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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

       For the quarter ended March 31, 2002 Commission File No. 000-26363

                          Internet Pictures Corporation
             (Exact name of registrant as specified in its charter)


         Delaware                                      52-2213841
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)

                              3160 Crow Canyon Road
                           San Ramon, California 94583
               (Address of principal executive offices, zip code)

       Registrant's telephone number, including area code: (925) 242-4002

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. Yes [X ] No [ ]

6,780,317  shares of $0.001 par value common stock  outstanding  as of April 15,
2002

                                  Page 1 of 18
<PAGE>



                          INTERNET PICTURES CORPORATION
                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2002
                                      INDEX
<TABLE>
<CAPTION>
<S>                                                                                                         <C>
PART I--FINANCIAL INFORMATION................................................................................3

   Item 1.     Condensed Consolidated Financial Statements...................................................3

   Item 2.     Management's Discussion and Analysis of Financial Condition and  Results of Operations.......10

PART II -- OTHER INFORMATION................................................................................17

   Item 1.     Legal Proceedings............................................................................17

   Item 2.     Changes In Securities And Use Of Proceeds....................................................17

   Item 3.     Defaults Upon Senior Securities..............................................................17

   Item 4.     Submission Of Matters To A Vote Of Security Holders..........................................17

   Item 6.     Exhibits And Reports On Form 8-K.............................................................17

Signatures..................................................................................................18
</TABLE>

                                  Page 2 of 18
<PAGE>

PART I--FINANCIAL INFORMATION

Item 1.      Condensed Consolidated Financial Statements

                          INTERNET PICTURES CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                    December 31,   March 31,
                                                                                         2001         2002
                                                                                    -----------   ------------
                                                                                        (1)       (unaudited)
(In thousands, except share and per share amounts)
ASSETS
<S>                                                                                  <C>            <C>
Cash and cash equivalents ......................................................     $    11,103    $   7,400
Accounts receivable, net .......................................................             921        1,272
Inventory, net .................................................................             219          139
Prepaid expenses and other current assets ......................................           3,179        3,639
                                                                                     -----------   -----------
       Total current assets ....................................................          15,422       12,450

Property and equipment, net ....................................................           4,614        4,920
Goodwill and other intangible assets ...........................................           3,042        3,042
                                                                                     -----------   -----------
       Total assets ............................................................     $    23,078    $  20,412
                                                                                     ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable ...............................................................     $     1,500    $   1,160
Accrued liabilities ............................................................           7,557        7,728
Deferred revenue ...............................................................           1,592        1,031
Current portion of obligations under capital leases ............................           1,267        1,260
                                                                                     -----------   -----------
       Total current liabilities ...............................................          11,916       11,179
                                                                                     -----------   -----------


Obligations under capital leases, net of current portion .......................           1,277          917
                                                                                     -----------   -----------
Other non-current liabilities...................................................           1,115          790
                                                                                     -----------   -----------

STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value: .............................................               1           1
   Authorized:  5,001,100 at December 31, 2001 and March 31, 2002 (unaudited)
   Issued and outstanding: 1,115,080 at December 31, 2001 and
   March 31, 2002(unaudited)
Class B common stock, $0.0001 par value: .......................................              --           --
   Authorized:  742,154 at December 31, 2001 and March 31, 2002 (unaudited)
   Issued and outstanding:  179,480 at December 31, 2001 and 179,480 at March
   31, 2002(unaudited)
Common stock, $0.001 par value: ................................................              66           66
   Authorized:  150,000,000 at December 31, 2001 and March 31, 2002 (unaudited)
   Issued and outstanding:  6,568,337 at December 31, 2001 and 6,600,837 at
   March 31, 2002 (unaudited)
Additional paid-in capital .....................................................         513,467      513,581
Note receivable from stockholder ...............................................            (179)          --
Unearned stock-based compensation ..............................................            (142)        (118)
Accumulated deficit ............................................................        (503,974)    (505,486)
Accumulated other comprehensive loss............................................            (469)        (518)
                                                                                     -----------   -----------
       Total stockholders' equity...............................................           8,770        7,526
                                                                                     -----------   -----------
       Total liabilities and stockholders' equity...............................     $    23,078   $   20,412
                                                                                     ===========   ===========
</TABLE>

(1)  The December  31, 2001  balances  were  derived from the audited  financial
     statements.

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.

                                  Page 3 of 18

<PAGE>

                          INTERNET PICTURES CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                                         Three months ended
                                                                              March 31,
                                                                         ------------------
In thousands, except per share data                                        2001       2002
                                                                         -------    -------
                                                                             (unaudited)
Revenues:
<S>                                                                       <C>        <C>
Transaction services.................................................     $1,892     $3,575
Immersive solutions..................................................      2,717      1,219
Full service real estate tours.......................................      4,914         --
                                                                         -------    -------
                                                                           9,523      4,794
                                                                         -------    -------
Cost of revenues:
Transaction services.................................................      1,681      1,669
Immersive solutions..................................................        839        455
Full service real estate tours.......................................      2,314         --
                                                                         -------    -------
                                                                           4,834      2,124
                                                                         -------    -------

Gross profit                                                               4,689      2,670
                                                                         -------    -------
Operating expenses:
Sales and marketing..................................................     10,437      2,040
Research and development.............................................      2,760      1,281
General and administrative...........................................      3,937        904
Goodwill amortization................................................        608         --
Restructuring and impairment.........................................      3,000         --
Loss on disposal of assets...........................................      1,769         --
                                                                         -------    -------
Total operating expenses.............................................     22,511      4,225
                                                                         -------    -------

Loss from operations.................................................    (17,822)    (1,555)

Other income(expense):
Interest expense.....................................................        (67)       (17)
Interest income and other............................................       (120)        60
                                                                         -------    -------
Loss before extraordinary items......................................    (18,009)    (1,512)

Extraordinary gain...................................................        901         --
                                                                         -------    -------
Net loss.............................................................   $(17,108)   $(1,512)
                                                                         =======    =======

Basic and diluted loss per common share:
Loss before extraordinary items......................................   $  (2.83)   $ (0.22)
Extraordinary gain...................................................       0.14         --
                                                                         -------    -------
Net loss.............................................................   $  (2.69)   $ (0.22)
                                                                         =======    =======
</TABLE>





See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.

                                  Page 4 of 18
<PAGE>

                          INTERNET PICTURES CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                Three months ended
                                                                                    March 31,
                                                                              --------------------
                                                                                2001        2002
                                                                              --------    --------
In thousands                                                                      (unaudited)

Cash flows from operating activities:
<S>                                                                           <C>        <C>
Net loss..................................................................    $(17,108)  $(1,512)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................................       1,655       700
Provision for doubtful accounts receivable................................         120       (22)
Loss on disposal of assets................................................       1,769        --
Accretion of available-for-sale securities................................          (5)       --
Non-cash compensation expense.............................................       1,218        53
Impairment loss...........................................................       1,122        --
Extraordinary gain........................................................        (901)       --
Changes in operating assets and liabilities:
   Accounts receivable....................................................      (1,366)     (328)
   Inventory..............................................................         327        80
   Prepaid expenses and other current assets..............................         276      (460)
   Other assets...........................................................         797        --
   Accounts payable.......................................................       2,591      (916)
   Accrued expenses.......................................................      (1,861)     (154)
   Deferred revenue.......................................................         (50)     (561)
                                                                              --------   -------
      Net cash used in operating activities...............................     (11,416)   (3,120)
                                                                              --------   -------
Cash flows from investing activities:
Purchases of furniture and equipment......................................        (186)     (522)
Proceeds from sale of assets..............................................       8,577        --
Maturities of securities available-for-sale...............................       6,000        --
                                                                              --------   -------
      Net cash provided by (used in) investing
          activities......................................................      14,391      (522)
                                                                              --------   -------
Cash flow from financing activities:
Repayments of capital lease obligation....................................        (371)     (275)
Proceeds from exercise of stock options...................................          21        84
Proceeds from notes receivable from stockholders, net.....................         (49)      179
                                                                              --------   -------
      Net cash used in financing activities...............................        (399)      (12)
                                                                              --------   -------
Effect of exchange rate changes on cash...................................      (1,180)      (49)
                                                                              --------   -------
Net increase (decrease) in cash and cash equivalents......................       1,396    (3,703)
Cash and cash equivalents, beginning of period............................       5,322    11,103
                                                                              --------   -------
Cash and cash equivalents, end of period..................................    $  6,718   $ 7,400
                                                                              ========   =======
</TABLE>



No income tax payments were made in either period  presented.  Interest paid for
the three months ending March 31, 2001 and 2002 was $67 and $17, respectively.

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.

                                  Page 5 of 18
<PAGE>

NOTES TO  UNAUDITED  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS  (Dollars in
thousands)

1.  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying  unaudited condensed  consolidated financial statements include
the accounts of Internet Pictures Corporation and its wholly-owned subsidiaries,
Interactive  Pictures  Corporation,  Interactive  Pictures UK Limited,  Internet
Pictures  (Canada),  Inc. and PW  Technology,  Inc. The  consolidation  of these
entities  will  collectively  be  referred  to  as  the  Company  or  iPIX.  All
significant intercompany balances and transactions have been eliminated. We have
prepared these financial  statements,  without audit,  pursuant to the rules and
regulations of the Securities and Exchange  Commission.  Certain information and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been omitted. The
unaudited  condensed   consolidated  financial  statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
included  in our  audited  financial  statements  as of and for the  year  ended
December 31, 2001. The  information  furnished  reflects all  adjustments  which
management  believes are  necessary  for a fair  presentation  of our  financial
position  as of March 31, 2002 and the  results of our  operations  and our cash
flows for the three  month  periods  ended  March  31,  2001 and 2002.  All such
adjustments are of a normal recurring nature.

2.  RESULTS OF OPERATIONS

The results of  operations  for the three month periods ended March 31, 2001 and
2002 are not  necessarily  indicative  of the  results  to be  expected  for the
respective full years.

Certain  amounts  reported  in the  previous  period have been  reclassified  to
conform to the current period presentation.  The reclassification did not affect
the previously reported total revenue, operating loss, net loss or stockholders'
equity.

3.  LOSS PER SHARE

LOSS PER SHARE  BEFORE  EXTRAORDINARY  ITEM.  We  compute  net loss per share in
accordance  with SFAS No.128,  Earnings Per Share.  Under the provisions of SFAS
No. 128,  basic and  diluted net loss per share is computed by dividing  the net
loss for the period by the  weighted  average  number of shares of common  stock
outstanding  during the period.  The  calculation  of diluted net loss per share
excludes potential common shares if the effect is antidilutive. Potential common
shares are  composed of  incremental  shares of common stock  issuable  upon the
conversion or exercise of  potentially  dilutive  convertible  preferred  stock,
stock options and warrants.

The following  table sets forth the  computation  of basic and dilutive net loss
per share for the periods indicated:

In thousands, except per share data

                                                      Three months ended
                                                         March 31,
                                                    --------------------
                                                        2001        2002
                                                    --------    --------
                                                         (unaudited)
NUMERATOR:
Loss before extraordinary item                      $(18,009)   $ (1,512)

DENOMINATOR:
Weighted average shares outstanding                    6,368       6,780

LOSS PER SHARE BEFORE EXTRAORDINARY ITEM:
Basic and diluted                                   $  (2.83)   $  (0.22)


The following table sets forth common stock equivalents that are not included in
the  diluted  net loss per share  calculation  above  because  to do so would be
antidilutive as of March 31, 2002:

In thousands, except per share data
                                          Shares              Range of Exercise/
                                                              Conversion Prices

Stock options                                  737                $1.42-$2.50
Convertible preferred stock                 10,267
Warrants                                     1,381                      $2.17

                                  Page 6 of 18
<PAGE>


4.   CAPITAL STOCK

Reverse Stock Split

On August 22, 2001 our shareholders  approved a one-for-ten  reverse stock split
of all of our  outstanding  $0.001 par value  common  stock and our  $0.0001 par
value Class B common  stock.  The reduction of shares was subject to an increase
to eliminate  fractional  interests  resulting from the reverse stock split.  No
fractional  shares of common  stock were issued in  connection  with the reverse
stock split, and cash was issued in lieu of any fractional  shares.  The reverse
stock split was effective as of the close of market on August 22, 2001,  and our
common  stock began  trading on a reverse  split basis on August 23,  2001.  All
share  and  per  share  data is  presented  to give  effect  to the  retroactive
application of the reverse stock split.

Preferred Stock

Effective  March  26,  2002,  each  share  of the  Series B  Preferred  Stock is
convertible  into  approximately  9.2  shares  of the our  common  stock  and is
entitled  to  vote on  matters  submitted  to  holders  of  common  stock  on an
as-converted  basis.  However,  at any time  that the  holders  of the  Series B
Preferred Stock hold more than 50% of our voting stock, a voluntary liquidation,
dissolution  or winding up of the  Company  must be approved by at least five of
the seven members of our board of directors.

5.  RESTRUCTURING AND IMPAIRMENT

During the first quarter of 2001, we recorded a  restructuring  charge of $1,878
consisting  of expenses  associated  with a reduction  in our  workforce,  lease
obligations for vacated offices and a write down of abandoned  office  equipment
of $1,122 to its net realizable value.  Additional  restructuring  accruals were
recorded  during 2001. As of March 31, 2002,  $2,074  remained in  restructuring
accruals,  primarily  associated with abandoned lease  obligations and long-term
severance agreements.

6.  DISPOSAL OF ASSETS

A subsidiary of Homestore.com  purchased  certain assets from us pursuant to the
terms of an acquisition agreement dated January 12, 2001. Under the terms of the
acquisition  agreement,   the  subsidiary  of  Homestore.com  purchased  certain
computers,  furniture,  fixtures and equipment and certain sales  contracts with
residential  real  estate  brokers  and  agents.  We used  these  assets  in our
operations  providing  virtual tours of residential real estate  properties.  As
part of the  acquisition,  Homestore.com's  subsidiary hired certain sales force
and customer service personnel.  The purchase price for these assets was $12,000
in cash, of which $155 was paid  directly to a lessor for certain  capital lease
obligations,  $7,454 was deposited  into control  accounts for deferred  revenue
obligations  and  the  remainder,  $4,391,  was  paid  to us.  We  also  granted
Homestore.com's  subsidiary  an  exclusive  domestic  license  of certain of our
virtual tour technology for the residential real estate market.

In  accordance  with the  January 12, 2001  purchase  transaction,  we agreed to
negotiate  one  remaining  residential  real  estate  contract  with RETT  f/k/a
National Reality Trust. Homestore.com's subsidiary, RETT and we settled on March
3, 2001 the remaining obligation of the contract for which we received $1,936.

We  recorded  an  extraordinary  gain of $901  from the cash  received  from the
January 12, 2001 agreement,  resulting in the disposal of assets used to provide
tours of residential real estate  properties that were related to the pooling of
Interactive Pictures Corporation and bamboo.com.

The remaining  residential real estate related assets that were unrelated to the
pooling of Interactive  Pictures  Corporation  and bamboo.com were recorded as a
loss on the disposal of assets of $1,655.

7.   STOCK-BASED COMPENSATION

Stock-based  compensation  expense  consists  of the  amortization  of  deferred
compensation  related to stock options  granted to employees and others prior to
our initial public  offering with an exercise price below the deemed fair market
value of our common stock on the date of grant, to the  amortization of the fair
value of warrants and options issued to non-employees and to the amortization of
the  fair  value  of  restricted   stock  granted  to  employees.   The  related
compensation  is  amortized  over the  vesting  period of the  options  or stock
grants.  Expenses  related to the  warrants are  amortized  over the term of the
agreements to which they relate.

                                  Page 7 of 18
<PAGE>

The following  presents,  for the periods indicated,  the charges that have been
included in the following captions:


                                                       Three months ended
                                                            March 31,
                                                            -------
In thousands                                              2001      2002
                                                        ------   -------
                                                          (unaudited)

Cost of revenues                                        $   89   $  --
Sales and marketing                                        718        53
Research and development                                   288      --
General and administrative                                 123      --
                                                        ------   -------
                                                        $1,218   $    53
                                                        ======   =======

8.   COMMITMENTS AND CONTINGENCIES

Please  reference  Legal  Proceedings  in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 for additional disclosures.

If the  plaintiffs  in any of these cases were to prevail in their  action,  our
financial  condition,  results of operations  and cash flows could be materially
adversely affected

We are subject to claims in the ordinary course of business. Management believes
the  ultimate  resolution  of these  matters  will have no  material  impact our
financial condition, results of operations or cash flows.

9.  SEGMENTS

We have two reportable segments. The accounting policies of the segments are the
same as  those of the  Company.  Management  evaluates  the  performance  of the
segments and allocates  resources to them based on  evaluations of the segment's
gross profit. There are no inter-segment revenues. We do not make allocations of
corporate costs to the individual  segments and do not identify  separate assets
of the segments in making  decisions  regarding  performance  or  allocation  of
resources to them.

In fiscal year 2001, we organized into two primary  business units:  Transaction
Services and Immersive Solutions.  In addition, as part of the sale of assets to
Homestore.com  during the first quarter of 2001, we no longer directly sell full
service  virtual  real  estate  tours  or iPIX  keys to  customers  in the  U.S.
residential real estate market.  We have not generated full service virtual tour
revenues  since the quarter  ended  September 30, 2001 and we expect to generate
minimal future  revenues from the sale of full service virtual real estate tours
in the U.S. residential real estate markets.

Information about the reported segments is as follows:

In thousands
                                                          Three months ended
                                                                March 31,
                                                          ------------------
                                                            2001       2002
                                                          -------    -------

(unaudited)
Revenues:
Transaction services                                      $ 1,892     $3,575
Immersive solutions                                         2,717      1,219
Full Service Real Estate                                    4,914         --
  Total                                                   -------    -------
                                                          $ 9,523     $4,794
                                                          =======    =======
Cost of revenues:
Transaction services                                       $1,681     $1,669
Immersive solutions                                           839        455
Full Service Real Estate                                    2,314         --
  Total                                                   -------    -------
                                                           $4,834     $2,124
                                                          =======    =======

                                  Page 8 of 18
<PAGE>
Immersive  solution  revenues  include  $0.47 million and $0.34 million from the
sale of camera kits for the  quarters  ended March 31, 2002 and March 31,  2001,
respectively, with a cost of $0.34 million and $0.25 million.

Long-lived asset information by geographic area is as follows:

In thousands
                                                         Dec. 31,    March 31,
                                                           2001        2002
                                                          ------      ------
                                                             (unaudited)
LONG-LIVED ASSETS:
Foreign                                                  $    83     $    55
United States                                              4,531       4,865
                                                         -------     -------
                                                         $ 4,614     $ 4,920
                                                         =======     =======

10.  EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

We adopted  Statement  of  Accounting  Standards  No. 142,  "Goodwill  and Other
Intangible  Assets"(FAS 142), effective January 1, 2002. Under FAS 142, goodwill
is no longer amortized, but reviewed for impairment annually, or more frequently
if certain indicators arise. Under the transitional  requirements,  we completed
an impairment test and no impairment loss resulted.

We also adopted FAS 144,  effective  January 1, 2002.  In August 2001,  the FASB
issued  FAS 144,  "Accounting  for the  Impairment  or  Disposal  of  Long-Lived
Assets." FAS 144 replaces FAS 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to Be Disposed Of." The FASB issued FAS 144 to
establish a single accounting model,  based on the framework  established in FAS
121,  as FAS 121 did not  address  the  accounting  for a segment  of a business
accounted for as a discontinued  operation under APB 30,  "Reporting The Results
of  Operations  -- Reporting  The Effects of Disposal of a Segment of a Business
and Extraordinary  Unusual and Infrequently  Occurring Events and Transactions."
FAS 144 also resolves significant  implementation  issues related to FAS 121. We
determined  that the  adoption of FAS 144 did not have a material  impact on our
reported results of operations, financial position or cash flows.

We also adopted EITF Issue 01-09,  effective  January 1, 2002. In November 2001,
the FASB's  Emerging  Issues Task Force reached a consensus on EITF Issue 01-09,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the Vendor's  Products," which is a codification of EITF 00-14, 00-22 and 00-25.
This issue presumes that  consideration  from a vendor to a customer or reseller
of the vendor's products to be a reduction in the selling prices of the vendor's
product and,  therefore,  should be characterized as a reduction of revenue when
recognized in the vendor's income  statement and could lead to negative  revenue
under certain circumstances.  Revenue reduction is required unless consideration
related to a separate  identifiable  benefit and the benefit's fair value can be
established.  We  determined  that this  consensus had no effect on our reported
results of operations, financial position or cash flows.

In  February  2002,  the EITF  issued  Topic  Number  D-103,  "Income  Statement
Characterization   of  Reimbursements   Received  for   Out-of-Pocket   Expenses
Incurred," which is effective for financial  statements beginning after December
31,  2001.  Topic  Number  D-103  requires  that  reimbursements   received  for
out-of-pocket expenses incurred,  generally,  be characterized as revenue in the
statement of  operations.  We adopted  Topic  Number D-103 in the quarter  ended
March 31, 2002. The adoption of Topic Number D-103 had no material effect on our
reported results of operations, financial position or cash flows.

                                  Page 9 of 18
<PAGE>

11.    CONCENTRATIONS OF CREDIT RISK

Financial  instruments that potentially  subject us to a concentration of credit
risk consist of cash and cash equivalents and accounts receivable. Cash and cash
equivalents are deposited with high quality financial institutions. Our accounts
receivable are derived from revenue earned from clients  located in the U.S. and
abroad.  We  perform  ongoing  credit  evaluations  of  our  clients'  financial
condition and we do not require collateral from our clients.

The following  table  summarizes  the revenue from customers in excess of 10% of
total revenues:

                                      Three months ended
                                        March 31, 2002
                                        --------------
Customer A                                 21%
Customer B                                 55%

During  the  quarter  ended  March  31,  2001,  there  were no  customers  which
represented  in excess of 10% of total  revenues.  At March 31, 2002  Customer B
represents  64% of accounts  receivable and holds 100,000 shares of our Series B
Preferred Stock and a warrant for 60,000 shares of our common stock. All amounts
due from  Customer B as of March 31, 2002,  were  collected in full during April
2002.


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

The  following  discussion  is  intended  to  assist  in the  understanding  and
assessment  of  significant  changes  and  trends  related  to  our  results  of
operations  and  our  financial   condition   together  with  our   consolidated
subsidiaries.  This discussion and analysis  should be read in conjunction  with
the consolidated  financial  statements and notes thereto included in our Annual
Report filed on Form 10-K.  Historical results and percentage  relationships set
forth in the statement of operations,  including trends which might appear,  are
not necessarily indicative of future operations.

OVERVIEW

In 2001, we restructured the Company around our higher gross margin  businesses.
The result is that we are focused on two  businesses:  (1) providing  outsourced
imaging services to facilitate online  transactions in the auction,  classifieds
and real estate markets and (2) providing  immersive  imaging  solutions for the
real estate,  security and observation  and visual  documentation  markets.  Our
products  and  services   include  the  capture,   processing,   management  and
distribution  of images and related  data.  Revenues  from online  auctions  and
classifieds are primarily  transactions based. Our transaction  services involve
designing,  building and managing an image management  infrastructure as well as
leasing  spaces  from  state-of-the-art  co-location  facilities  with access to
bandwidth.  Since these services are capital intensive, a high percentage of the
costs associated with transaction services are fixed and accordingly the margins
from transaction services are highly dependent upon asset utilization.

Our immersive  technology  primarily generates revenues in two ways: licenses of
software  and re-sale of camera  equipment.  We utilize iPIX keys to license our
still immersive technology to capture and save a single immersive image. We also
offer  time-based  seat or user  licenses  which permit an  unlimited  number of
immersive images to be captured and saved within a specific time period, usually
a year. Our video immersive technology,  which may be off-line or online, may be
purchased  on a per-unit  basis or a  per-year  license.  We sell our  immersive
products and services  primarily into the real estate,  security and observation
and visual  documentation  markets.  The cost of sales for our  licenses is very
low.  The cost of sales  for the sale of  camera  equipment  can be 50 to 75% of
related revenues.

We also  provide  professional  services  to  customers  that  request  specific
customizations   or  integrations  of  our  products  and  services.   Providing
professional services is labor intensive, and our cost of sales for professional
service tends to be 50 to 60% of revenues.

                                  Page 10 of 18
<PAGE>
Our real estate  business has changed over the past few years. In 2000, our real
estate focused revenues were generated from four primary  sources:  full service
virtual tours;  image management  services;  camera kits and immersive keys; and
professional  services.  We offered full service  virtual tours through  January
2001. A full service tour  includes  the  capture,  processing,  management  and
distribution  of real estate  images and related data for one price.  As part of
the sale of assets to a  subsidiary  of  Homestore.com  in January  2001,  we no
longer  directly  sell  full  service  virtual  tours to  customers  in the U.S.
residential real estate market.

Throughout  2001,  our real estate  focused  revenues were  generated from three
primary sources: image management services;  camera kits and immersive keys; and
other services. Our image management products and services were used in the real
estate  industry  primarily  to  associate  online  still  images with  for-sale
listings.  This  service is  offered  to  customers  under  license  agreements,
transaction  based  agreements  and  revenue  share  agreements  for real estate
properties around the world. Through January 12, 2002, we provided Homestore.com
with  processing,  hosting and  distribution  services and received  transaction
fees.

CRITICAL ACCOUNTING POLICIES

Financial  Reporting  Release  No.  60  issued by the  Securities  and  Exchange
Commission  ("SEC"),  requires all  registrants to discuss  critical  accounting
policies or methods used in the  preparation  of the financial  statements.  The
notes to the  consolidated  financial  statements  included in our Annual Report
filed on Form 10-K include a summary of the significant  accounting policies and
methods  used  in  the  preparation  of  our  Company's  consolidated  financial
statements.  Further,  we have made a number of estimates and  assumptions  that
affect reported amounts of assets, liabilities, revenues and expenses and actual
results may differ from those  estimates.  Those areas that require the greatest
degree of  management  judgment  include  adequacy of the allowance for doubtful
accounts,  reserves for obsolete inventory,  valuations of intangible assets and
the estimated  costs for excess  facilities  related to lease  terminations  and
non-cancelable  lease  costs  utilized  in  satisfaction  of  outstanding  lease
obligations.

We believe that full consideration has been given to all relevant  circumstances
that we may be  subject  to, and our  financial  statements  accurately  reflect
management's best estimate of the results of operations,  financial position and
cash flows for the periods presented.

We believe the following represent our critical accounting policies:

Revenue Recognition

We  recognize   revenue  in  accordance   with  SOP  97-2,   "Software   Revenue
Recognition," and SAB No. 101, "Revenue Recognition in Financial Statements."

Transaction   hosting  revenues  are  recognized  ratably  as  transactions  are
performed provided there was persuasive evidence of an arrangement,  the fee was
fixed and determinable and collection of the resulting receivable was probable.

Initial license fees are recognized when a contract exists, the fee is fixed and
determinable, software delivery has occurred and collection of the receivable is
deemed probable. If there are continuing obligations,  then we recognize revenue
ratably over the life of the contract.

Product  revenue is recognized  upon shipment or delivery  provided there are no
uncertainties  surrounding product acceptance or significant vendor obligations,
the fees are fixed and determinable and collection is considered probable.

Royalties  derived from desktop imaging products are recognized as revenues upon
receipt of the royalty sell-through reports from customers,  which are generally
in the  quarter  following  the quarter in which the sale by the  customer  took
place.

Revenue from the sale of the Company's  virtual tour product are recognized upon
distribution to the Website designated by the customer.

Revenues  generated  from  professional  services are  recognized as the related
services are  performed.  When such  professional  services  are  combined  with
on-going transaction services or are deemed to be essential to the functionality
of the  delivered  software  product,  revenue  from the entire  arrangement  is
recognized  while the  transaction  services are  performed,  on a percentage of
completion  method or not until the contract is completed in accordance with SOP
81-1,   "Accounting   for   Performance   of   Construction-Type   and   Certain
Production-Type  Contracts,"  and  ARB  No.  45,  "Long-Term   Construction-Type
Contracts."

                                  Page 11 of 18
<PAGE>
Allowances for Doubtful Accounts

Significant  management  judgments  and  estimates  must  be  made  and  used in
connection with  establishing the doubtful account  allowances in any accounting
period.  Management specifically analyzes accounts receivable and historical bad
debts, customer  concentrations,  customer  credit-worthiness,  current economic
trends and changes in our customer payment terms when evaluating the adequacy of
the allowance for doubtful  accounts.  Material  differences could result in the
amount and timing of expense  recorded if management made different  judgment or
utilized different estimates.

RESULTS OF OPERATIONS

The  following  table  presents,   for  the  periods   indicated,   the  percent
relationship to total revenues of select items in our statements of operations.



                                                   Three months ended
                                                         March 31,
                                                   ------------------
                                                    2001        2002
                                                   ------      ------
                                                      (unaudited)

Revenues:
 Transaction services                                 19.9%      74.6%
 Immersive solutions                                  28.5       25.4
 Full service real estate tours                       51.6         --
                                                    ------     ------
                                                     100.0      100.0
                                                    ------     ------
Cost of revenues:
 Transaction services                                 17.7       34.8
 Immersive solutions                                   8.8        9.5
 Full service real estate tours                       24.3         --
                                                    ------     ------
                                                      50.8       44.3
                                                    ------     ------
Gross profit                                          49.2       55.7
                                                    ------     ------
Operating expenses:
Sales and marketing                                  109.6       42.5
Research and development                              29.0       26.7
General and administrative                            41.3       18.9
Goodwill amortization                                  6.4         --
Restructuring and impairment                          31.5         --
Loss on disposal of assets                            18.6         --
                                                    ------     ------
Total operating expenses                             236.4       88.1
                                                    ------     ------
Loss from operations                                (187.2)     (32.4)

Other income(expense), net                            (2.0)       0.9
                                                    ------     ------
Loss before extraordinary items                     (189.2)     (31.5)

Extraordinary gain                                     9.5         --
                                                    ------     ------
Net loss                                            (179.7)%    (31.5)%
                                                    =======    ======


                                  Page 12 of 18
<PAGE>

Quarter Ended March 31, 2002 Compared to the Quarter Ended March 31, 2001

Revenues.  Total  revenues  decreased to $4.8 million in the quarter ended March
31, 2002,  compared to $9.5 million in quarter  ended March 31, 2001, a decrease
of $4.7 million or 49%.  This  decrease was due  primarily to a decrease of $4.9
million in sales of full service  virtual tours to the  residential  real estate
market.

As part of the sale of assets to Homestore.com during the first quarter of 2001,
we no longer  directly sell full service virtual tours or iPIX keys to customers
in the U.S. residential real estate market.  Instead,  through January 12, 2002,
we provided  Homstore.com certain processing,  hosting and distribution services
and received  transaction  fees and royalties.  Throughout 2001, other than full
service  virtual  tours,  our real estate  focused  revenues were generated from
three primary  sources:  image  management  services;  camera kits and immersive
keys; and other services.

The quarter ended March 31, 2001 revenues included $4.5 million from the sale of
our  technology  products and services and $4.9 million  related to full service
virtual  real estate  tours.  We did not  generate  full  service  virtual  tour
revenues after September 30, 2001 and expect to generate minimal future revenues
from the sale of full service virtual real estate tours in the U.S.  residential
markets.  The increase in transaction  services  revenues from the quarter ended
March 31, 2001 to the quarter  ended  March 31,  2002 was  primarily  related to
image  management  solutions  for the  auction  industry,  offset  by  decreased
immersive  sales  primarily as a result of planned  reductions in  international
sales and marketing expenditures.

Cost of Revenues.  Cost of revenues  consists of our direct expenses  associated
with the processing,  hosting and  distribution of digital content and the costs
of the digital  camera and related  components  included in an iPIX kit. Cost of
revenues decreased to $2.1 million in the quarter ended March 31, 2002, compared
to $4.8 million in the quarter  ended March 31, 2001, a decrease of $2.7 million
or 56%. Cost of revenues as a percentage of total  revenues  decreased to 44% in
the quarter  ended March 31, 2002 from 51% in the quarter  ended March 31, 2001.
$2.3  million of this  decrease was the result of our exit from the full service
virtual  tour real estate  business and $0.4 million of the decrease was related
to a change in the product mix of immersive software and hardware sales.

Sales and Marketing.  Sales and marketing expenses consist primarily of salaries
for marketing,  sales and business  development  personnel.  Sales and marketing
expenses also include  commissions and related  benefits for sales personnel and
consultants,   traditional  advertising  and  promotional  expenses.  Sales  and
marketing  expenses  decreased  to $2.0  million in the quarter  ended March 31,
2002,  compared to $10.4 million in the quarter ended March 31, 2001, a decrease
of $8.4 million or 80%.  $5.7 million of this  decrease was due primarily to our
decision to sell more of our  products and services  through  third  parties and
become less  reliant  upon a  worldwide  direct  sales  force.  As a result,  we
significantly  decreased  our sales force and  eliminated  our field  operations
personnel.  We also  eliminated  $2.1 million of costs  relating to  sponsorship
fees,  advertising  and branding  expenses.  In addition,  stock-based  expenses
recorded to sales and  marketing  expense,  decreased  from $0.7  million in the
quarter  ended March 31, 2001,  to $0.1  million in the quarter  ended March 31,
2002.

                                  Page 13 of 18
<PAGE>

Research and Development. Research and development expenses consist primarily of
personnel   costs   related  to  building  and   enhancing   our  digital  media
infrastructure  and  immersive  imaging  technology.  Research  and  development
expenses decreased to $1.3 million in the quarter ended March 31, 2002, compared
to $2.8 million in the quarter  ended March 31, 2001, a decrease of $1.5 million
or 54%. This decrease was due primarily to decreased personnel and related costs
as a result of our  reduction  in work force and our exit from the full  service
virtual tour real estate business.

General  and  Administrative.   General  and  administrative   expenses  consist
primarily of salaries  and related  benefits for  administrative  and  executive
staff, fees for outside professional services, bad debt expenses and other costs
associated  with being a public  company.  General and  administrative  expenses
decreased to $0.9 million in the quarter ended March 31, 2002,  compared to $3.9
million in the quarter  ended March 31, 2001, a decrease of $3.0 million or 77%.
This  decrease was due  primarily to a decrease in personnel  and related  costs
($1.7  million),  decreased bad debt expense ($0.3  million),  our exit from the
full service virtual tour real estate business.

($0.3  million) and fees related to  professional  services ($0.6  million).  In
addition,  stock-based expenses recorded to general and administrative  expense,
decreased from $0.1 million in the quarter ended March 31, 2001, to $0.0 million
in the quarter ended March 31, 2002.

Goodwill amortization.  Goodwill amortization in 2001 was the result of goodwill
associated with corporate acquisitions during 2000. Amortization of goodwill was
$0.6  million in the  quarter  ended  March 31,  2001.  We adopted FAS 142 as of
January 1, 2002 and as a result we no longer amortize goodwill.

Restructuring and Impairment. There were no restructuring and impairment charges
in the quarter  ended March 31,  2002,  compared to $3.0  million in the quarter
ended March 31, 2001.  Restructuring  charges  were  primarily  associated  with
reductions of our workforce, outstanding obligations under non-productive leases
resulting from the  consolidation of certain offices and write-offs of abandoned
computers and office furniture and equipment.

Interest  expense.  Interest expense was $17 thousand in the quarter ended March
31,  2002,  compared to interest  expense of $67  thousand in the quarter  ended
March 31,  2001.  This  decrease is primarily  related to the  weighted  average
amount under capital lease obligations in each period.

Interest  income and other.  Interest  income and other  consists  primarily  of
interest earned on cash and investments.  Interest income and other increased to
$60 thousand in the quarter  ended March 31, 2002,  compared to a net expense of
$120  thousand in the quarter  ended March 31,  2001.  The income in the quarter
ended March 31, 2002 is primarily due to earnings on our cash  investments.  The
loss in the quarter ended March 31, 2001 is primarily due to realized  losses on
investments sold during the quarter.

Extraordinary  Gain.  Extraordinary  gain was $0.9 million in the quarter  ended
March 31, 2001.  We recorded an  extraordinary  gain from the cash received from
the sale of assets to  Homestore.com  in January,  2001. The assets were used to
provide tours of  residential  real estate  properties  that were related to the
pooling of Interactive Pictures Corporation and bamboo.com.

                                  Page 14 of 18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Since inception,  we have financed our operations  through our registered public
offerings,  the private placements of capital stock, a convertible  debenture, a
convertible promissory note and warrant and option exercises. At March 31, 2002,
we had $7.4 million of cash and cash equivalents.

Net cash used in operating  activities  was $3.1  million for the quarter  ended
March 31, 2002 and $11.4 million for the quarter ended March 31, 2001.  Net cash
used for operating  activities in each of these periods is primarily a result of
net losses. Our net loss for the quarters ended March 31, 2002 and 2001 included
non-cash   charges  for  $0.7  million  and  $1.7  million,   respectively,   of
depreciation and  amortization and $0.1 million and $1.2 million,  respectively,
of non-cash stock based  compensation and non-cash  deferred  revenues of ($0.6)
million and ($0.1) million, respectively. Net of these non-cash amounts, our net
losses  reduced  cash by $1.3 million in the quarter  ended March 31,  2002,  an
improvement from $14.3 million used in the quarter ended March 31, 2001.

Also  included in net cash used in operating  activities  for the quarter  ended
March 31, 2002, were the following:

o    an increase in receivables due to increased  on-line auction revenues ($0.3
     million);
o    an increase in prepaid expenses which will increase future cash provided by
     operating activities as the prepaid expenses are amortized ($0.5 million);
o    a decrease in accounts  payable and accrued expenses  primarily  related to
     payments of year-end accruals from 2001 ($0.3 million); and
o    a decrease in accounts  payable and accrued expenses  primarily  related to
     payments  of  restructuring  accruals  from  2001  and  payments  of  prior
     obligations under extended terms ($0.8 million).

During the remainder of 2002, we expect to see a reduction in quarterly net cash
used in  operating  activities;  accordingly,  net cash  provided  by (used  in)
operating  activities is expected to be  approximately  break-even  for the nine
months ended December 31, 2002.

Net cash provided by (used in) investment  activities was ($0.5) million for the
quarter  ended March 31, 2002 and $14.4  million for the quarter ended March 31,
2001. Net cash provided by (used in) investing activities was related to the net
purchases and maturities of short-term investments,  the acquisition of computer
software  and  hardware and other  equipment  and the proceeds  from the sale of
assets.

Net cash used in financing  activities  was $12  thousand for the quarter  ended
March 31, 2002 and $399 thousand for the quarter  ended March 31, 2001.  The net
cash used in financing  activities  for these  periods was due  primarily to the
repayment  of capital  lease  obligations.  We expect to  continue to be able to
finance any significant  acquisitions of computer  hardware and software,  which
may occur, throughout the remainder of 2002.

Management  believes we have sufficient cash resources to meet our funding needs
for the next twelve  months.  We finished the quarter  ended March 31, 2002 with
$7.4  million  in cash and cash  equivalents.  Management's  focus in 2002 is to
reduce our cash  requirements  to manageable  levels and focus our operations on
profitability.   Our  operating  expenses,   however,  are  primarily  based  on
anticipated  revenue  levels.  Since a high  percentage  of those  expenses  are
relatively  fixed, a delay in revenue from licenses or transactions  could cause
significant  variations in operating results from quarter to quarter, and we may
continue to sustain losses as a result.

Our long-term strategy remains  unchanged.  We will continue to make significant
capital  investments as well as investments in research and  development for all
segments and will invest in the expansion of the online  auction and  classified
businesses and in the development of new security and  observation  products and
services during this economic downturn.

                                  Page 15 of 18
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

We adopted  Statement  of  Accounting  Standards  No. 142,  "Goodwill  and Other
Intangible  Assets"(FAS 142), effective January 1, 2002. Under FAS 142, goodwill
is no longer amortized, but reviewed for impairment annually, or more frequently
if certain  indicators  arise.  We completed an  impairment  test in the quarter
ended March 31, 2002 and no impairment loss resulted.

We also adopted FAS 144,  effective  January 1, 2002.  In August 2001,  the FASB
issued  FAS 144,  "Accounting  for the  Impairment  or  Disposal  of  Long-Lived
Assets." FAS 144 replaces FAS 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to Be Disposed Of." The FASB issued FAS 144 to
establish a single accounting model,  based on the framework  established in FAS
121,  as FAS 121 did not  address  the  accounting  for a segment  of a business
accounted for as a discontinued  operation under APB 30,  "Reporting The Results
of  Operations  -- Reporting  The Effects of Disposal of a Segment of a Business
and Extraordinary  Unusual and Infrequently  Occurring Events and Transactions."
FAS 144 also resolves significant  implementation  issues related to FAS 121. We
determined  that the  adoption of FAS 144 did not have a material  impact on our
reported results of operations, financial position or cash flows.

We also adopted EITF Issue 01-09,  effective  January 1, 2002. In November 2001,
the FASB's  Emerging  Issues Task Force reached a consensus on EITF Issue 01-09,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the Vendor's  Products," which is a codification of EITF Issues 00-14, 00-22 and
00-25.  This issue  presumes that  consideration  from a vendor to a customer or
reseller of the vendor's products to be a reduction in the selling prices of the
vendor's  product  and,  therefore,  should be  characterized  as a reduction of
revenue when  recognized  in the  vendor's  income  statement  and could lead to
negative  revenue under  certain  circumstances.  Revenue  reduction is required
unless  consideration  related  to  a  separate  identifiable  benefit  and  the
benefit's fair value can be  established.  We determined that this consensus had
no effect on our  reported  results of  operations,  financial  position or cash
flows.

In  February  2002,  the EITF  issued  Topic  Number  D-103,  "Income  Statement
Characterization   of  Reimbursements   Received  for   Out-of-Pocket   Expenses
Incurred," which is effective for financial  statements beginning after December
31,  2001.  Topic  Number  D-103  requires  that  reimbursements   received  for
out-of-pocket expenses incurred,  generally,  be characterized as revenue in the
statement of  operations.  We adopted  Topic  Number D-103 in the quarter  ended
March 31, 2002. The adoption of Topic Number D-103 had no material effect on our
reported results of operations, financial position or cash flows.

                                  Page 16 of 18
<PAGE>

INFLATION

Inflation has not had a significant impact on our operations to date.

                           FORWARD-LOOKING STATEMENTS

This quarterly  report contains  statements about future events and expectations
which  are   characterized  as   forward-looking   statements.   Forward-looking
statements are based on our management's  beliefs,  assumptions and expectations
of  our  future  economic  performance,  taking  into  account  the  information
currently  available to them.  These statements are not statements of historical
fact.  Forward-looking statements involve risks and uncertainties that may cause
our  actual  results,  performance  or  financial  condition  to  be  materially
different  from the  expectations  of future  results,  performance or financial
condition we express or imply in any  forward-looking  statements.  Factors that
could contribute to these differences  include those discussed in "Risk Factors"
of our registration statement on Form 10-K filed with the SEC on March 29, 2002.

The  words  "believe",  "may",  "will",  "should",   "anticipate",   "estimate",
"expect",  "intends",  "objective"  or similar  words or the  negatives of these
words are  intended  to  identify  forward-looking  statements.  We qualify  any
forward-looking statements entirely by these cautionary factors.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

Please  reference  Legal  Proceedings  in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 for additional disclosures.

If the  plaintiffs  in any of these cases were to prevail in their  action,  our
financial  condition,  results of operations  and cash flows could be materially
adversely affected.

We are subject to claims in the ordinary course of business. Management believes
the  ultimate  resolution  of these  matters  will have no  material  impact our
financial condition, results of operations or cash flows.

Item 2. Changes In Securities And Use Of Proceeds

Effective  March  26,  2002,  each  share  of the  Series B  Preferred  Stock is
convertible  into  approximately  9.2  shares  of the our  common  stock  and is
entitled  to  vote on  matters  submitted  to  holders  of  common  stock  on an
as-converted  basis.  However,  at any time  that the  holders  of the  Series B
Preferred Stock hold more than 50% of our voting stock, a voluntary liquidation,
dissolution  or winding up of the  Company  must be approved by at least five of
the seven members of our board of directors.


Item 3. Defaults Upon Senior Securities

          None.

Item 4. Submission Of Matters To A Vote Of Security Holders

          None.

Item 5. Other Information

          None.

Item 6. Exhibits And Reports On Form 8-K

          None.



                                  Page 17 of 18
<PAGE>





                           INTERNET PICTURES CORPORATION

                                   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.

DATE: May 13, 2002                  INTERNET PICTURES CORPORATION
                                            (Registrant)



                                            /s/ Paul Farmer
                                            ---------------
                                            Paul Farmer
                                            Authorized Officer
                                            Chief Financial Officer and
                                            Chief Accounting Officer


                                  Page 18 of 18