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

                           FORM 10-QSB, Amendment No.1








(X)QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002


( )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: 000-32319

                                   JPAL, Inc.
                                   ----------
        (Exact name of small business issuer as specified in its charter)

Nevada                                                              33-0851302
------                                                              ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)

              17620 Oak Street, Fountain Valley, California, 92708
-------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (714) 785.2095
                                 --------------
                           (Issuer's Telephone Number)



                      APPLICABLE ONLY TO CORPORATE ISSUERS


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of May 20, 2002, there were
8,645,260 shares of the issuer's $.001 par value common stock issued and
outstanding.




                                       1
<PAGE>





                         PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements



                                   JPAL, INC.
                                   ----------

                                      INDEX
                                      -----




Financial Statements                                                    PAGE
                                                                        -----
    Condensed Balance Sheet as of March 31, 2002                          3

    Condensed Statements of Operations for the three months ended
    March 31, 2002 and 2001                                               4

    Condensed Statements of Cash Flows for the three months ended
    March 31, 2002 and 2001                                               5

    Notes to Condensed Financial Statements                               7






                                       2
<PAGE>



                                   JPAL, INC.
                                   ----------

                             CONDENSED BALANCE SHEET
                             -----------------------

                                 MARCH 31, 2002
                                 --------------

                                   (unaudited)
                                   -----------

<TABLE>
<CAPTION>
       <S>                                                                       <C>

ASSETS

Current assets
   Cash and cash equivalents                                              $        4,885
   Prepaid expenses                                                                3,187
                                                                          --------------
     Total current assets                                                          8,072

Property and equipment, net of accumulated depreciation of $1,722                  1,331

Accrued interest on notes receivable                                              59,580

Notes receivable - Essential Reality, LLC                                      2,525,000
                                                                          --------------
       Total assets                                                       $    2,593,983
                                                                          ==============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Notes payable, net of deferred interest                                $      860,835
   Accrued interest payable                                                       71,089
   Accounts payable                                                               13,771
                                                                          --------------
       Total current liabilities                                                 945,695

Long-term liabilities
   Notes payable                                                               1,634,000
                                                                          --------------
         Total liabilities                                                     2,579,695
                                                                          --------------
Commitments and contingencies

Stockholders' equity
   Preferred stock, $.001 par value
     5,000,000 shares authorized
     No shares issued or outstanding                                                 ---
   Common stock, $.001 par value;
     50,000,000 shares authorized,
     8,645,260 shares issued and outstanding at March 31, 2002
     and December 31, 2001
                                                                                   1,729
   Additional paid-in capital                                                  1,434,635
   Accumulated deficit                                                        (1,422,076)
                                                                          --------------
       Total stockholders' equity                                                 14,288
                                                                          --------------
         Total liabilities and stockholders' equity                       $    2,593,983
                                                                          ==============
</TABLE>




                 See the accompanying notes to these unaudited
                         condensed financial statements

                                       3
<PAGE>


                                   JPAL, INC.
                                   ----------

                       CONDENSED STATEMENTS OF OPERATIONS
                       ----------------------------------

                                   (unaudited)
                                   -----------



<TABLE>
<CAPTION>
                   <S>                                                             <C>            <C>
                                                                             Three Months Ended March 31,
                                                                            -------------------------------

                                                                                 2002             2001
                                                                            --------------   --------------
REVENUES
   Rental commissions                                                       $          ---   $          399
                                                                            --------------   --------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
                                                                                    26,525           14,291
                                                                            --------------   --------------
OTHER (INCOME) EXPENSE
   Interest income                                                                 (39,965)             ---
   Interest expense                                                                747,475              ---
   Depreciation                                                                        146              146
                                                                            --------------   --------------
                                                                                   707,656              146
                                                                            --------------   --------------
LOSS BEFORE PROVISION FOR INCOME TAXES                                            (734,181)         (14,038)

PROVISION FOR INCOME TAXES                                                             ---              ---
                                                                            --------------   --------------
NET LOSS                                                                    $     (734,181)  $      (14,038)
                                                                            ==============   ==============
BASIC LOSS PER SHARE                                                        $        (0.08)  $        (0.00)
                                                                            ==============   ==============
DILUTIVE LOSS PER SHARE                                                     $        (0.08)  $        (0.00)
                                                                            ==============   ==============
BASIC AND DILUTIVE WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
                                                                                 8,645,260       18,987,345
                                                                            ==============   ==============
</TABLE>





                 See the accompanying notes to these unaudited
                         condensed financial statements

                                       4
<PAGE>



                                   JPAL, INC.
                                   ----------

                       CONDENSED STATEMENTS OF CASH FLOWS
                       ----------------------------------

                                   (unaudited)
                                   -----------

<TABLE>
<CAPTION>
                 <S>                                                                 <C>                  <C>
                                                                                  Three Months Ended March 31,
                                                                            ---------------------------------------
                                                                                   2002                   2001
                                                                            -----------------     -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                 $        (734,181)    $         (14,038)
   Adjustments  to  reconcile  net loss to net cash used in operating
    activities
     Depreciation                                                                         146                   146
     Goods and services and rent provided in exchange for  additional
       paid-in capital                                                                  1,200                 9,605
     Deferred interest                                                                702,210                   ---
     Changes in assets and liabilities
       Increase in accrued interest on notes receivable                               (39,965)                  ---
       Increase in prepaid expenses                                                    (3,066)                 (324)
       Increase in accounts payable                                                     8,906                 4,379
       Increase in accrued expenses                                                    45,265                   ---
                                                                            -----------------     -----------------
         Net cash used in operating activities                                        (19,485)                 (232)
                                                                            -----------------     -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Issuance of notes receivable                                                    (1,025,000)                  ---
                                                                            -----------------     -----------------
         Net cash used in investing activities                                     (1,025,000)                  ---
                                                                            -----------------     -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of notes payable                                          1,047,600                   ---
                                                                            -----------------     -----------------
         Net cash provided by financing activities                                  1,047,600                   ---
                                                                            -----------------     -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                                                        3,115                  (232)
CASH AND CASH EQUIVALENTS, beginning of period                                          1,770                   413
                                                                            -----------------     -----------------
CASH AND CASH EQUIVALENTS, end of period                                    $           4,885     $             181
                                                                            =================     =================
</TABLE>





                 See the accompanying notes to these unaudited
                         condensed financial statements

                                       5
<PAGE>



                                   JPAL, INC.
                                   ----------

                 CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
                 ----------------------------------------------

                                   (unaudited)
                                   -----------



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
              <S>                                                                 <C>                    <C>
                                                                                 Three Months Ended March 31,
                                                                            ---------------------------------------
                                                                                   2002                  2001
                                                                            -----------------      ----------------

   Cash paid during the period for interest                                 $             ---     $             ---
   Cash paid during the period for income taxes                             $             ---     $             ---
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
   During the period ended March 31, 2002, the Company recorded rent of $1,200
     and additional paid-in capital of $1,200 for rent provided by a
     stockholder.
   During the period ended March 31, 2002, the Company had $1,047,600 of
     proceeds from notes payable, of which $538,887 has been assigned to the
     value of the warrants and has been recorded as additional paid-in capital.
   During the period ended March 31, 2001, the Company recorded rent and
     computer services of $750 and $3,000, respectively, and additional paid-in
     capital of $3,750 for rent and services provided by a stockholder.
   During the period ended March 31, 2001, the Company recorded legal and
     accounting expense of $2,705 and $3,150, respectively, and additional
     paid-in capital of $5,855 for services paid directly by a stockholder.





                 See the accompanying notes to these unaudited
                         condensed financial statements

                                       6
<PAGE>




                                   JPAL, INC.
                                   ----------

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------

                             MARCH 31, 2001 AND 2000
                             -----------------------

                                   (unaudited)
                                   -----------


NOTE 1 - BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements reflect the
results of operations for JPAL, Inc. and have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments consisting of normal recurring accruals
and adjustments considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002. For further information, refer to the financial statements
and footnotes thereto included in JPAL, Inc.'s Annual Report on Form 10-KSB/A
for the year ended December 31, 2001 filed with the Securities and Exchange
Commission (SEC) on May 8, 2002.

         JPAL, Inc. (the "Company") was incorporated in the state of Nevada on
March 31, 1999 to operate as an Internet based provider of vacation rental
properties and services with an elected December 31st fiscal year end. A
majority of the services are to properties located in Nevada.

         During the year ended December 31, 2001, the Company abandoned the
development of their Internet services to provide vacation rental properties and
services. The Company is currently entered into a contribution agreement with
another company that may result in a merger with that company.

         The Company has experienced net losses since its inception and had an
accumulated deficit of approximately $1,422,000 at March 31, 2002. Such losses
are attributable to cash losses resulting from costs incurred in the development
of the Company's services and infrastructure. The Company expects operating
losses to continue for the foreseeable future as it continues to seek
alternative business opportunities.


NOTE 2 - INCOME TAXES

         The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of realizability.


                                       7
<PAGE>


NOTE 2 - INCOME TAXES

         The components of the Company's income tax provision consist of:
<TABLE>
<CAPTION>
                         <S>                                                       <C>                   <C>
                                                                                 Three Months Ended March 31,
                                                                            ---------------------------------------
                                                                                   2002                  2001
                                                                            -----------------     -----------------
         Federal taxes (deferred) net operating loss benefit                $        (111,500)    $          (2,200)
         Change in valuation account                                                  111,500                 2,200
                                                                            -----------------     -----------------
                                                                            $             ---     $             ---
                                                                            =================     =================
</TABLE>
         Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities as of March 31, 2002 are as
follows:

<TABLE>
<CAPTION>
                     <S>                                                                                 <C>
         Deferred income taxes
             Net operating loss benefit                                                           $         214,600
             Valuation allowance                                                                           (214,600)
                                                                                                  -----------------
                                                                                                  $             ---
                                                                                                  ================-
</TABLE>
         The Company has federal net operating loss carryforwards of
approximately $688,000 that will expire through 2021.

         The Company's tax reporting year end is December 31st. If the Company
has a net operating loss carryforward from operations for the year ended
December 31, 2002, it will expire in 2022.


NOTE 3 - RELATED PARTY TRANSACTIONS

         The Company is currently utilizing office space provided by the
Company's president (a stockholder). During the period ended March 31, 2002 and
2001, the Company has recorded rent expense of $1,200 and $750, respectively,
which represents the Company's pro rata share of the office space being provided
by the Company's president. During the period ended March 31, 2001, the Company
has also recorded computer consulting services of $3,000 which were provided by
the Company's president. The services were valued using hourly rates at
estimated fair market value of similar services. During the period ended March
31, 2001, the Company has recorded legal and accounting fees of $2,705 and
$3,150, respectively. These services were paid for by the Company's president.
The president has waived reimbursement of the allocated rent, computer
consulting services, legal and accounting services provided and has considered
them as additional paid-in capital.



                                       8
<PAGE>


NOTE 4 - NOTES PAYABLE

The Company has several unsecured notes payable with interest rates ranging from
8.00% to 8.50%. Notes totaling $550,000 which have a weighted average interest
rate of 8.50 % will mature on the earliest of (i) January 15, 2002 or (ii) the
sale or exchange of all or substantially all of the outstanding shares of common
stock. Notes totaling $425,000 which have a weighted average interest rate of
8.50 % will mature on the earliest of (i) March 1, 2002 or (ii) the sale or
exchange of all or substantially all of the outstanding shares of common stock.
As of May 15, 2002, these notes and accrued interest have not been repaid. The
note holders have not called the notes. In the event that a note is called,
other note holders have agreed to fund the Company to satisfy its debt. Notes
totaling $1,634,000 which have a weighted average interest rate of 8.49% were
originally scheduled to mature in 2002 but have subsequently been revised to
mature on the earliest of (i) January 31, 2003 or (ii) the sale or exchange of
all or substantially all of the outstanding shares of common stock. The total
amount of notes payable was $2,609,000 at March 31, 2002. Interest expense on
these notes during the three months ended March 31, 2002 was $45,265. For the
three months ended March 31, 2002, the Company issued warrants valued at
$538,887 to acquire 419,040 shares of JPAL, Inc.'s common stock at a purchase
price of $3.00 per share in connection with the issuance of these notes payable.
The value of such warrants has been reflected as a discount to the related notes
payable, and is being amortized to interest expense over the original terms of
the notes. Deferred interest of $702,210 has been amortized as interest expense
during the three months ended March 31, 2002. The remaining balance of deferred
interest of $114,165 has been netted with the outstanding principal balance of
the current notes payable.

         $2,525,000 of the proceeds from these notes has been advanced to
Essential Reality, LLC with which the Company is in the process of negotiating a
merger agreement (Note 5). The note receivable is unsecured and bears an
interest rate of 8.50%, however, interest did not begin to accrue until January
31, 2002. Imputed interest was $39,965 for the three months ended March 31, 2002
which is included in other income. The following is a schedule of maturity dates
of these notes receivable:

         Principal                           Maturity Date
     ---------------------              ---------------------
     $           1,950,000                    January 1, 2004
                   200,000                  February 12, 2004
                   225,000                  February 28, 2004
                   150,000                     March 20, 2004
     ---------------------
     $           2,525,000
     =====================

         Principal together with accrued interest is due on the earliest of (i)
the above schedule of maturity dates, (ii) the closing of the transactions
contemplated by the agreement dated August 23, 2001 (Note 5) or (iii) the sale
or exchange of all or substantially all of the membership interests of Essential
Reality.



                                       9
<PAGE>



NOTE 5 - COMMITMENTS AND CONTINGENCIES

         The Company has entered into an agreement with Essential Reality, LLC
("Essential Reality") dated August 23, 2001 whereas the Company and Essential
Reality have agreed to a business combination. This agreement was amended on
April 24, 2002.

         The following is a summary of the proposed business combination. This
summary is qualified by the more detailed description appearing in the Company's
Preliminary Proxy Statement on Form PRE 14A filed with Securities Exchange
Commission on May 9, 2002. Upon closing of the agreement, (a) the Company
intends to issue up to 17,280,000 shares of our common stock in exchange for all
of the outstanding membership interests of Essential Reality, including
9,600,000 shares to be issued to Essential Reality's current members. As a
result of this transaction, the Company will acquire and assume the business of
Essential Reality. (b) Essential Reality will consummate a private placement of
its membership interests prior to the exchange transaction, which will be
contributed to the Company in exchange for shares of the Company's common stock.
Essential Reality may sell up to 7,680,000 of its membership interests in its
private placement. (c) Upon completion of the exchange transaction, the
Company's business will be the business currently being conducted by Essential
Reality. (d) The Company's shareholders will not receive any cash, stock or
other property in connection with, or as a result of, the exchange transaction.
(e) Shareholder approval of the proposed business combination will require the
affirmative vote of a majority of the Company's outstanding shares of common
stock. The Company's controlling Shareholder has already informed the Company
that he will be voting in favor of the proposal. The number of votes held by the
controlling Shareholder is sufficient to satisfy the Shareholder vote
requirement for the proposed business combination. Therefore, no additional
votes will be needed to approve the proposed business combination.

         The Company currently holds several notes receivable due from Essential
Reality. These notes bear an interest rate of 8.50% and will mature on the
earliest of (i) the schedule of maturity dates in Note 4, (ii) the closing of
the transactions contemplated by the agreement dated August 23, 2001 or (iii)
the sale or exchange of all or substantially all of the membership interests of
Essential Reality. However, none of the events have occurred. The Company has
not generated any revenues which could have a significant adverse affect on the
Company's ability to repay its debt. In addition, $550,000 and $425,000 of the
notes payable which were due on January 15, 2002 and March 1, 2002,
respectively, have not been paid. The Company is currently negotiating with
these note holders to extend the due date of these notes. Certain of the
long-term note holders have executed letters to the Company indicating that they
could fund the Company to repay the short term notes if the need arises.



                                       10
<PAGE>


Item 2.  Plan of Operation
--------------------------

This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.

We were originally formed to provide vacation rental properties and services for
the Year 2000 New Year's Eve celebration in Las Vegas, and continued to provide
vacation rental properties and services after the Year 2000 New Year's Eve
celebration. We generated revenues of approximately $6,793 through December 31,
1999, and $3122 through December 31, 2000. As an Internet based provider of
vacation rental properties and services, we had been in the process of
redesigning our website to provide a wide range of services to both vacationers
and property owners. Our primary source of revenue was property rental fees,
which were charged to the property owners as a percentage of the vacationers'
total rental price. Those fees were our primary source of revenue, although we
also attempted to generate additional revenue sources such as Internet
advertising.

In August 2001, we suspended further development of our website that was
intended to provide vacation rental properties and services because we entered
into a contribution agreement with Essential Reality LLC, a Delaware limited
liability company. Essential Reality LLC is a privately held New York-based
technology firm specializing in the development of innovative computer and game
console peripherals. Essential Reality LLC is positioning itself to take
advantage of the opportunities in this marketplace with the development of its
first product, P5(TM), a 3D input device capturing finger-bend and relative
hand-position to enable intuitive interaction with 3D environments. P5(TM) is
designed as a low-cost natural interface for the computer, game consoles and
other USB-compatible 3D-software platforms. The product will utilize a patented
bend sensor technology to accurately determine the bend of the user's five
fingers. In addition, P5(TM) will track the relative position of the hand in
space.

The original contribution agreement provided that we issue 11 million shares of
our common stock to the current shareholders of Essential Reality LLC in
exchange for all of the equity interests of Essential Reality LLC. The
consummation of the transaction was contingent on a number of factors,
including, but not limited to, that we raise a minimum of $4.5 million dollars.
On April 24, 2002, we entered into an amended contribution agreement with
Essential Reality LLC. The amended contribution agreement provides that
Essential Reality LLC will consummate a private placement of its membership
interests prior to the exchange. Essential Reality LLC may sell up to 7,680,000
of its membership interests in its private placement. We intend to issue up to
17,280,000 shares of our common stock in exchange for all of the outstanding
membership interests of Essential Reality LLC.



                                       11
<PAGE>


Three Month Period Ended March 31, 2002, Compared to the Three Month Period
Ended March 31, 2001.

Liquidity and Capital Resources. We had cash of $4,885 and prepaid expenses of
$3,187 as of March 31, 2002. As of March 31, 2002, our total assets were
$2,593,983, of which approximately $2,525,000 was in the form of notes
receivable due from Essential Reality LLC, and $59,580 was accrued interest in
notes receivable from Essential Reality LLC. Our total liabilities were
approximately $2,579,695 as of March 31, 2002. Our total current liabilities for
the three month period ended March 31, 2002 was $945,695, which was represented
by $860,835 for notes payable, net of deferred interest, $71,089 which
represented accrued interest payable, and $13,771 which represented accounts
payable.

We have several unsecured notes payable in order to memorialize certain bridge
financings relating to the contemplated transaction with Essential Reality LLC.
Those unsecured notes payable have a weighted average interest rate of 8.50%.
Notes totaling $550,000 will mature on the earliest of (i) January 15, 2002, or
(ii) the sale or exchange of all or substantially all of the outstanding shares
of common stock. Notes totaling $425,000 will mature on the earliest of (i)
March 1, 2002, or (ii) the sale or exchange of all or substantially all of the
outstanding shares of common stock. As of May 15, 2002, those notes and accrued
interest have not been repaid. The note holders have not called the notes. In
the event that one of those notes is called, other notes holders have agreed to
fund us to satisfy this debt.

Notes totaling $1,634,000, which have a weighted average interest rate of 8.49%,
will mature on the  earliest of (i) January 1, 2003 or (ii) the sale or exchange
of all or substantially all of the outstanding shares of common stock. The total
amount of those notes  payable was  $2,609,000  as of March 31, 2002.  Our total
interest  expense on these notes  during the three month  period ended March 31,
2002 was $45,265.  For the three month ended March 31, 2002, we issued warrants,
valued at $538,887, to purchase 419,040 shares of our common stock at a price of
$3.00 per share in connection  with the issuances of additional  notes  payable.
The value of such warrants has been reflected as a discount to the related notes
payable,  and is being amortized to interest  expense over the original terms of
the notes.  Deferred interest of $702,210 has been amortized as interest expense
during the three month  period ended March 31, 2002.  The  remaining  balance of
deferred  interest of $114,165  has been netted with the  outstanding  principal
balance of the current notes payable.  Therefore, our current notes payable, net
of  deferred  interest,  was  $860,835  as of March  31,  2002.  Our  long  term
liabilities  were  represented  solely by long term  notes  payable,  which were
$1,634,000 as of March 31, 2002.

Pursuant  to the  contribution  agreement,  we  have  loaned  $2,525,000  of the
proceeds  from those notes  payable to  Essential  Reality  LLC.  The notes from
Essential Reality LLC are unsecured and bear interest of 8.5%; however, interest
did not begin to accrue until January 31, 2002. Imputed interest was $39,965 for
the 3 months  ended  March 31,  2002,  which is included  in other  income.  The
following is a schedule of maturity dates of these notes receivable:

         Principal                           Maturity Date
     ---------------------              ---------------------
     $           1,950,000                    January 1, 2004
                   200,000                  February 12, 2004
                   225,000                  February 28, 2004
                   150,000                     March 20, 2004
     ---------------------
     $           2,525,000
     =====================

The principal  together with accrued  interest is due on the earliest of (i) the
above  schedule  of  maturity  dates,  (ii)  the  closing  of  the  transactions
contemplated  by the  contribution  agreement,  or (iii) the sale or exchange of
substantially all of the membership interests of Essential Reality LLC. Although
none of those events have  occurred,  we believe  that this note is  collectible
because of the  financial  backing of the members of  Essential  Reality LLC and
projected cash flows from their future operations.  In addition,  certain of our
note holders have indicated that they will fund us if the need arises.





                                       12
<PAGE>



Results of Operations.

Revenue. For the three month period ended March 31, 2002, we generated no
revenues, compared to revenues of approximately $399 during the three month
period ended March 31, 2001, which were generated from rental commissions. The
decline in our revenues is due to the fact that we have suspended the
redevelopment of our website and all marketing activities because of our pending
acquisition of Essential Reality LLC. We do not expect that we will generate any
significant revenues until such time as we complete the acquisition of Essential
Reality LLC.

Operating Expenses. For the three month period ended March 31, 2002, our total
expenses increased to $734,181 from $14,437 for the three month period ended
March 31, 2001. For the three month period ended March 31, 2002, our selling,
general and administrative expenses totaled $26,525, compared to $14,291 for the
period ended March 31, 2002. The increases in our total expenses and our general
and administrative expenses are due to the contemplated acquisition of Essential
Reality LLC. We anticipate that we will continue to incur significant general
and administrative expenses with respect the contemplated acquisition of
Essential Reality LLC.

Our other expenses totaled $707,656 for the three month period ended March 31,
2002. Other expenses included $747,475 for interest expense and $146 in
depreciation expense, less $39,965 in interest income. Interest expense includes
the interest of $45,265 due on the notes payable during the three month period
ended March 31, 2002, and the deferred interest of $702,210 from the valuation
of the warrants. The value of the warrants, which has been reflected as a
discount to the related notes payable, and is being amortized to interest
expense over the original terms of the notes. Deferred interest of $702,210 has
been amortized as interest expense during the three month period ended March 31,
2002. Therefore, our net loss was $734,181 for the three month period ended
March 31, 2002, compared to a net loss of $14,038 for the period ended March 31,
2001.

Our Plan of Operation for the Next Twelve Months. Our plan of operation is
dependent on our ability to complete the acquisition of Essential Reality LLC or
complete the redevelopment of our website so that we can generate more revenues.
If we are unable to complete the acquisition of Essential Reality LLC, then we
intend to complete the redevelopment of our website.

In the opinion of management, available funds will satisfy our working capital
requirements for the next twelve months. Our forecast for the period for which
our financial resources will be adequate to support our operations involves
risks and uncertainties and actual results could fail as a result of a number of
factors. We will need to raise additional capital to complete the acquisition of
Essential Reality LLC. Such additional capital may be raised through public or
private financing as well as borrowings and other sources. We cannot guaranty
that additional funding will be available on favorable terms, if at all.

We are not currently conducting any research and development activities. We do
not anticipate conducting any other such activities in the next twelve months,
unless we complete the acquisition of Essential Reality LLC. We do not
anticipate that we will purchase or sell any significant equipment in the next
six to twelve months unless we complete the acquisition of Essential Reality
LLC. We do not anticipate that we will hire any employees in the next six to
twelve months, unless complete the acquisition of Essential Reality LLC.




                                       13
<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.
--------------------------

None.

Item 2. Changes in Securities.
------------------------------

For the three month ended March 31, 2002, we issued 419,040 warrants to purchase
419,040 shares of our common stock at a price of $3.00 per share in connection
with the issuances of additional notes payable.

Item 3.  Defaults Upon Senior Securities
----------------------------------------

None

Item 4.  Submission of Matters to Vote of Security Holders
----------------------------------------------------------

A special meeting was held on February 1, 2002 for the following purposes:

         1.       To consider and vote upon a proposal to approve the
                  Contribution Agreement, dated as of August 23, 2001, between
                  us and Essential Reality, LLC, a copy of which was attached as
                  Exhibit A to our Definitive Proxy Statement filed January 14,
                  2002;

         2.       To approve an amendment to our Articles of Incorporation, a
                  copy of which was attached as Exhibit B to our Definitive
                  Proxy Statement filed January 14, 2002, in order to change our
                  name to Essential Reality, Inc.;

          3.       To approve an amendment to our Articles of Incorporation, a
                   copy of which was attached as Exhibit B to our Definitive
                   Proxy Statement filed January 14, 2002, to provide for "blank
                   check" preferred stock; and

          4.       To approve our 2001 Stock Incentive Plan, a copy of which was
                   attached as Exhibit C to our Definitive Proxy Statement filed
                   January 14, 2002; and

          5.       To approve the appointment of Deloitte & Touche LLP as our
                   independent auditors for the fiscal year ended December 31,
                   2001.

Our stockholders will not receive any cash, stock or other property in
connection with, or as a result of, this transaction, however, after the
transaction is consummated, the owners of Essential, LLC will own approximately
70% of the shares of our common stock outstanding at the time.

Item 5.  Other Information
--------------------------

None.

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

None.




                                       14
<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                                JPAL, Inc.,
                                                a Nevada corporation



May 24, 2002                           By:      /s/ Frank Drechsler
                                                --------------------------------
                                                Frank Drechsler
                                       Its:     President, Secretary, Director