<PAGE>

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


                                  FORM 10-QSB


(Mark One)
               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
 [X]           SECURITIES EXCHANGE ACT OF 1934
                                                       March 31, 2001
                    For the quarterly period ended ----------------------


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

                                                 0-21151
               Commission file number -------------------------

                           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 May 10, 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>
============================================================================================================================


                                                                                            March 31,             June 30,
                                                                                              2001                  2000
============================================================================================================================

                                    Assets
                                    ------
<S>                                                                                    <C>                     <C>
Current assets:
       Cash and cash equivalents                                                       $    797,526            $ 1,744,032
       Accounts receivable                                                                   34,300                 14,300
       Contract work-in-progress                                                                  -                 69,779
       Prepaid expenses and other current assets                                             49,981                 46,272
                                                                                       ------------            -----------
             Total current assets                                                           881,807              1,874,383

Equipment, net                                                                              221,837                238,999
Patents, net                                                                                251,640                294,084
Other assets                                                                                 10,143                  9,993
                                                                                       ------------            -----------
             Total assets                                                              $  1,365,427            $ 2,417,459
                                                                                       ============            ===========


                     Liabilities and Stockholders' Equity
                     ------------------------------------
Current liabilities:
       Accounts payable - stockholder                                                  $          -            $     1,178
       Other accounts payable                                                                44,285                 73,660
       Accrued liabilities                                                                  113,251                165,697
                                                                                       ------------            -----------
             Total current liabilities                                                      157,536                240,535

Stockholders' equity:
       Common stock, $0.001 par value.  Authorized 10,000,000 shares; issued
             and outstanding 4,285,092 shares at March 31, 2001 and
             June 30, 2000                                                                    4,285                  4,285
       Additional paid-in-capital                                                         7,579,414              7,572,998
       Accumulated deficit                                                               (6,375,808)            (5,400,359)
                                                                                       ------------            -----------
             Total stockholders' equity                                                   1,207,891              2,176,924

============================================================================================================================

             Total liabilities and stockholders' equity                                $  1,365,427            $ 2,417,459
                                                                                       ============            ===========
============================================================================================================================
</TABLE>

           See accompanying notes to condensed financial statements.
<PAGE>

                          PROFILE TECHNOLOGIES, INC.

                      Condensed Statements of Operations
                                  (unaudited)

<TABLE>
<CAPTION>
============================================================================================================================


                                                            Three months ended                   Nine months ended
                                                                  March 31,                           March 31,
                                                    -------------------------------------------------------------------------

                                                          2001              2000              2001              2000
=============================================================================================================================
<S>                                                 <C>                     <C>              <C>               <C>
Revenue                                                    $   27,500        $    5,250      $    305,250      $    147,500
                                                    -------------------------------------------------------------------------

Cost of revenue                                                73,577               985           327,116            71,846
                                                    -------------------------------------------------------------------------

       Gross profit (loss)                                    (46,077)            4,265           (21,866)           75,654
                                                    -------------------------------------------------------------------------

Research and development                                       97,389            69,096           223,610           219,248
Selling general and administrative                            249,725           391,486           783,439           973,655
                                                    -------------------------------------------------------------------------

       Total operating expenses                               347,114           460,582         1,007,049         1,192,903
                                                    -------------------------------------------------------------------------

       Loss from operations                                  (393,191)         (456,317)       (1,028,915)       (1,117,249)
                                                    -------------------------------------------------------------------------

Interest income                                                13,637            32,265            53,466           100,827
                                                    -------------------------------------------------------------------------

       Net loss                                            $ (379,554)       $ (424,052)     $   (975,449)     $ (1,016,422)
                                                    -------------------------------------------------------------------------

Basic and diluted net loss per share                            (0.09)            (0.10)            (0.23)            (0.24)

Shares used to calculate basic and
       diluted net loss per share                           4,285,092         4,285,092         4,285,092         4,282,314
=============================================================================================================================
</TABLE>
<PAGE>

                          PROFILE TECHNOLOGIES, INC.

                      Condensed Statements of Cash Flows
                                  (unaudited)

<TABLE>
<CAPTION>
=============================================================================================================================



                                                                                                 Nine months ended
                                                                                                     March 31,
                                                                                        -----------------------------------

                                                                                              2001              2000
===========================================================================================================================
<S>                                                                                          <C>              <C>
Cash flows from operating activities:
       Net loss                                                                              $   (975,449)    $ (1,016,422)
       Adjustments to reconcile net loss to net cash used in
          operating activities:
              Depreciation and amortization                                                       111,746           63,228
              Stock compensation expense                                                            6,416                -
              Changes in assets and liabilities:
                 Accounts receivable                                                              (20,000)           3,056
                 Contract work-in-progress                                                         69,779           87,750
                 Accounts receivable/payable - stockholder                                         (1,178)          (6,245)
                 Prepaid expenses and other assets                                                 (3,859)         (33,872)
                 Other accounts payable                                                           (29,375)          31,251
                 Accrued liabilities                                                              (52,446)         (31,025)
                                                                                              -----------      -----------

                    Net cash used in operating activities                                        (894,366)        (902,279)
                                                                                              -----------      -----------

Cash flows from investing activities:
       Patents                                                                                    (15,000)         (29,718)
       Purchase of equipment                                                                      (37,140)         (61,045)
                                                                                              -----------      -----------

                    Net cash used in investing activities                                         (52,140)         (90,763)
                                                                                              -----------      -----------

Net cash flows provided by financing activities - Proceeds
       from exercise of common stock purchase warrants                                                  -           11,250
                                                                                              -----------      -----------


                    Decrease in cash and cash equivalents                                        (946,506)        (981,792)

Cash and cash equivalents at beginning of the period                                            1,744,032        3,140,647
                                                                                              -----------      -----------

Cash and cash equivalents at end of the period                                                $   797,526      $ 2,158,855
                                                                                              ===========      ===========

===========================================================================================================================
</TABLE>

           See accompanying notes to condensed financial statements.

<PAGE>

PROFILE TECHNOLOGIES, INC.
                                    3/31/01
                    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, 2000 (filed September 28, 2000). 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 and nine
months ended March 31, 2001 are options and warrants to acquire 1,381,000 shares
of common stock with a weighted-average exercise price of $4.19 because their
effect would be antidilutive. Excluded from the computation of diluted loss per
share for the three and nine months ended March 31, 2000 are options and
warrants to acquire 1,246,000 shares of common stock with a weighted-average
exercise price of $4.10 because their effect would be antidilutive.


4.       New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments embedded in other contracts, and for
hedging activities. The Statement requires that entities recognize all these
derivatives at fair value. SFAS 133 also specifies a new method of accounting
for hedging transactions, prescribes the type of items and transactions that may
be hedged, and specifies detailed criteria to be met to qualify for hedge
accounting. The Company adopted SFAS 133 on July 1, 2000. The adoption of this
statement did not have a material impact on the financial statements.

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101") SAB 101 provides guidance on revenue recognition issues. The Company
adopted SAB 101 on July 1, 2000. The adoption of SAB 101 did not have a material
impact on the Company's financial statements.
<PAGE>

In March 2000, the FASB issued Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25" ("FIN 44"). This interpretation provides guidance for applying APB Opinion
No. 25 "Accounting for Stock Issued to Employees." The Company adopted FIN 44 on
July 1, 2000. The adoption of FIN 44 did not 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.

Revenue

        We derive revenue solely form the sale of the EMW inspection service.
Revenue during the three and nine month periods ended March 31, 2001 was
generated from a limited number of customers. 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.

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. The Company has
not advertised to date.

Results of Operations

        Revenue increased to $27,500 for the three months and to $305,250 for
the nine months ended March 31, 2001, compared to $5,250 for the three months
and to $147,500 for the nine months ended March 31, 2000. Revenue includes fees
for testing services and fees for field demonstrations sponsored by large multi-
national oil companies and large utilities. These increases were due to
increased work on the North Slope in Alaska as well as an increase in the number
of field demonstrations.

        Cost of revenue increased to $73,577 for the three months and to
$327,116 for the nine months ended March 31, 2001, compared to $985 for the
three months and to $71,846 for the nine months ended March 31, 2000. These
increases were primarily due to the hiring of additional personnel in
anticipation of increased work on the North Slope in Alaska.

        Research and development expenses increased to $97,389 for the three
months and to $223,610 for the nine months ended March 31, 2001, compared to
$69,096 for the three months and to $219,248 for the nine months ended March 31,
2000. These increases were due primarily to increased development efforts on the
Company's technologies.
<PAGE>

        Selling general and administrative expenses decreased to $249,725 for
the three months and to $783,439 for the nine months ended March 31, 2001,
compared to $391,486 for the three months and $973,655 for the nine months ended
March 31, 2000. These decreases were primarily the result of certain of the
Company's employees working on more revenue generating projects.

        Loss from operations decreased to a deficit of $393,191 for the three
months and to a deficit of $1,028,915 for the nine months ended March 31, 2001
compared to a deficit of $456,317 for the three months and to a deficit of
$1,117,249 for the nine months ended March 31, 2000. The decrease in the loss
from operations is primarily due to increased revenue from testing services and
field demonstrations, partially offset by an increase in expenses associated
with hiring additional field personnel.

        Interest income decreased to $13,637 for the three months and $53,466
for the nine months ended March 31, 2001, down from $32,265 for the three months
and $100,827 for the nine months ended March 31, 2000. The decrease in interest
income is due to a decrease in cash and cash equivalents.

Liquidity and Capital Resources

        The Company has suffered recurring losses from operations and had an
accumulated deficit of $6,375,808 as of March 31, 2001. Net cash flows used in
operating activities was $894,366 for the nine months ended March 31, 2001. The
Company expects that additional operating activities will result in cash
outflows in the near term while the Company pursues additional commercial
contracts, marketing activities, and research and development. Cash outflows
from operations are expected to continue at least through the fourth quarter
ending June 30, 2001. No assurances can be given that operational activities
will generate positive cash flows thereafter. The Company anticipates seeking
additional financing by the sale of common stock in the next 12 months to
provide additional working capital.

        At March 31, 2001, the Company has cash and cash equivalents of
$797,526, working capital of $724,271 and no material long-term commitments or
material commitments for capital expenditures.

        Management believes that both revenues and expenses of the Company are
likely to increase during the remainder of the fiscal year ending June 30, 2001
compared to the fiscal year ended June 30, 2000 if it is able to secure
additional contracts with customers, of which there is no assurance. The
revenues earned by the Company to date have often included research and
development activities that have been sponsored by large multi-national oil
companies and large utilities. These activities included field demonstrations at
such companies' facilities and are likely to continue during the year ending
June 30, 2001 and for the foreseeable future. Management is also working towards
obtaining additional fee for service contracts that are expected to be the major
source of the Company's revenues. If such contracts are obtained, management
expects that its expenditures associated with personnel and testing equipment
will begin to rise. In addition, as the Company begins to actually provide fee
for service work on a larger scale, additional administrative support activities
will increase together with related expenses. If the Company is not able to
obtain such contracts, additional financing will be needed to provide additional
working capital.

        Management is currently directing the Company's activities towards
obtaining additional fee for service contracts, which will necessitate the
Company attracting, hiring, training and outfitting qualified technicians. The
Company's intention is to purchase such equipment for its field crews for the
foreseeable future, until such time as the scope of operations may require
alternate sources of financing such 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 might need one additional crew to service future contracts, but it
cannot be certain until contract negotiations are complete. That contracting
process should occur in the fourth quarter ending June 2001, but there can be no
assurance that such negotiations will be successfully completed.

        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
<PAGE>

increase to the extent revenues rise. Any such increase that occurs at the same
time or a greater rate than increases in revenue can be expected to reduce cash
and cash equivalents. The Company believes that its current cash and cash
equivalents will be sufficient to meet working capital and capital expenditure
requirements through fiscal 2001. While the Company anticipates seeking
additional financing in the next 12 months by the sale of common stock,
additional financing may not be available on acceptable terms, if at all. The
ability to raise additional capital could be affected by the fact that the
Company does not meet one of the NASDAQ SmallCap Market's continued listing
requirements (i.e., the $2 million in net tangible asset requirement). By
increasing its contract revenues and/or raising additional capital, the Company
will attempt to return to compliance with this standard. However, there is no
assurance that it will be able to do so. The Company's ability to grow,
implement business strategies and continue operations may be limited if
additional financing on acceptable terms or increased revenues are not obtained.

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.

        None.

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: May 15, 2001                          /s/ Henry Gemino
                                            ----------------
                                            Henry Gemino
                                            Chief Executive Officer;
                                            Chief Financial Officer