<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-QSB


( X ) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2001 or

( ) 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:                0-30568
                               ----------------------

                           VITAL LIVING PRODUCTS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


     Delaware                                                 56-1683886
     --------                                                 ----------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)


                    5001 Smith Farm Road, Matthews, NC 28104
             ------------------------------------------------------
                    (Address of principal executive offices)

                                 (704) 821-3200
             ------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
             ------------------------------------------------------
              (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, and (2)
has been subject to such filing requirements for the past 90 days.

Yes           X     No
         ---------         ---------

State the number of shares outstanding of each of the issuer's classes of common
equity as of August 13, 2001.

              Common Stock, $0.01 par value . . . . . . . . . 3,992,256

Transitional Small Business Disclosure Format (check one):

Yes                 No         X
         ---------         ---------


<PAGE>   2

PART I

ITEM 1.       FINANCIAL STATEMENTS


                         CONDENSED FINANCIAL STATEMENTS

                       For the Quarter Ended June 30, 2001

                           VITAL LIVING PRODUCTS, INC.


         The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures contained herein
are adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Form 10-KSB filed March 27, 2001, as
amended.



                                       2
<PAGE>   3

                           VITAL LIVING PRODUCTS, INC.

                                  BALANCE SHEET
                                   (UNAUDITED)

                                  JUNE 30, 2001


                                     ASSETS


CURRENT ASSETS:
   Cash                                                              $    400
   Accounts receivable, less allowance for doubtful
    accounts of $10,011                                               276,967
   Installment accounts receivable                                     10,158
   Prepaid expense                                                     28,178
   Inventory                                                          308,688
                                                                     --------
      Total current assets                                            624,391

PROPERTY AND EQUIPMENT:
   Office furniture and equipment                                      43,067
   Warehouse equipment                                                122,905
   Computer equipment                                                 192,202
   Vehicles                                                            75,833
   Water service equipment                                            427,871
   Leasehold improvements                                              23,563
                                                                     --------
                                                                      885,441
   Less accumulated depreciation                                      709,338
                                                                     --------
     Net property and equipment                                       176,103

OTHER ASSETS:
   Installment accounts receivable                                      9,670
   Deferred costs, net of accumulated amortization of $53,785          17,442
                                                                     --------
     Total other assets                                                27,112
                                                                     --------
                                                                     $827,606
                                                                     ========



                                       3
<PAGE>   4

                           VITAL LIVING PRODUCTS, INC.

                                  BALANCE SHEET
                                   (UNAUDITED)

                                  JUNE 30, 2001


                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
   Bank overdrafts                                                $     59,911
   Trade accounts payable                                              199,752
   Accrued interest payable to related party                             5,769
   Accrued dividends                                                 1,242,000
   Accrued payroll and payroll taxes                                    33,677
   Current portion of vehicle loans payable                             10,072
   Accrued interest                                                     10,462
   Other accrued liabilities                                            31,513
   Convertible debentures payable                                      413,600
                                                                  ------------
      Total current liabilities                                      2,006,756

LONG-TERM NOTES PAYABLE:
   Notes payable to related parties                                  1,070,000
   Vehicle loans payable                                                 4,996
                                                                  ------------
     Total long-term notes payable                                   1,074,996

REDEEMABLE PREFERRED STOCK: Class A; $.01 par value;
     3,303,375 shares authorized, issued and outstanding                33,034

 STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value; 50,000,000 shares authorized;
     3,693,363 shares issued and 3,369,516 outstanding                  36,933
   Preferred stock - Class B, convertible; $.01 par value;
     1,000,000 shares authorized
     Series A - 575,000 shares outstanding                           1,150,000
     Series B - 31,290 shares outstanding                            1,783,935
   Paid-in capital                                                   8,590,661
   Treasury stock, 323,847 shares, at cost                             (75,000)
   Retained earnings (deficit)                                     (13,773,709)
                                                                  ------------
     Total stockholders' equity                                     (2,287,180)
                                                                  ------------
                                                                  $    827,606
                                                                  ============


                                       4
<PAGE>   5

                           VITAL LIVING PRODUCTS, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                    Three Months Ended                  Six Months Ended
                                                                         June 30,                           June 30,
                                                                  2001              2000              2001              2000
                                                              -----------       -----------       -----------       -----------
<S>                                                           <C>               <C>               <C>               <C>
REVENUES:
   Product sales                                              $   562,626       $   414,926       $   848,843       $   713,443
   Service revenues                                                81,724            91,607           168,979           181,308
                                                              -----------       -----------       -----------       -----------
      Total revenues                                              644,350           506,533         1,017,822           894,751

COST OF GOODS SOLD:
   Direct material costs                                          265,725           210,470           420,431           369,921
   Labor, taxes and fringes                                        79,992            86,386           163,444           160,480
   Travel, vehicle and other costs                                 22,699            28,802            46,091            62,182
   Depreciation                                                    11,983            23,389            23,908            46,548
                                                              -----------       -----------       -----------       -----------
     Total cost of goods sold                                     380,399           349,047           653,874           639,131
                                                              -----------       -----------       -----------       -----------

GROSS MARGIN                                                      263,951           157,486           363,948           255,620

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
   Salaries, taxes and fringes                                    106,838           104,100           210,973           201,184
   Sales commissions and brokerage costs                           57,286            35,803            80,463            61,811
   Marketing, advertising and promotion                            56,553            44,541            99,670            88,455
   Travel and vehicle costs                                         7,241            18,212            10,276            23,604
   Professional fees and costs                                    185,350            46,775           325,231           120,400
   Bad debt expense (recovery)                                        539             1,712            (2,261)            1,992
   Office and telephone costs                                      29,178            29,447            61,231            59,525
   Depreciation and amortization                                    5,186             3,764            10,337             7,287
   Insurance and other                                              9,978             4,761            13,702            11,244
                                                              -----------       -----------       -----------       -----------
      Total selling, general and administrative expenses          458,149           289,115           809,622           575,502

INCOME (LOSS) FROM OPERATIONS                                    (194,198)         (131,629)         (445,674)         (319,882)
                                                              -----------       -----------       -----------       -----------

OTHER REVENUES (EXPENSES):
    Interest expense                                             (252,794)          (17,979)         (505,191)          (30,394)
    Gain on sale of fixed assets                                       --                --             9,575                --
    Other                                                           1,095             1,339             1,807             2,793
                                                              -----------       -----------       -----------       -----------
     Total other revenues (expenses)                             (251,699)          (16,640)         (493,809)          (27,601)
                                                              -----------       -----------       -----------       -----------

NET INCOME (LOSS) BEFORE INCOME TAXES                            (445,897)         (148,269)         (939,483)         (347,483)

INCOME TAX (PROVISION) BENEFIT                                         --                --                --                --
                                                              -----------       -----------       -----------       -----------

NET INCOME (LOSS)                                             ($  445,897)      ($  148,269)      ($  939,483)      ($  347,483)
                                                              ===========       ===========       ===========       ===========

BASIC INCOME (LOSS) PER COMMON SHARE                          ($     0.15)      ($     0.06)      ($     0.32)      ($     0.14)
                                                              ===========       ===========       ===========       ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                      3,214,953         3,098,326         3,165,389         3,089,836
                                                              ===========       ===========       ===========       ===========
</TABLE>



                                       5
<PAGE>   6

                           VITAL LIVING PRODUCTS, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                       Three Months Ended                    Six Months Ended
                                                                             June 30,                            June 30,
                                                                      2001             2000              2001              2000
                                                                  -----------       -----------       -----------       -----------
<S>                                                               <C>               <C>               <C>               <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
    Cash received from customers and others                       $   522,893       $   398,318       $   920,695       $   721,842
    Cash paid to suppliers and employees                             (661,445)         (653,829)       (1,260,577)       (1,127,043)
    Interest paid                                                     (29,281)           (9,817)          (56,158)          (21,192)
                                                                  -----------       -----------       -----------       -----------
     Net cash used by operating activities                           (167,833)         (265,328)         (396,040)         (426,393)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                 (10,729)           (1,591)          (17,694)          (35,252)
   Payment for product design costs                                        --                --            (1,000)               --
   Cash received from sale of fixed asset                                  --                --             9,575                --
                                                                  -----------       -----------       -----------       -----------
      Net cash used by investing activities                           (10,729)           (1,591)           (9,119)          (35,252)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment on bank overdraft, net                                      55,805             8,251            50,943           (11,120)
   Net proceeds from demand notes payable to related parties         (100,000)          256,500           (90,252)          438,500
   Payments on notes payable                                           (3,439)           (3,307)           (6,844)           (5,461)
   Proceeds from new borrowings                                       225,000             5,000           450,000            26,497
   Proceeds from common stock options exercised                           787                --             1,312            12,968
                                                                                    -----------       -----------       -----------
      Net cash provided by financing activities                       178,153           266,444           405,159           461,384
                                                                  -----------       -----------       -----------       -----------

NET DECREASE IN CASH                                                     (409)             (475)               --              (261)

CASH, beginning of period                                                 809               875               400               661
                                                                  -----------       -----------       -----------       -----------

CASH, end of period                                               $       400       $       400       $       400       $       400
                                                                  ===========       ===========       ===========       ===========
</TABLE>

NONCASH TRANSACTIONS:
  Preferred Series A, Class B dividends of $69,000 were accrued during each of
  the six month periods ended June 30, 2001 and 2000.

  Certain salaries to Company employees totaling approximately $17,700 were paid
  by a stockholders during each of the six month periods ended June 30, 2001 and
  2000.

  Options were granted to nonemployees for services provided during the six
  months ended June 30, 2001. The value of the options was approximately
  $29,100.

  Stock was issued to nonemployees for services provided during the six months
  ended June 30, 2001. The value of the stock was approximately $82,800.

  Debentures with value of $36,400, have been converted into 140,000 shares of
  common stock during the six months ended June 30, 2001.

                                    Continued



                                       6
<PAGE>   7

                           VITAL LIVING PRODUCTS, INC.

                      STATEMENTS OF CASH FLOWS - CONTINUED
                                   (UNAUDITED)

        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME (LOSS) TO NET                            Three Months Ended               Six Months Ended
   CASH USED BY OPERATING ACTIVITIES:                                      June 30,                        June 30,
                                                                     2001           2000             2001            2000
                                                                  ---------       ---------       ---------       ---------
<S>                                                               <C>             <C>             <C>             <C>
     Net income (loss)                                            ($445,897)      ($148,269)      ($939,483)      ($347,483)
     Adjustments to reconcile net income (loss) to net cash
       used by operating activities:
          Depreciation and amortization                              17,169          27,153          34,245          53,835
          Services provided at no charge by stockholder               8,851           8,852          17,703          17,704
          Provision for interest related to issuance of
             debentures and warrants                                225,000              --         450,000              --
          Stock issued for professional services                     52,187              --          82,833              --
          Stock options issued for professional services             21,462          17,546          29,148          17,546
          Gain on sale of fixed assets                                   --              --          (9,575)             --
          Increase in accounts receivable                          (122,552)       (114,753)        (98,934)       (175,702)
          (Increase) decrease in inventory                            3,231         (32,272)        (16,702)        (31,299)
          Increase in prepaid expenses                               (8,201)             --         (11,414)             --
          Increase (decrease) in trade accounts payable              61,089         (29,414)         40,780          63,658
          Increase (decrease) in accrued interest payable to
            related party                                            (6,475)          8,162          (8,692)          9,202
          Increase in accrued payroll and payroll taxes              (8,958)         (1,883)         14,391          18,929
          Increase in accrued interest                                4,988              --           7,725              --
          Increase (decrease) in other accrued liabilities           30,273            (450)         11,935         (52,783)
                                                                  ---------       ---------       ---------       ---------
             Net cash used by operating activities                ($167,833)      ($265,328)      ($396,040)      ($426,393)
                                                                  =========       =========       =========       =========
</TABLE>



                                       7
<PAGE>   8

                           VITAL LIVING PRODUCTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                  JUNE 30, 2001


1. BASIS OF PRESENTATION:

       The condensed interim financial statements included herein have been
         prepared by the Company, without audit, pursuant to the rules and
         regulations of the Securities and Exchange Commission. Certain
         information and footnote disclosures normally included in financial
         statements prepared in accordance with generally accepted accounting
         principles have been condensed or omitted pursuant to such rules and
         regulations, although the Company believes that the disclosures are
         adequate to make the information presented not misleading.

       These statements reflect all adjustments, consisting of normal recurring
         adjustments which, in the opinion of management, are necessary for fair
         presentation of the information contained therein. It is suggested that
         these condensed financial statements be read in conjunction with the
         financial statements and notes thereto included in the Company's Form
         10-KSB for the year ended December 31, 2000. The Company follows the
         same accounting policies in preparation of interim reports.

       Results of operations for the interim periods are not indicative of
         annual results.


2. COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN:

       As shown in the accompanying financial statements, the Company has
         incurred recurring losses from operations and resulting cash flow
         deficits. It also has current liabilities significantly in excess of
         current assets and a significant deficit in total stockholders' equity.
         These factors raise substantial doubt about the Company's ability to
         continue as a going concern as of June 30, 2001.

       Management continues to focus on its marketing and sales of water testing
         kits, which represent a relatively new product line. Management
         believes that this new line will help the Company to achieve
         profitability. The Company's ultimate ability to become profitable,
         however, is contingent on its achieving significantly higher sales
         levels. Until that occurs and until the Company generates positive cash
         flow from operations, additional outside funding will continue to be
         required.

       The Company expects to require additional financing to fund its
         operations during fiscal year 2001. In February 2001, the Company
         entered in to an equity financing agreement with a private equity
         investment fund, whereby the Company has received an initial cash
         infusion in the aggregate of $450,000 in exchange for its issuance of
         convertible debentures and warrants to the investment fund. (See Note
         3.)


                                       8
<PAGE>   9

       If, under this new financing agreement and/or subsequent financing
         agreements, the Company cannot meet its cash requirements for the
         coming year, its financial condition and results of operations could be
         materially adversely affected and it may be unable to continue as a
         going concern. The financial statements do not include any adjustments
         that might be necessary if the Company is unable to continue as a going
         concern.

3. ADDITIONAL FINANCING - ISSUANCE OF CONVERTIBLE DEBENTURES AND WARRANTS:

       In February 2001, the Company entered into an arrangement with an
         investment group which provides for borrowings of up to $450,000 under
         convertible debentures. These debentures, which require the payment of
         interest at 12% per year, will become due in February 2002. They are
         secured by substantially all company assets and provide for certain
         restrictions on additional borrowings, issuance of equity securities,
         and payment of dividends on common stock. The debentures are
         convertible into the Company's common stock at the lesser of $.278 per
         share or 50% of market price for that stock, as defined.

       As a part of this transaction, the debenture holders have received
         warrants to purchase up to 300,000 shares of the Company's common
         stock. These warrants may be exercised at any time within three years
         of their issuance at prices equal to the lesser of $.229 per share or
         50% of market price, as defined.

       The investors have purchased $450,000 of debentures and received warrants
         for 300,000 shares of common stock. In June 2001, debentures for
         $36,400 were converted into 140,000 shares of common stock at 50% of
         market price, as defined. Based on stock prices prior to July 31, 2001,
         the remaining debentures could be converted into approximately
         5,500,000 shares of the Company's common stock. In the cases of both
         the debentures and warrants, investors may acquire shares of the
         Company's common stock at discounts below their market value. Due to
         the preferential conversion feature of the debentures, the Company
         recorded $450,000 of interest expense and additional paid-in capital at
         the time of their issuance.


                                       9
<PAGE>   10

4.  SEGMENT INFORMATION:

       The Company has three reportable segments: water testing products, water
         treatment equipment and services, and vending machines and misting
         systems. Substantially all sales are in the United States, and all
         assets are located in the United States. There are no intersegment
         sales. Financial information by segment is as follows:

<TABLE>
<CAPTION>
                                     For the six months ended June 30, 2001
---------------------------------------------------------------------------------------------------------------------
                                       Water            Water
                                      Testing         Treatment          Vending          Corporate           Total
                                   -----------       -----------       -----------        ---------       -----------
<S>                                <C>               <C>               <C>                 <C>            <C>


Segment sales                      $   650,568       $   252,560       $   114,694               --       $ 1,017,822

Operating income (loss)                138,379            48,134            34,212         (666,399)         (445,674)

Interest expense                       235,619           159,608            30,998           78,966           505,191

Interest income                             --             1,808                --               --             1,808

Net income (loss)                      (97,240)         (100,092)            3,215         (745,366)         (939,483)



Segment assets                         385,992           261,471            50,780          129,363           827,606

Capital asset additions                     --            15,259             2,390               --            17,649

Depreciation and amortization            3,088             6,821            17,088            7,248            34,245


                                     For the six months ended June 30, 2000
---------------------------------------------------------------------------------------------------------------------
                                       Water            Water
                                      Testing         Treatment          Vending          Corporate           Total
                                   -----------       -----------       -----------        ---------       -----------
Segment sales                      $   509,316       $   235,136       $   150,299               --       $   894,751

Operating income (loss)                115,472            19,428             9,304         (464,086)         (319,882)

Interest expense                        15,915             8,450             4,212            1,817            30,394

Interest income                             --             2,793                --               --             2,793

Net income (loss)                       99,557            13,771             5,092         (465,903)         (347,483)



Segment assets                         447,700           237,698           118,489           51,110           854,997

Capital asset additions                     --               779            21,497           12,977            35,253

Depreciation and amortization            2,606            17,303            29,245            4,681            53,835
</TABLE>



                                       10
<PAGE>   11

<TABLE>
<CAPTION>
                                    For the three months ended June 30, 2001
-----------------------------------------------------------------------------------------------------------
                                     Water           Water
                                    Testing        Treatment        Vending        Corporate        Total
                                   ---------       ----------      ---------       ---------      ---------
<S>                                <C>             <C>             <C>             <C>            <C>

Segment sales                      $ 428,143       $ 163,338       $  52,869             --       $ 644,350

Operating income (loss)              109,880          47,824          13,996       (365,898)       (194,198)

Interest expense                     115,358          90,975           9,492         36,969         252,794

Interest income                           --           1,095              --             --           1,095

Net income (loss)                     (5,477)        (42,059)          4,505       (402,866)       (445,897)



Depreciation and amortization          1,552           3,439           8,545          3,634          17,170



                                    For the three months ended June 30, 2000
-----------------------------------------------------------------------------------------------------------
                                     Water           Water
                                    Testing        Treatment        Vending        Corporate        Total
                                   ---------       ----------      ---------       ---------      ---------


Segment sales                      $ 306,271       $ 105,718       $  94,544             --       $ 506,533

Operating income (loss)               87,506           9,167           7,274       (235,576)       (131,629)

Interest expense                      10,194           4,581           2,216            988          17,979

Interest income                           --           1,339              --             --           1,339

Net income (loss)                     77,312           5,927           5,057       (236,565)       (148,269)



Depreciation and amortization          1,303           8,626          14,763          2,461          27,153
</TABLE>


                                       11
<PAGE>   12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion should be read in conjunction with the
Company's Financial Statements and the related notes thereto contained in Item
1.

RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 2000 AND JUNE 30, 2001

         Revenues from operations for the second quarter of 2001 increased 36%
to $562,626 from $414,926 for the second quarter of 2000. The increase in
operating revenues was primarily the result of a 40% increase in sales of our
PurTest(R) line of products, which grew from $306,271 in the second quarter of
2000 to $428,143 in the second quarter of 2001. Sales of our PurTest(R) products
improved principally (1) as a result of receiving a large initial order for
$200,000 of test strips and (2) in response to a telemarketing program we
launched in late 2000 and which succeeded in increasing reorders from chain
stores like Lowes, Ace Hardware and Do-it-Best. Also contributing to the
improvement in operating revenues was an increase in revenues from the sale and
service of water treatment equipment which, as a result of our successful
implementation of a reorganization and retraining plan in our water treatment
department during the first quarter of 2001, were up 55% from $105,718 in the
second quarter of 2000 to $163,338 in the second quarter of 2001. Due chiefly to
a shift in focus and resources toward development of our PurTest(R) line of
products, revenues from our water vending and misting operations decreased 44%
from $94,544 in the second quarter of 2000 to $52,869 in the second quarter of
2001.

         Gross margin was 41% in the second quarter of 2001 compared to 31% in
the second quarter of 2000.

         Largely as a result of an increase in professional fees, which were
primarily associated with our exploration of additional financing sources (see
discussion below under LIQUIDITY AND CAPITAL RESOURCES) and totalled $183,350 in
the second quarter of 2001, up from $46,775 in the second quarter of 2000, loss
from operations only was $194,198 in the second quarter of 2001 compared to a
loss of $131,629 in the second quarter of 2000. We anticipate incurring a
relatively high level of professional fees associated with our being a public
reporting company and our continued exploration of additional financing sources
(see discussion below under LIQUIDITY AND CAPITAL RESOURCES).

         In June 2001 we issued to certain investors $225,000 of convertible
debentures and warrants to purchase an aggregate of 150,000 shares of common
stock (see discussion below under LIQUIDITY AND CAPITAL RESOURCES). Upon the
conversion of the debentures and the exercise of the warrants the investors may
acquire shares of our common stock at a discount below the fair market value of
such shares. Due to the preferential conversion feature of the debentures and
the below fair market value exercise price of the warrants, we have recorded
$225,000 of interest expense and additional paid in capital in the second
quarter of 2001. This debt issuance cost represents the value attributed to the
conversion feature of the debentures and the warrants, and it has been limited
to the amount of the proceeds allocated to the securities.

         Primarily as a result of the $225,000 in interest expense we recorded
in connection with the issuance of debentures as described above and our
incurring substantial professional fees associated with this transaction, net
loss for the second quarter of 2001 was $445,897, compared to net loss for the
second quarter of 2000 of $148,269.



                                       12
<PAGE>   13

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 2001

         Revenues from operations for the first six months of 2001 increased 14%
to $1,017,822 from $894,751 for the first six months of 2000. The increase in
operating revenues was primarily the result of a 28% increase in sales of our
PurTest(R) line of products, which grew from $509,316 in the first six months of
2000 to $650,568 in the first six months of 2001. Sales of our PurTest(R)
products improved principally (1) as a result of receiving a large initial order
for $200,000 of test strips during the second quarter of 2001 and (2) in
response to a telemarketing program we launched in late 2000 and which succeeded
in increasing reorders from chain stores like Lowes, Ace Hardware and
Do-it-Best. Also contributing to the improvement in operating revenues was an
increase in revenues from the sale and service of water treatment equipment
which, were up 7% from $235,136 in the first six months of 2000 to $252,560 in
the first six months of 2001. Due chiefly to a shift in focus and resources
toward development of our PurTest(R) line of products, revenues from our water
vending and misting operations decreased 24% from $150,299 in the first six
months of 2000 to $114,694 in the first six months of 2001.

         Gross margin increased to 36% in the first six months of 2001 from 29%
in the first six months of 2000.

         Largely as a result of an increase in professional fees, which were
primarily associated with our exploration of additional financing sources (see
discussion below under LIQUIDITY AND CAPITAL RESOURCES) and totalled $325,231 in
the first six months of 2001, up from $120,400 in the first six months of 2000,
loss from operations only was $445,674 in the first six months of 2001 compared
to a loss of $319,882 in the first six months of 2000. We anticipate incurring a
relatively high level of professional fees associated with our being a public
reporting company and our continued exploration of additional financing sources
(see discussion below under LIQUIDITY AND CAPITAL RESOURCES).

         In February and June 2001 we issued to certain investors $450,000 of
convertible debentures and warrants to purchase an aggregate of 300,000 shares
of common stock (see discussion below under LIQUIDITY AND CAPITAL RESOURCES).
Upon the conversion of the debentures and the exercise of the warrants the
investors may acquire shares of our common stock at a discount below the fair
market value of such shares. Due to the preferential conversion feature of the
debentures and the below fair market value exercise price of the warrants, we
have recorded $450,000 of interest expense and additional paid in capital in the
first six month of 2001. This debt issuance cost represents the value attributed
to the conversion feature of the debentures and the warrants, and it has been
limited to the amount of the proceeds allocated to the securities.

         Primarily as a result of the $450,000 in interest expense we recorded
in connection with the issuance of debentures as described above and our
incurring substantial professional fees associated with this transaction, net
loss for the first six months of 2001 was $939,483, compared to net loss for the
first six months of 2000 of $347,483.

LIQUIDITY AND CAPITAL RESOURCES

         We have incurred operating losses each year since our inception.
Throughout that time C. Wilbur Peters, Chairman of our board, or entities
controlled by Mr. Peters, have funded our operations by lending money to us and
by leasing to us equipment used in our business. On July 1, 1999, we established
a line of credit with Mr. Peters in the amount of $750,000 evidenced by a
promissory note



                                       13
<PAGE>   14

bearing interest at the LIBOR Market Index Rate plus 1.50%, due and payable on
June 30, 2001. On February 21, 2001 Mr. Peters executed an amendment to the
promissory note extending its term to February 23, 2003. At June 30, 2001, the
outstanding balance of that note was approximately $753,163. Under a $400,000
promissory note dated September 1, 1992 issued by us to CTF, Inc., a non-profit
corporation controlled by Mr. Peters, we owed approximately $322,605 at June 30,
2001. On February 21, 2001 CTF, Inc. executed an amendment to the promissory
note extending its term to February 23, 2003. This note bears interest at prime
plus 2%.

         Pursuant to a Securities Purchase Agreement dated February 23, 2001, in
February and June, 2001, we received a $450,000 private equity investment from
several investment funds through the issuance of $450,000 aggregate principal
amount of 12% Secured Convertible Debentures due February 23, 2002 (the
"Debentures"), which are convertible into shares of our common stock at a
conversion price of the lesser of $.278 and fifty percent of the average of the
lowest three inter-day trading prices for our common stock during the twenty
trading day period ending one trading day prior to the date of conversion. In
connection with the sale of the Debentures we also issued to the investors
three-year warrants (the "Warrants") to purchase an aggregate of 300,000 shares
of common stock at an exercise price equal to the lesser of $.229 and the
average of the lowest three inter-day trading prices for our common stock during
the ten trading day period ending one trading day prior to the date of exercise.
As of August 13, 2001 the outstanding balance of the Debentures was
approximately $373,600.

         Assuming the remaining balance of the Debentures was fully converted on
August 13, 2001 the conversion price would have been $.06 and upon conversion
the investors would have received 6,226,667 ($373,600/$.06) shares of common
stock. Assuming that all 300,000 Warrants were fully exercised concurrently with
such conversion the investors would have received 6,526,667 shares of common,
which following such conversion and exercise would have represented
approximately 62% of our total outstanding shares.

         Net cash used by operating activities was $396,040 in the first six
months of 2001 and $426,393 in the first six months of 2000. In both such
periods cash to fund such negative cash flows was obtained from the financing
arrangements described above. We do not expect positive cash flows from our
operations during 2001 and into 2002. Even if we are successful in continuing to
expand our product distribution, we expect that such expansion will continue to
require additional cash. We believe that our cash on hand, cash generated from
operations, and cash generated from the sale the Debentures described above will
enable us to continue our operations into the fall of 2001. No assurance can be
given, however, that such funds will satisfy our needs for such period or that,
if needed, additional funds will be available. We expect to require additional
financing to fund our operations at some point during the fall of 2001 and, to
the extent that the Debentures have not been converted into shares of our common
stock, we will require additional financing to repay the Debentures when due on
February 23, 2002. However, the Securities Purchase Agreement requires us to
obtain the consent of the investors who are party to that agreement prior to
negotiating or contracting with any third party to obtain additional equity
financing or debt financing with an equity component until 180 days after the
effective date of the registration statement that we filed pursuant to the
Registration Rights Agreement. We intend to explore various financing
alternatives, including obtaining an equity credit line, the sale of convertible
debt securities and the private placement of our equity securities. We have not
yet received any commitments for additional financing and there is no assurance
we will be able to obtain such financing. If we are unable to obtain any such
additional necessary financing our financial condition and results of operations
could be materially adversely affected and in order to continue as a going
concern we might be required to



                                       14
<PAGE>   15

substantially reduce expenses by among other things curtailing our efforts to
increase sales of our PurTest(R) and PurGuard(R) product lines.

CAUTIONARY STATEMENT AS TO FORWARD LOOKING INFORMATION

         Statements in this report as to projections of future financial or
economic performance of the Company, and statements of our plans and objectives
for future operations are "forward looking" statements, and are being provided
in reliance upon the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Important factors that could cause actual results
or events to differ materially from those projected, estimated, assumed or
anticipated in any such forward looking statements include: general economic
conditions in our markets including inflation; recession; increased competition
from existing competitors and from any new entrants in our markets; any loss of
key management personnel; changes in governmental regulations applicable to our
business; and the availability of additional funding necessary to support our
operations.



                                       15
<PAGE>   16

PART II

ITEM 1.           LEGAL PROCEEDINGS

         We are not currently party to any material legal proceedings. However,
we are currently and may from time to time in the future become a party to
various legal proceedings incidental to our business.

ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS

         On June 15, 2001 we entered into a consulting agreement with The N.I.R.
Group, LLC, a financial advisor, pursuant to which we agreed as partial
consideration for the services to be rendered to us under the agreement to issue
to such firm 52,500 shares of our common stock. Such shares were issued on June
26, 2001. These securities were issued in reliance upon the exemption from the
registration provisions of the Securities Act provided for by Section 4(2)
thereof for transactions not involving a public offering. Use of this exemption
is based on the following facts:

o    Neither the Company nor any person acting on its behalf solicited any offer
     to buy or sell the securities by any form of general solicitation or
     advertising.

o    In each case, the purchaser was engaged in the investor relations or
     financial advisory business and was sophisticated with regard to investment
     matters.

o    In its capacity as a consultant to the Company, each purchaser has had
     access to information regarding the Company and is knowledgeable about the
     Company and its business affairs.

o    All shares of our common stock issued or to be issued to the purchasers
     were or will be issued with a restrictive legend and may only be disposed
     of pursuant to an effective registration or exemption from registration in
     compliance with federal and state securities laws.

         On June 15, 2001, we issued 12% secured convertible debentures due
February 23, 2002 in the aggregate principal amount of $225,000 to AJW Partners,
LLC, New Millenium Capital Partners II, LLC and Equilibrium Equity, LLC, which
are convertible into shares of our common stock. In connection with the sale of
the debentures we also issued to these investors three-year warrants to purchase
an aggregate of 150,000 shares of common stock. These securities were issued in
reliance upon the exemption from the registration provisions of the Securities
Act provided for by Section 4(2) thereof and Rule 506 promulgated thereunder for
transactions not involving a public offering. Use of this exemption is based on
the following facts:

o    Neither the Company nor any person acting on its behalf solicited any offer
     to buy or sell the securities by any form of general solicitation or
     advertising.

o    At the time of purchase, each purchaser was an accredited investor, as
     defined in Rule 501(a) under the Securities Act.

o    Each purchaser represented that it was acquiring the securities as a
     principal for its own account for investment purposes only and without a
     view towards distribution or reselling these securities unless



                                       16
<PAGE>   17

     pursuant to an effective registration statement or exemption from
     registration in compliance with federal and state securities laws.

o    The securities were issued with a restrictive legend and may only be
     disposed of pursuant to an effective registration or exemption from
     registration in compliance with federal and state securities laws.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

         Exhibit No.       Document Description
         -----------       --------------------

         4.1               Form of Secured Convertible Debenture dated as of
                           February 23, 2001 (Exhibit 4.1 to the Company's Form
                           8-K filed March 1, 2001)

         4.2               Schedule identifying omitted Secured Convertible
                           Debentures dated as of June 15, 2001 which are
                           substantially identical to the Form of Secured
                           Convertible Debenture described in Exhibit 4.1
                           (Exhibit 4.2 to the Company's Form 10K-SB filed March
                           27, 2001)

         10.1              Form of Stock Purchase Warrant dated as of February
                           23, 2001 (Exhibit 10.3 to the Company's Form 8-K
                           filed March 1, 2001)

         10.2              Schedule identifying omitted Stock Purchase Warrants
                           dated as of February 23, 2001 which are substantially
                           identical to the Form of Stock Purchase Warrant
                           described in Exhibit 10.12 (Exhibit 10.13 to the
                           Company's Form 10K-SB filed March 27, 2001)


         (b) Reports on Form 8-K

                  The Company did not file any reports on Form 8-K during the
                  quarter ended June 30, 2001.



                                       17
<PAGE>   18

                                   SIGNATURES


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


                                          VITAL LIVING PRODUCTS, INC.



Date:  August 14 , 2001                   By:   /s/ Larry C. Pratt
                                              ----------------------------------
                                                   Larry C. Pratt
                                                   Vice President
                                                   (Principal Financial Officer)
                                                   (Duly Authorized Officer)




<PAGE>   19

                                INDEX OF EXHIBITS

                                   FORM 10-QSB

                                QUARTERLY REPORT

Exhibit No.       Document Description
-----------       --------------------

4.1               Form of Secured Convertible Debenture dated as of February 23,
                  2001 (Exhibit 4.1 to the Company's Form 8-K filed March 1,
                  2001)

4.2               Schedule identifying omitted Secured Convertible Debentures
                  dated as of February 23, 2001 which are substantially
                  identical to the Form of Secured Convertible Debenture
                  described in Exhibit 4.1

10.1              Form of Stock Purchase Warrant dated as of February 23, 2001
                  (Exhibit 10.3 to the Company's Form 8-K filed March 1, 2001)

10.2              Schedule identifying omitted Stock Purchase Warrants
                  dated as of February 23, 2001 which are substantially
                  identical to the Form of Stock Purchase Warrant
                  described in Exhibit 10.12 (Exhibit 10.13 to the
                  Company's Form 10K-SB filed March 27, 2001)