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, 2003

                         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     No  X .
                                                              ---    ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest  practicable  date: As of December 23, 2003,  there were
18,950,011 common shares outstanding.



<PAGE>

                                     PART I

ITEM 1. FINANCIAL STATEMENTS.

     Our unaudited condensed consolidated financial statements for the three and
six months ended June 30, 2003, 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
condensed  consolidated  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.

     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

                                                                               2

<PAGE>

technology  in  their  design  and  implementation.  Importantly,  all  our  key
technologies are proprietary, licensable and transferable.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     We have  identified  critical  accounting  policies  that,  as a result  of
judgements,  uncertainties,   uniqueness  and  complexities  of  the  underlying
accounting standards and operation involved, could result in material changes to
our financial  position or results of operations  under different  conditions or
using different assumptions. The most critical accounting policies and estimates
are:

     >    The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenue and expenses during the reporting  period.
          Actual results could differ from those estimates.

     >    Fair value of instruments. The Company's financial instruments consist
          of accounts receivable,  accounts payable and long term debt. The fair
          value of financial instruments approximate their recorded values. Fair
          value of loans payable to  stockholders  and balances of bank lines of
          credit, in the circumstances, are not reasonably determinable.

     >    Patents and trademarks. 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.

     >    Impairment of long-lived assets.  Long-lived assets, including patents
          and  trademarks,  to be held  and  used are  reviewed  for  impairment
          whenever events or changes in circumstances  indicate that the related
          carrying  amounts  may  not  be  recoverable   using  expected  future
          undiscounted cash flows. When required, impairment losses on assets to
          be held and used are  recognized  based on the  excess of the  asset's
          carrying  amount over its fair value as determined  by selling  prices
          for  similar  assets or  application  of other  appropriate  valuation
          techniques.

     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 three and six-month periods ended June 30, 2003 and 2002.


                                                                               3

<PAGE>

Results of Operations

Comparison of Results of Operations  for the Three and Six Months Ended June 30,
2003 and 2002.

     Our sales  revenues  decreased to $302,672 for the three month period ended
June 30, 2003,  from  $447,631 for the three month period ended June 30, 2002, a
decrease of $144,959 (32%). The decrease in revenues was mainly  attributable to
a decrease in sales of our hockey  related  products  (skates,  paints,  gloves,
bags, jerseys and girdles) to $101,574 for the three months ended June 30, 2003,
compared to $447,631 for the three  months ended June 30, 2002.  The decrease in
sales was offset by sales of paintball  products totaling $201,098 for the three
months  ended June 30, 2003,  while none were sold during the similar  period in
the prior year.  Sales decreased to $639,891 for the six-month period ended June
30, 2003, from $776,826,  a decrease of $136,935 (18%). The decrease in revenues
was mainly attributable to a decrease in sales of our hockey related products to
$370,491 for the six months  ended June 30,  2003,  compared to $776,826 for the
six months  ended June 30,  2002.  We believe the decrease is due to the general
downturn  in the  economy.  The  decrease  in sales  was  offset by the sales of
paintball products during the six months ended June 30, 2003, totaling $269,370,
while none were sold during the similar  period in the prior year.  The decrease
in sales was also  offset by a  reduction  of sales  discounts  extended  to our
customers.

     For the three month  period ended June 30,  2003,  cost of sales  decreased
from  $345,216 for the three month  period  ended June 30, 2002 to  $233,084,  a
decrease of $112,132 (32%).  For the six month period ended June 30, 2003, costs
of sales  decreased to $499,351  compared to $590,390 for the similar  period in
2002, a decrease of $91,039  (15%).  The  decreases  were due to the decrease in
sales volume  previously  discussed,  offset by lower margins in 2003 because of
inventory  sold at  lower  prices  in  conjunction  with  our  ongoing  business
relationship  with Sports Giant LLC of California  which  commenced in the first
quarter of 2003, wherein we entered into an agreement  establishing Sports Giant
as our  distributor  of our Nexed brand name roller hockey  product line.  For a
more detailed  description of our activities  with Sports Giant,  see our annual
report on Form 10-KSB/A1 for our fiscal year ended December 31, 2002.

     While no assurances can be provided,  we anticipate a future revenue stream
from  infringement  litigation  which is  discussed  in "Part II,  Item 1, Legal
Proceedings,"  below  herein,  provided  that we are either  successful  in this
litigation or acceptable settlements are reached. During the three and six month
periods ended June 30, 2003, we did not receive any royalty payments  applicable
to such infringement litigation.

     During the three month period ended June 30, 2003,  selling and promotional
costs decreased by $73,599 (44%), from $165,277 to $91,678. During the six-month
period ended June 30, 2003, selling and promotional costs decreased by $194,379,
from $382,287 to $187,908 (51%). The decrease is due to our being more selective
in the  scheduling of  promotional  events which  therefore  reduced  associated
travel  costs.  In addition,  we eliminated  the majority of our salaried  sales
force during 2003.


                                                                               4

<PAGE>

     General  and  administrative  expenses  were  $951,612  for the three month
period ended June 30, 2003, compared to $931,581 for the similar period in 2002,
a slight  increase of $20,031  (2%).  General and  administrative  expenses were
$1,447,750  for the six months ended June 30, 2003,  compared to $1,614,145  for
the similar period in 2002, a decrease of $166,395 (10%).  The overall  decrease
is mainly  attributable  to a decrease of  professional  and outside  consultant
expenses during the first six months of 2003.  Insurance costs also decreased in
the current  year.  The decrease in expenses was offset by the issuance of stock
as  compensation  to employees  totaling  $270,750 as compared to $48,825 in the
similar period last year. During the first six months of 2003, we also amortized
$187,500 of equity-based deferred compensation recorded at December 31, 2002.

     Research and development costs during the three month period ended June 30,
2003  increased  to $128,822  from  $82,003 for the three  months ended June 30,
2002, an increase of $46,819 (57%).  During the six-month  period ended June 30,
2003, research and development costs were $256,907,  as compared to $157,327 for
the  similar  period in 2002,  an  increase of $99,580  (63%),  The  increase in
research  and  development  is  primarily  due  to  costs  associated  with  the
production  of numerous  samples in  conjunction  with a possible  future  joint
venture.

     During the three months ended June 30, 2003,  depreciation and amortization
expense  decreased  from  $38,142 to $21,842.  For the six months ended June 30,
2003,  depreciation and amortization  expense decreased from $73,603 to $60,950.
Amortization  and  depreciation  is  associated  with  patents,  trademarks  and
equipment.

     Interest income and expense increased from a net expense of $11,916 for the
three-month  period ended June 30, 2002 to a net expense of  $1,381,769  for the
three months ended June 30, 2003. Interest income and expense was $19,204 in the
six months ended June 30, 2002,  compared to $2,726,516 for the six months ended
June 30, 2003, an increase of $2,707,312.  This significant  increase was due to
the  amortization  of deferred  financing  costs  recorded at December 31, 2002,
including  the  amortization  of current year deferred  financing  costs for the
issuance of shares of our common  stock to one of our  directors  for  providing
collateral for our bank lines of credit.

     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 this obligation. During the six
month period ended June 30, 2003, we settled two minor legal matters by agreeing
to issue payments totaling $47,500.

     During the three month period ended June 30, 2003,  dividends  attributable
to preferred stock was $62,269. During the six month period ended June 30, 2003,
dividends attributable to preferred stock was $118,417.

     As a result, we generated a net loss attributable to common stockholders of
$(2,568,404) for the three months ended June 30, 2003 ($.14 per share), compared
to a net loss of $(1,119,004) for the three months ended June 30, 2002 ($.07 per
share). We generated a net loss

                                                                               5

<PAGE>

attributable to common  stockholders  of  $(4,705,376)  for the six months ended
June 30, 2003 ($.25 per share),  compared to a net loss of $(1,939,532)  for the
six months ended June 30, 2002 ($.12 per share).

Liquidity and Capital Resources

     At June 30, 2003, we had $90,083 in cash and cash  equivalents,  a decrease
of $371,116 from December 31, 2002.  This decrease in cash was  attributable  to
net cash used in operating activities of $1,131,637,  net cash used in investing
activities  of $12,246  offset by net cash  provided by financing  activities of
$772,767.

     At June 30, 2003,  our working  capital  deficiency  was  $3,666,382.  This
working  capital  deficiency  is  primarily  due to the fact we had made various
short-term  financing  arrangements  to  continue  operations,  such  as  having
$2,500,000  outstanding  at June 30, 2003 in borrowings  from our $2,000,000 and
$500,000 lines of credit. As of June 30, 2003, the $2,000,000 and $500,000 lines
of credit had expiration dates of June 30, 2003 and July 1, 2003,  respectively.
Since June 30, 2003,  we arranged to extend both lines of credit to December 31,
2003.  In  addition,  we have  financed  operations  by  borrowing  from various
stockholders  and directors and have $396,008  outstanding at June 30, 2003 from
such arrangements.

     Net cash used in operating  activities  during the  six-month  period ended
June 30, 2003, was  $1,131,637,  versus  $1,007,637 for the same period in 2002.
Net loss for the six months ended June 30, 2003, was $4,586,959 and net loss for
the six months ended June 30, 2002 was $1,939,532.  A significant  factor in the
loss was the  amortization of $2,479,170 of deferred  financing costs which were
recorded at December 31,  2002,  along with  $162,900 of current  year  deferred
financing costs. In addition, $270,750 of expense was paid in stock and warrants
for services. During the first six months of 2003, we also amortized $187,500 of
equity-based  deferred  compensation  recorded at December 31, 2002.  Also,  net
accounts receivable increased by $76,765 to $298,810, and inventory decreased by
$222,910 to $207,362 which is  attributable to the recent  relationship  entered
into with Sports Giant LLC.

     During the six months ended June 30, 2003,  investing  activities consisted
of capital expenditures for equipment totaling $11,309,  along with the purchase
of marketable securities of $937.

     Net  cash  provided  by  financing  activities  totaled  $772,767  for  the
six-month period ended June 30, 2003. This was mainly attributable to two of our
officers/directors  selling an aggregate of 741,000 shares of their Common Stock
in our Company and  thereafter  contributing  $795,765 of the proceeds from such
sale to us. In consideration  therefore,  we issued these two people warrants to
purchase up to 236,000 shares of our Common Stock, each such warrant exercisable
to purchase one share of our Common  Stock at a price of $3.75 per share.  These
warrants were to expire December 31, 2003. However,  the two  officers/directors
decided to surrender the warrants  back to us and the warrants were  terminated.
No  compensation  cost was  recorded as a result of the issuance of grants above
the fair market value at the time of grant.


                                                                               6

<PAGE>

     In August 2002, we entered into a new $2,000,000  line of credit  agreement
with a bank. The line of credit was originally  available through June 30, 2003,
but has been extended through December 31, 2003.  Amounts drawn on the line bear
interest at the prime rate plus 1% but not to be less than 6% at any time (6% at
June 30, 2003) and is payable monthly.  The obligation is  collateralized by the
personal  guarantees and second  mortgages on specific real estate assets of one
of our  officers  and one of our  directors  and by  assignments  of patents and
settlement  proceeds  from patent  infringements.  At June 30, 2003 the line was
fully  utilized.  The  line  of  credit  agreement  contains  certain  financial
covenants including the submission of timely financial  statements.  At June 30,
2003, we were in compliance with such covenants.

     In  addition,  in June  2002,  we  obtained a new  $500,000  line of credit
agreement with a bank. The line of credit was originally  available through July
1, 2003, but has been extended through December 31, 2003.  Amounts drawn on this
line of credit bear  interest at prime rate plus 3% (7.25% at June 30, 2003) and
are payable monthly. The obligation is collateralized by certificates of deposit
and personal guarantees of one of our directors.  At June 30, 2003, the line was
fully utilized.

     In connection  with our lines of credit for  $2,000,000  and  $500,000,  we
issued  1,100,000  shares of our Common  Stock  valued at $3.00 per share for an
aggregate  value  of  $3,300,000  to  certain   stockholders  and  directors  in
consideration for their providing  collateral of assets and personal guarantees.
Of such amounts, $1,287,500 is recorded as finance charges during the year ended
December  31,  2002.  Accordingly,  $2,012,500  has been  recorded  as  deferred
financing  costs as of December  31,  2002.  Such amount is being  amortized  as
interest  expense over the remaining life of the loans. For the six months ended
June 30, 2003,  $2,012,500 has been  expensed.  As of June 30, 2003, no deferred
balance remained.

     In connection  with the lines of credit for  $2,000,000  and  $500,000,  we
issued  85,800  shares of our Common  Stock,  valued at $3.00 per share,  for an
aggregate value of  approximately  $257,000 to a director in  consideration  for
extending  collateral for our bank lines of credit beyond the original  maturity
date. Such amount is being amortized as interest expense over the remaining life
of the loan. For the six months ended June 30, 2003, $257,000 has been expensed.
As of June 30, 2003, no deferred balance remained.

     In addition,  we have an  outstanding  note  payable  which had a principal
balance of $70,000 at June 30, 2003. This note,  which was originally  $175,000,
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.

     In May 2002, a  stockholder/director  granted us an unsecured  loan,  which
loan is due on or before  December 31, 2003, and bears interest at 6% per annum.
At June 30, 2003, the principal loan balance to the stockholder was $119,508.

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<PAGE>

     During 2002, we borrowed  various  unsecured loans from other  stockholders
and a  director,  which  bear  interest  at 6% per  annum,  leaving a balance of
$314,000 at December 31, 2002,  payable on or before  December 31, 2003.  During
the six months ended June 30, 2003,  $37,500 was repaid by us to this  director,
leaving a remaining balance of $276,500.

     These  two  aforementioned   transactions  resulted  in  loans  payable  to
stockholders/directors of $396,008 at June 30, 2003.

     In connection with these borrowings from the stockholders and directors, we
issued  642,585  shares of our Common Stock,  valued at $3.00 per share,  for an
aggregate value of approximately  $1,928,000,  to the stockholders and directors
in consideration of them providing such funds. Such amount is being amortized as
interest  expensed  over the  remaining  life of the  loans.  For the year ended
December 31, 2002,  approximately  $1,461,000 has been expensed.  As of December
31, 2002,  approximately  $467,000 has been  deferred.  For the six months ended
June 30, 2003,  $466,670  has been  expensed.  As of June 30, 2003,  no deferred
balance remained.

     We have extended the lines of credit for $2,000,000 and $500,000 beyond the
maturity  dates  of June  30,  2003,  and  July 1,  2003,  as  presented  in the
accompanying condensed consolidated unaudited financial statements as of and for
the three and six months ended June 30, 2003. If either of these lines of credit
or the  borrowings  from  shareholders  and directors  were to become due, it is
unlikely that we would be able to meet these  obligations  or other  obligations
that occur in the normal course of business. We are pursuing long-term financing
arrangements and have taken several strategic initiatives to improve our working
cash  position,  including  an  expansion  of product  lines and  various  legal
proceedings  to defend our  patents.  We also have  taken  severe  cost  cutting
measures, including a reduction of staff. At this time, we are unable to predict
whether we will be successful in our efforts.

     We have incurred net losses and utilized  cash on our operating  activities
for each of the three and six months  ended June 30, 2003.  Our capital  deficit
has  increased  at  June  30,  2003  from  December  31,  2002.  Our  management
anticipates  that net losses  will  continue  and that  additional  cash will be
utilized for operations during the year ending December 31, 2003.

     We believe we will have adequate financial  resources for at least the next
12 months.  In order to increase  revenues,  we have started  selling  paintball
apparel and related  products.  Such sales,  which  commenced  in October  2002,
amounted to $269,370 for the six-month period ended June 30, 2003. However,  if,
during the next 12 months, we are unable to continually  extend current lines of
credit and borrowings  from  shareholders  as they become due, raise  additional
long-term  financing  arrangements  and  receive  market  acceptance  of our new
business  strategies,  we will not be able to continue as a going  concern.  The
report of our independent auditors on the consolidated  financial statements for
the years ended  December  31, 2002 and 2001  include an  explanatory  paragraph
which  stated that we  incurred  substantial  net losses  during the years ended
December  31, 2002 and 2001,  have a capital  deficit and have  working  capital
deficiency,  which  raise  substantial  doubt about our ability to continue as a
going  concern.  The  consolidated  financial  statements  do  not  include  any
adjustments that might result from the uncertainty.


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<PAGE>

     Finally,   during  the  six  months  ended  June  30,  2003,   two  of  our
officers/directors  sold an aggregate of 722,500 shares of their Common Stock in
our  Company and  contributed  $795,765  of the  proceeds  from such sale to us.
During  the  three  months  ended  March 31,  2003,  in  consideration  for such
proceeds,  we issued these two people  warrants to purchase up to 236,000 shares
of our  Common  Stock,  each such  warrant  exercisable  at a price of $3.75 per
warrant.  These  warrants  were to expire  December 31, 2003;  however,  the two
officers/directors decided to surrender the warrants back to the Company and the
warrants were terminated.  No compensation  cost was recorded since the warrants
were granted at an exercise price above the fair market value.

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 in the future.

     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 third most popular  extreme  sport,  having  surpassed
snowboarding participation.  Paintball participation is projected to continue to
grow and expand worldwide.

     During the second  quarter of 2003,  we  established  Muscovy  Import Group
("MIG").  Through our past experience with international  trade transactions and
through the  development of foreign  strategic  alliances,  Muscovy Import Group
offers consulting services to American companies seeking to establish a business
presence in the Russian  Federation and other countries  within the Commonwealth
of Independent States and the Newly Independent States.


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<PAGE>

     Russian  markets are expanding  exponentially  and are  embracing  American
goods and American business partners.  Macroeconomic  factors such as a dramatic
increase in gross  domestic  product and a decrease in  inflation,  as well as a
change in social and lifestyle  factors are reasons why businesses are currently
eager to enter or expand their presence in the Russian marketplace. Further, the
political  stability  of the current  administration  and the  overall  positive
attitude of the  Russian  people  bolster the  decision  for  companies  to move
forward in this area.

     The services offered by MIG include  assistance in the development of sales
and  distribution  channels  in  Russia,  identifying  and  contacting  selected
accredited  business partners in Russia,  arranging for preferred tax and tariff
treatment when doing business in Russia and negotiating the financial aspects of
any foreign business/trade transactions.

     Though MIG has only recently begun offering its consulting services,  since
August 2003, we have generated and received  $275,000 in consulting fees through
the date of this report.  While no assurances  can be provided,  we believe this
segment of our  business  has  tremendous  potential.  The  relevant  consulting
contracts  include a front end fee to MIG,  plus a percentage of future sales in
Russia by the respective client.

     Based upon the above  discussions,  we believe  the  acceptance  of our new
paintball  product  line and the  expansion  of MIG  together  with the expected
growth of our existing  business lines will enhance our growth. If these factors
occur,  and if economic  conditions in the United States  improve,  we expect to
reach  profitability  in 2004.  However,  there  can be no  assurances  that our
forecasts will be accurate.

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, 2003.

ITEM 3. CONTROLS AND PROCEDURES

     Our Chief  Executive  Officer and Chief  Financial  Officer (our  principal
executive  officer  and  principal   financial  officer,   respectively),   have
concluded,  based on their  evaluation as of December 23, 2003, (the "Evaluation
Date"),  that  the  design  and  operation  of  our  "disclosure   controls  and
procedures"  (as defined in Rules  13a-14(c) and 15d-14(c)  under the Securities
Exchange Act of 1934, as amended, (the "Exchange Act")), are effective to ensure
that  information  required  to be  disclosed  by us in  the  reports  filed  or
submitted  by us under the  Exchange Act is  accumulated,  recorded,  processed,
summarized  and reported to our  management,  including our principal  executive
officer and our principal  financial  officer,  as  appropriate  to allow timely
decisions regarding whether or not disclosure is required.

     There were no significant  changes in internal controls or in other factors
that could  significantly  affect internal controls subsequent to the Evaluation
Date, nor were there any

                                                                              10

<PAGE>

significant  deficiencies or material weaknesses in our internal controls.  As a
result, no corrective actions were required or undertaken.

                                     PART II

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.  In
November 2002, the Court entered an Order on the defendant's  Motion for Summary
Judgment,  dismissing  our  claims.  We have  filed a timely  notice  of  appeal
requesting  reversal of the trial court  decision  and this matter is now before
the US  Court  of  Appeals  for the 2nd  Circuit.  While  no  assurances  can be
provided, we are optimistic about the likelihood of success on appeal.

     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., Salomon 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.  In November
2002, the Court entered an Order on the defendant's Motion for Summary Judgment,
dismissing our claims.  We intend to appeal,  but have not yet done so as of the
date of this Report, as no final judgment has been entered.  While no assurances
can be provided, we are optimistic about the likelihood of success on appeal.

     In April 2001,  Vertex  Capital Corp.  filed a complaint  against us in the
United  States  District  Court for the  Southern  District of New York  seeking
damages for alleged breach of contract and unjust enrichment. In September 2002,
the court entered summary  judgment in our favor,  dismissing all but one of the
plaintiff's claims. In January 2003, we entered into a verbal settlement of this
matter,  which provided for us to issue warrants.  However,  when the settlement
was being reduced to writing,  a dispute concerning the terms of the warrants to
be issued arose and no formal  settlement  was reached.  The court has dismissed
this action,  without  prejudice,  due to the failure of the plaintiff to timely
file pleadings. No further action has taken place.

     In October 2001,  we filed an action  against USCO  Distribution  Services,
Inc.,  d/b/a USCO  Logistics  ("USCO"),  which was removed to 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.  USCO
asserted counterclaims totaling approximately $103,000

                                                                              11

<PAGE>

based on its charges for services  under the contracts and asserted a possessory
lien on our inventory in their  possession.  USCO  subsequently  liquidated  the
inventory  pursuant to their  possessory  lien. In April 2003, we entered into a
confidential  settlement  agreement,  which  partially  reimbursed  USCO for UPS
shipping charges.

     In January 2002, we filed a complaint in the United States  District Court,
Southern District of New York, Docket No. 010 CIV 1693,  against K2 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  and the  assignment  of two  patents.  As part of the
settlement, the Court ordered the settlement terms confidential.

     Thereafter,  we  learned  that,  immediately  prior  to  entering  into the
aforesaid settlement agreement,  K2 Corporation allegedly signed agreements with
both  Benetton  Group,  SPA and Roller Blade,  Inc., as well as adidas  America,
Salomon North  America,  Inc.,  Salomon S.A.,  adidas AG and adidas  Salomon AG,
which  agreements  included  covenants  not to sue for any  patent  infringement
relating  to the  patents  subsequently  assigned  to us.  We  maintain  that K2
Corporation never advised us of these agreements.  Applicable  thereto, in March
2003, we commenced an action against K2 Corporation  and its General  Counsel in
the US District Court,  District of Colorado,  alleging fraudulent  concealment,
misrepresentation  and breach of  contract,  with damages to be  established  at
trial. This matter was subsequently remanded to the United States District Court
for the Western District of Seattle,  Washington. As of the date of this Report,
this court has  issued  scheduling  orders  and the  matter is in the  discovery
phase. Trial on this matter has been scheduled for September 2004.

     Relevant  thereto,  in January 2003 we also commenced  patent  infringement
suits against both Benetton Group, SPA and Roller Blade, Inc., as well as 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. in separate  actions filed in the US
District Court, District of Colorado,  where we have alleged infringement by the
defendants  of those  patents  assigned to us by K2  Corporation.  Discovery has
commenced in these matters.

     In December 2002, we filed an action in the US District Court,  District of
New Jersey,  against KPMG Corporate  Finance LLC.,  ("KPMG")  alleging breach of
contract  and  conflict  of  interest.  We had  previously  signed a  consulting
agreement  with KPMG for it to  provide  investment  banking  services.  We have
alleged that KPMG failed to disclose that they also  represented  certain of our
competitors.   This  matter  was  resolved  by  the  parties   entering  into  a
confidential settlement agreement in October 2003.

     In December 1997, we entered into a Confidential  Settlement  Agreement and
Release  in  conjunction  with  a  Product  and  License  Agreement  to  resolve
outstanding litigation in the matter of The Brandner Corporation v. Jeannette L.
Brandner,  et al.,  docket no. 96CV 3163 (JRS) then pending in the United States
District Court for the Southern District of New York. The

                                                                              12

<PAGE>

settlement  sought  to  resolve  all  outstanding  issues  regarding  technology
embraced by Brandner's patent, no. 5,303,940 (the "940 Technology"). Pursuant to
the Product and License  Agreement,  we made all required  royalty  payments for
skates  utilizing  the  technology  as set forth in the  License  Agreement.  In
February 2002, Brandner filed a request with the Court, seeking royalty payments
for  skates  not  covered  by the 940  Technology.  We  filed an  opposition  to
Brandner's  request. In November 2002, the Court entered judgment against us. We
have  appealed  this ruling to the US Court of Appeals for the 2nd Circuit.  The
Court of Appeals has remanded the case back to the District Court to explore the
Company's position that the District Court lacked  jurisdiction over any alleged
continuing  disputes  between the parties  relative to the product and licensing
contract.  Although no assurances can be provided,  we are optimistic  about the
likelihood of our prevailing in this matter on appeal.

     Finally,  in December 2002, a complaint was filed against us by Primagency,
Inc. in the  Supreme  Court of the State of New York,  who alleged  that we owed
$200,000 in placement fees arising out of an agency compensation agreement which
we entered  into with the  plaintiff.  Judgment  was  entered  against us in the
principal  amount or $200,000  which  judgment was stayed by the court.  We have
filed an appeal and the matter is currently pending.

     There  are no  other  material  legal  proceedings,  either  threatened  or
current, to which we are a party, or are otherwise aware.

ITEM 2. CHANGES IN SECURITIES

     In  March  2003,  our  Board  of  Directors  declared  a  dividend  on  our
outstanding  Series A, Series B, Series C and Series D Preferred  Stock pursuant
to the  designations  and preferences of each such series of preferred stock. At
December 31, 2002,  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  $174,792  and  $7,320,  respectively.  All
dividends in arrears for 2002 were paid though the issuance of 78,944  shares of
our Common Stock during the first quarter of 2003.

     Also,  during the six-month  period ended June 30, 2003, two holders of our
Series C  Preferred  Stock  elected to convert  an  aggregate  of 24,000 of such
shares into 24,000 shares of our Common Stock.  Holders of 200 of our issued and
outstanding  Common  Stock  Purchase  Warrants  also  elected to exercise  their
warrants and we issued 200 shares of our Common Stock  applicable  thereto.  The
exercise price of these warrants was $3.75 per warrant.

     During the six months  ended June 30,  2003,  two  employees  were  granted
90,250  shares  of our  Common  Stock as part of an  employee  agreement,  or as
additional compensation.

     In connection  with our lines of credit for  $2,000,000  and  $500,000,  we
issued  85,800  shares  of our  Common  Stock  valued  at $3.00 per share for an
aggregate  value of  approximately  $257,00 to a director in  consideration  for
extending collateral for our bank lines of credit beyond

                                                                              13

<PAGE>

the original  maturity date. Such amount is being amortized as interest  expense
over the  remaining  life of the loans.  For the six months ended June 30, 2003,
$257,400 has been expensed. As of June 30, 2003, no deferred balance remained.

     Finally,   during  the  six  months  ended  June  30,  2003,   two  of  our
officers/directors  sold an aggregate of 722,500 shares of their Common Stock in
our Company and thereafter  contributed $795,765 of the proceeds to us from such
sale. See "Liquidity and Capital  Resources,"  above.  From July 1, 2003 through
September 30, 2003, these  officers/directors sold an aggregate of 18,500 shares
of their common stock in our Company and thereafter,  contributed $18,500 of the
proceeds  of these sales to us. In  consideration  of such  proceeds,  we issued
these two people  warrants to purchase up to 236,000 shares of our Common Stock,
each such warrant  exercisable  at a price of $3.75 per warrant.  These warrants
were to expire December 31, 2003. However, the two officers/directors decided to
surrender  the  warrants  back  to us  and  the  warrants  were  terminated.  No
compensation  cost was recorded  since the warrants  were granted at an exercise
price above the fair market value.

Subsequent Event

     During the three months ended  September 30, 2003, for services  performed,
an officer/director was issued 353,333 warrants to purchase common shares of our
Company,  each such  warrant  exercisable  at a price of $3.75 per  warrant.  We
converted  176,667 of such warrants on a cashless  basis.  The  officer/director
decided to surrender the remaining  176,666 warrants back to us and the warrants
were terminated.

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

         31      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
                 of 2002.

         32      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
                 of 2002.

     (b) Reports on Form 8-K.

                                                                              14

<PAGE>

     We did not file any reports on Form 8-K during the three month period ended
June 30, 2003.


                                                                              15
<PAGE>

<TABLE>
V-FORMATION, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet
(Unaudited)

<CAPTION>
                                                                                   June 30, 2003
                                                                                   ------------
<S>                                                                                <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                       $     90,083
   Investments in marketable securities                                                     937
   Accounts receivable, net of allowance for doubtful accounts of $40,000               298,810
   Inventories                                                                          207,362
   Prepaid expenses and other current assets                                             44,874
                                                                                   ------------

        Total current assets                                                            642,066

Property and equipment, net                                                             229,524
Patents and trademarks, net of accumulated amortization of $260,668                     658,704
Security deposits                                                                        24,792
Deferred financing costs                                                                 94,500
                                                                                   ------------

                                                                                   $  1,649,586
                                                                                   ============

LIABILITIES
Current liabilities:
   Bank lines of credit                                                            $  2,500,000
   Current maturities of long-term debt                                                  35,000
   Accounts payable and accrued expenses                                              1,311,081
   Related party loans payable                                                           66,359
   Due to stockholders/directors - loans                                                396,008
                                                                                   ------------

        Total current liabilities                                                     4,308,448
                                                                                   ------------

Long-term debt, net of current maturities                                                35,000
                                                                                   ------------

Mandatory redeemable, Series A convertible 6% cumulative preferred stock,
   no par value, 500,000 shares authorized, issued and
   outstanding, aggregating liquidation preference of $30,000                           500,000
                                                                                   ------------

CAPITAL DEFICIT
   Preferred stock - no par value, 7,000,000 shares authorized,
     474,127 and 473,043 shares issued and outstanding, respectively;
     aggregate liquidation preference $303,709 (Series B $300,003,
     Series C $3,401, Series D $305)                                                  2,438,857
   Common stock - no par value, 45,000,000 shares authorized, 19,430,093
      and 18,773,344 shares issued and outstanding, respectively;                    40,993,303
   Additional paid-in capital                                                        45,425,167
   Deferred compensation                                                               (187,500)
   Accumulated deficit                                                              (91,265,700)
   Treasury stock at cost, 657,833 shares                                              (597,989)
                                                                                   ------------

        Total capital deficit                                                        (3,193,862)
                                                                                   ------------

                                                                                   $  1,649,586
                                                                                   ============

</TABLE>


See notes to condensed consolidated financial statements

                                      F-1

                                                                              16
<PAGE>
<TABLE>
V-FORMATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(Unaudited)

<CAPTION>
                                                                                      Three Months Ended
                                                                                            June 30,
                                                                                  ----------------------------
                                                                                      2003            2002
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
Net sales                                                                         $    302,672    $    447,631
Cost of goods sold                                                                     233,084         345,216
                                                                                  ------------    ------------

Gross profit                                                                            69,588         102,415
License/royalty income                                                                      --          15,000
                                                                                  ------------    ------------

                                                                                        69,588         117,415
                                                                                  ------------    ------------

Costs and operating expenses:
   Selling and promotional                                                              91,678         165,277
   General and administrative (including stock-based compensation
      of $364,500 in 2003 and $48,825 in 2002)                                         951,612         931,581
   Research and development                                                            128,822          82,003
   Depreciation and amortization                                                        21,842          38,142
                                                                                  ------------    ------------

      Total operating expenses                                                       1,193,954       1,217,003
                                                                                  ------------    ------------

Loss from operations                                                                (1,124,366)     (1,099,588)
                                                                                  ------------    ------------

Other income (expense):
   Interest income                                                                          --           8,960
   Interest and financing expense                                                   (1,381,769)        (20,876)
   Equity-based interest expense                                                            --          (7,500)
                                                                                  ------------    ------------

      Total other income (expense), net                                             (1,381,769)        (19,416)
                                                                                  ------------    ------------

Net loss                                                                            (2,506,135)     (1,119,004)
                                                                                  ------------    ------------

Dividends attributable to preferred stock                                               62,269              --
                                                                                  ------------    ------------

Net loss attributable to common stockholders                                      $ (2,568,404)  $  (1,119,004)
                                                                                  ============    ============

Net loss attributable to common stockholders per common share basic and diluted:  $      (0.14)   $      (0.07)
                                                                                  ============    ============

Weighted average shares basic and diluted                                           18,683,094      16,017,206
                                                                                  ============    ============

</TABLE>
See notes to condensed consolidated financial statements

                                      F-2

                                                                              17
<PAGE>
<TABLE>
V-FORMATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(Unaudited)

<CAPTION>
                                                                                        Six Months Ended
                                                                                             June 30,
                                                                                   ----------------------------
                                                                                       2003            2002
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
Net sales                                                                          $    639,861    $    776,826
Cost of goods sold                                                                      499,351         590,390
                                                                                   ------------    ------------

Gross profit                                                                            140,510         186,436
License/royalty income                                                                       --          50,000
                                                                                   ------------    ------------

                                                                                        140,510         236,436
                                                                                   ------------    ------------

Costs and operating expenses:
   Selling and promotional                                                              187,908         382,287
   General and administrative (including stock-based compensation
      of $458,250 in 2003 and $48,825 in 2002)                                        1,447,750       1,614,145
   Research and development                                                             256,907         157,327
   Depreciation and amortization                                                         60,950          73,603
                                                                                   ------------    ------------

      Total operating expenses                                                        1,953,515       2,227,362
                                                                                   ------------    ------------

Loss from operations                                                                 (1,813,005)     (1,990,926)
                                                                                   ------------    ------------

Other income (expense):
   Interest income                                                                          187          17,820
   Interest and financing expense                                                    (2,726,641)        (37,024)
   Equity-based interest expense                                                             --         (15,000)
    Settlement adjustment                                                               (47,500)         85,598
                                                                                   ------------    ------------

      Total other income (expense), net                                              (2,773,954)         51,394
                                                                                   ------------    ------------

Net loss                                                                             (4,586,959)     (1,939,532)
                                                                                   ------------    ------------

Dividends attributable to preferred stock                                               118,417              --
                                                                                   ------------    ------------

Net loss attributable to common stockholders                                       $ (4,705,376)   $ (1,939,532)
                                                                                   ============    ============

Net loss attributable to common stockholders per common share basic and diluted:   $      (0.25)   $      (0.12)
                                                                                   ============    ============

Weighted average shares basic and diluted                                            18,615,894      16,017,206
                                                                                   ============    ============
</TABLE>

See notes to condensed consolidated financial statements

                                      F-3

                                                                              18

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

Condensed Consolidated Statements of Cash Flows
(Unaudited)

<CAPTION>
                                                                                     Six Months Ended
                                                                                          June 30,
                                                                                 --------------------------
                                                                                     2003           2002
                                                                                 -----------    -----------
<S>                                                                              <C>            <C>
Cash flows from operating activities:
   Net loss                                                                      $(4,586,959)   $(1,939,532)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                   60,950         79,603
      Amortization of deferred compensation                                          187,500             --
      Employee compensation paid in common stock                                     270,750         48,825
      Amortization of deferred financing costs                                     2,642,070             --
      Changes in:
        Accounts receivable                                                          (76,765)       113,765
        Inventories                                                                  222,910        336,223
        Prepaid expenses and other current assets                                      2,581        (13,311)
        Security deposits                                                                950         20,188
        Accounts payable and accrued expenses                                        144,376        346,602
                                                                                 -----------    -----------

           Net cash used in operating activities                                  (1,131,637)    (1,007,637)
                                                                                 -----------    -----------

Cash flows from investing activities:
   Capital expenditures for equipment                                                (11,309)        (5,000)
   Capital expenditures for patents                                                       --         (8,026)
   Purchase of marketable securities                                                    (937)            --
                                                                                 -----------    -----------

           Net cash used in investing activities                                     (12,246)       (13,026)
                                                                                 -----------    -----------

Cash flows from financing activities:
   Borrowings under bank lines of credit                                                  --      1,885,000
    Repayment of bank lines of credit                                                     --     (1,250,000)
   Advances from/(to) related parties - net                                           48,752       (185,551)
   Loans from officers/directors - net                                               (37,500)       402,500
   Principal payments under long-term debts                                          (35,000)      (225,083)
    Capital contribution by stockholders                                             795,765             --
   Proceeds from issuance of common stock and exercise of warrants                       750        212,000
                                                                                 -----------    -----------

           Net cash provided by financing activities                                 772,767        838,866
                                                                                 -----------    -----------

Net decrease in cash and cash equivalents                                           (371,116)      (181,797)
Cash and cash equivalents, beginning of period                                       461,199        214,736
                                                                                 -----------    -----------

Cash and cash equivalents, end of period                                         $    90,083    $    32,939
                                                                                 ===========    ===========
</TABLE>

See notes to condensed consolidated financial statements

                                       F-4

                                                                              19
<PAGE>

V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]  Basis of Presentation:

     The accompanying condensed consolidated financial statements as of June 30,
     2003 and for the six month  periods  ended June 30, 2003 and June 30, 2002,
     is unaudited,  but, in the opinion of the management of  V-Formation,  Inc.
     (the  "Company"),  contain  all  adjustments  which the  Company  considers
     necessary for the fair presentation of the Company's  financial position as
     of June 30, 2003,  the results of its operations and its cash flows for the
     six month  periods  ended June 30, 2003 and June 30,  2002.  The  condensed
     consolidated  financial  statements  included  herein have been prepared in
     accordance with the accounting  principles generally accepted in the United
     States of America for interim financial information and the instructions to
     Form 10-QSB.  Accordingly,  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.  These
     financial  statements  should  be  read in  conjunction  with  the  audited
     financial  statements  for the year ended December 31, 2002 included in the
     Company's  Annual Report on Form  10-KSB/A1  filed with the  Securities and
     Exchange  Commission.  The results of  operations  for the six months ended
     June 30,  2003 and 2002 are not  necessarily  indicative  of the results of
     operations to be expected for the full year.

[2]  Business:

     V-Formation,  Inc.  manufactures through contractors and distributes inline
     skates,  roller  hockey and  paintball  sporting  goods items.  Relating to
     inline skates,  the Company  incorporates a proprietary,  patented  angular
     wheel  technology,  that  displaces  the  wheels at  alternating  16-degree
     angles.

     The   Company   was   organized   in  January   1995  and  sells   patented
     V-configuration  in-line roller skates to sporting goods retailers  located
     throughout  the United States and Canada.  The  Company's two  subsidiaries
     discontinued operations in 2001 and remain inactive.

[3]  Going Concern:

     The  Company  has  incurred   substantial   losses  and  expects  to  incur
     substantial  losses for the foreseeable  future and has working capital and
     capital  deficits.  Additional  cash will be utilized during the year ended
     December 31, 2003.

     The Company's  viability is dependent upon its ability to raise  additional
     capital to continue as a going concern.  In June 2002, the Company obtained
     a  $500,000  line of  credit.  In  August  2002,  the  Company  obtained  a
     $2,000,000  line of credit.  At June 30,  2003,  both lines of credit  were
     fully utilized and are extended through December 31, 2003 (see Note B). The
     Company  continues to be in discussions with investment  bankers and others
     to seek  extension  of due dates for the  lines of  credit  and  additional
     financing  for  operations.  The  Company  believes  it will have  adequate
     financial resources for at least the next 12 months.  However, no assurance
     can be given that the Company will obtain any additional financing.

     In September 2002, the Company expanded its product  offerings to include a
     line of paintball products.  The Company believes that sales from paintball
     products will offset the declining sales from its existing  in-line skating
     products.  Unless the Company generates positive cash flows 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
     significantly curtail expenditures,  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.  The  accompanying  consolidated  financial
     statements  have been  prepared on the basis that the Company will continue
     as  a  going  concern,   which  assumes  the   realization  of  assets  and
     satisfaction  of  liabilities  in  the

                                      F-5

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

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[3]  Going Concern (continued):

     normal  course of  business,  and do not include any  adjustments  that may
     result from the outcome of this uncertainty.

[4]  Inventories:

     Inventories  are  stated  at the  lower of cost or  market  on a  first-in,
     first-out basis.

[5]  Supplementary disclosures of cash flow information:

     During  the six months  ended  June 30,  2003 and 2002,  the  Company  paid
     interest expense of $79,452 and $29,465, respectively.

[6]  Supplementary schedules of noncash investing and financing activities:

                                                               Six Months Ended
                                                                   June 30,
                                                              ------------------
                                                                2003      2002
                                                              --------  --------

       Common stock issued in connection with debt financing  $257,400
                                                              ========

       Common stock issued as dividends to preferred holders  $236,833  $236,154
                                                              ========  ========

[7]  Concentration of credit risk:

     During the six months ended June 30, 2003 and 2002, two customers accounted
     for approximately 74% and 23% of net sales, respectively.

     At June 30,  2003,  the  Company had  accounts  receivable,  excluding  the
     consideration  of the $40,000  allowance  for doubtful  accounts,  from one
     customer in the amount of approximately  $301,000,  representing 89% of the
     gross accounts receivable balance at that date.

     The Company uses outside manufacturers to produce its products.  During the
     six months ended June 30, 2003 and 2002,  two and one  vendor(s)  accounted
     for approximately 92% and 90% purchase of products, respectively.

[8]  Stock-based compensation:

     The Company accounts for stock-based employee compensation under Accounting
     Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock Issued to
     Employees",  and  related  interpretations.  The  Company  has  adopted the
     disclosure-only  provisions of Statement of Financial  Accounting Standards
     ("SFAS") No. 123,  "Accounting for Stock-Based  Compensation"  and SFAS No.
     148, "Accounting for Stock-Based Compensation - Transition and Disclosure",
     which was  released in December  2002 as an  amendment of SFAS No. 123. The
     following  table  illustrates  the effect on net loss and loss per share if
     the fair value-based method had been applied to all awards.

                                      F-6

                                                                              21

<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[8]  Stock-based compensation (continued):

<TABLE>
<CAPTION>
                                                                    Six Months Ended
                                                                        June 30,
                                                                -------------------------
                                                                   2003          2002
                                                                ----------    -----------
<S>                                                             <C>           <C>
       Reported net loss attributable to common stockholders    $(4,705,376)  $(1,939,532)
       Stock-based employee compensation expense included in
          reported net loss, net of related tax effects           2,912,820        48,825
       Stock-based employee compensation determined under the
          fair value-based method, net of related tax effects    (2,925,914)   (1,088,465)
                                                                -----------   -----------

       Pro forma net loss attributable to common stockholders   $(4,718,470)  $(2,979,172)
                                                                ===========   ===========

       Net loss attributable to common stockholders per
          common share (basic and diluted):
             As reported                                        $     (0.25)  $     (0.12)
                                                                ===========   ===========

             Pro forma                                          $     (0.25)  $     (0.19)
                                                                ===========   ===========
</TABLE>

     The fair  value  of each  warrant  grant on the date of grant is  estimated
     using the Black-Scholes  option-pricing  model with no expected volatility,
     expected life of one year,  risk-free  interest rate of approximately 1% in
     2003 and 3% in 2002 and a dividend  yield of 0%. The weighted  average fair
     value of  warrants  granted  during the six months  ended June 30, 2003 and
     2002 were $0.06 and $0.24, respectively.

[9]  Loss per common share:

     Loss per common share is computed using SFAS No. 128, "Earnings per Share."
     SFAS No. 128 established standards for the computation,  presentation,  and
     disclosure of earnings per share. Basic loss 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.  Dilutive
     earnings per share  calculations  include the  potential  exercise of stock
     options, warrants and convertible securities. The effects of stock options,
     warrants and convertible securities have not been included in 2003 and 2002
     loss per share computations as their effect would have been  anti-dilutive.
     Potential common shares totaling 3,948,683 and 5,542,361,  which consist of
     outstanding warrants and convertible preferred shares, are considered to be
     anti-dilutive at June 30, 2003 and 2002, respectively.

[10] Reclassification:

     Certain  prior period  amounts have been  reclassified  to conform  current
     period presentation.

[11] Newly issued accounting pronouncements:

     In April 2002, the Financial  Accounting  Standards  Board ("FASB")  issued
     SFAS No. 145,  "Rescission of FASB Statements No. 4, 44, and 64,  Amendment
     to FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds
     the requirement that all gains and losses from  extinguishment from debt be
     classified as an extraordinary  item.  Additionally,  SFAS No. 145 requires
     that certain  lease  modifications  that have economic  effects  similar to
     sale-leaseback transactions be accounted for in the same manner as

                                      F-7

                                                                              22
<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[11] Newly-issued accounting pronouncements (continued):

     sales-leaseback  transactions.  SFAS No. 145 is  effective  for the Company
     beginning  in 2003,  and the  effect of  adoption  did not have a  material
     impact on the financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation - Transition and  Disclosure."  This statement amends SFAS No.
     123,  "Accounting for  Stock-Based  Compensation,"  to provide  alternative
     methods of  transition  for an entity that  changes to fair value method of
     accounting for stock-based employee compensation. In addition, SFAS No. 148
     amends the  disclosure  provisions of SFAS No. 123 to require  expanded and
     more prominent  disclosures in annual financial statements about the method
     for stock-based compensation and the proforma effect on reported results of
     applying  the fair  value  method for  entities  that use  intrinsic  value
     method.  The  proforma  disclosures  are  also  required  to  be  displayed
     prominently in interim financial statements.  The Company did not change to
     the fair  value  method  of  accounting  and has  included  the  disclosure
     required of SFAS No. 148 in the accompanying financial statements.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
     of Variable  Interest  Entities"  ("FIN No. 46").  FIN No. 46 clarifies the
     application of Accounting Research Bulletin No. 51, "Consolidated Financial
     Statements", for certain entities that do no have sufficient equity at risk
     for the entity to finance its activities  without  additional  subordinated
     financial  support from other  parties or in which equity  investors do not
     have the  characteristics of a controlling  financial  interest  ("variable
     interest entities"). Variable interest entities within the scope of FIN No.
     46 will be required to be  consolidated by their primary  beneficiary.  The
     primary  beneficiary of a variable  interest entity is determined to be the
     party that absorbs a majority of the entity's  expected losses,  receives a
     majority of its expected returns,  or both. FIN No. 46 applies  immediately
     to variable  interest  entities  created  after  January 31,  2003,  and to
     variable interest entities in which an enterprise obtains an interest after
     that date. It applies in the first fiscal year or interim period  beginning
     after June 15, 2003, to variable  interest  entities in which an enterprise
     holds a variable  interest that it acquired  before  February 1, 2003.  The
     Company is in the process of determining what impact,  if any, the adoption
     of the  provisions of FIN No. 46 will have upon its financial  condition or
     results of operations.

     In May 2003, FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
     Instruments with  Characteristics of both Liabilities and Equity." SFAS No.
     150 establishes  standards for how an issuer classifies and measures in its
     statement  of  financial   position  certain  financial   instruments  with
     characteristics of both liabilities and equity.  SFAS No. 150 requires that
     an issuer  classify a financial  instrument  that is within SFAS No.  150's
     scope  as a  liability  (or an asset in some  circumstances)  because  that
     financial  instrument  embodies an obligation of the issuer.  Many of those
     instruments were previously  classified as equity. SFAS No. 150 requires an
     issuer to classify the following  instruments as liabilities  (or assets in
     some  circumstances):   mandatorily   redeemable   financial   instruments;
     obligations  to  repurchase  the  issuer's  equity  shares by  transferring
     assets;  and certain  obligations to issue a variable  number of its equity
     shares.  SFAS No. 150 is effective  for all financial  instruments  entered
     into or modified after May 31, 2003, and otherwise  became effective at the
     beginning of the first interim  period  beginning  after June 15, 2003. The
     adoption of SFAS No. 150 did not have a material effect on its consolidated
     financial statements.

NOTE B - BANK LINES OF CREDIT

     In August 2002, the Company  entered into a new  $2,000,000  line of credit
     agreement with a bank. The line of credit was originally  available through
     June 30, 2003,  but has been extended  through  December 31, 2003.  Amounts
     drawn on the line bear  interest  at the  prime  rate plus 1% but not to be
     less than 6% at any time (6% at June 30, 2003) and is payable monthly.  The
     obligation is  collateralized  by the personal  guarantees and mortgages on
     specific real estate assets of one of the Company's officers and one of its
     directors and by assignments of patents and settlement proceeds from patent
     infringements. At June 30,

                                      F-8

                                                                              23
<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE B - BANK LINES OF CREDIT (CONTINUED)

     2003 the line was fully  utilized.  The line of credit  agreement  contains
     certain  financial  covenants  including the submission of timely financial
     statements.  At June 30,  2003,  the  Company was in  compliance  with such
     covenants.

     In addition,  in June 2002,  the Company  obtained a new  $500,000  line of
     credit  agreement with a bank. The line of credit was originally  available
     through  July 1, 2003,  but has been  extended  through  December 31, 2003.
     Amounts  drawn on this line of credit  bear  interest at prime rate plus 3%
     (7.25%  at June 30,  2003)  and are  payable  monthly.  The  obligation  is
     collateralized by certificates of deposit and personal guarantees of one of
     the Company's directors. At June 30, 2003, the line was fully utilized.

     In connection  with the lines of credit for  $2,000,000  and $500,000,  the
     Company issued  1,100,000  shares of common stock valued at $3.00 per share
     for an aggregate value of $3,300,000, to certain stockholders and directors
     in  consideration  of them  providing  collateral  of assets  and  personal
     guarantees.  Of such  amount,  $1,287,500  is recorded  as finance  charges
     during the year ended December 31, 2002.  Accordingly,  $2,012,500 has been
     recorded as deferred  financing  costs as of December 31, 2002. Such amount
     is being  amortized  as interest  expense  over the  remaining  life of the
     loans. For the six months ended June 30, 2003, $2,012,500 has been expensed
     and there is no deferred balance remaining.

     In connection  with the lines of credit for  $2,000,000  and $500,000,  the
     Company  issued 85,800 shares of common stock valued at $3.00 per share for
     an aggregate value of approximately $257,000 to a director in consideration
     for extending  collateral  for our bank lines of credit beyond the original
     maturity  dates to December  31,  2003.  Such amount is being  amortized as
     interest  expense over the remaining  life of the loan.  For the six months
     ended June 30,  2003,  $162,900  has been  expensed.  As of June 30,  2003,
     $94,500 has been deferred.

NOTE C - COMMITMENTS AND CONTINGENCIES

[1]  Related party transactions:

     At  December  2002,  a balance was due to an  officer/director  of $17,607.
     During the six months ended June 30, 2003, the officer/director  loaned the
     Company an  additional  $70,000  of which  $21,248  was  repaid  during the
     period.  At June 30,  2003,  the net balance of $66,359 is shown as related
     party loans payable in the accompanying condensed financial statements.

     In May  2002,  a  stockholder/director  granted  an  unsecured  loan to the
     Company, which loan is due on or before June 30, 2003 and bears interest at
     6% per  annum.  At  June  30,  2003,  the  principal  loan  balance  to the
     stockholder/director was $119,508.

     During  2002,  the  Company  borrowed  various  unsecured  loans from other
     stockholders  and a director  bearing  interest at 6% per annum,  leaving a
     balance of  $314,000 at  December  31,  2002  payable on or before June 30,
     2003. During the six months ended June 30, 2003,  $37,500 was repaid by the
     Company to a director leaving a balance of $276,500.

     These two transactions  resulted in loans payable to  stockholders/officers
     of $396,008 at June 30, 2003.

     In connection with these  borrowings from the  stockholders  and directors,
     the company issued 642,585 shares of common stock valued at $3.00 per share
     for an aggregate value of approximately  $1,928,000 to the stockholders and
     directors in  consideration  of them providing  such funds.  Such amount is
     being  amortized as interest and expensed  over the  remaining  life of the
     loans. For the year ended December 31, 2002,  approximately  $1,461,000 has
     been  expensed.  As of December 31, 2002,  approximately  $467,000 has been
     deferred.  For the six  months  ended  June  30,  2003,  $467,000  has been
     expensed  thereby  leaving  no  remaining   deferred  balance.

                                       F-9

                                                                              24
<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE C - COMMITMENTS AND CONTINGENCIES (CONTINUED)

[1]  Related party transactions (continued):

     During the six months ended June 30, 2003,  two  officers/directors  of the
     Company sold an  aggregate  of 741,000  shares of their Common Stock in the
     Company and thereafter  contributed $795,765 of the proceeds from such sale
     to the Company.  In  consideration  thereof,  the Company  issued these two
     people warrants to purchase up to 236,000 shares of Common Stock, each such
     warrant exercisable at a price of $3.75 per warrant. These warrants were to
     expire December 31, 2003. However,  the two  officers/directors  decided to
     surrender   the  warrants  back  to  the  Company  and  the  warrants  were
     terminated.  No compensation  cost was recorded as a result of the issuance
     of grants above the fair market value at the time of grant.

[2]  Legal proceedings:

     In January 2001, the Company 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 the Company  alleged
     willful infringement of certain of its 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 upon the Company's  patents.  In November  2002,  the Court
     entered an Order on the defendant's Motion for Summary Judgment, dismissing
     the  Company's  claims.  The  Company  has filed a timely  notice of appeal
     requesting  reversal  of the trial  court  decision  and this matter is now
     before the US Court of Appeals for the 2nd Circuit. While no assurances can
     be provided,  the Company is optimistic  about the likelihood of success on
     appeal.

     In February  2001,  the  Company  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., Salomon 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 it, 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 the Company's  patents.  In November 2002, the
     Court  entered an Order on the  defendant's  Motion for  Summary  Judgment,
     dismissing the Company's claims. The Company intends to appeal, but has not
     yet done so as of the date of this  Report,  as no final  judgment has been
     entered.  While no  assurances  can be provided,  the Company is optimistic
     about the likelihood of success on appeal.

     In April 2001,  Vertex Capital Corp. filed a complaint  against the Company
     in the United States District Court for the Southern  District of New York,
     seeking  damages for alleged breach of contract and unjust  enrichment.  In
     September 2002, the Court entered summary  judgment in the Company's favor,
     dismissing  all but one of the  plaintiff's  claims.  In January 2003,  the
     Company entered into a verbal settlement of this matter, which provided for
     the  Company to issue  warrants.  However,  when the  settlement  was being
     reduced to writing,  a dispute  concerning  the terms of the warrants to be
     issued arose and no formal settlement was reached.  The Court has dismissed
     this  action,  without  prejudice,  due to the failure of the  plaintiff to
     timely file various pleadings. No further action has taken place.

     In October  2001,  the Company  filed an action  against USCO  Distribution
     Services,  Inc.,  d/b/a USCO Logistics  ("USCO"),  which was removed to 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.  USCO asserted  counterclaims  totaling  approximately  $103,000
     based on its  charges  for  services  under the  contracts  and  asserted a
     possessory  lien on the  Company's  inventory  in  their  possession.  USCO
     subsequently liquidated the inventory pursuant to their possessory lien. In
     April 2003, the Company entered into a confidential  settlement  agreement,
     which  partially  reimbursed  USCO  for  UPS  shipping  charges.

                                      F-10

                                                                              25
<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE C - COMMITMENTS AND CONTINGENCIES (CONTINUED)

[2]  Legal Proceedings (continued):

     In January  2002,  the  Company  filed a  complaint  in the  United  States
     District  Court,  Southern  District of New York,  Docket No. 010 CIV 1693,
     against K2 Corporation, wherein the Company alleged willful infringement of
     patent  rights held by it for  Toeplate  with Dual Flanges for Inline Skate
     Frames.  In August 2002,  the Company  entered  into a  settlement  of this
     matter in which the  Company  received a  compensatory  award for  previous
     infringement,  as well as a future  royalty  on  sales  for  roller  skates
     utilizing its patented  technology  and the  assignment of two patents.  As
     part  of  the   settlement,   the  Court  ordered  the   settlement   terms
     confidential.

     Thereafter,  the Company learned that,  immediately  prior to entering into
     the  aforesaid  settlement  agreement,   K2  Corporation  allegedly  signed
     agreements with both Benetton Group, SPA and Roller Blade, Inc., as well as
     adidas America,  Salomon North America,  Inc.,  Salomon S.A., adidas AG and
     adidas Salomon AG, which agreements  included  covenants not to sue for any
     patent infringement  relating to the patents  subsequently  assigned to the
     Company.  The Company  maintains  that K2  Corporation  never advised it of
     these agreements.  Applicable thereto, in March 2003, the Company commenced
     an action  against K2  Corporation  and its  General  Counsel in the United
     States  District   Court,   District  of  Colorado,   alleging   fraudulent
     concealment,  misrepresentation and breach of contract,  with damages to be
     established at trial.

     This matter was  subsequently  remanded to the United States District Court
     for the Western  District of  Seattle,  Washington.  As of the date of this
     Report,  this Court has issued  scheduling  orders and the matter is in the
     discovery  phase.  Trial on this matter has been  scheduled  for  September
     2004.

     Relevant  thereto,  in January  2003,  the Company  also  commenced  patent
     infringement suits against both Benetton Group, SPA and Roller Blade, Inc.,
     as well as adidas  America,  Salomon  North  America,  Inc.,  Salomon 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.
     in separate actions filed in the United States District Court,  District of
     Colorado, wherein the Company has alleged infringement by the defendants of
     those  patents  assigned to the Company by K2  Corporation.  Discovery  has
     commenced in these matters.

     In December 2002, the Company filed an action in the United States District
     Court,  District  of New  Jersey,  against  KPMG  Corporate  Finance  LLC.,
     ("KPMG") alleging breach of contract and conflict of interest.  The Company
     had  previously  signed a consulting  agreement with KPMG for it to provide
     investment  banking  services.  The  Company  alleged  that KPMG  failed to
     disclose that they also represented  certain of the Company's  competitors.
     This  matter was  resolved  by the  parties  entering  into a  confidential
     settlement agreement in October 2003.

     In  December  1997,  the Company  entered  into a  Confidential  Settlement
     Agreement and Release in conjunction  with a Product and License  Agreement
     to resolve outstanding litigation in the matter of The Brandner Corporation
     v. Jeannette L. Brandner,  et al.,  Docket No. 96CV 3163 (JRS) then pending
     in the United States District Court for the Southern  District of New York.
     The  settlement   sought  to  resolve  all  outstanding   issues  regarding
     technology   embraced  by  Brandner's   Patent  No.   5,303,940  (the  "940
     Technology").  Pursuant to the Product and License  Agreement,  the Company
     made all required  royalty  payments for skates utilizing the technology as
     set forth in the License  Agreement.  In February  2002,  Brandner  filed a
     request with the Court seeking  royalty  payments for skates not covered by
     the 940 Technology.  The Company filed an opposition to Brandner's request.
     In November  2002,  the Court  entered  judgment  against the Company.  The
     Company has appealed  this ruling to the United States Court of Appeals for
     the 2nd  Circuit.  The Court of Appeals has  remanded  the case back to the
     District  Court to explore the Company's  position that the District  Court
     lacked  jurisdiction  over any  alleged  continuing  disputes  between  the
     parties  relative  to the  product  and  licensing  contract.  Although  no
     assurances can be provided,  the Company is optimistic about the likelihood
     of  prevailing  in  this  matter  on  appeal.

                                      F-11

                                                                              26
<PAGE>
V-FORMATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE C - COMMITMENTS AND CONTINGENCIES (CONTINUED)

[2]  Legal Proceedings (continued):

     Finally,  in December  2002, a complaint  was filed  against the Company by
     Primagency, Inc. in the Supreme Court of the State of New York, who alleged
     that the Company owed  $200,000 in placement  fees arising out of an agency
     compensation  agreement  which the Company entered into with the plaintiff.
     Judgment was entered  against us in the principal  amount of $200,000 which
     judgment was stayed by the court. We have filed an appeal and the matter is
     currently pending.

     The  Company  has been  named as a  defendant  in one other  lawsuit in the
     normal course of business.  In the opinion of management,  after consulting
     with legal counsel,  the  liabilities,  if any,  resulting from this matter
     will not have a material effect on the Company's financial statements.

NOTE D - SUBSEQUENT EVENT

     During the three months ended  September 30, 2003, for services  performed,
     an  officer/director  was issued 353,333 warrants to purchase common shares
     of the  Company,  each  such  warrant  exercisable  at a price of $3.75 per
     warrant.  The  Company  converted  176,667 of such  warrants  on a cashless
     basis.  The  officer/director  decided to surrender the  remaining  176,666
     warrants back to the Company and the warrants were terminated.


                                      F-12

                                                                              27

<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: December 23, 2003


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


                                                                              28