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 September 30, 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 [ ]

6,798,418 shares of $0.001 par value common stock outstanding as of
October 15, 2002

Page 1 of 31




<PAGE>


                          INTERNET PICTURES CORPORATION
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002
                                      INDEX

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..................15

 Item 3.      Quantitative and Qualitative Disclosures About Market Risk......26

 Item 4.      Controls and Procedures.........................................26

PART II -- OTHER INFORMATION..................................................27

 Item 1.      Legal Proceedings...............................................27

 Item 2.      Changes In Securities And Use Of Proceeds.......................28

 Item 3.      Defaults Upon Senior Securities.................................28

 Item 4.      Submission Of Matters To A Vote Of Security Holders.............28

 Item 5.      Other Information...............................................28

 Item 6.      Exhibits And Reports On Form 8-K................................28


Signatures....................................................................28

Section 302 Certifications....................................................29

Exhibit Index.................................................................31


                                       2
<PAGE>
<TABLE>
<CAPTION>


PART I--FINANCIAL INFORMATION

Item 1.      Condensed Consolidated Financial Statements

                          INTERNET PICTURES CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS





                                                                                    December 31,  September 30,
                                                                                         2001         2002
                                                                                    -----------   ------------
                                                                                        (1)       (unaudited)
(In thousands, except share and per share amounts)
ASSETS
<S>                                                                                  <C>            <C>
Cash and cash equivalents.......................................................     $    11,103    $   6,350
Restricted cash and short term investments......................................           2,298        3,263
Accounts receivable, net .......................................................             921        1,990
Inventory, net .................................................................             219          124
Prepaid expenses and other current assets ......................................             881        1,050
                                                                                     -----------   -----------
       Total current assets ....................................................          15,422       12,777

Property and equipment, net ....................................................           4,614        5,311
Other long term assets .........................................................              --          110
Goodwill .......................................................................           3,042        3,042
                                                                                     -----------   -----------
       Total assets ............................................................     $    23,078    $  21,240
                                                                                     ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable ...............................................................     $     1,500    $   1,137
Accrued liabilities ............................................................           7,557        6,867
Deferred revenue ...............................................................           1,592           34
Current portion of obligations under capital leases ............................           1,267        2,898
                                                                                     -----------   -----------
       Total current liabilities ...............................................          11,916       10,936
                                                                                     -----------   -----------


Obligations under capital leases, net of current portion .......................           1,277        1,966
                                                                                     -----------   -----------
Other long term liabilities.....................................................           1,115          504
                                                                                     -----------   -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value: .............................................               1            1
   Authorized:  5,001,100 at December 31, 2001 and September 30, 2002
   (unaudited)
   Issued and outstanding: 1,115,080 at December 31, 2001 and
    September 30, 2002 (unaudited)
Class B common stock, $0.0001 par value: .......................................              --           --
   Authorized:  742,154 at December 31, 2001 and September 30, 2002 (unaudited)
   Issued and outstanding:  179,480 at December 31, 2001 and
    September 30, 2002 (unaudited)
Common stock, $0.001 par value: ................................................              66           66
   Authorized:  150,000,000 at December 31, 2001 and 50,000,000 at September 30,
    2002 (unaudited)
   Issued and outstanding:  6,568,337 at December 31, 2001 and
    6,618,938 at September 30, 2002 (unaudited)
Additional paid-in capital .....................................................         513,467      513,922
Note receivable from stockholder ...............................................            (179)          --
Unearned stock-based compensation ..............................................            (142)         (51)
Accumulated deficit ............................................................        (503,974)    (505,602)
Accumulated other comprehensive loss............................................            (469)        (502)
                                                                                     -----------   -----------
       Total stockholders' equity...............................................           8,770        7,834
                                                                                     -----------   -----------
       Total liabilities and stockholders' equity...............................     $    23,078   $   21,240
                                                                                     ===========   ===========

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

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.



</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>


                          INTERNET PICTURES CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



                                                               Three months ended    Nine months ended
                                                                 September 30,          September 30,
                                                               ------------------     ----------------
(In thousands, except per share data)                            2001       2002        2001     2002
                                                               -------    -------     -------  -------
                                                                   (unaudited)           (unaudited)
<S>                                                             <C>        <C>         <C>     <C>
Revenues:
Transaction services.......................................     $3,891     $4,242      $9,543  $11,619
Immersive solutions........................................      2,206      1,753       6,969    4,931
Full service real estate tours.............................        479         --       7,550       --
                                                              --------    -------    --------  -------
Total revenues.............................................      6,576      5,995      24,062   16,550
                                                              --------    -------    --------  -------
Cost of revenues:
Transaction services.......................................      1,396      1,738       4,544    5,238
Immersive solutions........................................        931        561       2,597    1,372
Full service real estate tours.............................         64         --       3,521       --
                                                              --------    -------    --------  -------
Total cost of revenues.....................................      2,391      2,299      10,662    6,610
                                                              --------    -------    --------  -------

Gross profit...............................................      4,185      3,696      13,400    9,940
                                                              --------    -------    --------  -------
Operating expenses:
Sales and marketing........................................      3,028      1,881      19,312    6,074
Research and development...................................      1,843      1,175       6,370    3,686
General and administrative.................................      2,310        621      13,942    2,418
Goodwill amortization......................................        609         --       1,825       --
Restructuring and impairment...............................      1,462        687      11,655      687
Loss (gain) on disposal of assets..........................       (114)        --       1,655       --
                                                              --------    -------    --------  -------
Total operating expenses...................................      9,138      4,364      54,759   12,865
                                                              --------    -------    --------  -------

Loss from operations.......................................     (4,953)      (668)    (41,359)  (2,925)

Other income(expense):
Interest expense...........................................     (9,637)       (81)    (10,642)    (112)
Interest income............................................         38        339         212      419
Patent infringement award..................................         --      1,000          --    1,000
Other, net.................................................          6        (14)       (381)     (10)
                                                              --------    -------    --------  -------
Income (loss) before extraordinary gain....................    (14,546)       576     (52,170)  (1,628)

Extraordinary gain.........................................         --         --         901       --
                                                              --------    -------    --------  -------
Net income(loss)...........................................   $(14,546)   $   576    $(51,269) $(1,628)
                                                              ========    =======    ========  =======

Basic net income(loss) per common share:
Income(loss)before extraordinary gain......................   $  (2.19)   $  0.08    $  (8.11) $ (0.24)
Extraordinary gain.........................................         --         --        0.14       --
                                                              --------    -------    --------  -------
Basic net income (loss) per common share...................   $  (2.19)   $  0.08    $  (7.97) $ (0.24)
                                                              ========    =======    ========  =======
Diluted net income(loss) per common share:
Income(loss)before extraordinary gain......................   $  (2.19)   $  0.03    $  (8.11) $ (0.24)
Extraordinary gain.........................................         --         --        0.14       --
                                                              --------    -------    --------  -------
Diluted net income (loss) per common share.................   $  (2.19)   $  0.03    $  (7.97) $ (0.24)
                                                              ========    =======    ========  =======
</TABLE>


See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.
                                       4
<PAGE>
<TABLE>
<CAPTION>

                          INTERNET PICTURES CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                Nine months ended
                                                                                  September 30,
                                                                              --------------------
                                                                                2001        2002
                                                                              --------    --------
(In thousands)                                                                    (unaudited)
<S>                                                                           <C>        <C>
Cash flows from operating activities:
Net loss..................................................................    $(51,269)  $(1,628)
Adjustments to reconcile net loss to net cash
  used in operating activities:
Depreciation and amortization.............................................       4,082     2,469
Provision for doubtful accounts receivable................................       3,513      (269)
Loss on disposal of assets................................................       1,655        --
Interest charge for amortization of discount on convertible debt..........      10,000        --
Non-cash compensation expense.............................................       6,639       120
Impairment loss...........................................................       1,122        --
Extraordinary gain........................................................        (901)       --
Changes in operating assets and liabilities:
   Accounts receivable....................................................         358      (800)
   Inventory..............................................................         771        95
   Prepaid expenses and other current assets..............................       1,830      (169)
   Other long term assets.................................................       1,199      (110)
   Accounts payable.......................................................          27      (363)
   Accrued expenses.......................................................      (2,520)     (555)
   Deferred revenue.......................................................         331    (1,558)
                                                                               --------   -------
      Net cash used in operating activities...............................     (23,163)   (2,768)
                                                                               --------   -------
Cash flows from investing activities:
Purchases of property and equipment.......................................        (631)   (3,258)
Purchase of short term investments........................................          --    (1,400)
Proceeds from sale of assets..............................................      11,165        --
Maturities of securities available-for-sale...............................       6,000        --
                                                                               --------   -------
      Net cash provided by (used in) investing activities.................      16,534    (4,658)
                                                                               --------   -------
Cash flow from financing activities:
Proceeds from sale/leaseback..............................................          --     3,870
Repayments of capital lease obligations and notes payable.................      (2,552)   (1,458)
Net proceeds from convertible promissory note and warrants................      20,974        --
Proceeds from issuance of common stock....................................          25       115
Distribution to stockholders..............................................        (839)       --
Proceeds from notes receivable from stockholders..........................          --       179
                                                                               --------   -------
      Net cash provided by financing activities...........................      17,608     2,706
                                                                               --------   -------
Effect of exchange rate changes on cash...................................        (981)      (33)
                                                                               --------   -------
Net increase (decrease) in cash and cash equivalents......................       9,998    (4,753)
Cash and cash equivalents, beginning of period............................       5,322    11,103
                                                                               --------   -------
Cash and cash equivalents, end of period..................................    $ 15,320   $ 6,350
                                                                               ========   =======
</TABLE>



No income tax payments were made in either period  presented.  Interest paid for
the nine  months  ending  September  30,  2001  and  2002  was  $229  and  $112,
respectively.

See  accompanying  notes  to  the  unaudited  condensed  consolidated  financial
statements.
                                       5
<PAGE>




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

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 September 30, 2002 and the results of our operations and our cash
flows for the three and nine month  periods  ended  September 30, 2001 and 2002.
All such adjustments are of a normal recurring nature. The results of operations
for the three and nine month periods  ended  September 30, 2001 and 2002 are not
necessarily  indicative  of the results to be expected for the  respective  full
years.

2.  RECLASSIFICATIONS

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

3.  CASH EQUIVALENTS, RESTRICTED CASH AND SHORT TERM INVESTMENTS

We consider all highly liquid debt instruments with a remaining maturity at date
of  purchase of three  months or less to be cash  equivalents.  Restricted  cash
consists primarily of deposits related to certain liabilities.  All other liquid
investments  are  classified as either short term or long term  investments.  We
determine the appropriate classification of investment securities at the time of
purchase and  reevaluate  such  designation  as of each balance  sheet date.  At
September 30, 2002, we had $1,400 of  investments  with a remaining  maturity of
three to twelve months that have been provided as collateral for certain capital
lease  obligations  and,  accordingly,   classified  as  restricted  short  term
investments.

                                       6

<PAGE>


4.  INCOME TAX PROVISION

At December  31,  2001,  the Company has  approximately  $223,445 and $99,000 of
federal and state, respectively, net operating loss carryforwards,  which it may
use to offset future taxable income.  The net operating loss  carryforwards,  if
not utilized,  will begin to expire in 2009. As a result of the  utilization  of
our carryforwards and that we expect a net loss for the year ending 2002, we did
not  record an income  tax  provision  for the net  income  reported  during the
quarter ended September 30, 2002.

5.  INCOME (LOSS) PER SHARE

We compute net income (loss) per share in accordance with FAS 128, "Earnings Per
Share." Under the  provisions of FAS 128, basic net income per share is computed
by  dividing  the net income for the period by the  weighted  average  number of
shares of common stock.  Under the provisions of FAS 128, diluted net income per
share is  computed  by  dividing  the net income for the period by the  weighted
average  number  of  shares  of  common  stock,   plus  potential  common  stock
outstanding during the period. The calculation of basic and 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.  Stock  options and warrants  with exercise  prices
above  the  average  common  stock  closing  price  during  the  period  are not
considered to be  potentially  dilutive in the  calculation of income (loss) per
share.

The following  table sets forth the  computation of basic and diluted net income
(loss) per share for the periods indicated:

(In thousands, except per share data)
<TABLE>
<CAPTION>

                                                    Three months ended   Nine months ended
                                                     September  30,          September 30,
                                                  --------------------  ------------------
                                                    2001         2002     2001      2002
                                                   ------       ------   ------    ------
                                                                 (unaudited)
<S>                                             <C>           <C>      <C>        <C>
NUMERATOR:
Income (loss) before extraordinary gain         $(14,546)     $   576  $(52,170)  $(1,628)

DENOMINATOR:
Weighted average shares outstanding - Basic        6,641        6,798     6,430     6,789
Weighted average potential common shares              --       10,267        --        --
                                                 --------     --------  --------- -------

Total used in calculation of EPS - Diluted         6,641       17,065     6,430     6,789


INCOME (LOSS) PER SHARE BEFORE
EXTRAORDINARY GAIN:
Basic                                            $ (2.19)     $  0.08  $  (8.11)  $ (0.24)
Diluted                                          $ (2.19)     $  0.03  $  (8.11)  $ (0.24)

</TABLE>
                                       7
<PAGE>

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 September 30, 2002:

(In thousands)
<TABLE>
<CAPTION>

                                                  Three months ended            Nine months ended
                                                     September 30,                September 30,
                                                 --------------------          --------------------
                                                  2001          2002            2001          2002
                                                 ------        ------          ------        ------
                                                                    (unaudited)
<S>                                              <C>           <C>              <C>           <C>
Stock options                                    3,444         3,550            3,444         3,565
Convertible preferred stock                     10,267            --           10,267        10,267
Warrants                                         2,472         2,472            2,472         2,472
</TABLE>

Under FAS 142, effective January 1, 2002,  goodwill is no longer amortized,  but
reviewed for  impairment  annually,  or more  frequently  if certain  indicators
arise.  In accordance  with FAS 142, the results for the prior year periods have
not been restated. A reconciliation of reported net income (loss) and net income
(loss) per common  share as if FAS 142 had been in effect for 2001 is  presented
as follows:

<TABLE>
<CAPTION>

                                                       Three months ended            Nine months ended
                                                          September 30,                September 30,
                                                      --------------------          --------------------
In thousands, except per share                         2001          2002            2001          2002
                                                      ------        ------          ------        ------
                                                                         (unaudited)
<S>                                                   <C>             <C>            <C>           <C>
Net income (loss) before extraordinary gain           $(14,546)       $  576         $(52,170)     $ (1,628)
   Extraordinary gain                                        -             -              901             -
                                                      --------        ------         --------      --------
Net income (loss)                                     (14,546)          576          (51,269)       (1,628)
  Goodwill amortization                                   609             -             1,825             -
                                                      --------        ------         --------      --------

Adjusted net income (loss)                            $(13,937)       $  576         $(49,444)     $ (1,628)
                                                      ========        ======         ========      ========

Basic net income (loss) per common share:
   Net income (loss) before extraordinary gain        $ (2.19)        $ 0.08         $  (8.11)     $  (0.24)
   Extraordinary gain                                       -              -             0.14             -
                                                      --------        ------         --------      --------
Net income (loss)                                       (2.19)          0.08            (7.97)        (0.24)
   Goodwill amortization                                 0.09              -             0.28             -
                                                      --------        ------         --------      --------

Adjusted basic net income (loss) per common share     $ (2.10)        $ 0.08         $  (7.69)     $ (0.24)
                                                      ========        ======         =========     ========

</TABLE>

Diluted loss per common share and adjusted diluted loss per common share for the
quarter ended  September 30, 2001 and both nine month periods above are the same
as the basic loss per common  share and  adjusted  basic loss per common  share,
respectively. For the quarter ended September 30, 2002, the diluted earnings per
share was $0.03.


                                       8
<PAGE>


6.   CAPITAL STOCK
Common Stock

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. 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. In May 2002,
our stockholders  approved and adopted an amendment to the restated  certificate
of incorporation decreasing the authorized number of shares of common stock from
150,000 to 50,000.

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. 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.

7.  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 $1,122  write down of  abandoned  office
equipment to its net realizable value.

During the second quarter of 2001, we recorded a restructuring  charge of $7,193
consisting  of expenses  associated  with a reduction  in our  workforce,  lease
obligations for vacated offices and a write down of abandoned  office  equipment
to its net realizable value.  Included in the second quarter 2001  restructuring
is $1,300  related  to a  severance  liability  for our former  Chief  Executive
Officer, James M. Phillips. At September 30, 2002, the unpaid liability is $500,
which is to be paid in  installments  ending in  September  of 2003.  As further
consideration for Mr. Phillips' separation agreement, we forgave a loan from the
Company to Mr. Phillips and the related interest  aggregating  $2,193,  which is
also included in the second quarter of 2001 restructuring expense.

Included in the third quarter 2001  restructuring  expense is $1,462  related to
the  write  off of the  unamortized  portion  of our  directors'  and  officers'
insurance  policy.  We were required to obtain a new policy due to the change in
control  of the  Company  related to the  closing  of  Tranche B of our  capital
raising transaction.

During the third  quarter of 2002,  we recorded a  restructuring  charge of $0.7
million consisting of expenses associated primarily with a negotiated buy-out of
certain lease obligations for previously  vacated offices.  In November 2002, we
paid  approximately  $1.3 million  related to the buy-out and we have  remaining
approximately $1.0 million in these restructuring accruals, primarily associated
with re-negotiated lease obligations and long term severance agreements.

                                      9
<PAGE>
8.  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 the first
quarter  of  2001,  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 2000 pooling of Interactive Pictures Corporation and bamboo.com.

The  $1,655  loss on the 2001  sale of the  remaining  residential  real  estate
related  assets  that were  unrelated  to the  pooling of  Interactive  Pictures
Corporation and bamboo.com was included in loss on the disposal of assets in the
accompanying statement of operations.

9.   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.

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

                                     Three months ended    Nine months ended
                                        September 30,        September 30,
                                     ------------------    ------------------
(In thousands)                         2001      2002        2001       2002
                                     -------    -------    -------    -------
                                                    (unaudited)
Cost of revenues                      $  (9)     $ --     $    95      $  --
Sales and marketing                     194        29       1,552        120
Research and development                110        --         650         --
General and administrative              114        --       2,149         --
                                     --------   --------  --------    -------
                                      $ 409      $ 29     $ 4,446      $ 120
                                     ========   ========  ========    =======

                                     10
<PAGE>

10.  COMMITMENTS AND CONTINGENCIES

On October  28,  1998,  Minds-Eye-View,  Inc.  ("Minds-Eye")  and Mr. Ford Oxaal
("Oxaal") filed a lawsuit against us in the United States District Court for the
Northern District of New York. Minds-Eye alleged in its lawsuit that we breached
a duty of confidence to them, made  misrepresentations and misappropriated trade
secrets.  The court removed this action to arbitration  upon our motion,  and we
cross-claimed alleging various affirmative claims, including trade secret theft.
Minds-Eye and Oxaal filed a motion to dismiss the suit, and the court  dismissed
the lawsuit on May 19, 1999.  Although the lawsuit was  dismissed,  we proceeded
with the arbitration in Knoxville, Tennessee. The arbitration was stayed pending
resolution of the following lawsuit.

On May 20, 1999,  Oxaal filed a lawsuit  against us and certain of our customers
in the same court alleging that our technology infringes upon a patent claim for
360 degree  spherical  visual  technology held by him. Oxaal filed an additional
complaint  on  December  5, 2000 in the  United  States  District  Court for the
Northern  District of New York,  naming us as the sole defendant.  The complaint
states a single  claim for  relief,  alleging  infringement  of U.S.  Patent No.
6,157,385, which issued on December 5, 2000. This patent encompasses a method of
seamlessly combining at least two images into a spherical image.

On June  11,  2002,  we  reached  an out of  court  settlement  with  Oxaal  and
Minds-Eye.  As a  result  of the  settlement,  each  of  the  lawsuits  and  the
arbitration  proceeding  described above were dismissed and mutual releases have
been  executed.  Pursuant to the  settlement  agreement,  neither party admitted
liability or any wrongdoing.  We were granted a non-exclusive  perpetual license
under  patents and pending  patents  conceived by Oxaal or in which Oxaal has an
interest.  The license rights inure to the benefit of our customers with respect
to  their  purchases  from us and  also  inure to the  benefit  of our  business
partners  with  respect to their  business  relations  with us. We included  the
one-time  cash payment for the cost of the license in property and  equipment on
the  accompanying  balance sheet. We do not believe that the cost of the license
or the non-cash  amortization of the license, had or will have a material effect
on our financial condition, results of operations or cash flows.

During the quarter ending September 30, 2002, we received  approximately  $1,400
in cash from a previously  disclosed  favorable  jury verdict  against  Infinite
Pictures that found the defendants  liable for infringement of our patents under
the  doctrine  of   equivalents   and  awarding  us  $1,000  in  damages,   plus
approximately  $400 in interest and court costs. The defendants filed for a writ
of certiorari  with the United States  Supreme Court in an effort to reverse the
lower  court's  findings in our favor.  The Supreme  Court  refused to grant the
writ, which exhausts the legal remedies for disputing the award. Accordingly, we
recorded the $1,000 in damages as other income,  along with the $400 in interest
and court costs, in the quarter ended September 30, 2002.

We are  subject to claims in the  ordinary  course of  business.  We believe the
ultimate  resolution  of these  matters  will not have a material  impact on our
financial condition, results of operations or cash flows. Please reference Legal
Proceedings  in our Annual Report for the fiscal year ended December 31, 2001 on
Form 10-K for disclosures regarding a case undergoing discovery.

                                       11
<PAGE>

11.  SEGMENTS

We  currently  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  the
performance or the allocation of resources to them.

Information about the reported segments is as follows:

(In thousands)
                                    Three months ended      Nine months ended
                                       September 30,           September 30,
                                    ------------------      ----------------
                                     2001       2002          2001      2002
                                   -------    -------       -------   ------

(unaudited)
Revenues:
 Transaction services               $ 3,891    $ 4,242       $ 9,543  $11,619
 Immersive solutions                  2,206      1,753         6,969    4,931
 Full service real estate               479         --         7,550       --
                                    -------    -------       -------  -------
 Total                              $ 6,576    $ 5,995       $24,062  $16,550
                                    =======    =======       =======  =======

Cost of revenues:
 Transaction services               $ 1,396    $ 1,738       $ 4,544  $ 5,238
 Immersive solutions                    931        561         2,597    1,372
 Full service real estate                64         --         3,521       --
                                    -------    -------       -------  -------
 Total                              $ 2,391    $ 2,299       $10,662  $ 6,610
                                    =======    =======       =======  =======

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.  Full  service  real  estate is
presented as a segment in 2001.


12.  EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

We adopted Statement of Financial  Accounting Standards 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. See Note 5.

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.

                                       12
<PAGE>

In February  2002, the Emerging  Issues Task Force  ("EITF")  issued EITF 00-14,
"Income Statement  Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred," which is effective for financial  statements beginning after
December  31,  2001.  EITF  00-14  requires  that  reimbursements  received  for
out-of-pocket expenses incurred,  generally,  be characterized as revenue in the
statement of  operations.  We adopted EITF 00-14 in the quarter  ended March 31,
2002. The adoption of EITF 00-14 did not have a material  effect on our reported
results of operations, financial position or cash flows.

In June  2002,  the FASB  issued  FAS  146,  "Accounting  for  Exit or  Disposal
Activities'"  ("FAS 146").  FAS 146 addresses  significant  issues regarding the
recognition,  measurement,  and reporting of costs that are associated with exit
and disposal activities,  including restructuring  activities that are currently
accounted  for under EITF 94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs  Incurred in a  Restructuring)."  The scope of FAS 146 also includes costs
related to  terminating a contract  that is not a capital lease and  termination
benefits that employees who are involuntarily terminated receive under the terms
of a one-time benefit  arrangement that is not an ongoing benefit arrangement or
an individual deferred-compensation contract. FAS 146 will be effective for exit
or disposal  activities  that are  initiated  after  December 31, 2002 and early
application is encouraged. We will adopt FAS 146 during the first quarter ending
March 31, 2003.  The provisions of EITF 94-3 shall continue to apply for an exit
activity  initiated  under an exit plan that met the criteria of EITF 94-3 prior
to the  adoption of FAS 146.  The effect on adoption of FAS 146 will change on a
prospective basis the timing of when  restructuring  charges are recorded from a
commitment date approach to when the liability is incurred.

13.    CONCENTRATIONS OF CREDIT RISK

Financial  instruments that potentially  subject us to a concentration of credit
risk  consist  of  cash  and  cash  equivalents,  restricted  cash,  short  term
investments and accounts receivable. Cash and cash equivalents,  restricted cash
and  short  term   investments   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         Nine months ended
                         September 30,                September 30,
                       ------------------         -----------------
                         2001     2002             2001     2002
                         ----     ----             ----     ----
Customer A                46%      16%              29%      20%
Customer B                27%      57%              17%      54%

                                     13
<PAGE>

At September  30,  2002,  Customer A holds a warrant for 16 shares of our common
stock. At September 30, 2002,  Customer B represents 53% of accounts  receivable
and holds 100 shares of our Series B Preferred Stock and a warrant for 60 shares
of our common  stock.  All amounts due from Customer B as of September 30, 2002,
were collected during October 2002. Our principal agreements with Customer A and
Customer B, expire on March 31, 2003 and September 30, 2003, respectively. These
agreements are subject to extension,  amendment and re-negotiation  from time to
time.

14.  CONVERTIBLE PROMISSORY NOTE AND WARRANTS

On May 14,  2001,  we entered into a definitive  agreement  with Image  Investor
Portfolio,  a separate series of Memphis Angels, LLC ("Image") for an investment
by  Image  in the  Company.  Pursuant  to the  terms  of a  securities  purchase
agreement  with Image  dated as of May 14,  2001,  Image  purchased  our $10,000
convertible  senior secured note (the "Note") and received Tranche A and Tranche
B warrants to purchase up to $20,000 of our Series B Preferred Stock.

The warrants were issued in conjunction  with the convertible  promissory  note,
and  accordingly,  based on APB 14,  "Accounting for  Convertible  Debt and Debt
Issued with Stock Purchase Warrants," and EITF 98-5, "Accounting for Convertible
Securities  with Beneficial  Conversion  Features," the entire proceeds from the
convertible  promissory  note,  $10,000,  were allocated to the warrants and the
beneficial  conversion  feature based on a calculation  using the  Black-Scholes
model.  During the second quarter of 2001, we recorded $805 as interest  expense
related to the accretion of the  convertible  promissory  note to its face value
over the fifteen month period of the Note. During the third quarter of 2001, the
$10,000 Note and the Tranche B warrants were  converted to preferred  stock and,
accordingly,  we recorded $9,195 as interest expense related to the accretion of
the convertible promissory note to its face value.

At  September  30,  2002,  there are two  Tranche A  warrants  ("Warrant  1" and
"Warrant 2"), issued to Paradigm Capital Partners and Memphis Angels, LLC, which
are outstanding.  Warrant 1 entitles the holder to purchase 150 shares of Series
B  Preferred  Stock at $20 per share and is  exercisable  at any time before the
expiration  date of May 14, 2006.  Warrant 2 entitles the holder to purchase 100
shares of Series B Preferred  Stock at $40 per share and is  exercisable  at any
time before the expiration date of May 14, 2006.

15.  iPIX INTERNATIONAL

In the  third  quarter  of 2002,  we  entered  into  license,  distribution  and
trademark agreements with Soroof International, a Saudi Arabia-based corporation
("Soroof").  Under the agreements,  Soroof will be the exclusive distributor for
iPIX immersive still products, including the iPIX GPS Mapping System, outside of
North America and Asia through its newly established  entity, iPIX International
("iPIX-I").  The agreement,  effective July 1, 2002,  expires December 31, 2007,
unless renewed.  iPIX-I has an exclusive license to develop integrated solutions
for markets including real estate, travel and tourism and other markets in which
online  marketing is critical.  We will also provide  certain  hosting  services
during the term of the  agreements.  Soroof  has  committed  to certain  minimum
quarterly  royalties  during the term of the  agreement.  Should  these  minimum
royalties not be met, we have the right to terminate our agreements with Soroof.

                                       14
<PAGE>
iPIX has a minority equity interest in iPIX-I,  however,  iPIX does not have the
ability to exercise significant influence over iPIX-I operations. We account for
our  investment  in  iPIX-I  on the cost  basis.  We did not  make  any  capital
contributions  to iPIX-I and we have no commitments  to fund iPIX-I.  We do have
the right, however, but not the obligation, to purchase iPIX-I from Soroof after
December  31, 2005 for  consideration  as defined in the  agreement.  During the
quarter ended  September  30, 2002,  we  recognized  $365 of revenue under these
agreements.

16.  PURCHASE AGREEMENT-LEASEBACK

On September 26, 2001 and May 31, 2002, we sold certain assets  totaling  $2,474
and $2,494, respectively,  to a stockholder and agreed to leaseback those assets
over a  three-year  period.  The net book value and the fair value of the assets
equaled the sale price,  resulting in no gain or loss on the sale of the assets.
In order to sell the assets to the stockholder during the third quarter 2001, we
paid off the remaining  payments  under an existing  capital lease of the assets
from a third party. During the quarter ended September 30, 2002, we sold certain
assets  totaling  $1,376  to an  unaffiliated  leasing  company  and  agreed  to
leaseback  those assets over a thirty-month  period.  The net book value and the
fair value of the assets equaled the sale price, resulting in no gain or loss on
the sale of the assets.


The future  aggregate  lease  payments are  approximately  $1,200 in the quarter
ended  December 31, 2002,  $2,500 in 2003,  $1,400 in 2004 and $100 in 2005. The
leases  are  accounted  for  as  capital  leases  in  accordance  with  FAS  13,
"Accounting for Leases."

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  transaction  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
telecommunications 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.

                                       15
<PAGE>
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.

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.

iPIX INTERNATIONAL

In the  third  quarter  of 2002,  we  entered  into  license,  distribution  and
trademark agreements with Soroof International, a Saudi Arabia-based corporation
("Soroof").  Under the agreements,  Soroof will be the exclusive distributor for
iPIX immersive still products, including the iPIX GPS Mapping System, outside of
North America and Asia through its newly established  entity, iPIX International
("iPIX-I").  The agreement,  effective July 1, 2002,  expires December 31, 2007,
unless renewed.  iPIX-I has an exclusive license to develop integrated solutions
for markets including real estate, travel and tourism and other markets in which
online  marketing is critical.  iPIX-I  serves as an effective  extension of our
international channel strategy and allows iPIX to provide our patented immersive
still products globally.

                                       16
<PAGE>
CRITICAL ACCOUNTING POLICIES

Financial  Reporting Release 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 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  101,  "Revenue  Recognition  in  Financial  Statements."
Transaction  hosting  revenues are  recognized  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.

Revenues  from  the  sale of our  virtual  tour  products  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  45,
"Long-Term Construction-Type Contracts."

                                       17
<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  had 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 consolidated statements of
operations:
<TABLE>
<CAPTION>

                                                         Three months ended          Nine months ended
                                                            September 30,              September 30,
                                                         ------------------          ----------------
                                                          2001        2002            2001      2002
                                                         ------      ------          ------    ------
                                                                          (unaudited)
<S>                                                        <C>        <C>              <C>       <C>
Revenues:
 Transaction services                                      59.2%      70.7%            39.7%     70.2%
 Immersive solutions                                       33.5       29.3             29.0      29.8
 Full service real estate tours                             7.3         --             31.3        --
                                                         ------     ------           ------    ------
Total revenues                                            100.0      100.0            100.0     100.0
                                                         ------     ------           ------    ------
Cost of revenues:
 Transaction services                                      21.2       29.0             18.9      31.6
 Immersive solutions                                       14.2        9.3             10.8       8.3
 Full service real estate tours                             1.0         --             14.6        --
                                                         ------     ------           ------    ------
Total cost of revenues                                     36.4       38.3             44.3      39.9
                                                         ------     ------           ------    ------
Gross profit                                               63.6       61.7             55.7      60.1
                                                         ------     ------           ------    ------
Operating expenses:
Sales and marketing                                        46.0       31.4             80.3      36.7
Research and development                                   28.0       19.6             26.5      22.3
General and administrative                                 35.1       10.4             57.9      14.6
Goodwill amortization                                       9.3         --              7.6        --
Restructuring and impairment                               22.2       11.5             48.4       4.1
Loss (gain) on disposal of assets                          (1.7)        --              6.9        --
                                                         ------     ------           ------    ------
Total operating expenses                                  138.9       72.9            227.6      77.7
                                                          ------     ------           ------    ------
Loss from operations                                      (75.3)     (11.2)          (171.9)    (17.6)
Other income(expense), net                               (145.9)      20.8            (44.9)      7.8
                                                         ------     ------           ------    ------
Income (loss) before extraordinary gain                  (221.2)       9.6           (216.8)    (9.8)
Extraordinary gain                                           --         --             (3.7)       --
                                                         ------     ------           ------    ------
Net income (loss)                                        (221.2)%      9.6%          (213.1)%   (9.8)%
                                                         ======     ======           ======    ======

</TABLE>
                                       18
<PAGE>


Quarter Ended September 30, 2002 Compared to the Quarter Ended
September 30, 2001

Revenues.  Total  revenues  decreased  to  $6.0  million  in the  quarter  ended
September  30, 2002,  compared to $6.6 million in quarter  ended  September  30,
2001,  a decrease of $0.6  million or 9%. The  decrease was the result of a $0.5
million  decrease  from  our  exit of full  service  virtual  tour  real  estate
business, a $0.5 million decrease in immersive solutions and an increase of $0.4
million increase in revenue from transaction  services.  The immersive solutions
decrease  was  primarily  the result of lower key sales in the U.S.  residential
market. The increased  revenues in the transaction  services group was primarily
related to increased services to on-line auction clients.

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.  For the quarter ended  September 30, 2001,  revenues
included $6.1 million from the sale of our technology  products and services and
$0.5 million  related to full  service  virtual  real estate  tours.  We did not
generate full service  virtual tour revenues after September 30, 2001 and do not
expect to generate any future  revenues  from the sale of full  service  virtual
real estate tours in the U.S. residential markets.

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 $2.3  million in the quarter  ended  September  30, 2002,
compared to $2.4 million in the quarter ended  September 30, 2001, a decrease of
$0.1  million or 4%.  The  decrease  was the result of a change to higher  gross
margin products in the product mix of immersive services,  software and hardware
($0.3  million)  and our exit from the full  service  virtual  tour real  estate
business ($0.1 million).  Immersive  solution  revenues include $0.5 million and
$0.5 million from the sale of camera kits for the quarters  ended  September 30,
2002 and September 30, 2001, respectively,  with a cost of $0.3 million and $0.5
million. These decreases were offset partially by an increase of $0.3 million in
the cost of providing  transaction  services  primarily as a result of increased
depreciation expense from additional purchases of computer hardware and software
in order to manage increased current and anticipated  transaction volumes.  Cost
of revenues as a percentage  of total  revenues  increased to 38% in the quarter
ended September 30, 2002 from 36% in the quarter ended September 30, 2001.

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,  advertising and promotional expenses. Sales and marketing expenses
decreased to $1.9 million in the quarter ended  September 30, 2002,  compared to
$3.0 million in the quarter ended September 30, 2001, a decrease of $1.1 million
or 38%. We signed more reseller  contracts and  restructured our sales strategy,
which resulted in a $0.9 million  decrease in our sales and marketing  costs. In
addition,   stock-based  expenses  recorded  to  sales  and  marketing  expense,
decreased  from $0.2 million in the quarter  ended  September  30, 2001,  to $29
thousand in the quarter ended September 30, 2002.

                                       19
<PAGE>

Research and Development. Research and development expenses consist primarily of
personnel  costs  related to  enhancing  our digital  media  infrastructure  and
immersive imaging  technology.  Research and development  expenses  decreased to
$1.2 million in the quarter ended  September 30, 2002,  compared to $1.8 million
in the quarter ended September 30, 2001, a decrease of $0.6 million or 35%. This
decrease was due primarily to decreased personnel and related costs.

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 $0.6 million in the quarter ended  September 30, 2002,  compared to
$2.3 million in the quarter ended September 30, 2001, a decrease of $1.7 million
or 73%.  This  decrease was due primarily to a decrease in personnel and related
costs ($1.2 million),  a decrease in bad debt expense ($0.3 million) and reduced
fees  related to refunded  court costs ($0.1  million).  In  addition,  non-cash
stock-based expenses recorded to general and administrative  expense,  decreased
from $0.1 million in 2001, to zero in the quarter ended September 30, 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  September 30, 2001. We adopted FAS 142 as of
January 1, 2002 and, as a result, we no longer amortize goodwill.

Restructuring and Impairment.  Restructuring and impairment charges decreased to
$0.7 million in the quarter ended  September 30, 2002,  compared to $1.5 million
in the quarter  ended  September  30,  2001,  a decrease of $0.8 million or 53%.
Restructuring  charges  in 2002  related  to  obligations  under  non-productive
facility leases resulting from the  consolidation of certain offices.  The third
quarter 2001  restructuring  charge of $1.5 million  related to the write off of
the unamortized  portion of our directors' and officers'  insurance  policy.  We
were required to obtain a new policy due to the change in control of the Company
related to the closing of Tranche B of our capital raising transaction.

Interest  Expense.  Interest  expense  was $0.1  million  in the  quarter  ended
September 30, 2002,  compared to $9.6 million in the quarter ended September 30,
2001.  This decrease is primarily  related to the 2001 non-cash  expense of $9.2
million related to the accretion of the promissory note issued to Image Investor
Portfolio,  a separate series of Memphis  Angels,  LLC to its face value and the
weighted average amount of debt in each period. During May 2001, we borrowed $10
million  which  was  repaid  in full in  September  2001 as part of our  sale of
preferred stock.

Interest Income.  Interest income generally  consists of interest earned on cash
and investments.  Interest income increased to $0.3 million in the quarter ended
September 30, 2002,  compared to $38 thousand in the quarter ended September 30,
2001.  The  increase  was  primarily  due  to  interest  earned  on  the  patent
infringement award.

                                      20
<PAGE>
Patent  infringement  award.  Patent  infringement  award of $1.0 million in the
quarter  ended  September  30, 2002,  is due to the  collection  of a previously
awarded  court  judgment  for which  all legal  remedies  for  appeal  have been
exhausted and the case is now closed.

Other Income  (Expense).  Other expense increased to $14 thousand in the quarter
ended  September  30, 2002,  compared to other income of $6 thousand in the 2001
quarter.

Nine Months Ended September 30, 2002 Compared to the Nine Months Ended
September 30, 2001

Revenues.  Total  revenues  decreased to $16.6  million in the nine months ended
September 30, 2002, compared to $24.1 million in the nine months ended September
30, 2001, a decrease of $7.5 million or 31%. This decrease was due to a decrease
of $7.5  million in sales of full  service  virtual  tours.  For the nine months
ended September 30, 2001,  revenues of $24.1 million included $16.5 million from
the sale of our  technology  products and  services and $7.6 million  related to
full service virtual real estate tours. We did not generate full service virtual
tour revenues after  September 30, 2001 and do not expect to generate any future
revenues  from the sale of full  service  virtual  real estate tours in the U.S.
residential markets. Transaction services revenues increased 22% or $2.1 million
to $11.6 million during the first nine months of 2002 relative to the first nine
months of 2001 and  represent  70% of total  revenues  for the nine months ended
September 30, 2002. The increase is transaction  services revenue is primarily a
result of increased  services related to on-line auctions.  Immersive  solutions
revenues  decreased  29% or $2.0 million to $4.9  million  during the first nine
months of 2002 relative to the first nine months of 2001,  primarily as a result
of a decreased focus on lower operating margin sales opportunities.

Cost of Revenues.  Cost of revenues  decreased to $6.6 million in the first nine
months of 2002,  compared to $10.7  million in the first nine months of 2001,  a
decrease of $4.1 million or 38%.  $3.5 million of the decrease was the result of
our exit from the full  service  virtual  tour  real  estate  business  and $1.3
million of the  decrease was related to a change in the product mix of immersive
software and hardware sales,  offset partially by an increase of $0.7 million or
15% in the  cost of  generating  22% more  revenue  from  transaction  services.
Immersive  solution revenues include $1.5 million and $1.4 million from the sale
of camera kits for the nine months ended  September  30, 2002 and  September 30,
2001,  respectively,  with a cost of $0.9  million  and  $1.0  million.  Cost of
revenues as a percentage of total  revenues  decreased to 40% in the nine months
ended September 30, 2002 from 44% in the nine months ended September 30, 2001.

Sales and Marketing.  Sales and marketing  expenses decreased to $6.1 million in
the nine months ended September 30, 2002,  compared to $19.3 million in the nine
months  ended  September  30,  2001,  a decrease of $13.2  million or 69%.  $9.4
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 $2.3
million  of  costs  relating  to  sponsorship  fees,  advertising  and  branding
expenses. In addition,  stock-based  compensation expenses recorded to sales and
marketing  expense,  decreased  from  $1.6  million  in the  nine  months  ended
September 30, 2001, to $0.1 million in the nine months ended September 30, 2002.

                                       21
<PAGE>

Research and Development.  Research and development  expenses  decreased to $3.7
million in the first nine months of 2002,  compared to $6.4 million in the first
nine months of 2001,  a decrease of $2.7 million or 42%.  This  decrease was due
primarily to decreased  personnel and related costs as a result of our reduction
in work force and the exit of the full service real estate tour business.

General and  Administrative.  General and  administrative  expenses decreased to
$2.4 million in the nine months  ended  September  30,  2002,  compared to $13.9
million in the nine months ended September 30, 2001, a decrease of $11.5 million
or 82%. This decrease was due primarily to decreased personnel and related costs
($4.0 million), a decrease in bad debt expense ($3.8 million), reduced fees paid
for  professional  services  ($1.2  million)  and our exit from the full service
virtual  tour  real  estate  business  ($0.4  million).  In  addition,  non-cash
stock-based   compensation  expenses  recorded  to  general  and  administrative
expense,  decreased  from $2.1  million in the nine months ended  September  30,
2001, to zero in the nine months ended September 30, 2002.

Goodwill Amortization.  Goodwill amortization in 2001 was the result of goodwill
associated with corporate acquisitions during 2000. Amortization of goodwill was
$1.8 million in the nine months ended  September 30, 2001. We adopted FAS 142 as
of January 1, 2002 and, as a result, we no longer amortize goodwill.

Restructuring and Impairment.  Restructuring and impairment charges decreased to
$0.7 million in the nine months ended September 30, 2002, compared $11.7 million
in the nine months ended September 30, 2001.

The charges in the nine months ended  September  30, 2001  consisted of expenses
associated  with a reduction in our  workforce,  lease  obligations  for vacated
office and other  contractual  obligations.  Restructuring  charges in 2001 also
included $1.5 million related to the write off of the unamortized portion of our
directors' and officers' insurance policy, which was canceled as a result of our
change in control in September 2001.

Included  in the 2001  restructuring  is $1.3  million  related  to a  severance
liability  with our  former  Chief  Executive  Officer,  James M.  Phillips.  At
September 30, 2002 the unpaid liability is $0.5 million,  which is to be paid in
installments  ending in  September  of 2003.  As further  consideration  for Mr.
Phillips'  separation  agreement,  in 2001 we forgave a loan from the Company to
Mr. Phillips and the related interest  aggregating $2.2 million.  In addition to
the  restructuring,  we wrote down abandoned office equipment of $1.1 million to
its net realizable value.

Restructuring  charges in 2002 were  related to  outstanding  obligations  under
non-productive  facility  leases  resulting  from the  consolidation  of certain
offices.

Loss on Disposal of Assets. The loss during the first nine months of 2001 on the
disposal of assets of $1.7 million is primarily the result of the sale of assets
used to provide  residential  real estate  virtual  tours that  consisted of the
remaining residential real estate assets that were unrelated to the 2000 pooling
of Interactive Pictures Corporation and bamboo.com.

                                       22

Interest Expense.  Interest expense decreased to $0.1 million in the nine months
ended  September  30, 2002,  compared to $10.6  million in the nine months ended
September  30,  2001.  In the first nine months of 2001,  we recorded a non-cash
interest  expense of $10.0 million  related to the  accretion of the  promissory
note to its face value. Cash interest expense of $0.6 million in the nine months
ended  September  30,  2001  primarily  related  to the  $10.0  million  of debt
outstanding from May 2001 through  September 2001. Cash interest expense of $0.1
million in the nine months ended September 30, 2002 primarily related to capital
lease obligations.

Interest Income.  Interest income generally  consists of interest earned on cash
and  investments.  Interest income  increased to $0.4 million in the nine months
ended  September  30,  2002,  compared to $0.2  million in the nine months ended
September 30, 2001.  The increase was  primarily  due to interest  earned on the
patent infringement award.

Patent infringement award. Patent infringement award of $1.0 million in the nine
months  ended  September  30,  2002,  is due to the  collection  of a previously
awarded  court  judgment  for which  all legal  remedies  for  appeal  have been
exhausted and the case is now closed.

Other  Income  (Expense).  Other  expense  decreased to $10 thousand in the nine
months ended  September  30,  2002,  compared to $0.4 million in the nine months
ended  September 30, 2001.  The decrease is primarily due to realized  losses on
investments sold during 2001.

Extraordinary  Gain. The extraordinary gain during the first nine months of 2001
of $0.9  million  resulted  from the sale of assets used to provide  residential
real estate  virtual tours that were related to the 2000 pooling of  Interactive
Pictures  Corporation and bamboo.com.  The sale  transaction took place within a
year of the 2000 pooling transaction.

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, capital leases and warrant and option exercises. At
September 30, 2002, we had $9.6 million of cash,  restricted cash and short term
investments, of which $6.4 million was unrestricted.

                       Summary Consolidated Cash Flow Data
<TABLE>
<CAPTION>

                                                                   Three months ended        Nine months ended
                                                                      September 30,             September 30,
                                                                   -----------------       ----------------
                                                                     2001       2002           2001       2002
                                                                   -------    -------        -------    -------
(In thousands)                                                                      (unaudited)
<S>                                                                <C>        <C>           <C>        <C>
Net cash provided by (used in)operating activities............     $(2,624)   $ 1,106       $(23,163)  $(2,768)
Net cash provided by (used in)investing activities............       2,111        (84)        16,534    (4,658)
Net cash provided by financing activities.....................       9,994        681         17,608     2,706
Effect of exchange rate changes on cash.......................         219        (12)          (981)      (33)
                                                                   -------    -------       --------   -------
Net increase (decrease) in cash and cash equivalents..........       9,700      1,691          9,998    (4,753)
Cash and cash equivalents, beginning of period................       5,620      4,659          5,322    11,103
                                                                   -------    -------       --------   -------
Cash and cash equivalents, end of period......................     $15,320    $ 6,350       $ 15,320   $ 6,350
                                                                   =======    =======       ========   =======
</TABLE>

                                       23
<PAGE>
Net cash provided by operating activities was $1.1 million for the quarter ended
September 30, 2002. Net cash provided by operating  activities in the quarter is
primarily a result of the $0.6 million in net income plus  non-cash  charges for
$1.0 million of  depreciation,  net of $0.5 million of  amortization of deferred
revenues.  Included in net income for the quarter  ended  September 30, 2002, is
the receipt of $1.0 million from patent infringement damages and $0.4 million in
related  interest  income and reimbursed  court costs.  In addition,  during the
quarter  ended  September 30, 2002, an accrual for $0.7 million was provided for
restructuring   charges   associated   with   outstanding    obligations   under
non-productive  facility leases.  Cash provided by operations of $1.1 million in
the quarter ended September 30, 2002 was a sequential  $1.9 million  improvement
from $0.8  million  used in the quarter  ended June 30, 2002 and a $3.7  million
year-over-year  improvement  from the $2.6  million  used in the  quarter  ended
September 30, 2001.

Net cash used in operating activities was $2.8 million for the nine months ended
September  30, 2002 and $23.2  million for the nine months ended  September  30,
2001.  Net cash  used for  operating  activities  in each of  these  periods  is
primarily a result of net losses and changes in working capital.

Also included in net cash used in operating activities for the nine months ended
September 30, 2002, were the following:

          o    Non-cash depreciation ($2.5 million);
          o    a decrease in deferred revenue  primarily related to pre-payments
               collected in 2001 ($1.6 million);
          o    an increase in receivables due primarily to increased services to
               on-line auction clients ($0.8 million);
          o    a decrease in accounts payable  primarily  related to payments of
               year-end accruals from 2001 ($0.4 million);
          o    a decrease in accrued expenses  primarily  related to payments of
               restructuring   accruals   from  2001  and   payments   of  prior
               obligations under extended terms ($0.6 million); and
          o    receipt of $1.4 million from the patent infringement settlement.

Net cash used in  investment  activities  was $4.7  million  for the nine months
ended  September  30, 2002 and net cash provided by  investment  activities  was
$16.5  million for the nine months ended  September  30, 2001.  Net cash used in
investing  activities in the first nine months of 2002 was primarily  related to
the acquisition of computer software and hardware and the purchase of short term
investments. We do not currently expect any significant acquisitions of computer
hardware and software throughout the remainder of 2002.

Net cash provided by financing  activities  was $2.7 million for the nine months
ended  September 30, 2002 and $17.6 million for the nine months ended  September
30, 2001. The cash provided by financing  activities in the first nine months of
2002 was primarily related to sale/leaseback transactions. The net cash provided
by financing  activities  for the first nine months of 2001 was due primarily to
the proceeds from the  convertible  note and warrants  which were converted into
preferred stock in the quarter ended September 30, 2001.

                                       24
<PAGE>

During the third  quarter of 2002,  we recorded a  restructuring  charge of $0.7
million consisting of expenses associated primarily with a negotiated buy-out of
certain lease obligations for previously  vacated offices.  In November 2002, we
paid  approximately  $1.3 million  related to the buy-out and we have  remaining
approximately $1.0 million in these restructuring accruals, primarily associated
with re-negotiated lease obligations and long term severance agreements.

In 2001 and 2002,  we sold  certain  assets and  agreed to lease them back.  The
future  aggregate lease payments are  approximately  $1,200 in the quarter ended
December 31, 2002, $2,500 in 2003, $1,400 in 2004 and $100 in 2005.

Management  believes we have sufficient cash resources to meet our funding needs
for at least the next twelve months. We finished the quarter ended September 30,
2002 with $9.6 million in cash and restricted  cash and short term  investments.
Management's  focus 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 capital  intensive and
relatively  fixed, a delay in revenue from licenses or transactions  could cause
significant  variations in operating results from quarter to quarter, and we may
sustain losses as a result.

Our long term strategy  remains  unchanged.  We will continue to make  necessary
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.

We recently announced that NASDAQ approved our request to transfer to the NASDAQ
SmallCap  Market,  effective  November 1, 2002.  Our  securities  will  continue
trading under the symbol: IPIX. Listing on the NASDAQ SmallCap Market enables us
to maintain a liquid trading profile on a well-regulated  and transparent market
for the benefit of all our  stockholders.  The NASDAQ  SmallCap Market gives our
stockholders  continued access to the electronic trading efficiencies of NASDAQ.
We currently  meet all criteria for continued  inclusion in the NASDAQ  SmallCap
Market.  We may also transfer back to the NASDAQ  National Market when we comply
with applicable  initial listing  requirements  for the NASDAQ National  Market,
principally $15 million of shareholders' equity.

RECENT ACCOUNTING PRONOUNCEMENTS

We adopted Statement of Financial  Accounting Standards 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.

                                       25
<PAGE>
In February  2002, the Emerging  Issues Task Force  ("EITF")  issued EITF 00-14,
"Income Statement  Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred," which is effective for financial  statements beginning after
December  31,  2001.  EITF  00-14  requires  that  reimbursements  received  for
out-of-pocket expenses incurred,  generally,  be characterized as revenue in the
statement of  operations.  We adopted EITF 00-14 in the quarter  ended March 31,
2002. The adoption of EITF 00-14 did not have a material  effect on our reported
results of operations, financial position or cash flows.

In June  2002,  the FASB  issued  FAS  146,  "Accounting  for  Exit or  Disposal
Activities'"  ("FAS 146").  FAS 146 addresses  significant  issues regarding the
recognition,  measurement,  and reporting of costs that are associated with exit
and disposal activities,  including restructuring  activities that are currently
accounted  for under EITF 94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs  Incurred in a  Restructuring)."  The scope of FAS 146 also includes costs
related to  terminating a contract  that is not a capital lease and  termination
benefits that employees who are involuntarily terminated receive under the terms
of a one-time benefit  arrangement that is not an ongoing benefit arrangement or
an individual deferred-compensation contract. FAS 146 will be effective for exit
or disposal  activities  that are  initiated  after  December 31, 2002 and early
application is encouraged. We will adopt FAS 146 during the first quarter ending
March 31, 2003.  The provisions of EITF 94-3 shall continue to apply for an exit
activity  initiated  under an exit plan that met the criteria of EITF 94-3 prior
to the  adoption of FAS 146.  The effect on adoption of FAS 146 will change on a
prospective basis the timing of when  restructuring  charges are recorded from a
commitment date approach to when the liability is incurred.

INFLATION

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

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk sensitive  instruments do not subject us to material market risk
exposures.

Item 4.    CONTROLS AND PROCEDURES

(a)  Evaluation  of Disclosure  Controls and  Procedures.  The  Company's  chief
executive  officer and chief financial  officer have evaluated the effectiveness
of the design and operation of the Company's  disclosure controls and procedures
(as defined in Exchange  Act  Rule13a-14(c))  as of a date within 90 days of the
filing  date of this  quarterly  report.  Based on that  evaluation,  the  chief
executive  officer and chief financial officer have concluded that the Company's
disclosure  controls  and  procedures  are  effective  to ensure  that  material
information relating to the Company and the Company's consolidated  subsidiaries
is made known to such  officers by others  within these  entities,  particularly
during the period this quarterly  report was prepared,  in order to allow timely
decisions regarding required disclosure.

(b) Changes in Internal Controls. There have not been any significant changes in
the Company's  internal  controls or in other  factors that could  significantly
affect these controls subsequent to the date of their evaluation.

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 annual report 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

During the quarter  ending  September 30, 2002, we received  approximately  $1.4
million in cash from a  previously  disclosed  favorable  jury  verdict  against
Infinite  Pictures  that found the  defendants  liable for  infringement  of our
patents  under the  doctrine of  equivalents  and  awarding  us $1.0  million in
damages, plus $0.4 million in interest and court costs. The defendants filed for
a writ of  certiorari  with the  United  States  Supreme  Court in an  effort to
reverse the lower  court's  findings in our favor.  The Supreme Court refused to
grant the writ,  which  exhausts  the legal  remedies for  disputing  the award.
Accordingly, we recorded the $1.0 million in damages as other income, along with
the $0.4 million in interest and court costs, in the quarter ended September 30,
2002.

We are  subject to claims in the  ordinary  course of  business.  We believe the
ultimate  resolution  of these  matters  will not have a material  impact on our
financial condition, results of operations or cash flows.

Please  reference  Legal  Proceedings  in our Annual  Report for the fiscal year
ended  December  31,  2001 on filed  on Form  10-K on  March  29,  2002 and 2002
quarterly  filings  on Form 10-Q for  disclosures  regarding  a case  undergoing
discovery.

Item 2.      Changes In Securities And Use Of Proceeds

               None.

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

               a)   Exhibits


                    Exhibit 99.1 Certification  pursuant  to 18  U.S.C.  Section
                              1350,  as adopted  pursuant  to Section 906 of the
                              Sarbanes-Oxley Act of 2002

                    Exhibit 99.2 Certification  pursuant  to 18  U.S.C.  Section
                              1350,  as adopted  pursuant  to Section 906 of the
                              Sarbanes-Oxley Act of 2002

               b)   Reports On Form 8-K

                    None.

                          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: November 13, 2002             INTERNET PICTURES CORPORATION
                                    (Registrant)
                                    /s/ Paul Farmer
                                    ---------------
                                    Paul Farmer
                                    Authorized Officer
                                    Chief Financial Officer and
                                    Chief Accounting Officer



                                       28
<PAGE>


                                302 CERTIFICATION


I, Donald Strickland, certify that:

1.   I have reviewed  this  quarterly  report on Form 10-Q of Internet  Pictures
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date     November 13, 2002



/s/ Donald Strickland
---------------------

Donald Strickland
Chief Executive Officer



                                       29
<PAGE>

                                302 CERTIFICATION


I, Paul Farmer, certify that:

1.   I have reviewed  this  quarterly  report on Form 10-Q of Internet  Pictures
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date     November 13, 2002




/s/ Paul Farmer
---------------

Paul Farmer
Chief Financial Officer


                                       30
<PAGE>


                          INTERNET PICTURES CORPORATION

                         INDEX TO EXHIBITS FOR FORM 10-Q

                      FOR QUARTER ENDED SEPTEMBER 30, 2002



EXHIBIT NO.                     EXHIBIT DESCRIPTION
-----------                     -------------------



Exhibit 99.1        Certification pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 99.2        Certification pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




                                       31
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly  Report of Internet  Pictures  Corporation
(collectively,  the "Company") on Form 10-Q for the period ending  September 30,
2002 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the "Report"),  I, Donald  Strickland,  Chief Executive Officer of the Company,
certify,  pursuant to 18 U.S.C.  ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of  operation of the
Company.

/s/ Donald Strickland
---------------------
Donald Strickland
Chief Executive Officer
November 13, 2002

                                       32
<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly  Report of Internet  Pictures  Corporation
(collectively,  the "Company") on Form 10-Q for the period ending  September 30,
2002 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the "Report"), I, Paul Farmer, Chief Financial Officer of the Company, certify,
pursuant  to 18  U.S.C.  ss.  1350,  as  adopted  pursuant  to  ss.  906  of the
Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of  operation of the
Company.

/s/ Paul Farmer
---------------
Paul Farmer
Chief Financial Officer
November 13, 2002

                                       33