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

     QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1998

Commission file number 0-21151


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

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


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


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


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

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

       There were 4,275,092 shares of common stock issued and outstanding
                              on October 20, 1998.

Transitional Small Business Disclosure Format
(Check one):

Yes          No    X

<PAGE>


Item 1. Financial Statements

                           PROFILE TECHNOLOGIES, INC.

                            Condensed Balance Sheets
                                                        
                                                    September 30,     June 30,
                                                        1998            1998
                                                        ----            ----
                                                        
                                                     (unaudited)          
                                     Assets
                                     ------
                                                        
Current assets:
       Cash and cash equivalents                     $ 4,036,660      4,167,951
       Accounts receivable                                48,155           --
       Prepaid expenses                                   51,222         59,645
                                                     -----------    -----------

        Total current assets                           4,136,037      4,227,596

Property and equipment, net                              121,269        113,173
Patents, net                                             245,155        204,037
Other assets                                               3,530          3,530
                                                     -----------    -----------

        Total assets                                 $ 4,505,991      4,548,336
                                                     -----------    -----------

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

Current liabilities:
       Accounts payable - stockholder                      8,424         21,737
       Other accounts payable                             11,668         19,553
       Other accrued liabilities                         152,311        134,322
                                                     -----------    -----------

        Total current liabilities                        172,403        175,612
                                                     -----------    -----------

Stockholders' equity:
       Common stock, $0.001 par value 
              Authorized 10,000,000 shares;
              issued and outstanding 4,275,092
              shares at September 30, 1998 and
              4,262,600 shares at June 30, 1998            4,275          4,263
       Additional paid-in capital                      7,561,758      7,514,145
       Accumulated deficit                            (3,232,445)    (3,145,684)
                                                     -----------    -----------

        Total stockholders' equity                     4,333,588      4,372,724
                                                     ===========    ===========


        Total liabilities and stockholders' equity   $ 4,505,991      4,548,336
                                                     ===========    ===========


            See accompanying notes to condensed financial statements

                                       1
<PAGE>


                           PROFILE TECHNOLOGIES, INC.
                                                
                       Condensed Statements of Operations
                                  (unaudited)
                                                
                                                
                                                
                                                         Three months ended   
                                                            September  30   
                                                     --------------------------
                                                         1998           1997
                                                         ----           ----
                                                
Revenues - services                                  $   138,985         30,000
                                                     -----------    -----------

Cost of services                                          42,211         24,270
                                                     -----------    -----------

   Gross profit                                           96,774          5,730
                                                     -----------    -----------

Operating expenses:
    Research and development                              68,850         60,774
    General and administrative                           168,950        136,210
                                                     -----------    -----------


                         Total operating expenses        237,800        196,984
                                                     -----------    -----------

                         Loss from operations           (141,026)      (191,254)
                                                     -----------    -----------

Interest income                                           54,265         67,349
                                                     -----------    -----------

                         Net loss                    $   (86,761)      (123,905)
                                                     -----------    -----------

Basic and diluted loss per share                           (0.02)         (0.03)

Weighted average basic and diluted common
     and common share equivalents outstanding          4,269,430      4,262,600
                                                     ===========    ===========

                                                                        
            See accompanying notes to condensed financial statements

                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                        
                                       PROFILE TECHNOLOGIES, INC.
                                                        
                                   Condensed Statements of Cash Flows
                                               (unaudited)
                                                        
                                                                                                               
                                                                                   Three months ended                      
                                                                                      September  30                   
                                                                               --------------------------                   
                                                                                   1998            1997    
                                                                                   ----            ----    
<S>                                                                            <C>               <C>      
Cash flows from operating activities:                                     
     Net loss                                                                  $   (86,761)      (123,905)
    Adjustments to reconcile net loss to net cash used in
        operating activities:
           Depreciation and amortization                                            21,316          8,272
           Changes in assets and liabilities:
              Accounts receivable                                                  (48,155)       (50,000)
              Contract work-in-progress                                               --           20,000
              Accounts receivable/payable - stockholder                            (13,313)        (2,500)
              Prepaid expenses                                                       8,423         22,140
              Other assets                                                            --             (180)
              Other accounts payable                                                (7,885)        10,188
              Accrued wages                                                           --          (14,094)
              Other accrued liabilities                                             17,989        (19,010)
                                                                               -----------    -----------

                             Net cash used in operating activities                (108,386)      (149,089)
                                                                               -----------    -----------

Cash flows from investing activities:
        Patents                                                                    (49,572)          --   
        Purchase of property and equipment                                         (20,958)       (45,465)
                                                                               -----------    -----------

                            Net cash used in investing activities                  (70,530)       (45,465)
                                                                               -----------    -----------

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

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


                            Increase (decrease) in cash and cash equivalents      (131,291)      (194,554)

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


Cash and cash equivalents at end of period                                       4,036,660      4,742,046
                                                                               -----------    -----------

                        See accompanying notes to condensed financial statements

                                                   3
</TABLE>
<PAGE>


                           PROFILE TECHNOLOGIES, INC.

                     Notes to Condensed Financial Statements


1. Description of Business

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

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

During the quarter ended  September 30, 1998, the Company  commenced work on its
initial commercial  contracts for corrosion  inspection services of pipeline and
has emerged from the  development  stage.  There can be no  assurances  that the
Company will be able to obtain additional commercial contracts in the future.

2. Basis of Presentation

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

3. Net Loss Per Share

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


                                        4

<PAGE>



Excluded  from the  computation  of diluted loss per share for the quarter ended
September  30, 1997 are  warrants to acquire 1,  120,000  shares of common stock
with a  weighted-average  exercise  price of $3.41 because their effect would be
antidilutive.  Excluded from the  computation  of diluted loss per share for the
quarter ended  September  30, 1998 are warrants to acquire 1, 140,000  shares of
common  stock with a  weighted-average  exercise  price of $3.59  because  their
effect would be antidilutive.

4. Product Development Costs - New Accounting Pronouncement

Product development costs are charged to operations as incurred.  In March 1998,
the AICPA issued Statement of Position (SOP) No. 98.1,  Accounting for the Costs
of computer  Software  Developed or Obtained for Internal  Use,  which  requires
capitalization of certain software  development costs for software developed for
internal use.

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

5.  Stock Option Plan and Stock Purchase Warrant

In October, 1998:

*    the Board approved a Stock Option Plan,  subject to  shareholder  approval,
     and reserved for issuance of stock options 500,000 shares of common stock;

*    the Company  granted a warrant to purchase 85,000 shares of common stock to
     its President with an exercise price of $7.50 per share.

                                        5

<PAGE>



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

GENERAL

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

     In order for the Company to obtain significant revenues from the use of its
technology,  the Company must establish a sales and marketing  organization that
is effective  and obtains  customers  for its pulse  propagation  analyzer.  The
Company must also be able to supply and train work crews in  sufficient  numbers
to satisfy the requirements of its customers.  From inception  through September
30, 1998, the Company  incurred  losses of $3,232,445 and losses are expected to
continue at least  through the second  quarter of the year ending June 30, 1999;
no assurances can be given that losses will not continue thereafter.

RESULTS OF OPERATIONS

                Quarter Ended September 30, 1998 Compared to the
                        Quarter Ended September 30, 1997

     The Company had revenues of $138,985 for the quarter  ended  September  30,
1998 compared to $30,000 for the quarter  ended  September 30, 1997, an increase
of  $108,985.  This 463%  increase in  operating  revenues was the result of the
Company  completing  its first two  commercial  contracts  on the North Slope of
Alaska.  The loss from  operations for the quarter ended  September 30, 1998 was
$141,026  compared to a loss from  operations  of $191,254 for the quarter ended
September 30, 1997. The operating loss for the quarter ended  September 30, 1998
was offset  somewhat  by interest  income in the amount of $54,265  representing
interest earned  primarily from proceeds of the Company's  public offering which
was  completed in February of 1997.  This  resulted in a net loss of $86,761 for
the quarter ended  September 30, 1998 compared to a net loss of $123,905 for the
quarter ended September 30, 1997. Cost of services  increased to $42,211 for the
quarter  ended  September  30, 1998  compared  to $24,270 for the quarter  ended
September  30, 1997.  The  resulting  gross profit  margin in the quarter  ended
September 30, 1998 was 70 percent.  Research and development  expenses increased
slightly to $68,850 for the quarter ended September 30, 1998 compared to $60,774
for the quarter ended September 30, 1997.  General and  administrative  expenses
increased to $168,950 for the quarter ended September 30, 1998 from $136,210 for
the quarter ended September 30, 1997,  primarily because of increased  personnel
expenses.

                                        6

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Company  since  inception  has funded its  operations  and research and
development  activities  through private placement equity offerings and proceeds
from the Company's  initial public offering.  The Company  completed work on its
first commercial  contracts during the three months ended September 30, 1998 and
has  emerged  from  development  stage  activities.  Net cash used in  operating
activities totaled $108,386 in the three months ended September 30, 1998 and 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 quarter  ending
December 31, 1998; no assurances  can be given that  operating  activities  will
generate positive cash flows thereafter.

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

     The Company's  available cash and equivalents as of September 30, 1998 were
$4,036,660. At September 30, 1998, the Company had working capital of $3,963,634
and no  material  long term  commitments  or  material  commitments  for capital
expenditures.

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

RESOURCES

     As of September 30, 1998 the Company did not have any material  commitments
for  capital  expenditures.  However,  management  is  currently  directing  the
Company's  activities  towards obtaining  additional fee for service  contracts,
which will necessitate the Company attracting,  hiring,  training and outfitting
qualified technicians. The Company's intention is to purchase such equipment for
its field crews for the foreseeable future,  until such time as the scope of the
operations may require alternate sources of financing such equipment. The timing
of these events is dependent upon the Company's ability to obtain additional fee
for service contracts,  which is dependent upon the Company's continuing ability
to demonstrate the  effectiveness  of its technology.  The Company believes that
its cash  position is  sufficient  to satisfy its  operating  needs for the next
twelve  months.  Management  believes  it is well on the way to  reaching  these
milestones,  but there can be no assurance that the Company's  process will gain
widespread  commercial  acceptance  within any particular time frame, or at all.
The  Company  will incur  additional  personnel  expenses as it hires and trains
field  crews  and  support  personnel  related  to  the  successful  receipt  of
commercial contracts.

                                        7

<PAGE>




YEAR 2000 COMPLIANCE

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the year 2000 approaches.  The "Year 2000" problem
is  concerned  with  whether  computer  systems  will  properly  recognize  date
sensitive  information  when the year  changes  to  20000.  Systems  that do not
properly  recognize such  information  could generate  erroneous data or cause a
system to fail. The Year 2000 problems  pervasive and complex as virtually every
company's  computer  operation  will be  affected  in some  way.  The  Company's
computer  programs  which  process  it's  field  data as well as  operation  and
financing  transactions,  were designed and developed  without  considering  the
impact of the  upcoming  change  in  century.  Nevertheless,  as a result of the
Company's analysis of it's computer programs and operations,  it has reached the
conclusion  that  "Year  2000"  problems  will not  seriously  impact  or have a
material  adverse  effect on the Company's  expenses,  business,  including data
gathering and interpretation, or it's operations.

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


                                        8

<PAGE>

                                     PART II

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.

     On October 17, 1998, the Company  restructured its management team.  Murphy
Evans, an outside director, was named President of the Company. Henry Gemino was
named  co-chairman of the Board of Directors.  Dr. John Tsungfen Kuo, an outside
director and the Company's Chief Technical  Consultant and Gale D. Burnett,  the
Company's former President, were named Vice- Chairmen of the Board of Directors.
At the same time, Mr. Evans was granted  85,000 common stock  purchase  warrants
exercisable at $7.50 per share.  Half are  exercisable  immediately and half are
exercisable  in one year if prior to that  date Mr.  Evans has not  resigned  as
President. All of such warrants expire October 31, 2004.

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

     (a) Exhibits.
             27.1     Financial Data Schedule
             27.2     Financial Data Schedule Restated

     (b) Reports on Form 8-K.
             None



                                        9

<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: October 20, 1998                      /s/ G.L. Scott
                                            ------------------------------------
                                            G.L. SCOTT
                                            Chief Executive Officer



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


                                       10