                                                                                ------------      ------------
Total Liabilities and Stockholders' Deficit .................................   $ 19,173,002      $ 25,049,636
                                                                                ============      ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                     Page 3

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                            Three Months Ended                Six Months Ended
                                      ------------------------------    ------------------------------
                                      June 30, 1997   June 30, 1996     June 30, 1997   June 30, 1996
                                      --------------  --------------    --------------  --------------

<S>                                   <C>             <C>               <C>             <C>           
Revenues ..........................   $    8,055,755  $    2,978,239    $   15,518,398  $    5,540,606

Cost of sales .....................        6,198,605       1,771,707        11,800,713       3,532,057
                                      --------------  --------------    --------------  --------------
     Gross Margin .................        1,857,150       1,206,532         3,717,685       2,008,549

Selling, general and administrative        2,047,901       1,447,664         4,118,345       2,972,518
                                      --------------  --------------    --------------  --------------

     Operating Loss ...............   $     (190,751) $     (241,132)   $     (400,660) $     (963,969)

Other income (expense):

 Interest income ..................             --                37             --                 37

 Interest expense .................         (826,218)       (188,314)       (1,671,364)       (367,477)
                                      --------------  --------------    --------------  --------------

     Net loss before Provision for
     Income Taxes .................       (1,016,969)       (429,409)       (2,072,024)     (1,331,409)

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

     Net Loss .....................   $   (1,016,969) $     (429,409)   $   (2,097,324) $   (1,331,409)
                                      ==============  ==============    ==============  ==============


     Net loss per share ...........   $        (0.06) $        (0.06)   $        (0.13) $        (0.29)
                                      ==============  ==============    ==============  ==============

     Weighted average number of
     shares outstanding ...........       15,978,610       6,713,479        15,978,610       4,558,601
                                      ==============  ==============    ==============  ==============


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


                                     Page 4

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

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

                                                        June 30, 1997    June 30, 1996
                                                        -------------    -------------

Cash Flows from Operating Activities

<S>                                                     <C>              <C>           
     Net loss .......................................   $  (2,097,324)   $  (1,331,409)

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

     Depreciation  and amortization .................       2,020,060          733,833
     Amortization of discounts and financing costs ..         727,978           62,809
     Gain on sale of assets .........................         (29,758)        (199,711)
     Write down of assets ...........................          16,396            --
     Other ..........................................         (17,103)           --

Changes in Operating Assets and Liabilities:

     (Increase) decrease in trade accounts receivable        (740,463)         405,438
     Increase in inventories ........................        (134,889)        (160,713)
     Decrease in prepaid expenses and other current
         assets .....................................          10,459          167,457
     Increase (decrease) in accounts payable ........        (208,307)         261,743
     Decrease in accrued liabilities ................      (1,686,536)        (586,018)
     Decrease in accrued payroll and
         payroll taxes ..............................         (94,283)         (27,028)
                                                        -------------    -------------
     Net cash used in operating activities ..........      (2,233,770)        (673,599)

Cash Flows from Investing Activities

     Proceeds from sale of USTMAN ...................       5,250,000            --
     Proceeds from sale of licenses .................       1,147,500            --
     Additions to equipment and improvements ........        (837,193)        (312,309)
     Proceeds from sale of equipment ................          79,758          253,590
     Other ..........................................          (5,456)           --
                                                        -------------    -------------
     Net cash provided by(used in) investing
         activities .................................       5,634,609          (58,719)

Cash Flows from Financing Activities

     Payments on line of credit .....................           --             (26,442)
     Proceeds from long-term debt ...................       1,450,000            --
     Payments on long-term debt .....................      (3,840,089)        (394,390)
     Proceeds from issuance of notes payable ........           --             850,000
                                                        -------------    -------------
     Net cash provided by (used in) financing
         activities .................................      (2,390,089)         429,168

     Net increase (decrease) in cash ................       1,010,750         (303,150)

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

                                                        -------------    -------------
     Cash  at end of period .........................   $   3,422,983    $      23,885
                                                        =============    =============
</TABLE>

                                     Page 5

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1:  ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS

     Basis  of  Presentation:  The  financial  statements  of 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 six month periods ended June 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 June 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.

                                     Page 6

<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 revenues of
certain items  included in the company's  statement of operations  for the three
month  and six month  periods  ended  June 30,  1997 and 1996.  The  results  of
operations  for both periods  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       Six Months Ended
                                  --------------------    --------------------

                                  June 30,    June 30,    June 30,    June 30,
                                    1997        1996        1997        1996
                                  --------    --------    --------    --------

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

Cost of Sales ................        77 %        59 %        76 %        64 %
                                  --------    --------    --------    --------

Gross Margin .................        23 %        41 %        24 %        36 %

Selling, General and  Admin...        26 %        49 %        27 %        54 %

                                  --------    --------    --------    --------
Operating Loss ...............        (3)%        (8)%        (3)%       (18)%

Interest Expense .............        10 %         6 %        11 %         7 %

Net Loss .....................       (13)%       (14)%       (14)%       (25)%
                                  ========    ========    ========    ========
</TABLE>



Revenues

     Revenues for the three months ended June 30, 1997 were $8,055,755  compared
to  $2,978,239  in the 1996  period,  an increase  of  $5,077,516  or 171%.  The
increase in revenues  over last year is due to the inclusion of the UST Group of
Companies  acquired  on October 25,  1996,  the  "Acquisition".  Revenues in the
second quarter of 1997 included  $422,696 of revenues from the Company's  USTMAN
Industries ("USTMAN") subsidiary which was sold on May 22, 1997.

     For the six  months  ended  June 30,  1997,  revenues  totaled  $15,518,398
compared to  $5,540,606  in the 1996 period,  an increase of $9,977,792 or 180%.
Revenues  for the  six-month  period ended June 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.


Cost of  Sales

     Cost of sales for the three months ended June 30, 1997 was $6,198,605  (77%
of revenue)  compared to $1,771,707  (59% of revenue) for the three months ended
June 30, 1996, an increase of $4,426,898,  or 250%.  Gross margin was $1,857,150
(23% of revenue)  for 1997,  compared to  $1,206,532  (41% of revenue) for 1996.
Gross margin as a percentage of sales  decreased from 41% of revenues in 1996 to
23% 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 six months ended June 30, 1997,  cost of sales totaled  $11,800,713
compared to  $3,532,057  in the 1996 period,  an increase of $8,268,656 or 234%.
Gross margin as a percentage of sales  decreased from 36% of revenues in 1996 to
24% of sales in 1997.


                                     Page 7

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


Selling, General and Administrative

     Selling, general and administrative expense for the three months ended June
30, 1997 was $2,047,901 or 26% of revenues compared to $1,447,664 in 1996 or 49%
of revenue,  an increase of $600,237 or 41%. The  increase in selling,  general,
and  administrative  expenses  was due to the  Acquisition.  The decrease in the
percentage  of sales  from 49% to 26% is due to the  cost  efficiencies  and the
higher overall volume of revenues realized as a result of the Acquisition.

     For the six months ended June 30, 1997, selling, general and administrative
expense  totaled  $4,118,345  compared  to  $2,972,518  in the 1996  period,  an
increase  of  $1,145,827  or  39%.  The  increase  in  selling,   general,   and
administrative  expenses  was  due  to  the  Acquisition.  The  decrease  in the
percentage of sales from 54% to 27% is due to the cost efficiencies realized and
the higher overall volume of revenues in conjunction with the Acquisition.


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

     For the three  months  ended June 30,  1997  EBITDA was  $859,352 or 11% of
revenues  compared to  $125,139  or 4% of  revenues in 1996.  For the six months
ended June 30,  1997  EBITDA was  $1,619,400,  or 10% of  revenues,  compared to
negative EBITDA of $230,136, or a negative 4% of revenues, in 1996. The increase
in EBITDA in both periods of $734,213 and $1,849,536,  respectively,  was due to
the cost  efficiencies  realized as a result of combining the  operations of the
UST  Group  and  NDE.  USTMAN,  which  was  sold  on May 22,  1997,  contributed
approximately $618,000 of EBITDA in the six- months ended June 30, 1997.


Interest Expense

     Interest  expense for the three and  six-month  periods ended June 30, 1997
was $826,218 (10% of revenues)  and  $1,671,364  (11% of revenue)  respectively,
compared to $188,314  (6% of  revenues)  and  $367,477  (7% of revenue)  for the
respective three and six-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 June 30, 1997,  the Company  incurred a net loss
of  $1,016,969,  an increase  of  $587,560  or 137%  compared to the net loss of
$429,409 for the three months ended June 30, 1996.  The net loss for the current
period includes  amortization  costs of $418,228 with no prior year counterpart.
Components  directly  attributable to the Acquisition  are:  $41,266 of goodwill
amortization  expense,  $55,485 of  amortization  of deferred  financing  costs,
$111,227  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.  USTMAN  contributed  approximately
$148,000 to the net loss for the period.

     For the six-months  ended June 30, 1997, the Company incurred a net loss of
$2,097,324,  an  increase  of  $765,915,  or  58%,  compared  to a net  loss  of
$1,331,409  for the six-month  period ended June  30,1996.  The net loss for the
current  period  includes  amortization  costs of  $872,210  with no prior  year
counterpart.  Components directly  attributable to the Acquisition are: $124,232
of goodwill amortization expense, $110,970 of amortization of deferred financing
costs,  $216,508 of amortization of discount of  subordinated  debt,  $20,000 of
amortization of a non-compete covenant,  and estimated accretion of the value of
the  Warrants  with Put Option of  $400,500.  USTMAN  contributed  approximately
$332,000 of net income for the period.


Liquidity and Capital Resources

     At June 30, 1997, the Company had working capital of $3,374,758 compared to
working capital of $101,162 at December 31, 1996.


                                     Page 8

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES


     Cash used in operating  activities  was $2,233,770 for the six months ended
June 30, 1997 and was used  primarily  to fund an increase  in  receivables  and
payments of accrued liabilities of $1,686,536  including payments of acquisition
related liabilities of $1,059,167.

     Cash provided by investing  activities  was  $5,634,609  for the six months
ended June 30, 1997 compared to cash used in investing  activities of $58,719 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 is in the process of  liquidating  this
working capital and redirecting these funds to its U.S. operation.

     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 June 30, 1997, the Company had  outstanding  long-term  debt  (including
current maturities) of $13,981,944 compared to $16,155,575 at December 31, 1996.
The decrease of $2,173,631 was due primarily to required  principle  payments on
bank term debt of $300,000 and the  $2,250,000  paydown on the revolving  credit
line from the  proceeds of the sale of USTMAN.  At June 30, 1997 the Company had
$700,000  outstanding  under  its  revolving  credit  line  and  had  $2,188,829
available for additional  borrowing under its revolving credit agreement.  As of
June 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.


PART II  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

     On June 6, 1997, the Company filed a Current Report on Form 8-K to disclose
the sale of it's USTMAN Industries subsidiary on May 22, 1997. USTMAN Industries
was part of the UST Group of companies  which were  acquired on October 25, 1996
from TEI, Inc., formerly known as Tanknology Environmental, Inc.



                                     Page 9

<PAGE>


                 NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES



                                   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, thereunto duly
authorized.



                                          NDE ENVIRONMENTAL CORPORATION
                                                    (Registrant)

Date:  August 14, 1997                         /s/ DAVID G. OSOWSKI
                                    -------------------------------------------
                                    David G. Osowski
                                    Vice President and Chief Financial Officer


                                     Page 10