<PAGE>

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                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549
                           -----------------------------
   
                                     FORM 10-Q

     (MARK ONE)

     /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarterly period ended December 31, 1998

                                         OR

     / /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the transition period from _______________to_________________

                           Commission File Number 0-16821

                                 UTILX CORPORATION
               (Exact Name of Registrant as Specified in Its Charter)

       DELAWARE                                       91-1171716
(State of Incorporation)               (I.R.S. Employer Identification Number)

      22820 RUSSELL ROAD (98032)
           P. O. BOX 97009
    KENT, WASHINGTON  98064-9709                      (253) 395-0200
(Address of Principal Executive Offices)     (Registrant's Telephone Number)

Indicate by check mark whether the Registrant has (1) filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) been subject to such 
filing requirements for the past 90 days.  Yes  X   No
                                              -----   -----

As of December 31, 1998, 7,425,560, shares of Common Stock were outstanding.

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

     ITEM                                                                                           PAGE
     ----                                                                                           ----
<S>  <C>                                                                                            <C>
                                     PART I
                              FINANCIAL INFORMATION

1.   Financial Statements

     Consolidated Balance Sheet
     December 31, 1998 and March 31, 1998........................................................     3

     Consolidated Statement of Operations
     For the Three Months Ended
     December 31, 1998 and 1997..................................................................     4

     Consolidated Statement of Operations
     For the Nine Months Ended
     December 31, 1998 and 1997..................................................................     5

     Consolidated Statement of Cash Flows
     For the Nine Months Ended
     December 31, 1998 and 1997..................................................................     6

     Notes to Consolidated Financial Statements..................................................     7

2.   Management's Discussion and Analysis of Financial
         Condition and Results of Operations.....................................................    10

3.   Quantitative and Qualitative Disclosure About Market Risks..................................    16

                                 PART II
                            OTHER INFORMATION

1.   Legal Proceedings...........................................................................    16

2.   Changes in Securities and Use of Proceeds...................................................    16

3.   Defaults Upon Senior Securities.............................................................    16

4.   Submission of Matters to a Vote of Security Holders.........................................    16

5.   Other Information...........................................................................    17

6.   Exhibits and Reports on Form 8-K............................................................    17

     Signatures..................................................................................    18

     Exhibit Index

</TABLE>
                                      2
<PAGE>

PART I - FINANCIAL INFORMATION
         ITEM 1.  FINANCIAL STATEMENTS

                                UTILX CORPORATION

                            CONSOLIDATED BALANCE SHEET
                          DECEMBER 31 AND MARCH 31, 1998
                           (IN THOUSANDS, EXCEPT SHARES)
                                     ASSETS
<TABLE>
<CAPTION>

                                                                                   DECEMBER 31            MARCH 31
                                                                                   -----------            --------
<S>                                                                                <C>                    <C>
Current assets:                                                                    (UNAUDITED)
     Cash and cash equivalents.............................................         $     670             $    528
     Accounts receivable, trade............................................            13,436               19,720
     Materials, supplies and inventories...................................             8,253                8,839
     Income taxes receivable...............................................               456                  433
     Prepaid expenses and other............................................               373                  284
                                                                                    ---------             --------
         Total current assets .............................................            23,188               29,804

Equipment and improvements, net............................................            13,456               13,091
Other assets, net..........................................................               377                  584
                                                                                    ---------             --------
         Total assets .....................................................         $  37,021             $ 43,479
                                                                                    ---------             --------
                                                                                    ---------             --------

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Note payable to bank..................................................         $   5,280            $   5,245
     Current portion of capital lease obligations..........................             1,061                  839
     Accounts payable......................................................             2,072                3,993
     Accrued liabilities...................................................             6,142                5,475
                                                                                    ---------            ---------
         Total current liabilities.........................................            14,555               15,552

Capital lease obligations, net of current portion..........................             2,464                2,224
Other long-term liabilities................................................               910                  872
                                                                                    ---------            ---------
            Total liabilities..............................................            17,929               18,648
                                                                                    ---------            ---------

Commitments and Contingencies (Note 6):

Stockholders' equity:
     Common Stock, $0.01 par value
         (authorized 25,000,000 shares)....................................                74                   74
     Additional paid-in capital............................................            18,521               18,469
     Retained earnings.....................................................             1,038                6,790
     Cumulative foreign currency translation adjustment....................              (541)                (502)
                                                                                    ---------            ---------
         Total stockholders' equity........................................            19,092               24,831
                                                                                    ---------            ---------
              Total liabilities and stockholders' equity...................         $  37,021            $  43,479
                                                                                    ---------            ---------
                                                                                    ---------            ---------

     Common Stock issued and outstanding...................................         7,418,666            7,407,760

</TABLE>

               (See Notes to Consolidated Financial Statements)

                                      3
<PAGE>

                              UTILX CORPORATION

                     CONSOLIDATED STATEMENT OF OPERATIONS
             FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       1998                  1997
                                                                                       ----                  ----
<S>                                                                                 <C>                   <C>
Revenues......................................................................      $  17,065             $  22,577
Cost of revenues..............................................................         17,822                19,354
                                                                                    ---------             ---------

     Gross profit.............................................................           (757)                3,223
                                                                                    ---------             ---------

Operating expenses:
     Selling, general and administrative......................................          2,697                 2,167
     Research and engineering                                                             193                   156
                                                                                    ---------             ---------
         Total operating expenses.............................................          2,890                 2,323
                                                                                    ---------             ---------

Operating income (loss) ......................................................         (3,647)                  900

Other expense, net............................................................           (210)                 (145)
                                                                                    ---------             ---------

Income (loss) before income taxes.............................................         (3,857)                  755
Income tax provision..........................................................              0                     0
                                                                                    ---------             ---------

Net income (loss).............................................................      $  (3,857)            $     755
                                                                                    ---------             ---------
                                                                                    ---------             ---------

Earnings( loss) per share (Note 2):
     Basic....................................................................      $    (.52)            $     .10
     Diluted..................................................................      $    (.52)            $     .10


CALCULATION OF COMPREHENSIVE INCOME (LOSS):

     Net Income (loss)........................................................      $  (3,857)            $     755
     Change in cumulative foreign currency
              translation adjustment, net.....................................            (95)                   44
                                                                                    ---------             ---------
     Comprehensive Income (loss)..............................................      $  (3,952)            $     799
                                                                                    ---------             ---------
                                                                                    ---------             ---------
</TABLE>

                  (See Notes to Consolidated Financial Statements)

                                      4
<PAGE>

                               UTILX CORPORATION

                       CONSOLIDATED STATEMENT OF OPERATIONS
                FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       1998                  1997
                                                                                       ----                  ----
<S>                                                                                 <C>                   <C>
Revenues......................................................................      $  57,974             $  62,078
Cost of revenues..............................................................         55,722                55,119
                                                                                    ---------             ---------

     Gross profit.............................................................          2,252                 6,959
                                                                                    ---------             ---------

Operating expenses:
     Selling, general and administrative......................................          6,977                 6,022
     Research and engineering.................................................            547                   443
                                                                                    ---------             ---------

         Total operating expenses.............................................          7,524                 6,465
                                                                                    ---------             ---------

Operating income (loss) ......................................................         (5,272)                  494

Other expense, net............................................................           (472)                 (326)
                                                                                    ---------             ---------

Income (loss) before income taxes.............................................         (5,744)                  168
Income tax provision..........................................................              0                     1
                                                                                    ---------             ---------

Net income (loss).............................................................      $  (5,744)            $     167
                                                                                    ---------             ---------
                                                                                    ---------             ---------
Earnings( loss) per share (Note 2):
     Basic....................................................................      $    (.77)            $     .02
     Diluted..................................................................      $    (.77)            $     .02


CALCULATION OF COMPREHENSIVE INCOME (LOSS):

     Net Income (loss)........................................................      $  (5,744)            $     167
     Change in cumulative foreign currency
              translation adjustment, net.....................................            (39)                    4
                                                                                    ---------             ---------
     Comprehensive Income (loss)..............................................      $  (5,783)            $     171
                                                                                    ---------             ---------
                                                                                    ---------             ---------

</TABLE>

               (See Notes to Consolidated Financial Statements)

                                      5
<PAGE>


                               UTILX CORPORATION

                       CONSOLIDATED STATEMENT OF CASH FLOWS
                FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                (IN THOUSANDS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                       1998                  1997
                                                                                       ----                  ----
<S>                                                                                 <C>                   <C>
OPERATING ACTIVITIES:
     Net income (loss)........................................................      $  (5,744)            $     167

      Adjustments to reconcile to net cash provided by (used in) operating
      activities:
         Depreciation and amortization........................................          3,454                 3,017
         Other non-cash expenses, net ........................................             37                    54
         Changes in assets and liabilities....................................          6,230                (3,704)
                                                                                    ---------             ---------

         Total adjustments....................................................          9,721                  (633)
                                                                                    ---------             ---------

              Net cash provided by (used in) operating activities.............          3,977                  (466)
                                                                                    ---------             ---------

INVESTING ACTIVITIES:
     Cost of additions to equipment...........................................         (2,504)               (2,936)
     Proceeds from sale of equipment..........................................             42                     0
                                                                                    ---------             ---------

              Net cash used in investing activities...........................         (2,462)               (2,936)
                                                                                    ---------             ---------

FINANCING ACTIVITIES:
     Net borrowings on note payable...........................................             35                 2,475
     Issuance of Common Stock.................................................             52                   117
     Net decrease in book overdraft...........................................           (742)                    0
     Principal payments on capital leases.....................................           (712)                 (148)
                                                                                    ---------             ---------

              Net cash provided by (used in) financing activities.............         (1,367)                2,444
                                                                                    ---------             ---------

EFFECT ON CASH FLOWS
   OF CHANGES IN EXCHANGE RATES...............................................             (6)                    8
                                                                                    ---------             ---------

     Net increase (decrease) in cash and cash equivalents.....................            142                  (950)

CASH AND CASH EQUIVALENTS:
     Beginning of period......................................................            528                 1,490
                                                                                    ---------             ---------

     End of period............................................................      $     670             $     540
                                                                                    ---------             ---------
                                                                                    ---------             ---------


</TABLE>

                (See Notes to Consolidated Financial Statements)

                                      6
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1.   FINANCIAL STATEMENT PRESENTATION

In the opinion of management of the Company, the accompanying unaudited 
consolidated financial statements contain all adjustments (consisting of only 
normal recurring accruals) necessary to present fairly the financial position 
and operating results for the three month and nine-month periods ending 
December 31, 1998 and 1997.  The statements should be read in conjunction 
with the March 31, 1998 audited consolidated financial statements included in 
the fiscal 1998 Annual Report on Form 10-K.

In June 1997 the FASB issued SFAS No. 131, "Disclosure about Segments of an 
Enterprise and Related Information" ("FAS 131").  FAS 131 establishes 
standards for disclosures about operating segments in annual financial 
statements and selected disclosures about operating segments in annual 
financial statements and selected information in interim financial reports.  
It also establishes standards for related disclosures about products and 
services, geographic areas and major customers.  FAS 131 supersedes FAS No. 
14, "Financial Reporting for Segments of a Business Enterprise."  FAS 131 is 
effective for the year ending March 31, 1999 and requires restatement of 
earlier periods presented.  The impact on disclosures in the Company's 
financial statements of adopting FAS 131 has not been determined. 

2.   EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) by 
the weighted average number of shares of Common Stock of UTILX Corporation, 
$0.01 par value per share (the "Common Stock") outstanding during the period. 
Diluted earnings (loss) per share is computed by dividing net income (loss) 
by the sum of the weighted average number of shares of Common Stock and, when 
dilutive, common stock equivalents outstanding during the period. Common 
stock equivalents include shares issuable upon exercise of the Company's 
stock options and certain warrants, net of the number of shares repurchasable 
on the open market with proceeds from the exercise of such options and 
warrants.

Earnings (loss) Per Share is calculated as follows:
Basic earnings (loss) per common share:

<TABLE>
<CAPTION>

                                               Three Months Ended           Nine Months Ended
                                                  December 31,                 December 31,
                                              1998            1997          1998           1997
                                              ----            ----          ----           ----
<S>                                          <C>             <C>           <C>             <C>
Net income (loss)                            (3,857)            755        (5,744)           167

Divided by weighted average common
shares outstanding                             7,426          7,208         7,419          7,194

Basic earnings (loss) per common share          (.52)           .10          (.77)           .02

</TABLE>

                                      7
<PAGE>

Diluted earnings (loss) per common share:

<TABLE>
<CAPTION>

                                               Three Months Ended            Nine Months Ended
                                                   December 31,                December 31,
                                              1998            1997          1998           1997
                                              ----            ----          ----           ----
<S>                                          <C>            <C>            <C>           <C>
Net income (loss)..................          (3,857)           755         (5,744)          167
                                             ------         ------         ------        ------

Weighted average common shares 
        outstanding................           7,426          7,208          7,419         7,194

Stock options and warrants assumed
        exercised - net, 
        if dilutive                               0            350              0           350
                                             ------         ------         ------        ------

Total diluted shares outstanding...           7,426          7,558          7,419         7,544
                                             ------         ------         ------        ------
                                             ------         ------         ------        ------

Diluted earnings (loss) per 
        common share...............           (.52)            .10           (.77)          .02
                                             ------         ------         ------        ------
                                             ------         ------         ------        ------

</TABLE>


3.  ACCOUNTS RECEIVABLE

Accounts receivable, trade, net consist of the following:

<TABLE>
<CAPTION>

                                                       (In thousands)
                                             December 31, 1998   March 31, 1998
                                             -----------------   --------------
<S>                                          <C>                 <C>
North American customers:
   Completed work not yet billed...........      $  5,708           $  7,299
   Billed but uncollected..................         6,574             11,527
International customers....................         1,641              1,349
Less allowance for doubtful accounts.......          (487)              (455)
                                                 --------           --------
                                                 $ 13,436           $ 19,720
                                                 --------           --------
                                                 --------           --------
</TABLE>

4.       MATERIALS, SUPPLIES AND INVENTORIES

Materials, supplies and inventories consist of the following:

<TABLE>
<CAPTION>

                                                      (In thousands)
                                             December 31, 1998     March 31, 1998
                                             -----------------     --------------
<S>                                          <C>                   <C>
Raw Materials and Spare Part..............       $ 8,544              $ 8,810
Work in Process...........................           278                  684
Finished Goods............................            27                  116
Less allowance for potentially 
       obsolete or overstocked 
       inventory..........................          (596)                (771)
                                                 -------              -------
                                                 $ 8,253              $ 8,839
                                                 -------              -------
                                                 -------              -------

</TABLE>

                                      8
<PAGE>

5.   NOTE PAYABLE TO BANK

The Company has a committed credit facility of $7,500,000 from Seafirst 
National Bank of Washington ("Seafirst"), which initially expired on January 
4, 1999 but was extended to April 4, 1999.  At December 31, 1998, the Company 
was not in compliance with certain financial covenants under this facility 
including tangible net worth, working capital and debt ratio. However, 
subsequent to December 31, 1998, the Company negotiated an extension of the 
line of credit to April 4, 1999 and a modification of terms and covenants. 
The agreement is collateralized by the Company's inventory and accounts 
receivable.  The credit agreement requires that the Company maintain certain 
financial covenants, including requirements to maintain certain levels of 
tangible net worth, working capital and debt ratio. Borrowings bear interest 
at the Seafirst reference rate plus 2%.  The Company pays a commitment fee of 
up to 0.25% on the unused portion of the facility.  At December 31, 1998 and 
March 31, 1998, the Company had an outstanding balance of $5,280,000 and 
$5,245,000, respectively, under this facility at a weighted average borrowing 
rate of 7.75% and 7.69%, respectively.

In addition, at December 31, 1998 the Company had an outstanding $500,000 
letter of credit under this facility, expiring April 15, 1999, to secure 
payments under an insurance policy.  No amounts have been drawn on this 
letter of credit.

The Company has been informed by Seafirst that the existing credit facility 
will not be renewed.  The Company has accepted a proposal from NationsCredit 
Commercial Corporation for a replacement line of credit for up to 
$12,000,000. The lender is completing its due diligence and the Company 
expects to have the replacement credit facility in place prior to April 4, 
1999.

6.   COMMITMENTS AND CONTINGENCIES

FLORIDA SUBCONTRACT SETTLEMENTS.  In December 1998, the Company executed a 
settlement agreement with a subcontractor.  The Company will pay the 
subcontractor $1,000,000 in four equal installments over two years.  The 
subcontractor has agreed to dismiss an ongoing dispute over the amount to be 
paid to the contractor for injection services performed subsequent to April 
1, 1997, and to desist from competing against the Company for seven years.  
The Company had previously accrued $443,000 for this dispute and realized 
expense of $292,000 in the quarter ended December 31, 1998.

INTERNAL REVENUE SERVICE EXAMINATION.  Pursuant to the completion of an 
Internal Revenue Service examination of the Company's Federal Income Tax 
return for fiscal 1994, the Company filed amended income tax returns for 
fiscal years 1991 through 1995 in December 1996, claiming additional income 
tax refunds.  The Internal Revenue Service completed its examination of these 
amended returns in December 1998.  As a result, income tax refunds of 
$180,000, including a refund related to loss carry-backs from fiscal 1996 are 
expected in February 1999.  The Company has agreed to the final examiner's 
report.

OTHER.  The Company is involved in other litigation matters, both as a 
plaintiff and as a defendant, arising in the ordinary course of its business. 
Management expects that these matters will not have a materially adverse 
effect on the consolidated financial position, results of operations or 
liquidity of the Company. 

                                      9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

REVENUES

Consolidated revenues decreased 24% in the third quarter of fiscal 1999, 
compared to the same period in fiscal 1998.  Consolidated revenues decreased 
7% in the first nine months of fiscal 1999, compared to the same period in 
fiscal 1998.

NORTH AMERICAN OPERATIONS.  Revenue from North American operations decreased 
to $15.5 million in the third quarter of fiscal 1999, compared to $21.1 
million in the same period of the prior year

During the third quarter of fiscal 1999, the Company completed the work 
allocated for the calendar year by its largest customer, Florida Power & 
Light ("FPL").  The Company maintained certain levels of overhead in 
anticipation of additional work from FPL in 1999 and the Company incurred 
losses as a result. Revenue from Florida operations was $2.8 million in the 
third quarter of fiscal 1999, compared to $6.9 million in the same period of 
the prior year.  Revenue from Florida operations was $17.0 million in the 
first nine months of fiscal 1999 compared to $13.6 million in the same period 
of the prior year.  The March 1998 cancellation of contracts with Washington 
Gas Company also adversely affected revenues contributing to a decrease in 
installation and replacement revenues in the third quarter and first nine 
months of fiscal 1999 of $2.3 million and $6.8 million, respectively, 
compared to the same periods of the prior year.

In December 1998, FPL informed the Company that they would be awarded all of 
FPL's statewide underground cable injection and replacement work for a three 
year period, beginning January 1, 1999.  The scope of the work is similar to 
the scope of work performed by the Company in 1997 and 1998 although the 
current contract does not include guaranteed volumes and issued work orders 
are cancelable without notice.  Work commenced on January 4, 1999.

INTERNATIONAL OPERATIONS.  Revenues from international operations increased 
to $1.6 million in the third quarter of fiscal 1999, compared to $1.5 million 
in the same period of fiscal 1998. 

Revenues from international operations decreased to $4.8 million in the first 
nine months of fiscal 1998 compared to $5.1 million in the same period of the 
prior year, due primarily to decreased revenue from international sales of 
equipment.

GROSS PROFIT

Gross profit decreased $4.0 million or 123.7% in the third quarter of fiscal 
1999, compared to the same period in fiscal 1998. Gross profit decreased $4.7 
million or 67.5% in the first nine months of fiscal 1999, compared to the 
same period in fiscal 1998.

NORTH AMERICAN OPERATIONS.   Gross profit from installation and replacement 
services decreased in the third quarter of fiscal 1999 compared to the same 
period of fiscal 1998.

The Company was not able to reduce the costs of Florida operations in line 
with the reduction in revenues, in part due to focusing crews and 
administrative staff in Florida on job completion, invoicing and collections. 
In addition, the Company incurred extra costs to temporarily relocate 
several Florida crews to other regions.  Furthermore, the Company chose to 
maintain a level of overhead costs in Florida consistent with the expectation 
of increased levels of business in the future.  This produced a severe 
adverse effect on gross profit from North American operations.

                                      10
<PAGE>

INTERNATIONAL OPERATIONS.  Gross profit from international operations in the 
third quarter of fiscal 1999 decreased slightly compared to the same period 
of the prior year primarily due to decreased revenue from sales of equipment.

Gross profit from international operations increased slightly for the first 
nine months of fiscal 1999 due to the increased gross profit from European 
service operations, which more than offset the impact of having less revenue 
from equipment sales.

OPERATING EXPENSES AND OTHER INCOME (EXPENSES)

Total operating expenses increased 24.4% in the third quarter of fiscal 1999, 
compared to the same period of fiscal 1998.   Total operating expenses 
increased 16.4% in the first nine months of fiscal 1999 compared to the same 
period of fiscal 1998.  The increase in selling, general and administrative 
expenses in fiscal 1999 was primarily generated by increased spending on 
corporate projects designed to support the Company's planned growth, 
including costs associated with the selection of a new management information 
system, as well as some non-recurring charges associated with certain 
severance benefits and the settlement of a lawsuit.  The higher level of 
research and engineering expense in fiscal 1999, while not a significant 
increase in total dollars spent, reflected increased spending on new 
electronic guidance devices for the Company's FlowMole equipment.

Other expense net, was $210,000 and $472,000 in the third quarter and the 
first nine months of fiscal 1999, respectively, compared to expense of 
$145,000 and $326,000 in the same periods of the prior year.  This change was 
a result of increased interest expense due primarily to new capital leases 
related to the financing of a portion of the Company's new drilling systems.

INCOME (LOSS) BEFORE INCOME TAXES

As a result of the foregoing, the Company recorded a pretax loss of $3.9 
million in the third quarter of fiscal 1999, compared to a pretax income of 
$755,000 in the same period of fiscal 1998.  The Company recorded pretax loss 
of $5.7 million in the first nine months of fiscal 1999 compared to a pretax 
income of $168,000 in the same period of fiscal 1998.

INCOME TAX PROVISION

The Company would normally expect an effective income tax rate of 
approximately 39% on positive pretax income.  This exceeds the federal 
statutory rate due to the impact of state income taxes and nondeductible 
expenses.  The Company has provided a valuation allowance against the full 
amount of the Company's net deferred tax assets.  Accordingly, no tax 
benefits were recorded against operating losses generated in fiscal 1998 and 
in the first nine months of fiscal 1999.

NET INCOME (LOSS) 

As a result of the foregoing, the Company recorded a net loss of $3.9 million 
in the third quarter of fiscal 1999, compared to a net income of $755,000 in 
the same period of fiscal 1998.   The Company recorded a net loss of $5.7 
million in the first nine months of fiscal 1999 compared to net income of 
$167,000 in the same period of fiscal 1998.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an 
Enterprise and Related Information" ("FAS 131"). FAS 131 establishes 
standards for disclosures about operating segments in annual financial 
statements and selected disclosures about operating segments in annual 
financial statements and selected information in interim financial reports.  
It also establishes standards for related disclosures about products and 

                                      11
<PAGE>

services, geographic areas and major customers.  FAS 131 supersedes FAS No. 
14, "Financial Reporting for Segments of a Business Enterprise."  FAS 131 is 
effective for the year ending March 31, 1999 and requires restatement of 
earlier periods presented.  The impact of adopting FAS 131 has not been 
determined.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, the Company had unused sources of liquidity consisting 
of $670,000 in cash and cash equivalents and an available balance on its 
committed line of credit of $1,715,000.  This compares to $528,000 in cash 
and cash equivalents and an available balance on its committed line of credit 
of $4,755,000 at March 31, 1998.  Uses of cash during the third quarter of 
fiscal 1999 primarily related to capital expenditures of $561,000 and funding 
of operating losses.  During the nine months ended December 31, 1998, the 
Company substantially reduced its level of outstanding receivables to 
generate cash from operations.  However, further reductions of that magnitude 
are not expected.

Capital expenditures in the nine months ended December 31, 1998 primarily 
included costs associated with the Company's plan to replace virtually all of 
its management information systems with new enterprise-wide software.  The 
Company had determined that some of its management information systems did 
not accurately adjust for the Year 2000, and commenced a project to replace 
its management information systems in its entirety.  The software selected is 
certified by the vendor to be Year 2000 compliant.  The implementation of the 
new system was substantially completed in November 1998.

The Company relies on cash flow from operations and lease financing, in 
addition to its line of credit, to fund operations and capital expenditures. 
There can be no assurance that these facilities or similar replacement 
facilities will continue to be available on terms acceptable to the Company 
or at all.  The Company's financial performance will be a key factor in 
determining the availability of such facilities.  If either facility became 
unavailable to the Company, or if the Company is required to seek additional 
capital to fund anticipated growth, the Company would be required to seek 
other sources of public or private capital.  There can be no assurance that 
adequate funds will be available to the Company through such sources when 
needed or will be available on terms favorable to the Company.  If at any 
time the Company is unable to obtain sufficient funds, the Company will be 
required to restrict or eliminate plans for expansion and other aspects of 
its operations or may be unable to meet its financial obligations on a timely 
basis.

The Company's $7,500,000 bank credit facility will expire on April 4, 1999.  
The Company has been informed by Seafirst that such existing credit facility 
will not be renewed.  The Company has accepted a proposal for a replacement 
credit facility and expects such lender to complete its due diligence and 
approve the new credit facility in March 1999.  There can be no assurance 
that negotiations for this new credit facility will be successfully 
completed. 

REVIEW AND OUTLOOK

     INSTALLATION AND REPLACEMENT SERVICES.  The Company anticipates that 
opportunities to add installation and replacement services for existing 
customers will be the primary source of growth in the near future, especially 
from existing customers who utilize CableCure services.  In mid December 
1998, FPL informed the Company that they would award to the Company all of 
FPL's statewide underground cable injection and replacement work for a three 
year period, beginning January 1999.  The Company expects FPL to continue to 
be a significant customer in calendar 1999 and future years.  However, there 
can be no assurances that competition, budgetary factors or other matters, 
including cancellation of previously issued work orders, will not reduce the 
level of work performed for FPL.  Also, the Company's revenue levels and the 
weighted average number of crews in operation on any given day, will be 
affected by a number of factors, including weather, pricing, competition, 
customer work release practices, soil and other work difficulty determinants, 
and permitting.  See also the discussion under COMPETITION, SEASONAL FACTORS 
AND UTILITIES' BUDGETARY CONSIDERATIONS included under "Important Risk 
Factors Regarding Forward-Looking Statements," below.

                                      12
<PAGE>

     REPAIR AND RESTORATION SERVICES. The Company expects a continuation of 
the trend towards increased customer acceptance of the CableCure process, 
including an increased level of work under "Test, Treat or Replace" 
contracts. The Company anticipates that the trend towards lower pricing for 
cable replacement will continue to place downward pressure on the price for 
CableCure services.  The Company's ten largest CableCure customers account 
for the majority of the Company's CableCure revenues.  CableCure revenues in 
Florida will be a key factor in determining growth in consolidated CableCure 
revenues in calendar 1999.  The Company expects to see increased volumes from 
new customers in calendar 1999, and some increased volumes from existing 
customers, but expects to continue to be dependent upon a small number of 
customers.  The Company's goal is to reduce this dependency through growth.  
Because the Company's customers can typically cancel their work on short 
notice, a certain degree of uncertainty always exists in the Company's future 
revenue levels. See also the discussion under COMPETITION, SEASONAL FACTORS, 
UTILITIES' BUDGETARY CONSIDERATIONS and DOW CORNING CORPORATION  included 
under "Important Risk Factors Regarding Forward-Looking Statements", below.

      INTERNATIONAL OPERATIONS.  Due to adverse developments affecting the 
general economy in many Asian countries, the Company cannot predict the level 
of equipment sales in the foreseeable future.  However, the Company does 
expect equipment sales to continue at some modest level.  Company management 
expects most of its international growth to come from CableCure services in 
Europe.

IMPORTANT RISK FACTORS REGARDING FORWARD-LOOKING STATEMENTS

     The Company may from time to time make written or oral forward-looking 
statements.  Written forward-looking statements may appear in documents filed 
with the Securities and Exchange Commission, in press releases, and in 
reports to stockholders.  The Private Securities Litigation Reform Act of 
1995 contains a safe harbor for forward-looking statements on which the 
Company relies in making such disclosures.  In connection with this safe 
harbor provision, the Company is hereby identifying important factors that 
could cause actual results to differ materially from those contained in any 
forward-looking statement made by or on behalf of the Company.  Any such 
statement is qualified by reference to the following cautionary statements:

     UTILITIES' BUDGETARY CONSIDERATIONS.  Budgetary considerations, arising 
from unfavorable regulatory determinations on matters such as rate-setting, 
capitalization of services performed by the Company, approval of mergers and 
acquisitions or siting of power production facilities, or from reductions in 
new housing starts, reductions in electric utility revenues due to mild 
weather, and general economic downturns, or overall utility profitability 
relative to its objectives have affected the ability of some of the Company's 
utility customers to sustain their cable replacement or other maintenance 
programs and accordingly adversely impact the Company's revenues and profits. 
 Although the Company has broadened its customer base, one customer is 
expected to generate over 40% of the Company's consolidated revenues, and a 
small number of customers generate over 60% of its CableCure revenues.  
Because cable replacement, restoration and other maintenance programs are, to 
a substantial extent, deferrable and the Company's contracts with its utility 
customers permit termination of orders on relatively short notice, 
postponement or cancellation of such programs by customers can interject 
substantial volatility into the Company's revenues and profits.

     COMPETITION. The Company has experienced a long-term trend of declining 
prices for guided boring services, particularly for smaller diameter utility 
installations, due to competitive pressures and changes in utility bidding 
practices. This trend has also caused the Company to lower its prices for 
CableCure injection services, which are priced at a discount to replacement 
costs, including replacement via guided boring. In addition, the Company's 
utility customers are increasing their requests for "turnkey" installation, 
replacement and restoration services, requiring their drilling contractors to 
take responsibility for switching circuits, terminating circuits, and other 
non-incidental tasks. These tasks require additional equipment and labor, and 
the cost increases can offset any price increase the Company is able to 
negotiate for the expansion of its services. The overall trend of falling 
prices for guided boring services is expected to continue into the future, as 
more customers award work based on competitive bidding, more customers 
require their drilling contractors to perform additional tasks as part of the 
drilling contract, and more conventional contractors acquire drilling 
capabilities in order to enter into this segment of the construction 
industry. This trend will continue to put downward pressure on the market 
price 

                                      13
<PAGE>

for CableCure Services. The Company cannot predict the ultimate duration or 
the magnitude of such decreases, which could result in a material adverse 
effect on the Company's financial condition, results of operations and cash 
flows.

     SEASONAL FACTORS.  Weather and other seasonal factors may decrease the 
Company's revenues and profits in any given period.  Adverse weather may 
preclude the Company from operating its FlowMole drilling systems or 
providing its CableCure services at certain times of the year.  Such factors 
severely impacted the Company's operations in the fourth quarter of fiscal 
1998.  In addition, the Company believes that the regular budgetary cycles of 
certain of its North American utility customers tend to concentrate demand 
for the Company's services during the third quarter of its fiscal year (the 
fourth quarter of the calendar year), although other budgetary factors 
described below may override this trend in any given quarter and have 
overridden these factors in calendar 1998.  As a result of these factors, 
results of operations in any given fiscal quarter are not necessarily 
indicative of results in any other fiscal quarter.

     MANAGEMENT OF GROWTH.  There can be no assurance that the Company's 
systems, procedures and controls will be adequate to support the Company's 
operations as they expand.  Any future growth will impose significant 
additional responsibilities on members of senior management, including the 
need to identify, recruit and integrate new senior level managers and 
executives.  To the extent that the Company is unable to manage its growth 
efficiently and effectively, or is unable to attract and retain additional 
qualified management, there could be a material adverse effect on the 
Company's financial condition, results of operations and cash flows.

     AVAILABILITY OF QUALIFIED EMPLOYEES.  The Company's ability to provide 
high-quality services on a timely basis requires an adequate supply of 
skilled laborers, equipment operators, journeymen linemen and project 
managers. Accordingly, the Company's ability to increase its productivity and 
profitability will be limited by its ability to employ, train and retain 
skilled personnel necessary to meet the Company's requirements.  Many 
companies in the Company's industry are currently experiencing shortages of 
qualified personnel, and there can be no assurance that the Company will be 
able to maintain an adequate skilled labor force necessary to operate 
efficiently, that the Company's labor expenses will not increase as a result 
of a shortage in the supply of skilled personnel or that the Company will not 
have to curtail its planned internal growth as a result of labor shortages.

     DOW CORNING CORPORATION.  The Company purchases its CableCure fluid 
exclusively from Dow Corning.  In May 1995, Dow Corning filed for protection 
under Chapter 11.  While the Company has been informed by Dow Corning that it 
intends to continue the CableCure business, there can be no assurance that 
Dow Corning or the bankruptcy court will not take action to amend or 
terminate the CableCure license agreement.

     FOREIGN CURRENCY FLUCTUATIONS.  The Company's financial results are 
affected by fluctuations in certain foreign currencies, particularly the 
exchange rate between the British Pound Sterling and the German Deutschmark. 
Such fluctuations could result in material adverse adjustments to the 
carrying values of accounts receivable or other assets measured in foreign 
currencies, or on the reported results of operations of the Company's 
European operations. 

     YEAR 2000 RISK FACTORS.  Significant uncertainty exists concerning the 
potential costs and effects associated with Year 2000 compliance.  Any Year 
2000 compliance problem of either the Company or its major vendors and 
customers could have a material adverse effect on the Company's financial 
condition, results of operations and cash flows. 

YEAR 2000 DATA CONVERSION.  The year 2000 issue is the result of computer 
programs having been written using two digits, rather than four, to define 
the applicable year.  Any of the Company's computers, computer programs, 
manufacturing and administration equipment or construction equipment used by 
its crews that have date-sensitive software may recognize a date using "00" 
as the year 1900 rather than the year 2000.  If any of the Company's systems 
or equipment that have date-sensitive software use only two digits, system 
failures or miscalculations may result causing disruptions of operations, 
including, among other things, a temporary inability to process transactions 
with third parties or engage in similar normal business activities.

                                      14
<PAGE>

During 1997, the Company initiated a project to address the Year 2000 issue 
that encompasses operating and administrative areas of the Company.  In 
addition, executive management regularly monitors the status of the Company's 
Year 2000 remediation plans.  The process includes an assessment of issues 
and development of remediation plans, where necessary, as they relate to 
internally used software, computer hardware and use of computer applications 
in the Company's processes and products.  In addition, the Company is engaged 
in assessing the Year 2000 issue with significant customers and suppliers.

INTERNAL INFRASTRUCTURE.   The Company has determined that its propriety 
equipment used by FlowMole and CableCure crews does not rely on date 
sensitive software.  The Company believes that it has identified 
substantially all of the major computers, software applications, and related 
equipment used in connection with is internal operations that must be 
modified, upgraded, or replaced to minimize the possibility of a material 
disruption to its business.  The Company has completed the process of 
replacing systems that have been identified as adversely affected.  On 
November 2, 1998, the Company converted its enterprise wide information 
systems to newly installed software certified by the vendor to be Year 2000 
compliant. 

SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS.  In addition to computers 
and related systems, the operation of office and facilities equipment, such 
as fax machines, photocopiers, telephone switches, security systems, 
elevators, and other common devices may be affected by the Year 2000 problem. 
 The Company is currently assessing the potential effect of, and costs of 
remediating, the Year 2000 problem on its office and facilities equipment.  
The Company estimates the total cost to the Company of completing any 
required modifications, upgrades, or replacements of these other internal 
systems will not have a material adverse effect on the Company's business or 
results of operations.  This estimate is being monitored and will be revised 
as additional information becomes available.

CUSTOMERS.  The Company is preparing to implement a communications plan with 
its customers to attempt to identify and resolve, if possible, issues 
associated with the Year 2000.  If the Company's customers are unable to 
resolve Year 2000 issues, those customers could have difficulty preparing new 
work packages for issuance to the Company or approving and paying invoices 
for the Company's services.  The Company's revenues and cash flows from 
operations could be severely affected as a result.  The Company's customers 
primarily consist of large utility companies who are expending substantial 
resources to solve Year 2000 problems.  However, there can be no assurance 
that the Company will be able to identify if its customers have Year 2000 
problems that will affect the Company.  Also, even if such problems are 
identified, the Company may not be able to influence its customers to 
prioritize a timely solution to Year 2000 problems that are identified.  Any 
failure of customers to resolve Year 2000 issues in a timely manner could 
have a material adverse effect on the Company's business, financial 
condition, cash flows and results of operations.

SUPPLIERS.  The Company has initiated communications with third party 
suppliers of the products and financial services used, operated, or 
maintained by the Company to identify and, to the extent possible, to resolve 
issues involving the Year 2000 problem.  The Company believes that its major 
suppliers are adequately addressing their Year 2000 exposure.  However, the 
Company has limited or no control over the actions of these third party 
suppliers.  Thus, while the Company expects that it will be able to resolve 
any significant Year 2000 problems with these systems before the occurrence 
of a material disruption to the business of the Company or any of its 
customers, any failure of these third parties to resolve Year 2000 problems 
with their systems in a timely manner could have a material adverse effect on 
the Company's business, financial condition, cash flows and results of 
operations.

MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS.  The Company expects to 
identify and resolve all Year 2000 problems that could materially adversely 
affect its business operations.  However, management believes that it is not 
possible to determine with complete certainty that all Year 2000 problems 
affecting the Company have been identified or corrected.  The number of 
devices that could be affected and the interactions among theses devices are 
simply too numerous.  In addition, one cannot accurately predict how many 
Year 2000 problem related failures will occur or the severity, duration, or 
financial consequences of these perhaps inevitable failures.  As a result, 
management expects that the Company could likely suffer the following 
consequences:

                                      15
<PAGE>

     1.        a significant number of operational inconveniences and 
          inefficiencies for the Company and its clients that may divert 
          management's time and attention and financial and human resources 
          from its ordinary business activities; and 

     2.        a lesser number of serious system failures that may require 
          significant efforts by the Company's customers to prevent or 
          alleviate material business disruptions.

CONTINGENCY PLANS.  The Company is currently developing contingency plans to 
be implemented as part of its efforts to identify and correct Year 2000 
problems affecting its customers or major vendors.  The Company expects to 
complete its contingency plans by June 30, 1999.  These plans could include 
increased work hours for Company personnel or use of contract personnel to 
provide manual workaround for customer work release systems or invoice 
approval processes, and similar approaches.  If the Company is required to 
implement any of these contingency plans, it could have a material adverse 
effect on the Company's financial condition and results of operations.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not Applicable

PART II - OTHER INFORMATION

     ITEM 1.  LEGAL PROCEEDINGS

     UTILX CORPORATION VS. POWER CABLE RESTORATION, INC. AND RONALD E. 
ALESHIRE. On December 17, 1998, the Company settled a lawsuit it filed in 
Federal District Court in Florida on October 31, 1997 against Power Cable 
Restoration, Inc. ("PCR"), a contractor in Florida with whom the Company had 
a contract for certain cable injection services for FPL through January 2000, 
and Ronald E. Aleshire, a principal shareholder in PCR.  The complaint 
alleged, among other things, certain breaches of contractual obligations and 
requested declaratory relief and a determination that the Company had 
sufficient grounds to terminate its contract with PCR. 

     The settlement provides for the immediate termination of the contract 
between the Company and PCR and the payment by the Company to PCR of 
$1,000,000 in four equal installments in December 1998, August 1999, April 
2000 and December 2000.  In addition, the principal shareholders of PCR 
agreed not to compete with the Company for a seven-year period.  The Company 
was paid approximately $45,000 in proceeds that had been held in escrow 
pending resolution of the pricing dispute between the parties.

     The Company is involved in other litigation matters, both as a plaintiff 
and as a defendant, arising in the ordinary course of its business.  
Management expects that these other matters will not have a materially 
adverse effect on the consolidated financial position, results of operations 
or liquidity of the Company.

     ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not Applicable.

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     Not Applicable. 

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not Applicable.

                                      16
<PAGE>

     ITEM 5.  OTHER INFORMATION

     In accordance with the Company's Bylaws, a shareholder proposing to
     transact business at the Company's annual meeting must provide written
     notice of such proposal, in the manner provided by the Company's Bylaws,
     not fewer than 60 nor more than 90 days prior to the date of such annual
     meeting (or, if the Company provides less than 60 days notice of such
     meeting, no later than 10 days after the date of the Company's notice).  In
     addition, if the Company receives notice of a shareholder proposal less
     than 45 days prior to the date of mailing the notice of such annual
     meeting, the persons named as proxies in such proxy statement and proxy
     will have discretionary authority to vote on such shareholder proposal. 
     The expected mailing date of the notice of the Company's 1999 annual
     meeting is June 30, 1999.

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)     Exhibits:

             27.1    Financial Data Schedule.  Filed herewith.

             10.40   Loan Modification Agreement between Registrant and Bank of 
                     America NW, N.A., doing business as Seafirst Bank, 
                     successor by name change to Seattle-First National bank, 
                     dated February 4, 1999. Filed herewith.

             10.41   Settlement Agreement and Mutual Release of Claims between 
                     UTILX Corporation, Power Cable Restoration, Inc. and 
                     Ronald E. Aleshire, signed on December 30, 1998 and 
                     January 12, 1999.  Filed herewith.

     (b)     Reports on Form 8-K:

             A Current Report on Form 8-K, dated November 9, 1998 was filed 
             with the Securities and Exchange Commission reporting that the 
             Company's Board of Directors had adopted a Stockholder Rights Plan.

             A Current Report on Form 8-K, dated November 10, 1998 was filed 
             with the Securities and Exchange Commission reporting that Craig 
             E. Davies, President and Chief Executive Officer, had left the 
             Company to pursue other opportunities and resigned from the 
             Company's Board of Directors. 

             A Current Report on Form 8-K, dated December 4, 1998 was filed 
             with the Securities and Exchange Commission reporting that the 
             Company's Board of Directors had elected its Chairman, William 
             M. Weisfield, to the permanent position of President and Chief 
             Executive Officer. 

                                      17
<PAGE>

                               UTILX CORPORATION

                                   SIGNATURES

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

                                              UTILX CORPORATION
                                      -----------------------------------------
                                                 (Registrant)


Date:  February 4, 1999               By:/s/ William M. Weisfield
                                      -----------------------------------------
                                      William M. Weisfield, Chairman, President
                                      and Chief Executive Officer


Date:  February 4, 1999               By:/s/ Darla Vivit Norris
                                      -----------------------------------------
                                      Darla Vivit Norris, Senior Vice President
                                      and Chief Financial Officer

                                      18