SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB


          QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


                       FOR THE PERIOD ENDED JUNE 30, 2001


                         COMMISSION FILE NUMBER: 0-29417


                                 ICRYSTAL, INC.
                       ----------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


      DELAWARE                                  62-1581902
----------------------              -----------------------------------
(STATE OF ORGANIZATION)            (I.R.S. EMPLOYER IDENTIFICATION NO.)


                          3237 KING GEORGE HWY., STE. 101-B
                    SURREY, BRITISH COLUMBIA, V5P 1B7 CANADA
                 ----------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                (604)542-5021
              --------------------------------------------------
              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE


CHECK  WHETHER THE ISSUER (1) FILED ALL REPORTS  REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE  EXCHANGE  ACT  DURING  THE PAST 12  MONTHS  AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES   X   NO
                                                              -----    -----

THERE ARE XX,XXX,XXX SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 2001.


<PAGE>


                          ICRYSTAL, INC. AND SUBSIDIARY

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       SIX MONTHS ENDED JUNE 30, 2001 AND
                          YEAR ENDED DECEMBER 31, 2000










<PAGE>



                                                   ICRYSTAL, INC. AND SUBSIDIARY
                                                               TABLE OF CONTENTS
                                             JUNE 30, 2001 AND DECEMBER 31, 2000
________________________________________________________________________________


                                                                            PAGE






PART I     FINANCIAL INFORMATION

ITEM 1     FINANCIAL STATEMENTS


           Condensed Consolidated Balance Sheets (Unaudited)...................1


           Condensed Consolidated Statement of Operations (Unaudited)..........2


           Condensed Consolidated Statement of Cash Flows (Unaudited)..........3


           Notes to Condensed Consolidated Financial Statements (Unaudited)..4-7


ITEM 2     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS.................................8

SIGNATURES....................................................................12

PART II    OTHER INFORMATION

           None.



<PAGE>
<TABLE>
<CAPTION>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                             JUNE 30, 2001 AND DECEMBER 31, 2000
________________________________________________________________________________


                                     ASSETS

                                                                                      June 30,        December 31,
                                                                                        2001              2000
                                                                                    (unaudited)
                                                                                    ------------      ------------
<S>                                                                                 <C>              <C>
CURRENT ASSETS
  Cash                                                                              $     18,100      $      7,700
  Accounts receivable                                                                     69,900           110,300
                                                                                    ------------      ------------
     Total current assets                                                                 88,000           118,000
PROPERTY AND EQUIPMENT, net                                                               30,500            32,100
                                                                                    ------------      ------------

TOTAL ASSETS                                                                        $    118,500      $    150,100
                                                                                    ============      ============



                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable and accrued liabilities                                          $    288,500      $    170,300
  Deferred revenue                                                                        13,400            30,000
  Notes payable                                                                           25,000            41,600
  Convertible debt                                                                       180,400            -
                                                                                    ------------      ------------
     Total current liabilities                                                           507,300           241,900
                                                                                    ------------      ------------

LONG-TERM LIABILITIES
  Advances from stockholder                                                                4,400             4,400
  Deferred revenue                                                                       127,100           120,600
                                                                                    ------------      ------------
     Total liabilities                                                                   638,800           366,900
                                                                                    ------------      ------------

STOCKHOLDERS' DEFICIT
  Common stock, $0.01 par value, 30,000,000
   shares authorized;  15,782,800 and 15,682,800
   shares issued and outstanding at June 30, 2001
   and December 31, 2000, respectively                                                   166,900           156,900
  Additional paid-in capital                                                           5,928,000         5,893,300
  Deferred compensation                                                                   (1,500)          (12,800)
  Accumulated deficit                                                                 (6,613,700)       (6,254,200)
                                                                                    ------------      ------------
     Total stockholders' deficit                                                        (520,300)         (216,800)
                                                                                    ------------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                         $    118,500      $    150,100
                                                                                    ============      ============
</TABLE>


SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.             1


<PAGE>
<TABLE>
<CAPTION>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
                                         SIX MONTHS ENDED JUNE 30, 2001 AND 2000
________________________________________________________________________________


                                                  Quarter        Quarter         Six Months   Six Months
                                                   Ended          Ended             Ended        Ended
                                                  June 30,       June 30,          June 30,     June 30,
                                                    2001           2000              2001         2000
                                                ----------    ----------         ----------   ----------
REVENUE
  <S>                                             <C>           <C>                <C>          <C>
  Software royalties                            $  182,500    $   54,200         $  283,200   $  159,700
                                                ----------    ----------         ----------   ----------
OPERATING EXPENSES
  General and administrative                       211,000       315,900            403,800      524,900
  Research and development                          97,800       100,100            198,000      161,700
  Sales and marketing                                6,800        13,100             12,900       20,600
                                                ----------    ----------         ----------   ----------
     Total operating expenses                      315,600       429,100            614,700      707,200
                                                ----------    ----------         ----------   ----------

LOSS FROM OPERATIONS                              (133,100)     (374,900)          (331,500)    (547,500)

OTHER EXPENSE
  Interest                                          27,000           100             28,000          300
                                                ----------    ----------         ----------   ----------
     Total other expense                            27,000           100             28,000          300
                                                ----------    ----------         ----------   ----------

NET LOSS BEFORE PROVISION
FOR INCOME TAXES                                  (160,100)     (375,000)          (359,500)    (547,800)

PROVISION FOR INCOME TAXES                         -             -                  -            -
                                                ----------    ----------         ----------   ----------

NET LOSS                                        $ (160,100)   $ (375,000)        $ (359,500)  $ (547,800)
                                                ==========    ==========         ==========   ==========

EARNINGS (LOSS) PER SHARE
  Basic and diluted                                 $(0.01)       $(0.02)            $(0.02)      $(0.04)
                                                    ======        ======             ======       ======

  Weighted average common shares
   outstanding (basic and diluted)              15,695,100    15,583,900         15,688,900   15,136,100
                                                ==========    ==========         ==========   ==========
</TABLE>



SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.             2


<PAGE>
<TABLE>
<CAPTION>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                         SIX MONTHS ENDED JUNE 30, 2001 AND 2000
________________________________________________________________________________


                           Increase (Decrease) in Cash


                                                                        Six Months       Six Months
                                                                           Ended            Ended
                                                                         June 30,         June 30,
                                                                           2001             2000
                                                                        ----------       ----------
<S>                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                              $ (359,500)      $ (547,800)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES
  Amortization of deferred compensation                                     11,300           29,900
  Depreciation                                                               3,200            2,100
  Noncash general and administrative expenses
   incurred in exchange for stock                                           22,000          182,500
  Noncash interest expense for intrinsic value of
   conversion feature of debt                                               22,700
CHANGES IN OPERATING ASSETS AND LIABILITIES
  Accounts receivable                                                       40,400           (3,100)
  Prepaid expenses                                                          -                   900
  Accounts payable and accrued liabilities                                 139,200           60,300
  Deferred revenue                                                         (10,100)          85,700
                                                                        ----------       ----------
     Net cash from operating activities                                   (130,800)        (189,500)
                                                                        ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                                       (1,600)         (29,500)
                                                                        ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from stock issuances                                             -               200,000
  Repayment of note payable                                                (16,600)          -
  Proceeds from issuance of convertible debt                               159,400           -
  Advances from (to) related parties, net                                   -                 3,400
                                                                        ----------       ----------
     Net cash from financing activities                                    142,800          203,400
                                                                        ----------       ----------

NET CHANGE IN CASH                                                          10,400          (15,600)
CASH, beginning of period                                                    7,700           23,800
                                                                        ----------       ----------

CASH, end of period                                                     $   18,100       $    8,200
                                                                        ==========       ==========

SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
  Interest paid                                                         $    1,400       $      300
                                                                        ==========       ==========
NONCASH TRANSACTIONS
  Accounts payable exchanged for convertible debt                       $   21,000       $   -
                                                                        ==========       ==========

</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.             3


<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
________________________________________________________________________________

NOTE 1 - BASIS OF PRESENTATION

        The accompanying  unaudited  interim  financial  statements of iCrystal,
        Inc. and  Subsidiary  (the  "Company")  have been  prepared  pursuant to
        Securities  and  Exchange  Commission  rules  and  regulations.  Certain
        information  and  footnote  disclosures  normally  included in financial
        statements  prepared in accordance  with generally  accepted  accounting
        principles  have been  condensed  or omitted  pursuant to such rules and
        regulations.  These financial  statements  should be read in conjunction
        with the audited financial  statements and notes thereto included in the
        Company's  annual report on Form 10-K for the fiscal year ended December
        31,  2000.  The  financial  information  included  herein  reflects  all
        adjustments  (consisting of normal recurring  adjustments)  that are, in
        the opinion of management,  necessary for a fair presentation of results
        for interim  periods.  Results of interim  periods  are not  necessarily
        indicative of the results to be expected for a full year.

        The Company has incurred net losses  since  inception,  and, at June 30,
        2001,   it  had  a  working   capital   deficiency  of  $419,300  and  a
        stockholders' deficit of $520,300.  During the six months ended June 30,
        2001,  the  Company did not  generate  revenues  sufficient  to fund its
        operations.  Revenues for the six months  ended June 30, 2001  decreased
        due to the Company's master licensee,  Manihi, Inc., experiencing credit
        card processing  restrictions  during this time. The Company anticipates
        revenues  will not return to previous  levels until the third quarter of
        2001.  Accordingly,  the  Company's  ability  to  fulfill  its  business
        strategy and to ultimately achieve profitable operations is dependent on
        its  capacity to execute its  business  plan and, if  necessary,  obtain
        additional financing.

        In the  event  that  future  operating  cash  flows  do not meet all the
        Company's cash requirements, it will need to obtain additional financing
        in the form of  private  placements  of equity  securities.  Success  in
        raising  additional  financing is dependent on the Company's  ability to
        demonstrate  that it can  fulfill its  business  strategy to license its
        games and websites and generate significant royalty revenues. Should the
        Company need  additional  financing  through debt or equity  placements,
        there is no assurance that such financing will be available,  if at all,
        at terms acceptable to the Company. Management believes these plans will
        allow the Company to generate  sufficient cash to support its operations
        through December 31, 2001.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION
        The consolidated  financial statements of iCrystal,  Inc. and Subsidiary
        include the accounts of its wholly-owned subsidiary, I crystal Software,
        Inc.  All material  intercompany  accounts  and  transactions  have been
        eliminated in consolidation.

                  REVENUE RECOGNITION
        The Company  recognizes revenue when earned, in accordance with American
        Institute of Certified  Public  Accountants  Statement of Position (SOP)
        97-2, SOFTWARE REVENUE  RECOGNITION,  and SOP 98-9,  MODIFICATION OF SOP
        97-2  WITH  RESPECT  TO  CERTAIN  TRANSACTIONS.   Royalties  based  upon
        licensees' net gaming revenues are recognized as licensees' revenues are
        earned.  Revenue from packaged product sales to and through distributors
        and  resellers is recorded  when related  products are shipped.  Revenue
        attributable to significant undelivered elements,  including maintenance
        and  technical  support,  is  recognized  over the  contract  period  as
        elements are delivered.

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

                                                                               4

<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
________________________________________________________________________________


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


        NET LOSS PER SHARE
        Net loss per share was  computed  using the weighted  average  number of
        common shares outstanding. Shares associated with stock options were not
        included because they are antidilutive.


NOTE 3 - NOTES PAYABLE

        In August  1999,  the Company  received a $78,200 loan advance from West
        Peak Ventures of Canada,  Inc. (West Peak). Under the terms of the loan,
        the  advance  is  unsecured  and  bears  interest  at 2% above the prime
        banking  lending  rate.  The loan was due in full on November  30, 1999,
        unless  converted  into 200,000  common  shares of  iCrystal,  which the
        Company agreed to register for resale at the request of West Peak.

        On December 23, 1999 the Company  issued  200,000  common shares to West
        Peak,  which did not accept the shares  tendered  based on its  position
        that the shares were to be  registered  upon  delivery.  On February 15,
        2000, after negotiations to resolve the issue failed,  West Peak filed a
        claim  against  the Company in the  Supreme  Court of British  Columbia,
        Canada, claiming breach of the loan agreement. On September 7, 2000, the
        Court  ordered the Company to pay West Peak the balance of the note plus
        interest and other costs. The Company made principle payments of $16,600
        during the six months ended June 30, 2001 leaving a balance of $24,900.


NOTE 4 - CONVERTIBLE DEBT

        During the first six months of 2001, the Company  received loan advances
        of $159,400 from Lexington Systems Limited (Lexington),  an affiliate of
        Manihi,  Inc.  (through  common  ownership).  Additionally,  the Company
        converted  $21,000 of accounts payable due to Lexington to a loan during
        2001.  Under the terms of the loan,  the advance is unsecured  and bears
        interest annually at 7.14% compounded monthly. The loan is due on demand
        unless  Lexington  elects to convert the loan plus accrued interest into
        registered  common shares of the Company at $0.08 per share. At June 30,
        2001,  Lexington  had not elected to convert the  $180,400  plus accrued
        interest into the Company's  common stock.  Interest  expense of $22,700
        was  recorded  for the  intrinsic  value  of the  beneficial  conversion
        feature embedded in the loan agreement.


NOTE 5 - CAPITAL STOCK

        The Company has a single class of $0.01 par value common  stock.  Thirty
        million  shares  are  authorized  and  15,782,800  shares are issued (or
        committed to be issued) and  outstanding  at June 30,  2001.  During the
        first  six  months  of 2001,  the  Company  issued  100,000  shares  for
        marketing and consulting services valued at $22,000.


NOTE 6 - RELATED PARTY TRANSACTIONS

        The Company is affiliated with the following entities:

        DIVERSIFIED COSMETICS INTERNATIONAL, INC. (DIVERSIFIED)
        The Company is affiliated  with  Diversified  through common  ownership.
        Diversified is an Alberta  corporation that was previously listed on the
        Alberta Stock Exchange.  In December 1998, the Company  acquired certain
        software  rights from  Diversified.  Subsequent  to the  transfer of the
        technology to the Company,  Diversified has had no significant  business
        operations;  and, as of June 30, 2001,  it was in the process of winding
        down its affairs. The Company had advances from Diversified of $4,400 at
        June 30, 2001.

                                                                               5


<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
________________________________________________________________________________


NOTE 6 - RELATED PARTY TRANSACTIONS (Continued)


        SLAMKO VISSER, CHARTERED ACCOUNTANTS (SLAMKO VISSER)
        The Company is affiliated  with the Canadian  chartered  accounting firm
        Slamko Visser through common ownership. During the six months ended June
        30,  2001  and  2000,   the  Company   incurred   $35,200  and  $20,200,
        respectively,  of expense to Slamko Visser for consulting and accounting
        fees and related costs.  The Company had $41,300 of accounts payable due
        to Slamko Visser at June 30, 2001.

        DCI, INC. AND MANIHI, INC.
        In April and October 1999,  respectively,  the Company  entered into two
        ten-year  nonexclusive  master license agreements with DCI, Inc. for use
        of the Company's  technology.  Leonard Slamko, a consultant  retained by
        DCI,  Inc., is a  stockholder  of the Company and a relative of officers
        and  directors  of  the  Company.  DCI,  Inc.  was  incorporated  in the
        Commonwealth of Dominica, where it was licensed to conduct international
        wagering, lotteries and games of chance by way of telecommunications.

        In the fourth  quarter of 2000,  the Company  approved a request by DCI,
        Inc.   to  assign  all  its  rights  and   obligations   under  the  two
        non-exclusive licensing agreements to Manihi, Inc. ("Manihi"). Manihi is
        a Costa Rican  corporation  operating  as a reseller of Internet  gaming
        solutions.  The effective date of the assignment was September 23, 2000.
        Effective  November 1, 2000,  Manihi and the Company  entered into a new
        25-year exclusive master license agreement (the "Agreement").

        Under terms of the  Agreement  with Manihi,  the Company is obligated to
        provide all new and existing  casino  gaming  software,  translation  of
        themed websites and casino gaming software,  smart-download features and
        website development, technical support and back-end accounting features.
        The  Company,  in  return,  will  receive  thirty  percent of the second
        $250,000 and fifteen  percent of any  additional  amounts of monthly net
        gaming revenue derived from the Company's software and website packages.
        In  conjunction  with the  exclusive  contract  with Manihi,  Inc.,  the
        Company  continues  to record  deferred  revenue  until the  elements of
        development,  maintenance, support and upgrades of the software packages
        are delivered.  The Company recorded $10,100 of revenue for the elements
        delivered during the six months ended June 30, 2001.

        The  Company  incurred  consulting  services of $51,000  with  Lexington
        Systems  Limited,  an affiliate of Manihi,  Inc. (Note 4) during the six
        months ended June 30, 2001.


NOTE 7 - SEGMENT AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS


        GEOGRAPHIC INFORMATION
        Following is a summary of revenues  related to the respective  countries
        in which the Company  operates.  Revenues  are  attributed  to countries
        based on location of customers.

<TABLE>
<CAPTION>
                                          Three Months Ended               Six Months Ended
                                      --------------------------      --------------------------
                                       June 30,        June 30,        June 30,        June 30,
                                         2001            2000            2001            2000
                                      ----------       ---------      ----------      ----------
<S>                                   <C>              <C>            <C>             <C>
Commonwealth of Dominica                               $ 54,200       $  -            $ 159,700
Central America or Costa Rica           182,500          -              283,200          -
                                      ----------       ---------      ----------      ----------
         Consolidated total           $ 182,500        $ 54,200       $ 283,200       $ 159,700
                                      ==========       =========      ==========      ==========

</TABLE>


        MAJOR CUSTOMERS

        During the six months ended June 30, 2001, the Company realized $283,200
        of revenue under its new exclusive master license agreement with Manihi,
        Inc. (Note 6).

                                                                               6


<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
________________________________________________________________________________


NOTE 8 - SUBSEQUENT EVENTS

        On July 31,  2001,  the Company  extended  the  exercise  period for all
        outstanding  stock options granted under the Company's stock option plan
        for an additional  sixty days from the existing  expiration date of July
        31, 2001.


















                                                                               7

<PAGE>


ITEM 2.   MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
          AND FINANCIAL CONDITION.

RESULTS OF OPERATIONS FOR THE  THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND JUNE
30, 2000

THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Revenues - Revenues for the three months  ending June 30, 2001 and June 30, 2000
were  $182,500  and  $54,200,  respectively.  The rise in  revenue  of  $128,300
reflects  increased  royalties from higher gaming activity through the company's
Master  Licensee,  Manihi,  Inc.,  as  compared to the prior year  quarter.  The
startup of the Partnership Program in the second quarter of 2001 has resulted in
increased marketing  activities and higher revenue. The Partnership Program is a
two-tiered software-game  distribution system developed by iCrystal which offers
two levels of participation for prospective  casino/gaming operators.  Under the
program  iCrystal's  master licensee will sell  sub-licenses to master partners,
who will in turn recruit affiliate  partners to operate casino sites. The master
partner  retains 10% of the gross site  winnings.  The  affiliate  partners  can
become  instantly  operational  will no  licensing  or  hosting  fees.  ICyrstal
receives a 15% royalty on the net revenues after  deducting  payment  processing
expenses.

The  level of  royalties  during  the  second  quarter  of 2001  was  less  than
management's  expectations  due to Manihi,  Inc., the Company's Master Licensee,
experiencing credit card processing restrictions during the first four months of
April 2001. The Company does not anticipate revenues will exceed previous levels
until the third quarter of 2001.


Operating Expenses - Operating expenses are primarily  comprised of research and
development  and general  and  administrative  costs.  Operating  expenses  were
$315,600  and  $429,000  for  the  quarters   ended  June  30,  2001  and  2000,
respectively.  The  decrease of $113,400 is due to the Company  incurring  lower
general and  administrative  expenses  incurred in exchange for stock of $48,000
and lower deferred compensation expense of $11,200 during the three months ended
June 30, 2001. Furthermore, legal and accounting fees incurred during the second
quarter 2000 were higher as a result of the Company filing Form SB-2.

Research and Development - The Company's  research and development costs consist
primarily of costs  associated  with the continued  development  of its Internet
based casino software.  Research and development costs were $97,800 and $100,100
for the  quarters  ended June 30,  2001 and 2000,  respectively.  The company is
continuing  to develop,  expand and  maintain  licensed  Internet  based  gaming
software.

General and  Administrative  - The Company's  general and  administrative  costs
consist of salaries and wages,  consulting  fees,  professional  fees,  investor
relation services,  and office expenses.  General and administrative  costs were
$211,000  and  $315,900  for  the  quarters   ended  June  30,  2001  and  2000,
respectively.  The decrease of $104,900  consists  mainly of the Company  having
incurred  less  legal  and  professional  costs in the  second  quarter  of 2001
compared to the second  quarter of 2000 for the filing of the Company's  SB-2 in
order to be a fully reporting issuer.

Net Loss - The Company  incurred a net loss of $(160,100) and $(375,000) for the
quarters ended June 30, 2001 and 2000,  respectively.  The $214,900  decrease in
operating  losses was the result of an increase in  royalties  and  reduction of
operating expenses.


                                                                               8

<PAGE>


SIX MONTHS ENDED JUNE 30, 2001 AND 2000

Revenues - Revenues  for the six months  ending  June 30, 2001 and June 30, 2000
were $283,200 and $159,700  respectively.  The increase of $123,500 reflects the
growth  in gaming  activities  with the  Company's  exclusive  master  licensee,
Manihi, Inc. and the startup of the Partnership Program.

Operating Expenses - Operating expenses are primarily  comprised of research and
development  and general  and  administrative  costs.  Operating  expenses  were
$614,700  and  $707,200  for the six  months  ended  June  30,  2001  and  2000,
respectively. The decrease of $92,500 was largely attributable to a reduction in
professional  fees for the six months  ended June 30, 2001 when  compared to the
same period in 2000 when the  Company  filed an SB-2.  The Company  additionally
incurred  $160,000  less of general  and  administrative  expenses  incurred  in
exchange for stock  during the six months  ended June 30, 2001 when  compared to
the same  period in 2000.  Exclusive  of  professional  fees and the general and
administrative  expenses incurred in exchange for stock,  operating  expenses in
total were comparable between periods.

Research and Development - The Company's research and development costs
consist  primarily of costs  associated  with the continued  development  of its
Internet based casino software. Research and development costs were $198,000 and
$161,700  for the six months  ended June 30,  2001 and 2000,  respectively.  The
$36,300  increase  reflects an increase in research and  development  activities
required for the Company to   development its partner program.
The company is, however, continuing to develop, expand and maintain its licensed
Internet based gaming software.

General and  Administrative  - The Company's  general and  administrative  costs
consist of salaries and wages,  consulting  fees,  professional  fees,  investor
relation services,  and office expenses.  General and administrative  costs were
$403,800  and  $524,900  for the six  months  ended  June  30,  2001  and  2000,
respectively.  The $121,100 decrease was largely  attributable to a reduction in
professional  fees from the prior  period due to the costs  associated  with the
filing of the SB-2 in order to be a fully reporting issuer.

Net Loss - The Company  incurred a net loss of $(359,500) and $(547,800) for the
six months ended June 30, 2001 and 2000, respectively. The $188,300 decrease was
the result of an increase in revenue  combined  with a  reduction  in  operating
expenses for the 2001 period as compared to 2000.


FLUCTUATIONS IN ANNUAL AND QUARTERLY RESULTS

The Company's annual and quarterly operating results may fluctuate significantly
in the future as a result of numerous factors, including:

         1. the amount and timing of expenditures required to develop,  maintain
            and upgrade the  Company's  gaming  software and its  licensing  and
            strategic relationships to enhance sales and marketing;

         2. changes in the growth  rate of  Internet  usage and the  interest of
            consumers in using Internet based gaming websites for recreation;

         3. the  emergence  of new services  and  technologies  in the market in
            which the Company now competes; and

         4. the ability of licensees to ensure clearing of credit card and other
            e-commerce receipts are done on a timely basis.


                                                                               9

<PAGE>

The  Company  also faces  foreign  currency  exchange  risk as a majority of its
revenue is  denominated in U.S.  currency and a majority of its operating  costs
are  incurred  in Canadian  currency.  Significant  fluctuations  in the foreign
exchange rate between U.S. and Canadian  currency will result in fluctuations in
the Company's annual and quarterly results.

LIQUIDITY AND CAPITAL RESOURCES

The working  capital  deficiency  was  $419,300  and  $123,900 at the end of the
second  quarter  at June 30,  2001 and  December  31,  2000,  respectively.  The
increase in the working capital deficiency of $295,400 is mainly attributable to
decline in cash flow generated  from  operations of during six months ended June
30, 2001. The Company  incurred a use of cash of $130,800  during the six months
ended June 30, 2001.

To assist in funding the lack of cash  generated  during this time,  the Company
received loan advances of $159,400 from Lexington  Systems Limited  (Lexington),
an affiliate of Manihi,  Inc.  (through  common  ownership).  Additionally,  the
Company  converted $21,000 of accounts payable due to Lexington to a loan during
2001.  Under the terms of the loan,  the advance is unsecured and bears interest
annually at 7.14% compounded monthly. The loan is due on demand unless Lexington
elects to convert the loan plus accrued  interest into registered  common shares
of the company at $.08 per share.  At June 30, 2001 Lexington had not elected to
convert the $180,400  plus accrued  interest  into the  Company's  common stock.
During the second  quarter of 2001  interest  expense of 22,700 was recorded for
the intrinsic value of the beneficial  conversion  feature  embedded in the loan
agreement.

Capital  expenditures  of $1,600 were incurred during the six month period ended
June 30, 2001. The Company's  budgeted capital  expenditures for the fiscal year
ending December 31, 2001 are  approximately  $50,000 for computer  upgrading and
office renovations.

During the second  quarter of 2001 the company  issued  100,000 Common shares at
$.22 per share totalling $22,000 in exchange for investor relations.

Management  continues to pursue numerous  potential  financing  sources to raise
capital to fund the operating  losses and working  capital  deficit.  Management
believes  that the  Company's  success in raising  financing  will depend on the
Company's  ability to demonstrate  that it can fulfill its business  strategy to
license its games and websites and generate  significant  royalty revenues.  The
Company does not currently have any commitments  from any third party to provide
additional  financing and there can be no assurance  that  additional  financing
will be available on acceptable terms, if at all.

Subsequent to the June 30, 2001 period end the Company  extended the  expiration
date of its stock  option plan from August 1, 2001 to September  30,  2001.  The
plan has 1,350,000 options granted at an exercise price of $.20 per share.

Revenues for the month of December 2000 had reached $110,000, which exceeded the
Company's monthly expenditures of approximately $85,000 per month. This compares
to monthly  revenues of  approximately  $60,800 and expenditures of $114,200 per
month for the second  quarter ended June 30, 2001.  The reduced  revenues in the
quarter ended June 30, 2001,  were directly  attributable  to the restriction of
the credit card  processing for gaming sites which occurred in the first quarter
of 2001. New  arrangements  have been put in place in place by Manihi for credit
card  approval  and  processing,   and  the  increased   marketing  activity  is
anticipated to positively affect revenue for the remainder of 2001.



                                                                              10

<PAGE>

The Company's  liquidity over the next 12 months is contingent on its ability to
raise money  through  debt or equity  financing  to meet its  short-term  needs.
However,  there can be no  certainty  that the Company  will be able to meet its
financing  goals or raise  sufficient  financing  to fund such  future  business
plans. In the event that the Company is unsuccessful in its efforts to raise the
capital  expected to be required over the next twelve  months,  the Company will
need to modify  its  business  strategy  accordingly,  to adjust  its  operating
requirements to meet its available liquidity and may need to consider reductions
in operations until capital  resources or operating cash flows are sufficient to
meet operating needs.

IMPACT OF INFLATION

The Company believes that  inflation  has not had a material  effect on its past
business



PART II - Other Information

Item 1 - Exhibits

         No Exhibits.




                                                                              11

<PAGE>




                                   SIGNATURES

Purusant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated this 20th day of August, 2001


                              ICRYSTAL, INC.


                              By: /s/ LARRY J. HRABI
                                  -----------------
                                      Larry J. Hrabi
                                      CEO

August 20, 2001










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