<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB
(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

For the quarterly period ended June 30, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the Transition period from                                  to

Commission file number  0-28484

                              QualMark Corporation
                     (Exact name of small business issuer as
                            specified in its charter)

             Colorado                                         84-1232688
  (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                         Identification No.)

    1329 West 121st Avenue, Denver, CO                          80234
 (Address of principal executive offices)                       (Zip Code)

(Issuer's telephone number)            (303) 254-8800


   (Former name, former address and former fiscal year, if changed since last
                                    report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes      [ ]No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] Yes      [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of latest practicable date:

The number of shares of no par value common stock at August 10, 2001 is
3,645,638.

    Transitional Small Business Disclosure Format (check one): [ ] Yes   [ X] No
<PAGE>   2
                         Part I - FINANCIAL INFORMATION
Item 1. Financial Statements

                              QUALMARK CORPORATION
                            STATEMENTS OF OPERATIONS
      (Unaudited, amounts in thousands, except shares and per share data)

<TABLE>
<CAPTION>
                                                                  For the three     For the three     For the six      For the six
                                                                  months ended      months ended      months ended     months ended
                                                                  June 30, 2001     June 30, 2000     June 30, 2001    June 30, 2000
                                                                    ---------         ---------         ---------        ---------
<S>                                                               <C>               <C>               <C>              <C>
Net revenue                                                           $ 2,604           $ 2,944           $ 5,319          $ 6,461
Cost of sales                                                           1,541             1,766             3,188            4,036
                                                                    ---------         ---------         ---------        ---------
    Gross profit                                                        1,063             1,178             2,131            2,425

Selling, general and administrative expenses                            1,011             1,116             1,915            2,054
Research and development expenses                                         202               305               413              420
Severance charges                                                          --               272                --              272
                                                                    ---------         ---------         ---------        ---------
    Loss from operations                                                 (150)             (515)             (197)            (321)

Other expense:
    Interest, net                                                         (45)              (73)             (120)            (151)
                                                                    ---------         ---------         ---------        ---------
Loss before income taxes                                                 (195)             (588)             (317)            (472)

Provision for income taxes                                                600                --               600               45
                                                                    ---------         ---------         ---------        ---------

Net loss                                                                ($795)            ($588)            ($917)           ($517)
                                                                    =========         =========         =========        =========


Net loss per share - basic and diluted                                 ($0.23)           ($0.17)           ($0.27)          ($0.16)

Weighted average number of common shares - basic                    3,610,000         3,558,000         3,610,000        3,553,000
Weighted average number of common shares - diluted                  3,610,000         3,558,000         3,610,000        3,553,000
</TABLE>






    The accompanying notes are an integral part of the financial statements.


                                       2
<PAGE>   3
                              QUALMARK CORPORATION
                                 BALANCE SHEETS
                 (amounts in thousands, except number of shares)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                          June 30,         December 31,
                                                                                            2001              2000
                                                                                          -------           -------
<S>                                                                                       <C>              <C>
ASSETS
Cash                                                                                      $   496           $   936
Accounts receivable, net of allowance for
    doubtful accounts of $65 and $187 at June 30,
    2001 and December 31, 2000, respectively                                                2,911             3,968
Inventories, net                                                                            1,410             1,297
Deferred income taxes                                                                         594             1,194
Other current assets                                                                          218               122
                                                                                          -------           -------
    Total current assets                                                                    5,629             7,517

Property and equipment, net                                                                   956             1,290
Other assets                                                                                  135               132
                                                                                          -------           -------

Total assets                                                                              $ 6,720           $ 8,939
                                                                                          =======           =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable                                                                          $ 1,273           $ 1,032
Accrued expenses                                                                              545               745
Customer deposits and deferred revenue                                                         --                82
Current portion of long-term obligations                                                    1,895               700
                                                                                          -------           -------
    Total current liabilities                                                               3,713             2,559

Noncurrent portion of long-term obligations                                                    --             2,461
Deferred tax liability                                                                         17                17
                                                                                          -------           -------
   Total liabilities                                                                        3,730             5,037

Redeemable preferred stock; no par value; 2,000,000 shares authorized;692,951
     designated as Series A, 538,327 shares issued and outstanding, liquidation
     preference of $1,107;
     99,619 designated as Series B, none issued or outstanding                              1,070             1,016

Shareholders' Equity:
Common Stock; no par value;15,000,000 shares authorized; 3,645,638 and 3,643,238
    shares issued at June 30, 2001
    and December 31, 2000, respectively                                                     7,354             7,403
Treasury Stock, at cost, 35,546 and 35,546 shares held
    at June 30, 2001 and December 31, 2000, respectively                                     (123)             (123)
Accumulated deficit                                                                        (5,311)           (4,394)
                                                                                          -------           -------
    Total shareholders' equity                                                              1,920             2,886
                                                                                          -------           -------

Total liabilities and shareholders' equity                                                $ 6,720           $ 8,939
                                                                                          =======           =======
</TABLE>

               The accompanying notes are an integral part of the
                             financial statements.



                                       3
<PAGE>   4
                              QUALMARK CORPORATION
                            STATEMENTS OF CASH FLOWS
                        (unaudited, amounts in thousands)

<TABLE>
<CAPTION>
                                                                       For the six           For the six
                                                                      months ended           months ended
                                                                      June 30, 2001         June 30, 2000
                                                                        -------                -------
<S>                                                                   <C>                   <C>
Cash Flows From Operating Activities:
Net loss                                                                ($  917)               ($  517)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
    Depreciation and amortization                                           292                    280
    Deferred income tax provision                                           600                     45
    Inventory write off                                                      --                    111
    Severance charges                                                        --                    190

Change in assets and liabilities:
    Accounts receivable, net                                              1,057                  1,029
    Inventories                                                               5                    (45)
    Other assets                                                           (107)                  (105)
    Accounts payable and accrued expenses                                    41                   (673)
    Customer deposits and deferred revenue                                  (82)                    24
                                                                        -------                -------
        Net cash provided by operating activities                           889                    339
                                                                        -------                -------

Cash Flows From Investing Activities:
Acquisition of property and equipment                                       (63)                  (271)
Investment in patents                                                        (5)                   (23)
                                                                        -------                -------
    Net cash used in investing activities                                   (68)                  (294)
                                                                        -------                -------


Cash Flows From Financing Activities:
Proceeds from borrowings                                                     --                    950
Payments on borrowings                                                   (1,266)                  (425)
Proceeds from issuance of common stock                                        5                     69
                                                                        -------                -------
    Net cash provided by (used in) financing activities                  (1,261)                   594
                                                                        -------                -------

Net increase (decrease) in cash                                            (440)                   639
Cash at beginning of period                                                 936                    525
                                                                        -------                -------
Cash at end of period                                                   $   496                $ 1,164
                                                                        =======                =======


Non-Cash Activities:
Redeemable preferred stock dividends declared                           $    45                $    42
Accretion of preferred stock                                            $     9                $     8
</TABLE>



                     The accompanying notes are an integral
                       part of the financial statements.


                                       4
<PAGE>   5
                              QUALMARK CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


QualMark Corporation (the "Company") was founded in 1991 and is a manufacturer
and distributor of physical stress systems, as well as a provider of physical
stress testing services. Physical stress systems rapidly and efficiently expose
product design and manufacturing related failures of customer products and
components, thereby providing manufacturers necessary information to improve
product design, quality and reliability. The Company provides physical stress
testing services through its network of test centers.


NOTE 1 - Financial Presentation

These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 2000 and notes thereto as
well as other information and analysis included in the Company's Form 10-KSB
for the year then ended.

The interim financial data as of June 30, 2001 and for the three and six months
ended June 30, 2001 and 2000 is unaudited; however, in the opinion of management
of the Company, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
for the interim periods presented. Results for the three and six months ended
June 30, 2001 are not necessarily indicative of results for the remainder of
2001. Amounts at December 31, 2000 are derived from the Company's audited
financial statements.


NOTE 2 - Inventories

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                    June 30,          December 31,
                                                      2001               2000
                                                    -------             -------
<S>                                                 <C>               <C>
         Raw materials                              $ 1,032             $   708
         Work in process                                 22                   1
         Finished goods                                 406                 638
         Less:Allowance for obsolescence                (50)                (50)
                                                    -------             -------
                                                    $ 1,410             $ 1,297
                                                    =======             =======
</TABLE>


NOTE 3 - Commercial Bank Borrowings

      The Company's commercial bank borrowings consist of a term loan and a
revolving line of credit, the ("Credit Agreement"), Refer to the 2000 Form
10KSB, Liquidity and Capital Resources.


                                       5
<PAGE>   6
The Credit Agreement bears interest at the reserve adjusted LIBOR rate plus the
applicable margin (as defined), which was 7.75% at June 30, 2001.


      On February 1, 2001, the Company renegotiated its Credit Agreement with
the commercial bank. Among other changes, this amendment to the Credit Agreement
reduces the revolving credit line to $1,000,000. In addition, the term loan
available was increased to $2,000,000.

      On June 29, 2001, the Company renegotiated its Credit Agreement with the
commercial bank. Among other changes, this amendment to the Credit Agreement
increases the monthly principal payments from $35,000 to $45,000 and will bear
interest at the Prime Rate plus 1.0%, both commencing on July 1, 2001. Both the
revolving credit line and term loan under the Credit Agreement become due on
March 15, 2002, and are collateralized by substantially all the assets of the
Company.

      As of June 30, 2001, the balances of the revolving credit and term loan
are zero and $1,895,000, respectively.

      The Company must maintain certain financial and other covenants in order
to draw amounts available under the line of credit. Provisions under this
agreement are not considered restricted to normal operations. As of June 30,
2001, the Company was in default of certain financial covenants contained in the
Credit Agreement. The Company has, however, received waivers from its lender
regarding such noncompliance. The financial covenants that the Company must meet
are based on quarterly operating results. If the covenants are not met as of
September 30, 2001, the Company will require waivers from its lender in order to
draw amounts available under the line of credit. There can be no assurance that
such waivers will be obtained from the Company's lender in the event the
financial covenants are not met.

      The Company expects to meet long term liquidity requirements through cash
flows generated by operations and existing cash balances. The Company does not
anticipate any additional term borrowing, or draws against the revolving credit
line in 2001. Management has implemented a short and long term plan to repay the
existing Credit Agreement. As defined by the renegotiated Credit Agreement on
June 29, 2001, the Company will make monthly principal payments, beginning July
1, 2001, of $45,000 on the term loan. The Company had also determined that,
during 2001, quarterly payments to the revolving line of credit would be made,
based on cash flows generated from operations. Through June 30, 2001, the
Company exceeded expectations on the quarterly revolving line of credit
repayment schedule by eliminating the outstanding balance. At the close of each
quarter, the Company has made arrangements to meet and review results of the
Company with the commercial bank and the Company believes its relations with its
commercial bank to be good. At the end of 2001, the Company expects to negotiate
with the commercial bank for an extension to the Credit Agreement, although
there can be no assurance that such renegotiations will be successful.


                                       6
<PAGE>   7
NOTE 4 - Revenue Recognition

Revenues from product sales are recognized when persuasive evidence of an
arrangement exists, delivery has occurred, sales price is fixed or determinable
and collectibility is probable. Generally, the criteria is met upon shipment of
products and transfer of title to customers. In certain instances, the Company
will recognize revenue prior to shipment when the customer requests in writing
that the transaction be on a bill and hold basis, the risk of ownership has
passed to the customer, the manufactured equipment is complete and ready for
shipment and there is a fixed schedule for delivery of the equipment. Provisions
for discounts and allowance are recorded in the period of sale. Revenue from
services are recognized when the services are performed and billable. Revenue
from equipment service contracts is recognized ratably over the term of the
contract.

NOTE 5 - Earnings (Loss) Per Share

Basic earnings (loss) per share are computed by dividing net income available to
common shareholders by the weighted average number of shares outstanding during
the period. Diluted earnings (loss) per share are computed using the weighted
average number of shares determined for the basic computations plus the number
of shares of common stock that would be issued assuming all contingently
issuable shares having a dilutive effect on earnings per share were outstanding
for the period.

The calculation of basic and diluted earnings per share is as follows (in
thousands):

Basic and diluted loss per share computation:

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED                 SIX MONTHS ENDED

                                 JUNE 30, 2001    JUNE 30, 2000    JUNE 30, 2001    JUNE 30, 2000
                                 ----------------------------------------------------------------
<S>                              <C>              <C>              <C>              <C>
Net loss                            $  (795)         $  (588)         $  (917)         $  (517)
Accretion of redeemable
  preferred stock and
  preferred stock dividends             (27)             (25)             (54)             (50)
                                 ----------------------------------------------------------------
Net loss applicable
  to Common shareholders               (822)            (613)            (971)            (567)
                                 ----------------------------------------------------------------
Weighted average shares
  outstanding - basic                 3,610            3,558            3,610            3,553
                                 ----------------------------------------------------------------
Net  loss
  per share - basic                 $ (0.23)         $ (0.17)         $ (0.27)         $ (0.16)
                                 ----------------------------------------------------------------
Weighted average shares
  outstanding - basic                 3,610            3,558            3,610            3,558
Dilutive stock options
  and warrants                           --               --               --               --
                                 ----------------------------------------------------------------
Weighted average shares
  outstanding - diluted               3,610            3,558            3,610            3,553
                                 ----------------------------------------------------------------
Net loss
  per share - diluted               $ (0.23)         $ (0.17)         $ (0.27)         $ (0.16)
                                 ----------------------------------------------------------------
</TABLE>


Options and warrants to purchase 1,378,535 and 1,530,944 common shares were not
included in the computation of earnings per share for the three and six month
period ending June 30, 2001 and 2000, respectively, because the options would
result in an antidilutive effect on earnings per share.


                                       7
<PAGE>   8
NOTE 6 - Segment Information

The Company operates two business segments, equipment and Accelerated
Reliability Test Centers ("ARTC"). The equipment segment ("Equipment") is
engaged in the manufacture and sale of vibration and thermal chambers for
reliability testing for various electronic devices and components. The ARTC
segment operates service centers where vibration and thermal chambers are
available to customers for daily rental.

The accounting policies for these segments are the same as those described in
Note 1 of the Company's Form 10-KSB for fiscal year ended 2000 and there are no
significant inter-segment transactions. The Company evaluates the performances
of its segments and allocates resources to them based primarily on gross profit.
All operating revenues and expenses are allocated to business segments in
determining their gross profit. All other expenses are not utilized in
determining the allocation of resources on a segment basis.


The table below summarizes information about the reported segments (in
thousands) as of and for the three months ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>

                                   EQUIPMENT       ARTC          TOTAL
<S>                                 <C>            <C>          <C>
THREE MONTHS ENDED 6/30/01

Sales                               $1,977         $627         $2,604
Gross profit                           892          171          1,063
Property and equipment, net            312          644            956




THREE MONTHS ENDED 6/30/00

Sales                               $2,082         $862         $2,944
Gross profit                           844          334          1,178
Property and equipment, net            533          974          1,507
</TABLE>




The table below summarizes information about the reported segments (in
thousands) as of and for the six months ended June 30, 2001 and 2000:


                                       8
<PAGE>   9
<TABLE>
<CAPTION>
                                   EQUIPMENT        ARTC          TOTAL
<S>                                <C>             <C>            <C>
SIX MONTHS ENDED 6/30/01

Sales                               $4,135         $1,184         $5,319
Gross profit                         1,842            289          2,131
Property and equipment, net            312            644            956
</TABLE>


<TABLE>
<CAPTION>
                                   EQUIPMENT        ARTC          TOTAL
<S>                                <C>             <C>            <C>
SIX MONTHS ENDED 6/30/00

Sales                               $4,793         $1,668         $6,461
Gross profit                         1,820            605          2,425
Property and equipment, net            533            974          1,507
</TABLE>


The following table shows sales by geographic area (in thousands) for the three
months ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>
                                 THREE MONTHS ENDED      THREE MONTHS ENDED
                                   JUNE 30, 2001           JUNE 30, 2000
<S>                              <C>                     <C>
     United States                    $2,040                  $2,130
     International                       564                     814
                                 ------------------------------------------
     Total                            $2,604                  $2,944
                                 ------------------------------------------
</TABLE>


The following table shows sales by geographic area (in thousands) for the six
months ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>

                                  SIX MONTHS ENDED       SIX MONTHS ENDED
                                   JUNE 30, 2001           JUNE 30, 2000
<S>                                   <C>                     <C>
     United States                    $3,887                  $4,647
     International                     1,432                   1,814
                                  ---------------------------------------
     Total                            $5,319                  $6,461
                                  ---------------------------------------
</TABLE>


NOTE 7 - Income Taxes


The Company experienced an unexpected downturn it its business during the first
six months of 2001, which resulted in operating


                                       9
<PAGE>   10
losses. The Company attributes the downturn primarily to the current uncertain,
general economic environment and the volatile economic environment faced by the
Company's customers. Because of this situation, management reassessed the
realization of its recorded net deferred tax assets. Based on this reassessment,
management concluded, based on the weight of available evidence as prescribed in
the Statement of Financial Accounting Standards 109 ("SFAS 109"), that it was
more likely than not that a portion of the existing deferred tax assets would
not be realizable and determined a valuation allowance was required for that
portion of the deferred tax assets. Accordingly, during the three month period
ended June 30, 2001, the Company's valuation allowance was increased by $600,000
which resulted in an increase to the provision for income taxes of the same
amount. Management will continue to evaluate the amount of the valuation
allowance based on near-term operating results and long-term projections. Given
the current unsettled and volatile economic environment, it is reasonably
possible that a future evaluation of the realizability of the Company's net
deferred tax assets could result in a determination that additional valuation
allowance is required, and such valuation allowance could be material.


Note 8 - New Accounting Pronouncements


In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141). SFAS No. 141 requires that all business combinations be accounted for
using the purchase method of accounting. The use of the pooling-of-interest
method of accounting for business combinations is prohibited. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
As of June 30, 2001, SFAS No. 141 will not have an effect on the Company.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142 changes
the accounting for goodwill and intangible assets and requires that goodwill no
longer be amortized but be tested for impairment at least annually at the
reporting unit level in accordance with SFAS No. 142. Recognized intangible
assets should be amortized over their useful life and reviewed for impairment in
accordance with FASB Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The provisions of SFAS No. 142 are effective for fiscal years
beginning after December 15, 2001, except for provisions related to the
nonamortization and amortization of goodwill and intangible assets acquired
after June 30, 2001, which will be subject immediately to the provisions of SFAS
No. 142. As of June 30, 2001, SFAS No. 142 will not have an effect on the
Company.




                                       10
<PAGE>   11
Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements

The statements contained in this report, which are not historical in nature, are
forward-looking statements subject to risks and uncertainties that are difficult
or impossible to predict with accuracy. Actual results could differ materially
from those set forth or implied by forward-looking statements. Such risks and
uncertainties include, but are not limited to, variability in order flow and
operating results, the ability of the Company to find and retain qualified
personnel to staff its manufacturing and marketing operations and existing and
anticipated test centers, and the risk that the demand for the Company's systems
will not continue to grow.

Results of Operations

The Company's annual and quarterly operating results could be subject to
fluctuations for a variety of reasons. The Company operates with a small backlog
relative to its revenue; thus most of its sales in each quarter result from
orders received in the current or prior quarter. In addition, because prices for
the Company's products are relatively substantial, a significant portion of net
sales for each quarter is attributable to a relatively small number of units.
The delay of the completion and/or delivery of a single unit can, and has, had a
substantial impact on the Company's quarter to quarter operating results.
Finally, the Company's customers operate in an uncertain general economic
environment. The Company expects to continue to experience such fluctuations in
its results of operations in the future.





Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000


Revenue

Net revenue decreased $340,000 or 11.5% from $2,944,000 in the three months
ended June 30, 2000 to $2,604,000 for the three months ended June 30, 2001.

Equipment revenue decreased $105,000 or 5.0% from $2,082,000 in the three-month
period ended June 30, 2000 to $1,977,000 in the three months ended June 30,
2001. Thirteen OVS units were sold in the second quarter of 2001 compared to
thirteen OVS units sold in




                                       11
<PAGE>   12
the second quarter of 2000. The decrease in sales for the period ended June 30,
2001 primarily occurred due to the product mix and the market discounts given to
compete in the prevalent volatile and uncertain economic atmosphere in the high
technology industry. Of the units sold in the quarter ended June 30, 2001, four
represented international sales versus five international sales for the quarter
ended June 30, 2000.

Test center revenue decreased $235,000 or 27.3% from $862,000 in the three
months ended June 30, 2000 to $627,000 in the three months ended June 30, 2001.
The Company operated six test centers and had two strategic partnership test
center operations in Europe during 2001 versus seven test centers in the U.S.
and four strategic partnership operations in Europe during the same period in
2000. The Company primarily attributes the decrease in ARTC lab revenue to a
volatile and uncertain economic atmosphere in the high technology industry.
During the third quarter 2000, the Company closed the North Carolina test center
in order to optimize overall test center performance by minimizing overhead. The
Company believes that these changes will result in improved margins as the
economic climate improves.

Gross Profit

The gross margin for the three months ended June 30, 2001 was 40.8%. This
compares to a gross margin of 40.0% for the three months ended June 30, 2000.
Gross margins remain consistent due to cost control mechanisms implemented in
2000, and carried out in 2001 to manage overhead. Management continues to place
emphasis on improving product mix, manufacturing utilization, and overhead
management.

Operating Expenses

Total operating expenses decreased $480,000 or 28.4% to $1,213,000 for the three
months ended June 30, 2001 from $1,693,000 for the three months ended June 30,
2000.

Selling, general and administrative expenses decreased $105,000 or 9.4% to
$1,011,000 in the three months ended June 30, 2001 from $1,116,000 for the three
months ended June 30, 2000. Expenses in the second quarter 2001 primarily
decreased due to cost saving initiatives implemented in the year ended 2000. The
cost savings initiatives consisted of an overall administrative staff reduction.
Included in the selling, general, and administrative expenses are sales and
marketing expenses, which decreased 16.6% for the three months ended June 30,
2001 as compared to the three months ended June 30, 2000. The reduction of sales
and marketing expenses are primarily due to the Company's current reorganization
of international sales staff and the reduction in the associated travel
expenses.


                                       12
<PAGE>   13
Research and development costs decreased $103,000 or 33.8% to $202,000 for the
three months ended June 30, 2001 from $305,000 for the three months ended June
30, 2000. The decrease is primarily attributed to the completion of the prior
year development project, the Typhoon chamber. The Typhoon enables the users of
combined stress and thermal-only test chambers to cut their consumable costs by
up to 50%, Refer to the 2000 Form 10KSB, Item 1, Description of Business. The
Company continually strives to sustain its commitment to product improvements
and research and development. As a result, research and development expenditures
fluctuate from quarter to quarter, and may increase in future years.

In the three months ended June 30, 2000 the Company incurred costs of $272,000
due to an organizational restructure. The organizational restructure focused on
personnel reductions throughout several departments within the Company, which
included costs associated with the termination of the former president. The
Company does not expect to incur any additional costs related to the
organizational restructure. All such costs were paid in May 2001 and there are
no remaining unpaid costs at June 30, 2001.

Income Taxes

The Company experienced an unexpected downturn it its business during the first
six months of 2001, which resulted in operating losses. The Company attributes
the downturn to the prevalent uncertain general economic atmosphere in the high
technology industry and the volatile economic environment faced by the Company's
customers. Because of this situation, management reassessed the realization of
its recorded net deferred tax assets. Based on this reassessment, management
concluded, based on the weight of available evidence as prescribed in the SFAS
109, that it was more likely than not that a portion of the existing deferred
tax assets would not be realizable and determined a valuation allowance was
required for that portion of the deferred tax assets. Accordingly, during the
three month period ended June 30, 2001, the Company's valuation allowance was
increased by $600,000 which resulted in an increase to the provision for income
taxes of the same amount. Management will continue to evaluate the amount of the
valuation allowance based on near-term operating results and long-term
projections. Given the current unsettled and volatile economic environment, it
is reasonable possible that a future evaluation of the realizability of the
Company's net deferred tax assets could result in a determination that
additional valuation allowance is required, and such valuation allowance could
be material.

Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000

Revenue

Revenue decreased $1,142,000 or 17.7% from $6,461,000 in the six months ended
June 30, 2000 to $5,319,000 in the six months ended June 30, 2001.

Equipment revenue decreased $658,000 or 13.7% to $4,135,000 in the six months
ended June 30, 2001 from $4,793,000 in the six months ended June 30, 2000.
Thirty-three OVS units were sold in the first six months of 2000 compared to
twenty-nine OVS units sold in the first six months of 2001. The decrease in
sales for


                                       13
<PAGE>   14
the period ended June 30, 2001 primarily occurred due to the market discounts
given to compete in the volatile and uncertain economic atmosphere and a
decrease in demand for capital equipment purchases. International OVS system
sales was slightly down with eleven units sold in the six month period ended
June 30, 2000 versus ten units sold in the six month period ended June 30, 2001.

Test center revenue decreased $484,000 or 29.0% from $1,668,000 in the six
months ended June 30,2000 to $1,184,000 in the six months ended June 30, 2001.
The Company operated six test centers and had two strategic partnership test
center operations in Europe during 2001 versus seven test centers in the U.S.
and four strategic partnership operations in Europe during the same period in
2000. The Company primarily attributes the decrease in ARTC lab revenue to a
volatile and uncertain economic atmosphere in the high technology industry.
During the third quarter 2000, the Company closed the North Carolina test center
in order to optimize overall test center performance by minimizing overhead. The
Company believes that these changes will result in improved margins as the
economic climate improves.

Gross Profit

The gross margin for the six months ended June 30, 2001 was 40.1%. This compares
to a gross margin of 37.5% for the six months ended June 30, 2000. Gross margin
increased in 2001 due to cost control mechanisms implemented in 2000 to manage
overhead. Management continues to place emphasis on improving product mix,
manufacturing utilization, and overhead management.

Operating Expenses

Total operating expenses decreased $418,000 or 15.2% to $2,328,000 in the six
months ended June 30, 2001 from $2,746,000 in the six months ended June 30,
2000.

Selling, general and administrative expenses decreased $139,000 or 6.8% from
$2,054,000 for the quarter ended June 30, 2000 to $1,915,000 for the quarter
ended June 30, 2001. Expenses in 2001 primarily decreased due to cost saving
initiatives implemented in the year ended 2000. The cost savings initiatives
consisted of an overall administrative staff reduction.

Research and development costs remain consistent from $420,000 for the six
months ended June 30, 2000 to $413,000 for the six months ended June 30, 2001.
During 2000, the Company completed the development project, Typhoon. The Company
also incurred additional costs for the relocation of its Director of
Engineering. The Company will continue its commitment to


                                       14
<PAGE>   15
investing in research and development, with a focus on current product line
improvements. As a result, research and development expenditures fluctuate from
quarter to quarter, and may increase in future years.

In the three months ended June 30, 2000 the Company incurred costs of $272,000
due to an organizational restructure. The organizational restructure focused on
personnel reductions throughout several departments within the Company, which
included costs associated with the termination of the former president. The
Company does not expect to incur any additional costs related to the
organizational restructure. All such costs were paid in May 2001 and there are
no remaining unpaid costs at June 30, 2001.

Income Taxes

The Company experienced an unexpected downturn it its business during the first
six months of 2001, which resulted in operating losses. The Company attributes
the downturn to the prevalent uncertain general economic atmosphere in the high
technology industry and the volatile economic environment faced by the Company's
customers. Because of this situation, management reassessed the realization of
its recorded net deferred tax assets. Based on this reassessment, management
concluded, based on the weight of available evidence as prescribed in the SFAS
109, that it was more likely than not that a portion of the existing deferred
tax assets would not be realizable and determined a valuation allowance was
required for that portion of the deferred tax assets. Accordingly, during the
three month period ended June 30, 2001, the Company's valuation allowance was
increased by $600,000 which resulted in an increase to the provision for income
taxes of the same amount. Management will continue to evaluate the amount of the
valuation allowance based on near-term operating results and long-term
projections. Given the current unsettled and volatile economic environment, it
is reasonably possible that a future evaluation of the realizability of the
Company's net deferred tax assets could result in a determination that
additional valuation allowance is required, and such valuation allowance could
be material.


Liquidity and Capital Resources

      During the six months ended June 30, 2001, the Company generated $889,000
of cash from operating activities, invested $63,000 for equipment and $5,000 for
patents, and repaid $1,266,000 of borrowings. Employees and investors exercised
options and warrants for proceeds of $5,000. Together, these activities resulted
in a cash decrease of $440,000, for an ending balance of $496,000 at June 30,
2001. During the six months ended June 30, 2000, the Company generated $339,000
of cash from operating activities, invested $271,000 for equipment and $23,000
for patents, and from banks borrowed $950,000 and repaid $425,000. Employees and
investors exercised options and warrants of common stock for proceeds of
$69,000. Together, these activities resulted in a cash increase of $639,000 for
an ending balance of $1,164,000 at June 30, 2000.


      The Company's commercial bank borrowings consist of a term loan and a
revolving line of credit, the ("Credit Agreement"), Refer to the 2000 Form
10KSB, Liquidity and Capital Resources.


                                       15
<PAGE>   16
The Credit Agreement bears interest at the reserve adjusted LIBOR rate plus the
applicable margin (as defined), was 7.75% at June 30, 2001.

      On February 1, 2001, the Company renegotiated its Credit Agreement with
the commercial bank. Among other changes, this amendment to the Credit Agreement
reduces the revolving credit line to $1,000,000. In addition, the term loan
available was increased to $2,000,000.

      On June 29, 2001, the Company renegotiated its Credit Agreement with the
commercial bank. Among other changes, this amendment to the Credit Agreement
increases the monthly principal payments from $35,000 to $45,000 and will bear
interest at the Prime Rate plus 1.0%, both commencing on July 1, 2001. Both the
revolving credit line and term loan under the Credit Agreement become due on
March 15, 2002, and are collateralized by substantially all the assets of the
Company.

      As of June 30, 2001, the balances of the revolving credit and term loan
are zero and $1,895,000, respectively.

      The Company must maintain certain financial and other covenants in order
to draw amounts available under the line of credit. Provisions under this
agreement are not considered restricted to normal operations. As of June 30,
2001, the Company was in default of certain financial covenants contained in the
Credit Agreement. The Company has, however, received waivers from its lender
regarding such noncompliance. The financial covenants that the Company must
meet are based on quarterly operating results. If the covenants are not met as
of September 30, 2001, the Company will require waivers from its lender in
order to draw amounts available under the line of credit. There can be no
assurance that such waivers will be obtained from the Company's lender in the
event the financial covenants are not met.

      The Company expects to meet long term liquidity requirements through cash
flows generated by operations and existing cash balances. The Company does not
anticipate any additional term borrowing, or draws against the revolving credit
line in 2001. Management has implemented a short and long term plan to repay the
existing Credit Agreement. As defined by the renegotiated Credit Agreement on
June 29, 2001, the Company will make monthly principal payments, beginning July
1, 2001, of $45,000 on the term loan. The Company had also determined that,
during 2001, quarterly payments to the revolving line of credit would be made
based on cash flows generated from operations. Through June 30, 2001, the
Company exceeded expectations on the quarterly revolving line of credit
repayment schedule by eliminating the outstanding balance. At the close of each
quarter, the Company has made arrangements to meet and review results of the
Company with the commercial bank. At the end of 2001, the Company expects to
negotiate with the commercial bank for an extension to the Credit Agreement,
although there can be no assurance that such negotiations will be successful.

      Based on forecasted cash flows, debt repayment requirements and its
relationship with the commercial bank, the Company believes it will be able to
repay or renegotiate its outstanding debt, despite the current forecasts that
provide uncertainty over the Company's ability to generate profits to realize
its deferred tax assets. However, the inability to renegotiate its debt or
obtain additional financing when needed would have a material adverse effect
on the business, financial condition and operating results and could adversely
affect the Company's ability to continue its business operations.


                                       16
<PAGE>   17
New accounting pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141). SFAS No. 141 requires that all business combinations be accounted for
using the purchase method of accounting. The use of the pooling-of-interest
method of accounting for business combinations is prohibited. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
As of June 30, 2001, SFAS No. 141 will not have an effect on the Company.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142 changes
the accounting for goodwill and intangible assets and requires that goodwill no
longer be amortized but be tested for impairment at least annually at the
reporting unit level in accordance with SFAS No. 142. Recognized intangible
assets should be amortized over their useful life and reviewed for impairment in
accordance with FASB Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The provisions of SFAS No. 142 are effective for fiscal years
beginning after December 15, 2001, except for provisions related to the
nonamortization and amortization of goodwill and intangible assets acquired
after June 30, 2001, which will be subject immediately to the provisions of SFAS
No. 142. As of June 30, 2001, SFAS No. 142 will not have an effect on the
Company.

Government Regulation

Periodically, the Company receives inquiries from regulatory agencies regarding
its compliance with laws and regulations. To its knowledge, the Company believes
it complies with all international, federal, state and local regulations,
including environmental regulations. However, there is no assurance that the
Company will continue to remain in compliance with all such regulations.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      The Company's exposure to interest rate changes are primarily related to
its variable rate debt issued under its $1,895,000 Credit Agreement (Refer to
Note 3 of the Financial Statements). Because the interest rates on these
facilities are variable, based upon the bank's prime rate or LIBOR, the
Company's interest expense and net income are affected by interest rate
fluctuations. If interest rates were to increase or decrease by 100 basis
points, the result, based upon the existing outstanding debt as of June 30, 2001
would be an annual increase or decrease of approximately $19,000 in interest
expense for a twelve month period.

      Revenue generated from foreign sales are payable in United States funds,
thus no foreign exchange rate risk exists.


                                       17
<PAGE>   18
                            PART II OTHER INFORMATION

Item 1     Legal Proceedings
           Not Applicable

Item 2     Changes in Securities

On April 30, 2001, the Company amended its Certificate of Designation of Series
A Convertible Preferred Stock, designating the number of Series A Preferred
Stock from 502,326 shares to 692,951 shares.

Item 3     Defaults upon Senior Securities
           None

Item 4     Submission of Matters to a Vote of Security Holders
           None

The following matters were submitted to a vote of shareholders of the Company at
the Annual Meeting of Shareholders held May 31, 2001:

           (a) The following members were elected to the Board of Directors to
               hold office until the next annual meeting.

<TABLE>
<CAPTION>
           Nominee                        For                     Withheld
           -------                        ---                     --------
<S>                                       <C>                     <C>
           Charles D. Johnston            3,139,410
           James LD Roser                 3,139,410
           Richard Jennewine              3,139,410
           H. Robert Gill                 3,139,410
           William Sanko                  3,139,410
</TABLE>


           (b) Arthur Andersen LLP, independent public accountants, were
               selected as the auditors of the Company for the fiscal year
               ending December 31, 2001, by a vote of 3,138,290 in favor and
               1,120 against.


Item 5     Other Information
           None

Item 6     Exhibits and Reports on Form 8-K.


           (a) Exhibits - See Index to Exhibits

           (b) Reports on Form 8-K during the quarter ended
               June 30, 2001:


                                       18
<PAGE>   19
           On May 1, 2001, QualMark Corporation dismissed PricewaterhouseCoopers
           LLP as its independent accountants. The Registrant's Audit Committee
           and Board of Directors approved the decision to change independent
           accountants. The Registrant engaged Arthur Andersen LLP as its new
           independent accountants as of May 1, 2001.

           On May 31, 2001, the Registrants Board of Directors appointed Anthony
           A. Scalese as Vice President of Finance and Administration.


                                   SIGNATURES

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

                              QualMark Corporation



Date:  August 14, 2001          By:/s/ CHARLES D. JOHNSTON
       ---------------         ---------------------------------------------
                                Charles D. Johnston
                                President, Chief Executive Officer


Date:  August 14, 2001          By:/s/ ANTHONY A. SCALESE
       ---------------         ---------------------------------------------
                                Anthony A. Scalese
                                VP of Finance & Administration


                                       19
<PAGE>   20
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit       Description
Number        -----------
------
<S>           <C>
3.1           Amended and Restated Articles of Incorporation of the Company. (1)
3.2           Amended and Restated Bylaws of the Company. (1)
3.3           Certificate of Designation for Series A Preferred Stock. (5)
3.4           Amended Certificate of Designation for Series A Preferred Stock.
3.5           Statement of Change of Registered Agent.
4.1           Form of Certificate for Shares of Common Stock. (1)
4.6           Form of Warrant issued to holders of 10% secured promissory notes. (1)
10.1          QualMark Corporation 1993 Incentive Stock Option Plan. (1)
10.2          QualMark Corporation 1996 Stock Option Plan. (3)
10.3          Employment Agreement dated March 1, 1993 by and between the Company and W. Preston Wilson. (1)
10.4          Employment Agreement dated August 15, 1994 by and between the Company and J. Wayne Farlow. (1)
10.5          Agreement dated September 30, 1995 by and between the Company and Gregg K. Hobbs. (1)
10.8          Addendum to Agreement dated as of December 21, 1995 by and between the Company and Gregg K. Hobbs. (1)
</TABLE>


                                    20
<PAGE>   21
<TABLE>
<CAPTION>
Exhibit       Description
Number        -----------
------
<S>           <C>
10.11         Loan and Security Agreement dated April 30, 1996, by and between QualMark Corporation and Silicon Valley Bank,
              as amended by Amendment to Loan and Security Agreement dated August 18, 1997. (2)
10.12         Loan and Security Agreement dated December 22, 1998, by and between QualMark Corporation and U.S. Bank
              National Association. (4)
10.13         Waiver and Amendment to Loan Agreement dated March 15, 1999 by and between QualMark and U.S. Bank National
              Association. (4)
10.14         Second Amendment to Loan Agreement dated August 23, 1999 by and between QualMark and U.S. Bank National
              Association. (5)
10.15         Settlement Agreement dated August 30, 1999 by and among QualMark Corporation and Screening Systems, Inc. (5)
10.16         Preferred Stock Purchase Agreement dated September 1, 1999, including Warrant to Purchase 139,535 Shares of
              Common Stock. (5)
10.17         Third Amendment to Loan Agreement dated March 31, 2000 by and between QualMark and U.S. Bank National
              Association. (6)
10.18         Employment Agreement dated July 17, 2000 by and between the Company and Charles D. Johnston. (7)
10.19         Second Amendment to Promissory Notes and Fifth Amendment to Loan Agreement dated February 1, 2001 by and
              between QualMark and U.S. Bank National Association. (8)
10.20         Third Amendment to Promissory Notes and Sixth Amendment to Loan Agreement dated June 29, 2001 by and between
              QualMark and U.S. Bank National Association.
</TABLE>

----------

(1)      Incorporated by reference from the Company's Registration Statement No.
         333-1454-D on Form SB-2.
(2)      Incorporated by reference from the Company's Quarterly Report on Form
         10-QSB for the quarter ended September 30, 1997.
(3)      Incorporated by reference from the Company's Proxy Statement for the
         1996 Annual Meeting of Shareholders.
(4)      Incorporated by reference from the Company's Annual Report of Form
         10-KSB for the year ended December 31, 1998.
(5)      Incorporated by reference from the Company's Quarterly Report on Form
         10-QSB for the quarter ended September 30, 1999.
(6)      Incorporated by reference from the Company's Quarterly Report on Form
         10-QSB for the quarter ended June 30, 2000.
(7)      Incorporated by reference from the Company's Quarterly Report on Form
         10-QSB for the quarter ended September 30, 2000.
(8)      Incorporated by reference from the Company's Quarterly Report on Form
         10-KSB for the year ended December 31, 2000.


                                       21