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 September 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 November  13, 2002 there were
16,320,749 common shares outstanding.





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                                     PART I

ITEM 1. FINANCIAL STATEMENTS.

     Our  unaudited  financial  statements  for the three and nine months  ended
September 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.  Also, in September  2002,  we formally  launched and
introduced NEXED Paintball. With industry revenues in excess of $250 million per
year,  consistent annual growth and existing cross marketing  opportunities,  it
was a logical  expansion for us.  According to the SGMA "2001  Superstudy",  the
sport of  Paintball  was  ranked  the 3rd most  popular  extreme  sport,  having
surpassed snowboarding  participation.  Paintball  participation is projected to
continue to grow and expand worldwide.

     Effective March 14, 2001,  pursuant to an Agreement and Plan of Merger (the
"Merger  Agreement")  and Rule 12(g) (3) (a) of the  Securities  Exchange Act of
1934, as amended (the "1934 Act"), we acquired all of the outstanding  shares of
Buckeye Oil & Gas,  Inc., a public  reporting  company,  in exchange for 478,082
shares of our common stock and the cash  payment of $150,000,  which was charged
to reorganization expense. The shares issued represented

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approximately   2.5%  of  our  outstanding   common  stock   subsequent  to  the
transaction. We were the surviving entity and by virtue of the merger, we became
a reporting company under the 1934 Act.

     While we can provide no assurances,  we believe that, with 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 intellectual properties
which  are  either  owned or  licensed  exclusively  by 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 nine-month periods ended September 30, 2002 and 2001.

Results of Operations

     Comparison of Results of Operations for the Nine Months Ended September 30,
2002 and 2001

     Our sales revenues  decreased to $1,043,977 for the nine-month period ended
September 30, 2002 from $1,394,072 for the similar period in 2001, a decrease of
$350,095 (25.1%). The decrease in revenues was mainly attributable to a decrease
in sales of hockey pants, skates and bags totaling $770,669 in 2002, compared to
$1,288,078 in 2001, a decrease of $517,409  (40.2%).  We believe the decrease is
due to the general downturn in the economy.  The decrease in sales was partially
offset by the sales of hockey jerseys which totaled $131,934 in 2002 compared to
$43,919 for the period  ended  September  30,  2001 an increase of $88,015.  The
decrease  in sales was  further  offset by the  sales of gloves  and  protective
girdles, which totaled $119,975 during the nine months ended September 30, 2002,
but were either not sold during the similar  period in the prior year or, in the
case of gloves,  were sold for one month for a total of $17,659,  an increase of
$102,316.

     In the nine months ended September 30, 2002, costs of sales also decreased,
to $791,853 compared to $1,105,202 for the similar period in 2001, a decrease of
$313,349,  (28.4%). 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 nine months  ended  September  30,  2002,  we received our first
payments of 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. We anticipate a

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substantial future revenue stream from these infringement settlements along with
the remaining  infringement  litigation  which is discussed in "Part II, Item 1,
Legal Proceedings", below herein.

     During  the  nine-month  period  ended  September  30,  2002,  selling  and
promotional  costs  decreased  by $522,302  from  $1,163,748  to  $641,446.  The
decrease is due  primarily  to our being more  selective  in the  scheduling  of
promotional  events  which,  when  combined  with the  associated  travel costs,
accounted for a decrease of  approximately  $236,000.  Also,  we eliminated  the
majority  of  our  salaried  sales  force  in  favor  of  outside   commissioned
representatives.  During the first nine months of 2002, this change in the sales
force  accounted for a savings of  approximately  $215,000 in wages and employee
benefits.

     General and  administrative  expenses were  $1,633,158  for the nine months
ended September 30, 2002, compared to $1,851,666 for the similar period in 2001,
a decrease  of  $218,508  (11.8%).  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 nine 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 nine  months of 2001  totaled  $179,149,
while there were payments to other  consultants of approximately  $15,000 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
$88,000.  Also,  in the first nine  months of 2001,  we  incurred  approximately
$165,000 of costs in connection  with  settlement  with the New Jersey Bureau of
Securities in the matter described under legal proceedings.

     Also,  during the nine-month period ended September 30, 2001, we incurred a
one-time charge of $184,441  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.

     Research and development costs during the nine-month period ended September
30, 2002 were $278,401 as compared to $303,999 for the prior period,  a decrease
of $25,598,  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  nine  months  ended  September  30,  2002,   depreciation  and
amortization expense increased slightly from $105,036 to $116,310.  Amortization
and depreciation is associated with patents, trademarks and equipment.

     Equity based  compensation  decreased  from  $1,008,680 for the nine months
ended September 30, 2001, to $749,349 for the same period 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  totaling  $48,825.  Additionally,  $700,524 of  stock-based
compensation was issued to three shareholders who extended loans to us.

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     Other income and expense,  which principally  consists of interest expense,
increased  from $12,706 in the nine months ended  September  30, 2001 to $45,514
for the nine months  ended  September  30,  2002,  an increase of $32,808.  This
increase was due to higher debt balances on which interest was calculated.

     During the nine month period ended  September  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 this 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  $208,764,  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  $(3,137,707)  for the nine months
ended September 30, 2002 ($.19 per share) compared to a net loss of $(4,715,170)
for the nine months ended September 30, 2001 ($.35 per share).

Liquidity and Capital Resources

     At  September  30,  2002,  we had $75,584 in cash and cash  equivalents,  a
decrease  of  $139,622  from  December  31,  2001.  This  decrease  in cash  was
attributable to net cash used in operating activities of $1,204,472 and net cash
used in  investing  activities  of  $807,487,  offset  by net cash  provided  by
financing activities of $1,872,807.

     Net cash used in operating  activities  during the nine-month  period ended
September 30, 2002 was $1,204,472 versus $4,309,391 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 $262,687 to $210,714 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 $381,820 from December
31, 2001, Lastly,  through diligent inventory management,  our inventory on hand
at September 30, 2002 decreased by $439,665 from the December 31, 2001 balance.

     During the nine months  ended  September  30,  2002,  investing  activities
consisted of capital  expenditures  for patents and advances to related parties.
We capitalized  $643,549 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 September 30, 2002, we have a loan  receivable from an officer with a
principal balance of $344,497. The principal balance was $207,229 as of December
31, 2001, an increase of $137,268.  The loan bears  interest at 8%, is unsecured
and is  repayable  upon demand.  Interest on the loan,  which is included in the
balance owed, totaled $17,350 for the nine-month period

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ended September 30, 2002.  These advances are shown as  non-current,  since they
will not be totally repaid within the next twelve months.

     Net cash  provided  by  financing  activities  totaled  $1,872,807  for the
nine-month  period ended September 30, 2002.  This was mainly  attributable to a
$1,699,201  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
shareholder  loans of $133,508 offset by cash used for principal  payments under
loan agreements of $171,902

     During August 2002, we obtained a $2,000,000 line of credit  agreement with
a bank. The line of credit is available through July 30, 2003.  Amounts drawn on
the line bear  interest at the prime rate plus 1% but not to be less than 6% per
annum. 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.

     Also during the third  quarter of 2002,  we obtained a new $500,000 line of
credit agreement with a bank through January 1, 2003. Amounts drawn on this line
of  credit  bear  interest  at  the  prime  rate  plus  3%.  The  obligation  is
collateralized by a personal guarantee and a $500,000  certificate of deposit of
one of our directors.

     In addition,  we have an  outstanding  note  payable  which had a principal
balance of $105,000 at September 30, 2002.  This note is  unsecured,  payable in
five annual  installments of $35,000 without interest,  which payments commenced
March 31,  2001 and is  related  to a  settlement  agreement  to resolve a legal
dispute which arose from a 1996  transaction  in which the  plaintiffs  acted as
brokers by introducing various parties that subsequently  invested in our Series
B  Preferred  Stock.  The  unpaid  balance of the note is payable in full in the
event of a 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, 2002, our Board of Directors  approved a short-term debt program.
In  conjunction  therewith,  we  borrowed  $358,000  of  short-term  loans  from
shareholders  and a  director,  and  granted  358,000  irrevocable  warrants  to
purchase  common  stock each  warrant  exercisable  to purchase one share of our
common stock at an exercise price of $3 per share.  In July 2002, the applicable
note related to this loan became due. At that time,  the holders of the note did
consent to an  extension  of the note  until an  undeterminable  time,  which we
estimate to be approximately  one year. In  consideration fo this extension,  we
agreed to waive the exercise price for these 233,508 warrants,  resulting in the
four holders  receiving an aggregate of 233,508 shares of our common stock. As a
result of this waiver,  we incurred a charge of $700,524 on our income statement
for the nine  month  period  ended  September  30,  2002.  See  "Part I, Item 1,
Financial  Statements"  herein.  The  loans  from  shareholders,  which  have an
outstanding  balance  of  $133,508,  bear  interest  at 6% per  annum.  Loans of
$124,492 from one shareholder were offset by a corresponding  amount  receivable
from the same shareholder.

     In the past, we have been dependent  upon capital  raised  through  private
placements of equity to finance our business operation.  We have incurred losses
from operations since

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inception and if we do not meet our  expectations as to revenues to be generated
over  the  next  12  months,  management  anticipates  that  we may  require  an
additional  infusion of funds to finance our operations  during this time.  Such
funds may be in the form of additional equity investment,  stockholder loans, or
an increase in our line of credit. There can be no assurance that such financing
will be obtained, or if obtained,  the terms of such financing will be favorable
to us.

     Therefore,  our  success  may  be  dependent  upon  our  ability  to  raise
additional  capital to continue as a going concern.  Unless we begin to generate
profits  from our  operations  in the near  future,  of  which  there  can be no
assurance,  the failure to infuse additional  capital into our Company may force
management to curtail certain expenditures and product introductions,  which may
affect our ability to fully  implement  our  business  plan.  These issues raise
substantial doubt about our ability to continue as a going concern.

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.  We believe the current economic downturn is the cause of
the decrease in sales this year.  However,  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  revenues and market share will continue to
grow in a proportional manner. Also, in September 2002, we formally launched and
introduced NEXED Paintball.  During late 2001, we started receiving  unsolicited
orders  for  NEXED  apparel  in  which  its use was  specifically  intended  for
Paintball.  Inadvertently,  our NEXED product line began to garner the attention
of many "elite"  Paintball  participants  and  enthusiasts.  In recognizing  the
opportunity,  we  quickly  responded  and  with  relatively  little  effort,  we
coordinated a manufacturing  and marketing  effort.  We  strategically  chose to
launch NEXED Paintball at the ESPN sponsored National Paintball League World Cup
Tournament  held at Disney's Epcot Center.  We plan on attending  similar events
throughout the remainder of the year.

     With  industry  revenues  in excess of $250  million  per year,  consistent
annual  growth and  existing  cross  marketing  opportunities,  it was a logical
expansion  for us.  According  to the  SGMA  "2001  Superstudy",  the  sport  of
Paintball  was ranked  the 3rd most  popular  extreme  sport,  having  surpassed
snowboarding participation.  Paintball participation is projected to continue to
grow and expand worldwide.


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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 nine months ended September 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 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.

     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

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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 alleged willful  infringement of patent rights held
by us for Toeplate with Dual Flanges for Inline Skate Frames.  On June 10, 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 April 2001, Vertex Capital Corp. ("Vertex") filed a complaint against us
in US 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 cross claims have been filed by the plaintiff.  Discovery has
been completed.  Both parties filed Motions for Summary Judgment in this matter.
In response  thereto,  the court granted our Motion, in part and denied Vertez's
Motion.  It  dismissed  all but one claim filed  against us. The court has set a
settlement  conference in this matter for November  2002,  but no trial date has
yet been set. It is our position that the plaintiff's remaining claim is without
merit and is being vigorously defended.

     In October  2001,  we filed a  mulit-million  dollar  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,
where we alleged  willful  infringement of patent rights held by us for Toeplate
with Dual Flanges for Inline  Skate  Frames.  In August 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.

     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

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

Controls and Procedures

     Within 90 days prior to the date of filing of this Quarterly Report on Form
10-QSB,  the Company carried out an evaluation,  under  supervision and with the
participation  of the  Company's  management,  including the CEO and CFO, of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's CEO and CFO concluded that the Company's  disclosure  controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the Company  required to be included in the  Company's  periodic SEC
filings.  Subsequent to the date of that evaluation,  there have been no changes
in  internal  controls  or in other  factors  that  could  significantly  affect
internal  controls,  nor were any  corrective  actions  required  with regard to
significant deficiencies and material weaknesses.

ITEM 2. CHANGES IN SECURITIES

     During the three  month  period  ended  September  30,  2002,  we issued an
aggregate  of  233,508  shares of our common  stock to four (4) of our  existing
shareholders. The circumstances relating to this issuance are as follows:

     On May 6, 2002, our Board of Directors  approved a short-term debt program.
In  conjunction  therewith,  we  borrowed  $358,000  of  short-term  loans  from
shareholders  and a  director,  and  granted  358,000  irrevocable  warrants  to
purchase  shares of our common  stock each warrant  exercisable  to purchase one
share of our common stock at an exercise  price of $3 per share,  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 one of our
principal  shareholders,  who is also a director.  In July 2002,  the applicable
note related to this loan became due. At that time,  the holders of the note did
consent to an  extension  of the note  until an  undeterminable  time,  which we
estimate to be approximately  one year. In  consideration fo this extension,  we
agreed to waive the exercise price for these 233,508 warrants,  resulting in the
four holders  receiving an aggregate of 233,508 shares of our common stock. As a
result of this waiver,  we incurred a charge of $700,524 on our income statement
for the nine  month  period  ended  September  30,  2002.  See  "Part I, Item 1,
Financial  Statements"  herein.  The  loans  from  shareholders,  which  have an
outstanding  balance  of  $133,508,  bear  interest  at 6% per  annum.  Loans of
$124,492 from one shareholder were offset by a corresponding  amount  receivable
from the same shareholder.

     In  the  aforesaid   transactions,   we  relied  upon  the  exemption  from
registration  afforded  by Section  4(2) under the  Securities  Act of 1933,  as
amended, to issue the securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None


                                       10

<PAGE>



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

         99.1  Certification of Financial Statements in accordance with Sarbanes
               -Oxley Act of 2002

     (b) Reports on Form 8-K.

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

                                       11

<PAGE>


<TABLE>

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

                                     ASSETS
                                     ------
<CAPTION>
                                                                             September 30,    December 31,
                                                                                  2002            2001
                                                                             -------------    ------------
<S>                                                                          <C>              <C>
Current assets:
   Cash and cash equivalents                                                 $      75,584    $    214,736
   Accounts receivable, net of allowance for doubtful accounts
               of $60,000 in 2002 and 2001                                         210,714         473,401
   Inventories                                                                     537,683         977,348
   Prepaid expenses and other current assets                                        45,579          45,103
   Related party loan receivable                                                    15,072          66,940
                                                                             -------------    ------------
               Total current assets                                                884,632       1,777,528

Property and equipment, net of accumulated depreciation of $257,572
   in 2002 and $200,661 in 2001                                                    258,740         283,663
Patents and trademarks, net of accumulated amortization of
   $229,544 in 2002 and $170,644 in 2001                                         1,368,116         724,567
Related party loan receivable                                                      344,497         207,229
Security deposits                                                                   26,242          44,318
                                                                             -------------    ------------

                  TOTAL ASSETS                                               $   2,882,227    $  3,037,305
                                                                             =============    ============

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

Current liabilities:
   Lines of credit                                                           $   2,299,201    $    600,000
   Current maturities of long-term debt                                             35,000         257,500
   Accounts payable and accrued expenses                                         1,229,460         847,640
   Shareholder loans                                                               133,508              --
                                                                             -------------    ------------
                  Total current liabilities                                      3,697,169       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, cumulative, 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,
      16,977,498 shares issued, 16,320,749 shares outstanding in 2002
      16,577,833 shares issued, 15,921,084 shares outstanding in 2001           33,559,464      32,361,961
   Additional paid-in capital                                                   30,626,213      30,798,116
   Accumulated deficit                                                         (67,555,487)    (64,417,780)
   Treasury stock at cost, 657,833 shares in 2002 and 2001                        (597,989)       (597,989)
                                                                             -------------    ------------
                  Total stockholders' equity (deficit)                          (1,384,942)        727,165
                                                                             -------------    ------------

                  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       $   2,882,227    $  3,037,305
                                                                             =============    ============
</TABLE>


           See notes to unaudited consolidated financial statements.

                                       12

<PAGE>

<TABLE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
                                   (UNAUDITED)



<CAPTION>
                                                           2002            2001
                                                       ------------    ------------
<S>                                                    <C>             <C>
Sales                                                  $  1,043,977    $  1,394,072

Cost of goods sold                                          791,853       1,105,202
                                                       ------------    ------------

Gross profit                                                252,124         288,870

Income from licensing and royalties                          50,000              --
                                                       ------------    ------------
                                                            302,124         288,870
                                                       ------------    ------------
Operating expenses:
      Selling and promotional                               641,446       1,163,748
      General and administrative                          1,633,158       1,851,666
      Loss on factory closing and disposal of assets          4,500         184,441
      Research and development                              278,401         303,999
      Depreciation and amortization                         116,310         105,036
      Equity-based compensation                             749,349       1,008,680
      Reorganization expense                                     --         150,000
                                                       ------------    ------------
                  Total operating expense                 3,423,164       4,767,570
                                                       ------------    ------------

Loss from operations                                     (3,121,040)     (4,478,700)
                                                       ------------    ------------
Other income (expense):
      Interest income                                        25,666              --
      Interest expense                                      (71,180)        (12,706)
      Equity-based interest expense                         (56,751)        (15,000)
      Settlement adjustment                                  85,598              --
                                                       ------------    ------------
                  Total other income (expense)              (16,667)        (27,706)
                                                       ------------    ------------

Loss from continuing operations                          (3,137,707)     (4,506,406)

Discontinued operations                                          --        (208,764)
                                                       ------------    ------------

      NET LOSS                                         $ (3,137,707)   $ (4,715,170)
                                                       ============    ============
Loss per common share:
      Continuing operations                            $      (0.19)   $      (0.33)
      Discontinued operations                                    --           (0.02)
                                                       ------------    ------------
                                                       $      (0.19)   $      (0.35)
                                                       ============    ============

Weighted average common shares outstanding               16,101,692      13,589,947
                                                       ============    ============

</TABLE>

           See notes to unaudited consolidated financial statements.

                                       13

<PAGE>

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


<CAPTION>
                                                           2002            2001
                                                       ------------    ------------
<S>                                                    <C>             <C>
Sales                                                  $    210,869    $    421,738

Cost of goods sold                                          201,463         368,950
                                                       ------------    ------------

Gross profit                                                  9,406          52,788
                                                       ------------    ------------
Operating expenses:
      Selling and promotional                               202,877         405,648
      General and administrative                            583,164         672,817
      Loss on factory closing and disposal of assets             --          81,798
      Research and development                              121,074         111,102
      Depreciation and amortization                          41,859          35,012
      Equity-based compensation                             700,524         151,180
                                                       ------------    ------------
                  Total operating expense                 1,649,498       1,457,557
                                                       ------------    ------------

Loss from operations                                     (1,640,092)     (1,404,769)
                                                       ------------    ------------
Other income (expense):
      Interest income                                         7,847              --
      Interest expense                                      (34,156)         (4,198)
      Equity-based interest expense                         (20,918)         (7,500)
                                                       ------------    ------------
                  Total other income (expense)              (47,227)        (11,698)
                                                       ------------    ------------
Loss from continuing operations                          (1,687,319)     (1,416,467)

Discontinued operations                                          --            (209)
                                                       ------------    ------------

      NET LOSS                                         $ (1,687,319)   $ (1,416,676)
                                                       ============    ============
Loss per common share:
      Continuing operations                            $      (0.10)   $      (0.09)
      Discontinued operations                                    --              --
                                                       ------------    ------------
                                                       $      (0.10)   $      (0.09)
                                                       ============    ============

Weighted average common shares outstanding               16,209,899      15,556,265
                                                       ============    ============
</TABLE>


           See notes to unaudited consolidated financial statements.

                                       14

<PAGE>

<TABLE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
            FOR THE NINE MONTHS ENDED SEPTEMBER 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       --          --       --         --            --            --

Issuance of stock for
   services to shareholders              234,005      700,524

Interest expense for
   warrants granted                           --           --       --          --       --         --        34,251            --

Net loss for the nine month period            --           --       --          --       --         --            --    (3,137,707)
                                    ------------  -----------  -------  ----------  -------  ---------   -----------  ------------

Balance at September 30, 2002         16,977,498  $33,559,464  498,127  $2,582,857  657,833  $(597,989)  $30,626,213  $(67,555,487)
                                    ============  ===========  =======  ==========  =======  =========   ===========  ============
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       15


<PAGE>

<TABLE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
                                   (UNAUDITED)

<CAPTION>
                                                                               2002            2001
                                                                            -----------    -----------
<S>                                                                         <C>            <C>
Cash flows from operating activities:
   Net loss                                                                 $(3,137,707)   $(4,715,170)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
          Bad debts                                                                  --         49,184
          Depreciation and amortization                                         116,310        105,036
          Settlement adjustment                                                 (85,598)            --
          Fees, commissions, and interest paid in stock and warrants            813,601      1,001,180
          Interest accrued on shareholder loans                                 (17,350)        (8,158)
          Loss on factory closing and disposal of assets                          4,500        184,441
          Changes in operating assets and liabilities:
             (Increase) decrease in accounts receivable                         262,687       (250,015)
             (Increase) decrease in inventories                                 439,665       (539,429)
             (Increase) decrease in prepaid expenses
                and other current assets                                           (476)      (234,674)
             (Increase) decrease in security deposits                            18,076         (9,092)
             Increase (decrease) in accounts payable and accrued expenses       381,820        107,306
                                                                            -----------    -----------
                  Net cash used in operating activities                      (1,204,472)    (4,309,391)
                                                                            -----------    -----------

Cash flows from investing activities:
   Advances to related parties                                                  (68,050)            --
   Additions to capital expenditures for equipment, patents and trademarks     (739,437)      (169,848)
                                                                            -----------    -----------
                  Net cash used in investing activities                        (807,487)      (169,848)
                                                                            -----------    -----------
Cash flows from financing activities:
   Proceeds from line of credit                                               1,699,201             --
   Principal payments under loan agreements                                    (171,902)      (202,078)
   Proceeds from issuance of common stock                                       212,000      4,272,768
   Purchase of treasury stock                                                        --         (4,540)
   Loans from officer and shareholders                                          133,508             --
                                                                            -----------    -----------
                  Net cash provided by financing activities                   1,872,807      4,066,150
                                                                            -----------    -----------

Net decrease in cash and cash equivalents                                      (139,152)      (413,089)

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

CASH AND CASH EQUIVALENTS - ENDING                                          $    75,584    $   296,262
                                                                            ===========    ===========
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       16


<PAGE>


                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                               September 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  nine-month  periods  ended
September  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,
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.

NOTE 3 -GOING CONCERN
---------------------

The Company has incurred losses from operations from inception.  The Company has
been dependent upon capital raised through private placement of convertible debt
and equity and through  the public  offering of the  Company's  common  stock to
finance its business operations. In addition, the Company has obtained new lines
of credit to implement its business plan.

                                       17
<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                               September 30, 2002

NOTE 3 -GOING CONCERN (CONTINUED)
---------------------------------

The  Company's  success may be  dependent  upon its ability to raise  additional
capital to  continue as a going  concern.  The  Company is in  discussions  with
investment  bankers and others to provide or assist in providing this financing.
However,  the  Company  does not have any  written  commitments  for any of this
financing,  and no  assurance  can be given  that the  Company  will  obtain any
additional  financing.  Unless  the  Company  begins to  generate  profits  from
operations in the near future,  of which there can be no assurance,  the failure
to infuse  additional  capital into the Company may force  management to curtail
marketing expenditures and product introductions, which may affect the Company's
ability to fully  implement its business  plan.  These issues raise  substantial
doubt about the Company's ability to continue as a going concern.

NOTE 4 - 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
6,058,853 and 4,991,914,  which consist of outstanding  warrants and convertible
preferred   shares  are  considered  to  be   antidilutive  at  2002  and  2001,
respectively.

NOTE 5 - PATENTS AND TRADEMARKS
-------------------------------

The Company  owns or  licenses  various  patents of  technology  concerning  its
V-configuration  skates, as well as in-line skates,  boots with  interchangeable
skate chassis,  and  self-illuminating  wheels. 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.

                                       18

<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                               September 30, 2002

NOTE 5 - PATENTS AND TRADEMARKS (CONTINUED)
-------------------------------------------

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  nine-month  period ended
September  30,  2002,  the  Company   capitalized   approximately   $707,000  of
expenditures  for legal  fees,  expert  witnesses  and other  costs  related  to
pursuing various legal actions against other manufacturers for infringing on its
patents.

NOTE 6 - SHAREHOLDER LOANS
--------------------------

On May 6, 2002, the Board of Directors  approved a short-term  debt program.  In
conjunction  therewith,  the Company borrowed $358,000 in the form of short-term
loans and granted  the lenders  irrevocable  common  stock  warrants to purchase
358,000 shares of common stock at an exercise  price of $3 per share.  The loans
from  shareholders  bear  interest at 6% 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.  During the nine-month period ended
September 30, 2002, the Company repaid $100,000 to one shareholder.

During  September  2002,  the Board of  Directors  realized  that the loans from
shareholders  should  bear  interest  at 6% per annum and not at 8% per annum as
originally  stated. The Company properly applied the correct interest rate of 6%
to the  outstanding  balance  of the  loan.  For  the  nine-month  period  ended
September 30, 2002, interest expense totaled $4,588 for these loans.

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  nine-month  period  ended  September  30,  2002,  the Company
recorded  $13,418 of equity based interest  expense in connection  with warrants
issued under the short-term debt program.

During the quarter ended  September  2002,  shareholders  exercised  warrants to
acquire  approximately  234,000  shares of common stock.  The exercise  price of
$700,524 was settled by the Company charging  compensation expense. The warrants
were issued in May 2002 to the  shareholders  for their  extending  the maturity
period  relative to the loan principal.  The amount of  compensation  charged to
operations has been determined  based upon the fair value of the common stock as
of the date of issuance.  Such fair value has been estimated by Management based
upon contemporaneous sales of common stock for cash at $3 per share.

                                       19
<PAGE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS
                               September 30, 2002

NOTE 7 - EQUITY TRANSACTIONS
----------------------------

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

For the nine-month  periods ended  September 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.

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

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

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 $22,500 for each of the
nine-month  periods ended  September  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.

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

For the  nine-month  period ended  September 30, 2002, the Company issued 16,275
shares of common stock and warrants to purchase 53,775 shares of common stock at
an exercise  price of $3 per share 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 nine-month  period
ended September 30, 2002.

For the nine-month  period ended  September 30, 2001, the Company issued 330,394
shares of  common  stock as  compensation  for  assets  and  services  valued at
$991,182.  In  addition,  the  Company  collected  $2,447,545  of  subscriptions
receivable.

                                       20
<PAGE>
                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS
                               September 30, 2002

NOTE 7 - EQUITY TRANSACTIONS (CONTINUED)
----------------------------------------

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

During the  nine-month  period ended  September  30, 2001,  investors  exercised
warrants to purchase an additional 592,521 shares of common stock 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  nine-month  period  ended
September  30,  2001,  officers  of the Company  exercised  warrants to purchase
3,712,966  shares of common stock 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.

Preferred stock converted
-------------------------

During the nine-month  period ended September 30, 2001,  shareholders  converted
81,286 shares of Series C preferred  stock to 81,286 shares of common stock.  In
connection therewith, the Company received $78,035 in conversion premiums.

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

During the  quarter  ended  September  30,  2002,  in return for  assistance  in
obtaining the line of credit and  collateralizing  the loan with personal assets
(Note 8), the  Company  provided a Director  irrevocable  warrants  to  purchase
750,000 shares of common stock at an exercise price of $3 per share.

The amount of equity based interest  expense charged to operations on account of
the director who received  warrants 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
1.84%;  expected  life of one year;  and no expected  volatility.  The  weighted
average fair value at date of grant for warrants  granted  during 2002 was $0.05
per share or $37,500.  For the nine-month  period ended  September 30, 2002, the
Company  recorded  $20,833 of equity based interest  expense in connection  with
warrants granted.


                                       21
<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                               September 30, 2002

NOTE 8 - LINES OF CREDIT
------------------------

During  August  2002,  the  Company  obtained  a new  $2,000,000  line of credit
agreement  with a bank.  The line of credit is available  through July 30, 2003.
Amounts drawn on this line of credit bear interest at the prime rate plus 1% but
not to be less than 6% per annum at any time. The effective rate as of September
30, 2002 was 6%. The Company shall reduce the outstanding  principal  balance of
the line of credit to zero and maintain that balance for 30 consecutive  days at
least once a year.  The  obligation  is  collateralized  by the  following:  all
general  intangibles  including  licenses,  patents  and  trademarks,   personal
guarantees  and by  mortgages  on  specific  real  estate  assets  of one of the
Company's officers and one of its directors.  At September 30, 2002,  $1,799,201
was drawn against this line of credit.

During the quarter ended  September 30, 2002, the Company used the proceeds from
the new line of credit to pay off the $1,250,000  line of credit  agreement with
another bank.  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
obligation  was  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 September  30, 2002,  the  borrowings on this line of credit were
paid in full.

In addition, the Company obtained a new $500,000 line of credit agreement with a
bank through January 1, 2003. Amounts drawn on this line of credit bear interest
at the New York (Wall Street  Journal) prime rate plus 3%. The effective rate as
of  September   30,  2002  was  7.75%  (prime  plus  3%).  The   obligation   is
collateralized by a personal guarantee and a $500,000  certificate of deposit of
one of the  Company's  directors.  At  September  30,  2002,  $500,000 was drawn
against this line of credit.

NOTE 9 - 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.

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

During the nine month period ended  September 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.

                                       22
<PAGE>

                                V-FORMATION, INC.
                                AND SUBSIDIARIES

                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS

                               September 30, 2002


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
--------------------------------------------------

Litigation
----------

In April 2001,  Vertex  Capital  Corp.  "Vertex"  filed a complaint  against the
Company  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.  The
Company filed an answer,  as well as  counterclaims  and the plaintiff has filed
cross  claims.  Discovery  has been  completed.  Both parties  filed Motions for
Summary  Judgment in this matter.  In response  thereto,  the court  granted the
Company  Motion,  in part and denied Vertex's  Motion.  It dismissed all but one
claim filed against us. The court has set a settlement conference in this matter
for  November  2002,  but no trial  date has yet been set.  It is the  Company's
position  that the  plaintiff's  remaining  claim is without  merit and is being
vigorously defended.

NOTE 10 - RELATED PARTY LOAN RECEIVABLE
---------------------------------------

The Company had made advances to the Chief  Executive  Officer.  As of September
30,  2002 and  December  31,  2001,  the balance of the loan  receivable,  which
includes advances and interest totaled $344,497 and $207,229, respectively. Such
advances  accrue  interest  at the  rate  of 8% per  annum,  are  unsecured  and
repayable  on demand.  At September  30, 2002 and  December  31,  2001,  accrued
interest on these  advances  totaled  $29,490 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.

NOTE 11 - SUBSEQUENT EVENTS
---------------------------

Shareholder loans
-----------------

Subsequent to September 30, 2002,  the Board of Directors  approved a short-term
loan and  convertible  debt  program.  In  conjunction  therewith,  the  Company
borrowed  $350,000 on a  short-term  basis and granted  irrevocable  warrants to
purchase  common  stock at an exercise  price of $3 per share.  The  granting of
warrants  to  purchase  116,667  shares of  common  stock was based on the total
proceeds received from the shareholders. One warrant granted for every $3 loaned
to the Company. The loans from shareholders bear interest at 15% per annum.

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

Subsequent to September 30, 2002,  the Board of Directors  approved the issuance
of  irrevocable  warrants  to a Director to  purchase  750,000  shares of common
stock.  The warrants are exercisable at $3 per share through  December 31, 2002.
The warrants were granted in connection  with the  Director's  assistance in the
Company  obtaining  the financing  arrangements  described in Note 8. During the
fourth  quarter,  the Company  revised the terms of the grant and issued 750,000
shares of the  Company's  common stock as  compensation  for the  aforementioned
services. The Company will record stock-based  compensation for this transaction
in the next quarter.

                                       23


                                   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: November 14, 2002


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


                                 CERTIFICATIONS


We, Richard Stelnick and Robert Miragliotta, certify that:

     1.   We have reviewed this quarterly  report on Form 10-QSB of V-Formation,
          Inc. (the "Registrant" or the "Company");

     2.   Based on our  knowledge,  this  quarterly  report does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary  in  order  to make  the  statements  made,  in light of the
          circumstances  under which such  statements  were made, not misleading
          with respect to the period covered by this quarterly report;

     3.   Based on our knowledge, the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the Registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   We  are  responsible  for  establishing  and  maintaining   disclosure
          controls and  procedures  (as defined in Exchange Act Rules 13a-14 and
          15d-14) for the Registrant and have;

          a.   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the Registrant,  including its
               consolidated  subsidiaries,  is made  known to  me/us  by  others
               within those  entities,  particularly  during the period in which
               this quarterly report is being prepared;


                                       24

<PAGE>


          b.   evaluated  the  effectiveness  of  the  Registrant's   disclosure
               controls and  procedures  as of a date within ninety (90) days of
               the filing date of this quarterly report (the "Evaluation Date");
               and

          c.   presented in this quarterly report my/our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               my/our evaluation as of the Evaluation Date;

     5.   We have  disclosed,  based on my/our  most recent  evaluation,  to the
          Registrant's  auditors  and the Audit  Committee  of the  Registrant's
          Board of Directors (or persons performing the equivalent function):

          a.   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the Registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  Registrant's  auditors any material
               weakness in internal controls; and

          b.   any fraud,  whether or not material,  that involves management or
               other  employees  who have a  significant  role in the  Company's
               internal controls; and

     6.   We have indicated in this  quarterly  report whether or not there were
          significant  changes in  internal  controls or in other  factors  that
          could significantly affect internal controls subsequent to the date of
          my/our most recent  evaluation,  including any corrective actions with
          regard to significant deficiencies and material weaknesses.


Dated: November 14, 2002                s/ Richard Stelnick
                                     -------------------------------------------
                                     Richard Stelnick, Chief Executive Officer


Dated: November 14, 2002                s/ Robert Miragliotta
                                     -------------------------------------------
                                     Robert Miragliotta, Chief Financial Officer



                                       25