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 September 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


                                 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)


                        (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 October 30, 2001:   8,460,264

<PAGE>
                             INDEX

                       VIRTUALMONEY, INC.


PART I, FINANCIAL INFORMATION

                                                       Page

Item 1. Financial Statements (Unaudited).

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

       Statements of operations for the three and nine months
       ended September 30, 2001 and 2000                             4

       Statements of cash flow for the nine months ended
       September 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)

                                       September 30,     December 31,
                                           2001            2000
              ASSETS

Current assets:
 Cash                                   $    15,617      $   27,903
 Millennium Dollars (MR$)                        80               -
 Miscellaneous receivables                    1,655               -
 Prepaid expenses:
   Legal retainer                                 -           3,258
   Directors fees                                 -          10,834
   Other                                      2,000             200
                                             ------          ------
        Total current assets                 19,352          42,195
                                             ------          ------
Furniture and equipment                      20,323          3,912
Less accumulated depreciation                 2,038            374
                                             ------          -----
        Net fixed assets                     18,285          3,538
                                             ------          -----
Other assets:
 Investment - related party                  66,700         41,200
 Developed software, net                    116,523        116,000
 License agreement, net                     505,000        550,000
                                            -------        -------
        Total other assets                  688,223        707,200
                                            -------        -------
        Total assets                    $   725,860     $  752,933
                                            =======        =======

 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                       $   184,417     $   42,669
 Accrued payroll and related                161,422         67,856
 Accrued director's fees                     17,250              -
 Accrued expenses - other                     1,609              -
 Millennium Dollar (MR$) liability            4,877              -
 Notes payable - related parties             47,299         10,604
                                            -------        -------
        Total current liabilities           416,874        121,129
                                            -------        -------
Stockholders' equity:
 Common stock, no par value; authorized
   10,000,000 shares                      1,136,740         942,295
 Deficit accumulated during the
   development stage                       (827,754)       (310,491)
                                            -------         -------
        Total stockholders' equity          308,986         631,804
                                            -------         -------
        Total liabilities and
          stockholders' equity          $   725,860      $  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          Nine Months Ended    (January 10, 2000)
                                        September 30,                September 30,            Through
                                     2001          2000          2001            2000   September 30, 2001
<S>                               <C>           <C>           <C>              <C>        <C>
Revenues                          $      146    $        -    $      260       $     -    $      260
                                     -------        ------        ------        ------      --------
Expense:
  Amortization                        21,685        15,000        55,027        35,000       105,027
  Depreciation                           938         1,194         1,664         1,239         2,038
  Directors fees                       8,750         4,375        29,751         7,292        45,168
  ICON Center lease/maintenance       12,899             -        49,953             -        65,653
  Insurance                              100             -           578             -           958
  Internet                               504           461         1,800           860         3,075
  Interest expense                     1,191            34         1,929            36         2,001
  Office and administrative            2,425         2,720        19,811         6,406        30,964
  Payroll and related                 36,239        25,216       158,387        40,216       242,345
  Professional and consulting fees    31,345        20,962       174,185        67,989       283,373
  Rent                                 6,000         3,982        12,626         9,197        25,075
  Repairs and maintenance                  -             -         1,380             -         1,380
  Telephone                            3,207         1,273         8,741         1,371        12,338
  Travel and entertainment                16           221           426         1,279         1,894
  Web design                               -         4,290         1,800         5,918         8,818
                                     -------        ------       -------       -------       -------
      Total expense                  125,299        79,728       518,058       176,803       830,107
                                     -------        ------       -------       -------       -------
Net loss before other income        (125,153)      (79,728)     (517,798)     (176,803)     (829,847)

Other income:
Interest and other income                 55           645           536           805         2,093
                                     -------        ------       -------       -------       -------
Net loss                          $ (125,098)   $  (79,083)   $ (517,262)   $ (175,998)   $ (827,754)
                                     =======        ======       =======       =======       =======
Basic earnings (loss) per share   $     (.02)   $     (.01)   $     (.06)   $     (.02)   $     (.11)
                                     =======        ======       =======       =======       =======
Weighted average number of
  shares outstanding               8,449,656     7,931,266     8,345,071     7,931,266     7,588,986
                                   =========     =========     =========     =========     =========
</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
                                            Nine Months Ended    (January 10, 2000)
                                              September 30,             Through
                                            2001         2000     September 30, 2001
<S>                                     <C>           <C>           <C>
Cash flows from operating activities:
  Net loss                              $ (517,262)   $ (175,998)   $ (827,754)
Adjustments to reconcile net loss
  to cash flows from operating
  activities:
    Depreciation                             1,664         1,239         2,038
    Amortization                            55,027        35,000       105,027
    Stock issued for services and
      future services                       15,220        55,250        82,856
    Millennium Dollars (MR$1)                  875             -           (80)
    Notes receivable - related
      party and other receivables           (1,655)       (7,418)       (1,655)
    Prepaid expenses                        12,292       (22,409)       (2,000)
    Accounts payable                       141,748        19,148       184,417
    Accrued expenses                       113,704        37,972       177,779
    Millennium Dollar (MR$1) liability       1,706             -         4,877
                                           -------        ------       -------
       Net cash flows from
         operating activities             (176,681)     (57,216)      (274,495)
                                           -------       ------        -------
Cash flows from investing activities:
  Purchases of furniture and equipment     (16,411)      (3,392)       (20,323)
  Purchase of investment - related party   (10,500)     (28,500)       (66,700)
  Investment in developed software          (4,825)     (50,000)      (126,550)
                                           -------       ------        -------
       Net cash flows from
         investing activities              (31,736)     (81,892)      (213,573)
                                            ------       ------        -------
Cash flows from financing activities:
  Proceeds from common stock, net          179,225      228,794        456,386
  Proceeds from note payable -
    related party                           36,695            -         47,299
                                           -------      -------        -------
      Net cash flows from
        financing activities               215,920      228,794        503,685
                                           -------      -------        -------
Increase (decrease) in cash                  7,503       89,686         15,617

Cash:
  Beginning of period                        8,114            -              -
                                            ------       ------         ------
  End of period                         $   15,617    $  89,686    $    15,617
                                            ======       ======         ======
</TABLE>

               See Notes to Financial Statements.

                                   5
<PAGE>

                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 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 has been  included.
 Operating  results  for the three-month period  ended  September
 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(tm)  process for the purpose of issuing an  asset-
  backed  real  monetary  equivalent (the Millennium  Dollar(tm))
  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 DollarO  in
  May 2001.

                                   6
<PAGE>

                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 30, 2001
                          (Unaudited)


2.  Development Stage Company

  From inception to September 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.   First
  revenues  were recognized in the second quarter  of  2001,  but
  these levels are still considered de minimis.

  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.

                                   7
<PAGE>

                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 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.

                                   8
<PAGE>
                       VIRTUALMONEY, INC.

                 NOTES TO FINANCIAL STATEMENTS
                       SEPTEMBER 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  $66,700  to  this individual toward  the  purchase  of
 33,350  shares  of  RMSI common stock at a  historical  cost  of
 $66,700.   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 September 30, 2001, the Company has continued  to
 advance  monies to this individual toward 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 Nine Months Ended September 30, 2001.

The  Company commenced revenue generating activities in May  2001
and has generated $146 in revenues from continuing operations for
the  for  the three months ended September 30, 2001 and $260  for
the nine months ended September 30, 2001.  We had no revenue from
operations during the comparable periods in 2000.

The  Company  had operating expenses of $125,299 for  the  three-
month  period that ended September 30, 2001, compared to  $79,728
for  the  three months ended September 30, 2000, and $518,058  in
the  nine  months ended September 30, 2001, compared to  $176,803
for  the  period  from the date of inception (January  10,  2000)
through September 30, 2000.  Our operating expenses increased 193
percent  for the nine months ended September 30, 2001,  over  the
comparable  period in 2000 because of the added expenses  arising
from    the    implementation   of   our   business   operations.
Specifically, our amortization expense arising from our  software
license  increased  by $20,027, directors' fees  to  attract  and
retain our directors increased by $22,459, lease expense for  the
servers  and equipment required to operate our business increased
to  $49,953, office expense increased by $13,405, payroll expense
increased  by  $118,171,  and  professional  fees  increased   by
$106,186.   As we continue to implement our business,  we  expect
that  we  will  continue to incur these expenses at approximately
the same rate through the remainder of 2001.

As  a result of the foregoing factors, the Company realized a net
loss  from  operations  of $125,153 for the  three  months  ended
September  30,  2001, compared to a net loss from  operations  of
$79,728 for the three months ended September 30, 2000, and a  net
loss  from  operations  of  $517,798 in  the  nine  months  ended
September  30,  2001 compared to a net loss of $176,803  for  the
period  from  the  date of inception (January 10,  2000)  through
September  30, 2000.  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 Dollar(tm),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.   This
system  would have required Company employees 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  was  completed,
which would reduce the amount of human intervention required.

On  or  about  April  23,  2001, the Company  was  informed  that
Bluewater  was  terminating  its  operations  in  the  St.  Paul,
Minnesota.   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

                                   10
<PAGE>

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.

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   of   computer   hardware  from   Leasing   Technologies
International, Inc. (LTI) for $9,658, 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
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.  Nonetheless, it now appears that Bluewater is incapable  of
performing on the delivery of the Veritas license, hence  we  are
in  the  process of renegotiating the final payment to LTI.   The
Company also entered into a contract with Oracle to purchase  the
database software license for $9,813, which was due on August 30,
2001.   The  Company has made a $2,000 payment to Oracle  with  a
balance  due  of $7,812.55.  The Company has offered  to  make  a
monthly  payment to Oracle to satisfy this obligation,  which  is
currently  being  negotiated.   The  Company's  ability  to  meet
certain  payments has been impacted by the dot.com  crash,  which
has made it harder to fund start-up companies.

From  the Fall of 2000 through the first six months of 2001,  the
Company  completed an evaluation of applicable state and  Federal
banking  laws that might be applicable to its operations.   Based
on that evaluation, the Company has determined that it is subject
only  to  the  Minnesota  Money Transmitters  Act,  which  became
effective   on   August  1,  2001.   This  Act   requires   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.  The  Company  is  also
required  by  the  Act  to post a $5,000  surety  bond  with  the
Department of Commerce, which it has done.

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 which  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.

The  Company's  Web site is now operational.  The  challenge  now
facing the Company is the marketing of the Company's product  and
services.   This  is  expected to be a learning  experience.   By
September 31, 2001, the Company had 72 accounts open, which  were
collectively holding $4,877 MR$.  Up to this point,  the  Company
was  engaged in marketing directly to commercial interests in the
greater  Minneapolis  area,  which  was  not  moving  forward  as
originally envisioned.  As such, the Company has decided to  turn
its  efforts to marketing over the Internet, which it expects  to
be more fruitful.  In particular, the Company proposes to develop
a  strategy  that will assist users of the Millennium  Dollar  to
find  commercial Web sites on the Internet that will accept  this
private  currency.  Concurrently, the benefit to  the  commercial
Web  sites  will be a potential flow of business from holders  of
the  private currency.  The Company is currently negotiating with
an  Internet business that would be capable of implementing  this
strategy.   In  summation, we now have the product and  services,
but we must perfect our marketing efforts.

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 two, and has reduced its
part time staff from two to zero; although it still relies on the
assistance  of 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 first quarter of 2002,  which
is six months later than original envisioned.

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As  of  September,  2001, the Company had  enrolled  57  consumer
accounts and 15 business accounts; thereby generating about  $146
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  October 2001, the Company projects  an  operating
overhead  of  approximately $25,000 per month.  However,  certain
officers  and  directors  have  elected  to  defer  salaries   of
approximately $10,750 per month.  Effective August 1,  2001,  the
directors voted to reduce their fees from $500 to $250 per  month
per director.  This leaves approximately $14,250 per month, which
must be funded on a cash basis.  It is further estimated that the
Company's operating overhead will increase at 3.0% per month,  as
unforeseen  expenses  are incurred.  In  addition,  the  relative
success  of the Company's offering of the private currency  could
accelerate the increase in the overhead, as the Company is forced
to  upgrade its hardware and software systems to meet the demand.
The  Company's marketing goal of 250,000 users in six months  has
been  changed  to 150,000 users in two years.  Obviously,  it  is
difficult  to  make such a projection, until  such  time  as  the
Internet marketing has been perfected; which the Company  expects
to  achieve by the first quarter of 2002. Inasmuch as the Company
is still perfecting its marketing efforts, its operations must be
funded  externally through debt or equity financing.  The Company
is  in  the process of seeking financing opportunities, but there
is no assurance financing will be available to fund the Company's
operations on acceptable terms.

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 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.

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                   PART II OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

      During  the  quarter ended September 30, 2001, the  Company
sold  16,750 shares of common stock to David Newby at  $1.00  per
share,  or  a  total of $16,750, without registration  under  the
Securities Act of 1933.  The sale was a private transaction  made
in  reliance  on the exemption provided by Section  4(2)  of  the
Securities  Act.  Mr. Newby has a pre-existing relationship  with
the Company and had access to all material information pertaining
to  the  Company and its financial condition.  No commission  was
paid to any person in connection with the sale

Item 6.   Exhibits and Reports on Form 8-K

Form  8-K:   The Company filed no reports on Form 8-K during  the
quarter ended September 30, 2001.

Exhibits:  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
                           President, Director

Dated: October 31, 2001

                                   13
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