SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-QSB

                QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
                                DECEMBER 31, 1998

Commission file number  0-21151


                           PROFILE TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)

DELAWARE                                                     91-1418002
(State or other jurisdiction                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)


1077 Northern Blvd., Roslyn, NY                                    11576
(Address of principal executive offices)                        (Zip Code)


                                  516-365-1909
                           (Issuer's telephone number)


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 be
subject to such filing requirements for the past 90 days. Yes X  No ___

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

  There were 4,275,092 shares of common stock outstanding on January 29, 1999.

Transitional Small Business Disclosure Format
(Check one):

Yes ___  No  X


<PAGE>
<TABLE>
<CAPTION>


Item 1. Financial Statements

                           PROFILE TECHNOLOGIES, INC.

                            Condensed Balance Sheets


                                                        December 31,    June 30,
                                                           1998           1998
                                                           ----           ----
                                                        (unaudited)
                                     Assets
                                     ------

Current assets:
<S>                                                    <C>              <C>      
    Cash and cash equivalents                          $ 3,735,505      4,167,951
    Contract work-in-progress                               37,553           --
    Prepaid expenses                                        40,051         59,645
                                                       -----------    -----------


          Total current assets                           3,813,109      4,227,596

    Property and equipment, net                            144,244        113,173
    Patents, net                                           232,474        204,037
    Other assets                                             3,530          3,530
                                                       -----------    -----------


          Total assets                                 $ 4,193,357      4,548,336
                                                       -----------    -----------


                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current liabilities:
    Accounts payable - stockholders                          1,311         21,737
    Other accounts payable                                  29,806         19,553
    Other accrued liabilities                               66,163        134,322
                                                       -----------    -----------


          Total current liabilities                         97,280        175,612
                                                       -----------    -----------


Stockholders' equity:
    Common stock, $0.001 par value.  Authorized
        10,000,000 shares; issued and outstanding
        4,275,092 shares at December 31, 1998 and
        4,262,600 shares at June 30, 1998                    4,275          4,263
    Additional paid-in capital                           7,561,758      7,514,145
    Accumulated deficit                                 (3,469,956)    (3,145,684)
                                                       -----------    -----------


          Total stockholders' equity                     4,096,077      4,372,724
                                                       ===========    ===========


          Total liabilities and stockholders' equity   $ 4,193,357      4,548,336
                                                       ===========    ===========


            See accompanying notes to condensed financial statements

                                       2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                     PROFILE TECHNOLOGIES, INC.

                                Condensed Statements of Operations
                                            (unaudited)
 
                                                  Three months ended             Six months ended
                                                     December  31                  December  31
                                              --------------------------    --------------------------
                                                 1998           1997           1998            1997
                                                 ----           ----           ----            ----

<S>                                           <C>            <C>            <C>             <C>   
Revenues - services                           $    39,925           --          178,910         30,000
                                              -----------    -----------    -----------    -----------

Cost of services                                   10,874           --           53,085         24,270
                                              -----------    -----------    -----------    -----------

Gross profit                                       29,051           --          125,825          5,730
                                              -----------    -----------    -----------    -----------

Operating expenses:
   Research and development                        77,927         75,131        146,777        135,905
   General and administrative                     236,243        181,991        405,193        318,201

                                              -----------    -----------    -----------    -----------

          Total operating expenses                314,170        257,122        551,970        454,106
                                              -----------    -----------    -----------    -----------

          Loss from operations                   (285,119)      (257,122)      (426,145)      (448,376)
                                              -----------    -----------    -----------    -----------

Interest income                                    47,608         64,265        101,873        131,614
                                              -----------    -----------    -----------    -----------

          Net loss                            $  (237,511)      (192,857)      (324,272)      (316,762)
                                              -----------    -----------    -----------    -----------

Basic and diluted net loss per share                (0.06)         (0.05)         (0.08)         (0.07)


Weighted average basic and diluted common
   and common share equivalents outstanding     4,275,092      4,262,600      4,272,261      4,262,600
                                              ===========    ===========    ===========    ===========




                      See accompanying notes to condensed financial statements

                                                   3
</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                                PROFILE TECHNOLOGIES, INC.

                            Condensed Statements of Cash Flows
                                        (unaudited)


                                                                    Six months ended
                                                                       December 31
                                                                --------------------------
                                                                     1998           1997
                                                                     ----           ----
Cash flows from operating activities:
<S>                                                             <C>               <C>      
   Net loss                                                     $  (324,272)      (316,762)
   Adjustments to  reconcile  net loss to net cash
       used in  operating activities:
          Depreciation and amortization                              47,711         17,544
          Changes in assets and liabilities:
              Contract work-in-progress                             (37,553)        20,000
              Accounts receivable/payable - stockholder             (20,426)        15,569
              Prepaid expenses                                       19,594         36,315
              Other assets                                             --             (180)
              Other accounts payable                                 10,253         (4,391)
              Accrued wages                                            --          (20,614)
              Other accrued liabilities                             (68,159)       (44,797)
                                                                -----------    -----------

                    Net cash used in operating activities          (372,852)      (297,316)
                                                                -----------    -----------

Cash flows from investing activities:
   Patents                                                          (49,572)       (15,000)
   Purchase of property and equipment                               (57,647)       (65,471)
                                                                -----------    -----------



                    Net cash used in investing activities          (107,219)       (80,471)
                                                                -----------    -----------



Cash flows from financing activities:
   Proceeds from exercise of common stock purchase warrants          47,625           --   
                                                                -----------    -----------


                    Net cash provided by financing activities        47,625           --   
                                                                -----------    -----------



                    Decrease in cash and cash equivalents          (432,446)      (377,787)

Cash and cash equivalents at beginning of period                  4,167,951      4,936,600
                                                                -----------    -----------



Cash and cash equivalents at end of period                        3,735,505      4,558,813
                                                                -----------    -----------


                 See accompanying notes to condensed financial statements


                                       4
</TABLE>

<PAGE>

                          PROFILE TECHNOLOGIES, INC.

                     Notes to Condensed Financial Statements



1.   Description of Business

Profile  Technologies,  Inc.  (Company)  is in the  business of  developing  and
commercializing potential processes for the nondestructive,  noninvasive testing
of both above  ground and buried  pipelines  for the  effectiveness  of pipeline
cathodic protecting systems and coating integrity. The Company's future revenues
are  currently  dependent  upon the market's  acceptance  of its sole  developed
process.

From 1986  (incorporation)  through June 30, 1998, the Company was considered to
be in the  development  stage  as the  Company  had  not  generated  significant
revenues from its research and development efforts and related service contracts
with respect to the above process,  and  operations,  consisting  principally of
product development and administrative  activities,  had primarily been financed
through the issuance of common stock.

During the six months ended December 31, 1998, the Company commenced work on its
initial commercial  contracts for corrosion  inspection services of pipeline and
has emerged from the  development  stage.  There can be no  assurances  that the
Company will be able to obtain additional commercial contracts in the future.

2.   Basis of Presentation

The unaudited  interim condensed  financial  statements and related notes of the
Company  have  been  prepared  pursuant  to  the  instructions  to  Form  10QSB.
Accordingly,  certain information and footnote  disclosures normally included in
the  financial   statements  prepared  in  accordance  with  generally  accepted
accounting  principles  have been  omitted  pursuant to such  instructions.  The
accompanying  condensed financial statements and related notes should be read in
conjunction with the audited financial  statements and notes thereto included in
the annual report FORM 10KSB for the year ended June 30, 1998.  The  information
furnished reflects, in the opinion of management, all adjustments, consisting of
only normal recurring items,  necessary for fair  presentation of the results of
the interim periods presented. Interim results are not necessarily indicative of
results  for a full  year.  Certain  reclassifications  have  been  made  to the
December   31,  1997   information   to  conform  with  the  December  31,  1998
presentation.

3.   Net Loss Per Share

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

Excluded from the computation of diluted loss per share for the three months and
six months ended December 31, 1997 are warrants to acquire  1,120,000  shares of
common  stock with a  weighted-average  exercise  price of $3.41  because  their
effect would be antidilutive.  Excluded from the computation of diluted loss per
share for the three months and six months  ended  December 31, 1998 are warrants
to acquire  1,212,508  shares of common stock with a  weighted-average  exercise
price of $3.86 and warrants because their effect would be antidilutive.

                                       5
<PAGE>


4.   Product Development Costs - New Accounting Pronouncement

Product development costs are charged to operations as incurred.  In March 1998,
the AICPA issued Statement of Position (SOP) No. 98-1,  Accounting for the Costs
of Computer  Software  Developed or Obtained for Internal  Use,  which  requires
capitalization of certain software  development costs for software developed for
internal use.

Costs incurred during the application  development  stage should be capitalized.
The Company adopted SOP No. 98-1 beginning July 1, 1998. The  implementation  of
the provisions of SOP No. 98-1 did not have a significant impact on the Company.

5.   Stock Option Plan and Stock Purchase Warrant

In October, 1998:

*    the Board approved a Stock Option Plan,  subject to  shareholder  approval,
     and reserved for issuance of stock options 500,000 shares of common stock;
   
*    the Company  granted a warrant to purchase 85,000 shares of common stock to
     its President with an exercise price of $7.50 per share.

                                       6

<PAGE>


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

GENERAL

     The Company is in the business of developing and commercializing  potential
processes for the non-destructive, non-invasive testing of both above ground and
buried  pipeline to evaluate the condition  and  integrity of the pipeline.  The
development of its pulse propagation analyzer process and the further refinement
of the technology  associated  therewith has progressed to the point where it is
now being utilized  commercially.  The Company has begun to obtain revenues from
its commercial activities but has not yet reached profitability. There can be no
assurance that the Company will obtain commercial  contracts in the future which
would  produce  operating  revenues  sufficient  to  attain  profitability.  The
Company's process identifies electromagnetic anomalies that may be indicative of
areas of corrosion,  areas that lack cathodic protection and areas that may have
defective  coating  on both  below  ground  and above  ground  pipes.  The pulse
propagation analyzer consists of a computer,  software to enhance collection and
processing  of data,  a precision  multi-channel  pulse  generator  and a signal
analyzer. The Company believes that it attained technological feasibility of its
process  with the  completion  of its  research  and  development  activity in a
controlled environment in July of 1996.

     In order for the Company to obtain significant revenues from the use of its
technology,  the Company must establish a sales and marketing  organization that
is effective  and obtains  customers  for its pulse  propagation  analyzer.  The
Company must also be able to supply and train work crews in  sufficient  numbers
to satisfy the  requirements of its customers.  From inception  through December
31, 1998, the Company  incurred  losses of $3,469,956 and losses are expected to
continue at least through the third quarter of the year ending June 30, 1999; no
assurances can be given that losses will not continue thereafter.

RESULTS OF OPERATIONS

Quarter Ended December 31, 1998 Compared to the Quarter Ended December 31, 1997.
--------------------------------------------------------------------------------

     The Company had revenues of $39,925 for the quarter ended December 31, 1998
compared to no revenues for the quarter ended  December 31, 1997.  The loss from
operations  for the quarter ended  December 31, 1998 was $285,119  compared to a
loss from  operations of $257,122 for the quarter ended  December 31, 1997.  The
loss from operations in the quarter ended December 31, 1998 increased by $27,997
over the  comparable  quarter  ended  December  31,  1997  primarily  because of
increased general and  administrative  expenses of $236,243 compared to $181,991
incurred in the quarter  ended  December 31, 1997.  The  operating  loss for the
quarter ended  December 31, 1998 was offset  somewhat by interest  income in the
amount of $47,608  representing  interest  earned from proceeds of the Company's
public stock offering which was completed in February of 1997.  This resulted in
a net loss of $237,511 for the quarter ended December 31, 1998 compared to a net

                                        7
<PAGE>


loss of  $192,857  for  the  quarter  ended  December  31,  1997.  Research  and
development  expenses  increased  slightly  to  $77,927  for the  quarter  ended
December 31, 1998 compared to $75,131 for the quarter  ended  December 31, 1997.
General and administrative  expenses increased by $54, 252 for the quarter ended
December 31, 1998 from the quarter ended December 31, 1997 primarily  because of
increased salary expenses  associated with hiring a new President and additional
personnel, as well as increased travel expenses.

Six Months  Ended  December 31, 1998  Compared to Six Months Ended  December 31,
1997.
--------------------------------------------------------------------------------

     Revenues  increased  significantly  to  $178,910  for the six months  ended
December  31, 1998  compared to $30,000 for the six months  ended  December  31,
1997. Revenues in the six month period ended December 31, 1998 were derived from
both commercial  contracts and  demonstration  projects whereas revenues for the
six months ended  December 31, 1997 were  derived  from  demonstration  projects
and/or  research and  development  contracts with two large  multi-national  oil
companies.  Total operating  expenses for the six months ended December 31, 1998
were  $551,970  compared to total  operating  expenses  of $454,106  for the six
months  ended  December 31,  1997,  an increase of $97,864 or 22%.  Research and
development expenses increased to $146,777 for the six months ended December 31,
1998 from  $135,905 for the six months ended  December 31, 1997,  an increase of
$10,872  or 8%.  The  increase  is due to a  slight  increase  in  research  and
development activity.  General and administrative expenses increased for the six
months  ended  December  31, 1998 to $405,193  compared to $318,201  for the six
months ended  December 31, 1997,  primarily as a result of increased  salary and
travel expenses.

     Management  believes  that both  revenues  and  expenses of the Company are
likely to continue to increase  during the  remainder  of the fiscal year ending
June 30,  1999  compared to the fiscal year ended June 30, 1998 if it is able to
secure additional contracts with customers, of which there is no assurance.  The
revenues  earned  by the  Company  to date  have  often  included  research  and
development  activities  that have been  sponsored by large  multi-national  oil
companies and large  utilities.  These  activities  included  field research and
development  at such  companies'  facilities.  These  activities  are  likely to
continue  during the year ending June 30, 1999 and for the  foreseeable  future.
Management  is  also  working  towards  obtaining  additional  fee  for  service
contracts  which are expected to be the major source of the Company's  revenues.
If  fee  for  service  contracts  are  obtained,  management  expects  that  its
expenditures associated with personnel and testing equipment will begin to rise.
In addition, as the Company begins to actually provide fee for service work on a
larger  scale,  additional   administrative  support  activities  will  increase
together with related expenses.

LIQUIDITY AND CAPITAL RESOURCES

     The Company completed work on its first commercial contracts during the six
months  ended  December  31,  1998  and  has  emerged  from  development   stage
activities.  Net cash used in operating  activities  totaled $372,852 in the six
months ended December 31, 1998 and the Company expects that additional operating

                                        8
<PAGE>


activities  will  result in cash  outflows  in the near term  while the  Company
pursues additional commercial contracts,  marketing activities, and research and
development.  Cash  outflows from  operations  are expected to continue at least
through the quarter  ending  March 31,  1999;  no  assurances  can be given that
operational activities will generate positive cash flows thereafter.

     In February of 1997, the Company  completed an initial  public  offering of
its common stock,  selling  1,000,000  shares at a price of $6.00 per share,  as
well as an Underwriter's  overallotment option of 50,000 shares, also at a price
of $6.00 per share.  Net  offering  proceeds of  approximately  $5,172,000  were
realized  by the  Company  from  this  public  offering.  The  Company,  pending
utilization  of the net proceeds in  operations,  has invested  such proceeds in
short-term, high grade, interest-bearing instruments.

     The Company's  available cash and  equivalents as of December 31, 1998 were
$3,735,505.  At December 31, 1998, the Company had working capital of $3,715,829
and no  material  long term  commitments  or  material  commitments  for capital
expenditures.

     The Company  believes that its current capital  resources and liquidity are
adequate for at least the next twelve months. Other than equipment purchases for
field crews if the Company is  successful  in  obtaining  additional  commercial
contracts and the expenses associated with the hiring and training of such field
crews, the Company does not have any plans for significant capital  expenditures
above its current level.

RESOURCES

     As of December 31, 1998 the Company did not have any  material  commitments
for  capital  expenditures.  However,  management  is  currently  directing  the
Company's  activities  towards obtaining  additional fee for service  contracts,
which will necessitate the Company attracting,  hiring,  training and outfitting
qualified technicians. The Company's intention is to purchase such equipment for
its field crews for the foreseeable future,  until such time as the scope of the
operations may require alternate sources of financing such equipment. The timing
of these events is dependent upon the Company's ability to obtain additional fee
for service contracts,  which is dependent upon the Company's continuing ability
to demonstrate the  effectiveness  of its technology.  The Company believes that
its cash  position is  sufficient  to satisfy its  operating  needs for the next
twelve  months.  Management  believes  it is well on the way to  reaching  these
milestones,  but there can be no assurance that the Company's  process will gain
widespread  commercial  acceptance  within any particular time frame, or at all.
The  Company  will incur  additional  personnel  expenses as it hires and trains
field  crews  and  support  personnel  related  to  the  successful  receipt  of
commercial contracts.

YEAR 2000 COMPLIANCE

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the year 2000 approaches.  The "Year 2000" problem
is  concerned  with  whether  computer  systems  will  properly  recognize  date
sensitive  information  when  the year  changes  to  2000.  Systems  that do not

                                        9
<PAGE>


properly  recognize such  information  could generate  erroneous data or cause a
system to fail.  The Year 2000 problem is pervasive and complex since  virtually
every company's  computer  operation will be affected in some way. The Company's
computer  programs  which  process  its  field  data as well  as  operation  and
financing  transactions  were designed and  developed  without  considering  the
impact of the  upcoming  change  in  century.  Nevertheless,  as a result of the
Company's analysis of its computer programs and operations, the Company believes
that "Year 2000" problems will not seriously  impact or have a material  adverse
effect  on the  Company's  expenses,  business,  including  data  gathering  and
interpretation, or its operations.

     It is  possible,  however,  that  "Year  2000"  problems  incurred  by  the
customers  or suppliers  of the Company  could have a negative  impact on future
operations and financial  performance  of the Company,  although the Company has
not been able to  specifically  identify any such problems  among its suppliers.
The Company  believes that it will not be dependent upon any single supplier for
its  equipment  or  machinery  in  the  year  2000,  and  therefore  has  made a
determination  not to contact its primary  suppliers  to  determine  if they are
developing plans to address processing transactions which may impact the Company
in the year 2000.  However,  there can be no assurance  that Year 2000  problems
will not occur with respect to the Company's computer systems.  Furthermore, the
Year 2000 problem may impact  other  entities  with which the Company  transacts
business and the Company  cannot  predict the effect of the Year 2000 problem on
such  entities or the resulting  effect on the Company.  The Company has not yet
developed  a  contingency  plan to operate  in the event that any  non-compliant
customer or supplier systems that materially impact the Company are not remedied
by January 1, 2000 and has not yet determined a time table for developing such a
plan. As a result, if preventative  and/or corrective  actions by the Company or
those  entities  with which the Company  does  business are not made in a timely
manner,  the Year  2000  issue  could  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations.



                                       10
<PAGE>


                            PART II OTHER INFORMATION


Item 1. Legal Proceedings.

     The Company is not a party to any pending or threatened legal proceedings.

Item 2. Changes in Securities.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

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

     On November 16, 1998, the Company held its Annual Meeting of  Shareholders.
The Company's  incumbent  Board of Directors  was  re-elected to serve until the
next annual  shareholders'  meeting. The shareholders also ratified and approved
the Company's 1999 Stock Plan.

Item 5. Other Information.

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits.

         27.1 Financial Data Schedule


     (b) Reports on Form 8-K

         None



                                       11

<PAGE>


                                   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.


                                                PROFILE TECHNOLOGIES, INC.
                                                       (Registrant)


Date: February 10, 1999                         /s/ G.L. Scott
                                                --------------------------------
                                                G.L. SCOTT
                                                Chief Executive Officer


                                                /s/ Henry Gemino
                                                --------------------------------
                                                HENRY GEMINO
                                                Chief Financial Officer



                                       12