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

                                  FORM 10-KSB,
                                 AMENDMENT NO. 1






[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from                  to
                                          -----------------    ----------------

Commission File Number: 000-32319

                                   JPAL, Inc.
                                   ----------
             (Exact name of registrant 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)                             (Zip Code)

                                 (714) 785.2095
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Act:


Title of each class registered:       Name of each exchange on which registered
-------------------------------       -----------------------------------------

              None                                       None
              ----                                       ----

Securities registered under Section 12(g) of the Act:

                   Common Stock, Par Value $.001
                   -----------------------------
                          (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  [X] Yes  [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]


State issuer's revenues for its most recent fiscal year. $1,039.00

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of April 12, 2002, approximately $14,534,500.

As of April 12, 2002, there were 8,645,260 shares of the issuer's $.001 par
value common stock issued and outstanding.

Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

                        [ ]    Yes          [X]    No



                                       1
<PAGE>


                                     PART I

Item 1. Description of Business.
--------------------------------

Our Background. JPAL, Inc. was incorporated pursuant to the laws of the State of
Nevada on March 31, 1999. On April 6, 2000, we filed Amended and Restated
Articles of Incorporation with the Secretary of State of Nevada to amend and
restate Articles of Incorporation in their entirety and specifically to
authorize 50,000,000 shares of $.001 par value common stock.

Our Business. 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 $2,462 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. Pursuant to the terms of the contribution agreement, we
will 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 is contingent on a number of
factors, including, but not limited to, that we raise a minimum of $4.5 million
dollars.

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.

Competition. If we consummate the acquisition of Essential Reality LLC, we will
enter the market for peripheral input devices, including mouses and joysticks,
which is very competitive. In addition, Sony and Nintendo, who currently
dominate the interactive entertainment software industry, may determine to
develop their own 3D peripheral port device and have the financial resources to
withstand significant price competition and to implement extensive advertising
campaigns. If we consummate the acquisition of Essential Reality LLC, many of
our competitors have far greater financial, technical, personnel and other
resources than we do, and many are able to carry larger inventories and adopt
more aggressive pricing policies. Prolonged price competition or reduced
operating margins would cause our profits to decrease significantly.

Patents and Proprietary Rights. We own the Internet domain name
"www.jpalco.com." Under current domain name registration practices, no one else
can obtain an identical domain name, but someone might obtain a similar name, or
the identical name with a different suffix, such as ".org", or with a country
designation. The regulation of domain names in the United States and in foreign
countries is subject to change, and we could be unable to prevent third parties
from acquiring domain names that infringe or otherwise decrease the value of our
domain names.

Essential Reality LLC is exploring intellectual property protection of P5(TM)
for dynamic manipulation of computer- generated objects in a multi-dimensional
environment. P5(TM) will benefit from Essential Reality LLC's proprietary bend



                                       2
<PAGE>



sensor and tracking technology as a means for coordination of movement between
human and machine. Essential Reality LLC believes that the integration of such
technologies into the glove interface, in combination with proprietary software
and firmware applications and drivers, will result in a superior product at a
low, cost effective price point not previously recognized in the field. The
securing of intellectual property rights in its glove device should enable
Essential Reality LLC to control, market, license, manufacture and distribute
P5(TM) in the United States and potentially worldwide.

Research and Development. 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.

Employees. As of April 12, 2002, we have no employees, other than our sole
officer. We anticipate that we will not hire any employees in the next six
months, unless we consummate the acquisition of Essential Reality LLC.

Item 2.  Description of Property.
---------------------------------

Our Facilities. Our executive, administrative and operating offices are located
at 17620 Oak Street, Fountain Valley, California 92708. Frank Drechsler, our
president, secretary and director, currently provides office space to us at no
charge. We do not have a written lease or sublease agreement and Mr. Drechsler
does not expect to be paid or reimbursed for providing office facilities.

Item 3.  Legal Proceedings.
---------------------------

There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.

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

There were no matters submitted for vote of our security holders during the year
ended December 31, 2001.

                                     PART II

Item 5.  Market Price for Common Equity and Related Stockholder Matters.
------------------------------------------------------------------------

Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, or SEC. The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.

On April 19, 2001, we were approved for quotation on the Over-the-Counter
Bulletin Board ("OTC BB") under the ticker symbol JPAL. The following table sets
forth, for the periods indicated, the range of the high and low bid quotations
for the shares of common stock as quoted on the OTC BB. The reported bid
quotations reflect inter-dealer prices, without retail markup, markdown or
commissions, and may not necessarily represent actual transactions. As of
December 31, 2001, there were 8,645,260 shares of our common stock outstanding.

----------------------------- ----------------------- -------------------------
              2001                     HIGH                      LOW
----------------------------- ----------------------- -------------------------
          2nd Quarter                 $1.00                     $0.263
----------------------------- ----------------------- -------------------------
          3rd Quarter                 $7.00                     $1.00
----------------------------- ----------------------- -------------------------
          4th Quarter                 $6.05                     $2.97
----------------------------- ----------------------- -------------------------

The closing price for our common stock on April 12, 2002, was $3.95.


                                       3
<PAGE>



On June 14, 2001, we redeemed 2,068,417 shares of its common stock for $2,068.
On July 2, 2001, we approved a 5 for 1 forward stock split of its common stock.
Accordingly, all share and per share amounts have been retroactively restated in
the financial statements to reflect this split.

During 2001, we issued 610,560 warrants, which were valued at $838,276, in
connection with short term promissory notes executed from August 23, 2001, to
December 31, 2001. The warrants were issued for the purchase of common stock at
$3.00 per share. These warrants are exercisable at the option of warrant holder
and expire three years from the date of issuance.

During January and February 2002, we issued additional warrants to acquire
353,040 shares of our common stock at a purchase price of $3.00 per share in
connection with the issuances of additional notes payable.

There are no outstanding shares of our common stock that we have agreed to
register under the Securities Act for sale by security holders.

As of December 31, 2001, the approximate number of holders of record of shares
of our common stock is thirty.

There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.

Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:

    o    a description of the nature and level of risk in the market for penny
         stocks in both public offerings and secondary trading;
    o    a description of the broker's or dealer's duties to the customer and of
         the rights and remedies available to the customer with respect to
         violation to such duties or other requirements of securities' laws;
    o    a brief, clear, narrative description of a dealer market, including
         "bid" and "ask" prices for penny stocks and the significance of the
         spread between the "bid" and "ask" price;
    o    a toll-free telephone number for inquiries on disciplinary actions;
    o    definitions of significant terms in the disclosure document or in the
         conduct of trading in penny stocks; and
    o    such other information and is in such form (including language, type,
         size and format), as the Securities and Exchange Commission shall
         require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:

    o    the bid and offer quotations for the penny stock;
    o    the compensation of the broker-dealer and its salesperson in the
         transaction;
    o    the number of shares to which such bid and ask prices apply, or other
         comparable information relating to the depth and liquidity of the
         market for such stock; and
    o    monthly account statements showing the market value of each penny stock
         held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.



                                       4
<PAGE>



Item 6. Management's Discussion and Analysis of Financial Condition or 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 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. No assurance can be
given 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.

Liquidity and Capital Resources. We had cash of $1,770 as of December 31, 2001.
Our total assets were $1,522,983, of which approximately $1,500,000 is due from
Essential Reality LLC. Our total liabilities were approximately $1,314,601 as of
December 31, 2001. From August through December 2001, we entered into several
unsecured notes payable in order to memorialize certain bridge financings
relating to the contemplated transaction with Essential Reality LLC. Those
unsecured notes payable bear interest rates ranging from 8.00% to 8.50%. Notes
totaling $650,000 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 April 12, 2002, those notes and accrued interest have not been
repaid. The note holders have not called the notes. In the event that on of
those notes is called, other notes holders have agreed to fund us to satisfy
this debt.

Notes totaling $911,400 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 notes payable was $1,561,400 at December
31, 2001. Our total interest expense on these notes during the year ended
December 31, 2001 was $25,824. We issued warrants to acquire 610,560 shares of
our common stock at a purchase price of $3.00 per share in connection with the
issuances of those notes payable. Those warrants were valued at $838,276. 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 $560,788 has been amortized as interest expense
during the year ended December 31, 2001. The remaining balance of deferred
interest of $277,488 has been netted with the outstanding principal balance of
$650,000 for the current notes payable. Therefore, our current notes payable,
net of deferred interest, was $372,512 as of December 31, 2001. Our long term
notes payable were $911,400 as of December 31, 2001.

Pursuant to the contribution agreement, we loaned $1,500,000 of the proceeds
from those notes payable to Essential Reality LLC. The note from Essential
Reality LLC is unsecured and bears interest of 8.5%; however, interest did not
begin to accrue until December 31, 2001. The principal together with accrued
interest is due on the earliest of (i) January 31, 2004, (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.



                                       5
<PAGE>



During January and February 2002, we executed several notes payable agreements.
Those notes total $882,600 and bear an interest rate of 8.50% with maturity
dates from January 15, 2002, through January 31, 2003. We issued warrants to
acquire 353,040 shares of our common stock at a purchase price of $3.00 per
share in connection with the issuances of those notes payable. A note of
$100,000 was due on January 15, 2002, and other notes totaling were due March 1,
2002. As of April 12, 2002, these notes and accrued interest have not been
repaid. The note holders have not called the notes. In the event that on of
those notes is called, other notes holders have agreed to fund us to satisfy
this debt.

Results of Operations.

Revenue. For the year ended December 31, 2001, we generated revenues of
approximately $1,039, compared to revenues of approximately $2,462 during the
year ended December 31, 2000. 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 year ended December 31, 2001, operating expenses
totaled $653,436. $586,612 of those expenses is for interest expense. Interest
expense includes the interest of $25,824 due on the notes payable during the
year ended December 31, 2001, and the deferred interest of $560,788 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 $560,788 has
been amortized as interest expense during the year ended December 31, 2001. We
also have incurred significant general and administrative expenses. We
anticipate that we will continue to incur significant general and administrative
expenses with respect the contemplated acquisition of Essential Reality LLC.

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.



                                       6
<PAGE>


Item 7.  Financial Statements
-----------------------------











                                   JPAL, INC.

                         REPORT AND FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000












                                       7
<PAGE>


                                   JPAL, INC.

                                      INDEX
                                      -----



                                                                           PAGE
                                                                           ----
Independent Auditors' Report                                                9

Balance Sheets as of December 31, 2001 and 2000                             10

Statements of Operations for the years ended December 31, 2001
and 2000 and for the period from March 31, 1999 (inception)
through December 31, 1999                                                   11

Statements of Stockholders' Equity for the for the years ended
December 31, 2001 and 2000 and for the period from March 31, 1999
(inception) through December 31, 1999
                                                                         12-13

Statements of Cash Flows for the years ended December 31, 2001 and
2000 and for the period from March 31, 1999 (inception) through
December 31, 1999                                                        14-15

Notes to Financial Statements                                            16-23




                                       8
<PAGE>






                                                                April 11, 2002
                       except for Note 10 as to which the date is May 6, 2002)




                          Independent Auditors' Report
                          ----------------------------

To the Board of Directors and Stockholders of
JPAL, Inc.:

         We have audited the accompanying balance sheets of JPAL, Inc. (the
"Company") as of December 31, 2001 and 2000, and the related statements of
operations, changes in stockholders' equity, and cash flows for each of the two
years ended December 31, 2001 and 2000 and the period from March 31, 1999
(inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of JPAL, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the two years ended December 31, 2001 and 2000 and the period from
March 31, 1999 (inception) through December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.

         As discussed in Note 10 to the financial statements, certain errors
resulting in understatement of the value of the warrants as of December 31,
2001, were discovered by management of the Company subsequent to December 31,
2001. Accordingly, the 2001 financial statements have been restated to correct
the error.



                                         Lesley, Thomas, Schwarz & Postma, Inc.
                                         A Professional Accountancy Corporation
                                         Newport Beach, California


                                       9
<PAGE>


                                   JPAL, INC.
                                   ----------
                                 BALANCE SHEETS
                                 --------------

<TABLE>
<CAPTION>
            <S>                                                                        <C>                  <C>
                                                                                          December 31,
                                                                             ---------------------------------------
                                                                                    2001                  2000
                                                                             -----------------     -----------------
ASSETS
Current assets
   Cash and cash equivalents                                                 $           1,770     $             413
   Prepaid expenses                                                                        121                   609
                                                                             -----------------     -----------------
     Total current assets                                                                1,891                 1,022

Property and equipment, net                                                              1,477                 2,074

Accrued interest on note receivable                                                     19,615                   ---

Note receivable - Essential Reality, LLC                                             1,500,000                   ---
                                                                             -----------------     -----------------
       Total assets                                                          $       1,522,983     $           3,096
                                                                             =================     =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Notes payable, net of deferred interest                                   $         372,512     $             ---
   Accounts payable                                                                      4,865                    97
   Accrued interest payable                                                             25,824                   ---
                                                                             -----------------     -----------------
       Total current liabilities                                                       403,201                    97

Long-term liabilities
   Notes payable                                                                       911,400                   ---
                                                                             -----------------     -----------------
       Total liabilities                                                             1,314,601                    97
                                                                             -----------------     -----------------
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 and  18,987,345  shares issued and  outstanding at
     December 31, 2001 and 2000, respectively                                            1,729                 3,797
   Additional paid-in capital                                                          894,548                34,700
   Accumulated deficit                                                                (687,895)              (35,498)
                                                                             -----------------     -----------------
       Total stockholders' equity                                                      208,382                 2,999
                                                                             -----------------     -----------------
         Total liabilities and stockholders' equity                          $       1,522,983     $           3,096
                                                                             =================     =================
</TABLE>




            See the accompanying notes to these financial statements


                                       10
<PAGE>




                                   JPAL, INC.
                                   ----------
                            STATEMENTS OF OPERATIONS
                            ------------------------


<TABLE>
<CAPTION>
             <S>                                                              <C>                          <C>
                                                                                                      March 31, 1999
                                                                                                        (Inception)
                                                                   Years Ended December 31,               Through
                                                             ------------------------------------      December 31,
                                                                    2001                2000               1999
                                                             -----------------   ----------------    ----------------
REVENUES
   Rental commissions                                        $           1,039   $          2,462    $          1,523
   Listing fees                                                            ---                660               5,270
                                                             -----------------   ----------------    ----------------
                                                                         1,039              3,122               6,793
                                                             -----------------   ----------------    ----------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
                                                                        85,842             21,599              22,835
OTHER (INCOME) EXPENSE
   Interest income                                                     (19,615)               ---                 ---
   Interest expense                                                    586,612                ---                 ---
   Depreciation                                                            597                599                 380
                                                             -----------------   ----------------    ----------------
                                                                       653,436             22,198              23,215
                                                             -----------------   ----------------    ----------------
LOSS BEFORE PROVISION FOR INCOME TAXES
                                                                      (652,397)           (19,076)            (16,422)
PROVISION FOR INCOME TAXES                                                 ---                ---                 ---
                                                             -----------------   ----------------    ----------------
NET LOSS                                                     $        (652,397)  $        (19,076)   $        (16,422)
                                                             =================   ================    ================
BASIC LOSS PER SHARE                                         $          (.05)    $          (.00)   $           (.00)
                                                             =================   ================    ================
DILUTIVE LOSS PER SHARE                                      $          (.05)    $          (.00)   $           (.00)
                                                             =================   ================    ================
Basic and  dilutive  weighted  average  of  common  shares
   outstanding                                                      13,344,135         16,651,693           4,500,000
                                                             =================   ================    ================
</TABLE>





            See the accompanying notes to these financial statements


                                       11
<PAGE>



                                   JPAL, INC.
                                   ----------
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  ---------------------------------------------
            YEARS ENDED DECEMBER 31, 2001 AND 2000 AND FOR THE PERIOD
            ---------------------------------------------------------
            FROM MARCH 31, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
            ---------------------------------------------------------


<TABLE>
<CAPTION>
               <S>                               <C>            <C>            <C>          <C>            <C>
                                                 Common Stock              Additional
                                           ----------------------------      Paid-In     Accumulated
                                              Shares           Amount        Capital       Deficit        Total
                                           ------------     -----------   -----------    -----------   -----------
BALANCE, March 31, 1999 (inception)
                                                    ---     $       ---   $       ---    $       ---   $       ---
ISSUANCE OF COMMON STOCK FOR SERVICES
                                              4,500,000             900           ---            ---           900
ADDITIONAL PAID-IN CAPITAL, (in exchange
   for goods and services and rent)
                                                    ---             ---        18,235            ---        18,235
NET LOSS                                            ---             ---           ---        (16,422)      (16,422)
                                           ------------     -----------   -----------    -----------   -----------
BALANCE, December 31, 1999                    4,500,000             900        18,235        (16,422)        2,713

ISSUANCE OF COMMON STOCK FOR CASH
                                             10,500,000           2,100           920            ---         3,020
ISSUANCE OF COMMON STOCK FOR SERVICES
                                              3,987,345             797           ---            ---           797
ADDITIONAL PAID-IN CAPITAL, (paid in
   cash)                                            ---             ---         9,795            ---         9,795

ADDITIONAL PAID-IN CAPITAL (in exchange
   for rent provided by a stockholder)
                                                    ---             ---         2,000            ---         2,000
ADDITIONAL PAID-IN CAPITAL (in exchange
   for computer services provided by a
   stockholder)                                     ---             ---         3,750            ---         3,750

NET LOSS                                            ---             ---                      (19,076)      (19,076)
                                           ------------     -----------   -----------    -----------   -----------
BALANCE, December 31, 2000                   18,987,345           3,797        34,700        (35,498)        2,999
                                           ------------     -----------   -----------    ------------  -----------
</TABLE>





            See the accompanying notes to these financial statements

                                       12
<PAGE>



                                   JPAL, INC.
                                   ----------
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
            ---------------------------------------------------------
            YEARS ENDED DECEMBER 31, 2001 AND 2000 AND FOR THE PERIOD
            ---------------------------------------------------------
            FROM MARCH 31, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
            ---------------------------------------------------------


<TABLE>
<CAPTION>
            <S>                                 <C>            <C>             <C>            <C>            <C>
                                                 Common Stock              Additional
                                           ----------------------------     Paid-In      Accumulated
                                              Shares           Amount       Capital        Deficit        Total
                                           ------------     -----------   -----------    -----------   -----------

BALANCE, December 31, 2000                  18,987,345            3,797        34,700        (35,498)        2,999

REDEMPTION OF COMMON STOCK
                                           (10,342,085)          (2,068)        2,068            ---           ---
ADDITIONAL PAID IN CAPITAL, (in exchange
   for rent provided by a stockholder)
                                                   ---              ---         3,900            ---         3,900
ADDITIONAL PAID IN CAPITAL, (in exchange
   for computer services provided by a
   stockholder)                                    ---              ---         4,625            ---         4,625

ADDITIONAL PAID IN CAPITAL, (in exchange
   for legal, accounting and other
   administrative services provided by a
   stockholder)                                    ---              ---        10,979            ---        10,979

VALUE OF WARRANTS ISSUED WITH
PROMISSORY NOTES                                   ---              ---       838,276            ---       838,276

NET LOSS                                           ---              ---                     (652,397)     (652,397)
                                           ------------     -----------   -----------    -----------   -----------
BALANCE, December 31, 2001                   8,645,260      $     1,729   $   894,548    $  (687,895)  $   208,382
                                           ============     ===========   ===========    ===========   ===========
</TABLE>





            See the accompanying notes to these financial statements

                                       13
<PAGE>



                                   JPAL, INC.
                                   ----------
                            STATEMENTS OF CASH FLOWS
                            ------------------------

<TABLE>
<CAPTION>
               <S>                                                            <C>                         <C>
                                                                                                       March 31, 1999
                                                                                                        (Inception)
                                                                   Years Ended December 31,              Through
                                                             ------------------------------------       December 31,
                                                                    2001                2000               1999
                                                             -----------------   ----------------    ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                  $        (652,397)  $        (19,076)   $        (16,422)
   Adjustments  to  reconcile  net  loss  to net  cash
    provided by (used in) operating activities
     Depreciation                                                          597                599                 380
     Services  provided  in exchange  for  issuance of
       common stock                                                        ---                797                 900
     Goods and services and rent  provided in exchange
       for additional paid-in capital                                   19,504              5,750              18,235
     Deferred interest                                                 560,788                ---                 ---
     Changes in operating assets and liabilities
       Increase in accrued interest on note receivable
                                                                       (19,615)               ---                 ---
       (Increase) decrease in prepaid expenses                             488               (609)                ---
       Increase (decrease) in accounts payable                           4,768               (747)                844
       Increase in accrued expenses                                     25,824                ---                 ---
                                                             -----------------   ----------------    ----------------
         Net  cash  provided  by (used  in)  operating
         activities                                                    (60,043)           (13,286)              3,937
                                                             -----------------   ----------------    ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of property and equipment                                     ---                ---              (3,053)
   Issuance of note receivable                                      (1,500,000)               ---                 ---
                                                             -----------------   ----------------    ----------------
         Net cash used in investing activities                      (1,500,000)               ---              (3,053)
                                                             -----------------   ----------------    ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of notes payable                           1,561,400                ---                 ---
   Proceeds from issuance of common stock                                  ---              3,020                 ---
   Proceeds from additional paid-in capital                              2,068              9,795                 ---
   Redemption of common stock                                           (2,068)               ---                 ---
                                                             -----------------   ----------------    ----------------
         Net cash provided by financing activities
                                                                     1,561,400             12,815                 ---
                                                             -----------------   ----------------    ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                                         1,357               (471)                884
CASH AND CASH EQUIVALENTS, beginning of period
                                                                           413                884                 ---
                                                             -----------------   ----------------    ----------------
CASH AND CASH EQUIVALENTS, end of period
                                                             $           1,770   $            413    $            884
                                                             =================   ================    ================
</TABLE>




            See the accompanying notes to these financial statements

                                       14
<PAGE>



                                   JPAL, INC.
                                   ----------
                      STATEMENTS OF CASH FLOWS (CONTINUED)
                      ------------------------------------


<TABLE>
<CAPTION>
                       <S>                                          <C>                <C>               <C>
                                                                                                     March 31, 1999
                                                                                                       (Inception)
                                                                   Years Ended December 31,              Through
                                                             ------------------------------------      December 31,
                                                                    2001                2000               1999
                                                             -----------------   ----------------    ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the period for interest                  $             ---   $            ---   $             ---
   Cash paid during the period for income taxes              $             ---   $            ---   $             ---
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
   During the year ended December 31, 2001 the Company had $1,561,400 of
     proceeds from notes payable, of which $838,276 has been assigned to the
     value of the warrants and has been recorded as additional paid-in capital.
   During the year ended December 31, 2001, the Company recorded rent, computer
     services, legal, accounting and other administrative expenses totaling
     $19,504 and additional paid in capital of $19,504 for rent and services
     paid for and provided by a stockholder.
   During the year ended December 31, 2000, the Company recorded rent and
     computer services expense of $2,000 and $3,750, respectively, and
     additional paid-in capital of $5,750 for rent and services provided by a
     stockholder.
   During the years ended December 31, 2000 and 1999, the Company issued stock
     in exchange for services provided valued at $797 and $900, respectively.
   During the period ended December 31, 1999, the Company recorded additional
     paid-in capital of $18,235, for goods and services and rent paid for and
     provided by stockholders.






            See the accompanying notes to these financial statements



                                       15
<PAGE>




                                   JPAL, INC.
                                   ----------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                           DECEMBER 31, 2001 AND 2000
                          ----------------------------


NOTE 1 - COMPANY OPERATIONS

         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 were 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 in the process of negotiating a merger with
another company.

         The Company has experienced net losses since its inception and had an
accumulated deficit of approximately $688,000 at December 31, 2001. 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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The significant accounting policies are summarized as follows:

         Cash and Cash Equivalents - For purposes of the balance sheets and
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three (3) months or less to be cash
equivalents.

         Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

         Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from three to seven years. Repairs and
maintenance to property and equipment are expensed as incurred. When property
and equipment is retired or disposed of, the related costs and accumulated
depreciation are eliminated from the accounts and any gain or loss on such
disposition is reflected in income.

         Advertising - Advertising costs are charged to operations when
incurred.


                                       16
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Income Taxes - The Company accounts for income taxes in accordance with
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted rates in effect for the periods in which the
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.

         Fair Value of Financial Instruments - SFAS No. 107, "Disclosure about
Fair Value of Financial Instruments", requires entities to disclose the fair
value of financial instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. SFAS No. 107 defines fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. As of December 31, 1999 and 2000, the carrying value of cash
and cash equivalents, accounts payable and accrued interest payable approximate
fair value due to the short-term nature of such instruments.

         Based upon borrowing rates currently available to the Company for loans
of similar terms, the carrying value of its debt obligations approximate fair
value.

         Based upon rates of return currently available to the Company for
investments of similar terms the carrying value of its note receivable
approximates fair value.

         Loss Per Share of Common Stock - Basic and diluted loss per share is
computed using shares of common stock issued to date. Consideration is also
given in the dilutive loss per share calculation for the dilutive effect of
common stock equivalents which might result from the exercise of stock options.
However, for all periods presented, there were no common stock equivalents or
the effect of common stock equivalents would be anti-dilutive.

         Common Stock Issued for Services Rendered - The Company periodically
issues common stock for services rendered. Common stock issued is valued at the
estimated fair market value of the services provided, as determined by
management. During the year ended December 31, 2000 and the period ended
December 31, 1999, the Company issued 4,500,000 and 3,987,345 shares of common
stock for services. 4,500,000 shares were issued for advisory services and
3,987,345 shares were issued for legal services.

         Recent Accounting Pronouncements - In July 2001, the FASB issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations," which is effective for business combinations initiated after June
30, 2001. SFAS 141 eliminates the pooling of interest method of accounting for
business combinations and requires that all business combinations occurring
after July 1, 2001 are accounted for under the purchase method. The Company has
not been affected by SFAS 141.


                                       17
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is
effective for fiscal years beginning after December 15, 2001. Early adoption is
permitted for entities with fiscal years beginning after March 15, 2001,
provided that the first interim financial statements have not been previously
issued. SFAS 142 addresses how intangible assets that are acquired individually
or with a group of other assets should be accounted for in the financial
statements upon their acquisition and after they have been initially recognized
in the financial statements. SFAS 142 requires that goodwill and intangible
assets that have indefinite useful lives not be amortized but rather be tested
at least annually for impairment, and intangible assets that have finite useful
lives be amortized over their useful lives. SFAS 142 provides specific guidance
for testing goodwill and intangible assets that will not be amortized for
impairment. The Company has not been affected by SFAS 142.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations."
SFAS 143 established standards associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. This statement is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company does not expect SFAS 143 to have a material impact on its
financial statements.

         In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS 144 addresses financial accounting and reporting for
the impairment of long-lived assets of which to be disposed. The provisions of
SFAS 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within these fiscal
years, with early adoption encouraged. The Company does not expect SFAS 144 to
have a material impact on its financial statements.


NOTE 3 - PROPERTY AND EQUIPMENT

   Property and equipment consist of the following:

                                                         December 31,
                                                ------------------------------
                                                     2001             2000
                                                -------------     ------------
   Computer                                     $       1,791     $      1,791
   Computer equipment                                   1,057            1,057
   Furniture                                              205              205
                                                -------------     ------------
                                                        3,053            3,053
   Less:  accumulated depreciation                     (1,576)            (979)
                                                --------------    ------------
                                                $       1,477     $      2,074
                                                =============     ============



                                       18
<PAGE>


NOTE 4 - NOTES PAYABLE

         The Company has several unsecured notes payable with interest rates
ranging from 8.00% to 8.50%. Notes totaling $650,000 which have a weighted
average interest rate of 8.5 % 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 April 11, 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 $911,400 which have a weighted average interest
rate of 8.48% 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 $1,561,400 at December 31, 2001.
Interest expense on these notes during the year ended December 31, 2001 was
$25,824. The Company issued warrants valued at $838,276 to acquire 610,560
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 $560,788 has been amortized as interest expense during the year
ended December 31, 2001. The remaining balance of deferred interest of $277,488
has been netted with the outstanding principal balance of the current notes
payable.

         $1,500,000 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 8). The note receivable is unsecured and bears an
interest rate of 8.5%, however, interest did not begin to accrue until January
31, 2002. Imputed interest was $19,615 for the year ended December 31, 2001
which is included in other income. Principal together with accrued interest is
due on the earliest of (i) January 31, 2004, (ii) the closing of the
transactions contemplated by the agreement dated August 23, 2001 (Note 8) or
(iii) the sale or exchange of all or substantially all of the membership
interests of Essential Reality.


NOTE 5 - 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.

   The components of the Company's income tax provision consist of:
<TABLE>
<CAPTION>
               <S>                                            <C>                <C>                 <C>
                                                                                                March 31, 1999
                                                             Years Ended December 31,            (Inception)
                                                       ------------------------------------     December 31,
                                                              2001                2000              1999
                                                       -----------------   ----------------   ----------------
   Federal  taxes   (deferred)  net  operating  loss
   benefit                                             $        (97,800)   $         (2,800)  $         (2,500)
   Change in valuation account                                   97,800               2,800              2,500
                                                       ----------------    ----------------   ----------------
                                                       $            ---    $            ---   $            ---
                                                       ================    ================   ================
</TABLE>



                                       19
<PAGE>


NOTE 5 - INCOME TAXES (CONTINUED)

         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 December 31, 2001 and 2000
are as follows:

                                                       December 31,
                                                 2001                2000
                                          ----------------    ----------------
    Deferred income taxes
        Net operating loss benefit        $        103,100    $          5,300
        Valuation allowance                       (103,100)             (5,300)
                                          ----------------    ----------------
                                          $            ---    $            ---
                                          ================    ================

         The Company has federal net operating loss carryforwards of
approximately $688,000 which if not utilized will expire at various times though
2021. For income tax purposes, only a portion of the net operating loss can be
utilized in any given year if the company that generated the loss has more than
fifty percent (50%) change in ownership in a three (3) year period. Accordingly,
there may be limitations on the use of the Company's net operating loss
carryforwards.

         A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As a result
of the uncertainties surrounding the realization of the net operating loss
carryforwards, management has determined that the realization of the deferred
tax assets is questionable. Accordingly, the Company has recorded a valuation
allowance equal to the net deferred tax asset amount as of December 31, 2001.


NOTE 6 - RELATED PARTY TRANSACTIONS

         The Company is currently utilizing office space provided by the
Company's president (a stockholder). During the years ended December 31, 2001
and 2000, the Company has recorded rent expense of $3,900 and $2,000,
respectively, which represents the Company's pro rata share of the office space
being provided by the Company's current and past presidents. The Company has
also recorded computer consulting services of $4,625 and $3,750 which were
provided by the Company's previous president for the years ended December 31,
2001 and 2000, respectively. The services were valued using hourly rates at
estimated fair market value of similar services. During the year ended December
31, 2001 the Company has recorded $10,979 for legal, accounting and other
administrative expenses that were paid for by the Company's current and past
presidents. The presidents have waived reimbursement of the allocated rent,
computer consulting services, legal, accounting and other administrative
services provided and have considered them as additional paid-in capital. During
the year ended December 31, 2001 the Company's current president received
$11,000 as compensation which is included in selling, general and administrative
expense.


                                       20
<PAGE>


NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)

         During the year ended December 31, 2000 the Company paid fees for
web-consulting services to a stockholder totaling $1,500. Additionally, during
the period ended December 31, 1999, the Company paid fees to a stockholder
totaling $2,600 for the construction of their website.

         During the year ended December 31, 2000, the Company entered into a
consulting agreement for legal services in exchange for 3,987,345 shares of
common stock which were valued at $797. The services were valued using hourly
rates at estimated fair market value of similar services. During the period
ended December 31, 1999, the Company entered into consulting agreements for
advisory services relating to the initial start-up of the Company in exchange
for 4,500,000 shares of common stock. Total fees were $900 for the period ended
December 31, 1999 with each consultant receiving a percentage of ownership in
the form of common stock. The services were valued using hourly rates at
estimated fair market value of similar services.

         In addition, during the period ended December 31, 1999, one of the
stockholders paid for various goods and services relating to the Company's
operations including travel, entertainment, trade shows and transportation
costs. These expenses have been included in the results of operations for the
corresponding period and recorded as additional paid-in-capital.


NOTE 7 - STOCKHOLDERS' EQUITY

Preferred stock
---------------

         Holders of the preferred stock do not have preemptive rights to
purchase additional shares of preferred stock. The preferred stock carries no
conversion rights and is not subject to redemption or to any sinking fund
provisions. The Company is authorized to issue 5,000,000 shares of preferred
stock.

Common stock
------------

         Holders of the common stock do not have preemptive rights to purchase
additional shares of common stock. The common stock carries no conversion rights
and is not subject to redemption or to any sinking fund provisions. All shares
of common stock are entitled to share equally in dividends from sources legally
available thereof when and if declared by the Board of Directors and, upon
liquidation or dissolution of the company, whether voluntary or involuntary, to
share equally in the assets of the Company available for distribution to
stockholders. The Company is authorized to issue 50,000,000 shares of common
stock.

         On June 14, 2001 the Company redeemed 10,342,085 shares of its common
stock for $2,068.

         On July 2, 2001, the Company approved a 5 for 1 forward stock split of
its common stock. Accordingly, all share and per share amounts have been
retroactively restated in the financial statements to reflect this split.




                                       21
<PAGE>


         NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

         During the year ended December 31, 2000, the Company issued 3,987,345
shares of common stock for services and 10,500,000 shares for cash.

         During the period ended December 31, 1999, the Company issued 4,500,000
shares of common stock for services.

Warrants
--------

         During 2001, the Company issued 610,560 warrants in connection with the
short term promissory notes executed from August 23, 2001 through December 31,
2001. The warrants were issued for the purchase of common stock at $3.00 per
share. These warrants are exercisable at the option of the warrant holder and
expire three years from the date of issuance. An amount of $838,276 based on the
Black-Scholes pricing model was included in additional paid-in capital at
December 31, 2001 as the estimated value of the warrants.

         The following represents a summary of the warrants outstanding as of
December 31, 2001, 2000 and 1999.

                                                                       Weighted
                                                                        Average
                                                                       Exercise
                                                        Shares          Price
                                                     ------------    -----------
  Outstanding, March 31, 1999                                 ---    $       ---

  Granted                                                     ---            ---
  Expired/forfeited                                           ---            ---
                                                     ------------    -----------
  Outstanding, December 31, 1999                              ---    $       ---
                                                     ============    ===========
  Outstanding, January 1, 2000                                ---    $       ---

  Granted                                                     ---            ---
  Expired/forfeited                                           ---            ---
                                                     ------------    -----------
  Outstanding, December 31, 2000                              ---    $       ---
                                                     ============    ===========
  Granted                                                 610,560    $      3.00
  Expired/forfeited                                           ---            ---
                                                     ------------    -----------
  Outstanding, December 31, 2001                          610,560    $      3.00
                                                     ============    ===========
  Weighted average fair value of warrants granted                    $      3.00
                                                                     ===========


         All of the warrants outstanding at December 31, 2001 had an exercise
price and a weighted average price of $3.00 and a weighted average remaining
contractual life of 2.83 years.



                                       22
<PAGE>


NOTE 8 - COMMITMENTS AND CONTINGENCIES

         The Company has entered into an agreement with Essential Reality, LLC
("Essential Reality") dated August 23, 2001 where as the Company and Essential
Reality have agreed to a business combination. The business combination is
contingent on the consummation of the Company's private placement of up to
1,730,769 shares of common stock and up to an additional 288,462 shares of
common stock at a selling price of $3.00 per share.

         Upon the closing of the agreement, the Company shall issue 11,000,000
shares of common stock in exchange for one hundred percent (100)% interest in
Essential Reality.

         The Company currently holds a note receivable due from Essential
Reality. This note bears an interest rate of 8.5% and will mature on the
earliest of (i) January 31, 2004, (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, $650,000 of the notes payable
which were due on March 1, 2002 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.


NOTE 9 - SUBSEQUENT EVENTS

         The Company executed notes payable agreements during January 2002
through February 2002. These notes total $882,600 which bear an interest rate of
8.50% with maturity dates from January 15, 2002 through January 31, 2003. The
Company issued warrants to acquire 353,040 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. A note of $100,000 was due on January 15, 2002 and other notes
totaling $225,000 were due on March 1, 2002. As of April 11, 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.


NOTE 10 - CORRECTION OF AN ERROR

         Warrants issued in connection with the promissory notes were
understated at December 31, 2001. Management of the Company has subsequently
revalued the warrants at $838,276. $560,788 has been recorded as interest
expense. $277,488 has been reflected as a discount to the related notes payable
and will be amortized to interest expense over the remainder of the original
term of the notes.


                                       23
<PAGE>


Item 8.  Changes in and Disagreements with Accountants.
-------------------------------------------------------

There have been no changes in or disagreements with our accountants since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B.


                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons.
----------------------------------------------------------------------

Our directors and principal executive officers are as specified on the following
table:

===================== ========= ==============================================
Name                    Age     Position
--------------------- --------- ----------------------------------------------
Frank Drechsler          34     president, secretary, treasurer and a director
===================== ========= ==============================================

Frank Drechsler. Mr. Drechsler has been one of our directors since June 2001.
Since July 2001, Mr. Drechsler has also been the president, secretary and a
director of Finger Tip Drive, Inc., a Nevada corporation which provides online
computer data storage services. Also since July 2001, Mr. Drechsler has been a
director of Zowcom, Inc., a Nevada corporation which designs customized websites
and web-based business planning applications. From October 1998 to May 2001, Mr.
Drechsler was the president and a director of Pacific Trading Post, Inc., a
Nevada corporation, which marketed and sold products on the Internet within the
outdoor sports industries, specifically in the areas of skate, surf and snow. In
January 1998, Mr. Drechsler co-founded and developed the business model for
skatesurfsnow.com, where he was responsible for the day-to-day operations.
During 1997, Mr. Drechsler was self-employed as a consultant and helped start up
companies develop sales and marketing programs. From 1995 to December 1996, Mr.
Drechsler was the international sales manager for Select Distribution. Mr.
Drechsler graduated from California State University, Fullerton with a Bachelor
of Science degree in International Business in 1992. Mr. Drechsler is not an
officer or director of any other reporting company.

There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.

Our director will serve until the next annual meeting of stockholders. Our
executive officers are appointed by our Board of Directors and serve at the
discretion of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance. We believe that our
officers, directors, and principal shareholders have filed all reports required
to be filed on, respectively, a Form 3 (Initial Statement of Beneficial
Ownership of Securities), a Form 4 (Statement of Changes of Beneficial Ownership
of Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).

Item 10.  Executive Compensation
--------------------------------

Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our board of directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.

Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services payable to our former and current officers
during the year ended December 31, 2001, and our current officer for the year
ending December 31, 2002. Our board of directors may adopt an incentive stock
option plan for our executive officers which would result in additional
compensation.


                                       24
<PAGE>


<TABLE>
<CAPTION>
              <S>                              <C>        <C>           <C>              <C>                      <C>
============================================ ======= ============= ============= ===================== =========================
Name and Principal Position                   Year      Annual      Bonus ($)        Other Annual       All Other Compensation
                                                       Salary ($)                   Compensation ($)
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Ryan Neely - former president and former     2001        None          None              None                    None
secretary
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Jason Ortega - former treasurer              2001        None          None              None                    None
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Frank Drechsler - president, secretary,      2001        None          None            $11,000                   None
treasurer and director
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
                                             2002        None          None              None                    None
============================================ ======= ============= ============= ===================== =========================
</TABLE>
Compensation of Directors. Our director receives no compensation for his service
on our board of directors.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 12, 2002, by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.

<TABLE>
<CAPTION>
          <S>                             <C>                                    <C>                           <C>
======================= ===================================== ====================================== =======================
    Title of Class                  Name and Address                     Amount and Nature               Percent of Class
                                  of Beneficial Owner                  of Beneficial Owner
----------------------- ------------------------------------- -------------------------------------- -----------------------
Common Stock            Frank Drechsler                                  5,100,260 shares
                        17620 Oak Street                         president, secretary, treasurer,             58.99%
                        Fountain Valley, CA 92708                            director
----------------------- ------------------------------------- -------------------------------------- -----------------------
Common Stock            All directors and named executive                5,100,260 shares                     58.99%
                        officers as a group
======================= ===================================== ====================================== =======================
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.

Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.

Item 12.  Certain Relationships and Related Transactions.
---------------------------------------------------------

Related Party Transactions. There have been no related party transactions,
except for the following:

Frank Drechsler, our president, secretary, treasurer and director, currently
provides office space to us at no charge. Mr. Drechsler does not expect to be
paid or reimbursed for providing office facilities. We do not have a written
lease or sublease agreement with Mr. Drechsler.

During the period ended December 31, 2001, we recorded rent expense of $3,900
which represents our pro rata share of the office space being provided by our
current and past presidents. We also recorded computer consulting services of
$4,625 which were provided by our previous president. The services were valued
using hourly rates at estimated fair market value of similar services. We have
recorded $10,979 for legal, accounting and other administrative expenses that
were paid for by our current and past presidents. The presidents have waived
reimbursement of the allocated rent, computer consulting services, legal,
accounting and other administrative services provided and have considered them
as additional paid-in capital. During the period ended December 31, 2001, our
current president received $11,000 as compensation which is included in selling,
general and administrative expense.



                                       25
<PAGE>



With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:

    o    disclosing such transactions in prospectuses where required;
    o    disclosing in any and all filings with the Securities and Exchange
         Commission, where required;
    o    obtaining disinterested directors consent; and
    o    obtaining shareholder consent where required.

Item 13.  Exhibits and Reports on Form 8-K
------------------------------------------

(a) Exhibit No.
---------------

3.1                        Articles of Incorporation*
                           (Charter Document)

3.2                        Bylaws*

* Included in the registration statement on Form SB-2 filed on February 1, 2001.

(b) Reports on Form 8-K
-----------------------

No reports on Form 8-K were filed during the last quarter of the period covered
by this annual report on Form 10-KSB.



                                       26
<PAGE>


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the Fountain Valley, California, on May 8, 2002.

JPAL, Inc.,
a Nevada corporation


By:     /s/  Frank Drechsler
        ------------------------------------
        Frank Drechsler
Its:    principal executive, financial and accounting officer
        president, secretary, treasurer, director

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

JPAL, Inc.

By:     /s/  Frank Drechsler                                    May 8, 2002
        ------------------------------------
        Frank Drechsler
Its:    principal executive, financial and accounting officer
        president, secretary, treasurer, director