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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-QSB

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

For The Quarterly Period Ended June 30, 2001

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

For the transition period from to

Commission file number: 000-20865

ZeroPlus.com, Inc.
(Exact name of registrant as specified in its charter)

Delaware 52-1929282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

12800 Middlebrook Road, Suite 400, Germantown, MD 20874
(Address of principal executive offices) (Zip Code)

(301) 601-8700
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed
since last report.)

Check whether the issuer (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 periods 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
--- ---

The number of shares of the Registrant's common stock, $.01 par value per
share, outstanding as of August 6, 2001 was 10,380,226.

Transitional small business disclosure format (check one):

Yes No X
--- ---

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

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PAGE

Item 1. Financial Statements (Unaudited)

Balance Sheets as of June 30 and March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 3

Statements of Operations for the three months ended June 30, 2001 and 2000 . . . . . . . . . . . 4

Statements of Cash Flows for the three months ended June 30, 2001 and 2000 . . . . . . . . . . . 5

Statements of Stockholders' Equity as of June 30, 2001 . . . . . . . . . . . . . . . . . . . . . 6

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Item 2. Management's Discussion and Analysis Or Plan of Operations . . . . . . . . . . . . . . . . . . . 9

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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ZEROPLUS.COM, INC.
BALANCE SHEETS
ASSETS

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<Caption>
JUNE 30, 2001 MARCH 31, 2001
------------- --------------
(UNAUDITED) (AUDITED)

CURRENT ASSETS
Cash and cash equivalents $ 157,823 $ 1,821,580
Short-term investments 810,255 802,252
Accounts receivable 18,200 66,605
Insurance claim receivable and prepaid expenses -- 216,606
------------ ------------

TOTAL CURRENT ASSETS 986,278 2,907,043

DEPOSITS AND OTHER ASSETS 36,835 39,699

PROPERTY AND EQUIPMENT, NET 280,000 358,400
------------ ------------

TOTAL ASSETS $ 1,303,113 $ 3,305,142
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable--trade $ 2,333,278 $ 811,446
Notes Payable, net 2,161,297 1,926,761
Accrued liabilities 1,421,229 1,941,805
------------ ------------

TOTAL CURRENT LIABILITIES 5,915,804 4,680,012

LONG TERM DEBT -- 116,010
------------ ------------

TOTAL LIABILITIES 5,915,804 4,796,022

STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 50,000,000 shares
Authorized; 10,669,268 and 10,669,268 shares issued;
10,380,226 and 10,347,830 shares outstanding
at June 30 and March 31, 2001, respectively 104,691 104,691
Treasury Stock (183,392) (250,209)
Additional paid-in capital 41,003,316 40,968,996
Retained deficit (45,537,306) (42,314,358)
------------ ------------

TOTAL STOCKHOLDERS' DEFICIT (4,612,691) (1,490,880)
------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,303,113 $ 3,305,142
============ ============

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The accompanying notes are an integral part of these statements.

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ZEROPLUS.COM, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED

JUNE 30
----------------------------
2001 2000
------------ ------------

SALES FROM SERVICES 473,889 102,051

COST OF SERVICES PROVIDED 1,444,352 143,024
------------ ------------

GROSS PROFIT (LOSS) (970,463) (40,973)
OPERATING EXPENSES
General and administrative 1,043,195 793,643
Selling and marketing 370,567 1,528,273
Impairment of assets 78,400 --
Research and development 375,087 380,752
------------ ------------

LOSS FROM OPERATIONS (2,837,712) (2,743,641)

OTHER INCOME (EXPENSE)
Other expenses (322,508) (52,027)
Interest income 23,146 133,289
------------ ------------

LOSS BEFORE INCOME TAXES (3,137,074) (2,662,379)

INCOME TAX PROVISION -- --
------------ ------------

NET LOSS $ (3,137,074) $ (2,662,379)
============ ============

LOSS PER SHARE-BASIC AND DILUTED $ (.30) $ (.25)
============ ============

WEIGHTED AVERAGE SHARES OUTSTANDING -- BASIC AND DILUTED 10,347,830 10,461,186

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The accompanying notes are an integral part of these statements.

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ZEROPLUS.COM, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED

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<Caption>
JUNE 30
--------------------------
2001 2000
----------- -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,137,074) $(2,662,379)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization -- 98,502
Stock-based compensation -- 3,581
Amortization of discount on notes payable 109,166 --
Loss on impairment of assets 78,400 --
Stock issued for services 15,263 --
Changes in operating assets and liabilities
Decrease (Increase) in accounts receivable 48,405 (80,360)
Decrease (Increase) in prepaid expenses, deposits and other assets 219,470 (243,531)
Increase in accounts payable and accrued liabilities 1,010,616 66,716
----------- -----------

NET CASH USED IN OPERATING ACTIVITIES (1,655,754) (2,817,471)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -- (244,255)
(Investment in) Net proceeds from short term securities (8,003) 2,331,264
Investment in long term instruments -- (10,000)
----------- -----------

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (8,003) 2,077,009
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock -- 20,434
----------- -----------

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES -- 20,434
----------- -----------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,663,757) (720,028)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,821,580 3,497,936
----------- -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,823 $ 2,777,908
=========== ===========

SUPPLEMENTAL DISCLOSURES:
Income Taxes Paid $ -- $ --
=========== ===========

Interest Paid $ -- $ --
=========== ===========

</Table>

The accompanying notes are an integral part of these statements.

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ZEROPLUS.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)

COMMON STOCK
----------------------- ADDITIONAL TOTAL
NO. OF PAID IN TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
----------- -------- ----------- --------- ------------- ------------

BALANCE, MARCH 31, 2001 10,347,830 $104,691 $40,968,996 $(250,209) $(42,314,358) $(1,490,880)

Issuance of common stock Associated with:
Priceline agreement 32,396 34,320 66,817 (85,874) 15,263

Net loss -- -- -- -- (3,137,074) (3,137,074)
----------- -------- ----------- --------- ------------- ------------

BALANCE, JUNE 30, 2001 10,380,226 $104,691 $41,003,316 $(183,392) $(45,537,306) $(4,612,691)
=========== ======== =========== ========= ============ ===========

</Table>

The accompanying notes are an integral part of these statements.

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ZEROPLUS.COM, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE A--SUSPENSION OF OPERATIONS

The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. However, the
Company has incurred substantial net losses from operations since its inception
and as of June 30, 2001, had a working capital deficit of $4,929,526 and an
accumulated deficit of $45,537,306.

On June 5, 2001, the Company announced the shutdown of its operations
and the immediate termination of all services and most employees in order to
conserve cash while seeking to pursue and consider any possible alternatives for
attaining value for the Company's technology and strategic relationships. The
Company however, has not been able to identify and secure a suitable source of
immediate funding, nor can any assurance be provided that the Company will be
able to secure such funding to enable it to continue as a going concern.

The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.

NOTE B--BASIS OF PRESENTATION

The accompanying unaudited financial statements include the accounts of
ZeroPlus.com, Inc. (the "Company"), which was incorporated in January 1995. Such
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (US GAAP) for interim financial
information and pursuant to the regulations of the Securities and Exchange
Commission; accordingly, they do not include all of the information and notes
required by US GAAP for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
(consisting of normal recurring accruals) have been included.

The accompanying unaudited financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2001.

NOTE C--PROPERTY AND EQUIPMENT

Property and equipment are carried at cost, net of an
allowance for accumulated depreciation and amortization. Prior to March 31,
2001, depreciation was computed on equipment and furniture, using a
straight-line method over a three-year period. Subsequent to March 31, 2001,
these assets were being held for disposal and accordingly, are not being
depreciated. In conjunction with its announced suspension of operations on June
5, 2001, the Company recognized impairment losses of $977,100 and $78,400 at
March 31, 2001 and June 30, 2001, respectively to reflect property and
equipment, consisting primarily of database and network equipment and furniture,
at their estimated net realizable value. While management believes its estimates
of these assets' net realizable value are reasonable, the actual realized value
may differ. Related impairment costs have been included in the Statement of
Operations as "Operating Expenses" for the period ended June 30, 2001.

NOTE D--DEBT FACILITY

In March 2001, the Company secured short-term debt in the amount of $2,000,000.
The note is convertible into common stock at the conversion rate of $1.00 per
share. Interest accrues at an annual rate of 17%. Interest expense and financing
fees (4%) were waived in exchange for the granting of a technology license. The
Company also granted the lender 500,000 common stock warrants with an exercise
price equal to the closing market price ($.4375) of the company common stock as
listed on Nasdaq. Total funds received of $2,000, 000 were allocated $136,458 to
the warrants and $1,863,542 to the note payable. The value allocated to the
warrants has been included in additional paid-in capital and the related
discount has been amortized to interest expense over the term of the note. At
June 30, 2001 the discount had been fully amortized. The note is secured by the
assets of the corporation and was due on June 12, 2001. On June 12, 2001, the
Company and the lender executed a 90-day Forbearance Agreement, by which the
note will mature September 10, 2001.

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NOTE E--NON-QUALIFIED STOCK OPTION PLAN

At June 30, 2001, the Company had three stock-based compensation plans.
As permitted under generally accepted accounting principles, grants under those
plans are accounted for following APB Opinion No. 25 (APB 25) and related
interpretations. For the quarter ended June 30, 2001, there were no grants to
non-employees or non-directors of the Company. All options granted to employees
are non-compensatory for financial statement purposes, under the provisions of
APB 25 and related interpretations.

NOTE F--INCOME TAXES

The Company has generated net operating losses since its inception. At
June 30, 2001, the Company recorded a valuation allowance in an amount equal to
the deferred tax asset due to the uncertainty of generating future taxable
income.

NOTE G--CONCENTRATION

The Company's accounts receivable balance at June 30, 2001 was from one
customer. Sales from services to one customer comprised approximately 89% of
total revenue.

NOTE H--CONTINGENCIES

As a result of the phased shut down of operations on June 5, 2001 as
discussed in Note A, the Company is attempting to conserve its liquid assets
and as a result has slowed payment to many of its creditors.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

This information should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements and notes contained in our Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2001.

RESULTS OF OPERATIONS

FIRST QUARTER ENDED JUNE 30, 2001 AND JUNE 30, 2000

On June 5, 2001, ZeroPlus.com announced a phased shutdown of operations
and the immediate termination of all services. In addition, the majority of our
employees were terminated on June 5, 2001. This was done in an effort to
conserve cash while seeking to pursue and consider any possible alternatives to
recapitalize our business or to attain value for our technology and/or
relationships. As a result of these developments, the Company does not believe
that the historical financial information in this Form 10-QSB provides a
meaningful indication of the Company's future financial condition. Despite
extensive efforts by the Company and its management to rebuild stockholder value
and ensure a viable future for the business, the Company has not been able to
identify and secure a suitable source of immediate funds, a strategic alliance
partner or other arrangement pursuant to which the Company could continue to
operate as a going concern or realize going concern value for its assets.
Accordingly, there cannot be any assurance that the Company will be able to
secure sources of capital, or enter into strategic alliances or other
arrangements pursuant to which the Company will be able to operate as a going
concern in the future or realize going concern value for its assets.

NET SALES

Sales for the first quarter ended June 30, 2001 were approximately
$473,900, an increase of 364% over the approximately $102,100 recorded for the
corresponding quarter of 2000. Increased revenues from our ZeroPlus.com services
business accounted for the significant revenue increase over the corresponding
quarter of 2000. The primary source of the revenue increase was attributed to
our contract with Worldwide Consumer Direct, Inc. whereby we provided flat rate
residential long distance on a wholesale basis.

GROSS PROFIT (LOSS)

Gross profits (loss) for the first quarter ended June 30, 2001 were
approximately ($970,500), compared to the approximately ($41,000) for the
corresponding quarter of 2000. The negative gross profit for the quarter ended
June 30, 2001 was attributed primarily to higher than anticipated voice
transmission costs due to calling patterns of our flat rate customers. Fixed
infrastructure costs associated with our network buildout and increased customer
support costs also contributed to the negative gross profit.

OPERATING EXPENSES

Selling and marketing expenses for the first quarter ended June 30,
2001, were approximately $370,600, a decrease of 76% over the approximately
$1,528,300 recorded for the corresponding quarter of 2000. The dollar decrease
in these expenses over the prior year reflected decreased spending for
advertising-related programs and promotional traffic costs. In addition,
personnel costs decreased in conjunction with our June 5, 2001 announced phased
shutdown and termination of a majority of our employees.

General and administrative expenses for the first quarter ended June
30, 2001, were approximately $1,043,200, an increase of 31% over the
approximately $793,600 recorded for the corresponding quarter of 2000. The prior
year's quarter ended June 30, 2000 included an offset to general and
administrative expenses of $330,000 relating to an insurance claim reimbursement
from our Directors and Officers liability carrier.

Research & development expenses for the first quarter ended June 30,
2001, were approximately $375,100, a slight decrease (2%) over the approximately
$380,800 recorded for the corresponding quarter of 2000.

For the quarter ended June 30, 2001, the Company recognized an
impairment loss in the amount of $78,400 due to an estimated decrease in the
Company's property and equipment net realizable value. While management
believes its estimates of these assets' net realizable value are reasonable,
the actual realized value may differ.

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OTHER INCOME (EXPENSE)

Other income and expense for the quarter ended June 30, 2001 includes
increased interest expense, as compared to the corresponding quarter of 2000,
due to our short term debt obligation. In addition, interest income decreased
significantly due to decreased levels of cash and investments.

OTHER

To date, inflation and seasonality have not had a material impact on our
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

In the three months ended June 30, 2001, we used approximately
$(1,655,800) in cash flows from operating activities, compared to approximately
$(2,817,500) for the corresponding period of 2000.

Cash used by investing activities totalled approximately ($8,000) for
the three months ended June 30, 2001 as compared to approximately $2,077,000
provided by investing activities for the corresponding period of 2000. The main
component of the investing activity for the period ended June 30, 2000, was the
redemption of short-term securities of approximately $2,331,300.

In March 2001, we secured a short-term loan for $2,000,000, which was
due in June 2001 and convertible to equity. In June 2001, we negotiated a 90-day
Forbearance Agreement with the lender.

On June 5, 2001, ZeroPlus.com announced a phased shutdown of
operations and the immediate termination of all services. In addition, the
majority of our employees were terminated on June 5, 2001. This was done in
an effort to conserve cash while seeking to pursue and consider any possible
alternatives for attaining value for our technology and/or relationships. At
June 30, 2001, our available cash, cash equivalents, and short-term
investments was approximately $968,100. At the same date, our current
liabilities totalled approximately $5,915,800, of which $1,409,000 were
beyond contracted payment terms. Despite extensive efforts by the Company and
its management to rebuild stockholder value and ensure a viable future for
the business, the Company has not been able to identify and secure a suitable
source of immediate funds, a strategic alliance partner or other arrangement
pursuant to which the Company could continue to operate as a going concern or
realize going concern value for its assets. Accordingly, there cannot be any
assurance that the Company will be able to secure sources of capital, or
enter into strategic alliances or other arrangements pursuant to which the
Company will be able to continue to operate as a going concern or realize
going concern value for its assets.

FUTURE OPERATING RESULTS

The preceding paragraphs and the following discussion include
forward-looking statements regarding our future financial position and results
of operations. Actual financial position and results of operations may differ
materially from these statements. All such statements are qualified by the
cautionary statements set forth in our most recent Annual Report on Form 10-KSB
under Part I, Item 1, "Forward Looking and Cautionary Statements" and Part II,
Item 6, under "Risk Factors", as well as the following statements.

Because of these and other uncertainties affecting our future operating
results, past performance should not be considered to be a reliable indicator of
future performance. The use of historical trends to anticipate results or trends
in future periods may be inappropriate.

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PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibit Description

NONE

(b) Since the end of its most recent fiscal year on March 31, 2001,
ZeroPlus.com, Inc. has filed the following reports on Form 8-K:

Date of Report Item Reported

June 27, 2001 Item 5 -- Other Events
June 13, 2001 Item 5 -- Other Events
June 12, 2001 Item 5 -- Other Events
June 6, 2001 Item 5 -- Other Events

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

ZeroPlus.com, Inc.
(Registrant)

DATE: August 14, 2001 /s/ Robert A. Veschi
----------------------------------
Robert A. Veschi
President and Chief Executive Officer

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