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

                                  FORM 10-QSB

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

                    FOR THE QUARTER PERIOD ENDED JUNE 30, 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 NUMBER 0-26943

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

                  DELAWARE                              95-4695878
                  --------                              ----------
       (STATE OR OTHER JURISDICTION OF                (IRS EMPLOYER
       INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)

       947 NEWHALL STREET, COSTA MESA, CA                      92627
       ----------------------------------                      -----
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  949-515-1776

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.01 PER SHARE

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  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.
Yes [X] No[ ]

As of August 15, 2001, there were 8,621,346  shares of the  Registrant's  common
stock, $.01 par value per share, issued and outstanding.


<PAGE>

                                      PAGE

PART I     FINANCIAL INFORMATION.................................  2

Item 1.    Financial Statements (Unaudited)......................  3

           Balance Sheet.........................................  3

           Statement of Operations for the Three Months
             Ended June 30, 2001 and 2000........................  4

           Statement of Operations for the Six Months
             Ended June 30, 2001 and 2000 .......................  5

           Statement of Cash Flows For the Six Months
             Ended June 30, 2001 and 2000........................  6

           Notes to Financial Statements
             as of June 30, 2001.................................  7

Item 2.    Management's Discussion and Analysis of
             Financial Condition and Results of Operations.......  8

PART II    OTHER INFORMATION..................................... 10

Item 1:    Legal Proceedings..................................... 10

Item 2:    Changes in Securities................................. 10

Item 3:    Defaults Upon Senior Securities....................... 10

Item 4:    Submission of Matters to a Vote of Security Holders... 10

Item 5:    Other Information..................................... 10

Item 6(a): Exhibits.............................................. 10

Item 6(b): Reports on Form 8.K................................... 10

SIGNATURES....................................................... 11



                                       1
<PAGE>


PART I - FINANCIAL INFORMATION

NOTE REGARDING FORWARD-LOOKING STATEMENTS.

This Form 10-QSB contains  forward-looking  statements within the meaning of the
safe harbor" provisions under Section 21E of the Securities Exchange Act of 1934
and the Private Securities Litigation Reform Act of 1995. We use forward-looking
statements in our description of our plans and objectives for future  operations
and  assumptions   underlying   these  plans  and  objectives.   Forward-looking
terminology  includes the words  "may,"  "expects,"  "believes,"  "anticipates,"
"intends,"  "projects,"  or  similar  terms,  variations  of such  terms  or the
negative  of  such  terms.  These   forward-looking   statements  are  based  on
management's  current expectations and are subject to factors and uncertainties,
which could cause actual results to differ  materially from those,  described in
such  forward-looking  statements.  We  expressly  disclaim  any  obligation  or
undertaking to release publicly any updates or revisions to any  forward-looking
statements  contained  in  this  Form  10-QSB  to  reflect  any  change  in  our
expectations or any changes in events,  conditions or circumstances on which any
forward-looking  statement is based. Factors,  which could cause such results to
differ materially from those described in the  forward-looking  statements,  and
elsewhere in, or incorporated by reference into this Form 10-QSB.










                                       2
<PAGE>

ITEM 1   Financial Statements

                          AMERICAN INFLATABLES, INC.
                                BALANCE SHEET

                                                      June 30,    December 31,
                                                       2001           2000
                                                   ------------   ------------
                                                    (UNAUDITED)

                                ASSETS
Current assets:
  Cash ............................................$      -0-     $    3,900
  Accounts Receivable..............................    10,200          -0-
  Inventory........................................    10,800         10,800
  Prepaid expenses and other current assets........    90,300         50,400
                                                    ---------      ---------
        Total current assets.......................   111,300         65,100

Fixed assets
  Display and promotional blimps, net..............    16,600         16,600
  Computers, furniture and office equipment, net...    32,000         36,900
  Leasehold improvements, net..........................53,900         57,000
                                                    ---------      ---------
        Total fixed assets..........................  102,500        110,500

Deposits...........................................    15,400         13,400
                                                    ---------      ---------
        Total assets...............................$  229,200     $  189,000
                                                    =========      =========

                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Overdraft                                        $    6,100     $     -0-
  Notes payable....................................   330,000        330,000
  Accounts payable.................................    83,100         77,700
  Accrued payroll liabilities......................   171,700        162,300
  Accrued liabilities..............................    81,200          6,100
  Due to related party.............................    43,600         43,600
                                                    ---------      ---------
        Total current liabilities..................   715,700         619,700

Stockholders' equity
  Common stock.....................................     86,000         86,000
  Additional paid in capital.......................  3,154,100      3,154,100
  Note receivable..................................   (250,000)      (250,000)
  Accumulated deficit.............................  (3,476,600)    (3,420,800)
                                                    ---------      ----------
        Total stockholders' equity (deficit).......   (486,500)      (430,700)
                                                    ---------      ----------
        Total liabilities and
          stockholders' (deficit) equity           $   229,200    $   189,000
                                                    ===========    ==========

                   See accompanying notes to financial statements

                                       3
<PAGE>


                           AMERICAN INFLATABLES, INC.
                            STATEMENTS OF OPERATIONS
                   FOR THE THREE MONTH PERIODS ENDED JUNE 30,



                                                          2001         2000
                                                       ---------     ---------
                                                      (UNAUDITED)   (UNAUDITED)

Revenues...........................................   $  389,800   $   402,100
     Cost of goods sold............................      210,100       268,400
                                                       ---------     ---------
Gross profit                                             179,700       133,700
                                                       ---------     ---------

Administrative expenses:
     Depreciation and amortization.................        3,700         8,300
     Professional fees.............................       28,900     1,868,600
     Office expense................................       59,600        86,800
     Salaries and payroll expenses.................       39,300       215,500
     Marketing.....................................       48,900        85,400
     Travel & entertainment........................       55,300        47,700
                                                       ---------     ---------

          Total....................................      235,700     2,313,900
                                                       ---------     ---------

             Net loss..............................   $  (56,000)  $(2,180,200)
                                                       =========    ===========
      Loss per share...............................   $    (0.01)  $     (0.40)
                                                       =========    ==========
      Weighted average shares......................    8,594,792    5,350,000
                                                       =========    ==========




                    See accompanying notes to financial statements



                                       4
<PAGE>


                           AMERICAN INFLATABLES, INC.
                            STATEMENTS OF OPERATIONS
                      FOR THE SIX MONTH PERIODS ENDED JUNE 30,
                                  (UNAUDITED)

                                                          2001         2000
                                                       ---------    ----------
                                                      (UNAUDITED)   (UNAUDITED)

Revenues.........................................     $  902,400   $   853,200
     Cost of goods sold..........................        470,700       467,000
                                                       ---------    ----------
Gross profit.....................................        431,700       386,200
                                                       ---------    ----------
Administrative expenses
     Depreciation and amortization...............          8,000        13,600
     Legal, accounting and consulting............         61,100     1,882,500
     Office expense..............................        108,900       152,400
     Salaries and payroll expenses...............         78,400       283,300
     Marketing...................................        114,700       160,600
     Travel & entertainment......................        116,400        68,700
                                                       ---------    ----------
          Total..................................        487,500     2,561,100
                                                       ---------    ----------
              Net loss ..........................     $  (55,800)   (2,174,900)
                                                       =========    ==========
     Loss per share..............................     $    (0.01)  $     (0.41)
                                                       =========    ==========
     Weighted average shares.....................      8,594,792     5,200,000
                                                       =========    ==========







                   See accompanying notes to financial statements


                                       5
<PAGE>


                           AMERICAN INFLATABLES, INC.
                            STATEMENTS of CASH FLOWS
                      For The Six Month Periods Ended June 30,

                                                     2001           2000
                                                --------------   --------------
                                                 (UNAUDITED)       (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)............................... $   (55,800)     $(2,174,900)
Adjustments to Reconcile
Net Income (Loss) to Net Cash Provided
 By (Used In) Operating Activities
Stock issued for services.......................         -0-        1,122,700
Depreciation and amortization...................       8,000           13,600
 (Increase) Decrease in:
 Accounts receivable............................     (10,200)            -0-
Prepaid expense and other assets................     (39,900)         104,700
Inventory.......................................        -0-           (28,000)
Deposits........................................      (2,000)            -0-
Increase (Decrease) in:
 Accounts payable...............................       5,400          (20,400)
 Accrued expenses...............................      84,500          922,800
                                                 -----------      -----------
NET CASH USED IN OPERATING ACTIVITIES...........     (10,000)        (268,900)
                                                 -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment/leaseholds................        -0-            (4,800)
Advances to/from related party..................        -0-            (4,000)
                                                 -----------      -----------
NET CASH USED IN INVESTMENT ACTIVITIES..........        -0-            (8,800)
                                                 -----------      -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock........................        -0-           315,000
Repayment of debt...............................        -0-           (13,000)

                                                 -----------      -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......                      302,000
                                                 -----------      -----------
NET INCREASE (DECREASE) IN CASH.................     (10,000)          24,300
CASH AT BEGINNING OF PERIOD.....................       3,900              900
                                                 -----------      -----------
CASH AT END OF PERIOD........................... $    (6,100)     $    25,200
                                                 ===========      ===========




                  See accompanying notes to financial statements



                                       6
<PAGE>

                    Notes to Financial Statements (Unaudited)


Note A.    BASIS OF PRESENTATION

The  unaudited  financial  statements  of American  Inflatables,  Inc. have been
prepared in accordance  with the  instructions to Form 10-QSB and do not include
all of the  information  and note  disclosures  required by  generally  accepted
accounting  principles.   However,   management  has  included  all  adjustments
necessary  so the  financial  statements  are not  misleading  in the opinion of
management.  These  statements  should be read in conjunction with the financial
statements and notes thereto included in our last audited financial statements.










                                       7
<PAGE>


Item 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

The Company has authorized 20,000,000 shares of $0.01 par value common stock. As
of June 30, 2001 there were 8,594,792 shares issued and outstanding.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

RESULTS OF OPERATIONS.  Net sales were $902,400 for the six months ended June 30
2001,  an increase of $49,200 (6%) compared to net sales of $853,200 for the six
months  ended  June 30,  2000.  The  increase  in  sales  is due to the  Company
increasing  its  customer  base.  Sales for the  Company  continue to grow at an
increasing  rate not just from  repeat  customers  but from new  customers.  The
Company  continues to increase  its  presence  and  exposure in the  advertising
markets  through  increased  attendance  at trade  shows and  other  advertising
mediums that provide greater exposure.

Gross margin as a percentage of sales for the six months ended June 30, 2001 was
48%,  an  increase of 3% from the six months  ended June 30,  2000.  The Company
through  its  use  of  higher  quality   materials  for  production,   decreased
replacements  and warranty  coverage and provides a stronger product for sale to
the  customer.  During  Fiscal  2000 and the first  quarter of 2001 the  Company
increased  production and manufacturing staff. The increase in net sales enabled
the Company to fully utilize its  production  staff to increase gross margins in
2001.

Legal, accounting and consulting costs decreased $1,821,400 during the first six
months of 2001  compared to the same period in 2000.  The decrease  results from
non recurring merger and acquisition costs and professional fees associated with
a cancelled registration statement incurred during the six months ended June 30,
2000.

Office expense increased $43,500 or 29% in the first six months of 2001 compared
to the  same  period  in 2000 as a  result  of  efficiencies  realized  with the
maturity of the Company's systems and procedures.

Payroll costs decreased $204,900 or 72% in the first six months of 2001 compared
to the first six months of 2000 due to a more stable  work force in 2001,  which
is more  efficient  and resulted in less  training  time for new  employees.  In
addition, the number of administrative employees was reduced by three.

Marketing  costs  decreased  $45,900  or 29% during the first six months of 2001
compared to the same period in 2000 as a result of the  Company's  more  focused
approach to its target market.

Travel and entertainment  costs increased $47,700 or 69% in the first six months
of 2001  compared  to the  first six  months of 2000 as a result of the  Company
sending  more  representatives  to trade  shows and  attending  trade shows more
distant from its offices.

                                       8
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, the Company had a cash and cash equivalents  overdraft $6,100,
a decrease of $10,000 from $3,900 at December 31, 2000.

Cash used in operating  activities was $10,000 during the six month period ended
June 30, 2001. Use of cash in operating  activities  consisted mainly of the net
loss for the six month period of $55,800, the offsetting effects of depreciation
and amortization of $8,000, and fluctuations in certain assets and liabilities.

To date,  the Company has not  invested in  derivative  securities  or any other
financial  instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, used for general
operating purposes.

From time to time, the Company may evaluate potential  acquisitions of products,
businesses,  and  technologies  that may  complement  or  expand  the  Company's
business.  Any such transactions  consummated may use a portion of the Company's
working capital and/or require the issuance of equity or debt.

The Company's success will be dependent upon its ability to generate  sufficient
cash flow to meet its  obligations  on a timely  basis,  to obtain  financing or
refinancing  as may be required,  and ultimately to achieve  profitability.  The
Company believes that its current cash resources to fund its operations  through
fiscal 2001 without additional financing.  The Company may not be able to obtain
sufficient  financing  to satisfy  its cash  requirements.  The  Company  may be
required to obtain  financing on terms that are not  favorable to the Company or
its shareholders.  If the Company is unable to obtain additional  financing when
needed,  it may be required to delay or scale back its  operations,  which could
have a material adverse effect on its business,  financial condition and results
of operations.

The  Company  anticipates  that it will need to raise  additional  capital  on a
private  placement  basis  through  the  sale  of the  Company's  common  stock,
preferred  stock,  debt or convertible  debt, or some combination  thereof.  The
Company believes that if it is unable to raise additional equity or debt capital
sufficient to meet its current needs,  the Company may need  additional  capital
soon thereafter.  This additional  capital,  if needed, will be on such terms as
may then be available.

While the  Company  is  currently  exploring  opportunities  available  to raise
additional  capital,  it has not  received  any  commitment  from any  investor,
underwriter, lender or broker dealer to provide any funds. There is no assurance
that the Company  will be  successful  in raising  additional  funds,  or, if is
successful, that, in view of the Company's current circumstances,  and funds can
be raised on terms that are reasonable.


                                       9
<PAGE>

The Company is in the process of being  acquired  by National  Paintball  Supply
Co., Inc. The Company believes that National  Paintball Supply Co., Inc. has the
ability to, and will provide the  necessary  liquidity to the Company  after the
acquisition is completed.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 133 ("SFAS 133"),  "Accounting for Derivative
Instruments and Hedging Activities." This statement  establishes  accounting and
reporting  standards  for  derivative  instruments,  including  some  derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives),  and for other hedging activities. The Company will adopt SFAS 133
in Fiscal 2001, in accordance  with SFAS 137,  which deferred the effective date
of SFAS 133.  The  adoption of this  standard in Fiscal 2001 is not expected not
have a material impact on the Company's consolidated financial statements.


PART II.   OTHER INFORMATION

Item 1.    LEGAL PROCEEDINGS

There are no material  legal  proceedings  to which the  Company is  currently a
party or to which the property of the Company is subject.

Item 2.    CHANGES IN SECURITIES

           None

Item 3.    DEFAULTS UPON SENIOR SECURITIES

           None

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           None

Item 5.    OTHER INFORMATION

           None

Item 6.    EXHIBIT AND REPORTS ON FORM 8-K

           a) Exhibits

           b)   Reports on Form 8-K

                None.

                                       10
<PAGE>


                                 SIGNATURES



In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Date:  August 21, 2001                      By:  /s/ Gregg Mulholland
                                            ---------------------------
                                                Gregg Mulholland
                                                Chief Executive Officer

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.

Date:  August 21, 2001                      By:  /s/ Gregg Mulholland
                                            ---------------------------
                                                Gregg Mulholland
                                                Chairman of the Board
                                                Chief Executive Officer

Date:  August 21, 2001                      By:  /s/ Jeffrey Jacobsen
                                            ---------------------------
                                                Jeffrey Jacobsen
                                                Chief Operating Officer
                                                Director

Date: August 21, 2001                       By:  /s/ David Ariss
                                            ---------------------------
                                                David Ariss
                                                Director





                                       11