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

                          FORM 10-QSB

(Mark One)

    X     Quarterly Report Under Section 13 or 15(d) of the
     Securities Exchange Act of 1934 (No Fee Required)

     For the quarterly period ended June 30, 2001


     Transition Report Under Section 13 or 15(d) of the
     Securities Exchange Act of 1934 (No Fee Required)

     For the transition period from       to


     Commission file number 000-31009


                       VIRTUALMONEY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

               Minnesota                     41-1961048
(State or Other Jurisdiction of     (IRS Employer ID Number)
Incorporation or Organization)


      16910 - 45th Avenue North, Plymouth, Minnesota 55446
            (Address of Principal Executive Offices)



                          763-744-0123
        (Issuer's Telephone Number Including Area Code)


       2325 Sheridan Hills Road, Wayzata, Minnesota 55391
                        (Former Address)
(Former Name, Former Address and Former Fiscal Year, If Changed
Since Last Report)



Check whether the issuer: (1) filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes        X        No

Number of shares outstanding as of July 25, 2001:   8,439,398

<PAGE>
                             INDEX

                       VIRTUALMONEY, INC.


PART I, FINANCIAL INFORMATION

                                                                    Page

Item 1. Financial Statements (Unaudited).

       Balance sheets as of June 30, 2001 and December 31, 2000        3

       Statements of operations for the three and six months ended
       June 30, 2001 and 2000                                          4

       Statements of cash flow for the six months ended
       June 30, 2001 and 2000                                          5

       Notes to financial statements                                   7

Item 2.   Management's  Discussion and Analysis of Financial
       Condition and Results of Operations                            10


PART II. OTHER INFORMATION

Item 1. Legal Proceedings                                             11

Item 6. Exhibits and Reports on Form 8-K                              12

SIGNATURES

                                      2
<PAGE>

Item 1.  Financial Statements (Unaudited)

                       VIRTUALMONEY, INC.
                 (A Development Stage Company)

                         BALANCE SHEETS
                          (Unaudited)

                                       June 30,   December 31,
                                         2001         2000
              ASSETS

Current assets:
 Cash                                 $    8,114    $   27,903
 Millennium Dollars (MR$)                    955             -
 Miscellaneous receivables                 1,819             -
 Prepaid expenses:
   Legal retainer                              -         3,258
   Directors fees                              -        10,834
   Other                                   2,000           200
        Total current assets              12,888        42,195

Furniture and equipment                   20,323         3,912
Less accumulated depreciation              1,100           374
        Net fixed assets                  19,223         3,538

Other assets:
 Investment - related party               63,700        41,200
 Developed software, net                 123,208       116,000
 License agreement, net                  520,000       550,000
        Total other assets               706,908       707,200

        Total assets                  $  739,019    $  752,933


 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                      $ 150,010    $   42,669
 Accrued payroll and related             139,426        67,856
 Accrued director's fees                   8,500             -
 Accrued expenses - other                    899             -
 Millennium Dollar (MR$) liability         3,171             -
 Note payable - related party             17,198        10,604
        Total current liabilities        319,204       121,129

Stockholders' equity:
 Common stock, no par value; authorized
   10,000,000 shares                   1,121,913       942,295
 Deficit accumulated during the
   development stage                    (702,098)     (310,491)
        Total stockholders' equity       419,815       631,804

        Total liabilities and
          stockholders' equity         $ 738,019    $  752,933

               See Notes to Financial Statements.

                                      3
<PAGE>

                                    VIRTUALMONEY, INC.
                              (A Development Stage Company)

                                 STATEMENTS OF OPERATIONS
                                       (Unaudited)
<TABLE>
<CAPTION>

                                                                                Date of Inception
                                    Three Months Ended      Six Months Ended   (January 10, 2000)
                                         June 30,                June 30,            Through
                                     2001        2000        2001        2000     June 30, 2001
<S>                               <C>         <C>        <C>         <C>          <C>
Revenues                          $     114   $     -    $    114    $       -    $      114

Expense:
  Amortization                       18,342    15,000      33,342       20,000        83,342
  Depreciation                          503        46         726           46         1,100
  Directors fees                     12,042     2,917      21,001        2,917        36,418
  ICON Center lease/maintenance      13,504         -      37,054            -        52,754
  Insurance                             412         -         478            -             -
  Internet                              640       255       1,295          255         2,570
  Interest expense                      514         1         738            1           738
  Office and administrative          11,524     5,478      17,337        7,272        31,405
  Payroll and related                72,859    15,000     121,941       15,000       205,174
  Professional and consulting fees   78,064    46,114     142,694       47,027       251,882
  Rent                                4,343     2,127       6,943        5,256        19,392
  Repairs and maintenance             1,260         -       1,260            -             -
  Telephone                           3,393        26       5,184           97         8,781
  Travel and entertainment              409         -         409        1,058         1,877
  Web design                          1,500     1,624       1,800        1,628         8,817

      Total expense                 219,309    88,588     392,202      100,557       704,250

Net loss before other income       (219,195)  (88,588)   (392,088)    (100,557)     (704,136)

Other income:
Interest and other income               183        88         481           88         2,038

Net loss                          $(219,012) $(88,500)  $(391,607)   $(100,469)   $ (702,098)

Basic earnings (loss) per share   $    (.03) $   (.01)  $    (.05)   $    (.02)   $     (.09)

Weighted average number of
  shares outstanding              8,399,085  7,415,000  8,291,686    6,110,401     7,441,557
</TABLE>

                       See Notes to Financial Statements.

                                      4
<PAGE>

                        VIRTUALMONEY, INC.
                  (A Development Stage Company)

                     STATEMENTS OF CASH FLOWS
                   Increase (Decrease) in Cash
                           (Unaudited)
<TABLE>
<CAPTION>

                                                                Date of Inception
                                            Six Months Ended    (January 10, 2000)
                                                June 30,             Through
                                            2001       2000        June 30, 2001
<S>                                     <C>          <C>           <C>
Cash flows from operating activities:
  Net loss                              $ (219,012)  $ (100,469)   $ (702,098)
Adjustments to reconcile net loss
  to cash flows from operating
  activities:
    Depreciation                               503           46         1,100
    Amortization                            18,342       20,000        83,342
    Stock issued for services and
      future services                            -       52,250        67,636
    Notes receivable - related
      party and other receivables            1,634       (4,393)       (1,819)
    Prepaid expenses                        (6,762)      (4,000)       (2,000)
    Accounts payable                        75,194       12,735       150,010
    Accrued expenses                        46,049       15,000       148,825
       Net cash flows from
         operating activities              (84,052)      (8,831)     (255,004)

Cash flows from investing activities:
  Purchases of furniture and equipment     (16,261)      (1,703)      (21,423)
  Purchase of investment - related party    (7,500)     (13,500)      (63,700)
  Investment in developed software          (4,825)           -      (126,550)
       Net cash flows from
         investing activities              (28,586)     (15,203)     (211,673)

Cash flows from financing activities:
  Proceeds from common stock                87,242      121,415       457,593
  Proceeds from note payable -
    related party                            5,607            -        17,198
      Net cash flows from
        financing activities                92,849      121,415       474,791

Increase (decrease) in cash                (19,789)      97,381         8,114

Cash:
  Beginning of period                       27,903            -             -

  End of period                         $    8,114   $   97,381    $    8,114
</TABLE>

               See Notes to Financial Statements.

                                      5
<PAGE>

                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                         JUNE 30, 2001
                          (Unaudited)


A.      BASIS OF PRESENTATION

 The accompanying unaudited financial statements have been
 prepared in accordance with generally accepted accounting
 principles for interim financial information and with the
 instructions to Form 10-QSB of Regulation S-B.  Accordingly,
 they do not include all of the information and footnotes
 required by generally accepted accounting principles for
 complete financial statements.  In the opinion of management,
 all adjustments (consisting of normal recurring accruals)
 considered necessary for a fair presentation have been
 included.  Operating results for the three-month period ended
 June 30, 2001 are not necessarily indicative of the results
 that may be expected for the year ending December 31, 2001.
 For further information, refer to the financial statements and
 footnotes thereto included in the Company's Form 10-KSB for the
 period ended December 31, 2000.


1.                   Company

  Virtualmoney, Inc. (d/b/a Virtualmoney.com) was formed under
  the laws of the State of Minnesota on January 10, 2000.  The
  Company has obtained an exclusive license to use the Real
  Monetization process for the purpose of issuing an asset-
  backed real monetary equivalent (the Millennium Dollar) that
  is defined in terms of the United States Dollar ($1.00 or
  USD).  Specifically, the Millennium Dollar will be defined as
  equaling the purchasing power of the USD on the base line date
  of January 1, 2000, using the Consumer Price Index for All
  Urban Consumers (CPI-U) Reference Number for October 1999.  As
  such, the Millennium Dollar will fluctuate with inflation and
  deflation over time, as measured by the percentage change in
  the CPI-U.  The Company will sell the Millennium Dollars (or
  private currency) for U.S. Dollars (USD), which will then be
  invested in assets to back the purchasing power and conversion
  of the private currency back into USD.  The purchaser will own
  the USD, just as the Company will own the USD.  The Company
  will stand ready to repurchase the Millennium Dollar  at a
  price sufficient to cover the expense incurred in providing
  this liquidity.  In addition, the Company will initiate and
  maintain monetary transfer services over the Internet,
  composed of e-mail transmissions, such that users of the
  Millennium Dollar will be able to use it as a virtual
  currency.

  Intangible Assets

  An intangible asset was recorded at the fair value of the
  common stock issued to enter into the Millennium Dollar
  license agreement.  This intangible asset is being amortized
  over ten years using the straight-line method.

  Software being developed for processing Millennium Dollar
  based transactions is being capitalized in accordance with
  Statement of Position 98-1: Accounting for Costs of Computer
  Software Developed or Obtained for Internal Use.  These costs
  are being amortized on a straight-line basis over the
  estimated useful life of the software of 10 years commencing
  upon the sale of the first Millennium Dollar in May 2001.

  Common Stock

  The Board of Directors has approved a 2 for 1 stock split to
  be effective upon the sale of the first Millennium Dollar.
                           (Continued)

                                      6
<PAGE>


                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                         JUNE 30, 2001
                          (Unaudited)


2.  Development Stage Company

  From inception to June 30, 2001, the Company is deemed to be
  in the development stage.  To date the Company has devoted the
  majority of its efforts to: raising capital; entering into the
  Millennium Dollar license agreement; and researching and
  articulating the plan of operations for the purpose of
  introducing the Millennium Dollar and thereafter for providing
  monetary transfer and conversion services via the Internet.
  Planned principal operations have not yet commenced and the
  first revenues were recognized in the second quarter of 2001.

  The Company is presently attempting to: create the Company's
  Web Site; formalize a marketing incentive program involving
  viral network marketing for early participants; prepare for
  the issuance of Millennium Dollar monetary units in the form
  of "promises-to-pay" via e-mails over the Internet; and
  preparing the databases required for (a) the ownership and
  transfer of the Millennium Dollar, (b) the investment of the
  USD, received in the distribution and utilized for the
  conversion of the Millennium Dollar, and (c) the ownership and
  transfer of the Company's common stock, as well as the ongoing
  efforts to fund the Company and engage key personnel.
  Ultimately, the Company feels that it will be able to gain
  acceptance for the Millennium Dollar and its monetary transfer
  services, whereby the Company expects to generate revenues
  from (a) the investment income earned upon the USD assets,
  primarily U.S. Treasuries, backing the Millennium Dollar, as
  well as (b) from the currency spread charged for the
  conversion of the Millennium Dollar promises-to-pay back into
  USD.  It is expected that these combined operations will
  generate net revenues (after the inflationary adjustment, but
  before operating expenses and income-sharing) of about four
  percent (4.0%) per annum on the outstanding Millennium Dollar
  in circulation.  As such, it is expected that the Company can
  achieve profitable operations and thereby realize assets and
  settle obligations in the normal course of operations.  No
  estimate can be made of the range of loss that is reasonably
  possible should the Company be unsuccessful.


3.  Related Party Transactions

  Millennium Dollar Agreements

  On February 24, 2000, the Company entered into a license
  agreement with Real Monetary Systems, Inc. (RMSI) for the
  exclusive rights to sponsor the issuance of an asset-backed
  real monetary equivalent (the Millennium Dollar) that is
  defined in the terms of the United States Dollar ($1.00).  As
  consideration for this license the Company agreed to:

 *  Issue RMSI 1,200,000 shares of unregistered common stock in
     the Company with a fair value at issuance of $600,000, and

 *  to pay RMSI a royalty of 7-1/2 basis points (.075%) per
     annum on the outstanding Millennium Dollar principal
     balance; which may be calculated in either Millennium
     Dollar, or the corresponding accrued nominal value in United
     States Dollars.
                           (Continued)

                                      7
<PAGE>


                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                         JUNE 30, 2001
                          (Unaudited)


3.   Related Party Transactions (Continued)

 Millennium Dollar Agreements (Continued)

 RMSI has applied for patent protection and will use its best
 efforts to complete the pending patent application.  No
 warranty has been made regarding the validity of any pending
 patent rights or claims.  The acquired licensed trade secrets
 are for the use of certain processes, which will be utilized
 for the introduction and maintenance of a private currency
 defined in United States Dollars. Initially, these processes
 may be carried out by the first generation of Real Monetary
 Software , which is composed of certain spread sheet files; all
 of which the Company is authorized to use and amend as needed.

 Nonetheless, the future development of the Real Monetary
 Software will be exclusively licensed to Real Monetary
 Software, Inc. (RMSOFT), subject to a contractual agreement
 that the use of the Real Monetary Software must be in
 conjunction with an exclusive license issued by RMSI with
 respect to a given type of real financial instrument.  The
 terms and conditions of the Company's use of the stand-alone
 version of the Real Monetary Software are still being worked
 out with RMSOFT, as are the terms and conditions of the license
 by and between RMSI and RMSOFT.  Nonetheless, the granting of
 the exclusive license by RMSI to develop the Real Monetary
 Software, will be contingent upon RMSOFT's granting of a
 license for the software to the Company.  One purpose of this
 licensing structure is to standardize the software, as well as
 to minimize the development and maintenance costs, which may
 then be shared by various licensed users over time.

 Furthermore, the software itself is not material, until such
 time as a sufficient volume of real financial instruments have
 been issued and outstanding; since the critical function of the
 software is to assist in the creation of a liquid market for
 the accruing interest that is inherent in real financial
 instruments.  The Company's license is limited to the use of
 the technology for the issuance of the Millennium Dollar as
 previously defined.  Nonetheless, it is expected to have a
 close working relationship with other companies licensed by
 RMSI to create: (a) the stand-alone software, (b) the liquid
 market for the Treasury Inflation Protection Securities and (c)
 for the liquid market for Real Mortgage-Backed Securities.  The
 Company will begin to generate a market for the products and
 services of these other companies, as it begins to succeed in
 the distribution and maintenance of the Millennium Dollar in
 the marketplace.  Any improvements, made by the Company with
 respect to the licensed trade secrets and software, shall
 remain the sole property of RMSI.  Hence, any and all
 improvements, created by individual licensees, may then be
 distributed to all licensees at the sole discretion of RMSI.
 Once again, the goal being to standardize the development of
 the software, thereby creating a coherent real monetary system
 for the benefit of all Millennium Dollar users.
                           (Continued)

                                      8
<PAGE>


                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                         JUNE 30, 2001
                          (Unaudited)


3.   Related Party Transactions (Continued)

 Investment - Related Party

 The Company's founder and president has granted the Company an
 option to acquire up to 45,000 shares of Real Monetary Systems,
 Inc. (RMSI) common stock from him at $2 per share.  This option
 was to expire February 16, 2001, but has been extended through
 December 31, 2002.  Through June 30, 2001, the Company has
 advanced $63,700 to this individual towards the purchase of
 31,850 shares of RMSI common stock at a historical cost of
 $63,700.  RMSI is a privately held company with limited
 operations.  Although the market value of the investment in
 RMSI is not readily determinable, management believes it is
 equal to its carrying value.

 Subsequent to June 30, 2001, the Company has continued to
 advance monies to this individual towards the purchase of RMSI
 stock.

                                      9
<PAGE>



Item 2.  Management's Discussion and analysis of financial
Condition and Results of Operations

Forward-Looking Statement Notice


When used in this report, the words "may", "will", "expect",
"anticipate", "continued", "estimate", "project", "intend", and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933  and Section 21E of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position.  Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors.

Three and Six Months Ended June 30, 2001.

The Company commenced revenue generating activities in May 2001
and has generated $114 in revenues from continuing operations for
both the periods that ended June 30, 2001 and the period from the
date of inception (January 10, 2000) through June 30, 2001.

The Company had general and administrative expense of $219,309
for the three-month period that ended June 30, 2001, $392,202 in
the six months ended June 30, 2001, compared to $704,250 for the
period from the date of inception (January 10, 2000) through June
30, 2001.  These general and administrative expenses consisted of
general corporate administration, web design, payroll, director's
fees, legal fees and professional expenses, and accounting and
auditing costs.

The Company had depreciation and amortization expenses of $18,342
for the three-month period that ended June 30, 2001, $83,342 in
the six months ended June 30, 2001, and $84,442 for the period
from the date of inception (January 10, 2000) through June 30,
2001.  The depreciation and amortization expenses consisted of
furniture and equipment, the Millennium Dollar licensing
agreement and the developed software.  Amortization of developed
software commenced effective upon the sale of the first
Millennium DollarO in May 2001.

As a result of the foregoing factors, the Company realized a net
loss of $219,012 for the three months ended June 30, 2001,
$391,607 in the six months ended June 30, 2001 compared to a net
loss of $702,098 for the period from the date of inception
(January 10, 2000) through June 30, 2001.  This loss is due to
the cost of developing business operations.

Plan of Operation

Business Overview:

The Company was organized on January 10, 2000 to offer a private
currency to the general public, along with the requisite monetary
conversion, accounting and transfer systems; such that the
private currency could be used over the Internet.  As such, the
private currency will be represented as stored value on the
Company's database.  The private currency will be called the
Millennium DollarO,at which may be abbreviated as "MR$".  The
purpose of this private currency is to offer a monetary unit that
substantially holds its purchasing power over time, as measured
by the Consumer Price Index for All Urban Consumers (CPI-U).  The
offering of the private currency over the Internet will entail
the development of the requisite software systems.


The Company engaged Bluewater Information Convergence, Inc.
(Bluewater) on a turn-key basis to develop, operate and maintain
the hardware and software systems required to carry out the
Company's offering of the private currency over the Internet.
Originally, Bluewater defined three phases for the initial
development of the Company's web site and related systems.  These
systems were originally envisioned to allow the Company to begin
the offering of its private currency in September 2000.
Nonetheless, this would entail that Company operators (i.e.
employees) would have to carry out many functions by hand on
terminals.  Based upon Bluewater's recommendation, the Company
elected to delay the offering of the MR$ until such time as
additional development is completed, which would reduce the
amount of human intervention required.

                                      10
<PAGE>

On or about April 23, 2001, the Company was informed that
Bluewater Information Convergence, Inc. was terminating its
operations in the Twin Cities.  At that time the Company began a
process of completing the web site development, which was
approximately 85% complete.  The Company was able to engage one
full time employee and a number of independent contractors, who
originally worked with Bluewater on the development of the
Company's Web site.  On or about May 15, 2001, the Web site
software development was completed with the exception of some
ongoing corrections.

The offering of private currency raises legal issues related to
the distribution, circulation and conversion of such currencies.
As such, the Company engaged a banking attorney to review the
Company's proposed business plan with respect to any state or
federal laws that might be pertinent.  On November 9, 2000, the
Company was advised of a number of legal issues that should be
reviewed.  On November 10, 2000, management decided that it was
only prudent that these legal issues be addressed prior to the
offering of the private currency.  As such, the offering of the
private currency was postponed until the third calendar quarter
of the year 2001.

On April 18, 2001, the Company's banking attorney received a
letter from the Minnesota Department of Commerce, stating
"Virtualmoney would not be viewed by this Department as a "bank"
under Minnesota statutes."  The letter went on to state that the
Company would be within the scope of Minnesota Statutes, Section
48.151, which requires the posting of a $5,000 surety bond with
the Department of Commerce.  The Company has posted the required
surety bond, which was effective on April 26, 2001.  The
Department of Commerce letter went on to note the proposed
Minnesota Money Transmitters Act (H.F. 1311, S.F. 1485), which
was working its way through the legislature.  Since then, S.F.
1485 was formally enacted by the Minnesota state Legislature and
subsequently approved by the Governor.

The Minnesota Money Transmitters Act amends Section 48.151, under
which the Company will be regulated.  This Act will take effect
on August 1, 2001, and will require money transmitters, such as
the Company, to obtain a license no later than January 1, 2002.
The Company does not believe that this newly enacted law will
adversely affect its business.  Among other things, the new law
stipulates that money received by money transmitters is
considered to be held in trust for the benefit of the remitter,
should the money transmitter file bankruptcy.  This provision is
effective regardless of whether or not the money transmitter has
commingled such funds with other funds.  It is the Company's
intent to hold the assets backing the redemption of the
Millennium Dollars separate and apart from other corporate funds.
Nonetheless, this new law will give the customers of all money
transmitters a certain degree of added protection that may not
have existed before it was enacted.

On May 15, 2001, the Company commenced operations on the Internet
from the state of Minnesota.  Currently, the Company will
commence a state-by-state review of the laws; and, where such
laws are not arduous, the Company will make the appropriate
license applications and/or post the required bonds.
Nonetheless, it is expected that the Company will begin
operations on a state-by-state basis in those states that have
been properly cleared, until all such regulatory hurdles are
overcome.  Certainly, this will result in the Company incurring
certain expenses and time constraints that were not originally
envisioned.

Gross Margin:

Inasmuch as the Company is currently in its development stage,
there are no significant revenues; and hence no gross margin to
report.  Nonetheless, revenues are expected to commence with the
offering of the private currency, which commenced on May 15,
2001.  Revenues will be generated from interest earned on the
currency float, after reimbursing the users for the inflationary
adjustment on the private currency; and by fees charged for
certain monetary conversions and/or transmissions.  There will be
no charge for the conversion of U.S. dollars into Millennium
Dollars.  Consumers will pay a small transfer fee to convert the
Millennium Dollars back into U.S. dollars, while merchants ill
pay a small transfer and a currency discount.  The charges to the
merchants should be less than a standard credit card transaction.

Operating Expenses:

As the Company moves from a development stage company to the
generation of revenues, the operating expenses will increase over
time.  The increases are a function of increasing regulatory
expenses, software development, the leasing of hardware and
various business-related expenses including insurance and
personnel.

                                      11
<PAGE>

Originally, Bluewater's ICON Center was engaged for the ongoing
operation and maintenance of the system, as well as the leasing
of the required third party software and hardware systems.  This
two-year contract at $7,850 per month was terminated by mutual
agreement, as described below.

On May 30, 2001, the Company entered into an Internet Data
Services Agreement with InFlow, Inc.  (INFLOW), a Delaware
corporation, for the purpose of providing the Company with secure
hosting services.  The INFLOW contract is for a period of one
year, which included a $350 installation fee and monthly payments
of $3,200.  Concurrently, the Company arranged to purchase
$32,193.15 of computer hardware from Leasing Technologies
International, Inc. (LTI) for$9,657.95, which LTI had been
leasing to Bluewater on behalf of the Company.  As part of that
arrangement, the Company agreed to make a final payment of
$8,455.00 to Bluewater, which was assigned to LTI.  Bluewater
further agreed to assign the Veritas License, and deliver the
Veritas software, to the Company.  To date, the Company has paid
LTI a total of $14,589.95.  At such time as Bluewater performs,
the Company will be obligated to make a final payment of$3,523.00
to LTI.   The Company also entered into a contract with Oracle to
purchase the database software license for $9,812.55, which is
due and payable on August 30, 2001.

Net Income (Loss):

The Company's net loss from inception through June 30, 2001, is
$702,098, on an unaudited basis.  During the balance of 2001 the
losses will continue as the Company works to expand operations.

Now that the Virtualmoney.com Web site is operational, the
Company will shift away from software development to focus on
marketing its products and services.  This coupled with the
departure of Bluewater, which resulted in the unforeseen cash
outlays discussed above; has led the Company to undertake
measures to reduce its overhead.  The Company has reduced its
full time staff from five individuals to three, and has reduced
its part time staff from two to zero; although it still relies on
the assistance of two independent contractors for technical
assistance.  Nonetheless, the Company will engage marketing
assistance, which it expects to pay on a commission basis and/or
via the viral network marketing program.  Such marketing efforts
are expected to begin generating results in the third quarter of
2001.

As of July 25, 2001, the Company had enrolled 40 consumer
accounts and 11 business accounts; thereby generating about $50
in fees and interest.  The Company expects to generate about $15
per account annually, which means that the Company will need
about 30,000 users to break-even.  The Company is relying on its
viral network marketing program, which is just getting underway,
to generate this volume of users.  Specifically, the Company will
market its product and services as a virtual money debit card
system to small to medium size businesses by showing them (a) how
to save money on current monetary transfers by using the
Company's product and services and (b) how to develop a passive
profit center by participating in the viral network marketing
program.  Small businesses can achieve these results simply by
using the Company's product and services when making payments to
employees, contractors and suppliers.

Commencing in July 2001, the Company projects an operating
overhead of approximately $35,000 per month.  However, certain
officers and directors have elected to defer salaries of
approximately $15,000 per month.  This leaves approximately
$20,000 per month, which must be funded on a cash basis.  In
addition, the relative success of the Company's offering of the
private currency could increase the overhead, as the Company is
forced to upgrade its hardware and software systems to meet the
demand.  Nonetheless, the general assumption is that the current
system will be able to cope with up to 250,000 users, which is
the Company's year-end marketing goal.  Inasmuch as the Company
is currently a development stage company, funding must be raised
via restricted stock sales and/or loans to the Company from third
parties.  To date, the Company has funded all of its activities
via stock sales, and/or stock compensation.

The projected growth rate is largely dependent upon the success
of the Company's viral network marketing program.  This program
will include a marketing incentive program, whereby one percent
of the interest earned on the private currency float will be
shared on a network basis with early users who actively sign-up
other users.  In addition, the projection is also dependent upon
the amount of average daily funds per user account, representing
the currency float.  At the break-even point, the Company
estimates that the average daily funds will be approximately $165
per user.  Any combination of a slower growth rate of the user
base, and/or a lower amount of average daily funds per user;
would extend the

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time period during which the Company would incur
net losses.  The success of the Company is dependent upon its
ability to fund such losses until the break-even point is
reached.

Liquidity and Capital Resources:

The Company estimates it will need approximately $250,000 of
additional financing to fund operations through December 31,
2001.  The Company has no commitments for financing at this time.
If the Company is unable to obtain financing, its ability to
implement its business plan will be impaired.


                   PART II OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is not involved in any legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds

The Company has effected a two-for-one stock distribution
increasing the number of outstanding shares from 4,218,199 to
8,439,398.

           During  the  quarter ended June 30, 2001, the  Company
sold   209,958   post  split  shares  of  common  stock   without
registration  under the Securities Act of 1933.  The  sales  were
private  transactions made in reliance on the exemption  provided
by Section 4(2) of the Securities Act.  Each purchaser had a pre-
existing  relationship with the Company and  had  access  to  all
material  information pertaining to the Company and its financial
condition.  The Company received $104,595 in gross proceeds  from
the sale of 206,190 shares, on which the Company paid commissions
of  $3,485  to a broker.  The remaining 3,768 shares were  issued
for  services  valued at $1,884.  The following table  identifies
the purchasers and the number of shares acquired.

Name                           Shares

Jeanne M. Sommerfeld            5,768
Linn M. Kesler                 10,000
Angeno's Grove Square          49,200
Russell Wivell                 64,000
Suzann Roehl McLain            65,538
Charles Kulas                  12,452
Michael McNeely                 3,000

Item 6.  Exhibits and Reports on Form 8-K:  None


                           SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.

                       VIRTUALMONEY, INC.


                    By: /s/ Thomas W. Tripp
                        Thomas W. Tripp
                      President, Director

Dated July 26, 2001

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