SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

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

                           For the fiscal year ended:
                                  June 30, 2000

                             Commission File Number
                                     0-21151

                           PROFILE TECHNOLOGIES, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

               DELAWARE                                        91-1418002
    ------------------------------                       ---------------------
   (State or other jurisdiction of                          (I.R.S. Employer
    incorporation or organization)                       Identification Number)

           1077 NORTHERN BLVD.
               ROSLYN, NY                                         11576
   --------------------------------------                        --------
  (Address of Principal Executive Offices)                      (Zip Code)

Issuer's telephone number:  (516) 365-1909
Securities  registered under Section12(b) of the Act: None
Securities registered under Section 12(g) of the Act:

                          Common Stock $.001 Par Value

                                 Title of Class

Check whether the issuer (1) has 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 90 days.

                                 Yes X   No
                                   -----   -----

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X

State issuer's revenues for the most recent fiscal year. $224,779.
                                                        ----------

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $10,206,310, based on the closing bid and ask prices as reported
by the NASDAQ SmallCap market on September 20, 2000.

There were 4,285,092 shares of common stock $.001 par value outstanding as of
September 20, 2000.

                      Documents incorporated by reference:
Definitive Proxy material for annual shareholder meeting to be held November
17,2000 filed pursuant to Regulation 14A.
Transitional Small Business Format (check one): Yes     ; No   X
                                                   -----     -----

<PAGE>



Item 1.  Description of Business.
         ------------------------
Introduction

        The Company was originally incorporated in Washington in 1988 but has
been a Delaware corporation since 1995. Since its inception the Company has been
engaged in the business of researching and developing a high speed scanning
process, which is nondestructive and noninvasive, to remotely test buried and
above ground pipelines for corrosion. The Company's process, called a dual pulse
propagation analyzer ("PPA") is a patented process of analyzing the waveforms of
electrical impulses in a way that extracts point-to-point pipeline integrity
information. This process involves sending an electrical pulse along the pipe
being tested from each of two locations toward an intersecting location between
the two locations. At least one of the modified pulses is analyzed to determine
whether an anomaly exists at the intersecting location. This process is designed
to detect external corrosion of pipeline which occurs under pipe insulation
without the need for taking the line out of service, physically removing the
coating, and then visually inspecting the outside of the pipe for corrosion. The
most common forms of corrosion under insulation ("CUI") are localized corrosion
of carbon steel and chloride stress corrosion cracking of stainless steel.
Refineries, chemical plants, utilities, natural gas transmission companies and
the petroleum industry have millions of miles of corrosion protected pipeline.
Much of this piping is exposed to harsh and severe environments. As a result,
there is an on-going effort by these industries to ensure that the quality of
the pipe meets standards set by regulatory bodies and the industry to protect
operating personnel and the environment. While the Company continues to develop
and refine its PPA process, the technology has evolved to the point where it is
now being used in the field on a commercial basis by large multi-national oil
companies. In the summer of 1998, the Company completed its first commercial
contract on the North Slope of Alaska, testing approximately 100 road and
caribou crossings on British Petroleum pipelines under a contract with ASCG
Inspection, Inc. The contract was completed ahead of schedule and under budget.
In the summer of 1999, the Company followed up its initial North Slope work with
a larger contract with another large multi-national oil company to test
approximately 250 below grade pipes. During the summer of 2000, the Company
expanded its efforts on the North Slope yet again, testing a total of 372 below
ground pipes. Negotiations were also underway to test above ground pipes. In
addition, discussions are underway with a large east coast public utility to
begin testing below grade natural gas lines located in an urban setting. There
can be no assurance, however, that these discussions will lead to additional
commercial contracts.

Corrosion Protection

        Virtually all pipeline systems are required to have some type of
corrosion protection applied to extend the useful life of the pipeline and to
prevent pipeline failures due to corrosion. The effect of such failures ranges
from a few drops of a toxic substance on the surface of the pipeline to
catastrophic explosions that result in extensive damage of property and loss of
human life.

        Although there are many special techniques used to protect pipeline
systems, two are most common. The first is to apply a coating to the pipeline
that will keep the pipeline isolated from its environment. This is a
fundamentally sound approach, but it is complicated by the fact that coatings

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can become damaged during the installation process. Most coatings also degrade
over time so the effectiveness of protection is reduced.

        The second technique, used to protect predominantly buried and submersed
pipelines, is designed to protect bare pipeline or pipeline which has damaged or
missing coating. This technique is called cathodic protection. Simply stated,
the technique uses the flow of electric current to polarize the pipeline and
prevent corrosion. The polarization process attempts to maintain the pipeline at
some negative voltage with respect to an external reference voltage, called a
"half-cell". That reference level is called a Pipe-to-Soil-Potential and is
commonly referred to as a "PSP". The polarization process basically uses an
electrochemical process to prevent the pipe from corroding in the ground. Many
years of experience and extensive experimentation have generated a PSP level
that is generally considered to represent "protected" pipe. To determine the
effectiveness of the cathodic protection system, it is necessary to measure the
PSP at sufficient locations along the segment of pipeline so that a protection
profile can be viewed.

        A combination of federal, state, local and industry jurisdictions
combine to regulate corrosion protection. For example, regulations covering the
operation of natural gas transmission systems promulgated by the U.S. Department
of Transportation's Office of Pipeline Safety has required steel pipelines to be
equipped with cathodic protection since the early 1970's. In addition, the U.S.
Department of Labor, operating through the Occupational Safety and Health
Administration ("OSHA") has jurisdiction over numerous plants and facilities
containing corrosion protected pipeline that, if breached, could cause serious
bodily injury or death to on-site workers. Finally, the American Petroleum
Institute ("API") has promulgated a comprehensive Piping Inspection Code which
requires that extensive corrosion testing be done by all members (which includes
the vast majority of the petroleum and petrochemical industries). As a result of
the extensive regulation and testing requirements as described above, the
industry is faced with the requirement to engage in extensive testing for
corrosion.

        In 1993, the API imposed even stricter test standards regarding the
problem of CUI. When pipeline is uninsulated and above ground, external
corrosion can be identified visually. The petroleum and other related
industries, however, insulate much of their piping to conserve energy and/or to
prevent injury to personnel from high temperature levels on the pipelines. As
soon as piping is insulated, a very complex situation is created. Corrosion can
occur underneath the insulation due to moisture or corrosive products that find
their way through broken or poorly sealed insulation. This CUI is very difficult
to locate economically. In the past, testing for this problem had been on a
limited sample basis and relied upon inspection processes that were very
cumbersome and costly. Two prevalent testing methods used to detect CUI are
X-ray and eddy current methods, which are methods of detecting defects in pipe
by analyzing visual image and decay. After physically stripping away coating for
visual inspection, depth gauges, ultrasonics and X-ray could then be used to
determine the severity of CUI on questionable pipe. However, the stripping of
insulation to determine corrosion is a costly testing method for the industry
because it often meant the assembly of scaffolding for testing otherwise
inaccessible above ground pipe (particularly in refineries and petrochemical
plants) or an actual dig-up on below ground pipe. The Company's technology
enables it to test pipe segments in a refinery setting as long as three hundred


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feet and to use "cherry pickers" instead of costly scaffolding. CUI is also a
very complicated problem to test for because it cannot be easily identified by
statistical sampling. If, for example, a segment of pipe has a small insulation
part removed every ten feet and is visually inspected using eddy current or
x-ray techniques, there is no statistical basis to assume that the external
condition of the piping between the removed insulation parts is good or bad. The
API testing standard adopted in 1993, in essence, mandates either stripping even
larger amounts of coating or using an alternate system that will identify CUI
without stripping the coating on suspected (or unsuspected) pipe. Because of the
enormous cost involved in using the stripping and visual testing process, the
industry is enthusiastically searching for an alternate testing system that is
reliable and less costly. The Company believes that its PPA process provides an
alternate testing system that the industry is looking for. However, while the
Company has obtained some commercial contracts and prospects for expanded
commercial contracts in the future appear good, there can be no assurance that
such acceptance will continue to grow.

The Company's Dual Pulse Propagation Analyzer Process

        The PPA process extracts corrosion related information from segments of
both accessible and inaccessible pipelines underneath the entire insulation
barrier by analyzing the intersection of two electrical current pulses traveling
in opposite directions along the pipeline. This corrosion related information is
extracted without the need for removing the insulation protecting the pipeline.
The Company established by laboratory and field testing that the electrical
response, called characteristic transfer function (CTF), of two intersecting
pulses traveling along the pipeline is uniquely defined with location specific
information that relates to the integrity of the pipeline at the point of
intersection. Constructive interference occurs when the two current impulses run
into and interfere with each other at the point of intersection on a pipeline.
The CTF is determined, not only by the nature and characteristics of the
original pulses, but by the physical characteristics of the pipeline segment in
its environment at the point of intersection.

        The PPA process was developed to evaluate the condition and integrity of
pipelines. Electro-magnetic pulses are applied at both ends of the pipe segment
being tested. Under computer control, the timing of the pulses is controlled so
that the intersection point of the two pulses moves sequentially from one end of
the pipe to the other end. A unique CTF is obtained for each intersection point
of the pipeline segment being tested on some predetermined interval; such as, in
one foot intervals. When this data is geophysically displayed, it provides a
visual display of data related to the physical condition of the pipe at each
point of intersection. Information can also be derived using the PPA process to
determine the condition of the coating and the effectiveness of the existing
corrosion protection system that is being used to protect each point of
intersection. Where there are indications of problems, closer interval
inspection can be performed and/or one of the other location specific processes
used in the industry may be utilized before the insulation is removed to inspect
the pipe condition.

        As simple as the concept may appear, the PPA process is not intuitively
obvious. The petroleum industry has spent large sums trying to solve the problem
of finding corrosion under insulation. Correlating pipeline corrosion
information using the Company's technology requires a combination of

                                       4

<PAGE>


state-of-the-art instrumentation plus an understanding of the physical phenomena
that are being measured. Although the principles of the PPA process are simple
to explain, management believes that the measurement and analysis of the effect
are pushing the leading edge of technology.

        The Company believes that the principal advantage to using the PPA is
that it provides a method for the operating companies to do a visual equivalent
inspection on inaccessible pipe without the need to remove insulation. Research
and development efforts will continue in the development of new applications for
the Company's technology and to develop new products for the petroleum industry
and other industries.

Patents, Proprietary Technology and Other Intellectual Property

        The Company pursues a policy of generally obtaining patent protection
both in the United States and abroad for patentable subject matter in its
proprietary technology. As of June 30, 2000, the Company had seven issued U.S.
patents, four issued foreign patents, eleven U.S. patent applications pending,
fifteen foreign patent applications pending and three patent applications filed
under the patent cooperation treaty which enables the Company to file additional
foreign patent applications in the future.

        The Company's success depends in large part upon its ability to protect
its process and technology under United States and international patent laws and
other intellectual property laws. U.S. patents have a term of 17 years from date
of issuance or, for more recently filed patent applications, 20 years from the
filing of such applications, and patents in most foreign countries have a term
of 20 years from the proprietary filing date of the patent application. The
first U.S. patent was issued in 1990, three patents were issued in 1993, one
patent was issued in 1998 and two patents were issued in 2000.

        The Company believes that it owns and has the right to use or license
all proprietary technology necessary to license and market its process under
development. The Company is not aware of the issuance of any patents or the
filing of any patent applications which relate to processes or products which
utilize the Company's proprietary technology in a manner which could be similar
to or competitive with the Company's products or processes. The Company has no
knowledge that it is infringing any existing patent such that it would be
prevented from marketing or licensing products or services currently being
developed by the Company.

        The Company may decide for business reasons to retain a patentable
invention as a trade secret. In such event or if patent protection is not
available, the Company must rely upon trade secrets, internal knowledge and
continuing technological innovation to develop and maintain its competitive
position. The Company's employees and consultants have access to the Company's
proprietary information and have signed confidentiality agreements.

                                       5

<PAGE>


Research and Development Spending

        During the two most recent fiscal years ended June 30, 2000 and 1999,
the Company spent $299,282 and $314,571 respectively on research and development
activities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

Development of Business

        Up through the year ended June 30, 1994, all revenues earned by the
Company were derived from research and development contracts with a large public
utility and a large independent natural gas company. These contracts focused on
evaluating below ground pipe for cathodic protection and coating defects.
However, by late 1994, the Company, as a result of its activities up to that
point in time, came to the realization that its technology had the potential to
identify the location of actual corrosion, as opposed to simply identifying
locations which might have insufficient cathodic protection or defective
coating, and therefore a likelihood of corrosion. The Company believed that the
identification of actual corrosion was of even greater importance to the
petroleum, petrochemical and utility industries because these industries'
resources could be used more efficiently in correcting actual corrosion
locations. Once corrosion locations had been identified and corrected, the
Company's technology could still be used to identify lack of cathodic protection
and coating defects as part of a preventive maintenance program.

        In early 1995, the Company spent three months at the refinery of a large
multi-national oil company, researching and developing test procedures for
identifying corrosion of above ground refinery pipe as part of a shift in
emphasis away from testing of below ground pipe for cathodic protection and
coating defects. An important factor in this shift in emphasis had to do with
verification. Potential customers could more easily and less expensively verify
the accuracy and dependability of the Company's technology in an above ground
environment that doesn't involve time consuming and costly dig ups. The Company
believes that once potential customers have satisfied themselves that the
technology is accurate and cost effective, they would be more likely to expand
the use of the technology to difficult to reach below ground environments. The
Company also believes that this shift in emphasis was a significant step forward
because major oil companies were willing to provide detailed data concerning
pipe quality and testing standards. Beginning in 1995, the Company began
conducting research and development activities at the research facilities of
another large multinational oil company to develop the Company's technology to
the point where it could identify corrosion locations. As part of this process,
numerous segments of pipe in various conditions ranging from excellent to
extremely corroded were assembled in various configurations and covered with
insulation. The Company then used its technology to evaluate the various pipe
segments without prior knowledge of the condition of the pipe segments. After
obtaining data, the Company evaluated the results and then submitted a report
that summarized its findings. In late July of 1996, representatives of the
Company traveled to the Prudhoe Bay area of Alaska and met with operating
personnel from three of the largest multi-national oil companies with operations
in the area to discuss the feasibility of conducting a field demonstration and
test of the Company's technology on operating pipeline in that area. The Company
subsequently conducted a field demonstration and test on a 24 inch line in

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September of 1996 and then submitted a report summarizing its activities and
findings. In August of 1997, the Company completed a second field demonstration
using refined hardware and software that the Company had developed since its
previous field demonstration. These field demonstrations resulted in the Company
obtaining its first commercial contract in the summer of 1998 to test 100 road
and caribou crossings on the North Slope of Alaska. In the summer of 1999, the
Company entered into a larger contract with another multi-national oil company
to test 250 underground pipes. In the summer of 2000, the Company tested
approximately 372 underground pipes on the North Slope. As a result of this
work, the Company is now currently in discussions to expand the work scope of
this contract to include above grade pipes on a significantly larger scale.

Marketing Strategy

        The Company intends to increase its marketing activities. Such marketing
activities are being directed at the large multi-national petroleum companies,
petrochemical companies and utilities that are already aware of the Company's
technology and its potential to help solve the testing requirements mandated by
the API Piping Inspection Code, as well as voluntary testing for safety
concerns. The Company believes that the corrosion control specialists in the
petroleum and utilities industries constitute a reasonably small community and
the free flow of information regarding emerging or new technologies among this
group is common. Accordingly, the Company believes that word of mouth has been,
and will continue to be, an important factor in the Company's marketing efforts.
With respect to the refinery market, the Company expects to provide service for
two levels of testing on above ground or refinery pipe. The first level of
testing will be a "global testing", i.e., a screening test to identify problem
areas of corrosion in pipe. The second level of testing will be a detailed
analysis of the corrosion in the pipe. The Company believes it is possible that
each of its field crews could operate at one refinery or similar facility on
virtually a year round basis. Pricing of the Company's services is currently
based upon a dollar amount per linear foot of pipeline tested or on a per diem
basis, with pricing based upon many factors including difficulty of access, cost
of alternate means of testing, availability of crews and urgency of immediate
testing data and evaluation. The actual pricing used in any particular contract
is based upon arm's length negotiations with the customer. The Company has not
encountered any difficulty in finding qualified field technicians for its work
crews.

        The Company also intends to increase its promotional budget for industry
journals, trade shows, newsletters, direct mail and seminars. The Company may
also consider from time to time the acquisition of complimentary businesses
providing services to the petroleum and petrochemical industry, as well as
expansion into foreign countries.

Competition

        The Company believes that the nondestructive testing industry is highly
fragmented and comprised of numerous companies, many of whom are larger and have
greater financial resources than does the Company. However, the Company believes
that these competitors are offering non-destructive testing services that rely
on technologies which are different from the technology offered by the Company.
These other technologies, including x-ray, ultrasonic and eddy current, have
been in existence for many years and have gained wide acceptance within the
industry. In addressing the requirements of the large national companies that

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have either entered into commercial contracts with the Company or shown an
interest in the Company's services, the Company has competed and will in the
future compete on the basis of technical performance, delivery capability,
service quality and price.

        Substantially all of the Company's competitors have, and potential
future competitors could have, substantially greater technical, financial,
marketing, and other resources than the Company and have, or could have, greater
name recognition and market acceptance of their products and technologies. No
assurance can be given that the Company's competitors will not develop new
technologies or enhancements to existing services or introduce new services that
will offer superior price or performance features. In such case, the Company may
experience significant price competition, which could have a material adverse
effect on gross margins.

Marketplace

        Nondestructive corrosion testing services are required across a broad
market. Customers are expected to be generally the owners of, or engineering
firms associated with, major processing facilities and pipeline systems. The
Company's services are expected to be provided to the refining, petrochemical
and pipeline segments of the petroleum industry and to the utilities industry,
and demand for these services is typically driven by safety and environmental
considerations.

        Most refineries, petrochemical plants and other similar facilities have
ongoing maintenance programs which may require one or more crews performing
corrosion control testing on a continuous basis. Typically, these services are
provided by an outside contractor under a blanket service agreement, rather than
by the employees of the refineries and plants. The Company expects that if it is
successful in obtaining contracts with major oil refineries (of which there is
no assurance), such contracts will be of this type.

        The Company also will seek to perform testing services for the utility
industry. Utilities have thousands of miles of underground gas transmission
lines that are constantly being monitored and tested for corrosion.

Employees

        The Company presently has thirteen employees, of which four are part
time. It is anticipated that if additional commercial contracts are secured,
additional field crews will be hired and trained. The number of crews employed
by the Company at any given time is dependent upon the Company's level of
business activity. In addition, the Company will continue to retain independent
consultants to render advice with respect to technical and scientific matters.

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Compliance With Environmental Laws

        Because of the nature of the Company's business, it does not believe
that the costs and effects of compliance with environmental laws, whether
federal, state or local, would be significant or even material.



Item 2.  Description of Property
         -----------------------

        The Company's executive offices are located at 1077 Northern Blvd.,
Roslyn, NY 11576. The Company leases on a month to month basis approximately
1,400 sq. feet of office space at the address from a non-affiliate. The rental
payment is one thousand nine hundred dollars per month.

        The Company's research and development facility is located in Ferndale,
Washington. The Company leased 1,800 sq. feet of space on a month to month basis
from a non-affiliate at a monthly rental rate of $1,400.

        The Company also leases approximately 1,650 sq. feet of office space
from a non-affiliate that it uses for data analysis and interpretation in Pearl
River, New York. The lease is for two years and the monthly rental payment is
approximately $3,300. The Company also reimburses its President for rent,
secretarial and office expenses incurred by him on behalf of the Company in
Laurinburg, North Carolina in the amount of $1,500 per month under an informal,
oral agreement.

        The Company does not own any real estate.

        The Company does not invest in, nor does the Company intend in the
future, to invest in real estate or interests in real estate, real estate
mortgages or securities of or interests in persons primarily engaged in real
estate activities.

Item 3.  Legal Proceedings.
         ------------------

        The Company is not a party to any material pending legal proceedings nor
is any of its property subject to any such legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders.
         ----------------------------------------------------

        No matters were submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended June 30, 2000, either through
the solicitation of proxies or otherwise.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.
         ----------------------------------------------------------------------

        The Company's common stock has been traded on the NASDAQ SmallCap market
since it began public trading in February of 1997, under the symbol PRTK. The
following table sets forth the high and low bid prices for the Company's common

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stock, by quarter, for each of the last two fiscal years as reported by Nasdaq.


         Quarter Ended          High Bid       Low Bid
         -------------          --------       -------
       September 30, 1998       $19.00          $11.75
       December 31, 1998        $16.75          $3.00
       March 31, 1999           $11.25          $8.00
       June 30, 1999            $10.00          $7.125

       September 30, 1999        $8.25          $6.25
       December 31, 1999         $8.25          $5.50
       March 31, 2000            $7.88          $5.50
       June 30, 2000             $6.75          $2.25

        The above prices are believed to be representative interdealer
quotations, without retail markup, markdown or other fees or commissions, and
may not represent actual transactions.

        At September 20, 2000, the bid price of the Company's common stock was
$3.38 per share. On such date the Company had 125 holders of record of the
Company's common stock and the Company estimates that it has approximately 700
beneficial shareholders.

        The Company has not paid any dividends on its common stock and the Board
of Directors presently intends to continue a policy of retaining earnings, if
any, for use in the Company's operations and to finance expansion of its
business. The declaration and payment of dividends in the future, of which there
can be no assurance, will be determined by the Board of Directors in light of
conditions then existing, including earnings, financial condition, capital
requirements and other factors. There are no restrictions that currently
materially limit the Company's ability to pay dividends or which the Company
reasonably believes are likely to limit materially the future payment of
dividends on common stock.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
of Operations.
--------------

GENERAL
-------

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        The Company is focused upon expanding its commercial operations. The
goal of the Company has continued to be the establishment of profitable
commercial operations associated with services designed to electronically
measure corrosion in various kinds of piping. The Company's product identifies
areas of corrosion on both below ground and above ground pipes. The pulse
propagation analyzer consists of a computer, software to enhance collection and
processing of data, a precision multi-channel pulse generator and a signal
analyzer. During fiscal 1996, the Company began to see rapid progress in the
development of its technology and its ability to meet the expectations of
potential customers. By that time, the Company had begun to accelerate its
efforts and expend more resources to develop its technology faster. Thus,
expenses and purchases of equipment have been generally increasing at a faster
pace than in prior periods. This trend accelerated in the fiscal year ended June
30, 1997, particularly after completion of the Company's initial public stock
offering in February of 1997. The Company believes that it attained
technological feasibility of its product with the completion of its research and
development activity in a controlled environment in July of 1996. A field
demonstration of the Company's service capabilities utilizing its pulse
propagation analyzer process was performed for two multinational oil companies
at Prudhoe Bay, Alaska in September of 1996. A further demonstration using
updated and more sophisticated hardware and software was completed at Prudhoe
Bay, Alaska in August of 1997. This work led to an initial commercial contract
to test 100 road and caribou crossings, which was completed in July of 1998.
During the summer of 2000, the Company tested 372 underground pipes at Prudhoe
Bay.

        In order for the Company to continue to realize significant growth in
its revenues which, in turn, may lead to profitable operations, the Company must
continue to expand its customer base by utilizing its newly hired marketing
personnel in an effective manner. The Company must also be able to supply and
train additional work crews in sufficient numbers to satisfy the requirements of
its customers.

        In the opinion of management, significant progress has been made to date
in developing its technologies, gaining credibility with its markets and
building its board of directors and investor base, without spending inordinate
sums to achieve these goals.

RESULTS OF OPERATIONS
---------------------

Years Ended June 30, 2000 and June 30, 1999
-------------------------------------------

        The Company incurred a net loss of $1,390,037 in the year ended June 30,
2000 compared to a net loss of $864,638 in the year ended June 30, 1999.
Revenues for the year ended June 30, 2000 were $224,779, which represented a
decrease of $58,853, or 21% as compared to revenues of $283,632 for the year
ended June 30, 1999. This revenue decrease is primarily the result of reduced
demonstration projects. Interest income decreased to $128,868 for the year ended
June 30, 2000 from $180,234 for the year ended June 30, 1999. This decrease was
the result of declining cash and cash equivalent balances during the year as the
Company used such resources to sustain its commercial operations and research
and development activities. Expenses for the Company for the year ended June 30,
2000 increased significantly over the year ended June 30, 1999. Total operating

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expenses of $1,633,509 were recorded in the year ended June 30, 2000 compared to
total operating expenses of $1,238,070 for the year ended June 30, 1999. This
represents an increase in operating expenses of $395,439 or 32%. The increase in
operating expenses for the year ended June 30, 2000 is attributed almost
entirely to increased expenditures associated with general and administrative
costs, which increased to $1,334,227 for the year ended June 30, 2000 from
$923,499 for the year ended June 30, 1999 and reflects the payment of salaries
associated with an increase in personnel, including the hiring of a
Vice-President in charge of marketing and additional field crew personnel.
Additional expenses were incurred in acquiring added office space that is used
for data interpretation. Research and development expenses decreased slightly to
$299,282 for the year ended June 30, 2000 from $314,571 for the year ended June
30, 1999 and reflects the Company's continued emphasis on refining and expanding
the capability of the Company's technology.

        Management believes that both revenues and expenses of the Company will
increase substantially during the fiscal year ending June 30, 2001 if it is able
to secure additional commercial contracts with customers, of which there is no
assurance. Until the fiscal year ended June 30, 1998, the revenues earned by the
Company were principally related to research and development activities that
were sponsored by large multi-national oil companies and large utilities. These
activities included field research and development at such companies'
facilities. However, beginning in the fiscal year ended June 30, 1999 and since,
most of the Company's revenues were derived from commercial contracts on the
North Slope of Alaska. The Company believes that much of its anticipated future
revenues will also be derived from commercial contracts, although demonstration
projects are expected to provide significant revenues.

        If additional commercial contracts are obtained, management expects its
expenditures associated with field personnel and testing equipment will continue
to rise. In addition, administrative support activities will increase together
with related expenses.


LIQUIDITY AND CAPITAL RESOURCES

        Since inception, the Company has funded operations and investments in
equipment through equity financing arrangements. Through June 30, 2000, net
proceeds from the sale of common stock totaled approximately $6.6 million.

        At June 30, 2000, the Company had cash and cash equivalents of $1.7
million, a decrease of approximately $1.4 million from cash and cash equivalents
of $3.1 million at June 30, 1999. This decrease was due primarily to $1.2
million used in operations and $139,608 used to acquire equipment.

        Management is currently directing the Company's activities towards
obtaining additional fee for service contracts, which will necessitate the
Company attracting, hiring, training and outfitting qualified technicians. The
Company's intention is to purchase such equipment for its field crews for the
foreseeable future, until such time as the scope of operations may require
alternate sources of financing such equipment. There can be no assurance that

                                       12

<PAGE>


the Company's process will gain widespread commercial acceptance within any
particular time frame, or at all. The Company will incur additional expenses as
it hires and trains field crews and support personnel related to the successful
receipt of commercial contracts.

        The Company anticipates that capital will be expended to develop
infrastructure to support anticipated future growth. As a result, it is expected
that cash will be used in operations and to meet capital expenditure
requirements. The Company expects that accounts receivable and contract
work-in-progress will continue to increase to the extent revenues rise. Any such
increase that occurs at the same or a greater rate than increases in revenue can
be expected to reduce cash and cash equivalents. The Company currently has no
material commitments for capital expenditures. The Company believes that its
current cash and cash equivalents will be sufficient to meet working capital and
capital expenditure requirements for at least the next 12 months. However,
additional financing may be required within this time frame and any additional
financing, if needed, may not be available on acceptable terms, if at all. The
ability to grow, implement business strategies and continue operations may be
limited if additional financing is not obtained when necessary.


NEW ACCOUNTING PRONOUNCEMENTS

        In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments embedded in other contracts, and
for hedging activities. The Statement requires that entities recognize all
derivatives as either assets or liabilities on the balance sheet and measure
these derivatives at fair value. SFAS 133 also specifies a new method of
accounting for hedging transactions, prescribes the type of items and
transactions that may be hedged, and specifies detailed criteria to be met to
qualify for hedge accounting. This Statement as amended is effective for
financial statements for periods beginning after June 15, 2000. The Company does
not expect the adoption of this Statement to have a material impact on its
financial statements.

        In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin 101 "Revenue Recognition in Financial Statements" ("SAB
101") which the Company expects to adopt no later than the fourth quarter of
fiscal 2001. SAB 101 provides guidance on revenue recognition issues. The
Company does not expect the adoption of SAB 101 to have a material impact on its
financial statements.

        In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 will
be effective July 1, 2000. This interpretation provides guidance for applying
APB Opinion No. 25 "Accounting for Stock Issued to Employees". The Company does
not expect the adoption of FIN 44 to have a material impact on its financial
statements.

                                       13

<PAGE>


        In March 2000, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue No. 00-02, "Accounting
for Web Site Development Costs" which provides guidance on when to capitalize
versus expense costs incurred to develop a web site. The consensus for web site
development costs is effective July 1, 2000. The Company does not expect this
Statement to have a material impact on its financial statements.



Item 7.  Financial Statements.



<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                              Financial Statements

                             June 30, 2000 and 1999

                   (With Independent Auditors' Report Thereon)


<PAGE>







                           PROFILE TECHNOLOGIES, INC.


                                Table of Contents




                                                                          Page

Independent Auditors' Report                                               F-1

Balance Sheet                                                              F-2

Statements of Operations                                                   F-3

Statements of Stockholders' Equity                                         F-4

Statements of Cash Flows                                                   F-5

Notes to Financial Statements                                              F-6

<PAGE>


                          Independent Auditors' Report



The Board of Directors
Profile Technologies, Inc.:


We have audited the accompanying balance sheet of Profile Technologies, Inc. as
of June 30, 2000, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the two-year period ended June
30, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Profile Technologies, Inc. as
of June 30, 2000, and the results of its operations and its cash flows for each
of the years in the two-year period ended June 30, 2000, in conformity with
accounting principles generally accepted in the United States of America.

                                     By:  /s/  KPMG LLP
                                          --------------------------------------
                                               KPMG LLP


Seattle, Washington
September 15, 2000

                                      F-1
<PAGE>
<TABLE>
<CAPTION>


                             PROFILE TECHNOLOGIES, INC.

                                    Balance Sheet

                                    June 30, 2000


Assets

Current assets:
     <S>                                                                  <C>
     Cash and cash equivalents                                            $ 1,744,032
     Accounts receivable                                                       14,300
     Contract work-in-progress                                                 69,779
     Prepaid expenses and other current assets                                 46,272
                                                                          -----------
                    Total current assets                                    1,874,383
                                                                          -----------
Equipment, at cost                                                            480,562
     Less accumulated depreciation                                            241,563
                                                                          -----------
                    Net equipment                                             238,999

                                                                          -----------
Patents, net of accumulated amortization of $113,903                          294,084
Other assets                                                                    9,993
                                                                          -----------
                    Total assets                                          $ 2,417,459
                                                                          ===========


                                   Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable - stockholder                                       $     1,178
     Other accounts payable                                                    73,660
     Accrued liabilities                                                      165,697
                                                                          -----------
                    Total current liabilities                                 240,535
                                                                          -----------

Stockholders' equity (deficit):
     Common stock, $0.001 par value.  Authorized 10,000,000 shares;
        issued and outstanding 4,285,092 shares                                 4,285
     Additional paid-in capital                                             7,572,998
     Accumulated deficit                                                   (5,400,359)
                                                                          -----------
                    Total stockholders' equity                              2,176,924

Commitments
                                                                          -----------
                    Total liabilities and stockholders' equity            $ 2,417,459
                                                                          ===========


                See accompanying notes to financial statements.

                                        F-2
</TABLE>

<PAGE>



                           PROFILE TECHNOLOGIES, INC.

                            Statements of Operations

                       Years ended June 30, 2000 and 1999



                                                         2000           1999
                                                     -----------    -----------

Revenues                                             $   224,779        283,632
Cost of revenues                                         110,175         90,434
                                                     -----------    -----------
                    Gross profit                         114,604        193,198
                                                     -----------    -----------
Costs and expenses:
     Research and development                            299,282        314,571
     General and administrative                        1,334,227        923,499
                                                     -----------    -----------
                    Total costs and expenses           1,633,509      1,238,070
                                                     -----------    -----------
                    Loss from operations              (1,518,905)    (1,044,872)


Interest income                                          128,868        180,234
                                                     -----------    -----------
                    Net loss                         $(1,390,037)      (864,638)
                                                     ===========    ===========
Basic and diluted net loss per share                 $      0.32           0.20
                                                     ===========    ===========

Shares used to calculate basic and diluted net loss
     per share                                         4,283,009      4,273,676
                                                     ===========    ===========


                See accompanying notes to financial statements.

                                      F-3

<PAGE>
<TABLE>
<CAPTION>


                                           PROFILE TECHNOLOGIES, INC.

                                       Statements of Stockholders' Equity

                                       Years ended June 30, 2000 and 1999



                                                   Common stock        Additional                   Total
                                             -----------------------    paid-in    Accumulated   stockholders'
                                               Shares       Amount      capital      deficit       equity
                                             ----------   ----------   ----------   ----------    ----------

<S>                                           <C>         <C>           <C>         <C>           <C>
Balances at June 30, 1998                     4,262,600   $    4,263    7,514,145   (3,145,684)    4,372,724

Exercise of common stock purchase warrants       12,492           12       47,613         --          47,625
Net loss                                           --           --           --       (864,638)     (864,638)
                                             ----------   ----------   ----------   ----------    ----------
Balances at June 30, 1999                     4,275,092        4,275    7,561,758   (4,010,322)    3,555,711

Exercise of common stock purchase warrants       10,000           10       11,240         --          11,250
Net loss                                           --           --           --     (1,390,037)   (1,390,037)
                                             ----------   ----------   ----------   ----------    ----------

Balances at June 30, 2000                     4,285,092   $    4,285    7,572,998   (5,400,359)    2,176,924
                                             ==========   ==========   ==========   ==========    ==========


                                See accompanying notes to financial statements.

                                                      F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                          PROFILE TECHNOLOGIES, INC.

                                           Statements of Cash Flows

                                      Years ended June 30, 2000 and 1999


                                                                           2000           1999
                                                                       -----------    -----------
Cash flows from operating activities:
    <S>                                                                <C>               <C>
     Net loss                                                          $(1,390,037)      (864,638)
     Adjustments to reconcile net loss to net cash used in operating
        activities:
           Depreciation and amortization                                   105,645        105,983
           Accounts receivable                                                 806        (15,106)
           Contract work-in-progress                                        17,971        (87,750)
           Prepaid expenses and other current assets                       (21,710)        35,083
           Other assets                                                       --           (6,463)
           Accounts payable - stockholder                                   (6,245)       (14,314)
           Other accounts payable                                           47,834          6,273
           Accrued liabilities                                              77,197        (45,822)
                                                                       -----------    -----------
                    Net cash used in operating activities               (1,168,539)      (886,754)
                                                                       -----------    -----------

Cash flows from investing activities:
     Patents                                                               (99,718)      (104,232)
     Purchase of equipment                                                (139,608)       (83,943)
                                                                       -----------    -----------
                    Net cash used in investing activities                 (239,326)      (188,175)
                                                                       -----------    -----------
Cash flows from financing activities - proceeds from exercise of
     common stock purchase warrants                                         11,250         47,625
                                                                       -----------    -----------
                    Decrease in cash and cash equivalents               (1,396,615)    (1,027,304)

Cash and cash equivalents at beginning of year                           3,140,647      4,167,951
                                                                       -----------    -----------
Cash and cash equivalents at end of year                               $ 1,744,032      3,140,647
                                                                       ===========    ===========


                               See accompanying notes to financial statements.

                                                     F-5
</TABLE>

<PAGE>





                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999



(1)    Nature of Business and Summary of Significant Accounting Policies


       (a)    Nature of Business

              Profile Technologies, Inc. (Company), was incorporated in 1986 and
              commenced operations in fiscal year 1989. The Company is in the
              business of developing and commercializing potential processes for
              the nondestructive, noninvasive testing of both above ground and
              buried pipelines for the effectiveness of pipeline cathodic
              protecting systems and coating integrity. The Company's marketing
              and development efforts have primarily been focused towards large
              multinational oil companies. In July 1998, the Company commenced
              work on its initial commercial contract for corrosion inspection
              services of pipeline at approximately one hundred road and caribou
              crossings in Alaska.


       (b)    Contract Revenue Recognition

              Revenue from service contracts primarily relates to testing of
              industrial pipeline integrity and is recognized on the
              percentage-of-completion method of contract accounting. Contract
              revenues earned are measured using either the
              percentage-of-contract costs incurred to date to total estimated
              contract costs or, when the contract is based on measurable units
              of completion, revenue is based on the completion of such units.

              Anticipated losses on contracts are charged to earnings as soon as
              such losses can be estimated. Changes in estimated profits on
              contracts are recognized during the period in which the change in
              estimate is known.

              The Company records claims for additional compensation on
              contracts upon revision of the contract to include the amount to
              be received for the additional work performed. Contract costs
              include all direct material and labor costs and those indirect
              costs related to contract performance, such as indirect labor,
              supplies, tools and repairs, and depreciation costs. Selling,
              general and administrative costs are charged to expense as
              incurred. Service contracts generally extend no more than six
              months.


       (c)    Research and Development

              Research and development costs are expensed when incurred.


       (d)    Equipment

              Equipment is stated at cost and is depreciated using the
              straight-line method over estimated useful lives of three to seven
              years.

                                       F-6
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999


       (e)    Patents

              Patent and related application costs are amortized using the
              straight-line method over their estimated useful lives of
              approximately 4-6 years. The Company assesses the recoverability
              of this intangible asset by determining whether the balance can be
              recovered through forecasted future operations. The amount of
              impairment, if any, is measured based on projected future results
              using a discount rate reflecting the Company's assumed average
              cost of funds.

       (f)    Income Taxes

              Income taxes are accounted for under the asset and liability
              method. Deferred tax assets and liabilities are recognized for the
              future tax consequences attributable to differences between the
              financial statement carrying amounts of existing assets and
              liabilities and their respective tax bases and operating loss and
              tax credit carryforwards. Deferred tax assets and liabilities are
              measured using enacted tax rates expected to apply to taxable
              income in the years in which those temporary differences are
              expected to be recovered or settled. The effect on deferred tax
              assets and liabilities of a change in tax rates is recognized in
              income in the period that includes the enactment date. A valuation
              allowance is recorded for deferred tax assets when it is more
              likely than not that such deferred tax assets will not be
              realized.


       (g)    Major Customers

              All of the Company's revenues were from five customers for the
              years ended June 30, 2000 and 1999. Both accounts receivable and
              contract work-in-progress at June 30, 2000 were from two
              customers.


       (h)    Cash Equivalents

              The Company considers all short-term investments with a maturity
              date at purchase of three months or less to be cash equivalents.


       (i)    Net Loss Per Share

              Basic earnings per share is computed using the weighted average
              number of common shares outstanding during the period. Diluted
              earnings per share is computed using the weighted average number
              of common and dilutive common equivalent shares outstanding during
              the period. As the Company had a net loss in each of the periods
              presented, basic and diluted net loss per share is the same.

              Excluded from the computation of diluted loss per share for 2000
              are warrants and options to acquire 1,296,000 shares of common
              stock with a weighted average exercise price of $4.12 because
              their effect would be antidilutive. Excluded from the computation
              of diluted loss per share for 1999 are warrants and options to
              acquire 1,256,000 shares of common stock with a weighted average
              exercise price of $4.08 because their effect would be
              antidilutive.

                                      F-7
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999


       (j)    Use of Estimates

              The preparation of financial statements in conformity with
              generally accepted accounting principles requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and liabilities and disclosure of contingent assets and
              liabilities at the date of the financial statements and the
              reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimates.


       (k)    Patents, Proprietary Technology and Other Intellectual Property

              The Company pursues a policy of generally obtaining patent
              protection both in the United States and abroad for patentable
              subject matter in its proprietary technology. The Company's
              success depends in a large part upon its ability to protect its
              products and technology under United States and international
              patent laws and other intellectual property laws. U.S. patents
              have a term of 17 years from date of issuance and patents in most
              foreign countries have a term of 20 years from the proprietary
              filing date of the patent application.

              The Company believes that it owns and has the right to use or
              license all proprietary technology necessary to license and market
              its products under development. The Company is not aware of the
              issuance of any patents or the filing of any patent applications
              which relate to processes or products which utilize the Company's
              proprietary technology in a manner which could be similar to or
              competitive with the Company's products or processes. The Company
              has no knowledge that it is infringing on any existing patent such
              that it would be prevented from marketing or licensing products or
              services currently being developed by the Company.


       (l)    Financial Instruments and Concentrations of Credit Risk

              Financial instruments which potentially subject the Company to
              concentrations of credit risk include cash equivalents, accounts
              receivable, and contract work-in-progress. The fair value of these
              instruments approximates their financial statements carrying
              amount. Credit is extended to customers based on an evaluation of
              their financial condition. The Company does not require any
              collateral. The Company regularly invests funds in excess of its
              immediate needs in money market accounts with Citibank (Accounts).
              Funds invested in these Accounts are uninsured and subject to
              investment risk. Included with cash and cash equivalents were
              amounts held in the Accounts totaling $1,738,664 at June 30, 2000.
              Amounts held in these Accounts are insured up to $100,000 by the
              Federal Depository Insurance Corporation.

                                      F-8
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999


       (m)    Stock-Based Compensation

              The Company accounts for its stock-based employee compensation
              arrangement in accordance with provisions of Accounting Principles
              Board (APB) Opinion No. 25, Accounting for Stock Issued to
              Employees, and related interpretations. As such, compensation
              expense under fixed plans would be recorded on the date of grant
              only if the fair value of the underlying stock at the date of
              grant exceeded the exercise price. SFAS No. 123, Accounting for
              Stock-Based Compensation, requires entities that continue to apply
              the provisions of APB Opinion No. 25 for transactions with
              employees to provide pro forma net income and pro forma earnings
              per share disclosures for employee stock option grants made in
              1995 and future years as if the fair-value-based method defined in
              SFAS No. 123 had been applied to these transactions.


       (n)    Reclassifications

              Certain reclassifications have been made to the 1999 amounts to
              conform to the 2000 presentation.


       (o)    Segment Reporting

              The Company operates in one business segment. Revenues consist
              almost entirely of fees generated from providing testing services.
              Expenses incurred to date are reported according to their expense
              category. No further segment segregation is considered meaningful
              at this time.

              The Company's customers are located in the United States and
              various foreign countries. Revenues by geographic region are as
              follows:

                                                  Years ended June 30,
                                                 ---------------------
                                                   2000          1999
                                                 ---------     -------

                         United States           $ 224,779     243,707
                         Saudi Arabia                 --        39,925
                                                 ---------     -------

                                                 $ 224,779     283,632
                                                 =========     =======


       (p)    Liquidity

              The Company has incurred net losses since inception and has
              limited working capital at June 30, 2000. Management's plan to
              address this is to focus on obtaining additional fee for service
              contracts and generate cash flows from operations. If the Company
              is not successful in obtaining additional contracts or does not
              generate sufficient cash flows from operations, additional
              financing may be necessary.

                                      F-9
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999




(2)    Related Parties


       (a)    Accounts Payable - Stockholder

              At June 30, 2000, the Company owed $1,178 to a stockholder of the
              Company for business expenses.


       (b)    Consulting Services and Wages

              Consulting fees were paid to a stockholder of the Company, Dr.
              John Kuo, totaling approximately $130,000 and $120,000 for the
              years ended June 30, 2000 and 1999, respectively.


       (c)    Royalty Arrangement

              In July 1988, the primary technology rights used by the Company
              were contributed by Northwood Enterprises Inc. (NEI), a company
              wholly-owned by certain Company stockholders. In exchange for
              contributing the technology, the Company agreed to pay a royalty
              of 4% of the Company's net earnings before taxes to certain
              Company stockholders. When the Company becomes profitable,
              royalties will be due quarterly. In March 1996, an additional 1%
              royalty arrangement was awarded to a director of the Company in
              exchange for his expertise, technological know-how and proprietary
              information and trade secrets.


(3)    Income Taxes

       Federal income taxes reported by the Company differ from the amount
       computed by applying the statutory rate due primarily to the valuation
       allowance on deferred tax assets.

       The tax effect of temporary differences that give rise to significant
       portions of Federal deferred tax assets are comprised of the following at
       June 30, 2000:

                  Deferred tax assets:
                  Net operating loss carryforwards          $1,538,000
                  Stock compensation                           292,000
                  Research and experimentation credit
                  carryforwards                                111,000
                                                             ---------

                           Gross deferred tax assets         1,941,000

                  Less valuation allowance                   1,941,000
                                                             ---------

                           Net deferred tax assets          $     --
                                                            ==========

       The net increase in the valuation allowance for deferred tax assets was
       $481,000 and $351,000 for the years ended June 30, 2000 and 1999,
       respectively. The increases were primarily due to increases in the amount
       of net operating loss carryforwards that could not be utilized.

                                      F-10
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999



       For Federal income tax purposes, the Company has net operating loss
       carryforwards at June 30, 2000 available to offset future Federal taxable
       income, if any, of approximately $4,520,000 which begin to expire in
       2003. In addition, the Company has research and experimentation tax
       credit carryforwards of approximately $111,000 at June 30, 2000 which are
       available to offset income taxes and begin to expire in 2003.

       The utilization of the tax net operating loss carryforwards may be
       limited due to ownership changes that have occurred as a result of the
       sale of common stock.


(4)    Stock-Based Compensation

       The Company has granted stock options and warrants to compensate key
       employees, consultants and board members for past and future services.
       During fiscal year 1999, the Company adopted a stock option plan (Plan).
       The Plan provides for both incentive and non-qualified stock options to
       be granted to employees, officers, directors and consultants. The Company
       has reserved 500,000 shares of common stock for option grants under the
       Plan.

       A summary of warrant-related activity follows:

                                                                  Weighted
                                                  Number of       average
                                                    shares     exercise price
                                                  ---------      ----------
             Outstanding at June 30, 1998         1,140,000       $   3.590

             Grants                                  85,000           7.500
             Exercises                              (15,000)          5.975
             Forfeitures                               --              --
                                                  ---------
             Outstanding at June 30, 1999         1,210,000           3.836

             Grants                                    --              --
             Exercises                              (10,000)          1.125
             Forfeitures                               --              --
                                                  ---------
             Outstanding at June 30, 2000         1,200,000       $   3.860
                                                  =========       =========

                                      F-11
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999



       The following is a summary of warrants outstanding, all of which are
       exercisable, at June 30, 2000:

                                                Weighted-
                                                 average      Weighted
                                                remaining      average
                 Exercise          Number      contractual     exercise
                  prices      outstanding      life (years)     price
              --------------    ---------      ------------   ---------

              $  1.125-1.500      345,000           7.33      $   1.170
                 3.000-3.500      555,000           7.33          3.260
                 7.200-7.500      190,000           7.33          7.330
                       8.400       90,000           7.33          8.400
                      13.500       20,000           7.33         13.500
                                ---------

              $ 1.125-13.500    1,200,000           7.33      $   3.860
              ==============    =========      ============   =========


       A summary of stock option-related activity follows:

                                                          Options outstanding
                                                        ------------------------
                                                                      Weighted
                                           Shares                      average
                                          available     Number of      exercise
                                          for grant       shares        price
                                          ----------    ----------    ----------
           Balance at June 30, 1998            --            --       $     --

           Plan introduction                500,000          --             --
           Grants                           (46,000)       46,000          10.34
                                          ----------    ----------
           Balance at June 30, 1999         454,000        46,000          10.34
           Grants                           (65,000)       65,000           5.92
           Forfeitures                       15,000       (15,000)         10.00
                                          ----------    ----------
           Balance at June 30, 2000         404,000        96,000     $     7.40
                                          ==========    ==========    ==========

                                      F-12
                                                                     (Continued)

<PAGE>

                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999



       The following is a summary of stock options outstanding, all of which are
       exercisable at June 30, 2000:

                                                     Weighted-
                                                      average
                                                     remaining
                       Exercise       Number        contractual
                        prices      outstanding     life (years)
                     ------------   -----------     -----------

                     $       5.00       25,000          7.33
                             6.50       40,000          7.33
                            10.50       31,000          7.33
                                    -----------
                     $ 5.00-10.50       96,000          7.33
                     ============   ===========     ===========


       The Company applies APB Opinion No. 25 and related interpretations in
       accounting for option and warrant grants to employees. Had compensation
       cost for the Company's option and warrant awards been determined
       consistent with SFAS No. 123, the Company's net loss would have been
       increased to the pro forma amounts indicated below:

                                                      Years ended June 30,
                                               ------------------------------
                                                  2000                1999
                                               -----------         ----------
                    Net loss:
                        As reported            $ 1,390,037            864,638
                        Pro forma                1,582,970          1,297,229

                    Net loss per share:
                        As reported            $     .32                .20
                        Pro forma                    .37                .30


       The weighted average fair value per share of the warrant grants made
       during the year ended June 30, 1999, where the exercise price was above
       the fair value of the underlying stock was $3.68, and the number of
       warrants was 85,000.

       The weighted average fair value per share of the option grants made
       during the year ended June 30, 2000, where the exercise price of the
       underlying stock exceeded the fair value was $2.17, and the number of
       options was 65,000. The weighted average fair value of the option grants
       made during the year ended June 30, 1999, where the fair value of the
       underlying stock equaled the exercise price was $5.07, and the number of
       options was 46,000.

       The fair value of option and warrant grants is estimated using the
       Black-Scholes option pricing model with the following weighted average
       assumptions used for grants in fiscal year 2000: expected volatility of
       50%, risk-free interest rate of 6.2%, expected lives of 4.5 years, and a
       0% dividend yield. The weighted average assumptions used for grants in


                                      F-13
                                                                     (Continued)

<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                          Notes to Financial Statements

                             June 30, 2000 and 1999


       fiscal year 1999 are as follows: expected volatility of 50%, risk-free
       interest rate of 4.7%, expected lives of five years, and a 0% dividend
       yield.


(5)    Operating Leases

       The Company leases office  facilities in various  states under  operating
       lease  agreements  that expire  during fiscal year 2000.  Future  minimum
       rental  payments on  operating  leases are $39,340 and $38,741 for fiscal
       years 2001 and 2002, respectively.

       Total rent expense under operating  leases was $99,120 and $59,600 during
       the years ended June 30, 2000 and 1999, respectively.

                                      F-14
                                                                     (Continued)

<PAGE>



Item 8.  Changes In and Disagreements With Accountants on Accounting and
         ---------------------------------------------------------------
         Financial Disclosure.
         ---------------------

        None

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        ------------------------------------------------------------------------
        With Section 16(a) of the Exchange Act.
        ---------------------------------------

       The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement (the "Proxy Statement") to be distributed in
connection with the Company's Annual Meeting of Shareholders to be held on
November 17, 2000. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than October 13, 2000. The information required by
this Item 9 is incorporated by reference from the Proxy Statement.

Item 10.  Executive Compensation.

       The information required by this Item 10 is incorporated by reference
from the Proxy Statement.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

       The information required by this Item 11 is incorporated by reference
from the Proxy Statement.

Item 12.  Certain Relationships and Related Transactions.

       The information required by this Item 12 is incorporated by reference
from the Proxy Statement.

Item 13.  Exhibits and Reports on Form 8-K.

         (a) Exhibits
                  (3)
                           (i) Articles of Incorporation(1)
                           (ii) Bylaws(2)

                  (23.1) Consent of Independent Certified Public Accountants
                  (27.1) Financial Data Schedule

         (b) No reports on Form 8-K were filed during the quarter ended June 30,
             2000.

                                       15

<PAGE>


       (1) Incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form SB-2 of Profile Technologies, Inc. filed with the Securities
and Exchange Commission on May 10, 1996. (333-4714-NY)

       (2) Incorporated by reference to Exhibit 3.3 to the Registration
Statement on Form SB-2 of Profile Technologies, Inc. filed with the Securities
and Exchange Commission on May 10, 1996 (333-4714-NY)

                                       16

<PAGE>



                                   SIGNATURES

       In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on September 27, 1999.


                                            PROFILE TECHNOLOGIES, INC.



                                            By:  /s/  G.L. Scott
                                              ---------------------------------
                                                      G.L. SCOTT
                                                      Chief Executive Officer


       In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signatures                                Title                  Date
----------                                -----                  ----
By:  /s/  G.L. SCOTT              Co-Chairman, Principal         Sept. 27, 2000
----------------------------      Executive Officer,
          G.L. SCOTT              Director


By:  /s/  HENRY GEMINO            Co-Chairman, Executive Vice-   Sept. 27, 2000
-----------------------------     President, Chief
          HENRY GEMINO            Operating Officer,
                                  Chief Financial Officer,
                                  Principal Accounting
                                  Officer, Director

By:  /s/  MURPHY EVANS            President, Director            Sept. 27, 2000
-----------------------------
          MURPHY EVANS


By:  /s/  GALE D. BURNETT         Vice-Chairman, Director        Sept. 27, 2000
-----------------------------
          GALE D. BURNETT


By:  /s/  JOHN TSUNGFEN KUO       Vice-Chairman, Director,       Sept. 27, 2000
-----------------------------     Chief Technical Consultant
          JOHN TSUNGFEN KUO


By:  /s/  ALLEN G. REEVES         Director                       Sept. 27, 2000
   --------------------------
          ALLEN G. REEVES


By:  /s/  CHARLES CHRISTENSON     Director                       Sept. 27, 2000
   --------------------------
          CHARLES CHRISTENSON


By:  /s/  WILLIAM A. KRIVSKY      Director                       Sept. 27, 2000
   --------------------------
          WILLIAM A. KRIVSKY

                                       17