<PAGE>

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

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

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

                 For the quarterly period ended March 31, 2001

                                      OR

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


  For the transition period from ____________________to______________________


                          Commission File No 0-22803
                                            --------



                       PROLONG INTERNATIONAL CORPORATION
            (Exact name of registrant as specified in its charter)


<TABLE>
<CAPTION>
<S>                                     <C>                                                        <C>
            Nevada                                           6 Thomas                                         74-2234246
(State or other jurisdiction of                          Irvine, CA  92618                         (IRS Employer Identification No.)
 incorporation or organization)         (Address of principal executive offices) (Zip Code)
</TABLE>

                                (949) 587-2700
                        (Registrant's telephone number,
                             including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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.

                             (1)  Yes [X]  No [_]

                             (2)  Yes [X]  No [_]


There were 28,438,903 shares of the registrant's common stock ($0.001 par value)
                        outstanding as of May 3, 2001.
                              Page 1 of 16 pages
                Exhibit Index on Sequentially Numbered Page 16

================================================================================
<PAGE>

                       PROLONG INTERNATIONAL CORPORATION
                                   FORM 10-Q
                               TABLE OF CONTENTS



PART 1     FINANCIAL INFORMATION                                            Page


Item 1:    Financial Statements

           Consolidated Condensed Balance Sheets -
           March 31, 2001 and December 31, 2000................................3

           Consolidated Condensed Statements of Operations - Three months
           ended March 31, 2001 and 2000.......................................4

           Consolidated Condensed Statements of Cash Flows -
           Three months ended March 31, 2001 and 2000..........................5

           Notes to Consolidated Condensed Financial Statements................6

Item 2:    Management's Discussion and Analysis of Financial Condition
           and Results of Operations..........................................12

Item 3:    Quantitative and Qualitative Disclosures About Market Risk.........14

PART II    OTHER INFORMATION

Item 1:    Legal Proceedings..................................................16

Item 6:    Exhibits and Reports on Form 8-K...................................16

           Signatures.........................................................16

                                       2


<PAGE>

Item 1.  Financial Statements

              PROLONG INTERNATIONAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS


                                    ASSETS

                                                       March 31,   December 31,
                                                         2001          2000
                                                      -----------  ------------
                                                      (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents                             $   124,380   $   126,917
Accounts receivable, net of allowance for doubtful
accounts of $168,775 at March 31, 2001 and at
December 31, 2000, respectively                         4,119,891     3,245,892
Inventories, net                                        1,031,122       970,236
Prepaid expenses, net                                     302,898       360,227
Income taxes receivable                                       ---        87,002
Prepaid television time                                   120,149         5,583
Advances to employees, current portion                     74,235        57,525
Deferred tax asset                                        858,453       943,177
                                                      -----------  ------------

                 Total current assets                   6,631,128     5,796,559

Property and equipment, net                             3,114,244     3,193,109

Intangible assets, net                                  6,403,315     6,529,986

Deferred tax asset, noncurrent                          1,925,750     1,972,387

Other assets                                              165,944       223,159
                                                      -----------  ------------

TOTAL ASSETS                                          $18,240,381   $17,715,200
                                                      ===========  ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable                                      $ 2,682,360   $ 2,183,482
Accrued expenses                                          889,856       937,618
Line of credit                                          2,088,157     2,050,716
Notes payable, current                                    724,118       725,442
Income taxes payable                                        4,780           ---
                                                      -----------  ------------

                 Total current liabilities              6,389,271     5,897,258

Notes payable, noncurrent                               2,265,738     2,277,130
                                                      -----------  ------------

                 Total liabilities                      8,655,009     8,174,388

COMMITMENTS AND CONTINGENCIES (Note 7 & 8)

STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 50,000,000 shares
 authorized; no shares issued or outstanding                  ---           ---
Common stock, $0.001 par value; 150,000,000 shares
 authorized; 28,438,903 shares issued and
 outstanding                                               28,439        28,439
Additional paid-in capital                             15,035,261    15,035,261
Accumulated deficit                                    (5,478,328)   (5,522,888)
                                                      -----------  ------------

                 Total stockholders' equity             9,585,372     9,540,812
                                                      -----------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $18,240,381   $17,715,200
                                                      ===========  ============

            See notes to consolidated condensed financial statements

                                       3
<PAGE>

              PROLONG INTERNATIONAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                          March 31,
----------------------------------------------------------------------------
                                                     2001            2000
                                                 -----------     -----------
<S>                                              <C>            <C>
NET REVENUES                                     $ 4,151,945     $ 7,757,199

COST OF GOODS SOLD                                 1,307,251       1,726,911
                                                 -----------     -----------

GROSS PROFIT                                       2,844,694       6,030,288

OPERATING EXPENSES:

Selling and marketing                              1,569,927       3,312,551
General and administrative                           977,156       1,428,153
                                                 -----------     -----------

          Total operating expenses                 2,547,083       4,740,704

OPERATING INCOME                                     297,611       1,289,584

OTHER INCOME (EXPENSE), net:
Interest (expense)                                  (123,467)       (154,256)

Interest income                                        6,557           2,335
                                                 -----------     -----------

          Total other (expense) net                 (116,910)       (151,921)
                                                 -----------     -----------

INCOME BEFORE PROVISION FOR INCOME TAXES             180,701       1,137,663

PROVISION FOR INCOME TAXES                           136,141         496,843
                                                 -----------     -----------

NET INCOME                                       $    44,560     $   640,820
                                                 ===========     ===========

NET INCOME PER SHARE:
Basic                                            $      0.00     $      0.02
                                                 ===========     ===========
Diluted                                          $      0.00     $      0.02
                                                 ===========     ===========

WEIGHTED AVERAGE COMMON SHARES:
Basic                                             28,438,903      28,445,835

Diluted options outstanding                                0         128,219
                                                 -----------     -----------

Diluted                                           28,438,903      28,574,054
                                                 ===========     ===========
</TABLE>



           See notes to consolidated condensed financial statements

                                       4
<PAGE>

              PROLONG INTERNATIONAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                 March 31,
--------------------------------------------------------------------------------------------------
                                                                            2001          2000
                                                                         ---------     -----------
<S>                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                               $  44,560     $   640,820
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
  Depreciation and amortization                                            210,830         225,004
  Provision for doubtful accounts                                              ---          30,000
  Deferred taxes                                                           131,361       2,078,947
  Reserve for inventory obsolescence                                      (118,837)       (100,002)
  Compensation costs related to options                                        ---          22,999
  Amortization of warrants issued to lender                                 42,093             ---
  Changes in assets and liabilities:
    Accounts receivable                                                   (873,999)     (2,590,753)
    Inventories                                                             57,951        (135,899)
    Prepaid expenses                                                        15,236        (130,307)
    Income taxes receivable                                                 87,002             ---
    Prepaid television time                                               (114,566)       (226,868)
    Other assets                                                            54,340         (40,632)
    Accounts payable                                                       498,878         283,259
    Accrued expenses                                                       (47,762)        237,055
    Income taxes payable                                                     4,780         256,431
                                                                         ---------     -----------
      Net cash (used in) provided by operating activities                   (8,133)        550,054

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                         (2,419)            ---
Employee advances                                                          (16,710)          3,073
                                                                         ---------     -----------
      Net cash (used in) provided by investing activities                  (19,129)          3,073

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable                                                  (12,716)        (10,786)
Net proceeds (payments) from line of credit                                 37,441        (885,000)
                                                                         ---------     -----------
      Net cash provided by (used in) financing activities                   24,725        (895,786)

NET DECREASE IN CASH AND CASH EQUIVALENTS                                   (2,537)       (342,659)

CASH AND CASH EQUIVALENTS, beginning of period                             126,917       1,094,779
                                                                         ---------     -----------
CASH AND CASH EQUIVALENTS, end of period                                 $ 124,380     $   752,120
                                                                         =========     ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid                                                        $     ---     $       ---
                                                                         =========     ===========
Interest paid                                                            $ 123,467     $   154,256
                                                                         =========     ===========
</TABLE>

SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
During the first quarter of 2000, the Company completed the following
 transaction:
Recorded $22,999 to additional paid-in capital for compensation costs related
 to stock options.

           See notes to consolidated condensed financial statements

                                       5
<PAGE>

                       PROLONG INTERNATIONAL CORPORATION
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1.   BUSINESS

     Prolong International Corporation (PIC) is a Nevada corporation originally
     organized on August 24, 1981.  In June 1995, PIC acquired 100% of the
     outstanding stock of Prolong Super Lubricants, Inc. (PSL), a Nevada
     corporation.  In 1997, Prolong Foreign Sales Corporation was formed as a
     wholly-owned subsidiary of PIC.  In 1998, Prolong International Holdings
     Ltd. was formed as a wholly-owned subsidiary of PIC.  At the same time,
     Prolong International Ltd. was formed as a wholly-owned subsidiary of
     Prolong International Holdings Ltd.  PIC, through its subsidiaries, is
     engaged in the manufacture, sale and worldwide distribution of a patented
     complete line of high-performance and high-quality lubricants and
     appearance products.

2.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated condensed financial statements
     include the accounts of PIC and its wholly-owned subsidiaries, PSL, Prolong
     Foreign Sales Corporation, Prolong International Holdings Ltd. and its
     wholly-owned subsidiary, Prolong International Ltd. (collectively, the
     Company or Prolong).  All significant intercompany accounts have been
     eliminated in consolidation.  These financial statements have been prepared
     in accordance with generally accepted accounting principles for interim
     financial information and the instructions to Form 10-Q and Article 10 of
     Regulation S-X.  Accordingly, they do not include all of the information
     and footnotes required by generally accepted accounting principles for
     complete financial statements.  In the opinion of management, all
     adjustments, including normal recurring accruals, considered necessary for
     a fair presentation have been included.  Operating results for the three
     months ended March 31, 2001 are not necessarily indicative of the results
     that may be expected for the year ending December 31, 2001.  For further
     information, refer to the Form 10-K for the year ended December 31, 2000
     filed by the Company with the Securities and Exchange Commission.

3.   INVENTORIES

     Inventories consist of the following:

                                             March 31,             December 31,
                                               2001                   2000
                                               ----                   ----
                                            (Unaudited)

       Raw materials                        $  519,752              $330,641
       Finished goods                          511,370               639,595
                                            ----------              --------
                                            $1,031,122              $970,236
                                            ==========              ========

                                       6
<PAGE>

4.  PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:

                                            March 31,              December 31,
                                             2001                     2000
                                          -----------              ----------
                                          (Unaudited)

    Building and improvements             $ 2,280,783              $2,280,783
    Computer equipment                        265,965                 272,978
    Office equipment                           55,753                  55,753
    Furniture and fixtures                    585,168                 585,168
    Automotive equipment                       35,925                  35,925
    Exhibit equipment                         115,143                 115,143
    Machinery and equipment                    17,953                  17,953
    Molds and dies                            223,383                 213,951
                                          -----------              ----------

                                            3,580,073               3,577,654
     Less accumulated depreciation         (1,003,829)               (922,545)
                                          -----------              ----------

                                            2,576,244               2,655,109
     Land                                     538,000                 538,000
                                          -----------              ----------

                                          $ 3,114,244              $3,193,109
                                          ===========              ==========
5.  LINE OF CREDIT

    On May 8, 2000, the Company entered into a new $6,000,000 credit facility
    with a financial institution, expiring in May 2003. Effective November 21,
    2000, the credit facility was reduced to $5,000,000. Such facility is
    collateralized by eligible accounts receivable and inventories. Interest is
    currently payable monthly at the rate of the financial institution's prime
    rate (8.0% at March 31, 2001), plus 4% subject to a minimum interest charge
    of $50,000 per quarter, and the credit facility contains certain revised
    defined net income and net equity financial covenants for the Year 2001. At
    March 31, 2001, the Company was in compliance with or had received a waiver
    which is dependent upon the Company and the financial institution executing
    an amendment to the credit agreement by May 31, 2001, for all financial
    covenants. As of March 31, 2001, $2,088,157 was outstanding and
    approximately $180,000 was available under the terms of the line of credit.

                                       7
<PAGE>

6.  NOTES PAYABLE

    Notes payable consist of the following as of March 31, 2001:

    a)  Note payable to a bank bearing interest at 7.875%
        per annum to be repaid in monthly principal and
        interest payments of $13,050 with a final payment
        of all remaining unpaid principal and interest due
        on May 1, 2008.                                            $1,622,264

    b)  Loan from CDC Small Business Finance Corporation
        bearing interest at 7.65% per annum to be repaid in
        monthly principal and interest payments of $6,376
        each through July 1, 2018.                                    692,592

    c)  Loan from ABQ Dolphin LP; interest is payable monthly
        at the rate of the Prime Rate (8.0% at March 31, 2001)
        plus 2.5%.  The loan has a maturity date of October 30,
        2001 and includes an option to extend for one additional
        year.  In connection with this loan, the Company issued
        a warrant to purchase 900,000 shares of common stock at
        an exercise price of $0.1875.  If the loan is paid in
        full on or before October 30, 2001, the Company may
        repurchase up to an aggregate of 300,000 of the shares
        subject to the warrant at a price of $0.05 per share.         675,000
                                                                   ----------

                                                                    2,989,856

        Less current maturities                                      (724,118)
                                                                   ----------

                                                                   $2,265,738
                                                                   ==========
        Year ending December 31,
        2001                                                       $  712,726
        2002                                                           53,974
        2003                                                           57,969
        2004                                                           61,909
        2005                                                           66,856
        Thereafter                                                  2,036,422
                                                                   ----------
                                                                   $2,989,856
                                                                   ==========
7.  CONTINGENCIES

    Litigation - Michael Walczak et al - On or about November 17, 1998, Michael
                 ---------------------
    Walczak et al (Walczak), on behalf of himself and other similarly situated
    shareholders of EPL filed a purported class action and derivative suit in
    the U.S. District Court (the Court) in San Diego, California against PIC,
    PSL, EPL and certain of their respective former and current officers and
    directors. The named plaintiffs allege breach of contract, certain fraud
    claims, civil RICO, breach of fiduciary duty and conversion and seek
    monetary

                                       8
<PAGE>

    damages. The named plaintiffs in the action are allegedly current EPL
    shareholders who hold less than two per cent (2%) of the outstanding shares
    of EPL's common stock, in the aggregate. The plaintiffs applied for a
    preliminary injunction to halt the sale of the assets of EPL to PIC and to
    prevent the dissolution of EPL.

    On November 25, 1998, the Court granted a temporary restraining order
    without a hearing and before opposition could be submitted. On December 30,
    1998, the Court held a hearing on whether a preliminary injunction should be
    issued in connection with such action. The Court entered a preliminary
    injunction based on the plaintiffs' (a) alleged claim for fraudulent
    conveyance in connection with PSL's license agreement with EPL and (b)
    alleged claim for breach of fiduciary duty. The preliminary injunction
    enjoins the further consummation of the asset purchase transaction and
    prevents EPL from completing its liquidation and dissolution until further
    notice from the Court. The preliminary injunction will last until the case
    is tried on its merits or until the preliminary injunction is otherwise
    dismissed. The Court ordered the Walczak plaintiffs to post a bond for
    $100,000, which bond was posted. PIC appealed the Court's preliminary
    injunction ruling, which appeal was subsequently denied.

    The Prolong defendants successfully moved to change venue and the case was
    ordered transferred to the federal court in Orange County, California, where
    PIC's principal office is located. In December 1999, plaintiffs' counsel was
    disqualified from the matter on the grounds of unwaivable conflict of
    interest. Plaintiffs have selected new counsel, except for three of the
    plaintiffs who withdrew from the case. The Prolong defendants each filed and
    served motions to dismiss the complaint pursuant to Rule 12(b)(6) of the
    Federal Rules of Civil Procedure. The motion has been granted in part and
    denied in part. There has been no ruling to date on the Walczak plaintiffs'
    request to certify the class as a class action. A mediation conference has
    been held and concluded and substantial settlement discussions have been
    undertaken. However, final resolution cannot presently be determined. PIC
    and PSL and their respective current officers and directors believe that the
    settlement, if approved, will not result in a material adverse affect on the
    Company's financial statements. If the settlement as proposed is not
    consummated, the Company will continue to vigorously defend against the
    claims.

    Federal Trade Commission - On February 15, 1999, PSL entered into a
    ------------------------
    negotiated Consent Order with the Federal Trade Commission (FTC) based upon
    concerns of the commission related to inadequate substantiation of certain
    advertising claims for Prolong Engine Treatment. Without admitting any of
    the allegations, the Company agreed that it would not make advertising
    claims without having adequate scientific substantiation for such claims. No
    fine or monetary redress was levied in connection with the FTC action.

    Four purported class action lawsuits based on the FTC action have been
    brought against PIC and/or PSL.  Although meaningful settlement discussions
    are proceeding, final resolution of the below referenced FTC based lawsuits
    cannot presently be determined.  The suits are identified as follows:

    .  Kachold et al v PSL was filed November 19, 1999 and is pending in the
       U.S. District Court, Northern District of Illinois, file
       No. 99-CV-08349.  The case is a purported class action and individual
       action alleging violation of the Illinois Consumer Fraud Act, Magnuson
       Moss Consumer Products Warranty Act, and for damages.  Prolong

                                       9
<PAGE>

       successfully filed a motion to dismiss the complaint, and plaintiff
       thereafter filed an amended complaint.  PSL's officers and directors
       believe that there is no merit to the plaintiffs' complaint and are
       vigorously defending against the claims.  The parties are presently
       involved in meaningful settlement discussions.

    .  Fernandes et al v PSL was filed January 5, 2000 in Los Angeles County
       Superior Court, file No. BC222712. The case is a purported class action
       alleging false advertising, unfair competition, violation of the
       California Consumer Legal Remedies Act, fraud, deceit, negligent
       misrepresentation and for equitable relief. PSL's officers and directors
       believe that there is no merit to the plaintiffs' complaint and are
       vigorously defending against the claims. The parties are presently
       involved in meaningful settlement discussions.

    .  Bowland et al v PSL was filed January 21, 2000 in County Court at Law
       No. 4, Nueces County, Texas, file No. 00-60119-4. The case is a purported
       class action alleging breach of contract, breach of express warranty and
       violations of the Texas Deceptive Trade Practices Act. PSL's officers and
       directors believe that there is no merit to the plaintiffs' complaint and
       are vigorously defending against the claims. The parties are presently
       involved in meaningful settlement discussions.

    .  Mata et al v PSL and PIC was filed February 18, 2000 in the District
       Court of Hidalgo County, Texas, 275th Judicial District, file No. C-292-
       00-E. The case is a purported class action alleging breach of contract
       and breach of express and implied warranty. A special appearance and
       motion to dismiss was filed by PIC and an answer and plea in abatement
       was filed by PSL in order to stay this matter based upon the prior filed
       Bowland case. PSL's officers and directors believe that there is no merit
       to the plaintiffs' complaint and are vigorously defending against the
       claims. The parties are presently involved in meaningful settlement
       discussions.

    Helman et al v PSL and PIC et al - On April 8, 1997, prior to the filing
    --------------------------------
    of the Walczak complaint, the attorney who was disqualified from
    representing the plaintiffs in Walczak filed Helman et al v PSL and PIC et
    al in the Court of Common Pleas, Columbiana County, Ohio. The case was filed
    as a purported class action alleging breach of fiduciary duty, breach of
    oral and written contract, and fraud, in 13 original causes of action. The
    court subsequently denied plaintiff's motion to certify the case as a class
    action. The appellate court in Ohio largely affirmed a series of orders by
    the trial judge in favor of PSL, the effect of which was to reduce the
    number of complaining parties from approximately one hundred, to seven.
    Trial of the remaining plaintiffs' matters is set for January 15, 2002.
    PSL's officers and directors believe that there is no merit to the
    plaintiffs' complaint and are vigorously defending against the claims.

    PIC and its subsidiaries are subject to other legal proceedings, claims,
    and litigation arising in the ordinary course of business.  PIC's
    management does not expect that the ultimate costs to resolve these matters
    will have a material adverse affect on PIC's consolidated financial
    position, results of operation or cash flows.

                                       10
<PAGE>

8.  COMMITMENTS

    The Company has outstanding noncancelable inventory purchase commitments
    with a contract packager of approximately $406,000 as of March 31, 2001.
    Under the terms of the agreement, the packager purchases components,
    manufactures, warehouses and distributes certain car care products for the
    Company. When inventories held by the packager exceed approximately 75 days
    from the date of production, the Company may be obligated to pay a storage
    handling fee of 1.5% per month, and/or purchase these inventories at the
    option of the packager.

                                       11
<PAGE>

ITEM 2:
-------

                       PROLONG INTERNATIONAL CORPORATION
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                                   CONDITION
                           AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS


                                                         Percentage of Net
                                                             Revenues

                                                        Three Months Ended
                                                            March 31,
                                                     ------------------------
                                                        2001           2000
                                                     ------------------------
Net revenues                                            100.0          100.0
Cost of goods sold                                       31.5           22.3
                                                     ------------------------
Gross profit                                             68.5           77.7
Selling and marketing expenses                           37.8           42.7
General and administrative expenses                      23.5           18.4
                                                     ------------------------
Operating income                                          7.2           16.6
Other income (expense)                                   (2.8)          (1.9)
                                                     ------------------------
Income before income taxes                                4.4           14.7
Provision for income taxes                                3.3            6.4
                                                     ------------------------
Net income                                                1.1            8.3
                                                     ------------------------



Three Months Ended March 31, 2001 vs. Three Months Ended March 31, 2000

Net revenues for the three months ended March 31, 2001 were approximately
$4,152,000 as compared to approximately $7,760,000 for the comparable period of
the prior year, a decrease of $3,608,000 or 46.5%.  Revenues for the three month
period ended March 31, 2001 were derived from the following sources:  Retail
sales of $3,371,000 ($3,356,100 of lubricant products and $14,900 of
appearance); international and other sales of $636,000; direct response
television sales of $64,000 and, industrial sales of $81,000.  Revenues for the
three month period ended March 31, 2000 were derived from the following sources:
Retail sales of $6,900,000 ($6,393,000 of lubricant products and $507,000 of
appearance); international and other sales of $619,000; direct response
television sales of $168,000, and industrial sales of $73,000.

During the first quarter of 2001, retail sales were 81.2% of total revenues
while international and other sales comprised 15.3% of total revenues.  During
the first quarter of 2000, retail sales were 88.9% of total revenues while
international and other sales comprised 8.0% of total revenues.  The lower
retail sales for the period ended March 31, 2001 versus the same period a year
ago are attributable to a decrease in lubricant sales of approximately
$3,037,000 and a $492,100 decrease in appearance sales.  The lubricant sales
decline is attributable to a continuing soft market for specialty lubricants,
higher than expected store inventory levels at major retailers, competitive
factors and also due to the decision to discontinue the direct response
infomercial for lubricants

                                      12
<PAGE>

in lieu of an ongoing evaluation of more cost effective means of promoting the
line. Revenues for the appearance products declined due to a decreased demand
and market acceptance of the product line and limited distribution.
International sales remained steady for the quarter, and as a percentage of
sales increased to 15.3%.

Cost of goods sold for the three months ended March 31, 2001 was approximately
$1,307,000 as compared to $1,727,000 for the comparable period of the prior
year, a decrease of $420,000 or 24.3%. As a percentage of sales, cost of goods
sold increased from 22.3% for the three months ended March 31, 2000 to 31.5% for
the three months ended March 31, 2001. The increase was mainly attributable to
the shift in product mix with the international sales yielding a lower gross
margin than the domestic retail lubricant sales and the recording of an one time
sale of slow moving appearance products ($81,000), which was sold at a discount.

Selling and marketing expenses of $1,570,000 for the three months ended March
31, 2001 represented a decrease of $1,743,000 over the comparable period of the
prior year.  This 52.6% decrease was primarily the result of decreased expenses
for endorsement and sponsorship payments, promotional activities to promote
product awareness, expenditures for television air-time purchases, commissions
and salaries.  Selling and marketing expenses as a percentage of sales were
37.8% for the three months ended March 31, 2001 versus 42.7% for the comparable
period of the previous year.

General and administrative expenses for the three months ended March 31, 2001
were approximately $977,000 as compared to $1,428,000 for the three months ended
March 31, 2000, a decrease of $451,000 or 31.6%.  This decrease is primarily
attributable to a decrease in legal expenses and salaries (headcount).  As a
percentage of sales, general and administrative expenses increased from 18.4% in
2000 to 23.5% in 2001.  Even though the aggregate expenses declined during the
period, the ratio of expenses as a percentage of sales increased due to the more
than expected decline in sales during the period.

Net interest expense of $117,000 for the three months ended March 31, 2001
represented a decrease of $35,000 over the comparable period in 2000.  The
decrease is attributable to a lower average balance in bank loans during the
period.

Net income for the three month period ended March 31, 2001 was approximately
$45,000 as compared to a net income of approximately $641,000 for the comparable
period in the prior year, a decrease of $596,000.  The decrease is a result of
the factors discussed above.


LIQUIDITY AND CAPITAL RESOURCES

The Company utilizes funds generated from operations and borrowings from an
existing credit facility to meet its working capital requirements.  At March 31,
2001, the Company had a net working capital of $242,000 as compared to a
negative net working capital of $101,000 at December 31, 2000 or an increase of
$343,000.  During the period ended March 31, 2001, the Company used $8,100 in
operations, which was primarily from increases in receivables and prepaid
television time which were partially offset by increases in accounts payable and
income taxes receivable. As of May 8, 2000, the Company entered into a new
$6,000,000 credit facility with a financial institution, expiring in May 2003.
Effective November 21, 2000 the credit facility was reduced to $5,000,000. Such
facility is collateralized by eligible accounts receivable.

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and inventories. Interest is currently payable monthly at the rate of the
financial institution's prime rate (8.0% at March 31, 2001) plus 4% subject to a
minimum interest charge of $50,000 per quarter. The credit facility contains
certain defined net income and net equity covenants. At March 31, 2001, the
Company was in compliance or had received a waiver which is dependent upon the
Company and the financial institution executing an amendment to the credit
agreement by May 31, 2001, for all financial covenants. As of March 31, 2001,
$2,088,157 was outstanding and approximately $180,000 was available under the
terms of the line of credit.

On October 30, 2000, the Company entered into a loan agreement with a lender for
$675,000 with proceeds of approximately $504,000, net of loan costs and other
payables. The loan has a maturity date of October 30, 2001 and includes an
option to extend for one additional year. The loan is collateralized by a Third
Priority Trust Deed lien against the Company's real property in Irvine, CA.
Interest is payable monthly at the rate of the Prime Rate (8.0% at March 31,
2001) plus 2.5%.

The Company is currently seeking additional new financing arrangements through
subordinated debt and/or equity providers.  We cannot guarantee that we will be
able to obtain funds when we need them or on acceptable terms, if at all.  Any
inability to obtain funds when we need them would have a material adverse effect
on our financial condition.  At March 31, 2001, the Company had an accumulated
deficit of approximately $5,478,000.  As a result, the Company is vigorously
continuing to evaluate further reductions in operating expenses and manpower
requirements, and revise vendor payment terms to the extent possible.  We cannot
guarantee that the timing of further reductions in operating expenses will be
adequate to return to profitability for the remainder of the Year 2001 and
beyond.  There are also continued efforts to convert certain assets to cash on
an accelerated basis which may include the sale and/or sale and leaseback of the
current facility in Irvine, CA.  Management will also continue to vigorously
defend the litigation described in Note 7 of Notes to Consolidated Condensed
Financial Statements.  Management believes that these plans, if successfully
executed, will provide adequate financial resources to sustain the Company's
operations and enable the Company to continue as a going concern.

ITEM 3:
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PIC's financial instruments include cash and long-term debt.  At March 31, 2001
and December 31, 2000 respectively, the carrying values of PIC's financial
instruments approximated their fair values based on current market prices and
rates. It is PIC's policy not to enter into derivative financial instruments.
PIC does not currently have any significant foreign currency exposure since it
does not transact business in foreign currencies. Due to this, PIC did not have
significant overall currency exposure at March 31, 2001 and December 31, 2000.

RISK FACTORS AND FORWARD LOOKING STATEMENTS

This report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties.  In addition, the Company may from time to time make oral forward
looking statements.  Actual results are uncertain and may be impacted by the

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factors discussed in more detail in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 filed with the Securities and Exchange
Commission.  In particular, certain risks and uncertainties that may impact the
accuracy of the forward looking statements with respect to revenues, expenses
and operating results including without limitation, the risks set forth in the
risk factors section of the Annual Report on Form 10-K for the year ended
December 31, 2000, which risk factors are hereby incorporated into this report
by this reference.  As a result, the actual results may differ materially from
those projected in the forward looking statements.

Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.

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PROLONG INTERNATIONAL CORPORATION

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to Note 7 of the notes to consolidated condensed financial
statements.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     None.

(b)  Reports on Form 8-K

     No reports on Form 8-K have been filed by the Company during the Quarter.



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                               PROLONG INTERNATIONAL CORPORATION

Date:  May 7, 2001                             /s/ Nicholas Rosier
       -----------                             -------------------
                                               Nicholas Rosier
                                               Chief Financial Officer
                                               (Principal Financial Officer)

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