---

UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM
10-QSB

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

For
the quarterly period ended March 31, 2007

[    ]  
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 000-29196

PROFILE
TECHNOLOGIES, INC.(Name of  Small Business Issuer in Its Charter)

|Delaware                        | 91-1418002
|------------------------------- | ----------
|(State or other jurisdiction of |           
|Incorporation or organization)  |           
|                                |           

|2 Park Avenue, Suite 201                 | 11030
|---------------------------------------- | -----
|Manhasset, New York                      |      
|(Address of principal executive offices) |      
|                                         |      

(516) 365-1909(Issuers Telephone Number, Including Area Code)

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

Indicate
by check mark  whether the  registrant  is a shell  company (as defined in Rule 12b-2 of
the Exchange  Act).  Yes [    ] No  [ X ]

State
the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date: 12,727,278 shares of common stock as
of May 4, 2007.

Transitional
Small Business Disclosure Format (check one): Yes [    ] No  [ X ]



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TABLE
OF CONTENTS

|Description                                                           | Page Number
|--------------------------------------------------------------------- | -----------
|PART I.   FINANCIAL INFORMATION                                       |            
|Item 1.    Financial Statements                                       |            
|                                                                      |            
|Balance Sheet (Unaudited) -                                           |            
|At March 31, 2007                                                     |            
|                                                                      |            
|Statements of Operations (Unaudited) -                                |            
|Three and Nine Months Ended March 31, 2007 and 2006                   |            
|                                                                      |            
|Statements of Cash Flows (Unaudited) -                                |            
|Nine Months Ended March 31, 2007 and 2006                             |            
|                                                                      |            
|Notes to Financial Statements (Unaudited)                             |            
|                                                                      |            
|Item 2.   Managements Discussion and Analysis or Plan of Operations  |            
|                                                                      |            
|Item 3.   Controls and Procedures                                     |            
|                                                                      |            
|PART II.    OTHER INFORMATION                                         |            
|                                                                      |            
|Item 1.   Legal Proceedings                                           |            
|                                                                      |            
|Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds |            
|                                                                      |            
|Item 3.   Defaults Upon Senior Securities                             |            
|                                                                      |            
|Item 4.   Submission of Matters to a Vote of Shareholders             |            
|                                                                      |            
|Item 5.   Other Information                                           |            
|                                                                      |            
|Item 6.   Exhibits                                                    |            
|                                                                      |            
|SIGNATURES                                                            |            
|                                                                      |            
|CERTIFICATIONS                                                        |            
|                                                                      |            
|                                                                      |            

2



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PART
I  FINANCIAL INFORMATION

Item 1.
Financial Statements.

PROFILE TECHNOLOGIES, INC.Balance
Sheet(unaudited)

| | Assets
| | ------

|                                                                         | March
      31,2007
|------------------------------------------------------------------------ | -------------------
|Current assets:                                                          |                    
|Cash
      and cash equivalents                                          |                    
|Prepaid
      expenses and other current assets                          |                    
|                                                                         |                    
|Total
      current assets                                               |                    
|                                                                         |                    
|Equipment, net of accumulated depreciation of $548,312                   |                    
|Deferred
      financing fees                                            |                    
|Other
      assets                                                       |                    
|                                                                         |                    
|                                                                         |                    
|Total
      assets                                                       |                    
|                                                                         |                    
|                                                                         |                    
|Liabilities
      and Stockholders' Deficit                              |                    
|                                                                         |                    
|Current
      Liabilities:                                               |                    
|Accounts
      payable                                                   |                    
|Notes
      payable to stockholders                                      |                    
|Current
      portion of convertible debt                                |                    
|Deferred
      wages                                                     |                    
|Accrued
      professional fees                                          |                    
|Accrued
      interest                                                   |                    
|Other
      accrued expenses                                             |                    
|                                                                         |                    
|                                                                         |                    
|Total
      current liabilities                                          |                    
|                                                                         |                    
|Long-term
      convertible debt, net of unamortized discount of $59,386 |                    
|                                                                         |                    
|Stockholders' deficit:                                                   |                    
|Common
      stock, $0.001 par value. Authorized 25,000,000              |                    
|shares;
      issued and outstanding 12,627,278 shares                   |                    
|Additional
      paid-in capital                                         |                    
|Accumulated
      deficit                                                |                    
|                                                                         |                    
|                                                                         |                    
|Total
      stockholders' deficit                                        |                    
|                                                                         |                    
|Commitments, contingencies and subsequent events                         |                    
|                                                                         |                    
|                                                                         |                    
|Total
      liabilities and stockholders' deficit                        |                    
|                                                                         |                    
|                                                                         |                    
|                                                                         |                    

See
accompanying notes to financial statements.

3



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PROFILE
TECHNOLOGIES, INC. Statements of Operations (unaudited)

|                                                                                     | Three Months EndedMarch 31, | Nine Months EndedMarch 31, |   |                    
|------------------------------------------------------------------------------------ | --------------------------- | -------------------------- | - | -------------------
|
|Revenue                                                                              |                             | $                         |   | $                 
|                                                                                     |                             |                            |   |                    
|Cost of
      revenues                                                               |                             |                           |   |                   
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Gross profit                                                                         |                             |                           |   |                   
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Operating
      expenses:                                                            |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Research and development                                                             |                             | 66,575                     |   | 56,852             
|General and administrative                                                           |                             | 124,081                    |   | 158,891            
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Total operating expenses                                                             |                             | 190,656                    |   | 215,743            
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Loss from operations                                                                 |                             | (190,656                   | ) | (215,743           
|                                                                                     |                             |                            |   |                    
|Interest
      expense                                                               |                             | 10,051                     |   | 12,300             
|Interest
      income                                                                |                             | 1,812                      |   |                   
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Net loss                                                                             |                             | $       (198,895           | ) | $       (228,043   
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    
|Basic and
      diluted net loss per share                                           |                             | $            (0.02         | ) | $            (0.02 
|                                                                                     |                             |                            |   |                    
|Weighted
      average shares outstanding    used to calculate basic and diluted net |                             |                            |   |                    
|loss per
      share                                                                 |                             | 12,623,945                 |   | 10,544,723         
|                                                                                     |                             |                            |   |                    
|                                                                                     |                             |                            |   |                    

See
accompanying notes to financial statements.

4



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

|                                                                     | Nine Months EndedMarch 31, |                
|-------------------------------------------------------------------- | -------------------------- | ---------------
|
|Cash flows from operating activities:                                |                            |                
|Net loss                                                             |                            | $(1,496,619    
|Adjustments to reconcile net loss to
      net cash                  |                            |                
|used in operating
      activities:                                  |                            |                
|Depreciation
      and amortization                                  |                            | 4,272          
|Accreted
      discount on convertible debt                          |                            | 560            
|Amortization
      of convertible debt discount                      |                            |                
|included
      in interest expense                                   |                            | 7,365          
|Accrued
      interest on convertible debt converted to equity       |                            |               
|Accrued
      interest on notes payable to stockholders              |                            |                
|converted
      to equity                                            |                            |               
|Amortization
      of debt issuance costs                            |                            | 480            
|Equity
      issued for services to consultants                      |                            | 192,950        
|Equity
      issued for services to employees and board of directors |                            | 685,300        
|Changes
      in operating assets and liabilities:                   |                            |                
|Prepaid
      expenses and other current assets                      |                            | (772           
|Other
      assets                                                   |                            | (1,634         
|Accounts
      payable                                               |                            | (23,532        
|Deferred
      wages                                                 |                            | 24,609         
|Accrued
      professional fees                                      |                            | 15,000         
|Accrued
      interest                                               |                            | (588           
|Other
      accrued expenses                                         |                            |               
|                                                                     |                            |                
|                                                                     |                            |                
|Net
      cash used in operating activities                          |                            | (592,609       
|                                                                     |                            |                
|Cash
      flows from financing activities:                          |                            |                
|                                                                     |                            |                
|Common stock issuance costs                                          |                            |               
|Allocated proceeds from issuance of
      common stock               |                            |               
|Allocated proceeds from issuance of
      warrants                   |                            |                
|attached to issuance of
      common stock                           |                            |               
|Proceeds from issuance of notes
      payable to stockholders        |                            |               
|Proceeds from exercise of stock
      options and warrants           |                            | 61,333         
|                                                                     |                            |                
|                                                                     |                            |                
|Net
      cash provided by financing activities                      |                            | 61,333         
|                                                                     |                            |                
|                                                                     |                            |                
|Increase
      (decrease) in cash                                    |                            | (531,276       
|                                                                     |                            |                
|Cash at
      beginning of period                                    |                            | 852,468        
|                                                                     |                            |                
|                                                                     |                            |                
|Cash at
      end of period                                          |                            | $    321,192   
|                                                                     |                            |                
|                                                                     |                            |                
|Supplemental disclosure of cash flow information:                    |                            |                
|Cash paid for interest                                               |                            | $        6,339 
|Convertible debt and related accrued
      interest converted        |                            |                
|into 100,000 and 456,740
      shares of common stock during         |                            |                
|the nine months ended
      March 31, 2007 and 2006, respectively    |                            | $      50,000  
|Notes payable to stockholder
      converted into                    |                            |                
|2,322,446 shares of
      common stock during the nine months        |                            |                
|ended March 31,
      2006                                           |                            | $             
|Accrued interest on notes payable to
      stockholder               |                            |                
|converted into 229,554
      shares of common stock                  |                            |                
|during the nine months
      ended March 31, 2006                    |                            | $             
|                                                                     |                            |                
|                                                                     |                           
|                                                                     |                            |                

See
accompanying notes to financial statements.

5



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PROFILE
TECHNOLOGIES, INC  March 31, 2007  Notes to Financial Statements (Unaudited)

1.   Description
of Business

Profile
Technologies, Inc. (the Company), was incorporated in 1986 and
commenced operations in fiscal year 1988. The Company is in the business of
inspecting pipelines for corrosion and has developed a patented, non-destructive
and non-invasive, high speed scanning process, using electro magnetic waves to
remotely inspect buried, encased and insulated pipelines for corrosion. The
Company is now actively marketing its inspection services for encased and
insulated pipelines. In order to focus its resources on securing contracts for
those services, it has temporarily suspended development work on its direct
buried (encased) inspection service.

2.   Basis of
Presentation

The unaudited
interim 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 preparation of
financial statements requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues, and expenses. On
an on-going basis, the Company evaluates its estimates, including contract
revenue recognition and impairment of long-lived assets. Actual results and
outcomes may differ materially from these estimates and assumptions.

The
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, 2006. 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.   Liquidity

The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company incurred cumulative losses of
$14,334,005 through March 31, 2007, and had negative working capital of $893,933
as of March 31, 2007. Additionally, the Company has expended a significant
amount of cash in developing its technology and patented processes. These
conditions raise substantial doubt about the Companys ability to continue
as a going concern. Management recognizes that in order to meet the
Companys capital requirements, and continue to operate, additional
financing, including seeking industry-partner investment through joint ventures
or other possible arrangements, 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 revenue contracts and generate positive cash flow, it is unlikely 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.

4.   Summary
of Significant Accounting Policies

Cash
and cash equivalents

Cash
and cash equivalents includes highly liquid investments with original maturities
of three months or less. On occasion, the Company has amounts
deposited with financial institutions in excess of federally insured limits.

Fair
Value of Financial Instruments

The
Company has the following financial instruments: cash, accounts payable, notes
payable to stockholders, and convertible debt. The carrying value of these
instruments, other than the convertible debt, approximates fair value based on
their liquidity. The fair value of the convertible debt was determined as the
excess of the proceeds over the fair value of the warrants.

6



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Deferred
Financing Fees

The
Company records costs incurred related to debt financings as deferred financing
fees and amortizes, on a straight-line basis, the costs incurred over the life
of the related debt. The amortization is recognized as interest in the financial
statements. Upon conversion into equity or extinguishment of the related debt,
the Company recognizes any unamortized portion of the deferred financing fees as
interest expense.

Contract
Revenue Recognition

The
Company recognizes revenue from service contracts using the percentage of
completion method of accounting. Contract revenues earned are measured using
either the percentage of contract costs incurred to date to total estimated
contract costs or, when the contract is based on measurable units of completion,
revenue is based on the completion of such units. This method is used because
management considers total cost or measurable units of completion to be the best
available measure of progress on contracts. Because of the inherent
uncertainties in estimating costs, it is at least reasonably possible that the
estimates used may change in the near term.

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

Cost
of revenues include contract costs incurred to date as well as any idle time
incurred by personnel scheduled to work on customer contracts.

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

The
Company does not currently have any revenue generating service contracts to
which this contract revenue recognition policy applies.

Research
and Development

Research
and development costs are expensed when incurred. During the three months ended
March 31, 2007 and 2006, the Company incurred $66,575 and $56,852 on research
and development activities. During the nine months ended March 31, 2007 and
2006, the Company incurred $381,297 and $303,718 on research and development
activities.

Impairment
of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The
Company reviews long-lived assets, such as equipment and intangibles, for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset.

Valuation
of Warrants and Options

The
Company estimates the value of warrants and option grants using a Black-Scholes
pricing model based on management assumptions regarding the warrant and option
lives, expected volatility, and risk free interest rates.

7



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Use
of Estimates

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

Recently
Issued Accounting Standards Not Yet Adopted

In
September  2006,  the FASB issued  Statement  of  Financial  Accounting  Standards  No.
157,  Fair Value  Measurements  (SFAS No. 157).  SFAS No. 157 defines fair
value,  establishes a framework for measuring fair value  and expands  disclosures about
fair value measurements but does not require any new fair value  measurements.  SFAS  No.
157 is effective for financial  statements  issued for fiscal years  beginning  after
November 15, 2007,  with  early adoption  permitted as of January 1,  2007. The Company
is currently  evaluating the impact SFAS No. 157 will  have on its Statement of
Operations and Balance Sheet.

In
September 2006, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice among
registrants, SAB 108 expresses SEC staff views regarding the process by which
misstatements in financial statements are evaluated for purposes of determining
whether financial statement restatement is necessary. SAB 108 is effective for
fiscal years ending after November 15, 2006, and early application is
encouraged. The Company does not expect any material impact from applying SAB
108.

In
February 2007, the FASB issued FASB Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (SFAS
No. 159). SFAS No. 159 permits an instrument by instrument
election to account for selected financial assets and liabilities at fair value.
SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007, with early adoption permitted as of January 1,
2007. The Company is currently evaluating the impact SFAS No. 159 will have
on its Statement of Operations and Balance Sheet.

Vendor
Concentration

Consultant
Scientist Fees

The
Company relies on the expertise of two consultant scientists to facilitate the
development and testing of the Companys hardware and software. These
scientists are also instrumental in compiling and interpreting the data captured
during the testing of the hardware and software. The loss of the specialized
knowledge provided by the scientists could have an adverse effect on the ability
of the Company to successfully market its hardware and software. During the
three and nine months ended March 31, 2007, the Company incurred cash fees
payable to the scientists of $62,003 and $193,992, which are included in
research and development expense in the Companys Statements of Operations.
During the three and nine months ended March 31, 2006, the Company incurred cash
fees payable to the scientists of $32,915 and $133,453, which are included in
research and development expense in the Companys Statements of Operations.

As
partial compensation for services rendered, on November 13, 2006, the Company
granted the scientists stock options to purchase a total of 100,000 shares of
common stock at an exercise price of $0.86 per share, expiring November 12,
2016. The 100,000 stock options had a fair value at the date of grant of
$77,000, which is included in research and development expense in the
Companys Statements of Operations for the nine months ended March 31,
2007.

As
partial compensation for services rendered, on July 13, 2006, the Company
granted one of the scientists a stock option to purchase 100,000 shares of
common stock at an exercise price of $1.05 per share, expiring July 12, 2011.
The 100,000 stock options had a fair value at the date of grant of $89,000,
which is included in research and development expenses in the Companys
Statements of Operations for the nine months ended March 31, 2007.

As
partial compensation for services rendered, on December 12, 2005, the Company
granted one of the scientists a stock option to purchase 50,000 shares of common
stock at an exercise price of $1.12 per share, expiring December 12, 2010. The
50,000 stock options had a fair value at the date of grant of $50,500, which is
included in research and development expense in the Companys Statements of
Operations for the nine months ended March 31, 2006.

8



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Total
cash and equity compensation expense incurred for settlement of services
rendered by the scientists totaled $62,003 and $359,992, or approximately 93%
and 94%, of research and development expense for the three and nine months ended
March 31, 2007.

Total
cash and equity compensation expense incurred for settlement of services
rendered by the scientists totaled $32,915 and $183,953, or approximately 58%
and 61%, of research and development expense for the three and nine months ended
March 31, 2006.

As
of March 31, 2007, the Company owed the consultant scientists a total of
$62,706, which is included in accounts payable at March 31, 2007.

5.   Stock
Based Compensation

Prior
to January 1, 2006, the Company accounted for stock-based awards under the
intrinsic value method, which followed the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. The intrinsic value method of
accounting resulted in compensation expense for stock options to the extent that
the exercise prices were set below the fair market price of the Companys
stock at the date of grant.

Effective
January 1, 2006, the Company adopted SFAS No. 123R, Share-Based
Payment (SFAS 123R) using the modified prospective application
method, which requires measurement of compensation cost for all stock-based
awards at fair value on date of grant and recognition of compensation over the
service period for awards expected to vest. The fair value of stock options is
determined using the Black-Scholes valuation model, which is consistent with the
Companys valuation techniques previously utilized for options in footnote
disclosures required under SFAS No. 123, Accounting for Stock Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure. Such value is recognized as
expense over the service period. To date, all stock option grants have been
fully vested upon grant.

Had
compensation cost for the Companys stock options been determined using the
fair value method consistent with SFAS 123R for all periods presented, the
Companys net loss and net loss per share would have been reduced to the
pro forma amounts indicated below:

|                                        | Three MonthsEnded | Nine MonthsEnded    
|--------------------------------------- | ----------------- | --------------------
|
|
|Net loss:                               |                   |                     
|As reported                             |                   | $         (228,043  
|Plus: stock-based employee compensation |                   |                     
|expense included in reported net loss   |                   |                    
|                                        |                   |                     
|Less: stock based compensation expense  |                   |                     
|determined under fair value based       |                   |                     
|method for all employee awards          |                   |                    
|                                        |                   |                     
|Net loss                                |                   | $        (228,043   
|                                        |                   |                     
|                                        |                   |                     
|Net loss per share                      |                   |                     
|Basic and diluted  as reported         |                   | $              (0.02
|Basic and diluted  pro forma           |                   | $              (0.02
|                                        |                   |                     

6.    Net Loss
Per Share

Basic
net loss per share is computed  by  dividing  the net loss by the  weighted  average
number of common  shares  outstanding  during the period.  Diluted  net 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.

9



---

Excluded
from the  computation  of diluted net loss per share for the three and nine months ended
March 31,  2007,  because their effect would be antidilutive,  are stock options and
warrants to acquire  12,426,417 shares of  common stock with a  weighted-average
exercise  price of $0.99 per share.  Also excluded from the  computation  of  diluted net
loss per share for the three and nine months  ended March 31, 2007 are 250,000  shares of
common  stock  that may be issued if investors  exercise their conversion right under the
Debentures  related to the 2003 Offering  as discussed in Note 8 because their effect
would be antidilutive.

Excluded
from the  computation  of diluted net loss per share for the three and nine months ended
March 31,  2006,  because their effect would be antidilutive,  are stock options and
warrants to acquire  10,204,818 shares of  common stock with a  weighted-average
exercise  price of $1.12 per share.  Also excluded from the  computation  of  diluted net
loss per share for the three and nine months  ended March 31,  2006 are 350,000  shares of
common  stock  that may be issued if investors  exercise their conversion right under the
Debentures  related to the 2003 Offering  as discussed in Note 8 because their effect
would be antidilutive.

For
the three and nine months ended March 31, 2007 and 2006,  additional  potential dilutive
securities that  were  excluded from the diluted net loss per share  computation  are the
exchange  rights  discussed in Note 9 that  could result in options to acquire up to
223,000  shares of common stock with an exercise  price of $1.00 per share  at March 31,
2007 and 2006.

For
purposes of earnings per share  computations,  shares of common stock that are issuable
at the end of a  reporting period are included as outstanding.

7.    Related
Parties

Notes
Payable  Stockholders

In
April 2002, the Company  issued a  non-interest  bearing bridge note payable to an
officer of the Company  in the  amount of $7,500.  The note is  payable  in full when the
Company  determines  it has  sufficient  working  capital to do so. On September 29,
2002, the officer who was owed the $7,500 died.

The
Company entered into various loan agreements  with Murphy Evans,  President,  a director
and stockholder  of the Company.  On March 6, 2003,  the Companys  Board of
Directors  approved the Loan  Amendment and  Promissory  Note (the  Amended  Evans
Loan)  between the Company and Murphy  Evans.  The Amended  Evans Loan  aggregated
all  previous debt and  superseded  and replaced all of the terms of the previous  loans
with Mr.  Evans,  including any  conversion  features.  The Amended Evans Loan bore
interest on the aggregate  principal balance at a rate of 5% per  annum,  payable on June
30 and  December  31 of each year,  with the  principal  balance due and payable in full
on  December  31, 2003.  The Amended  Evans Loan was exempt from  registration  under
Section  4(2) of the  Securities  Act.

In
January 2006,  Mr. Evans  converted  the entire then  outstanding  principal and accrued
interest on the  Amended Evans Loan pursuant to the terms of the 2005 Offering as defined
below.

Interest
expense  related to the  Amended  Evans Loan was $579 and  $16,449  for the three and
nine  months  ended March 31, 2006.

In
September  2002,  the Company  entered into two  non-interest  bearing  bridge  loans in
the  respective  principal  amounts of $40,000 and $10,000 (the  "Stockholder
Loans")  payable to two  stockholders of the Company.  The terms of the  Stockholder
Loans provide for payment at such time as the Company  determines it has  sufficient
working capital to repay the principal  balances of the Stockholder  Loans.  The
Stockholder  Loans are convertible  into  57,142  and  14,286  equity  units,
respectively,  at any time  prior to  re-payment.  Each  equity  unit is  comprised of
one share of the Company's common stock,  with a detachable  5-year warrant to purchase
one additional  share at an exercise price of $1.05 per share.  Neither  stockholder  has
converted  either  Stockholder  Loan into  equity units.

10



---

The
following is a summary of notes payable to stockholders as of March 31, 2007:

|                      | 
|--------------------- | 
|Deceased Officer Note | 
|Stockholder Loans     | 
|                      | 
|                      | 
|Total                 | 
|                      | 
|                      | 

8.  
Convertible Debt

On
June 19, 2003, the Board of Directors approved the offering (the 2003
Offering) of $1,000,000 in convertible debentures (the
Debentures). The Debentures are convertible into that number of
shares of the Companys common stock equal to the amount of the converted
indebtedness divided by $0.50 per share. The Debentures bear interest at a rate
of 5% per annum, payable quarterly. Delinquent interest payments bear interest
at a rate of 12% per annum. The Company is required to redeem each Debenture on
the 5th anniversary of the date of the Debenture. The Company may, in its
discretion, redeem any Debenture at any time prior to the mandatory redemption
date of the Debenture by providing no less than 60 days prior written
notice to the holder of the Debenture. Certain events of default will result in
the Debentures being redeemable by the Company upon demand of the holder.

Upon
the purchase of, and for each $0.50 of the Debentures principal amount,
the Company issued to each investor a warrant (the Warrant) to
purchase one (1) share of the Companys common stock at an exercise price
of $0.75 per share. The Warrants are exercisable at any time prior to the 5th
anniversary date of the redemption of the Debenture.

Warrants
issued in connection with the 2003 Offering were recorded based on their
relative fair value as compared to the fair value of the debt at issuance. The
relative fair value of the warrants was recorded as paid-in capital. The
intrinsic value of the Debentures results in a beneficial conversion feature,
recorded as a discount against the Debentures, which reduces the book value of
the convertible debt to not less than zero. The Company amortizes the discount
using the effective interest method over the five-year life of the Debentures.

During
the quarter ended March 31, 2005, the Board of Directors terminated the 2003
Offering. As of the closing date of the 2003 Offering, the Company had raised
$503,000 from the 2003 Offering.

During
the three and nine months ended March 31, 2007, two and three investors,
respectively, exercised their conversion right and converted Debentures in the
combined principal amounts of $25,000 and $50,000, respectively, pursuant to the
terms of the 2003 Offering. Of the principal amounts of $25,000 and $50,000
converted during the three and nine months ended March 31, 2007, $7,500 was
recorded as long-term convertible debt on the balance sheet at the time of
conversion. Accordingly, upon conversion, the remaining unamortized discount of
$7,365 at the conversion date was recognized as interest expense and is included
in interest expense for the three and nine months ended March 31, 2007. The
discount related to the remaining principal amounts of $17,500 and $42,500 for
the three and nine months ended March 31, 2007 was previously expensed as
interest expense during the quarter ended June 30, 2004 when the Company was
deemed to be in default with respect to the interest payment terms.

During
the three and nine months ended March 31, 2006, one and six investors,
respectively, exercised their conversion right under the terms of the
Debentures. Accordingly, the carrying value of the convertible debt was
reclassified as equity upon conversion. Since the convertible debt instruments
include a beneficial conversion feature, the remaining unamortized discount of
$7,991 and $197,945 at the conversion date was recognized as interest expense
during the three and nine months ended March 31, 2006.

As
of March 31, 2007, accrued interest on the Debentures was $1,594. The Company
recorded interest expense related to the accretion of the discount on the
Debentures and amortization of the convertible debt discount as a result of the
conversions discussed above of $7,604 and $7,925 for the three and nine months
ended March 31, 2007. The Company recorded interest expense related to the
accretion of the discount on the Debentures and amortization of the convertible
debt discount as a result of the conversions discussed above of $8,039 and
$198,051 for the three and nine months ended March 31, 2006. As of March 31,
2007 the carrying value of the long-term portion of the Debentures was $614, net
of unamortized debt discount of $59,386.

11



---

9.   Deferred
Wages and Accrued Professional Fees

To
reduce cash outflows, certain of the Companys employees, officers,
consultants, and directors have agreed to defer a portion of their salaries and
professional fees until the Company has sufficient resources to pay the amounts
owed or to exchange such amounts into options as described below. At March 31,
2007, the Company has accrued $943,360 related to the deferred payment of
salaries and professional fees of which $736,210 is included under deferred
wages and $207,150 in accrued professional fees. On March 18, 2002, the Board
approved a conversion right on all deferred wages and accrued professional fees
deferred as of March 18, 2002 (the Conversion Right). Pursuant to
the Conversion Right, employees, officers, consultants, and directors may elect
to convert $1.00 of fees owed to them as of March 18, 2002 for an option to
purchase two shares of the Companys common stock, at an exercise price of
$1.00 per share for a term of five years. Of the total $943,360 deferred
salaries and professional fees, the amount subject to the Conversion Right is
$111,500, resulting in the potential issuance of 223,000 options under the terms
mentioned above. No conversions have occurred to date. At March 18, 2002, there
was no intrinsic value associated with these exchange rights. As such, no
additional compensation cost was recorded.

10.   Common
Stock and Warrants

On January
19, 2005, the Board of Directors approved the offering (the 2005
Offering) of 2,000,000 units (the Units) to accredited
investors for a total offering price of $1,000,000. Each Unit consists of one
share of common stock and a warrant to acquire common stock. On November 21,
2005, the Board of Directors approved an increase in the number of Units offered
in the 2005 Offering to 6,000,000 Units, for a total offering price of
$3,000,000. The purchase price of one Unit is $0.50. Each Unit consists of one
share of common stock and a warrant to purchase one share of common stock at an
exercise price of $0.75. The warrants are exercisable at any time prior to the
fifth anniversary from the date of their issuance.

The
2005 Offering was terminated on June 9, 2006. As of the closing date of the 2005
Offering, the Company had raised $1,801,000 from the 2005 Offering. Accordingly,
the Company issued 3,602,000 shares of common stock and warrants to purchase up
to 3,602,000 shares of common stock at an exercise price of $0.75 per share.

The
Company engaged a brokerage firm to help in the fund raising efforts of the 2005
Offering. Pursuant to the terms of the agreement with the brokerage firm, the
Company paid the brokerage firm a ten percent cash commission on all funds that
the brokerage firm helped raise. During the three and nine months ended March
31, 2006, the Company incurred $39,400 and $110,750 of fees that were paid in
cash to the brokerage firm. The brokerage firm and the Company also agreed that
the Company would issue warrants to purchase a total of 439,600 shares of common
stock at an exercise price of $0.60. The warrants are exercisable for up to five
years from the date of issuance, which is the date the proceeds were received
under the 2005 Offering. Of the total 439,600 warrants that the brokerage firm
received, 78,800 were earned during the three months ended March 31, 2006 as a
result of the funds raised by the brokerage firm during that period.
Accordingly, during the three months ended March 31, 2006, the Company recorded
$100,076 as a reduction to paid-in capital for the fair value of the 78,800
warrants. The fair value of the warrants issued to the brokerage firm during the
three months ended March 31, 2006 were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions: expected
volatility of 151.04%, risk-free interest rate of 4.82%, expected lives of five
years, and a 0% dividend yield.

Of
the total 439,600 warrants that the brokerage firm received, 221,500 were earned
during the nine months ended March 31, 2006 as a result of the funds raised by
the brokerage firm during that period. Accordingly, during the nine months ended
March 31, 2006, the Company recorded $207,260 as a reduction to paid-in capital
for the fair value of the 221,500 warrants. The fair value of the warrants
issued to the brokerage firm during the nine months ended March 31, 2006 were
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions: expected volatility ranging from 151.04% to
376.15%, risk-free interest rates ranging from 4.14% to 4.82%, expected lives of
five years, and a 0% dividend yield.

12



---

11.   Stock
Options and Warrants

Stock
Options

Stock
Option  Grants

On
November 13, 2006, the Board approved the issuance of stock options exercisable
for a total of 575,000 shares of common stock pursuant to the 1999 Stock Option
Plan to certain directors, officers, employees and four consultants of the
Company. The stock options are fully vested upon grant and are exercisable until
November 12, 2016. The exercise price of the stock options granted to insiders
owning or controlling more than ten percent of the Companys common stock
was $0.95, which is ten percent over the closing bid price of the Companys
common stock as quoted on the Over the Counter Bulletin Board on the grant date,
November 13, 2006. The exercise price of the stock options granted to
non-insiders was $0.86. On November 13, 2006, the date of grant, the Company
recognized $77,000 as research and development expense related to the fair value
of 100,000 of the stock options and $365,750 as general and administrative
expense related to the fair value of 475,000 of the stock options. The fair
value of the stock option grants were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions: expected
volatility of 142%, risk-free interest rate of 4.60%, expected lives of five
years, and a 0% dividend yield.

On
July 13, 2006, the Board approved an option grant to a consultant to purchase
100,000 shares of the Companys common stock at an exercise price of $1.05
per share. The option was granted in consideration for work the consultant is
performing for the Company and was not granted pursuant to the 1999 Stock Option
Plan. The option was fully vested upon grant and is exercisable until July 13,
2011. The Company recognized $89,000, at the time of grant, as research and
development expense for the fair value of the option grant. The fair value of
the option grant was estimated using the Black-Scholes option pricing model with
the following weighted average assumptions: expected volatility of 160%,
risk-free interest rate of 5.04%, expected life of five years, and a 0% dividend
yield.

Stock
Option Cancellations

On
November 13, 2006, the Board cancelled 30,000 stock options that were originally
granted on December 9, 2002 with an exercise price of $0.55 per share.

Stock
Option Exercises

On
October 18, 2006, a non-employee Board member exercised stock options to
purchase shares of the Companys common stock. The following is a summary
of the stock options exercised on October 18, 2006 by the non-employee Board
member:

|             | Number of Shares ofCommon Stock Acquired | Exercise Price ofStock Option
|------------ | ---------------------------------------- | -----------------------------
|Stock Option |                                          | 20,000                       
|Stock Option |                                          | 10,000                       
|Stock Option |                                          | 20,000                       
|             |                                          |                              

A
summary of stock option-related activity follows:

13



---

|                                     |  | Options outstanding |  
|------------------------------------ |  | ------------------- | -
|
|Outstanding at June 30, 2006         |  | 115,000             |  
|Increase in authorized stock options |  |                     |  
|available for grant                  |  | 2,000,000           |  
|Grants                               |  | (575,000            | )
|Cancellations                        |  | 30,000              |  
|Exercises                            |  | 50,000              |  
|Expirations                          |  | 115,000             |  
|                                     |  |                     |  
|Outstanding at March 31, 2007        |  | 1,735,000           |  
|                                     |  |                     |  
|                                     |  |                     |  
|                                     |  |                     |  

|(1) |  | Consists
of stock options available for grant under the Companys 1999  Stock Option Plan.
|--- |  | ------------------------------------------------------------------------------------------

|(2) |  | Consists
of stock options outstanding under the Companys 1999 Stock Option  Plan and stock
options outstanding that were granted outside of the 1999 Stock  Option Plan.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Warrants

Warrant
Grants

On
November 13, 2006, the Board approved the issuance of warrants exercisable for a
total of 450,000 shares of common stock to certain directors and officers of the
Company. The warrants are fully vested upon grant and are exercisable until
November 12, 2016. The exercise price of the warrants was $0.86, which is the
closing bid price of the Companys common stock as quoted on the Over the
Counter Bulletin Board on the grant date, November 13, 2006. During the three
months ended December 31, 2006, the Company recognized $346,500 as general and
administrative expense related to the fair value of the warrants. The fair value
of the warrants grants were estimated using the Black-Scholes option pricing
model with the following weighted average assumptions: expected volatility of
142%, risk-free interest rate of 4.60%, expected lives of five years, and a 0%
dividend yield.

Warrant
Cancellations

On
November 13, 2006, the Board cancelled the following warrants: 5,000 warrants at
an exercise price of $0.55 per share, 150,000 warrants at an exercise price of
$1.05 per share, 190,000 warrants at an exercise price of $1.125 per share, and
80,000 warrants at an exercise price of $3.00 per share.

Warrant
Exercises

On
October 18, 2006, a non-employee Board member exercised a warrant to purchase
20,833 shares of the Companys common stock at an exercise price of $1.00
per share.

14



---

A
summary of warrant-related activity follows:

|                              | Number ofwarrantsoutstanding | Weightedaverageexercise price
|----------------------------- | ---------------------------- | -----------------------------
|Outstanding at June 30, 2006  |                              | 9,943,418                    
|Grants                        |                              | 450,000                      
|Cancellations                 |                              | (425,000                     
|Exercises                     |                              | (20,833                      
|Expirations                   |                              | (701,168                     
|                              |                              |                              
|Outstanding at March 31, 2007 |                              | 9,246,417                    
|                              |                              |                              
|                              |                              |                              

12.  
Subsequent Events

On
April 11, 2007, the Company entered into a three-year consulting agreement
(Consulting Agreement) with a firm (Consultant) to
provide consulting services and assist in obtaining both short and long-term
financing. As compensation, upon execution of the Consulting Agreement, the
Company issued to the Consultant 100,000 restricted shares of common stock and a
warrant to purchase 50,000 shares of common stock at an exercise price of $1.00
per share. The warrant expires on April 10, 2012.

Item 2.
Managements Discussion and Analysis or Plan of Operations.

Plan of
Operations

In
recent years, the Company has focused on the buried pipe market in the United
States. It has redesigned and improved the hardware underlying its EMW
Inspection Process. It has also performed lab and field testing of this new
hardware and has developed computer models to better predict and interpret field
conditions.

On
March 27, 2007, the Company was issued a patent by the United States Patent and
Trademark Office. This patent provides significant patent protection for
the improvements made to the Companys EMW technology over the last three
years. These improvements are now being incorporated into new hardware and
software that will be deployed to the field.

The
Company is now actively marketing a cased pipe inspection service; however,
there can be no assurance that contracts for this service will be obtained.
Failure to obtain such contracts could have a serious and material effect on the
business and financial condition of the Company.

The
Company has temporarily postponed further development work on its direct buried
(uncased) pipe inspection equipment, so that, in the short term, its efforts can be focused on
building field-ready test sets for cased and insulated pipe inspection and on
the marketing of those services.

While
the Company has, in the past, inspected only for external corrosion, it has
recently filed a patent application covering the adaptation of its technology
for internal pipe inspections. However, significant design, fabrication and
testing must be done before the Company will be able to offer internal pipe
inspection services.

Capital
will be expended to support operations until the Company can generate sufficient
cash flows from operations. In order for the Company to generate cash flows from
operations, the Company must obtain revenue generating contracts. Management is
currently directing the Companys activities towards obtaining service
contracts, which, if obtained, will necessitate the Company attracting, hiring,
training and outfitting qualified technicians. If service contracts are
obtained, it will also necessitate additional field test equipment purchases in
order to provide the services. The Company expects that if revenue contracts are
secured, working capital requirements will increase. The Company will incur
additional expenses as it hires and trains field crews and support personnel
related to the successful receipt of commercial contracts. Additionally, the
Company anticipates that cash will be used to meet capital expenditure
requirements necessary to develop infrastructure to support future growth.

15



---

The
Company has expended a significant amount of cash in developing its technology
and patented processes. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. Management recognizes
that in order to meet the Companys capital requirements, and continue to
operate, additional financing, including seeking industry-partner investment
through joint ventures or other possible arrangements, will be necessary within
the next twelve months. 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 revenue
contracts and generate positive cash flow, it is unlikely that the Company will
be able to continue as a going concern.

Off Balance
Sheet Arrangements

The Company
has no off-balance sheet arrangements.

FORWARD-LOOKING
STATEMENTS

This
Quarterly Report on Form 10-QSB contains forward-looking statements.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company
believes, anticipates, expects or words of
similar import. Similarly, statements that describe the Companys projected
future results, future plans, objectives or goals or future conditions or events
are also forward looking statements. Actual results are inherently difficult to
predict. Any such forward-looking statements are subject to the risks and
uncertainties that could cause actual results of operations, financial
condition, acquisitions, financing transactions, operations, expenditures,
expansion and other events to differ materially from those expressed or implied
in such forward-looking statements. Any such forward-looking statements would be
subject to a number of assumptions regarding, among other things, future
economic, competitive and market conditions generally. Such assumptions would be
based on facts and conditions as they exist at the time such statements are made
as well as predictions as to future facts and conditions, the accurate
prediction of which may be difficult and involve the assessment of events beyond
the Companys control.

The
forward-looking statements contained in this report 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 to continue its operations, 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 with
respect to the Companys business, demand for the Companys products
and services will significantly increase, that the Company will be able to
secure additional fee-for-services or licensing contracts, that the
Companys executive officers will remain employed as such by the Company,
that the Companys forecast 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 the Company
believes the expectations reflected in the forward-looking statements are
reasonable, the Company cannot guarantee future results, levels of activity,
performance or achievements.

16



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Item 3.
Controls and Procedures.

Evaluation
of Disclosure Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures

| | The
term disclosure controls and procedures is defined in Rules  13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the  Exchange Act).
This term refers to the controls and procedures of a  company that are designed to ensure
that information required to be disclosed by  a company in the reports that it files
under the Exchange Act is recorded,  processed, summarized, and reported within the
required time periods. The  Companys Chief Executive Officer and Chief Financial
Officer have  evaluated the effectiveness of the Companys disclosure controls and
procedures as of the end of the period covered by this report. They have  concluded that,
as of that date, the Companys disclosure controls and  procedures were effective at
ensuring that required information will be  disclosed on a timely basis in the Companys
reports filed under the  Exchange Act.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Changes
in Internal Control over Financial Reporting

| | No
change in the Companys internal control over financial reporting (as  defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during  the period covered
by this report that has materially affected, or is reasonably  likely to materially
affect, the Companys internal control over financial  reporting.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART
II  OTHER INFORMATION

Item 1.
Legal Proceedings.

The
Company is not aware of any legal proceedings contemplated by any governmental
authority or any other party involving the Company or its properties. As of the
date of this report, no director, officer or affiliate is a party adverse to the
Company in any legal proceeding or has an adverse interest to the Company in any
legal proceedings. The Company is not aware of any other legal proceedings
pending or that have been threatened against the Company or its properties.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

Convertible
Debt

On
June 19, 2003, the Board of Directors approved the offering (the 2003
Offering) of $1,000,000 in convertible debentures (the
Debentures). The Debentures are convertible into that number of
shares of the Companys common stock equal to the amount of the converted
indebtedness divided by $0.50 per share. Upon the purchase of, and for each
$0.50 of the Debentures principal amount, the Company issued to each
investor a warrant (the Warrant) to purchase one (1) share of the
Companys common stock at an exercise price of $0.75 per share. The
Warrants are exercisable at any time prior to the 5th anniversary date of the
redemption of the Debenture. The 2003 Offering is exempt from registration under
Section 4(2) of the Securities Act.

In
January 2007, two investors exercised their conversion right, pursuant to the
terms of the 2003 Offering and converted Debentures in the aggregate principal
amount of $25,000 pursuant to the terms of the 2003 Offering. Accordingly, the
Company issued 50,000 shares of common stock in accordance with the terms of the
2003 Offering.

Item 3.
Defaults Upon Senior Securities.

None.

17



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Item 4.
Submission  of Matters to a Vote of Shareholders.

None.

Item 5.
Other Information.

None.

Item 6.
Exhibits.

The
following exhibits are filed with or incorporated by reference into this report:

|Exhibit No. |  | Description of Exhibit
|----------- |  | ----------------------

|Exhibit 3.1 |  | Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the  Companys
Registration Statement on Form SB-2 filed with the Commission on  May 10, 1996).
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 3.2 |  | Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the  Companys
Registration Statement on Form SB-2 filed with the Commission on  May 10, 1996).
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 3.3 |  | Amendment to Certificate of Incorporation (incorporated by reference to  Exhibit A to the
Companys Definitive Proxy Statement filed with the  Commission on October 28, 2002).
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 3.4 |  | Amendment to Certificate of Incorporation (incorporated by reference to  Appendix A to
the Companys Preliminary Proxy Statement filed with the  Commission on September
13, 2006).
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.1 |  | Loan Agreement dated March 6, 2003, by and between the Company and Murphy  Evans
(incorporated by reference to Exhibit 4.1 to the Companys Quarterly  Report on Form
10-QSB filed with the Commission on May 15, 2002).
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.2 |  | Loan Amendment and Promissory Note dated March 6, 2003, by and between the  Company and
Murphy Evans (incorporated by reference to Exhibit 10.1 to the  Companys Quarterly
Report on Form 10-QSB filed with the Commission on May  20, 2003).
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.3 |  | Lease Extension dated February 26, 2003 by and between the Company and  Fatum LLC
(incorporated by reference to Exhibit 10.5 to the Companys  Annual Report on Form
10-KSB filed with the Commission on October 12, 2004).
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.4 |  | Royalty Agreement (incorporated by reference to Exhibit 10.1 to the  Companys
Registration Statement on Form SB-2 filed with the Commission on  May 10, 1996).
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.5 |  | Assignment of Patent Rights (incorporated by reference to Exhibit 10.2 to  the Companys
Registration Statement on Form SB-2 filed with the Commission  on May 10, 1996).
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.6 |  | 1999 Stock Option Plan (incorporated by reference to Exhibit 10.9 to the  Companys
Annual Report on Form 10-KSB filed with the Commission on October  12, 2004).
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

18



---

|Exhibit 10.7 |  | First Amendment to the 1999 Stock Option Plan (incorporated by reference to  Appendix B
to the Companys Preliminary Proxy Statement filed with the  Commission on September
13, 2006).
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 10.8 |  | Lease dated March 1, 2007 by and between the Company and Long Island  Property Management
LP. *
|------------ |  | -----------------------------------------------------------------------------------------------

|Exhibit 10.9 |  | Consulting Agreement dated April 11, 2007, by and between the Company and  R.F. Lafferty.
*
|------------ |  | -------------------------------------------------------------------------------------------

|Exhibit 31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Henry E. Gemino, as Chief  Executive Officer
and Chief Financial Officer of the Company. *
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Philip L. Jones, as Chief  Operating Officer
and Executive Vice President of the Company. *
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.1 |  | Certification under Section 906 of the Sarbanes-Oxley Act of 2002 by Henry  E. Gemino, as
Chief Executive Officer and Chief Financial Officer of the  Company. *
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.2 |  | Certification under Section 906 of the Sarbanes-Oxley Act of 2002 by Philip  L. Jones, as
Chief Operating Officer and Executive Vice President of the  Company. *
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

_____________

* Filed
herewith.

19



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EXHIBIT
INDEX

|Exhibit 10.8 |  | Lease dated March 1, 2007 by and between the Company and Long Island  Property Management
LP.*
|------------ |  | ----------------------------------------------------------------------------------------------

|Exhibit 10.9 |  | Consulting Agreement dated April 11, 2007, by and between the Company and  R.F. Lafferty.
*
|------------ |  | -------------------------------------------------------------------------------------------

|Exhibit 31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Henry E. Gemino, as Chief  Executive Officer
and Chief Financial Officer of the Company.*
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------

|Exhibit 31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Philip L. Jones, as Chief  Operating Officer
and Executive Vice President of the Company.*
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.1 |  | Certification under Section 906 of the Sarbanes-Oxley Act of 2002 by Henry  E. Gemino, as
Chief Executive Officer and Chief Financial Officer of the  Company.*
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.2 |  | Certification under Section 906 of the Sarbanes-Oxley Act of 2002 by Philip  L. Jones, as
Chief Operating Officer and Executive Vice President of the  Company.*
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

____________

* Filed
herewith.

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---

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:  May 9,
2007

| | /s/ Henry E. GeminoHenry E. GeminoChief Executive Officer andChief Financial Officer
| | ------------------------------------------------------------------------------------

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