<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-QSB

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

                   For the quarterly period ended       September 30, 2001
                                                 -------------------------------

[_]            TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
                  For the transition period from ______________ to _____________


               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 of            (IRS Employer Identification No.)
 incorporation or organization)

    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 part 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes  X  No ___
                                                              ---

Applicable only to corporate issuers

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: On October 9, 2001, there were
4,285,092 shares of common stock outstanding.

Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
<PAGE>

        PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.


                          PROFILE TECHNOLOGIES, INC.
                           Condensed Balance Sheets
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                  September 30,
                                                                      2001         June 30,
                                Assets                             (unaudited)       2001
                                                                  ------------    -----------
<S>                                                               <C>             <C>
Current assets:
     Cash and cash equivalents                                    $    68,909     $   306,058
     Accounts receivable                                              192,523          32,129
     Contract work-in-progress                                        194,035          17,850
     Prepaid expenses and other current assets                         25,770          31,969
                                                                  -----------     -----------
                    Total current assets                              481,237         388,006

Equipment, net                                                        217,823         212,544
Patents, net                                                          209,344         230,492
Other assets                                                           11,008          11,008

                                                                  -----------     -----------
                    Total assets                                  $   919,412     $   842,050
                                                                  ===========     ===========

                 Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable - stockholder                               $         -     $     3,262
     Other accounts payable                                            76,805          52,524
     Accrued liabilities                                               23,856          21,511

                                                                  -----------     -----------
                    Total current liabilities                         100,661          77,297
                                                                  -----------     -----------

Stockholders' equity:
     Common stock, $0.001 par value.  Authorized 10,000,000
        shares; issued an outstanding 4,714,259 shares at
        September 30, 2001 and 4,285,092 at June 30, 2001               4,714           4,285
     Additional paid-in capital                                     7,802,659       7,585,830
     Accumulated deficit                                           (6,988,622)     (6,825,362)

                                                                  -----------     -----------
                    Total stockholders' equity                        818,751         764,753
                                                                  -----------     -----------

                                                                  -----------      -----------
                    Total liabilities and stockholders' equity    $   919,412     $   842,050
                                                                  ===========      ===========
</TABLE>

           See accompanying notes to condensed financial statements

                                       1
<PAGE>

                          PROFILE TECHNOLOGIES, INC.
                      Condensed Statements of Operations
                                  (unaudited)


                                                 For the three months ended,
                                                        September 30,
                                                     2001           2000
                                                 --------------------------

Revenues                                         $  341,208      $ 246,421
Cost of revenues                                    141,608        150,550

                                                 ----------      ---------
        Gross profit                                199,600         95,871

Operating expenses:
     Research and development                        72,843         32,480
     General and administrative                     290,833        250,245
                                                 ----------      ---------
     Total operating expenses                       363,676        282,725
                                                 ----------      ---------

        Loss from operations                       (164,076)      (186,854)
                                                 ----------      ---------
Interest income                                         816         22,164
                                                 ----------      ---------
                    Net loss                     $ (163,260)     $(164,690)
                                                 ==========      =========

Basic and diluted net loss per share             $    (0.04)     $   (0.04)
Shares used to calculate basic and diluted
     net loss per share                           4,536,496      4,285,092


           See accompanying notes to condensed financial statements
<PAGE>

                          PROFILE TECHNOLOGIES, INC.
                      Condensed Statements of Cash Flows
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                         For the three months ended
                                                                                September 30,
                                                                             2001            2000
                                                                        ---------------------------
<S>                                                                     <C>             <C>
Cash flows from operating activities:
     Net loss                                                           $  (163,260)    $  (164,690)
     Adjustments to reconcile net loss to net cash used in
        operating activities:
           Depreciation and amortization                                     42,649          35,584
           Changes in certain assets and liabilities:
              Accounts receivable                                          (160,394)          7,500
              Contract work-in-progress                                    (176,185)       (246,421)
              Prepaid expenses and other current assets                       6,199          20,911
              Accounts payable - stockholder                                 (3,262)              -
              Other accounts payable                                         24,281         (47,735)
              Accrued liabilities                                             2,345         (25,000)
                                                                        -----------     -----------
                    Net cash used in operating activities                  (427,627)       (419,851)

                                                                        -----------     -----------
Cash flows from investing activities - Purchase of equipment                (26,780)         (8,957)

                                                                        -----------     -----------
Cash flows from financing activities - Issuance of common stock, net
        of offering costs                                                   217,258               -

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

                    Net decrease in cash and cash equivalents              (237,149)       (428,808)

Cash and cash equivalents at beginning of the period                        306,058       1,744,032
                                                                        -----------     -----------
Cash and cash equivalents at end of the period                          $    68,909     $ 1,315,224
                                                                        ===========     ===========
</TABLE>

                    See accompanying notes to condensed financial statements

<PAGE>

                           PROFILE TECHNOLOGIES, INC
                              September 30, 2001
                    Notes to Condensed Financial Statements


1.    Description of Business

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

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 10-QSB.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to such
instructions. The condensed financial statements and related notes should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's annual report on form 10-KSB for the year ended June
30, 2001 (filed September 28, 2001). 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.

3.    Net Loss Per Share

Basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. Diluted loss 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
ended September 30, 2001 are options and warrants to acquire 1,870,167 shares of
common stock with a weighted-average exercise price of $3.49 because their
effect would be antidilutive. Excluded from the computation of diluted loss per
share for the three months ended September 30, 2000 are options and warrants to
acquire 1,331,000 shares of common stock with a weighted-average exercise price
of $4.12 because their effect would be antidilutive.


4.    Sale of Common Stock

During the three months ended September 30, 2001, the Company raised gross
proceeds of $257,500 from the sale of 429,167 shares of common stock and issued
one warrant in connection with each share of common stock sold. The warrants are
exercisable at $1.00 per share until September 18, 2006. Each share of common
stock and warrant was sold for a total of $0.60. The certificates for these
shares have not been issued as of September 30, 2001 but are reflected as
outstanding in the financial statements.


5.    Liquidity

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  The Company incurred cumulative losses of
$6,988,622 through September 30, 2001 and has working capital of $380,576 as of
September 30, 2001.   The Company has expended a significant amount of cash in
developing its technology and patented processes.  Management recognizes that in
order to meet the Company's capital requirements, additional financing will be
necessary.  The Company is evaluating alternative sources of financing to
improve its cash position and is undertaking efforts to raise capital.  If the
Company is unable to raise additional capital or secure additional revenue
contracts and generate positive cash flow, there can be no assurance that the
Company will be able to continue as a going concern.  The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.


6.    NASDAQ Delisting

On June 27, 2001, the Company announced that it received a Nasdaq Staff
Determination on June 20, 2001,
<PAGE>

indicating that the Company failed to comply with the minimum bid price and net
tangible asset/shareholder equity requirements of the Nasdaq Marketplace Rules
for continued listing set forth in Marketplace Rule 4310(c)(4), and that its
securities were, therefore, subject to delisting from the Nasdaq SmallCap
Market. On August 10, 2001, the Nasdaq Stock Market suspended trading in the
Company's common stock. Effective Monday, August 13, 2001, the Company began
trading on the Over the Counter Bulletin Board under the symbol PRTK.

7.    New Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, "Business Combinations", and
Statement No. 142, "Goodwill and Other Intangible Assets". Statement No. 141
requires business combinations initiated after June 30, 2001 to be accounted for
using the purchase method of accounting, and specifies criteria for recognizing
intangible assets acquired in a business combination. Statement No. 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually. Intangible
assets with definite useful lives, such as the Company's patents which have a
net book value of $209,344 as of September 30, 2001, will continue to be
amortized over their respective estimated useful lives. The Company is required
to adopt the provisions of Statement No. 141 immediately and Statement No. 142
effective July 1, 2002. The impact of adopting Statement No. 141 was not
material. Because of the extensive effort needed to comply with adopting
Statement No. 142, it is not practicable to reasonably estimate the impact of
adopting this statement on the Company's financial statements at this time.


In October, 2001 the FASB issued FASB Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While Statement No. 144 supersedes FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", it
retains many of the fundamental provisions of that Statement. Statement No. 144
also supersedes the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", for the disposal of a segment of a business. However,
it retains the requirement in Opinion No. 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. The Company is required and plans to adopt the
provisions of Statement No. 144 for the fiscal year beginning July 1, 2002. The
adoption of this statement is not expected to have a material impact on the
Company's financial statements.
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation.

General

     Since its inception in 1988, Profile Technologies, Inc. (the "Company"), a
Delaware corporation, has been engaged in the business of researching and
developing a high speed scanning process, which is nondestructive and
noninvasive, to remotely test buried and insulated pipelines for corrosion.  The
Company's electromagnetic wave inspection process, referred to as EMW, is a
patented process of analyzing the waveforms of electrical impulses in a way that
extracts point-to-point information along a segment of pipeline to illustrate
the integrity of the entire pipeline.  This process involves sending an
electrical pulse along the pipe being tested from each of two locations toward
varying intersecting points between the two locations.  At least one of the
modified pulses is analyzed to determine whether an anomaly exists at the
intersecting location.

     This process is designed to detect external corrosion of pipelines without
the need for taking the line out of service, physically removing the insulation,
or uncovering the pipe, and then visually inspecting the outside of the pipe for
corrosion.  Often the Company can inspect the pipelines by using various access
points to the pipeline that already exist for other reasons.  Where such access
is not already available, the Company's technology permits inspection of
pipelines with only a very minimal amount of disturbance of the covering or
insulation that is present on the pipeline.  Finally, the Company's technology
permits an inspection of the entire pipeline, as opposed to other technologies
which only conduct inspections at the points selected for the testing.

Sales

     We derive revenue from the sale of the EMW inspection service and from
research and development activities that have been sponsored by large
multinational oil companies and large utilities. The Company relies upon several
employees, including the Chief Executive Officer, the Chief Operating Officer
and the Vice President - Field Operations, for the Company's sales functions.
The Company relies solely upon the employees of the Company to conduct its sales
activities.

     During the three months ended September 30, 2001, all of the Company's
sales were attributable to three customers.  Two of the Company's customers
individually accounted for 57% and 40%, and 0% and 100% of its net sales during
the three months ended September 30, 2001 and 2000, respectively.

Marketing

     The Company's sales and marketing strategy includes positioning the
Company's EMW as the method of choice to detect pipeline corrosion where the
pipelines are either inaccessible to other inspection tools or much more costly
to inspect with tools other than Profile's EMW inspection.  The Company does not
have a designated sales force, but currently relies upon several employees,
including the Chief Executive Officer, the Chief Operating Officer and the Vice
President - Field Operations, for the Company's sales functions.

Results of Operations

     Revenues for the three months ended September 30, 2001 were $341,208 which
represented an increase of $94,787 or 38% as compared to revenues of $246,421
for the three months ended September 30, 2000.  This increase was primarily due
to additional work performed on the North Slope of Alaska.

     Cost of revenues decreased 6% to $141,608 for the three months ended
September 30, 2001 compared to $150,550 for the three months ended September 30,
2000. The decrease in cost of revenues is primarily due to the Company becoming
more efficient in the delivery of its services.

     Gross profit increased to $199,600 for the three months ended September 30,
2001 from gross profit of $95,871 for the three months ended September 30, 2000.
The increase in gross profit for the three months ended September 30, 2001 as
compared to the same quarter of the previous year resulted from efficiencies in
the testing services performed and certain fixed costs that do not fluctuate
based on revenue.
<PAGE>

     Research and development expenses for the three months ended September 30,
2001 increased 124% to $72,843 from $32,480 for the three months ended September
30, 2000, an increase of $40,363.  The increase is due to certain employees
spending more time on research and development and less time on revenue
generating contracts.

     General and administrative expenses increased 16% to $290,833 for the three
months ended September 30, 2001 from $250,245 for the three months ended
September 30, 2000, an increase of $40,588.  The increase is due to additional
administrative expenses as a result of increased operating activities.

     Loss from operations decreased 12% to $164,076 for the three months ended
September 30, 2001 compared to $186,854 for the three months ended September 30,
2000. The decrease is due to higher revenues, which were partially offset by
higher operating costs.

     Interest income decreased to $816 for the three months ended September 30,
2001 down from $22,164 for the three months ended September 30, 2000. This
decrease was the result of declining cash and cash equivalent balances as the
Company used such resources to sustain its commercial operations and research
and development activities and lower rates of return on invested funds.

     Net Loss decreased 1% to $163,260 for the three months ended September 30,
2001 compared to $164,690 for the three months ended September 30, 2000.

Liquidity and Capital Resources

     Net cash used in operating activities was $427,627 for the three months
ended September 30, 2001 compared with $419,851 for the three months ended
September 30, 2000, primarily as a result of the Company's net loss and an
increase in accounts receivable and contract work-in-progress.

     Net cash used in investing activities was $26,780 for the three months
ended September 30, 2001 compared with $8,957 for the three months ended
September 30, 2000, as the Company increased its purchases of equipment.

     Net cash from financing activities was $217,258 for the three months ended
September 30, 2001 compared to $0 for the three months ended September 30, 2000.
The net cash provided by financing activities was due to the sale of common
stock during the quarter.

     The Company's cash and cash equivalents as of September 30, 2001 were
$68,909 and the Company had no material long-term commitments or material
commitments for capital expenditures.

     Management is currently directing the Company's activities towards
obtaining additional service contracts, which will necessitate the Company
attracting, hiring, training and outfitting qualified technicians. The Company's
intention is to purchase such equipment for its field crews for the foreseeable
future, until such time as the scope of operations may require alternate sources
of financing equipment. 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 expenses as it hires and trains field
crews and support personnel related to the successful receipt of commercial
contracts. At the present time the Company anticipates that it may need one
additional crew to service future contracts, but it cannot be certain until
contract negotiations are complete.

     The Company anticipates that capital will be expended to develop
infrastructure to support anticipated future growth. As a result, it is expected
that cash will be used in operations and to meet capital expenditure
requirements. The Company expects that accounts receivable and contract work-in-
progress will continue to increase to the extent revenues rise. Any such
increase that occurs at the same time or at a greater rate than an increase in
revenue can be expected to reduce cash and cash equivalents. The Company has
incurred cumulative losses of $6,988,622 through September 30, 2001 and had
working capital of only $380,576 as of September 30, 2001. Management recognizes
that in order to meet the Company's capital requirements, additional financing,
in addition to the net proceeds of $217,258 raised from June 30, 2001 through
September 30, 2001 will be necessary. The Company is evaluating alternative
sources of financing to improve its cash position and is undertaking efforts to
<PAGE>

raise capital. If the Company is unable to raise additional capital or secure
additional revenue contracts and generate positive cash flow, there can be no
assurance that the Company will be able to continue as a going concern.

FORWARD-LOOKING STATEMENTS

     Some of the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Report and
in the Company's periodic filings with the Securities and Exchange Commission
constitute forward-looking statements. These statements involve known and
unknown risks, significant uncertainties and other factors that may cause actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements.

  In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "could," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms or other comparable terminology.

  The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties.  Such forward-looking statements
are based on assumptions that the Company will obtain or have access to adequate
financing for each successive phase of its growth, that the Company will market
and provide products and services on a timely basis, that there will be no
material adverse competitive or technological change in condition of the
Company's business, that demand for the Company's products and services will
significantly increase, that the Company's executive officers will remain
employed as such by the Company, that the Company's forecasts accurately
anticipate market demand and that there will be no material adverse change in
the Company's operations, business or governmental regulation affecting the
Company or its customers.  The foregoing assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.  Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements.
<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.

     In connection with a confidential offering memorandum dated July 9, 2001,
as supplemented, the Company raised, up through September 30, 2001, $257,500
through stock subscriptions for 429,167 shares of our common stock and warrants
to acquire 429,167 shares of our common stock in a private placement of
securities. The warrants have an exercise price of $1.00 and can be exercised
prior to September 18, 2006. The shares and the warrants were offered directly
by the Company and by R.F. Lafferty. R.F. Lafferty did not place any of the
shares and warrants. All of the investors were accredited investors. We relied
on Section 4(2) of the Securities Act and on Rule 506 of Regulation D in selling
the shares and warrants without registering the offering under the Securities
Act.

Item 3. Defaults Upon Senior Securities

     None.

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

     None.

Item 5. Other Information.

     None.

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

     (a)   Exhibits.

           None.

     (b)   Reports on Form 8-K

           None.
<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: November 14, 2001                            /s/ Henry E. Gemino
                                                   --------------------------
                                                   Henry E. Gemino
                                                   Chief Executive Officer;
                                                   Chief Financial Officer