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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-QSB

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2001

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period
from                            to

Commission file number: 333-60842

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INPURPLE, INC.

CALIFORNIA(State or other jurisdiction of incorporation)

NO. 33-0947822(IRS Employer Identification No.)600 Anton Boulevard11th Floor, Costa Mesa, California(Address of principal executive offices)

92626(Zip Code)


Registrant's telephone number, including area code:(714) 371-4034

Not Applicable(Former name or former address, if changed since last report)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(c) of the Securities Exchange Act of 1934 during the
preceding 12 months (of 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 / /

APPLICABLE
ONLY TO CORPORATE ISSUERS

On
February 11, 2002, there were 1,500,001 shares of InPurple, Inc. Common Stock outstanding.

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InPurple, Inc. and Subsidiaries  December 31, 2001    INDEX

|                             |   |                                                                                                                       |  | PAGE
|---------------------------- | - | --------------------------------------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION
|Item 1                       |  | Financial Statements                                                                                                  |  |     
|                             |   | Condensed Consolidated Balance Sheets at December 31, 2001 and June 30, 2001                                          |  | 2   
|                             |   | Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended September 30, 2001 and 2000 |  | 3   
|                             |   | Condensed Consolidated Statements of Changes in Shareholders' Equity from July 1, 2000 through December 31, 2001      |  | 4   
|                             |   | Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2001 and 2000                |  | 5   
|                             |   | Notes to Consolidated Financial Statements                                                                            |  | 6   
|Item 2                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 7   
|PART IIOTHER INFORMATION   
|Item 1                       |  | Legal Proceedings                                                                                                     |  | 9   
|Item 2                       |  | Changes in Securities                                                                                                 |  | 9   
|Item 3                       |  | Defaults upon Senior Securities                                                                                       |  | 9   
|Item 4                       |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 9   
|Item 5                       |  | Other Information                                                                                                     |  | 9   
|Item 6                       |  | Exhibits and Reports on Form 8-K                                                                                      |  | 9   

1

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InPurple, Inc. and Subsidiaries  Condensed Consolidated Balance Sheets  (UnauditedDollar Amounts in Thousands)

|                                     |                                                                                                         | December 31,
2001          |            | June 30,
2001 |          
|------------------------------------ | ------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ------------- | ---------
|ASSETS                               |                                                                                                         |                            |            |               |          
|Current Assets                       |                                                                                                         |                            |            |               |          
|                                     | Cash                                                                                                    |                            | $          | 20,403        |          
|                                     | Accounts receivable, less allowance for doubtful accounts                                               |                            |            | 65,197        |          
|                                     | Inventory                                                                                               |                            |            | 2,714         |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | Total Current Assets       |            |               | 88,314   
|Premises and Equipment               |                                                                                                         |                            |            |               |          
|                                     | Leasehold improvements                                                                                  |                            |            | 219,620       |          
|                                     | Furniture and equipment                                                                                 |                            |            | 256,159       |          
|                                     | Vehicles                                                                                                |                            |            | 57,204        |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         |                            | 532,983    |               |          
|                                     | Less accumulated depreciation                                                                           |                            |            | (98,410       | )        
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | Net Premises and Equipment |            |               | 434,573  
|Other Assets                         |                                                                                                         |                            | 183,533    |               |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | $                          | 706,420    |               | $        
|                                     |                                                                                                         |                            |            |               |          
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                                         |                            |            |               |          
|Current Liabilities                  |                                                                                                         |                            |            |               |          
|                                     | Accounts payable and accrued expenses                                                                   |                            | $          | 533,974       |          
|                                     | Payroll and sales taxes payable                                                                         |                            |            | 358,757       |          
|                                     | Notes payableothers                                                                                    |                            |            | 804,976       |          
|                                     | Due to officers and directors                                                                           |                            |            | 239,778       |          
|                                     | Other short-term borrowings                                                                             |                            |            | 89,088        |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | Total Current Liabilities  |            |               | 2,026,573
|Long term debtDebentures            |                                                                                                         |                            | 146,160    |               |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | Total Liabilities          |            |               | 2,172,733
|Commitments and Contingencies        |                                                                                                         |                            |           |               |          
|Shareholders' Equity                 |                                                                                                         |                            |            |               |          
|                                     | Common Stock, par value $0.001 per share; 2,500,000 shares authorized; 1,500,001 issued and outstanding |                            |            | 1,500         |          
|                                     | Additional paid-in-capital                                                                              |                            |            | 945,724       |          
|                                     | Accumulated deficit                                                                                     |                            |            | (2,407,512    | )        
|                                     | Accumulated other comprehensive income                                                                  |                            |            | (6,025        | )        
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         |                            | (1,466,313 | )             |          
|                                     |                                                                                                         |                            |            |               |          
|                                     |                                                                                                         | $                          | 706,420    |               | $        
|                                     |                                                                                                         |                            |            |               |          

2

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Item 1Financial StatementsContinued

InPurple, Inc. and Subsidiaries  Condensed Consolidated Statements of Operations  (UnauditedDollar Amounts in Thousands, Except EPS)

|                                  |                                  | For the Three Months Ended
December 31, |          | For the Six Months Ended
December 31, |         
|--------------------------------- | -------------------------------- | --------------------------------------- | -------- | ------------------------------------- | --------
|
|Sales                             |                                  | $                                       | 207,456  |                                       | $       
|Costs of Good Sold                |                                  |                                         | 84,747   |                                       |         
|                                  |                                  |                                         |          |                                       |         
|                                  |                                  | Gross Profit                            |          |                                       | 122,709 
|Administrative Expenses           |                                  |                                         |          |                                       |         
|                                  | Salaries and employee benefits   |                                         |          | 449,388                               |         
|                                  | Consultants                      |                                         |          |                                      |         
|                                  | Advertising                      |                                         |          | 3,828                                 |         
|                                  | Automobile expenses              |                                         |          | 13,757                                |         
|                                  | Rent                             |                                         |          | 29,376                                |         
|                                  | Legal and accounting             |                                         |          | 6,754                                 |         
|                                  | Telephone                        |                                         |          | 9,006                                 |         
|                                  | Depreciation                     |                                         |          | 22,690                                |         
|                                  | Printing, postage and stationary |                                         |          | 2,031                                 |         
|                                  | Interest expense                 |                                         |          | 81,119                                |         
|                                  | Other expenses                   |                                         |          | 10,263                                |         
|                                  |                                  |                                         |          |                                       |         
|                                  |                                  | Total Administrative Expenses           |          |                                       | 628,212 
|                                  |                                  |                                         |          |                                       |         
|Income (Loss) Before Income Taxes |                                  |                                         | (505,503 | )                                     |         
|Provision for Income Taxes        |                                  |                                         |         |                                       |         
|                                  |                                  |                                         |          |                                       |         
|                                  |                                  | NET INCOME (LOSS)                       |          | $                                     | (505,503
|                                  |                                  |                                         |          |                                       |         
|Earnings (Loss) Per ShareBasic   |                                  | $                                       | (0.34    | )                                     | $       

3

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Item 1Financial StatementsContinued

InPurple, Inc. and Subsidiaries  Condensed Consolidated Statements of Shareholders' Equity  (UnauditedDollar Amounts in Thousands)

|                                                |                            | Common Stock         |  |   |       |  |   | Accumulated
Other
Comprehensive
Income |  |   |           
|----------------------------------------------- | -------------------------- | -------------------- |  | - | ----- |  | - | -------------------------------------- |  | - | ----------
|
|
|Balance at July 1, 2000                         |                            | 700,001              |  | $ | 700   |  | $ | 299,524                                |  | $ | (291,184  
|Dividends                                       |                            |                      |  |   |       |  |   |                                        |  |   | (70,500   
|Stock sale                                      |                            | 800,000              |  |   | 800   |  |   | 9,200                                  |  |   |           
|Additional capital contribution                 |                            |                      |  |   |       |  |   | 45,000                                 |  |   |           
|Fair value of services provided by shareholders |                            |                      |  |   |       |  |   | 204,000                                |  |   |           
|Beneficial conversion feature of debentures     |                            |                      |  |   |       |  |   | 213,000                                |  |   |           
|                                                |                            | Comprehensive Income |  |   |       |  |   |                                        |  |   |           
|Net Income                                      |                            |                      |  |   |       |  |   |                                        |  |   | (913,420  
|Foreign currency translation gain               |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                | Total Comprehensive Income |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|Balance at June 30, 2001                        |                            | 1,500,001            |  |   | 1,500 |  |   | 770,724                                |  |   | (1,275,104
|Fair value of services provided by shareholders |                            |                      |  |   |       |  |   | 175,000                                |  |   |           
|                                                |                            | Comprehensive Income |  |   |       |  |   |                                        |  |   |           
|Net loss                                        |                            |                      |  |   |       |  |   |                                        |  |   | (1,132,408
|Foreign currency translation loss               |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                | Total Comprehensive Income |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           
|Balance at December 31, 2001                    |                            | 1,500,001            |  | $ | 1,500 |  | $ | 945,724                                |  | $ | (2,407,512
|                                                |                            |                      |  |   |       |  |   |                                        |  |   |           

4

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Item 1Financial StatementsContinued

InPurple, Inc. and Subsidiaries  Condensed Consolidated Statements of Cash Flows  (UnauditedDollar Amounts in Thousands)

|                                                  |                                                                                                 | For the Six Months Ended
December 31,                        |         
|------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------
|
|OPERATING ACTIVITIES                              |                                                                                                 |                                                              |         
|                                                  | Net Income (Loss)                                                                               |                                                              | $       
|                                                  | Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |                                                              |         
|                                                  |                                                                                                 | Depreciation and amortization                                |         
|                                                  |                                                                                                 | Contributed services reported as salaries                    |         
|                                                  |                                                                                                 | Amortization of discount on debentures                       |         
|                                                  |                                                                                                 | (Increase) decrease in accounts receivable                   |         
|                                                  |                                                                                                 | (Increase) decrease in inventory                             |         
|                                                  |                                                                                                 | (Increase) decrease in other assets                          |         
|                                                  |                                                                                                 | Increase (decrease) in accounts payable and accrued expenses |         
|                                                  |                                                                                                 |                                                              |         
|CASH PROVIDED (USED) BY OPERATIONS                |                                                                                                 |                                                              | (262,364
|INVESTING ACTIVITIES                              |                                                                                                 |                                                              |         
|                                                  | Equipment and other asset purchases                                                             |                                                              |         
|                                                  |                                                                                                 |                                                              |         
|CASH USED BY INVESTMENT ACTIVITIES                |                                                                                                 |                                                              | (155,445
|FINANCING ACTIVITIES                              |                                                                                                 |                                                              |         
|                                                  | Proceeds from debentures                                                                        |                                                              |         
|                                                  | Proceeds from notes payableothers                                                              |                                                              |         
|                                                  | Proceed from loans from officers and directors                                                  |                                                              |         
|                                                  | Net change in other short-term borrowings                                                       |                                                              |         
|                                                  |                                                                                                 |                                                              |         
|CASH PROVIDED BY (USED) FINANCING ACTIVITIES      |                                                                                                 |                                                              | 348,015 
|                                                  |                                                                                                 |                                                              |         
|NET INCREASE (DECREASE) IN CASH                   |                                                                                                 |                                                              | (69,794 
|CASH AT BEGINNING OF PERIOD                       |                                                                                                 |                                                              | 90,197  
|                                                  |                                                                                                 |                                                              |         
|CASH AT END OF PERIOD                             |                                                                                                 | $                                                            | 20,403  
|                                                  |                                                                                                 |                                                              |         
|Supplemental Disclosure of Cash Flow Information: |                                                                                                 |                                                              |         
|                                                  | Interest paid                                                                                   |                                                              | $       
|                                                  | Income taxes paid                                                                               |                                                              | $       

5

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Item 1Financial StatementsContinued

InPurple, Inc. and Subsidiaries  Notes to Consolidated Financial Statements

Note 1Basis Of Presentation And Management Representation

The accompanying financial information has been prepared in accordance with the Securities and Exchange Commission rules and regulations for quarterly reporting
and therefore does not necessarily include all information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles.

The
consolidated financial statements include the accounts of the InPurple, Inc. and its wholly owned subsidiaries, InPurple Limited and Talkpoint Co., Ltd. All significant
intercompany balances and transactions have been eliminated in consolidation.

InPurple
Limited and Talkpoint Co., Ltd. were acquired by InPurple, Inc. on April 30, 2001 for $10,000 in cash and 700,001 shares of the common stock of
InPurple, Inc. Since the acquired companies were under common control the acquisition was accounted for as a reorganization of entities under common control in a manner similar to a pooling of
interests. The consolidated financial statements give retroactive effect to the reorganization transaction. The excess of the of the fair value of the 700,001 shares was recorded as a deemed
distribution to the controlling shareholder of InPurple, Inc. with a related credit to additional paid-in capital. For purposes of this transaction, the shares of
InPurple, Inc. were valued at $8,750 or $0.125 per share, the same value assigned to the initial stock sale.    The net book value of the acquired companies was $(190,767) resulting
in a deemed distribution and offsetting credit to additional paid-in capital of $199,517.

Operating
results for interim periods are not necessarily indicative of operating results for an entire fiscal year. In the opinion of management, the unaudited financial information for
the three-month and six-month periods ended December 31, 2001 and 2000, reflect all adjustments, consisting only of normal recurring accruals and provisions, necessary for a fair
presentation thereof.

Note 2Development Stage Operations

The parent company, InPurple, Inc. and its wholly owned subsidiary, InPurple Limited are development stage enterprises. They were formed to develop a
business to business company offering national and international telephony services such as voice communication, teleconferencing, e-mail and Internet communication. Operation since
inception were securing a management team, developing a strategic plan, perfecting patents on its intellectual property preparing the necessary forms and documents to raise capital and acquiring
offices, staff and equipment necessary for the business operations.

Included
in the consolidated loss for the six months ended December 31, 2001 was $1,024,225 in losses incurred in development stage operations from InPurple Inc. and
InPurple Limited. Since inception the Company has incurred aggregate losses of $1,873,079 from development stage operations. The Company expects to continue to incur significant operating losses and
to generate negative cash flow while it completes installation of its offices and develops its customer base. The Company's ability to eliminate operational losses and to generate positive cash flow
from operations will depend upon a variety of factors, many of which it is unable to control. These factors include: (1) the cost to equip and staff its facilities, (2) changes in
technology, (3) the level of demand for its services, (4) competitive products and services and (5) general economic conditions.

6

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Note 3Business Segment Information

The Company has two business segments, the development stage operations discussed in Note 2 and the sale and installation of telephone systems and data
cabling segment. The accounting polices of the segment are the same as those described in the summary of significant accounting policies. These segments operate in the United States of America (US)
and the United Kingdom (UK). The following is a summary of condensed operating results and other selected financial information by segment and geographic location as of December 31, 2001 and
for the six months then ended:

|                               |  |   |          | Development Stage |   |            |  
|------------------------------ |  | - | -------- | ----------------- | - | ---------- | -
|
|
|Sales                          |  | $ | 345,767  |                   | $ |           |  
|Cost of goods sold             |  |   | 136,293  |                   |   |            |  
|Gross Profit                   |  |   | 209,474  |                   |   |           |  
|Salaries and employee benefits |  |   | 243,463  |                   |   | 611,067    |  
|Consultants                    |  |   |         |                   |   |           |  
|Advertising                    |  |   | 7,225    |                   |   | 57,281     |  
|Depreciation                   |  |   | 10,024   |                   |   | 32,286     |  
|Interest expense               |  |   | 4,622    |                   |   | 136,984    |  
|Other expenses and taxes       |  |   | 52,323   |                   |   | 170,447    |  
|                               |  |   |          |                   |   |            |  
|Net Income (Loss)              |  | $ | (108,183 | )                 | $ | (1,008,065 | )
|                               |  |   |          |                   |   |            |  

|Balance Sheet Data          |  |   |         |   |   |            |   |   |        |   |  
|--------------------------- |  | - | ------- | - | - | ---------- | - | - | ------ | - | -
|Inventory                   |  | $ | 2,714   |   | $ |           |   | $ |       |   | $
|Premises and Equipment, net |  |   | 34,538  |   |   | 400,035    |   |   |       |   |  
|Total Assets                |  |   | 147,991 |   |   | 550,121    |   |   | 8,308  |   |  
|Shareholders' Equity        |  |   | (77,779 | ) |   | (1,385,042 | ) |   | (3,492 | ) |  

As
of December 31, 2000 and for the six months then ended, the primary operating segment present in the Company was the sale and installation of telephone systems and data cabling
segment. During the six months ended December 31, 2000, the Company incurred $17,317 in development stage operations. Accordingly, no separate segment information is reported for those periods.

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

Introduction

Some matters discussed in this Form 10-QSB may be "forward-looking statements" within the meaning of the Private Litigation Reform Act of 1995
and therefore may involve risks, uncertainties and other factors which may cause our actual results to be materially different from the results expressed or implied by our forward-looking statements.
These statements generally appear with words such as "anticipate," "believe," "estimate," "may," "intend," and "expect."

We
are currently in the process of selling securities through a public offering of common stock. Please see our recently filed Form SB-2 which became effective on
February 11, 2002 for additional historical information on us and our proposed business plan.

7

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Current Operations

For the quarter ended December 31, 2001, we incurred a loss of $505,503, or $0.34 per share. This compared to a loss of $115,765, or $0.08 in the same
period of 2000. The increase in the loss in 2001 is directly related to the development stage operations of our parent InPurple, Inc. and our United Kingdom subsidiary, InPurple Limited.

As
more fully described in our recently filed Form SB-2, our development stage operations began in early 2001 and through December 31, 2001 we have incurred
accumulated expenses of approximately $1.9 million. Of that total approximately $1.0 million was incurred in the six months ended December 31, 2001.

In
addition to the operating losses discussed above, we have made significant capital investments during our development stage operations. As of December 31, 2001, we had acquired
leasehold improvements, office furniture and equipment of approximately $438,000. The capital investments and operating costs of our development stage operations have been funded by various sources of
borrowed funds. It is our intent to repay these obligations and fund future operations from the proceeds of our public offering as
well as other secured borrowings. See our recently filed Form SB-2 for additional information and discussion of our public offering and proposed use of proceeds.

Our
other operating subsidiary, Talkpoint Co., Ltd reported a loss of $18,835 for the quarter ended December 31, 2001 compared to a loss of $98,448 for the same period in
2000. This improvement was directly related to higher gross profit margins on our current contracts as gross revenues and operating costs were relatively unchanged.

8

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PART IIOTHER INFORMATION



9

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Signatures

Pursuant to the requirement 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.

|                        |  | InPurple, Inc.                                                                            
|----------------------- |  | ------------------------------------------------------------------------------------------
|Date: February 14, 2002 |  | /s/SEAN P. LEWISSean P. Lewis
Chairman of the Board,
Chief Executive Officer,
and Director
|Date: February 14, 2002 |  | /s/STEPHEN P. NORTHStephen P. North
President, Chief Operating Officer,
and Director      

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