U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-QSB


[x]   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934.

      FOR THE QUARTERLY PERIOD ENDED MAY 31, 1998.


[ ]   Transition report under Section 13 or 15(d) of the Exchange Act.

      For the transition period from _______________ to _______________


Commission file number                0-23902
                       ---------------------------------------------------------

                                    IPI, INC.
--------------------------------------------------------------------------------
      (Exact Name of Small Business Issuer as Specified in its Charter)


      MINNESOTA                             41-1449312
--------------------------------------------------------------------------------
      (State or Other Jurisdiction of       (I.R.S. Employer Identification No.)
      Incorporation or Organization)

      15155 TECHNOLOGY DRIVE
      EDEN PRAIRIE, MN  55344
--------------------------------------------------------------------------------
      (Address of Principal Executive Offices)


                                 (612) 975-6200
--------------------------------------------------------------------------------
      (Issuer's Telephone Number, Including Area Code)


                                 NOT APPLICABLE
--------------------------------------------------------------------------------
      (Former Name, Former Address and Former Fiscal Year, If Changed Since
      Last Report)


      Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes __X__     No _____


      As of July 10, 1998, there were 4,734,087 Common Shares outstanding.

<PAGE>


                                    IPI, INC.
                                Table of Contents


                                                                            Page
                                                                            ----

PART I.  FINANCIAL INFORMATION

     Item 1.    Financial Statements (Unaudited)

                Condensed Consolidated Balance Sheets as of May 31,
                1998 and November 30, 1997.                                  3

                Condensed Consolidated Statements of Operations for the
                Three and Six Months Ended May 31, 1998 and May 31,
                1997.                                                        4

                Condensed Consolidated Statements of Cash Flows for the
                Six Months Ended May 31, 1998 and May 31, 1997.              5

                Notes to Condensed Consolidated Financial Statements.        6


     Item 2.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations.                         7-8



PART II.  OTHER INFORMATION

     Item 1.    Legal Proceedings                                            9

     Item 2.    Changes in Securities                                        9

     Item 3.    Defaults Upon Senior Securities                              9

     Item 4.    Submission of Matters to Vote of Security Holders            9

     Item 5.    Other Information                                            9

     Item 6.    Exhibits and Reports of Form 8-K                             9

     Signatures                                                             10

<PAGE>


PART I.  FINANCIAL INFORMATION
ITEM 1.

                            IPI, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      May 31, 1998     November 30,
                                                                       (Unaudited)         1997
                                                                      ------------     ------------
<S>                                                                   <C>              <C>         
                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                        $  2,119,000     $  1,294,000
     Short-term investments                                              1,440,000          800,000
     Marketable equity securities                                        5,179,000        5,014,000
     Trade accounts receivable                                           1,413,000        1,274,000
     Current maturities of notes receivables, net of allowance for
         doubtful accounts of $163,000 and $163,000                        987,000          987,000
     Inventories                                                           311,000          315,000
     Prepaid expenses and other                                            126,000          119,000
     Deferred income taxes                                                 532,000          593,000
                                                                      ------------     ------------

         Total current assets                                           12,107,000       10,396,000
                                                                      ------------     ------------

PROPERTY AND EQUIPMENT:
     Property and equipment                                              1,435,000        1,356,000
     Less - Accumulated depreciation                                      (836,000)        (790,000)
                                                                      ------------     ------------
         Property and equipment, net                                       599,000          566,000
NOTES RECEIVABLE, net of current maturities and allowance for
     doubtful accounts of $724,000 and $522,000                          1,133,000        1,852,000
GOODWILL AND OTHER INTANGIBLES, net of accumulated
     amortization of $1,280,000 and $1,164,000                           3,272,000        3,388,000
                                                                      ------------     ------------
                                                                      $ 17,111,000     $ 16,202,000
                                                                      ============     ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                 $    693,000     $    417,000
     Accrued compensation                                                  113,000          411,000
     Accrued financing liabilities                                         200,000          200,000
     Deferred revenues                                                      15,000           52,000
     Other accrued liabilities                                             511,000          563,000
                                                                      ------------     ------------
         Total current liabilities                                       1,532,000        1,643,000
                                                                      ------------     ------------

LONG-TERM CAPITAL LEASE OBLIGATIONS                                         79,000          107,000

SHAREHOLDERS' EQUITY:
     Common Stock, $.01 par value, 15,000,000 shares authorized:
         4,734,087 shares issued and outstanding                            47,000           47,000
     Additional paid-in capital                                         15,584,000       15,584,000
     Accumulated deficit                                                  (187,000)      (1,132,000)
     Unrealized gain (loss) on marketable securities available for
         sale, net of related income tax effects                            56,000          (47,000)
                                                                      ------------     ------------
         Total shareholders' equity                                     15,500,000       14,452,000
                                                                      ------------     ------------

                                                                      $ 17,111,000     $ 16,202,000
                                                                      ============     ============
</TABLE>

        The accompanying notes are an integral part of these consolidated
                                balance sheets.

<PAGE>


                            IPI, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended           Six Months Ended
                                                             May 31,                      May 31,
                                                     ------------------------    ------------------------
                                                         1998         1997          1998          1997
                                                         ----         ----          ----          ----
<S>                                                  <C>           <C>           <C>           <C>       
REVENUES:
     Royalty fees                                    $1,195,000    $1,193,000    $2,182,000    $2,166,000
     Printing equipment, supplies and services        1,012,000     1,077,000     2,074,000     2,375,000
     Finance and other income                           434,000       314,000       679,000       501,000
                                                     ----------    ----------    ----------    ----------

     Total revenues                                   2,641,000     2,584,000     4,935,000     5,042,000
                                                     ----------    ----------    ----------    ----------
COSTS AND EXPENSES:
     Cost of sales                                      797,000       869,000     1,630,000     1,953,000
     Selling, general and administrative expenses       903,000       936,000     1,690,000     1,754,000
     Amortization of goodwill                            57,000        57,000       115,000       115,000
                                                     ----------    ----------    ----------    ----------

     Total costs and expenses                         1,757,000     1,862,000     3,435,000     3,822,000
                                                     ----------    ----------    ----------    ----------

     Income before provision for income taxes           884,000       722,000     1,500,000     1,220,000

PROVISION FOR INCOME TAXES                              327,000       267,000       555,000       451,000
                                                     ----------    ----------    ----------    ----------

NET INCOME                                           $  557,000    $  455,000    $  945,000    $  769,000
                                                     ==========    ==========    ==========    ==========

BASIC EARNINGS PER COMMON SHARE                      $     0.12    $     0.09    $     0.20    $     0.16
                                                     ==========    ==========    ==========    ==========

DILUTED EARNINGS PER COMMON SHARE                    $     0.12    $     0.09    $     0.20    $     0.16
                                                     ==========    ==========    ==========    ==========
WEIGHTED AVERAGE NUMBER OF
   COMMON AND COMMON SHARE
   EQUIVALENTS OUTSTANDING

      - BASIC                                         4,734,000     4,734,000     4,734,000     4,734,000
                                                     ==========    ==========    ==========    ==========

      - DILUTED                                       4,746,000     4,734,000     4,745,000     4,734,000
                                                     ==========    ==========    ==========    ==========
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.

<PAGE>


                            IPI, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                                        May 31,
                                                                              ---------------------------
                                                                                 1998             1997
                                                                              -----------     -----------
<S>                                                                           <C>             <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income                                                               $   945,000     $   769,000
     Adjustments to reconcile net income to net cash provided by
         operating activities -
              Depreciation and amortization                                       205,000         192,000
              Net change in other operating items:
                  Trade accounts receivable                                      (138,000)        (94,000)
                  Inventories                                                       4,000          80,000
                  Prepaid expenses and other                                       (8,000)         (9,000)
                  Accounts payable, accrued liabilities and other                (111,000)        103,000
                                                                              -----------     -----------
                      Net cash provided by operating activities                   897,000       1,041,000
                                                                              -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of short-term investments, net                                     (640,000)        (80,000)
     Purchase of property and equipment, net                                     (151,000)       (209,000)
     Change in notes receivable, net                                              719,000         361,000
                                                                              -----------     -----------
                      Net cash provided by (used for) investing activities        (72,000)         72,000
                                                                              -----------     -----------

                      Increase in cash and cash equivalents                       825,000       1,113,000

CASH AND CASH EQUIVALENTS, beginning of period                                  1,294,000       1,257,000
                                                                              -----------     -----------

CASH AND CASH EQUIVALENTS, end of period                                      $ 2,119,000     $ 2,370,000
                                                                              ===========     ===========
SUPPLEMENTAL CASH FLOW INFORMATION:

     Income taxes paid                                                        $   513,000     $   332,000
                                                                              ===========     ===========
     Equipment acquired under capital lease                                   $      --       $   212,000
                                                                              ===========     ===========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

<PAGE>


                            IPI, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   BASIS OF PRESENTATION

     The accompanying interim condensed consolidated financial statements of
     IPI, Inc. ("IPI" or the "Company") and its wholly owned subsidiary,
     Insty-Prints, Inc. ("Insty-Prints"), are unaudited; however, in the opinion
     of management, all adjustments necessary for a fair presentation of such
     financial statements have been reflected in the interim periods presented.
     Such adjustments consisted only of normal recurring items and all
     intercompany transactions have been eliminated in consolidation. The
     significant accounting policies, certain financial information and footnote
     disclosures which are normally included in financial statements prepared in
     accordance with generally accepted accounting principles, but which are not
     required for interim reporting purposes, have been condensed or omitted.
     The operating results for the interim periods presented are not necessarily
     indications of the operating results to be expected for the full fiscal
     year. The accompanying financial statements of the Company should be read
     in conjunction with the Company's audited financial statements for the
     years ended November 30, 1997 and 1996 and the notes thereto, included in
     the Company's Form 10-KSB.

     In August 1997, marketable equity securities were purchased to enhance
     returns on cash funds. In accordance with Statement of Financial Accounting
     Standards No. 115, Accounting for Certain Investments in Debt and Equity
     Securities, these securities are shown on the balance sheet at market value
     and unrealized gains (losses) are reflected as a separate component of
     shareholders equity, net of related income taxes.

     In the first quarter of fiscal 1998, the Company adopted Statement of
     Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings per
     Share," which is effective for interim periods ending after December 15,
     1997. As a result, all prior period earnings per share data has been
     restated. This adoption of SFAS No. 128 did not have any significant impact
     on previously reported earnings per share. Basic earnings per share was
     computed by dividing net income by the weighted average number of shares of
     common stock outstanding during the period. Diluted earnings per share was
     computed similar to the computation for basic earnings per share, except
     that the denominator is increased for the assumed exercise of dilutive
     options and other dilutive securities using the treasury stock method.

<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

     As of May 31, 1998, the Company, through its wholly-owned subsidiary
Insty-Prints, had 258 franchise locations and one Company-owned store.

RESULTS OF OPERATIONS

     The following table sets forth certain statement of operations data as a
percentage of sales for the periods indicated:

<TABLE>
<CAPTION>
                                                                 Quarter Ended                   Six Months Ended
                                                                     May 31,                          May 31,
                                                          ----------------------------     ----------------------------
                                                             1998              1997            1998             1997
                                                             ----              ----            ----             ----
<S>                                                          <C>               <C>             <C>              <C>  
     Revenues:
         Royalty fees                                        45.3%             46.2%           44.2%            43.0%
         Printing equipment, supplies and services           38.3              41.7            42.0             47.1
         Finance and other income                            16.4              12.1            13.8              9.9
                                                             ----              ----            ----              ---

         Total revenues                                     100.0             100.0           100.0            100.0
                                                            -----             -----           -----            -----
     Costs and expenses:
         Costs of sales                                      30.2              33.7            33.0             38.7
         Selling, general and administrative expenses        34.2              36.2            34.3             34.8
         Amortization of goodwill                             2.1               2.2             2.3              2.3
                                                              ---               ---             ---              ---

         Total costs and expenses                            66.5              72.1            69.6             75.8
                                                             ----              ----            ----             ----

     Income before provision for income taxes                33.5              27.9            30.4             24.2
     Provision for income taxes                              12.4              10.3            11.2              8.9
                                                             ----              ----            ----              ---

     Net income                                              21.1%             17.6%           19.2%            15.3%
                                                             ====              ====            ====             ====
</TABLE>

FOR THE QUARTERS AND SIX MONTHS ENDED MAY 31, 1998 AND 1997

     Revenues. Total revenues for the three months ended May 31, 1998,
consisting of royalties, sales of printing equipment, supplies and services,
franchise fees and finance and other income, totaled $2,641,000, an increase of
$57,000 or 2.2% compared to the three months ended May 31, 1997. Total revenues
for the six months ended May 31, 1998, of $4,935,000 were $107,000 or 2.1% below
the six months ended May 31, 1997.

     Royalty revenue increased slightly to $1,195,000 in the second quarter of
1998 from $1,193,000 in 1997. For the six months ended May 31, 1998, royalty
revenue was $2,182,000, an increase of $16,000 or 0.7% over the same period a
year ago. Royalties were essentially flat as the increased royalties paid as a
result of increased sales by existing franchise locations was offset by reduced
royalties resulting from the number of franchised locations decreasing to 258 as
of May 31, 1998 from 285 as of May 31, 1997. Most of the store reductions were
in low-performing locations; however, there was some impact on royalty revenue.

     Sales of printing equipment, supplies and services for the second quarter
of 1998 decreased to $1,012,000 from $1,077,000 for 1997, a decrease of 6.0%.
For the six months ended May 31, 1998, sales of products were $2,074,000 or
12.7% below the sales of $2,375,000 for the same period a year ago. The decrease
in 1998 resulted primarily from the elimination of selling certain electronic
publishing equipment, envelopes and inks.

     Finance and other income was $434,000 for the quarter ended May 31, 1998,
which is $120,000 or 38.2% greater than the same quarter a year ago. For the six
months ended May 31, 1998, finance and other income was $178,000 or 35.5% more
than the $501,000 for the same period a year ago. For the three and six month
periods of 1998, the increased revenues were primarily due to investing in
higher yielding investments and an increased level of investments. Overall,
franchise fee revenues are not significant in 1998 or 1997 due to the Company's
emphasis during such periods on increasing existing franchise location sales and
growth through acquisitions.

<PAGE>


     Cost of Sales. Cost of sales decreased to $797,000 for the second quarter
of 1998 from $869,000 for 1997, a decrease of 8.3% for the quarter. The decrease
in the second quarter is the result of a related decrease in sales of printing
and electronic publishing equipment. Six month cost of sales amounts totaled
$1,630,000 in 1998, compared to $1,953,000 in 1997, a decrease of $323,000 or
16.5%, relating primarily to sales decreases. Average margins in products and
services increased to 21.4% for the six month period of 1998 compared to 17.7%
for the six month period ended May 31, 1997 due to the elimination of selling
certain low margin products and generally improved margins on most other product
lines.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $903,000 for the second quarter 1998 compared to
$936,000 for 1997, a decrease of 3.5%. Total expenses for the six months ended
May 31, 1998 were $1,690,000 compared to $1,754,000 for 1997, representing a
3.6% decrease. The decrease in expenses was due to the elimination of one
executive position and the expiration of a long-term consulting agreement,
effective December 1, 1997, which was offset by general inflationary increases
in other operating expenses.

     Provision for Income Tax. The Company's effective combined federal and
state income tax rate is estimated to be 37% for 1998 due primarily to the
effect of state income taxes, non-taxable income on municipal securities and
non-deductible goodwill amortization.

LIQUIDITY AND CAPITAL RESOURCES

     During the six months ending May 31, 1998, the Company generated $897,000
from operating activities, a decrease of $144,000 from $1,041,000 of funds
provided from operating activities for the six month period of 1997. The
decrease in funds provided from operating activities was primarily attributable
to a reduction in accounts payable and an increase in accounts receivable,
offset by an increase in net income.

     The Company has no bank debt or credit facility. Operations are funded from
cash generated by the business.

     Franchise owners may finance their equipment purchases through a $6,000,000
equipment financing facility established with U. S. Bank by Insty-Prints for the
benefit of the franchise owners. This facility is guaranteed by IPI and
Insty-Prints, whose contingent liability under this agreement is capped at
$2,400,000 annually. A loss reserve of $200,000 is recorded on the balance sheet
at May 31, 1998, representing estimated losses on these guarantees, net of
equipment value. The aggregate balance outstanding under this facility as of May
31, 1998 was approximately $3,027,000.

     The Insty-Prints' franchise business is not highly seasonal, and franchise
owners' sales generally follow overall economic trends. The business is not
impacted materially by inflation.

<PAGE>


PART II.       OTHER INFORMATION


Item 1.        Legal Proceedings

               The Company and its subsidiary are involved in various legal
               proceedings arising in the normal course of business, none of
               which is expected to result in any material loss to the Company
               or its subsidiary.

Item 2.        Changes in Securities
               Not applicable.

Item 3.        Defaults Upon Senior Securities
               Not applicable.

Item 4.        Submission of Matters to Vote of Security Holders
               Not applicable.

Item 5.        Other Information
               Not applicable.

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

               (a)  Exhibits.

                    *11  Statement Re: Computation of per share earnings    11

               (b)  Reports on Form 8-K.

                    No reports on Form 8-K were filed during the quarter for
                    which this report is filed.


                    --------------------------
                    *Filed herewith

<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 thereunto duly authorized.


Dated:  July 13, 1998           IPI, Inc.



                                By: /S/ Robert J. Sutter
                                    --------------------------------------------
                                    Robert J. Sutter
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)




                                By: /S/ David M. Engel
                                    --------------------------------------------
                                    David M. Engel
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)