<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended: June 30, 2001

                                       OR

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

         For the transition period from__________________to_____________________

                         Commission File Number: 0-27658
                             PNI TECHNOLOGIES, INC.

                       (formerly Preferred Networks, Inc.)

             (Exact name of Registrant as Specified in its Charter)

                       GEORGIA                             58-1954892
           (State or other jurisdiction of              (I.R.S. Employer
            incorporation or organization)           Identification Number)

                       850 Center Way, Norcross, GA 30071
                    (Address of principal executive offices)
                                   (Zip Code)
                                 (770) 582-3500
               (Registrant's telephone number including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                           if changed since last year)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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 [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 16,520,417 shares of common
stock, no par value, as of August 20, 2001.


<PAGE>   2
                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
PART I.           FINANCIAL INFORMATION                                                      PAGE
                                                                                            NUMBER
                                                                                            ------

<S>                                                                                         <C>
         Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets for June 30, 2001
                  (Unaudited) and December 31, 2000.....................................       3

                  Condensed Consolidated Statements of Operations for the three and
                  six months ended June 30, 2001 and 2000 (Unaudited)...................       4

                  Condensed Consolidated Statements of Cash Flows for the three and
                  six months ended June 30, 2001 and 2000
                  (Unaudited)...........................................................       5

                  Notes to Condensed Consolidated Financial Statements (Unaudited)......       6

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations.............................................       9

         Item 3.  Quantitative and Qualitative Disclosure of Market Risk................      14



PART II.          OTHER INFORMATION

         Item 1.  Legal Proceedings.....................................................      14

         Item 3.  Defaults Upon Senior Securities.......................................      14

         Item 6.  Exhibits and Reports on Form 8-K......................................      15

                  Signatures............................................................      16
</TABLE>


<PAGE>   3

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           JUNE 30,      DECEMBER 31,
                                                                                             2001            2000
                                                                                         ------------    ------------
                                                                                         (UNAUDITED)

<S>                                                                                      <C>             <C>
                                                       ASSETS
Current assets
   Cash and cash equivalents ........................................................    $  1,207,741    $  1,912,625
   Accounts receivable, net .........................................................         652,429       1,562,409
   Inventory ........................................................................         244,547       1,285,051
   Prepaid expenses and other current assets ........................................         209,045         140,468
                                                                                         ------------    ------------
     Total current assets ...........................................................       2,313,762       4,900,553

Property and equipment, net .........................................................       3,213,263      11,422,545
Goodwill net ........................................................................              --       6,314,652
FCC licenses, net ...................................................................              --       7,454,935
Other assets, net ...................................................................         169,361         180,306
                                                                                         ------------    ------------
                                                                                         $  5,696,386    $ 30,272,991
                                                                                         ============    ============

                                      LIABILITIES, REDEEMABLE PREFERRED STOCK,
                                             AND STOCKHOLDERS' DEFICIT
Current liabilities
   Pre-petition accounts payable ....................................................    $  3,454,257    $  1,912,829
   Post-petition accounts payable ...................................................         135,002              --
   Accrued liabilities ..............................................................       1,303,669       1,237,585
   Accrued compensation .............................................................          37,995         143,286
   Current portion of notes payable and capital lease obligations ...................       5,348,981       5,283,151
Class A Redeemable Preferred Stock, no par value, $1.50 per share
   redemption price; 13,500,000 shares authorized, 10,000,000
   shares issued and outstanding (including $6,046,038 of undeclared
   dividends in 2001) ...............................................................      20,674,980              --
Class B Senior Redeemable Preferred Stock, no par value, $1.50 per share
   redemption price; 5,500,000 shares authorized, 5,333,336 shares issued
   and outstanding (including $3,829,079 of undeclared dividends in 2001) ...........      12,327,150              --
                                                                                         ------------    ------------
     Total current liabilities ......................................................      43,282,034       8,576,851

Notes payable and capital lease obligations, less current portion ...................              --         152,951
Class A Redeemable Preferred Stock, no par value, $1.50 per
   share redemption price; 13,500,000 shares authorized, 10,000,000
   shares issued and outstanding (including $5,308,333 of undeclared
   dividends in 2000) ...............................................................              --      19,725,682
Class B Senior Redeemable Preferred Stock, no par value, $1.50
   per share redemption price; 5,500,000 shares authorized, 5,333,336
   shares issued and outstanding (including $4,685,190 and
   $3,829,079 of undeclared dividends in 2001 and 2000, respectively) ...............              --      11,371,349
                                                                                         ------------    ------------
     Total liabilities and Redeemable Preferred Stock ...............................      43,282,034      39,826,833

Deficit in Stockholders' Equity
   Common Stock, no par value, 100,000,000 shares authorized in 2001 and 2000;
     16,520,417 issued and outstanding in 2001 and 2000, respectively ...............      54,320,062      55,905,980
   Accretion of Redeemable Preferred Stock ..........................................      (2,385,195)     (2,073,912)
   Accumulated deficit ..............................................................     (89,520,515)    (63,385,910)
                                                                                         ------------    ------------
     Total Stockholders' deficit ....................................................     (37,585,648)     (9,553,842)
                                                                                         ------------    ------------
                                                                                         $  5,696,386    $ 30,272,991
                                                                                         ============    ============
</TABLE>

            See notes to condensed consolidated financial statements.


                                        3
<PAGE>   4

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                          JUNE 30,                        JUNE 30,
                                                                ------------------------------------------------------------
                                                                    2001            2000            2001            2000
                                                                ------------    ------------    ------------    ------------

<S>                                                             <C>             <C>             <C>             <C>
Revenues
     Network services ......................................    $  1,957,992    $  2,712,071    $  4,106,670    $  5,648,672
     Pager sales ...........................................         558,904         791,190       1,039,978       1,610,025
     Networking products ...................................          65,992         189,409         101,464         258,900
     Other services ........................................          30,611          66,907          73,167         104,665
                                                                ------------    ------------    ------------    ------------
              Total revenues ...............................       2,613,499       3,759,577       5,321,279       7,622,262

Costs of revenues
     Network services ......................................       1,670,682       1,839,401       3,456,483       3,818,421
     Pager sales ...........................................         501,251         664,350         972,909       1,383,972
     Networking products ...................................         137,339         112,070         309,134         209,528
     Other services ........................................             109             133           2,451           1,252
                                                                ------------    ------------    ------------    ------------
              Total costs of revenues ......................       2,309,381       2,615,954       4,740,977       5,413,173
                                                                ------------    ------------    ------------    ------------
Gross margin ...............................................         304,118       1,143,623         580,302       2,209,089

Selling, general and administrative expenses ...............       2,117,483       1,616,159       3,570,290       3,218,105
Reorganization costs .......................................          69,720              --          69,720              --
Depreciation and amortization ..............................       1,312,103       1,261,599       2,623,964       2,561,501
Impairment Loss ............................................      20,149,970              --      20,149,970              --
                                                                ------------    ------------    ------------    ------------
              Operating loss ...............................     (23,345,158)     (1,734,135)    (25,833,642)     (3,570,517)
Interest expense ...........................................        (151,074)       (162,333)       (304,698)       (325,506)
Interest income ............................................             540          75,111           3,735         101,128
Net Loss ...................................................     (23,495,692)     (1,821,357)    (26,134,605)     (3,794,895)
Accretion of Redeemable Preferred Stock ....................        (155,642)       (155,653)       (311,282)       (311,284)
Redeemable Preferred Stock dividend requirements ...........        (823,866)       (719,989)     (1,593,816)     (1,444,717)
                                                                ------------    ------------    ------------    ------------
              Net loss attributable to Common Stock ........    $(24,475,200)   $ (2,696,999)   $(28,039,703)   $ (5,550,896)
                                                                ============    ============    ============    ============

Net loss per share of Common Stock .........................    $      (1.48)   $       (.16)   $      (1.70)   $       (.34)

Weighted average number of common shares used in
     calculating net loss per share of Common Stock ........      16,520,417      16,544,417      16,520,417      16,472,917
</TABLE>

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>   5

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED JUNE 30,
                                                                          ----------------------------
                                                                              2001            2000
                                                                          ------------    ------------

<S>                                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .............................................................    $(26,134,605)   $ (3,794,895)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Depreciation and amortization .....................................       2,623,964       2,561,501
   Maintenance services from sale of PTS .............................              --         416,665
   Bad debt expense ..................................................         810,092         214,556
   Impairment loss ...................................................      20,149,970              --
   Stock option and restricted stock grant compensation expense ......           7,898          23,254
   Changes in operating assets and liabilities:
        Accounts receivable ..........................................          99,888        (477,606)
        Inventory ....................................................         256,384        (222,002)
        Prepaid expenses and other assets ............................         (68,577)          8,628
        Accounts payable .............................................       1,676,430        (421,158)
        Accrued liabilities ..........................................          91,084          81,608
        Accrued compensation .........................................        (105,291)         (7,358)
                                                                          ------------    ------------
   Net cash used in operating activities .............................        (592,763)     (1,616,807)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment ...............................................              --         (91,356)
Payment of accrued expenses related to sale of subsidiary in 1999 ....              --        (570,000)
Proceeds from holdback related to sale of subsidiary in 1999 .........              --         750,000
Purchases of other assets and FCC licenses ...........................              --              --
                                                                          ------------    ------------
   Net cash used by investing activities .............................              --          88,644

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings .............................................              --         550,000
Repayments of borrowings .............................................        (112,121)       (999,482)
Issuance of redeemable preferred stock ...............................              --              --
Issuance of Common Stock upon exercise of stock options ..............              --         290,746
                                                                          ------------    ------------
   Net cash provided (used) by financing activities ..................        (112,121)       (158,736)

Net increase (decrease) in cash and cash equivalents .................        (704,884)     (1,686,899)
Cash and cash equivalents, beginning of period .......................       1,912,625       5,489,898
                                                                          ------------    ------------
Cash and cash equivalents, end of period .............................    $  1,207,741    $  3,802,999
                                                                          ------------    ------------
</TABLE>

            See notes to condensed consolidated financial statements.


                                       5
<PAGE>   6

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

1.       THE COMPANY

         PNI Technologies, Inc., formerly known as Preferred Networks, Inc.
         ("PNI" or the "Company"), commenced operations in 1991 as a carrier's
         carrier of one-way paging networks, whereby the Company's customers
         purchase and resell the Company's network services to their
         subscribers. During 1999, the Company completed development of its
         intelligent, high-speed switching technology. The Company shipped its
         first beta units in 1999 and in early 2000, began shipments to
         customers of its first networking products. However, substantially all
         of its revenues and costs continue to be derived from its network
         services business. Due to the early stages of commercial sales of PNI's
         networking products, PNI's limited working capital, and PNI's limited
         development personnel, PNI has been inhibited in its ability to
         complete multiple customer orders. Concurrent with its Chapter 11
         Bankruptcy filing, PNI suspended all development, assembly and
         shipments of its networking products. PNI does not expect to resume
         such activities in the foreseeable future, although it may seek to
         transfer or license its patent with respect to these technologies. The
         Company changed its name effective August 2000.

2.       BASIS FOR PRESENTATION

         The interim condensed consolidated financial information contained
         herein has been prepared by the Company, without audit, pursuant to the
         rules and regulations of the Securities and Exchange Commission ("SEC")
         and includes in the opinion of management, all adjustments, which are
         of a normal recurring nature necessary for a fair presentation of the
         financial position, results of operations and cash flows for the
         periods presented. Certain information and footnote disclosures
         normally included in financial statements prepared in accordance with
         generally accepted accounting principles ("GAAP") have been condensed
         or omitted pursuant to such rules and regulations. The Company
         believes, however, that its disclosures are adequate to make the
         information presented not misleading. These financial statements and
         related notes should be read in conjunction with the financial
         statements and notes as of December 31, 2000, included in the Company's
         Annual Report on Form 10-K (File No. 0-27658) and the Company's
         Quarterly Report on Form 10-Q for the period ending March 31, 2001.
         Results of operations for the periods presented herein are not
         necessarily indicative of results to be expected for the full year or
         any other interim period.

3.       CHAPTER 11 REORGANIZATION

         On June 8, 2001 (the "Petition Date"), PNI Technologies, Inc. and all
         of its subsidiaries (collectively, the "Debtors"), filed voluntary
         petitions for relief under Chapter 11, Title 11 of the United States
         Code (the "Bankruptcy Code") in the United States Bankruptcy Court for
         the Northern District of Georgia (the "Bankruptcy Court"). The Debtors
         are managing their business as "debtor-in-possession" in accordance
         with the applicable provisions of the Bankruptcy Code. No trustee or
         examiner has been appointed to the cases.

         Subsequent to the commencement of the Chapter 11 cases, the court has
         approved certain orders which were intended to enable the Debtors to
         continue business operations as debtors-in-possession. To date, the
         most significant of these orders (i) permitted the Debtors to utilize
         cash collateral, with the consent of the Company's senior lender, for
         its continuing operations (consisting of the majority of its network
         operations in the Southeast and Northeast) during the Chapter 11 cases
         in substantially the same manner as it was operated prior to the
         commencement of the Chapter 11 cases; (ii) authorized the Debtors to
         discontinue service in certain markets (consisting of its networks in
         the Mid-west, Florida, the Mid-Atlantic and selected networks operating
         on certain frequencies in the Southeast and Northeast); (iii)
         authorized payment of post-petition wages, vacation pay, and employee
         benefits and reimbursement of employee business expenses; (iv)
         authorized payment of pre and post-petition regulatory fees and taxes,
         including franchise, personal property, net worth, capital and gross
         receipts taxes owed by the Debtors; and (v) authorized the Debtors to
         pay certain pre-petition obligations to critical vendors to aid the
         Debtors in maintaining operation of their businesses.


                                       6
<PAGE>   7

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

         In bankruptcy, the rights of, and the Debtors' ultimate payments to,
         pre-petition creditors and shareholders may be substantially altered.
         This could result in claims being liquidated in the bankruptcy cases at
         less (and possibly substantially less) than 100% of their face value,
         and the equity of the Debtors' common shareholders being diluted or
         cancelled. In addition, pursuant to the provisions of the Bankruptcy
         Code, the Debtors are not permitted to pay any claims or obligations
         that arose prior to the Petition Date ("Pre-petition Claims") unless
         specifically authorized by the Bankruptcy Court. Similarly, claimants
         may not enforce any claims against the Debtors that arose prior to the
         Petition Date unless specifically authorized by the Court. The Debtors
         also have the right, as debtors-in-possession, subject to the
         Bankruptcy Court's approval, to assume or reject any executory
         contracts and unexpired leases in existence on the Petition Date.
         Parties having claims as a result of such rejection may file claims
         with the Court, which will be addressed as part of the Chapter 11
         cases. The Bankruptcy Code also provides that the Debtors have an
         exclusive period during which only they may propose and file and
         solicit acceptances of a plan of reorganization. This period may be
         extended upon request of the Debtors and subsequent Bankruptcy Court
         approval. If the Debtors fail to file a plan of reorganization during
         the exclusive period, as extended, or, after such plan has been filed,
         if the Debtors fail to obtain acceptance of such plan from the
         requisite classes of creditors and equity security holders during the
         exclusive solicitation period, any party in interest may file their own
         plan of reorganization for the Debtors.

         Due to material uncertainties, it is not possible to determine the
         additional amount of claims that may arise or ultimately be filed, or
         to predict the length of time the Debtors will operate under the
         protection of Chapter 11 of the Bankruptcy Code, the outcome of the
         bankruptcy cases in general, whether the Debtors will continue to
         operate under their current organizational structure, or the effect of
         the cases on the Debtors' business or on the claims and interests of
         the various creditors and security holders.

         Although the Chapter 11 bankruptcy filing raises substantial doubt
         about the Company's ability to continue as a going concern, the
         accompanying financial statements have been prepared on a going-concern
         basis. This basis contemplates the continuity of operations,
         realization of assets, and discharge of liabilities in the ordinary
         course of business. With the exception of certain assets written down
         pursuant to an impairment loss (as further discussed in Management's
         Discussion and Analysis of Financial Condition and Results of
         Operations below), the statements also present the assets of the
         Company at historical cost. A plan of reorganization could materially
         change the amounts and the carrying values currently disclosed in the
         financial statements.

         PNI continues to experience an erosion of its revenues from traditional
         one-way paging, which is the core of PNI's network services business
         and its principal revenue source. This decline in networking services
         revenue is indicative of the trends experienced by other one-way paging
         carriers. PNI expects to continue to experience significant net losses
         and declining cash flows. At the same time, the Company believes, based
         on information presently available to it, that cash available from its
         continuing operations will provide sufficient liquidity to allow it to
         continue as a going concern for the foreseeable future. However, the
         ability of the Company to continue as a going concern (including its
         ability to meet post-petition obligations of the Debtors) and the
         appropriateness of using the going concern basis for its financial
         statements are dependent upon, among other things, (i) the Company's
         ability to obtain sufficient credit and payment terms from vendors,
         (ii) the Company's ability to comply with the terms of any cash
         management order entered by the Bankruptcy Court in connection with the
         Chapter 11 cases, (iii) the ability of the Company to maintain adequate
         cash on hand, (iv) the ability of the Company to generate cash from
         operations, (v) confirmation of a plan of reorganization under the
         Bankruptcy Code, and (vi) the Company's ability to achieve
         profitability following such confirmation. As a result of these
         uncertainties, there can be no assurance that existing or future
         sources of liquidity will be adequate.

4.       SUPPLEMENTAL CASH FLOW INFORMATION

         Cash and cash equivalents include investments in money market
         instruments, which are carried at fair market


                                       7
<PAGE>   8

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

         value. There were no significant federal or state income taxes paid or
         refunded for the six months ended June 30, 2001 and 2000.

5.       IMPAIRMENT LOSS

         Statement of Financial Accounting Standards ("SFAS") No. 121,
         Accounting For The Impairment Of Long Lived Assets and For Long Lived
         Assets To Be Disposed Of, requires impairment losses to be recognized
         for long-lived assets used in operations when indicators of impairment
         are present and the undiscounted cash flows are not sufficient to
         recover the assets' carrying amount. The impairment loss is measured
         by comparing the fair value of the asset to its carrying amount. In
         accordance with SFAS 121, at June 30, 2001, a total impairment loss
         of $20.1 million has been recorded relating to the write down of
         certain network system equipment in markets which the Company intends
         to discontinue service in the amount of $6.2 million, the Company's
         intangible assets consisting of goodwill and FCC licenses in the
         amount of $13.1 million, and for the write down of certain inventory
         in the amount of $783,000. The network system equipment write down is
         based on limited market for the sale of this equipment to a third
         party, the declining financial condition of the Company's competitors,
         the declining number of paging subscribers industry-wide, and the
         overall level of excess network equipment in the industry. With
         respect to the intangibles, the value of these assets is directly
         attributable to the recurring revenue stream generated by the
         Company's customers. Due to recurring reductions in revenues and the
         number of active units in service, it is the opinion of management that
         the recoverability of the carrying value of these intangible assets
         may be in doubt. Further, the overall valuations in recent
         transactions involving other paging carriers and the current financial
         condition of the Company raise substantial questions concerning the
         recoverability of these assets. The impairment charge was taken at the
         time the Company made the decision to discontinue service to these
         markets, which was June 30, 2001.

6.       SEGMENT INFORMATION

         The Company operates its business as one reportable segment.


                                       8
<PAGE>   9

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)


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

OVERVIEW

        In this section, the Company makes reference to "EBITDA" which
represents earnings before interest expense, interest income, taxes,
depreciation and amortization. EBITDA is a financial measure commonly used in
the telecommunications industry and should not be construed as an alternative to
operating income (as determined in accordance with generally accepted accounting
principles ("GAAP")), as an alternative to cash flows from operating activities
(as determined in accordance with GAAP), or as a measure of liquidity. The table
below provides the components of the Company's consolidated statements of
operations and EBITDA for each of the three and six months ended June 30, 2001
and 2000, respectively, as a percentage of total revenues.

<TABLE>
<CAPTION>
                                                     Three Months Ended   Six Months Ended
                                                          June 30,            June 30,
                                                     ------------------   ----------------
                                                       2001      2000      2001      2000
                                                      ------    ------    ------    ------
<S>                                                   <C>       <C>       <C>       <C>
Revenues
   Network services ..............................      74.9%     72.1%     77.2%     74.1%
   Pager sales ...................................      21.4      21.0      19.5      21.1
   Networking products ...........................       2.5       5.0       1.9       3.4
   Other services ................................       1.2       1.9       1.4       1.4
                                                      ------    ------    ------    ------
     Total revenues ..............................     100.0     100.0     100.0     100.0
Cost of revenues
   Network services ..............................      63.9      48.9      65.0      50.1
   Pager sales ...................................      19.2      17.7      18.3      18.2
   Networking products ...........................       5.3       3.0       5.8       2.7
   Other services ................................       0.0       0.0       0.0       0.0
                                                      ------    ------    ------    ------
     Total cost of revenues ......................      88.4      69.6      89.1      71.0
                                                      ------    ------    ------    ------
Gross margin .....................................      11.6      30.4      10.9      29.0
Selling, general and administrative expenses .....      81.0      43.0      67.1      42.2
Reorganization costs .............................       2.7        --       1.3        --
Depreciation and amortization ....................      50.2      33.6      49.3      33.6
Impairment loss ..................................     771.0        --     378.7        --
                                                      ------    ------    ------    ------
     Operating loss ..............................    (893.3)    (46.2)   (485.5)    (46.8)
                                                      ------    ------    ------    ------
Interest expense .................................      (5.8)     (4.3)     (5.7)     (4.3)
Interest income ..................................       0.0       2.0       0.1       1.3
                                                      ------    ------    ------    ------
Net loss .........................................    (899.1)%   (48.5)%  (491.1)%   (49.8)%
                                                      ======    ======    ======    ======
EBITDA ...........................................    (843.1)%   (12.6)%  (436.2)%   (13.2)%
                                                      ======    ======    ======    ======
</TABLE>

RESULTS OF OPERATIONS

Revenues

        Total revenues were $2.6 million and $5.3 million for the three and six
months ended June 30, 2001, respectively, compared to $3.8 million and $7.6
million for the three and six months ended June 30, 2000, respectively. The
decrease in total revenues compared to the prior year periods was due to lower
revenues in all revenue categories, with the largest decline occurring from
network services.

        Revenues from network services were $2.0 million and $4.1 million for
the three and six months ended June 30, 2001, respectively, compared to $2.7
million and $5.6 million for the three and six months ended June 30, 2000,
respectively. PNI's airtime revenues have been affected by industry trends of
increased competition for reseller service units, declining service unit net
additions and declining average revenue per unit ("ARPU"). The Company's
airtime revenues were also affected by its limited working capital available
for pager purchases,


                                       9
<PAGE>   10

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)


because its customers typically rely on the Company for pager supply in order to
add service units to the Company's networks. Due to these factors, PNI
experienced a decline in total units in service to 348,179 at June 30, 2001,
compared to 468,314 at June 30, 2000. In addition, total average revenue per
unit ("ARPU") declined to $1.82 for the six months ended June 30, 2001, compared
to $1.92 in the prior year period. As part of its planned reorganization under
the Chapter 11 Bankruptcy filing, PNI intends to reduce its operating losses by
discontinuing service in certain markets that are not profitable (consisting of
its networks in the Mid-west, Florida, the Mid-Atlantic and selected networks
operating on certain frequencies in the Southeast and Northeast.) PNI intends to
continue to operate its profitable networks, which consist of the majority of
its Northeast and Southeast operations. Accordingly, although PNI believes these
efforts will provide a benefit to future net operating results, the reduction in
network markets will result in a further decrease in units in services and
associated airtime revenues.

        Revenues from pager sales were $559,000 and $1.0 million for the three
and six months ended June 30, 2001, respectively, compared to $791,000 and
$1.6 million for the three and six months ended June 30, 2000, respectively.
PNI's pager sales were affected by its limited working capital available for
pager purchases, as discussed above.

        PNI began commercial shipments of its first networking product, the
iTerminal(TM) desktop messaging terminal, in early 2000, and subsequently
introduced additional products, including its Platform1(R) intelligent,
high-speed, modular switch. PNI generated revenues from sales of networking
products of $66,000 and $101,000 for the three and six months ended June 30,
2001 compared to $189,000 and $259,000 for the three and six months ended June
30, 2000. Due to the early stages of commercial sales of PNI's networking
products, PNI's limited working capital, and PNI's limited development
personnel, PNI has been inhibited in its ability to complete multiple customer
orders. Concurrent with its Chapter 11 Bankruptcy filing, PNI suspended all
development, assembly and shipments of its networking products. PNI does not
expect to resume such activities in the foreseeable future, although it may seek
to transfer or license its patent with respect to these technologies.

Cost of Revenues

        Cost of network services was $1.7 million and $3.5 million for the
three and six months ended June 30, 2001, respectively, compared to $1.8
million and $3.8 million for the three and six months ended June 30, 2000,
respectively. The decrease in cost of network services is due to continued
initiatives to reduce operating costs. Due to its plans to eliminate certain
unprofitable network operations (as discussed above), PNI expects that it will
achieve further reductions in cost of network services, consisting primarily of
reductions in recurring site rents and telephone expenses.

        Cost of pager sales were $501,000 and $972,000 for the three and six
months ended June 30, 2001, respectively, compared to $664,000 and $1.4 million
for the three and six months ended June 30, 2000, respectively. The decreases
in cost of pager sales were due primarily to the Company's limited pager supply
and related decrease in pager revenue.

        Cost of networking products were $137,000 and $309,000 for the three
and six months ended June 30, 2001, respectively, compared to $112,000 and
$210,000 for the three and six months ended June 30, 2000, respectively. The
majority of the cost of networking products in both periods resulted from an
allocation of S,G&A expenses that are associated with the delivery of
commercial products. Due to the early stages of commercial sales of PNI's
networking products and its attempts to build its networking products business,
this expense allocation exceeded the networking products revenues for both
periods. In connection with the discontinuation of operations related to its
networking products, this allocation will cease to occur in future periods.

Overhead

        S,G&A expense was $2.1 million and $3.6 million for the three and six
months ended June 30, 2001, respectively, compared to $1.6 million and $3.2
million for the three and six months ended June 30, 2000,


                                       10
<PAGE>   11

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

respectively. The increase in S,G&A expense was due primarily to a charge to bad
debt expense during the three month period to write off certain outstanding
accounts receivable that the Company believes may be uncollectable because of
discontinuance of service in certain markets and due to additional accruals for
certain expenses that may be payable post-petition. Prior to this charge, the
Company's S,G&A expenses would have decreased due primarily to reductions in
personnel and office related expenses. Concurrent with its Chapter 11 Bankruptcy
filing, PNI reduced its workforce by approximately 50% and commenced the
consolidation of certain office operations, which will enable further reductions
of personnel and office-related expenses in the future. Accordingly, PNI expects
that its recurring S,G&A will further decrease. The Company also incurred
approximately $70,000 of reorganization costs for the three months ended June
30, 2001, consisting primarily of legal fees associated with the Chapter 11
Bankruptcy proceedings. Depreciation and amortization expense was $1.3 million
and $2.6 million for the three and six months ended June 30, 2001 and 2000,
respectively. Due to the write-down of certain assets (as further discussed
below), the Company expects its depreciation expense to be reduced in future
periods. Interest expense was $151,000 and $304,000 for the three and six months
ended June 30, 2001 compared to $162,000 and $325,000 for the three and six
months ended June 30, 2000.

        Net loss before impairment loss was $3.3 million and $6.0 million for
the three and six months ended June 30, 2001, respectively, compared to $1.8
million and $3.8 million for the three and six months ended June 30, 2000,
respectively. The increase in net loss before impairment loss was due primarily
to decreases in gross profit due to lower revenues and due to the charges to
SG&A discussed above.

        The net loss attributable to Common Stock was $24.5 million and $28.0
million for the three and six months ended June 30, 2001, respectively,
compared to $2.7 million and $5.6 million for the three and six months ended
June 30, 2000, respectively.

Impairment Loss

        At June 30, 2001, a total impairment loss of $20.1 million has been
recorded relating to the write down of certain network system equipment in
markets which the Company intends to discontinue service in the amount of $6.2
million, the Company's intangible assets consisting of goodwill and FCC
licenses in the amount of $13.1 million, and for the write down of certain
inventory in the amount of $783,000. The network system equipment write down is
based on limited market for the sale of this equipment to a third party, the
declining financial condition of the Company's competitors, the declining
number of paging subscribers industry-wide, and the overall level of excess
network equipment in the industry. With respect to the intangibles, the value
of these assets is directly attributable to the recurring revenue stream
generated by the Company's customers. Due to recurring reductions in revenues
and the number of active units in service, it is the opinion of management that
the recoverability of the carrying value of these intangible assets may be in
doubt. Further, the overall valuations in recent transactions involving other
paging carriers and the current financial condition of the Company raise
substantial questions concerning the recoverability of these assets.

Liquidity and Capital Resources

Summary of 2000 and 2001 Events


                                       11
<PAGE>   12

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

        At June 30, 2001, PNI had $1.2 million in cash, $652,000 in net
accounts receivable, $3.6 million in accounts payable and $1.3 million in
accrued liabilities. An aggregate of $5.3 million in principal plus accrued
interest was outstanding under PNI's credit facilities with its lenders as of
June 30, 2001. PNI's net cash used in operations for the six month period ended
June 30, 2001 was $593,000, compared to $1.6 million in 2000. The reduction in
cash used in operations was due primarily to the further aging of accounts
payable as part of the Company's efforts to preserve cash.

        During the first six months of 2001, PNI continued in its efforts to
develop its networking products business, and to that end incurred expenses in
the development and promotion of this business that it would not have incurred
solely as a provider of network services. PNI has not yet achieved significant
sales of its networking products, and its costs attributable to this business
have exceeded its revenues. Concurrent with its Chapter 11 Bankruptcy filing,
PNI suspended all development, assembly and shipments of its networking
products. PNI does not expect to resume such activities in the foreseeable
future, although it may seek to transfer or license its patent with respect to
these technologies. PNI's principal revenue source remains its network services
business, which continues its trend toward lower per-user and aggregate
revenues. PNI intends to reduce its operating losses by discontinuing service
in certain markets that are not profitable (consisting of its networks in the
Mid-west, Florida, the Mid-Atlantic and selected networks operating on certain
frequencies in the Southeast and Northeast.). PNI intends to continue to
operate its profitable networks, which consist of the majority of its Northeast
and Southeast operations. Accordingly, although PNI believes that these efforts
will provide a net benefit to future cash generation, the reduction in network
markets will result in a further decrease in revenues.

        PNI has three primary lenders, as further discussed in the "Capital
Resources" section below. At June 30, 2001, PNI had $1.9 million outstanding
under a senior credit facility that is secured by substantially all of the
assets of PNI and is to be used for working capital purposes. The amount
outstanding under this facility was due on March 31, 2001. PNI notified this
lender of its intent to delay this payment and of its efforts to complete a
strategic transaction that would enable it to retire this obligation. In May
2001, this lender agreed to forbear its rights relating to the defaults during
the period in which PNI hoped to consummate the strategic transaction. The
Company does not presently believe that the anticipated strategic transaction
will be consummated and management is no longer in discussions with this party.

        Beginning in February 2001, PNI ceased to make principal and interest
payments to its two other primary lenders, although these payments were due
under the applicable loan agreements. These loans are secured by the majority
of PNI's paging network assets. As of the date that PNI ceased to make payments
to these institutions, the aggregate outstanding balance totaled $3.3 million,
of which $1 million was due and payable on March 31, 2001. Thereafter, PNI is
required to make regular principal payments to these lenders in the aggregate
average monthly amount of $180,000 (in addition to monthly interest payments)
for the remainder of 2001. PNI notified these lenders of its intent to delay
these payments and of its efforts to complete a strategic transaction that
would enable it to retire these obligations. The Company does not presently
believe that the anticipated strategic transaction will be consummated and
management is no longer in discussions with this party.

Capital Resources

        PNI continues to experience an erosion of its revenues from traditional
one-way paging, which is the core of PNI's network services business and its
principal revenue source. This decline in networking services revenue is
indicative of the trends experienced by other one-way paging carriers. PNI
expects to continue to experience significant net losses and negative cash
flows. At the same time, the Company intends, under a plan of reorganization
pursuant to its Chapter 11 Bankruptcy filing, to eliminate operations that are
unprofitable and to continue to operate in network markets that are profitable.
The Company believes, based on information presently available to it, that cash
available from these continuing operations will provide sufficient liquidity to
allow it to continue as a going concern for the foreseeable future. However,
the ability of the Company to continue as a going concern (including its
ability to meet post-petition obligations of the Debtors) and the
appropriateness of using the going concern basis for its financial statements
are dependent upon, among other things, (i) the Company's ability


                                       12
<PAGE>   13

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

to obtain sufficient credit and payment terms from vendors, (ii) the Company's
ability to comply with the terms of any cash management order entered by the
Bankruptcy Court in connection with the Chapter 11 cases, (iii) the ability of
the Company to maintain adequate cash on hand, (iv) the ability of the Company
to generate cash from operations, (v) confirmation of a plan of reorganization
under the Bankruptcy Code, and (vi) the Company's ability to achieve
profitability following such confirmation. As a result of these uncertainties,
there can be no assurance that existing or future sources of liquidity will be
adequate.

        During 1999, the Company repaid in full its senior credit facility that
was used to finance paging network acquisitions. At December 31, 1999, the
Company had established a $2.0 million revolving credit facility with this
financial institution to be used for working capital purposes. The outstanding
balance under this facility bears interest at 2% plus the prime rate. The
amount outstanding under this facility as of June 30, 2001 was $1.9 million,
which was due on March 31, 2001. In May 2001, this lender agreed to forbear its
rights relating to this and certain other defaults during the period in which
PNI hoped to consummate the strategic transaction. However, the Company
subsequently ceased to have discussions with this strategic party and did not
meet the terms of the forbearance agreement, which constitutes an event of
default. On July 10, 2001, the Company repaid $364,000 of principal and accrued
interest to this lender. Borrowings under this facility are secured by
substantially all the assets of the Company. This credit facility contains
various conditions, financial covenants and restrictions related to a variety
of issues.

        PNI has purchased certain of its paging network equipment under a
vendor financing facility bearing interest at the rate of 12.57%. This credit
facility was established in 1996 and this lender has since amended certain
terms and conditions. This credit facility contains various conditions,
financial covenants and restrictions and is secured by paging equipment. In
connection with PNI's sale of its subsidiary EPS Wireless, Inc. in December
1999, this lender amended this facility with respect to the outstanding balance
to suspend principal payments until March 31, 2001 (although PNI was still
obligated to pay interest). A principal payment of $1 million was due on March
31, 2001, following which PNI is obligated to make monthly principal payments
of approximately $124,000 until December 2001. As of June 30, 2001, there was
$1.9 million outstanding under this facility with no additional availability.
PNI ceased to make interest payments to this lender in February 2001 and did
not make the payment due on March 31, 2001, both of which constitute events of
default. Since its Chapter 11 Bankruptcy filing, the Company has made no
payments to this lender.

        The Company has purchased certain of its paging network equipment under
a secured credit facility from a finance company bearing interest at a rate of
10.0%. This credit facility was established in 1996 and this lender has since
amended certain terms and conditions. This credit facility contains various
conditions, financial covenants and restrictions and is secured by paging
equipment. In connection with the sale of its subsidiary Preferred Technical
Services, Inc., in May 1999, this lender amended this facility with respect to
the outstanding balance to suspend principal payments until May 2000 (although
the Company was still obligated to pay interest). In May 2000, a principal
payment of $613,000 was due and paid, following which monthly principal
payments of approximately $56,000 are due until February 2003. As of June 30,
2001, there was $1.4 million outstanding under this facility with no additional
availability. PNI ceased to make principal and interest payments to this lender
in February 2001, both of which constitute events of default. Since its Chapter
11 Bankruptcy filing, the Company has made no payments to this lender.

        In addition to the above-described issues related to PNI's
indebtedness, PNI's current financial situation could impact operations in a
number of other ways, some, but not all, of which are described here. PNI
continues to operate at a loss, and its current financial condition may
adversely affect its ability to obtain supplies and services from vendors on
acceptable terms, to maintain relationships with its existing vendors (in
particular, its relationships with suppliers responsible for keeping PNI's
networks operational), and to retain and attract employees and customers. These
factors could, in turn, aggravate the condition PNI presently is experiencing
by further reducing revenues and operating cash flow.

        PNI may not be able to propose or have confirmed a plan of
reorganization acceptable to creditors, or to


                                       13
<PAGE>   14

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

emerge from Chapter 11 Bankruptcy. If PNI was required to satisfy its
obligations to its lenders, became insolvent or was liquidated, and PNI's
lenders proceeded against PNI's assets to satisfy those obligations, the value
of its assets might not be sufficient to satisfy those obligations. This
condition could be exacerbated by the fact that some of PNI's assets are
intangible assets, primarily FCC licenses, goodwill and subscriber lists. The
Company believes its intangible assets in the context of a liquidation or sale
of business will have substantially no value, and accordingly, the Company has
written these assets down to $0. At June 30, 2001, PNI's total tangible assets
were approximately $5.7 million. There can be no assurance that the value of
PNI's assets is, or will be, sufficient to repay its debt obligations. Even if
PNI is able to satisfy its debt obligations, this could exhaust most, if not
all, of PNI's assets. In such a situation, there would be little, if any,
surplus remaining for distribution to the holders of PNI's preferred and common
stock.

Forward-Looking Statements

        The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q, the Company's Annual Report on Form 10-K, and
other materials filed or to be filed by PNI with the Securities and Exchange
Commission (as well as information included in oral statements or other written
statements made or to be made by PNI) contains statements that are or will be
forward-looking, such as statements relating to future sales activity or
financial performance, marketing efforts and their possible results, financing
and restructuring alternatives and their possible results, the possibility of
any reorganization, acquisition or other strategic transaction, future capital
expenditures, financing sources and availability and the effects of laws and
regulations (including FCC regulations) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of PNI. These risks and uncertainties include, but are not limited to,
uncertainties affecting the wireless industries generally; risks relating to
PNI's discontinuing service in certain markets; risks related principal
suppliers discontinuing service to PNI due to the bankruptcy filing; risks
relating to PNI's efforts to implement its business strategy, including
successful completion of bankruptcy reorganization proceedings; risks related
to loss of employees since PNI must retain a substantial number of employees to
network services; the relatively unproven nature of PNI's networking products,
which represent a new product line for PNI; challenges to PNI's technologies
(such as challenges to the validity of the patent on PNI's switching
technology); risks relating to the ability of PNI to obtain additional funds in
the form of debt or equity (including availability of financing terms
acceptable to PNI); fluctuations in interest rates; and the existence of and
changes to federal and state laws and regulations.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

        There have been no significant changes since December 31, 2000. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

                                     PART II

ITEM 1.           LEGAL PROCEEDINGS

        The information called for by this item is provided in Note 3, Notes to
Condensed Consolidated Financial Statements under Part I, Item 1 of this Form
10-Q, which discusses significant developments in the Bankruptcy proceedings
involving the Registrant since the last Form 8-K filed by the company on
June 8, 2001.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

        The Company has $1.9 million outstanding under a revolving credit
facility with a financial institution to be used for working capital purposes,
which was due on March 31, 2001. PNI did not make this payment on March 31,
2001, which constitutes an event of default. In May 2001, this lender agreed to
forbear its rights relating to this and certain other defaults until October
15, 2001, provided the Company makes a principal payment of $500,000 by June
15, 2001. PNI did not make the principal payment on June 15, 2001, which
constitutes an event of default.


                                       14
<PAGE>   15

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

        The Company has purchased certain of its paging network equipment under
a vendor financing facility that had $1.9 million outstanding as of June 30,
2001. A principal payment of approximately $1 million was due on March 31,
2001, following which PNI is obligated to make monthly principal payments of
approximately $124,000 until December 2001. PNI ceased to make interest
payments to this lender beginning in February 2001 and did not make the payment
due on March 31, 2001, both of which constitute events of default. A total of
$1.3 million in scheduled principal payments and $103,000 of accrued interest
was due and unpaid to this lender as of this filing date.

        The Company has purchased certain of its paging network equipment under
a secured credit facility that had $1.4 million outstanding as of June 30,
2001. The Company is presently obligated to make monthly principal payments of
approximately $56,000 until February 2003. PNI ceased to make principal and
interest payments to this lender beginning in February 2001, both of which
constitute events of default. A total of $275,000 in scheduled principal
payments and $56,000 of accrued interest was due and unpaid to this lender as
of this filing date.

        The filing of a voluntary petition for relief under the Bankruptcy Code
constitutes a default under the Company's senior credit facilities.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits:

                  None

(b)      Reports on Form 8-K:

         The Registrant filed a Form 8-K in connection with the Registrant's
         voluntary petition for reorganization under Title 11 of the United
         States Code (the "Bankruptcy Code") United States Bankruptcy Court for
         the Northern District Court of Georgia (filed on June 8, 2001 and
         incorporated by reference herein).


                                       15
<PAGE>   16

                             PNI TECHNOLOGIES, INC.
                             (DEBTOR-IN-POSSESSION)

                                   SIGNATURES

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

                       PNI TECHNOLOGIES, INC.


Date: August 20, 2001  By: /s/ Mark B. Jones
                           -----------------------------------------------------
                           Mark B. Jones
                           Chief Executive Officer, Chief Financial Officer and
                           Principal Accounting Officer


                                       16