U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-QSB


                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                  For the Quarterly Period Ended June 30, 2002

                         Commission File Number 0-25725


                                V-FORMATION, INC.
          (Exact name of small business issuer as specified in charter)

                                   New Jersey
                (State of either jurisdiction of incorporation or
                                  organization)

                                   22-3345169
                        (IRS Employer Identification No.)

                         99 Wood Avenue South, Suite 805
                            Iselin, New Jersey 08830
                    (Address of principal executive offices)

                                  732-321-4040
                           (Issuer's telephone number)


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

State the number of shares outstanding of each of the issuer's classes of common
equity as of the  latest  practicable  date:  As of August  19,  2002 there were
16,086,744 common shares outstanding.


<PAGE>

                                     PART I

ITEM 1. FINANCIAL STATEMENTS.

     Our unaudited financial  statements for the three and six months ended June
30, 2002, are attached hereto.

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

     The following  discussion  should be read in conjunction with our unaudited
financial  statements and notes thereto included herein. In connection with, and
because  we desire to take  advantage  of the "safe  harbor"  provisions  of the
Private  Securities  Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following  discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange  Commission.  Forward looking
statements are statements not based on historical  information  and which relate
to future  operations,  strategies,  financial  results  or other  developments.
Forward looking  statements are necessarily based upon estimates and assumptions
that are inherently  subject to significant  business,  economic and competitive
uncertainties and  contingencies,  many of which are beyond our control and many
of which,  with  respect to future  business  decisions,  are subject to change.
These  uncertainties and contingencies can affect actual results and could cause
actual results to differ  materially from those expressed in any forward looking
statements  made by us, or on our behalf.  We disclaim any  obligation to update
forward-looking statements.

Overview

     V-Formation,  Inc. ("we," "us," "our" or the "Company") is a multi-faceted,
innovative,  sports technologies  company that has made significant  advances in
the development and marketing of the first major evolution in inline skates. Our
objective is to become the premier sports and related  technologies  firm in the
sports product and  entertainment  industry.  We  manufacture  and sell patented
V-configuration  roller skates, as well as "cutting edge" extreme sports apparel
under the Nexed brand name, to sporting goods retailers  located  throughout the
United States and Canada and to a limited extent, Europe.

     While we can  provide no  assurances,  we  believe  that,  with  additional
suitable capital funding,  we will be well positioned to make substantial market
penetration  with  respect  to our  product  lines  and  capture  market  share,
substantially fueling our growth. Additionally,  through the use and acquisition
of

                                        2

<PAGE>

intellectual  properties which are either owned by or licensed to us, we believe
we have effectively  established the broad foundation we have used to attain the
accomplishments  we have  experienced to date. We intend to use our intellectual
properties  as a  springboard  for  future  growth.  Presently,  all our  sports
products   incorporate   next   generation   technology   in  their  design  and
implementation.   Importantly,   all  our  key   technologies  are  proprietary,
licensable and transferable.

     The  following  information  is intended to highlight  developments  in our
operations  to  present  our  results  of  operations,  to  identify  key trends
affecting our businesses and to identify other factors  affecting our results of
operations for the six-month periods ended June 30, 2002 and 2001.

Results of Operations

Comparison of Results of  Operations  for the Six Months Ended June 30, 2002 and
2001

     Our sales  revenues  decreased to $833,108 for the  six-month  period ended
June 30,  2002,  from  $972,334  for the similar  period in 2001,  a decrease of
$139,226 (14.3%).  The decrease in revenues was mainly attributable to the sales
of hockey pants,  skates and bags totaling $607,976 in 2002 compared to $913,417
in 2001,  a decrease of $305,441  (33.4%).  We believe  that this  decrease  was
attributable to general unfavorable economic  conditions.  The decrease in sales
was partially offset by the sales of hockey gloves and protective girdles, which
totaled  $108,948  during the six months ended June 30, 2002,  but were not sold
during the similar  period in the prior year. The decrease was further offset by
the sales of miscellaneous items, including wheels and bearing packs.

     In the six months ended June 30, 2002,  costs of sales also  decreased,  to
$590,390  compared to $736,252  for the  similar  period in 2001,  a decrease of
$145,862,  (19.8%). This was due primarily to the decrease in revenues described
in the  preceding  paragraph.  Gross  margins  were  lower  in 2001  because  of
inventory  liquidated at lower prices in  conjunction  with our factory  closing
during the first quarter of 2001.

     During the six months ended June 30, 2002, we had income from licensing and
royalties of $50,000. This revenue was realized as a result of the settlement of
litigation  against  several  manufacturers  that had  infringed on our patents.
While no  assurances  can be  provided,  we  anticipate  greater  revenues  from
royalties to be generated during the first calendar quarter of 2003.


                                        3

<PAGE>

     General and  administrative  expenses  were  $1,049,994  for the six months
ended June 30, 2002,  compared to $1,178,849  for the similar  period in 2001, a
decrease  of  $128,855  (10.9%).  This  decrease  was  due  primarily  to  costs
associated  with payments to newly  retained  outside  consultants  in the prior
year,  for which no costs were  incurred in the first six months of 2002.  These
consultants were comprised of financial  advisors and an investor relations firm
hired in connection with our becoming a public reporting  company.  The payments
to these consultants during the first six months of 2001 totaled $133,928, while
there were payments to other consultants of approximately $11,000 in the similar
period in 2002.  The decrease in consultant  expense was partially  offset by an
increase in insurance and rent expense,  which  totaled  approximately  $71,000.
Also,  in the first six months of 2001,  we  incurred  approximately  $95,000 of
costs in connection  with settlement with the New Jersey Bureau of Securities in
the matter described under legal proceedings.

     Also,  during the  six-month  period  ended June 30,  2001,  we  incurred a
one-time charge of $102,643  arising from the closing of our warehouse  facility
in  Paterson,  NJ. Our  warehouse  operations  are now handled by a  fulfillment
center located in Aurora,  Colorado.  As a result of this change, profit margins
increased  due to lower  costs of sales by  reducing  employee-  related  costs,
shipping costs and general factory overhead.

     During the six-month  period ended June 30, 2002,  selling and  promotional
costs  decreased  by $319,531  from  $758,100 to  $438,569.  The decrease is due
primarily to our being more  experienced and as a result,  more selective in the
scheduling of promotional events which, when combined with the associated travel
costs, accounted for a decrease of approximately  $175,000.  Also, we eliminated
the  majority  of our  salaried  sales  force in favor of  outside  commissioned
representatives.  During the first six months of 2002,  this change in the sales
force  accounted for a savings of  approximately  $123,000 in wages and employee
benefits.

     Research and development  costs during the six-month  period ended June 30,
2002 were $157,327 as compared to $192,897 for the prior  period,  a decrease of
$35,570,  which is primarily due to costs  associated  with the  introduction of
numerous new products/models in the first half of the prior year.

     During the six months ended June 30, 2002,  depreciation  and  amortization
expense   increased   slightly  from  $70,024  to  $74,452.   Amortization   and
depreciation is associated with patents, trademarks and equipment.

     Equity based compensation  decreased from $850,000 for the six months ended
June 30, 2001, to $48,825 for the same period

                                        4

<PAGE>

in 2002.  During 2001, we issued  common stock as  compensation  to  consultants
under an agreement  which has since been  terminated.  During 2002,  stock based
compensation was issued only to three employees.

     Other income and expense,  which  principally  consists of interest expense
increased  from $8,508 in the six months  ended June 30, 2001 to $37,024 for the
six months ended June 30, 2002, an increase of $28,516. This increase was due to
higher debt balances on which interest was calculated.

     During the six month  period  ended June 30, 2002,  we were  notified  that
other defendants in a litigation  matter that was settled in 1998, had satisfied
$85,598 of a note payable  obligation,  which we had originally  recorded.  As a
result, we recognized income from elimination of our obligation.

     During 2001, we  discontinued  the operations of our  subsidiaries,  On Net
Sports, Inc. and Soft Machine,  Inc. The operating expenses of the subsidiaries,
which totaled  $208,555,  have been reported as  discontinued  operations in the
consolidated  statement of operations  during 2001.  Neither of the subsidiaries
had generated any revenues since their inception, late in 2000.

     As a result,  we  generated a net loss of  $(1,434,922)  for the six months
ended June 30, 2002 ($.09 per share) compared to a net loss of $(3,298,494)  for
the six months ended June 30, 2001 ($.26 per share).

Liquidity and Capital Resources

     At June 30, 2002, we had $32,939 in cash and cash  equivalents,  a decrease
of $181,797 from December 31, 2001.  This decrease in cash was  attributable  to
net cash used in operating activities of $582,410 and net cash used in investing
activities of $709,402,  offset by net cash provided by financing  activities of
$1,110,015.

     Net cash used in operating  activities  during the  six-month  period ended
June 30, 2002,  was $582,410  versus  $3,180,567 for the same period in 2001. In
part,  this  improvement  was due to a decrease  in the net loss for the current
year period,  which was  significantly  lower than the prior year.  In addition,
accounts receivable  decreased by $113,765 to $359,636 from $473,401 at December
31, 2001, which our management attributes to the fact that seasonal sales at the
end of December would normally create a higher receivable  balance at that time.
Accounts  payable and accrued  expenses also increased by $358,617 from December
31, 2001. Lastly, through diligent inventory management, our

                                        5

<PAGE>

inventory on hand at June 30, 2002,  decreased by $336,223 from the December 31,
2001 balance.

     During the six months ended June 30, 2002,  investing  activities consisted
of  capital  expenditures  for  patents  and  advances  to related  parties.  We
capitalized  $523,851 of expenditures for legal fees, expert witnesses and other
costs related to pursuing our various legal actions against other  manufacturers
for infringing on our patents.

     As of June 30,  2002,  we have a loan  receivable  from an  officer  with a
principal balance of $345,744. The principal balance was $207,229 as of December
31, 2001, an increase of $138,515.  The loan bears  interest at 8%, is unsecured
and is  repayable  upon demand.  Interest on the loan,  which is also payable on
demand,  totaled  $10,516 for the  six-month  period ended June 30, 2002.  These
advances are shown as non-current, since we do not expect the loan to be totally
repaid  within the next twelve  months.  Subsequent to June 30, 2002, we entered
into a signed  note  agreement  with  this  officer.  The  agreement,  which was
approved by a resolution  of the Board of Directors,  states the interest  rate,
repayment amounts and repayment due dates.

     Net cash  provided  by  financing  activities  totaled  $1,110,015  for the
six-month period ended June 30, 2002. This was mainly attributable to a $635,000
increase in the balance of our line of credit along with proceeds  received from
the sale of our common stock  totaling  $212,000  and proceeds  from officer and
shareholder loans of $402,500,  offset by cash used for principal payments under
loan agreements of $139,485.

     During  September 2001, we obtained a $1,250,000  line of credit  agreement
with a bank. The line of credit is available  through  January 1, 2003.  Amounts
drawn on the line bear  interest  at the prime rate plus 3%. The  obligation  is
collateralized  by personal  guarantees and by mortgages on specific real estate
assets of one of our officers and one of our directors.  See "Subsequent Event,"
below.

     At June 30, 2002, we had certain  outstanding  notes  payable,  including a
note payable in 18 equal quarterly  installments of $33,066,  including interest
at 8%, which commenced April 1, 1998 and was due July 1, 2002. As of the date of
this Report, this note has been paid in full.

     In addition,  we have an  outstanding  note  payable  which had a principal
balance of $105,000 at June 30, 2002.  This note is  unsecured,  payable in five
annual installments of $35,000 without interest,  which payments commenced March
31, 2001. The unpaid balance of the note is payable in full in the event of a

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<PAGE>

sale or merger of our  company,  or in the event we receive  net funding of $1.5
million or more from an equity offering.

     On May 6, 2000, our Board of Directors approved a short- term debt program.
In conjunction  therewith,  we borrowed $358,000 in short-term loans,  including
the principal  amount of $144,000 from Nicholas  Veenstra,  one of our directors
and granted an  aggregate  of 358,000  irrevocable  warrants to purchase  common
stock at an exercise price of $3 per share,  including  144,000  warrants to Mr.
Veenstra.  The loans from shareholders bear interest at 8% per annum and will be
repaid  within one year.  Loans of $124,492  from Mr.  Veenstra were offset by a
corresponding amount receivable from him.

     Management  anticipates that it may require an additional infusion of funds
to finance our operations over the next twelve months.  Such funds may be in the
form of additional equity  investment,  stockholder loans, or an increase in our
lines of credit.

Subsequent Event

     Effective  August 19, 2002, we obtained a commitment  from  NorCrown  Bank,
Livingston,  New Jersey,  a new financial  institution,  to provide a $2 million
line of credit.  The interest  rate on this new line of credit shall be equal to
the prime rate,  plus 100 basis  points,  but the rate shall never drop below 6%
per annum. This loan is  collateralized by our patents,  as well as personal and
commercial properties owned by Messrs.  Robert Miragliotta,  one of our officers
and directors,  and Nicholas  Veenstra,  a director.  Each of these persons also
personally guaranteed this obligation.

     However,  we may  continue to require  additional  financing to fund future
operations. There can be no assurance that such financing will be obtained.

Trends

     Our strategy is to direct our current  efforts to increase sales and market
penetration  along with  developing  an income  stream from the licensing of our
patented technologies.  While no assurances can be provided, we believe that our
core  business,  the wholesale  distribution  and  marketing of "Nexed"  branded
roller skates, apparel and accessories, will substantially grow over the next 12
months.  In  support  of  this  contention,  the  Sporting  Goods  Manufacturing
Association  activity  report  dated April 30,  2001,  cites the sport of inline
skating  as "the  third  most  popular  sports  for  youth,  based  on  frequent
participation"  for ages 6-17. We remain  confident  that this growth trend will
continue and as a result, our sales

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<PAGE>

revenues  and  market  share will  continue  to grow in a  proportional  manner.
Therefore,  while no  assurances  can be  provided,  we believe  that we will be
profitable  by the first half of 2003 without  taking into account the potential
inflow of revenue from the outstanding patent infringement  lawsuits since there
is no assurance of a favorable outcome to us.

Inflation

     Although our operations are influenced by general economic  conditions,  we
do not believe that inflation had a material effect on the results of operations
during the six months ended June 30, 2002.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     As of the  date of this  Report,  we are  party  to  various  judicial  and
administrative matters, including the following:

     In  December  1999,   the  New  Jersey  Bureau  of  Securities   served  an
administrative complaint on us alleging that we had sold unregistered securities
and used unregistered agents for that purpose and that we had failed to disclose
or  misstated  material  information  about us in selling our  securities.  This
administrative  complaint  was never  formally  docketed.  We denied any and all
allegations.  In March 2001, the New Jersey Bureau of Securities  entered into a
Consent Decree with us, wherein we, without admitting or denying any wrongdoing,
did agree to pay $212,000  over a nine (9) month period in equal  increments  of
$23,555. As of the date of this Report, we have paid all obligations thereunder.
On July  30,  2002,  the  State  of New  Jersey  did  provide  us with a  letter
acknowledging  that we had  satisfied  all  obligations  pursuant to the Consent
Decree  and that this  matter is now  closed  as to both the  Complaint  and all
individuals.

     In January  2001,  we filed a complaint  against  Benetton  Group,  SPA and
Roller Blade, Inc. in the United States District Court, Southern District of New
York,  Docket No. 01 CIV 510,  wherein we have alleged  willful  infringement of
certain of our patent  rights for  Toeplate  with Dual  Flanges for Inline Skate
Frames.  Upon  information  and belief,  the  defendants  are making,  using and
offering to sell inline  skate  products  which  infringe  on our  patents.  The
defendants  have filed an answer and the matter is  currently  in the  discovery
phase. Our complaint requests injunctive relief, an accounting of profits and an
award  of  monetary  damages.  While  no  assurances  can  be  provided,  we are
optimistic about the likelihood of success.

                                        8

<PAGE>

     In February 2001, we filed a complaint in the United States District Court,
Southern  District of New York,  Docket No. 01 CV 7179,  against adidas America,
Salomon North America,  Inc.,  Salmon S.A., adidas AG and adidas Salomon AG, The
Sports Authority,  Inc., Princeton Ski Outlet Corp., dba Princeton Ski Shops and
Paragon  Sporting Goods Co., Inc. for willful  infringement  of certain  patents
held by us, including  Toeplate with Dual Flanges for Inline Skate Frames.  Upon
information  and belief,  the defendants are making,  using and offering to sell
inline skate products  which  infringe on certain of our patents.  Our complaint
requests  injunctive  relief,  an accounting of profits and an award of monetary
damages.  All of these  defendants  have  filed  answers  to our  complaint  and
discovery has commenced.  While no assurances can be provided, we are optimistic
about the likelihood of success.

     In March 2001,  we filed a complaint in the United States  District  Court,
Southern  District of New York,  Docket No. 01 CIV 2262,  against MGM SPA,  Fila
Holding SPA. and Fila USA, Inc.,  for willful  infringement  of certain  patents
held by us,  including  Toeplate with Dual Flanges for Inline Skate  Frames.  On
June 5, 2002,  we entered into a settlement  with these  defendants  in which we
received a  compensatory  award for previous  infringement,  as well as a future
royalty on sales for roller  skates  utilizing  our patented  technology.  These
royalty payments are scheduled to commence in July 2002, for skates made or sold
during the second calendar  quarter of 2002. As part of the terms of settlement,
the Court issued a protective order deeming the settlement terms confidential.

     In April 2001,  we filed a complaint in the United States  District  Court,
Southern  District  of New York,  Docket  No. 010 CIV 1693,  against  First Team
Sports,  Inc. for willful  infringement of certain patents held by us, including
Toeplate  with  Dual  Flanges  for  Inline  Skate  Frames,  as well as breach of
contract. In February 2002, we entered into a settlement of this matter in which
we received a compensatory award for previous infringement,  as well as a future
royalty on sales for roller skates utilizing our patented technology. As part of
the terms of  settlement,  the  Court  issued a  protective  order  deeming  the
settlement terms confidential.

     In February  2002, we filed a complaint  against  National  Sporting  Goods
Corp. in the United States District Court, Southern District of New York, Docket
No. 02 CIV 1273,  wherein we have alleged willful  infringement of patent rights
held by us for  Toeplate  with  Dual  Flanges  for  Inline  Skate  Frames.  Upon
information  and belief,  the  defendant  is making,  using and offering to sell
inline  skate  products  which  infringe on our patents.  On June 10,  2002,  we
entered  into a  settlement  of this matter in which we received a  compensatory
award for previous

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<PAGE>

infringement,  as well as a future royalty on sales for roller skates  utilizing
our patented technology. As part of the terms of settlement,  the Court issued a
protective order deeming the settlement terms confidential.

     In April 2001,  Vertex  Capital Corp.  filed a complaint  against us in the
United  States  Federal  Court for the  Southern  District of New York,  seeking
damages in an amount to be established at trial,  but no less than $5.5 million,
for alleged breach of contract and unjust  enrichment.  We have filed our answer
as well as  counterclaims  and  discovery  has been  completed.  We have filed a
Motion for Summary  Judgment in this matter and cross  claims have been filed by
the plaintiff. As of the date of this Report, our Motion for Summary Judgment is
under advisement with the Court. It is our position that the plaintiff's  claims
are without merit and are being vigorously defended.

     In October 2001,  we filed an action  against USCO  Distribution  Services,
Inc., d/b/a USCO Logistics ("USCO"), in the United States District Court for the
District of Colorado,  asserting  claims  arising from USCO's failure to perform
according to its "order fulfillment" contracts,  which resulted in our incurring
six  figure  losses.  USCO has  asserted  counterclaims  totaling  approximately
$103,000  based on its charges for services  under the  contracts and asserted a
possessory lien on our inventory in their possession,  which has a cost basis of
approximately  $80,000.  USCO subsequently  liquidated the inventory pursuant to
their  possessory  lien. At trial,  we intend to assert various claims  alleging
wrongful  conduct by the defendant in the  foreclosure of its  possessory  lien.
Discovery has  commenced  but a trial date has not yet been  scheduled as of the
date of this Report.

     In January 2002, we filed a complaint in the United States  District Court,
Southern District of New York, Docket No. 010 CIV 1693,  against K-2 Corporation
for willful  infringement of certain patents held by us, including Toeplate with
Dual  Flanges  for  Inline  Skate  Frames.  Upon  information  and  belief,  the
defendants  are making,  using and offering to sell inline skate  products which
infringe on certain of our patents. Our complaint requests injunctive relief, an
accounting of profits and an award of monetary damages.  The defendant has filed
an answer to our  complaint,  but no discovery  has  commenced as of the date of
this Report.  While no assurances can be provided,  we are optimistic  about the
likelihood of success.

     We have either commenced  actions or been named as a party in other matters
in the  normal  course of our  business.  In the  opinion of  management,  after
consulting with legal counsel, the

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<PAGE>

liabilities,  if any,  resulting  from  these  matters  will not have a material
affect on our financial statements.

ITEM 2. CHANGES IN SECURITIES

     During the three month period  ended June 30, 2002,  we issued an aggregate
of  86,942  shares  of our  common  stock  in favor of 5  persons,  including  2
employees,  who received an aggregate of 16,275 shares  pursuant to the terms of
their respective employment  agreement.  The balance of these shares were issued
to accredited  investors (as that term is defined  under the  Securities  Act of
1933,  as amended) at a price of $3.00 per share.  We received  net  proceeds of
$212,001 from the sale of these shares.  Mr. Richard Bachetta also was appointed
as a director of our company.

     Also,  on May 6, 2000,  our Board of Directors  approved a short-term  debt
program.  In conjunction  therewith,  we borrowed  $358,000 in short-term loans,
including the principal  amount of $144,000 from Nicholas  Veenstra,  one of our
directors,  and granted an aggregate of 358,000 irrevocable warrants to purchase
common stock at an exercise price of $3 per share, including 144,000 warrants to
Mr. Veenstra.

     In each of the aforesaid  transactions,  we relied upon the exemption  from
registration  afforded  by Section  4(2) under the  Securities  Act of 1933,  as
amended, and/or Regulation D promulgated thereunder to issue the securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -

     None

ITEM 5. OTHER INFORMATION - None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -

     (a) Exhibits - None

     (b) Reports on Form 8-K.

     We did not file any reports on Form 8-K during the six month  period  ended
June 30, 2002.

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<TABLE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                     ASSETS
                                     ------


<CAPTION>
                                                                              June 30,     December 31,
                                                                                2002           2001
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
Current assets:
    Cash and cash equivalents                                              $     32,939    $    214,736
    Accounts receivable, net of allowance for doubtful accounts
       of $60,000 in 2002 and 2001                                              359,636         473,401
    Inventories                                                                 641,125         977,348
    Prepaid expenses and other current assets                                    58,414          45,103
    Related party loan receivable                                                    --          66,940
                                                                           ------------    ------------
       Total current assets                                                   1,092,114       1,777,528

Property and equipment, net of accumulated depreciation of $238,013
    in 2002 and $200,661 in 2001                                                246,311         283,663
Patents and trademarks, net of accumulated amortization of
    $207,244 in 2002 and $170,644 in 2001                                     1,206,818         724,567
Related party loan receivable                                                   345,744         207,229
Security deposits                                                                24,130          44,318
                                                                           ------------    ------------

       TOTAL ASSETS                                                        $  2,915,117    $  3,037,305
                                                                           ============    ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

Current liabilities:
    Line of credit                                                         $  1,235,000    $    600,000
    Current maturities of long-term debt                                         67,417         257,500
    Accounts payable and accrued expenses                                     1,176,257         847,640
    Due to officer                                                               44,500              --
    Shareholder loans                                                           233,508              --
                                                                           ------------    ------------
       Total current liabilities                                              2,756,682       1,705,140
                                                                           ------------    ------------

Long-term debt, net of current maturities                                        70,000         105,000
                                                                           ------------    ------------

Mandatorily redeemable, Series A convertible preferred stock
    no par value, 500,000 shares authorized
    500,000 shares issued and outstanding in 2002 and 2001
    Aggregate liquidation preference of $30,000 in 2002 and 2001                500,000         500,000
                                                                           ------------    ------------
Stockholders' equity (deficit):
    Preferred stock - no par value, 7,000,000 shares authorized,
      498,127 shares issued, 497,043 shares outstanding in 2002 and 2001
      Aggregate liquidation preference of $303,960 in 2002 and 2001           2,582,857       2,582,857
    Common stock - no par value, 45,000,000 shares authorized,
      16,743,493 shares issued, 16,086,744 shares outstanding in 2002
      16,577,833 shares issued, 15,921,084 shares outstanding in 2001        32,858,940      32,361,961
    Additional paid-in capital                                               30,597,329      30,798,116
    Accumulated deficit                                                     (65,852,702)    (64,417,780)
    Treasury stock at cost, 657,833 shares in 2002 and 2001                    (597,989)       (597,989)
                                                                           ------------    ------------
       Total stockholders' equity (deficit)                                    (411,565)        727,165
                                                                           ------------    ------------

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                $  2,915,117    $  3,037,305
                                                                           ============    ============
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       12
<PAGE>

<TABLE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
             FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001


<CAPTION>
                                                          2002           2001
                                                     ------------    ------------
<S>                                                  <C>             <C>
Sales                                                $    833,108    $    972,334

Cost of goods sold                                        590,390         736,252
                                                     ------------    ------------

Gross profit                                              242,718         236,082

Income from licensing and royalties                        50,000              --
                                                     ------------    ------------
                                                          292,718         236,082
                                                     ------------    ------------

Operating expenses:
    Selling and promotional                               438,569         758,100
    General and administrative                          1,049,994       1,178,849
    Loss on factory closing and disposal of assets          4,500         102,643
    Research and development                              157,327         192,897
    Depreciation and amortization                          74,452          70,024
    Equity-based compensation                              48,825         850,000
    Reorganization expense                                     --         150,000
                                                     ------------    ------------
                Total operating expense                 1,773,667       3,302,513
                                                     ------------    ------------

Loss from operations                                   (1,480,949)     (3,066,431)
                                                     ------------    ------------

Other income (expense):
    Interest income                                        17,820              --
    Interest expense                                      (37,024)         (8,508)
    Equity-based interest expense                         (20,367)        (15,000)
    Settlement adjustment                                  85,598              --
                                                     ------------    ------------
                Total other income (expense)               46,027         (23,508)
                                                     ------------    ------------

Loss from continued operations                         (1,434,922)     (3,089,939)

Discontinued operations                                        --        (208,555)
                                                     ------------    ------------

    NET LOSS                                         $ (1,434,922)   $ (3,298,494)
                                                     ============    ============

Loss per common share:
    Continuing operations                            $      (0.09)   $      (0.24)
    Discontinued operations                                    --           (0.02)
                                                     ------------    ------------

                                                     $      (0.09)   $      (0.26)
                                                     ============    ============

Weighted average shares outstanding                    16,017,206      12,894,786
                                                     ============    ============

</TABLE>

           See notes to unaudited consolidated financial statements.

                                       13
<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
            FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001


                                                    2002           2001
                                               ------------    ------------

Sales                                          $    481,193    $    772,515

Cost of goods sold                                  345,216         545,060
                                               ------------    ------------

Gross profit                                        135,977         227,455

Income from licensing and royalties                  15,000              --
                                               ------------    ------------
                                                    150,977         227,455
                                               ------------    ------------

Operating expenses:
    Selling and promotional                         198,839         408,164
    General and administrative                      529,934         135,507
    Research and development                         82,004         109,954
    Depreciation and amortization                    39,476          35,012
    Equity-based compensation                            --         835,000
                                               ------------    ------------
                Total operating expense             850,253       1,523,637
                                               ------------    ------------

Loss from operations                               (699,276)     (1,296,182)
                                               ------------    ------------

Other income (expense):
    Interest income                                   8,960           1,989
    Interest expense                                (20,876)         (9,453)
    Equity-based interest expense                   (12,867)         (7,500)
                                               ------------    ------------
                Total other income (expense)        (24,783)        (14,964)
                                               ------------    ------------

Loss from continued operations                     (724,059)     (1,311,146)

Discontinued operations                                  --        (208,555)
                                               ------------    ------------

    NET LOSS                                   $   (724,059)   $ (1,519,701)
                                               ============    ============

Loss per common share:
    Continuing operations                      $      (0.05)   $      (0.11)
    Discontinued operations                              --           (0.01)
                                               ------------    ------------

                                               $      (0.05)   $      (0.12)
                                               ============    ============

Weighted average shares outstanding              16,086,744      14,926,675
                                               ============    ============

           See notes to unaudited consolidated financial statements.

                                       14
<PAGE>

<TABLE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
             FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001

<CAPTION>
                                                                               2002           2001
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
Cash flows from operating activities:
    Net loss                                                               $(1,434,922)   $(3,298,494)
    Adjustments to reconcile net loss to net cash
        used in operating activities:
          Bad debts                                                                 --         29,000
          Depreciation and amortization                                         74,452         70,024
          Settlement adjustment                                                (85,598)            --
          Fees, commissions, and interest paid in stock and warrants            54,192        850,000
          Interest accrued on shareholder loans                                (10,516)            --
          Loss on factory closing and disposal of assets                         4,500        102,643
          Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable                         113,765       (446,751)
            (Increase) decrease in inventories                                 336,223        (63,445)
            (Increase) decrease in prepaid expenses
               and other current assets                                        (13,311)      (566,742)
            (Increase) decrease in security deposits                            20,188          8,938
            Increase (decrease) in accounts payable and accrued expenses       358,617        134,260
                                                                           -----------    -----------
                Net cash used in operating activities                         (582,410)    (3,180,567)
                                                                           -----------    -----------

Cash flows from investing activities:
    Advances to related parties                                               (185,551)            --
    Capital expenditures for equipment, patents and trademarks                (523,851)      (116,613)
                                                                           -----------    -----------
                Net cash used in investing activities                         (709,402)      (116,613)
                                                                           -----------    -----------

Cash flows from financing activities:
    Proceeds from line of credit                                               635,000             --
    Principal payments under loan agreements                                  (139,485)      (119,098)
    Proceeds from issuance of common stock                                     212,000      4,194,733
    Purchase of treasury stock                                                      --         (4,540)
    Loans from officer and shareholders                                        402,500             --
                                                                           -----------    -----------
                Net cash provided by financing activities                    1,110,015      4,071,095
                                                                           -----------    -----------

Net increase (decrease) in cash and cash equivalents                          (181,797)       773,915

Cash and cash equivalents - beginning                                          214,736        709,351
                                                                           -----------    -----------

CASH AND CASH EQUIVALENTS - ENDING                                         $    32,939    $ 1,483,266
                                                                           ===========    ===========

</TABLE>

           See notes to unaudited consolidated financial statements.

                                       15
<PAGE>

<TABLE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               FOR THE SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)

<CAPTION>
                                           Common Stock          Preferred Stock      Treasury Stock
                                      -----------------------  -------------------  ------------------
                                         Number                Number               Number               Additional
                                           of                    of                    of                  Paid-in     Accumulated
                                        Shares       Amount    Shares     Amount     Shares     Amount     Capital       Deficit
                                      ----------  -----------  -------  ----------  -------  ---------   -----------  ------------
<S>                                   <C>         <C>          <C>      <C>         <C>      <C>         <C>          <C>
Balance at January 1, 2002            16,577,833  $32,361,961  498,127  $2,582,857  657,833  $(597,989)  $30,798,116  $(64,417,780)

Sales of stock for cash                   70,667      212,000       --          --       --         --            --           --

Issuance of stock for dividends           68,718      206,154       --          --       --         --      (206,154)          --

Issuance of stock for interest            10,000       30,000       --          --       --         --            --           --

Issuance of stock for employee
   compensation                           16,275       48,825       --          --       --         --            --           --

Interest expense for warrants granted         --           --       --          --       --         --         5,367           --

Net loss for the six month period             --           --       --          --       --         --            --    (1,434,922)
                                      ----------  -----------  -------  ----------  -------  ---------   -----------  ------------

Balance at June 30, 2002              16,743,493  $32,858,940  498,127  $2,582,857  657,833  $(597,989)  $30,597,329  $(65,852,702)
                                      ==========  ===========  =======  ==========  =======  =========   ===========  ============
</TABLE>

See notes to unaudited consolidated financial statements.

                                       16
<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                                  June 30, 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTNG POLICIES
--------------------------------------------------

The consolidated financial statements have been prepared by the Company, without
audit,  pursuant to the rules and  regulations  of the  Securities  and Exchange
Commission and reflect all adjustments  which are, in the opinion of management,
necessary to present fairly the information required herein. Certain information
and footnote  disclosures normally included in the financial statements prepared
in accordance with generally  accepted  accounting  principles have been omitted
pursuant to such rules and regulations,  although  management  believes that the
disclosures are adequate to make the information presented not misleading.  This
information  should be read in conjunction  with the Company's Form 10-KSB filed
April 11, 2002.  The results of operations for the six- month periods ended June
30, 2002 and 2001 are not necessarily indicative of the results of operations to
be expected for the full year.

NOTE 2 - HISTORY AND BUSINESS ACTIVITY
--------------------------------------

V-Formation is a multi-faceted,  innovative sports technologies company that has
made  significant  advances in the  development and marketing of the first major
evolution to the inline skate.  The Company has been  credited with  introducing
the "V" technology,  which  incorporates a proprietary,  patented  angular wheel
technology, which displaces the wheels at alternating angles.

V-Formation,  Inc. (the  "Company") was organized in January 1995 and was in the
development  stage  through  December 31,  1996.  In January  1997,  the Company
commenced the sale of patented  V-configuration  roller skates to sporting goods
retailers  located  throughout  the United States and Canada.  During 1999,  the
Company acquired the Nexed brand of hockey  equipment and apparel.  During 2000,
the Company acquired On Net Sports,  Inc. ("ONSI"),  a development stage company
that has had no operations to date. In addition,  the Company  incorporated Soft
Machine,  Inc. ("SMI") as a wholly-owned  subsidiary to acquire certain software
and intellectual properties. SMI has had no operations to date. During 2001, the
ONSI and SMI discontinued operations.

Effective  March 14, 2001,  pursuant to an Agreement and Plan of  Reorganization
(the "Merger Agreement"),  the Company acquired all of the outstanding shares of
Buckeye Oil and Gas, Inc. ("Buckeye"), a publicly-held corporation,  in exchange
for 478,082  shares of the  Company's  common  stock and a payment of  $150,000,
which was  charged to  reorganization  expense.  The shares  issued  represented
approximately  2.5% of the Company's  outstanding  securities  subsequent to the
transaction.  V-Formation  was the  surviving  corporation  and by virtue of the
merger, became a fully-reporting  publicly-held company under the Securities Act
of 1934.










                                       17

<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                                  June 30, 2002

NOTE 3 - LOSS PER COMMON SHARE
------------------------------

Loss per common  share is  computed  using  Statement  of  Financial  Accounting
Standards  (SFAS) No.  128,  "Earnings  per  Share."  SFAS No.  128  established
standards  for the  computation,  presentation,  and  disclosure of earnings per
share.  Basic per share  amounts are  computed  by dividing  the net loss by the
weighted  average  number of  common  shares  outstanding  during  the  periods.
Treasury  stock is  subtracted  from shares  issued to  determine  the  weighted
average of shares  outstanding.  Diluted loss per share  amounts are the same as
the basic amounts since the assumed  exercise of the Company's stock options and
warrants and assumed conversion of convertible  preferred stock would reduce the
loss per share.  Such stock options,  warrants and conversions could potentially
dilute  earnings  per share in the  future.  Potential  common  shares  totaling
5,542,361 and 4,991,914,  which consist of outstanding  warrants and convertible
preferred   shares  are  considered  to  be   antidilutive  at  2002  and  2001,
respectively.

NOTE 4 - PATENTS AND TRADEMARKS
-------------------------------

The Company  owns or  licenses  various  patents of  technology  concerning  its
V-configuration skates, as well as in-line skates and boots with interchangeable
skate chassis. The Company has also trademarked various names and logos.

The  costs  associated  with  the  acquisition  of a  patent,  and the  costs of
registering  the patents and  trademarks  are  capitalized  and amortized on the
straight-line  basis over the remaining lives, of 15 to 17 years. The periods of
amortization  are  periodically  evaluated  to determine  whether  circumstances
warrant revised estimates of useful lives.

The Company  reviews the carrying  value of patents and  trademarks to determine
whether there are any  impairment  losses.  If  indicators  of  impairment  were
present, and future cash flows were not expected to be sufficient to recover the
assets' carrying  amount,  an impairment loss would be charged to expense in the
period  identified.  Although  the  Company  has  experienced  operating  losses
projected  cash flows do not indicate an  impairment of the value of patents and
trademarks recorded in the accompanying consolidated financial statements.

In December 2000, the Company  acquired six patents,  which cover a range of key
in-line  skate  design  elements,  including  wheel and  sidewall  mounting  and
construction.  The patents were  acquired for  $130,000.  Commencing  January of
2001, the Company filed several lawsuits against in-line skate manufacturers for
infringing on one or more of these patents.  For the six-month period ended June
30, 2002, the Company  capitalized  approximately  $524,000 of expenditures  for
legal fees,  expert  witnesses and other costs related to pursuing various legal
actions against other manufacturers for infringing on its patents.







                                       18

<PAGE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                  June 30, 2002

NOTE 5 - EQUITY TRANSACTIONS
----------------------------

Dividends
---------

On March 5, 2002,  the Board of  Directors  declared a dividend on the Series B,
Series  C and  Series  D  preferred  stock  pursuant  to  the  designations  and
preferences of each such series of preferred  stock.  In addition,  the Board of
Directors  declared a dividend on mandatorily  redeemable,  Series A convertible
preferred stock, which is recorded as equity based interest expense. At December
31, 2001, dividends on the Series A and Series B Cumulative Preferred Stock were
in  arrears by $30,000  and  $24,000,  respectively.  If such  dividends  are in
arrears,  no dividends  shall be declared,  nor shall there be any redemption of
shares  having a rank lower in  priority  to the Series A  Preferred  Stock with
respect to  dividends.  Dividends  on the Series C and Series D preferred  stock
were in arrears by $174,834 and $7,320,  respectively.  All dividends in arrears
for 2001 were paid though the issuance of 78,718 shares of the Company's  common
stock during the first quarter of 2002.

Dividends on mandatorily  redeemable,  Series A convertible  preferred stock are
accrued as equity based  interest  expense since the Company pays such dividends
in common stock.  Equity based interest  expense totaled $15,000 for each of the
six-month periods ended June 30, 2002 and 2001. Dividends on the other series of
preferred  stock are not declared  until the Company is in a position to pay the
dividend in cash or common stock.

Common stock sold
-----------------

For the  six-month  periods  ended June 30, 2002 and 2001,  the Company  sold an
aggregate of 70,667 and 345,165 shares of its common stock,  receiving  proceeds
of $212,000 and $1,035,495, respectively.

Employee compensation
---------------------

For the six-month  period ended June 30, 2002,  the Company issued 16,275 shares
of common  stock and 53,775  warrants to purchase its common stock to one of its
employees and two of its former  employees in accordance  with their  employment
agreements.  Stock and  warrants  issued to employees  as  compensation  totaled
$48,825 for the six-month period ended June 30, 2002.

For the six-month  period ended June 30, 2001, the Company issued 330,000 shares
of common stock as compensation  for assets and services valued at $990,000.  In
addition, the Company collected $2,447,545 of subscriptions receivable.

Warrants exercised
------------------

During  the  six-month  period  ended  June 30,  2001,  investors  exercised  an
additional  592,521  common stock warrants at an exercise price of $3 per share,
raising proceeds of $683,507, net of $1,094,057 of subscriptions  receivable. In
addition  during the  six-month  period  ended June 30,  2001,  officers  of the
Company exercised  3,712,966 common stock warrants at an exercise price of $0.10
per share.  The Company  purchased  128,833 shares of treasury  stock  including
128,033  shares  redeemed to pay for the  warrants  exercised by officers of the
Company.

                                       19

<PAGE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                  June 30, 2002

NOTE 5 - EQUITY TRANSACTIONS (CONTINUED)
----------------------------------------

Treasury stock
--------------

At June 30, 2002 and  December  31,  2001,  treasury  stock  consists of 656,749
shares of common stock and 1,084 shares of preferred stock.

Warrants granted
----------------

On May 6, 2002, the Board of Directors  approved a short-term  debt program.  In
conjunction  therewith,  the Company  borrowed  $358,000 of short-term loans and
granted 358,000 irrevocable common stock warrants to purchase common stock at an
exercise price of $3 per share. The loans from  shareholders bear interest at 8%
per  annum and will be  repaid  within  one  year.  Loans of  $124,492  from one
shareholder  were  offset by a  corresponding  amount  receivable  from the same
shareholder.

The amount of equity based interest  expense charged to operations on account of
shareholders  who  received  warrants  in  conjunction  with the short term debt
program has been  determined  in  accordance  with SFAS No. 123,  utilizing  the
Black-Scholes Model. For valuing warrants granted the following assumptions were
used: no dividend  yield; a risk-free  interest rate of 3%; expected life of one
year;  and no expected  volatility.  The weighted  average fair value at date of
grant for  warrants  granted  during  2002 was $0.09 per share or  approximately
$32,200.  For the  six-month  period ended June 30, 2002,  the Company  recorded
$5,367 of equity based interest expense in connection with warrants issued under
the short-term debt program.

NOTE 6 - LINE OF CREDIT
-----------------------

The Company extended its $1,250,000 line of credit agreement with a bank through
January 1, 2003.  Effective  July 1, 2002,  amounts  drawn on the line of credit
bear  interest  at the New York (Wall  Street  Journal)  prime rate plus 3%. The
effective  rate as of June 30, 2002 was 6.75% (prime plus 2%). This line will be
repaid in monthly payments of $100,000  principal,  plus interest beginning July
30,  2002.  The  obligation  is  collateralized  by personal  guarantees  and by
mortgages on specific real estate  assets of one of the  Company's  officers and
one of its directors.  At June 30, 2002,  $1,235,000 was drawn against this line
of credit.

NOTE 7 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

Settlement agreements
---------------------

In February  2002,  the Company  entered into a  settlement  of its suit against
First Team Sports, Inc. which provided for the Company to receive an undisclosed
amount of cash,  as well as future  royalties on all sales of roller skates made
by the defendant that incorporate the Company's technology.

In addition,  the Company  entered into two additional  settlements of its suits
against National  Sporting Goods Corporation and MGM SPA Fila which provided the
Company to receive  future  royalties on all sales of roller  skates made by the
defendant that incorporate the Company's technology.


                                       20

<PAGE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                                  June 30, 2002

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
-------------------------------------------------

Settlement adjustment
---------------------

During the six month period ended June 30, 2002,  the Company was notified  that
other defendants in a litigation  matter that was settled in 1998, had satisfied
$85,598 of a note payable obligation, which the Company had originally recorded.
As a result, the Company recognized income from elimination of its obligation.

NOTE 8 - RELATED PARTY LOAN RECEIVABLE
--------------------------------------

As of June 30, 2002 and December 31, 2001,  the Company had made advances to the
Chief  Executive  Officer in the amount of $345,744 and $195,087,  respectively.
Such  advances  accrue  interest at the rate of 8% per annum,  are unsecured and
repayable on demand. At June 30, 2002 and December 31, 2001, accrued interest on
these  advances  totaled  $10,516 and $12,141  respectively.  These advances are
shown as  non-current,  since it is not  anticipated  that  they  will be repaid
during the next year.  Subsequent to June 30, 2002,  the Company  entered into a
signed note agreement with the Chief Executive Officer. The agreement, which was
approved by a resolution  of the Board of Directors,  states the interest  rate,
repayment amounts and repayment due dates.

NOTE 9 - SUBSEQUENT EVENT
-------------------------

Effective August 19, 2002, the Company obtained a commitment from NorCrown Bank,
Livingston,  New Jersey,  to provide a $2 million  line of credit.  The interest
rate on this new line of credit shall be equal to the prime rate, plus 100 basis
points,  but the  rate  shall  never  drop  below  6% per  annum.  This  loan is
collateralized  by the  Company's  patents,  as well as personal and  commercial
properties owned by Messrs.  Robert  Miragliotta,  one of the Company's officers
and directors and Nicholas  Veenstra,  a director of the Company.  Each of these
persons also personally guaranteed this obligation.



                                       21

<PAGE>


                                   SIGNATURES


     Pursuant to the  requirements  of Section 12 of the Securities and Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        V-FORMATION, INC.
                                        (Registrant)

                                        Dated: August 19, 2002


                                        By:s/ Richard Stelnick
                                           -------------------------------------
                                           Richard Stelnick, Chief Executive
                                           Officer


                                       22