SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

             [X] Quarterly report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  For the quarterly period ended June 30, 2001

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

                         Commission file number 0-21934

                              DIGITAL PRIVACY, INC.
        (Exact name of small business issuer as specified in its charter)

                                    Delaware
                         (State or other jurisdiction of
                         incorporation or organization)

                                   52-1680936
                        (IRS Employer Identification No.)

            1433 Utica Avenue South, Suite 290, Minneapolis, MN 55416
               (Address of principal executive offices)(Zip Code)

                                 (952) 544-2200
                           (Issuer's telephone number)

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,  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

As of July 31, 2000,  the  Registrant  had 3,968,113  shares of its Common Stock
outstanding.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.

                              Digital Privacy, Inc.
                            Condensed Balance Sheets

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


                                                             June 30,         December 31,
                         ASSETS                                2001               2000
                                                            ------------     -------------
                                                            (unaudited)

CURRENT ASSETS
       Cash                                                        $ 839            $ 5,279
       Accounts receivable, net of allowance for doubtful         19,144             24,411
          accounts of $18,500
       Inventory                                                  36,614             36,737
       Other                                                      30,325              4,836
                                                             ------------     -------------
          TOTAL CURRENT ASSETS                                    86,922             71,263
                                                             ------------     -------------
PROPERTY AND EQUIPMENT                                            25,159             34,877
                                                             ------------     -------------
OTHER ASSETS
       Patents and trademarks                                    411,286            407,041
       License fee escrow                                         49,978             49,978
                                                             ------------     -------------
                                                                 461,264            457,019
                                                             ------------     -------------
                                                               $ 573,345          $ 563,159
                                                             ============     =============
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
       Current maturities of notes payable                     $ 978,000          $ 748,000
       Accounts payable                                          196,902            149,327
       Accrued interest                                           37,084             18,574
       Accrued expenses - other                                  337,773            183,386
                                                             ------------     -------------
          TOTAL CURRENT LIABILITIES                            1,549,759          1,099,287
                                                             ------------     -------------
NOTES PAYABLE, net of current maturities                          81,000             81,000
                                                             ------------     -------------
STOCKHOLDERS' DEFICIT
       Preferred stock:
          Series A, 8% cumulative convertible - $.01
             par value, $10 stated and liquidation value
             (authorized - 40,000 shares; issued and
             outstanding - 30,000 shares)                        300,000            300,000
          Undesignated - $.01 par value (authorized -
             4,960,000 shares; no shares issued and
             outstanding)                                              -                  -
       Common stock - $.01 par value (authorized -
          95,000,000 shares; issued and outstanding -
          3,968,113 shares)                                       39,681             39,681
       Additional paid-in capital                                714,469            714,469
       Options and warrants                                       96,460             96,460
       Accumulated deficit                                    (2,208,024)        (1,767,738)
                                                             ------------     -------------
                                                              (1,057,414)          (617,128)
                                                             ------------     -------------
                                                               $ 573,345          $ 563,159
                                                             ============     =============

</TABLE>

       See notes to condensed financial statements.

<PAGE>

                              Digital Privacy, Inc.
                       Condensed Statements of Operations
                                   (unaudited)

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

                                                         Three months ended June 30,           Six months ended June 30,
                                                         -----------------------------         ---------------------------
                                                                2001          2000                2001            2000
                                                         ------------    ----------           ----------     ----------
REVENUE                                                   $        -      $ 60,473              $  228        $ 75,088

COST OF GOODS SOLD                                                 -           947                 130           1,358

GROSS PROFIT                                                       -        59,526                  98          73,730

OPERATING EXPENSES                                           188,441       350,803             386,419         638,065
                                                         ------------    ----------           ----------     ----------
OPERATING LOSS                                              (188,441)     (291,277)           (386,321)       (564,335)

INTEREST EXPENSE                                              30,515        15,537              53,965          30,579
                                                         ------------    ----------           ----------     ----------
NET LOSS                                                    (218,956)     (306,814)           (440,286)       (594,914)

DIVIDENDS ON PREFERRED STOCK                                   6,000         6,000              12,000          10,691
                                                         ------------    ----------           ----------     ----------
NET LOSS APPLICABLE TO COMMON
  STOCKHOLDERS                                            $ (224,956)   $ (312,814)         $ (452,286)      $(605,605)
                                                         ============    ==========           ==========     ==========
NET LOSS PER SHARE OF COMMON STOCK-
  BASIC AND DILUTED                                       $    (0.06)   $    (0.08)         $    (0.11)      $   (0.16)
                                                         ============    ==========           ==========     ==========
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                       3,968,113     3,918,992           3,968,113       3,816,783
                                                         ============    ==========           ==========     ==========

</TABLE>

See notes to condensed financial statements.

<PAGE>

                              Digital Privacy, Inc.
                       Condensed Statements of Cash Flows
                                   (unaudited)
<TABLE>
<S>                                                                               <C>             <C>


                                                                                  Six months ended June 30,
                                                                                  --------------------------------
                                                                                        2001            2000
                                                                                  -----------    -------------
OPERATING ACTIVITIES
      Net loss                                                                    $ (440,286)     $ (594,914)
      Adjustments to reconcile net loss
      to net cash used by operating activities:
             Depreciation                                                              9,717          14,174
             Changes in operating assets and liabilities:
               Accounts receivable                                                     5,267         (43,299)
               Inventory                                                                 123          (8,075)
               Other current assets                                                  (25,489)           (251)
               Accounts payable and accrued liabilities                              220,473           6,380
                                                                                  -----------     -------------
                  Net cash used by operating activities                             (230,195)       (625,985)
                                                                                  -----------     -------------
INVESTING ACTIVITIES
      Purchases of property and equipment                                                  -         (28,509)
      Patent and trademark costs                                                      (4,245)         (8,291)
                                                                                  -----------     -------------
                  Net cash used by investing activities                               (4,245)        (36,800)
                                                                                  -----------     -------------
FINANCING ACTIVITIES
      Proceeds from notes payable                                                    230,000               -
      Proceeds from issuance of stock and option exercises                                 -         727,000
                                                                                  -----------     -------------
                  Net cash provided by financing activities                          230,000         727,000
                                                                                  -----------     -------------
NET INCREASE (DECREASE) IN CASH                                                       (4,440)         64,215

CASH
      Beginning of period                                                              5,279          84,493

      End of period                                                                    $ 839       $ 148,708
                                                                                   ===========    =============

</TABLE>

See notes to condensed financial statements.

<PAGE>

                              DIGITAL PRIVACY, INC

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  June 30, 2001

                                   (unaudited)

1.       Basis of Presentation:
          The interim financial statements are unaudited,  but in the opinion of
          management  reflect all adjustments  necessary for a fair presentation
          of  results  of such  periods.  All such  adjustments  are of a normal
          recurring nature. The results of operations for any interim period are
          not necessarily indicative of results for a full fiscal year.

          The  condensed  balance sheet as of December 31, 2000, is derived from
          the audited financial  statements but does not include all disclosures
          required by  accounting  principles  generally  accepted in the United
          States of America.  The notes accompanying the financial statements in
          the Company's Annual Report on form 10-KSB for the year ended December
          31,  2000,  include  accounting  policies and  additional  information
          pertinent to an understanding of both the December 31, 2000, condensed
          balance sheet and the interim  financial  statements.  The information
          has  not   changed   substantially   except  as  a  result  of  normal
          transactions in the six months ended June 30, 2001.

<PAGE>

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

         The  following  discussion  should  be read  in  conjunction  with  the
financial  statements  and  related  notes  which  are  included  under  Item 1.
Statements  made  below  which  are not  historical  facts  are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not limited to, general economic conditions,  our
ability  to  complete  development  and then  market our  products,  competitive
factors and other risk factors as stated in other of our public filings with the
Securities and Exchange Commission.

Overview

         We were  initially  formed in  December  1990 and filed for  bankruptcy
under  Chapter  11  of  the  U.S.  Bankruptcy  Code  on  January  6,  1999.  Our
Reorganization  Plan was confirmed by the U.S. Bankruptcy Court for the District
of Minnesota on September 8, 1999.

         We began  commercial  activity in the first quarter of 2000 and are now
in a position to offer a diverse range of products  designed  around the concept
of providing useful products and services in an attractive, convenient format to
people in their everyday environments.

         From December 7, 1990 through  December  1998, we raised  approximately
$5,000,000  through  equity and debt  financings  from private  investors.  As a
development stage enterprise, we incurred losses in excess of $8 million.

         Our ability to continue  in  business  is  dependent  on our ability to
raise additional capital and, ultimately,  to generate sufficient cash flow from
operations to support our cost  structure.  The following are primary  obstacles
which we feel  contributed to our inability to generate cash flow  sufficient to
meet  scheduled  payments  and  sustain  further  operations  and forced us into
bankruptcy:

         1.  We  experienced   significant   delays,   some   unforseeable   and
uncontrollable, in the design and development of our products;

         2. We experienced  delays in bringing our products to market because of
the slow  adaptation and development of the smart card and security market place
in the United States, and the lack of established distribution channels;

         3. Our inability to deliver to the government market our hardware based
product and the significant time delay in developing new software products; and

         4. We expended a considerable amount of time and resources in preparing
for further  financing  and growth.  It was  necessary to engage an  independent
auditor to review and audit historical financials and operational procedures and
to retain  consultants to provide marketing research and prepare a comprehensive
business  plan.  We also  retained the services of corporate  counsel to prepare
private placement memorandum, review our past sales of securities for compliance

<PAGE>

with  applicable   securities  laws  and  applicable   contractual   shareholder
obligations,   assist  in  reducing  potential  liability  resulting  from  past
transactions,  and advise on the  revaluation  and  related  issues  involved in
recapitalization efforts.

         We  recognized  only  very  nominal  revenues  in 1998.  Revenues  were
generated primarily on integration services and the sale of our developer's tool
kit product. 1998 was the first year we realized sales.

         Inadequate cash flow and lack of capital resources  continued to be the
most serious  concerns  facing our management  coming into 1999. At December 31,
1998,  we had a  significant  negative  net  worth.  Having  taken  steps to cut
expenses  and  extend  the  payment  schedule  on  long-term  payables,  we then
developed a proposal  for a  restructuring  of our debts that would  involve the
conversion of secured and certain unsecured debt into common stock.  Ultimately,
we concluded that a non-bankruptcy restructuring was unlikely to be completed in
a timely  manner.  We therefore  decided to file a Chapter 11  bankruptcy as the
best method for restructuring our obligations.

         Following  the  bankruptcy  proceedings  we  added  to  our  management
structure  and board of  directors.  Current  management  is  familiar  with our
history and  recognizes  the problems  that plagued us prior to the  bankruptcy.
Accordingly, we are now focused on two aspects: (i) raising sufficient financing
to  support  us until  positive  cash flow from  sales  are  generated  and (ii)
generating sales.

Liquidity

         During the quarter we raised  $79,000 from the issuance of  convertible
notes to our president.  We have no meaningful cash on hand. Our cash outlay for
expenses are currently approximately $25,000 per month and they are being funded
by personal  loans from  management.  We are accruing an additional  $20,000 per
month in salary to management. There is no obligation for these loans to be made
and they may  terminate  at any time.  Without  these  loans or other  immediate
financing,  we will have to cease operations.  We currently have no plans on how
to raise any funds and avoid closing operations.

         We currently project requiring  approximately an additional  $1,500,000
to allow us to grow the business.  In the event we are  unsuccessful  in raising
such  funds  in this  offering,  we will  have to seek  alternative  sources  of
funding. We currently have no plans how to raise such additional funds.

         There can be no assurance  that we will be able to raise any additional
proceeds  from private  offerings  of our  securities  or  otherwise  obtain the
substantial  additional  capital  necessary to permit us to attract and retain a
sufficient  number  of  subscribers  or that  any  assumptions  relating  to our
business  plan  will  prove to be  accurate.  While we hope to raise  additional
financing,  we have no current  arrangements  with  respect  to, or sources  of,
additional  financing  and there can be no  assurance  that any such  financing,
particularly the significant  amounts of financing that would be required,  will
be available to us on commercially reasonable terms, or at all. Any inability to
obtain  additional  financing could have a material  adverse  effect,  including
possibly requiring us to significantly curtail or cease operations.

<PAGE>

Second Quarter Activities

         We continued to actively  market our computer  security  products.  Our
family of Privacy products  consisting of PrivacyWeb(TM),  Privacy.AccessTM  and
Privacy.FileTM  are fully  developed and we are actively  marketing them. We are
actively  working with other solution  providers to develop a  multi-application
smartcard solution.

         We incurred a loss during the quarter of $188,441 from  operations  (as
compared to $291,277  during the second  quarter of 2000) and had zero  revenues
(as compared to $60,473 during the second quarter of 2000).

         Our primary  objective  now is to obtain  financing.  We can reach this
goal by making sales, forming joint ventures or through sales of securities.  In
the event we are  unsuccessful  in these  efforts,  we will either have to cease
operations or sell the company.


                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings.

         None.

Item 2.  Changes in Securities.

         During the  quarter  we issued an  aggregate  of $79,000  face value of
promissory  notes to our  president.  The  notes  were  issued  pursuant  to the
exemption from registration contained in Regulation D, Rule 506.

Item 3.  Defaults Upon Senior Securities.

         None.

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

         None.

Item 5.  Other Information.

         None.

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

         (a)      None.

         (b)      None.


<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the  undersigned  thereto  duly
authorized.


Date: August 14, 2001

                                               DIGITAL PRIVACY, INC.



                                               By: /s/Howard Miller
                                                   Howard Miller
                                                   Chief Executive Officer