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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 AMENDMENT NO. 2
                                  FORM 10-QSB/A

[X]  Quarterly  Report Under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934

                For the quarterly period ended September 30, 2002

[_]  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 0-21637

                      BRILLIANT DIGITAL ENTERTAINMENT, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

          DELAWARE                                                95-4592204
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

                    6355 TOPANGA CANYON BOULEVARD, SUITE 120
                        WOODLAND HILLS, CALIFORNIA 91367
                    (Address of Principal Executive Offices)

                                 (818) 615-1500
                (Issuer's Telephone Number, Including Area Code)

         State the number of shares  outstanding of each of the issuer's classes
of common equity,  as of the latest  practicable  date:  Common Stock, par value
$0.001, 40,114,978 shares issued and outstanding as of June 25, 2003.

         Transitional Small Business Disclosure Format (check one):
                                Yes [_]   No  [X]



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                                 AMENDMENT NO. 2
                 TO THE QUARTERLY REPORT ON FORM 10-QSB FILED BY
           BRILLIANT DIGITAL ENTERTAINMENT, INC. ON NOVEMBER 14, 2002

         The following Items amend the Quarterly  Report on Form 10-QSB filed by
Brilliant Digital Entertainment,  Inc. (the "Company") on November 14, 2002 (the
"Form  10-QSB"),  as permitted by the rules and  regulations  promulgated by the
Securities and Exchange Commission.  The Form 10-QSB is hereby amended to insert
those  Items as set forth  herein.  All  capitalized  terms used  herein but not
defined shall have the meanings ascribed to them in the Form 10-QSB.

                                     PART I

                              FINANCIAL INFORMATION

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The information contained in this Form 10-QSB is intended to update the
information  contained  in our Annual  Report on Form  10-KSB for the year ended
December 31, 2001 and presumes  that readers have access to, and will have read,
the "Management's  Discussion and Analysis of Financial Condition and Results of
Operations" and other information  contained in such Form 10-KSB.  The following
discussion  and  analysis  also should be read  together  with our  consolidated
financial  statements  and the notes to the  consolidated  financial  statements
included elsewhere in this Form 10-QSB.

         THIS  DISCUSSION  SUMMARIZES  THE  SIGNIFICANT  FACTORS  AFFECTING  THE
CONSOLIDATED OPERATING RESULTS, FINANCIAL CONDITION AND LIQUIDITY AND CASH FLOWS
OF BRILLIANT DIGITAL  ENTERTAINMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
AND SEPTEMBER 30, 2001. EXCEPT FOR HISTORICAL INFORMATION, THE MATTERS DISCUSSED
IN THIS MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS   ARE  FORWARD   LOOKING   STATEMENTS   THAT  INVOLVE  RISKS  AND
UNCERTAINTIES AND ARE BASED UPON JUDGMENTS  CONCERNING  VARIOUS FACTORS THAT ARE
BEYOND OUR CONTROL.  ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED
IN THE  FORWARD-LOOKING  STATEMENTS  AS A RESULT OF,  AMONG  OTHER  THINGS,  THE
FACTORS  DESCRIBED  BELOW  UNDER THE  CAPTION  "CAUTIONARY  STATEMENTS  AND RISK
FACTORS."

OVERVIEW

         Brilliant Digital Entertainment, Inc. is a developer and distributor of
rich media advertising  technologies and through its Altnet  subsidiary,  secure
peer-to-peer solutions.

         In   February   2002,   we   formed   Altnet,   Inc.   to   operate   a
peer-to-peer-based  content  distribution network that allows Altnet to securely
and efficiently  distribute a content owner's music,  video,  software and other
digital  files to  computer  users.  Using  internally  developed  and  licensed
technology,  we have created a private, or "closed" peer-to-peer network,  which
allows us to centrally  control the  distribution  of a digital file,  which has
been authorized by its owner,  directly from one computer user (peer) to another
(peer).  Our  ability to control  which files are  distributed  over our private
network,  as well as our use of widely available  digital rights  management (or
DRM)  technologies  from Microsoft  Corporation,  TryMedia and others to


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protect  against  copyright  infringement,  will  prevent  the  distribution  of
unauthorized files over our network and help to protect against the unauthorized
use of a digital  file  distributed  over our network  once it resides on an end
user's  computer.  We own 51% of the  outstanding  capital  stock of Altnet  and
manage  all of its  day-to-day  operations,  and the  remaining  49% is owned by
Joltid,  Ltd.  (formally  known as  Blastoise,  Ltd.),  the company from whom we
license a substantial portion of Altnet's peer-to-peer technology.

         Commencing in the second quarter of 2002 we began to supply  authorized
files from our secure  Altnet  peer-to-peer  system for display in, and download
from, the search results section inside the KaZaA Media Desktop. The KaZaA Media
Desktop,  owned and  operated  by Sharman  Networks,  currently  is the  leading
peer-to-peer  file sharing system,  with an average of approximately 3.5 million
users at any given time  sharing  media files.  We have entered into  agreements
with  owners  of  proprietary  media  content,  such as music,  movie  trailers,
computer  games,  and software  products,  that permit us to display  authorized
files to end users in  response to the end user's  search  request (we call this
TopSearch).  Pursuant to our agreement with Sharman Networks, we currently offer
our  customers  (the owners of media  files) the ability to display  their media
files to the millions of users of the KaZaA Media Desktop, and we facilitate the
secure delivery of these files from the Altnet peer-to-peer system to users upon
request in  accordance  with  parameters,  including  price,  set by the content
owner,  to the extent the  content  owner  desires to offer its media  files for
sale. We intend to further  exploit Altnet by partnering  with other third party
operators  of web sites and Internet  applications  to enable users of those web
sites and  applications to search for and download digital files from the Altnet
network.

         We have  recently  tested and  commercially  launched  a  micro-payment
processing  system,  which allows for the individual  sale of digital content at
any price point, including prices well below $1.00.

         We commercialize our advertising technology in two primary ways: (i) we
license our rich media Brilliant Banner advertising  server  technologies to web
sites  to  enable  the  selling  and  serving  of  our  proprietary  rich  media
advertising format, and (ii) we license our rich media content authoring tools -
"b3d Studio" and "b3d Studio Pro" - to production studios and content developers
interested in creating content for the Internet,  primarily rich media Brilliant
Banner  content We launched  our rich media 3D  advertising  banners - Brilliant
Banners - into the market during the first quarter of 2001 to offer  advertisers
and web sites an alternative to the current Graphics Interchange Format, or GIF,
banners that are  prevalent on web sites today.  We believe that our animated 3D
banner  advertisements  perform  better than GIF banners  because  they  include
animation and sound,  which is more engaging to a viewer. We have introduced the
Brilliant Banner to our syndication partners,  other significant advertisers and
websites,  making the  technologies  available for them to commence  selling and
serving this rich media advertising format.

         We generate revenue from our Internet advertising business by licensing
our ad serving  technology,  which is used to display our Brilliant Banners,  to
third  party  operators  of web sites and other  Internet  applications,  and we
generate revenue from our software tools business by selling licenses to our b3d
software tools. We will generate revenue from our Altnet business by contracting
with  content  owners to  distribute  and sell their  digital  files to computer
users. We will charge the content owner a placement or distribution fee based on
one or more of the


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following: (i) a negotiated fee for each file downloaded,  (ii) a negotiated fee
for each license  issued once the end user tries to play the file the first time
after it has been  downloaded,  and (iii) a negotiated  percentage  of the sales
price a computer user pays to purchase a digital file.

         In August 2002, we engaged Europlay Capital Advisors,  LLC ("ECA"),  an
entity in which Mark Dyne, our Chairman,  is a principal  owner, for a period of
12 months to assist in business development  activities primarily for Altnet. We
will remit  $10,000 per month to ECA as a retainer  fee.  This retainer fee will
accrue  until such time as we  recognize  at least Two  Hundred  Fifty  Thousand
Dollars ($250,000) in revenues (determined in accordance with generally accepted
accounting  principles) in two consecutive  calendar months.  Additionally,  ECA
will be  eligible  to receive a  commission  with  respect  to any net  receipts
recognized by us resulting from ECA's direct efforts.  Such commission  shall be
calculated as a percentage of net receipts  calculated on a cumulative  basis as
follows:  12.5% of net  receipts up to $20  million;  and 15% of net receipts in
excess of $20 million.

         We are a Delaware  corporation  that was incorporated in July 1996. Our
executive  offices  are located at 6355  Topanga  Canyon  Boulevard,  Suite 120,
Woodland Hills,  California  91367,  and our telephone number is (818) 615-1500.
Information on our web sites, www.brilliantdigital.com and www.b3d.com, does not
constitute part of this Form 10-QSB.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion  and analysis of our financial  condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going basis,  we evaluate our estimates,  including those
related  to  reserves  for  bad  debts.  We base  our  estimates  on  historical
experience and on various other  assumptions  that are believed to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates  under  different  assumptions  or  conditions.  Our use of estimates,
however, is quite limited, as we have adequate time to process and record actual
results from operations.

         Our  critical  accounting  policies  are  described  in  Note  2 to the
consolidated  financial statements included in Item 7 of our Form 10-KSB for the
fiscal year ended  December 31, 2001.  We believe our most  critical  accounting
policies include revenue recognition,  the corresponding accounts receivable and
our use of the  consolidation  method when accounting for our  subsidiaries.  We
believe the following critical  accounting  policies affect our more significant
judgments  and  estimates  used in  preparation  of our  consolidated  financial
statements.

         Under SEC Staff  Accounting  Bulletin  No. 101 and AICPA  Statement  of
Position  97-2(SOP  97-2),  generally  we  recognize  revenue  when  all  of the
following  criteria are met: (1) persuasive  evidence of an arrangement  exists,
(2) delivery has occurred or services have been rendered, (3) the seller's price
to the buyer is fixed or  determinable,  and (4)  collectibility  is  reasonably
assured.  In the case of each of our product and  service  lines we  establish a
contract or insertion order with our customers with specifics for  requirements,
a fixed price, a delivery


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schedule, and terms for payment. Unless cash is paid in advance, our receivables
are recorded as revenue is earned. We regularly  evaluate the  collectibility of
our  receivables  based on a combination of factors.  When a customer's  account
becomes past due, we initiate dialogue with the customer to determine the cause.
If we  determine  that  the  customer  will  be  unable  to meet  its  financial
obligations to us, due to a bankruptcy  filing,  deterioration in the customer's
operating results or financial position or other material events impacting their
business,  we  record a  specific  reserve  for bad debt to reduce  the  related
receivable  to the amount we expect to recover given all  information  presently
available.  If circumstances related to specific customers change, our estimates
of the  recoverability  of receivables  could materially  change. We do not have
material exposure to any single customer or group of customers at this time.

         Commencing  in fiscal  2002,  we have  shifted  our  emphasis  from our
Internet  advertising  and  b3d  toolset  business  to our  Altnet  peer-to-peer
business.  This shift in  emphasis  has  occurred  primarily  due to our limited
financial resources which have been unable to support both businesses. With this
shift,  we  anticipate  that an increasing  percentage of future  revenues and a
substantial  majority  of our  operating  costs will be derived  from our Altnet
business.  We will generate revenue from our Altnet business by contracting with
content owners to distribute and sell their digital files to computer  users. We
will need to rely on estimates for bad debt reserves in those instances where we
charge a content owner a fee for each file downloaded or for each license issued
to an end user.

         We  have  significant  business  relationships  with  Sharman  Networks
Limited,  and piggyback on Sharman's  distribution of the KaZaA Media Desktop to
further  several of our  business  needs.  For  instance,  we bundle our Digital
Projector and Altnet  peer-to-peer  networking  software  with  downloads of the
KaZaA Media Desktop.  In addition,  commencing in the fourth quarter of 2002, we
intend to distribute and sell digital files to users of the KaZaA Media Desktop,
who search for,  select and  download  these files using  KaZaA's  graphic  user
interface.  We also generate revenue from the serving of Brilliant Banner ads on
the KaZaA Media Desktop.  Sharman Networks,  the KaZaA Media Desktop,  and other
peer-to-peer  software  products,  are  currently  the  subject  of  a  lawsuit,
METRO-GOLDWYN-MAYER  STUDIOS,  INC. ET. AL. V. GROKSTER,  LTD. ET. AL., filed in
the United States District Court for the Central District of California (Western
Division) by twenty-eight  entertainment  companies  claiming that,  among other
things,  the KaZaA Media  Desktop  facilitates,  contributes  to and  encourages
copyright infringement.  On November 18, 2001, there was an additional complaint
filed,  LIEBER ET. AL. V. CONSUMER  EMPOWERMENT B.V. ET. AL. A disruption in the
distribution  of the  KaZaA  Media  Desktop  by  Sharman,  as a  result  of this
litigation  or  otherwise,  would  necessarily  adversely  impact (1) the future
distribution of our Digital  Projector and Altnet  software,  which would impact
the growth of Altnet  users and  persons  enabled to view our b3d  content,  (2)
revenues we derive from serving  Brilliant  Banners on the KaZaA Media  Desktop,
and (3) the growth in users of the KaZaA  Media  Desktop to whom Altnet can sell
authorized digital files.

RESULTS OF OPERATIONS

         REVENUES

         ADVERTISING  REVENUE:  We derive  advertising  revenue by  serving  our
Brilliant Banner  advertisements on web sites and other Internet applications on
behalf of our advertiser  clients.  Our clients pay us a fee based on a cost per
thousand  impressions  (CPM)  or  specified   conversions


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delivered  (CPA). In accordance with SOP 97-2 we recognize this revenue when the
impressions are made or conversions  delivered,  and reflect this revenue in the
Operating Statement as Development fees and other revenue.

         DISTRIBUTION FEES: We have granted distribution rights to our Multipath
Movie products and b3d Toolset to distributors in exchange for a  non-refundable
minimum  fixed fee and a  percentage  of sales of the  products  within  certain
territories.

         In  accordance  with SOP 97-2,  revenue  related to the  non-refundable
minimum  fixed  fee is  recognized  when the  master  file is  delivered  to the
customer,  the terms of the sale are considered  fixed,  and  collectibility  is
probable. Additional revenue, based on a percentage of sales, is recognized upon
notification  by the  distributor  that a royalty  has been  earned  by us.  For
distribution agreements,  which cover a period of time in excess of one year and
are  exclusive  for  a  geographic   territory,   we  recognize   revenue  on  a
straight-line  basis  over  the  life  of  the  agreement.  In the  case  of our
distribution  agreement with e-New Media,  e-New Media paid us a  non-refundable
advance  for   distribution   rights  to  our  Multipath   Movies  in  specified
territories.  This  advance is being  recognized  as revenue on a  straight-line
basis over the six-year  term of the  agreement.  We reflect this revenue in the
Operating Statement as Distribution and technology revenue from a related party.

         PRODUCTION  FEES:  We have  received  revenue for the  development  and
creation  of  Music  Videos  for  Digital  Hip Hop and for 3D  Brilliant  Banner
advertisements.  We receive  production fees in exchange for the development and
creation of animated content including banner ads and animated music web videos,
in accordance with customer specifications. The development agreements generally
specify certain "milestones",  such as completion of the script or incorporation
of the music, which must be achieved throughout the production process. As these
milestones  are  achieved,  we  recognize  the  portion of the  development  fee
allocated to each milestone.  In the case of music videos, the production period
is 6 to 12 weeks and the customer  signs off on the  milestones as they are met,
and the customer is invoiced for that stage of production. In the case of banner
ads, the  production  period is much shorter,  perhaps two weeks,  so we usually
require 50% payment up front and 50% upon  completion.  We recognize the revenue
upon  delivery  of the  file to the  client.  We  reflect  this  revenue  in the
Operating Statement as Development fees and other revenue.

         DEVELOPMENT  FEES: We have received  revenue for the development of new
animated content for viewing in short segments,  or Webisodes,  on the Internet.
We  are no  longer  developing  Webisodes.  We  have  entered  into  development
contracts for series of Webisodes developed over a period of time under which we
are entitled to fixed minimum guaranteed payments.  In accordance with SOP 97-2,
the minimum  guaranteed  payments are recognized as revenue when the master file
is delivered for each Webisiode to the publisher for use on their web sites, the
terms of the sale are  considered  fixed  (upon  signing of the  contract),  and
collectibility  is  probable.  We develop or create the  Webisodes  based on the
publishers' scripted storyboards. The publishers have approval rights and review
the Webisodes as they are developed. The publisher reviews the content, look and
feel or style of the Webisode, script, music, voice-overs,  and all other facets
of the  Webisode.  We recognize  revenue  from these sales upon  delivery of the
master  file.  Additionally,  we receive an agreed  upon  percentage  of revenue
received by the publisher from advertising  attached to the Webisodes,  which we
recognize  when


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the  publisher  notifies  us that a royalty  has been  earned.  We reflect  this
revenue in the Operating Statement as Development fees and other revenue.

         SOFTWARE  SALES:  We receive or have received  revenue from the sale or
license of our software as follows:

                  b3d tools, our software products which enable a user to create
3D animation,  are downloaded over the internet.  We recognize  revenue once the
product is delivered and paid for by the end user.  Upon  payment,  the end user
receives  a key to  unlock  the  toolset,  which  the  end  user  can use for an
unlimited period. We reflect this revenue in the Operating Statement as Software
sales.

                  Multipath  Movies are 3D animated movies developed by us using
of b3d  tooset.  We no longer  produce  copies of existing  Multipath  Movies or
develop  new  Multipath  Movies.  All  Multipath  Movie  development  costs were
capitalized  and have since been  expensed.  The master  file for each movie was
delivered to our Woodland  Hills  office and CD-ROMs were  duplicated,  boxed in
jewel cases and shipped to wholesalers.  We recognized  revenue upon delivery of
the CD-ROMs to the wholesaler.  The wholesalers  delivered the product to retail
stores for sale to end users.  We  provided a reserve for returns and bad debts.
We reflected  Multipath  Movie  revenues in the Operating  Statement as Software
sales.

                  We have  entered  into  licensing  agreements  with  web  site
publishers for the display of Webisodes and Multipath  Movies on the publishers'
web sites.  We  received an agreed upon  percentage  of revenue  received by the
publisher from advertising attached to the Webisodes and Multipath Movies. Under
some agreements,  we received a fixed non-refundable minimum guaranteed payment.
In accordance withSOP 97-2, the minimum  guaranteed  payments were recognized as
revenue when the master file was  delivered to the  publisher,  the terms of the
sale  were   considered   fixed  (upon  the  signing  of  the   contract),   and
collectibility  was probable.  We recognized  revenues for advertising  when the
publisher  notified us that a royalty had been earned. We reflect these revenues
in the Operating  Statement as Development fees and other revenue.  We no longer
license Multipath Movies to publishers, and only license Webisodes to publishers
on a very limited basis.

                  We have entered into licensing  agreements  with  distributors
for conversion of our Multipath Movies to the DVD format and for distribution to
retailers.   We  entered  into   contracts   under  which  we  received   fixed,
non-refundable  minimum  guaranteed  payments.  In accordance with SOP 97-2, the
minimum guaranteed  payments were recognized as revenue when the master file was
delivered to the distributor,  the terms of the sale were considered fixed (upon
signing of the  contract),  and  collectibility  was probable.  We reflect these
revenues in the Operating  Statement as Development  fees and other revenue.  We
are no longer selling our Multipath Movies in the DVD format.

                  In the case of our  software  licensing  agreement  with e-New
Media,  e-New  Media  paid us a  non-refundable  advance  for  rights to our b3d
toolset to produce its own  Multipath  Movies and to resell the  toolset  within
specified  territories.  We  are  recognizing  this  advance  as  revenue  on  a
straight-line  basis over the five-year term of the  agreement.  We reflect this
revenue in the Operating Statement as Distribution and technology revenue from a
related party.


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         We intend to derive  revenue  from our Altnet  business by charging the
content  owner a  placement  or  distribution  fee  based  on one or more of the
following: (i) a negotiated fee for each file downloaded,  (ii) a negotiated fee
for each license  issued once the end user tries to play the file the first time
after it has been  downloaded,  and (iii) a negotiated  percentage  of the sales
price a computer user pays to purchase a digital file. Revenues earned from fees
charged for file downloads and licenses  issued to end users,  which are paid by
the content owner, will be recognized as each download occurs or license issues.
With  respect to revenues  earned from  purchases of digital  files  pursuant to
revenue  share  agreements  with content  owners,  we will  recognize  only that
portion of the purchase  price to which we are entitled  under our  agreement at
the time of payment by the end user.

         Revenues  decreased  12%  from  $1,439,000  for the nine  months  ended
September 30, 2001 to $1,269,000  for the nine months ended  September 30, 2002.
During the nine months ended  September 30, 2002,  our primary source of revenue
was from our  distribution  and technology  agreements  with e-New Media,  which
generated $688,000 in revenue. Internet Fuel, an agent for placement of Internet
advertising,  provided  revenues of $209,000  while Sharman  Networks  generated
revenues of  $154,000 as part of a revenue  sharing  agreement  for  advertising
deals  brokered  by us. We also  earned  $79,000 in  advertising  revenues  from
Winstar  Interactive,  an advertising  rep firm. In 2001,  e-New Media generated
$688,000, while Island Def Jam produced $250,000 related to web video production
fees and Warner Bros.  Online  generated  $240,000 of production and advertising
revenue.  We also earned $100,000 from an advertising  agreement with Infogrames
in 2001.  The  decrease in revenues  in the 2002  period is due  primarily  to a
reduction in revenues from the production of animated music videos following our
substantial  reduction of Digital Hip Hop  operations  in November  2001 and the
discontinuation  of production of our Superman series with Warner Bros.  Online.
This  reduction was partially  offset by the increase in  advertising  and other
revenue from Internet Fuel, Winstar Interactive and Sharman Networks.

         COST  OF  REVENUES.   Cost  of  revenues  consists   primarily  of  the
amortization  of  licensing  royalties  payable to third  parties and the direct
costs associated with content production and animation design.  Cost of revenues
decreased  significantly  from $542,000 for the nine months ended  September 30,
2001 to $158,000 for the nine months ended September 30, 2002. This represents a
decrease of $384,000,  or 71%,  which is  primarily  due to the  termination  of
production of content for Warner Bros.  Online and the substantial  reduction of
Digital  Hip Hop  operations.  Additionally  there  was a  decrease  in  royalty
expense,  from  $79,000  in 2001 to  $59,000  in 2002,  as two of our  licensing
agreements were fully amortized during 2001.

         SALES AND MARKETING.  Sales and marketing  expenses were reduced by 54%
from  $564,000 for the nine months ended  September 30, 2001 to $258,000 for the
nine months ended  September  30, 2002.  In the first half of 2001,  we incurred
$426,000 in expense for warrants  issued in connection  with our agreement  with
Yahoo!,  which was fully amortized  during 2001. The decrease in warrant expense
is partially offset by an increase in Internet bandwidth  expense,  from $34,000
in 2001 to $124,000 in 2002. Our bandwidth  expense  increased due to our launch
of Altnet  whereby  we hosted  some  files  propagated  on the  Altnet  network.
Additionally,  in the nine months ended September 30, 2002, we incurred $129,000
in fees paid to sales  consultants  primarily  in  connection  with our  initial
marketing efforts for Altnet.


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         GENERAL  AND  ADMINISTRATIVE.   General  and  administrative   expenses
primarily  include  salaries  and  benefits  of  management  and  administrative
personnel,   rent,   insurance  costs  and   professional   fees.   General  and
administrative  expenses  decreased $981,000 or 28% from $3,505,000 for the nine
months  ended  September  30,  2001 to  $2,524,000  for the  nine  months  ended
September  30,  2002.  The  over-all  decrease is a composite  of the U.S office
cutting  expenses by $939,000  and the  Australian  office  cutting  expenses by
$187,000.  Additionally,  due to the  substantial  reduction  of Digital Hip Hop
operations,  expenses were further  reduced by $532,000.  This was offset by the
addition of general and administrative expenses,  including legal and consulting
fees  related  to the  establishment  and launch of Altnet,  of  $675,000.  This
decrease in the U.S. office is primarily  attributable to a decrease in salaries
and  employee  benefits of $389,000  due to a reduction  in headcount in the Los
Angeles  office,  a decrease in insurance  costs of $81,000,  a reduction in the
rent expense of $41,000,  plus a reduction of $41,000 in travel costs.  Expenses
were  additionally  decreased  by $532,000 by the closure of the Digital Hip Hop
office in Los Angeles, of which $270,000 was attributable to payroll costs. With
the  commencement  of operations of our Altnet  peer-to-peer  subsidiary,  other
consulting  and  professional  fees  increased  by $125,000 in Los  Angeles.  In
Australia, a cut in the production space and a reduction in the headcount caused
a decrease in general and administrative costs of $187,000. The overall decrease
in general  and  administrative  expenses  was  partially  offset by a one-time,
non-cash  expense of $279,000  that we incurred in  connection  with options and
warrants  issued for  consulting  services,  primarily  related to the launch of
Altnet, during the 2002 period. Additionally,  we incurred $10,000 of consulting
expenses in the third quarter of 2002 related to the engagement of ECA.

         RESEARCH AND  DEVELOPMENT.  Research and development  expenses  include
salaries and benefits of personnel as well as payments to third party developers
attributable to the research and development of software products, including the
software  used by Altnet.  Research and  development  costs also  include  costs
associated with creating our software tools used to develop 3D animated  content
for banner ads and Internet web site  development  costs.  These costs decreased
87% from $1,362,000 for the nine months ended September 30, 2001 to $182,000 for
the nine months ended September 30, 2002 primarily due to a decrease in web site
development  costs,  research  and  development  personnel  and  overhead  costs
associated  with  research and  development.  We decreased  the headcount of our
research and development  personnel in our Sydney,  Australia office during 2001
from 53 employees to 7 employees at September 30, 2002.

         DEPRECIATION  AND   AMORTIZATION.   Depreciation   expense  relates  to
depreciation of fixed assets such as computer  equipment and cabling,  furniture
and fixtures and leasehold improvements. These fixed assets are depreciated over
their estimated useful lives (up to five years) using the straight-line  method.
Depreciation  expense  decreased  77% from  $235,000  for the nine months  ended
September 30, 2001 to $54,000 for the nine months ended  September 30, 2002. The
decrease is attributable to the full  amortization of certain fixed assets prior
to the nine months  ended  September  30,  2002 and the  disposal of other fixed
assets in connection with the closing of office space in Los Angeles and Sydney.

         OTHER INCOME AND EXPENSE.  Other income and expense  includes  interest
income and interest  expense and debt discount on capital  financing,  gains and
losses on foreign exchange  transactions,  and export development grants paid to
our now  closed  subsidiary,  Brilliant  Interactive  Ideas  Pty.  Ltd.,  by the
Australian Trade Commission for its participation in certain


                                       9


<PAGE>


export  activities.  Other income and expense  decreased from a loss of $117,000
for the nine months ended  September  30, 2001 to a loss of  $2,667,000  for the
nine  months  ended  September  30,  2002.  The loss is due to a  non-cash  debt
discount expense of $2,355,000 and accrued interest expense of $224,000 incurred
in connection  with our sale of $3,014,150  in principal  amount of  convertible
promissory notes in 2001. During the remaining quarter of 2002, we will incur an
additional  $520,000 in non-cash debt discount  expense in connection  with this
financing transaction.  See Note 5 for additional information.  We have incurred
$57,000 in interest  expense  pertaining to several  licensing  agreements and a
note.  During the first nine  months of 2001,  we earned  $56,000  for the trade
export grant and recognized a $44,000 gain on foreign exchange transactions.

         NET GAIN ON DISPOSAL OF  DISCONTINUED  OPERATIONS.  The Auction Channel
has been  accounted for as a  discontinued  operation  pursuant to  Management's
formal  adoption on December 31, 2000 of a plan to dissolve the business unit. A
net gain of $313,000  was  recognized  for the nine months ended  September  30,
2001.  The net assets of The Auction  Channel were sold in the second quarter of
2001 and the company was subsequently dissolved.

LIQUIDITY, CAPITAL RESOURCES AND RELATED PARTY TRANSACTIONS

         As of  September  30,  2002,  our  cash and  cash  equivalents  totaled
approximately  $785,000.  This is a net  increase  of  $600,000  as  compared to
December 31, 2001. The increase is due to debt and equity financing transactions
consummated  during  the  nine  months  ended  September  30,  2002,  offset  by
continuing losses from operations.

         Cash flows from operating,  financing and investing  activities for the
nine months ended  September  30, 2002 and 2001 are  summarized in the following
table:

     ACTIVITY:                                   2002              2001
     --------                                    ----              ----

     Continuing Operations ............      $(2,037,000)      $(4,498,000)
     Discontinuing Operations .........      $      --         $  (301,000)
     Investing ........................      $    (7,000)      $    (1,000)
     Financing ........................      $ 2,620,000       $ 2,284,000

         Net cash of  $2,037,000  used in operating  activities  during the nine
months ended  September 30, 2002 was primarily  attributable  to a net loss from
operations of $4,614,000.  This is compared to a net use of cash during the nine
months ended  September  30, 2001 of  $4,498,000  attributable  to a net loss of
$4,885,000  and  an  additional  use  of  cash  of  $301,000   attributable   to
discontinued operations.

         Net cash used to purchase computer  equipment amounted to $7,000 in the
nine months ended September 30, 2002.

         We are  required as of September  30, 2002 to make minimum  payments of
$37,000 under various licensing agreements.


                                       10


<PAGE>


         At  September  30,  2002,  we had  rental  commitments  for our  office
facility  of  $28,000  and one  promissory  note  for the  financing  of  office
furniture and computer equipment in the amount of $33,000 over the next 2 years.
Our contractual obligations are as follows:

              CONTRACTUAL                            LESS THAN        1-3
              OBLIGATIONS                TOTAL         1 YEAR        YEARS
              -----------                -----         ------        -----

     Capital Lease ..............       $33,000       $11,000       $22,000
     Operating Lease ............       $28,000       $21,000       $ 7,000


         In March 2002, we sold an aggregate of 6,051,437 shares of common stock
and warrants to purchase up to an aggregate of 10,758,110 shares of common stock
in a private placement for aggregate proceeds to us of $800,000.  In April 2002,
we sold an additional  2,276,045 shares of common stock and warrants to purchase
up to an aggregate of 4,145,921 shares common stock for aggregate proceeds to us
of $450,000.  In August 2002, we sold an aggregate of 7,123,836 shares of common
stock and warrants to purchase up to an aggregate of  12,664,597  shares  common
stock in a private placement for aggregate proceeds to us of $1,070,000.  Markev
Services,  LLC,  owned by Mark  Dyne,  our  Chairman,  and Kevin  Bermeister,  a
director and our Chief  Executive  Officer and  President,  and Harris Toibb,  a
significant  stockholder of the Company,  purchased  securities in some of these
financing   transactions.   See  Note  2  to  Notes  to  Consolidated  Financial
Statements.

         Our  operations  generated  negative  cash flow  during the nine months
ended  September  30,  2001 and 2002,  and we expect a  significant  use of cash
during the  remaining  months of the 2002  fiscal year as we continue to develop
the business opportunity for Altnet, as well as continue to develop our software
and  continue  our  marketing  efforts  for our 3D rich media  banners  ads.  We
anticipate our current cash reserves,  plus our expected generation of cash from
existing  operations,  will be sufficient to fund our  anticipated  expenditures
into the first quarter of fiscal 2003. Consequently,  we will require additional
equity or debt financing commencing in the first quarter of 2003, the amount and
timing of which will depend in large part on our  spending  program.  Our recent
financings  have  been  significantly   dilutive  to  our  stockholders  and  if
additional  funds are raised through the issuance of equity or convertible  debt
securities,  our stockholders may experience  significant  additional  dilution.
Furthermore,  there  can be no  assurance  that  additional  financing  will  be
available  when needed or that if available,  such  financing will include terms
favorable to our  stockholders  or us. If such  financing is not available  when
required or is not available on acceptable terms, we may be unable to develop or
enhance our products and services,  take advantage of business  opportunities or
respond to  competitive  pressures,  any of which could have a material  adverse
effect on our business, financial condition and results of operations, and would
most likely  result in our having to file for  bankruptcy  protection  under the
Bankruptcy Code.

         The accompanying  consolidated  financial statements have been prepared
assuming  that we will  continue  as a going  concern,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business.  The carrying  amounts of assets and  liabilities  presented in the
financial  statements  do not  purport to  represent  realizable  or  settlement
values.  The report of our  Independent  Certified  Public  Accountants  for the
December


                                       11


<PAGE>


31, 2001  financial  statements  included an  explanatory  paragraph  expressing
substantial doubt about our ability to continue as a going concern.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial  Accounting  Standards Board finalized FASB
Statements No. 141, BUSINESS  COMBINATIONS (SFAS 141), and No. 142, GOODWILL AND
OTHER  INTANGIBLE  ASSETS (SFAS 142).  SFAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interests method of
accounting for business  combinations  initiated  after June 30, 2001.  SFAS 141
also requires that we recognize  acquired  intangible assets apart from goodwill
if the acquired intangible assets meet certain criteria. SFAS 141 applies to all
business  combinations  initiated after June 30, 2001 and for purchase  business
combinations  completed on or after July 1, 2001.  It also requires  that,  upon
adoption of SFAS 142, we reclassify  the carrying  amounts of intangible  assets
and goodwill based on the criteria in SFAS 141.

         SFAS 142  requires,  among  other  things,  that  companies  no  longer
amortize  goodwill,  but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that we identify reporting units for the purposes
of assessing potential future impairments of goodwill, reassess the useful lives
of other  existing  recognized  intangible  assets,  and cease  amortization  of
intangible  assets with an indefinite  useful life. An intangible  asset with an
indefinite  useful life should be tested for  impairment in accordance  with the
guidance  in SFAS 142.  SFAS 142 is  required  to be  applied  in  fiscal  years
beginning  after December 15, 2001 to all goodwill and other  intangible  assets
recognized  at  that  date,  regardless  of when  those  assets  were  initially
recognized.  SFAS 142 requires us to complete a transitional goodwill impairment
test nine months from the date of adoption. We are also required to reassess the
useful lives of other  intangible  assets within the first interim quarter after
adoption of SFAS 142.

         In August  2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
Retirement Obligations". SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived  asset.  SFAS No. 143 is effective for fiscal years  beginning  after
June 15, 2002. We believe the adoption of this  Statement  will have no material
impact on our financial statements.

         In October  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets".  SFASB 144 requires  that those
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell,  whether  reported in  continuing  operations  or in  discontinued
operations. Therefore, discontinued operations will no longer be measured at net
realizable  value or include  amounts  for  operating  losses  that have not yet
occurred.  SFASB 144 is effective  for  financial  statements  issued for fiscal
years  beginning  after  December  15,  2001 and,  generally,  are to be applied
prospectively.  We believe the adoption of this  Statement will have no material
impact on our financial statements.

         In  April  2002,  the FASB  issued  SFAS No.  145,  Rescission  of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections.  This statement  eliminates the current  requirement that gains and
losses on debt  extinguishment  must be


                                       12


<PAGE>


classified as extraordinary items in the income statement.  Instead,  such gains
and losses will be classified as extraordinary  items only if they are deemed to
be unusual and  infrequent,  in  accordance  with the current GAAP  criteria for
extraordinary classification.  In addition, SFAS 145 eliminates an inconsistency
in lease  accounting  by requiring  that  modifications  of capital  leases that
result in  reclassification as operating leases be accounted for consistent with
sale-leaseback   accounting   rules.   The   statement   also   contains   other
nonsubstantive  corrections to authoritative accounting literature.  The changes
related to debt  extinguishment  will be effective  for fiscal  years  beginning
after  May 15,  2002,  and the  changes  related  to  lease  accounting  will be
effective  for  transactions  occurring  after May 15,  2002.  Adoption  of this
standard  will not have  any  immediate  effect  on our  consolidated  financial
statements.

         In June  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated  with Exit or Disposal  Activities,  which  addresses  accounting for
restructuring  and similar costs.  SFAS No. 146 supersedes  previous  accounting
guidance,  principally Emerging Issues Task Force (EITF) Issue No. 94-3. We will
adopt the  provisions  of SFAS No. 146 for  restructuring  activities  initiated
after  December 31, 2002.  SFAS No. 146 requires  that the  liability  for costs
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under EITF No. 94-3, a liability  for an exit cost was  recognized at
the  date  of a  company's  commitment  to an  exit  plan.  SFAS  No.  146  also
establishes that the liability should initially be measured and recorded at fair
value.  Accordingly,  SFAS No. 146 may affect the timing of  recognizing  future
restructuring costs as well as the amount recognized.

CAUTIONARY STATEMENTS AND RISK FACTORS

         Several   of  the   matters   discussed   in  this   document   contain
forward-looking  statements  that  involve  risks  and  uncertainties.   Factors
associated with the  forward-looking  statements that could cause actual results
to differ  materially  from those  projected  or  forecast  are  included in the
statements  below.  In addition to other  information  contained in this report,
readers should carefully consider the following cautionary statements.

         IF WE ARE UNABLE TO RAISE ADDITIONAL FUNDS, WE MAY BE REQUIRED TO DELAY
IMPLEMENTATION  OF OUR BUSINESS PLAN,  REDUCE OVERHEAD  SIGNIFICANTLY OR SUSPEND
OPERATIONS. We currently have a number of obligations that we are unable to meet
without  generating  additional  revenues or raising additional  capital.  If we
cannot  generate  additional  revenues or raise  additional  capital in the near
future, we may become insolvent.  As of September 30, 2002, our cash balance was
approximately  $785,000 and our outstanding  accounts payable,  accrued expenses
and  current  notes  payable  totaled  $1,018,000,  not  including  the  capital
financing notes, which have a convertible feature.  Historically, we have funded
our capital  requirements with debt and equity financing.  Our ability to obtain
additional equity or debt financing depends on a number of factors including our
financial  performance and the overall conditions in our industry. If we are not
able to raise  additional  financing or if such  financing  is not  available on
acceptable  terms, we may liquidate  assets,  seek or be forced into bankruptcy,
and/or  continue  operations  but suffer  material  harm to our  operations  and
financial condition.  These measures could have a material adverse affect on our
ability to continue as a going concern.

         WE HAVE A HISTORY OF LOSSES,  A NEGATIVE NET WORTH AND MAY NEVER ATTAIN
PROFITABILITY.  We have a  limited  operating  history  and  have  not  attained
profitability. Since inception, we have


                                       13


<PAGE>


incurred significant losses and negative cash flow, and as of September 30, 2002
we had an accumulated deficit of $59.2 million.  Additionally, as of the date of
this report,  our current  liabilities  exceed our current  assets.  We have not
achieved  profitability and expect to continue to incur operating losses for the
foreseeable future as we fund operating and capital expenditures in the areas of
software   tools   development,    brand   promotion,   sales   and   marketing,
administration,  deployment  of our Altnet  peer-to-peer  network and  operating
infrastructure.  Our business model assumes that consumers and advertisers  will
be attracted to our rich media advertising formats (Brilliant Banners), and that
animators and those who produce banner advertisements will use our b3d tools and
technology in the development of other b3d-produced  content. Our business model
also assumes that a significant  portion of our future  revenues will be derived
from  our  Altnet  peer-to-peer   business,   which  has  only  recently  become
operational. This business model is not yet proven and we cannot assure you that
we will ever achieve or sustain  profitability or that our operating losses will
not  increase  in the future or be  inconsistent  with the  expectations  of the
public market.  Primarily as a result of our continued  losses,  our independent
public  accountants  modified  the opinion on our  December  31, 2001  financial
statements  to  include  an   explanatory   paragraph   wherein  they  expressed
substantial doubt about our ability to continue as a going concern.

         OUR  RECENT  CAPITAL  RAISING  EFFORTS  HAVE  RESULTED  IN  SUBSTANTIAL
DILUTION TO OUR  STOCKHOLDERS  AND OUR FUTURE  CAPITAL NEEDS WOULD INCREASE THIS
DILUTION.  During 2001, we raised $3.0 million  through the sale of  convertible
promissory notes and common stock purchase warrants. The promissory notes, which
now mature on December  31, 2003,  and accrued  interest may be converted by the
holders at any time into a number of shares of our common  stock  determined  by
dividing the amount due under the notes, including interest, by a price equal to
the lesser of $0.20 and the lowest 5 day volume  weighted  average  price of our
common stock as reported by the American  Stock  Exchange at any time during the
term of the notes.  At October 30, 2002, the principal and interest  outstanding
under the Notes could be  converted  by the holders  into  28,169,269  shares of
common  stock,  which would  represent  46.8% of our  outstanding  common  stock
immediately following the conversion. The warrants attached to the Notes have an
expiration  date of May 23,  2004 and  entitle  the holders to purchase up to an
aggregate  of  69,768,745  shares of our Common  Stock at an  exercise  price of
$0.1353375 per share on 44,542,717  shares,  and at an exercise price of $0.2091
on 25,226,028  shares. The exercise of the warrants would increase the number of
shares  outstanding  and result in further  dilution to our other  stockholders.
Additionally,  during the first  nine  months of 2002,  we raised an  additional
$2,320,000  through the sale of 15,451,318  shares of common stock at an average
price  per  share of $0.15,  and in  connection  therewith  issued  warrants  to
purchase  up to an  additional  27,568,627  shares of common  stock at  exercise
prices ranging from $0.148725 to $0.28125 per share.  We anticipate  that during
the first  quarter of 2003,  we will need to raise  additional  capital,  as our
current  operations do not generate  positive cash flow. As such, any additional
capital raising efforts would cause further dilution to stockholders.

         The following table  illustrates our  capitalization  as of October 30,
2002,  and  identifies  the number of shares issued and  outstanding  as of such
date,  as well as the  number of shares  that may be issued in the  future  upon
conversion  of  outstanding   convertible   promissory  notes  and  exercise  of
outstanding options and warrants:


                                       14


<PAGE>


                                           SHARES OF         PERCENTAGE OF FULLY
SECURITY                                 COMMON STOCK          DILUTED SHARES
-----------------------------            ------------        -------------------

Outstanding Common Stock                   32,014,978                26.5%
Convertible Promissory Notes,
   with accrued interest                   34,494,092                28.6%
Outstanding Warrants(1)                    47,708,184                39.5%
Outstanding Options                         6,459,000                 5.4%
                                         ------------         ------------------
  Fully Diluted Shares of
     Common Stock(2)                      120,676,254               100.0%
------------------
1     For  purposes  of this  table,  we have only  included  warrants  that are
      "in-the-money"  (the exercise  price of the warrants is below the price of
      our common stock), and the number of shares of common stock underlying the
      outstanding  warrants has been calculated on a "cashless"  exercise basis,
      whereby  the holder of each  warrant  receives  upon  exercise a number of
      shares of common  stock with a value  equal to (i) the total  value of the
      shares  underlying the warrants less (ii) the aggregate  exercise price of
      the warrants,  and is  calculated  based on the closing sales price of our
      common stock on the American Stock Exchange on October 30, 2002, which was
      $0.32.
2      This number  excludes (i)  13,495,375  shares that have been reserved for
       issuance under our 1996 Stock Option Plan that were not the subject of an
       outstanding  stock  option or other award at October 30,  2002,  and (ii)
       70,035 shares underlying  warrants that have exercise prices ranging from
       $0.3216 to $0.75 per share, and thus not "in-the-money."
------------------

         IF WE  BECOME  INSOLVENT,  WE  WILL BE IN  DEFAULT  UNDER  OUR  SECURED
CONVERTIBLE  PROMISSORY  NOTES,  WHICH  COULD  RESULT IN OUR  OBLIGATION  TO PAY
IMMEDIATELY ALL AMOUNTS THEN OUTSTANDING UNDER THE NOTES. If we generally do not
pay,  or become  unable to pay,  our debts as such  debts  become  due,  we will
default under our  outstanding  Secured  Convertible  Promissory  Notes,  in the
aggregate  principal  amount of $3.0 million.  If a default occurs,  all amounts
owed to the holders of the notes would  immediately  become due and payable.  If
the debt  becomes due before its maturity in December  2003,  we likely will not
have sufficient funds to repay the indebtedness,  which will entitle the holders
of the notes to exercise all of their rights and remedies, including foreclosure
on all of our assets which we pledged as collateral  to secure  repayment of the
debt.

         ALTNET IS AN UNPROVEN  BUSINESS  VENTURE  AND MAY  REQUIRE  SIGNIFICANT
CAPITAL TO BE  SUCCESSFULLY  IMPLEMENTED.  Our Altnet  peer-to-peer  business is
unproven and we cannot  guaranty  that it will be  financially  successful.  The
success of the business  will depend,  in part, on our ability to enter into end
user agreements with a sufficient  number of qualified  personal computer owners
to  allow  the  network  to work  efficiently  and  effectively,  acceptance  by
corporate customers of our services, the technical viability of the commercially
available digital rights  management,  or DRM, software we employ to protect the
proprietary  content  that will pass  through  the Altnet  network and reside on
network  computers,  acceptance  of content  offered  through  TopSearch,  broad
acceptance and use of our micro-payment  processing  system,  and our underlying
peer-to-peer  technology.  Additionally,  we do not have  sufficient  capital to
internally fund Altnet's development and operations.  Consequently,  the capital
necessary  to fund  Altnet  and  expand  the  operations  will need to come from
outside  sources.  We cannot make  assurances


                                       15


<PAGE>


that sufficient capital will be available at all or on terms acceptable to us to
fund Altnet's development and operations.

         ALTNET'S MICRO-PAYMENT PROCESSING SYSTEM IS RELIANT UPON THE TECHNOLOGY
AND SYSTEMS OF THIRD PARTY VENDORS THAT PROVIDE THEIR SERVICES TO ALTNET. We use
the  technology  and  services  of third  parties  to  process  payment  for the
individual  sale of digital  content over our Altnet  peer-to-peer  system.  The
ability to process payment for individual sales at price points well below $1.00
(better known as micro payments) is integral to our ability to commercialize the
secure distribution to and sale of our customers' digital content to millions of
users.  Our  ability  to  commercialize  Altnet  could be  materially  adversely
affected if we do not maintain our  relationships  with the vendors that provide
these  services on our behalf.  Additionally,  a  disruption  in these  vendors'
services,  problems with their  technology,  or any other matters that interfere
with their provision of services to us could disrupt our ability to collect fees
for the digital  content we  distribute,  which would have a materially  adverse
affect on our operations and our relationship with our customers.

         OUR  BUSINESS  MODEL  CONTEMPLATES  RECEIVING  A PORTION  OF OUR FUTURE
REVENUES FROM RICH MEDIA INTERNET ADVERTISEMENTS  DEVELOPED AND SERVED USING OUR
SOFTWARE TOOLS AND FROM INTERNET ADVERTISING  SERVICES.  INTERNET ADVERTISING IS
DEPENDENT ON THE ECONOMIC  PROSPECTS OF  ADVERTISERS  AND THE ECONOMY IN GENERAL
AND RECENTLY HAS  EXPERIENCED A  SIGNIFICANT  DECLINE.  A CONTINUED  DECREASE IN
EXPENDITURES  BY ADVERTISERS OR A PROLONGED  DOWNTURN IN THE ECONOMY COULD CAUSE
US TO FAIL TO ACHIEVE OUR REVENUE PROJECTIONS.  We are focusing a portion of our
resources on generating revenues from the sale of our b3d tools for the creation
of rich media  Internet  advertisements  and from the sale of  technologies  and
services  to Web  publishers,  third  party  advertising  representation  firms,
advertisers  and  agencies.   In  recent  quarters,   the  market  for  Internet
advertising has experienced lower demand,  lower prices for  advertisements  and
the  reduction  of  marketing  and  advertising   budgets.   As  a  consequence,
expenditures for Internet  advertisements  have decreased.  We cannot be certain
that future decreases will not occur and that spending on Internet advertisement
will return to historical  levels. A continued decline in the economic prospects
of  advertisers  or the economy in general could cause us to fail to achieve our
advertising-related revenue projections.

         WE WILL NOT BE ABLE TO GENERATE  REVENUES FROM OUR BRILLIANT BANNERS IF
THEY DO NOT ACHIEVE MARKET ACCEPTANCE.  The success of our Brilliant Banner rich
media ad format and our ability to generate revenues through sale and serving of
these advertisements will be determined by consumer reaction and acceptance.  To
generate revenues, we must develop advertisements that appeal to the advertising
community and the consumer, which is unpredictable.  Additionally, our Brilliant
Banner  advertisements face competition from other online advertising  companies
like Unicast, Eyeblaster and Viewpoint. Other factors that influence our ability
to generate revenues from our Brilliant Banners include:

         o        Acceptance of the Brilliant Banner  advertising  format by web
                  sites;

         o        Performance  of the  Brilliant  Banner versus other rich media
                  advertising formats and traditional 2D advertisements; and


                                       16


<PAGE>


         o        Our  ability to broadly  disseminate  our  Digital  Projector,
                  which is necessary to view our Brilliant Banners.

         OUR  FAILURE TO  MAINTAIN  STRATEGIC  RELATIONSHIPS  WITH  DISTRIBUTION
PARTNERS  COULD  REDUCE  THE  NUMBER  OF  DIGITAL  PROJECTORS  WE  ARE  ABLE  TO
DISSEMINATE  TO CONSUMERS,  WHICH WOULD REDUCE THE NUMBER OF USERS THAT ARE ABLE
TO VIEW OUR MEDIA  CONTENT,  DECREASE  THE  VALUE OF OUR  BRILLIANT  BANNERS  TO
ADVERTISERS AND LIMIT THE NUMBER OF USERS FOR OUR ALTNET PEER-TO-PEER  BUSINESS.
We distribute our Digital Projector and the software necessary to create and run
our Altnet peer-to-peer business primarily by bundling it with Sharman Networks'
KaZaA  Media  Desktop.  We rely on  computer  users'  demand for the KaZaA Media
Desktop to increase the installed  base of our (1) Digital  Projector,  which is
necessary to view b3d-produced  content such as our Brilliant  Banners,  and (2)
Altnet software, which is necessary to connect users to our private peer-to-peer
network.  Our business,  results of operations and financial  condition could be
materially   adversely   affected  if  we  do  not  maintain  our   distribution
relationship  with Sharman Networks on acceptable terms or if this  relationship
does not achieve the projected  distribution of our Digital Projector and Altnet
software.  Additionally,  a disruption  in the  distribution  of the KaZaA Media
Desktop or a  decrease  in demand for the  product  by users  would  necessarily
impact (1) the future  distribution of our technology,  and (2) revenues derived
from  advertisers  that  were  introduced  by us to  Sharman  Networks.  Sharman
Networks, the KaZaA Media Desktop, and other peer-to-peer software products, are
currently the subject of a lawsuit, METRO-GOLDWYN-MAYER STUDIOS, INC. ET. AL. V.
GROKSTER,  LTD.  ET.  AL.,  filed in the United  States  District  Court for the
Central District of California (Western Division) by twenty-eight  entertainment
companies   claiming  that,   among  other  things,   the  KaZaA  Media  Desktop
facilitates,  contributes to and encourages copyright infringement.  On November
18, 2001, there was an additional  complaint  filed,  LIEBER ET. AL. V. CONSUMER
EMPOWERMENT  B.V. ET. AL. To the extent that Sharman  Networks is precluded from
distributing  the KaZaA Media Desktop as a result of this  litigation,  it would
prevent  the  further   distribution   of  the  Digital   Projector  and  Altnet
peer-to-peer software with the KaZaA product which could have a material adverse
affect on our business and financial condition.

         OUR STOCK PRICE MAY DECLINE  SIGNIFICANTLY  IF WE ARE DELISTED FROM THE
AMERICAN STOCK  EXCHANGE.  Our common stock  currently is quoted on the American
Stock Exchange.  For continued inclusion on the American Stock Exchange, we must
meet certain  tests,  including  maintaining  a sales price for our common stock
above  $1.00 per  share,  and net  tangible  assets of at least $6  million.  We
currently are not in compliance  with both the bid price and net tangible assets
requirements.  Specifically, we are not in compliance with the following listing
requirements as set forth in the AMEX Company Guide:

         o        Section  1003  (a)(i) with  shareholders'  equity of less than
                  $2,000,000 and losses from  continuing  operations  and/or net
                  losses in two of our three most recent fiscal years;

         o        Section 1003 (a)(ii)  with  shareholders'  equity of less than
                  $4,000,000 and losses from  continuing  operations  and/or net
                  losses in three of our four most recent fiscal years;

         o        Section 1003 (a)(iii) with  shareholders'  equity of less than
                  $6,000,000 and losses from  continuing  operations  and/or net
                  losses in our five most recent fiscal years; and


                                       17


<PAGE>


         o        Section  1003 (a)(iv) in that we have  sustained  losses which
                  are so  substantial  in relation to our overall  operations or
                  our existing financial  resources,  or our financial condition
                  has become so impaired  that it appears  questionable,  in the
                  opinion  of the  exchange,  as to  whether  we will be able to
                  continue  operations  and/or  meet  our  obligations  as  they
                  mature.

         We were afforded the  opportunity to submit a plan of compliance to the
exchange,  which we did on  April  30,  2002.  On June 19,  2002,  the  exchange
notified us that it accepted our plan of compliance and granted us an extension,
the length of which is at the discretion of the exchange,  to regain  compliance
with the continued listing standards.  We are subject to periodic reviews by the
exchange staff during the extension period.

         Failure  to  make  progress  consistent  with  the  plan  or to  regain
compliance  with the  continued  listing  standards by the end of the  extension
period could result in us being  delisted from the American Stock  Exchange.  If
this  occurs,  trading of our common  stock may be  conducted  on (i) the NASDAQ
SmallCap  Market,  if we qualify for listing at that time, which we currently do
not,  (ii) in the  over-the-counter  market  on the "pink  sheets",  or (iii) if
available,  the  NASD's  "Electronic  Bulletin  Board."  In any of those  cases,
investors  could find it more  difficult to buy or sell,  or to obtain  accurate
quotations as to the value of our common  stock.  The trading price per share of
our common stock likely would be reduced as a result.

         WE MAY NOT BE ABLE TO COMPETE  EFFECTIVELY  WITH OTHER  COMPANIES  THAT
OFFER SOFTWARE TOOLS AND SERVICES  SIMILAR TO OURS. The markets for our software
tools are highly  competitive and  characterized  by pressure to incorporate new
features and  accelerate the release of new and enhanced  products.  A number of
companies currently offer content development products and services that compete
directly or  indirectly  with one or more of our tools sets.  These  competitors
include,  among others,  Macromedia,  Inc., Adobe Systems, Inc. as well as Pulse
Entertainment,  Inc.  and  Viewpoint  Corporation.  As we  compete  with  larger
competitors  such as  Macromedia  across a broader  range of  product  lines and
different platforms, we may face increasing competition from such companies.

         WE MAY BE UNABLE TO SUCCESSFULLY COMPETE WITH MICROSOFT,  REAL NETWORKS
AND OTHER  COMPANIES IN THE MEDIA DELIVERY  MARKET.  The market for software and
services for the delivery of media over the Internet is constantly  changing and
highly competitive.  Companies such as Microsoft  Corporation and Real Networks,
Inc.  have   substantial   penetration  in  the  media  delivery   market,   and
significantly  greater  resources  than we do. More  companies  are entering the
market for,  and  expending  increasing  resources  to develop,  media  delivery
software and services.  We expect that  competition  will continue to intensify.
Because our b3d content, such as our Brilliant Banners, can only be viewed using
our Digital  Projector,  if we do not achieve a widespread  distribution  of our
media player,  there will not be substantial demand for b3d-produced  content or
our software tools.

         IF WE DO NOT IMPROVE OUR SOFTWARE  TOOLS TO PRODUCE NEW,  MORE ENHANCED
3D ANIMATED CONTENT, OUR REVENUES WILL BE ADVERSELY AFFECTED. The software tools
that enable us to create 3D content,  such as our Brilliant  Banners,  have been
developed  over the past five  years.  Additional  refinement  of these tools is
necessary  to  continue  to  enhance  the  b3d  format.  If  we  cannot


                                       18


<PAGE>


develop  improvements  to these software  tools,  our Brilliant  Banners and all
other b3d-produced  content may not obtain or maintain market acceptance and our
revenues will be adversely affected.

         ERRORS OR DEFECTS IN OUR  SOFTWARE  TOOLS AND PRODUCTS MAY CAUSE A LOSS
OF MARKET ACCEPTANCE AND RESULT IN FEWER SALES OF OUR PRODUCTS. Our products are
complex and may contain undetected errors or defects when first introduced or as
new versions are released.  In the past, we have  discovered  software errors in
some of our new  products and  enhancements  after their  introduction  into the
market. Because our products are complex, we anticipate that software errors and
defects will be present in new products or releases in the future. While to date
these errors have not been  material,  future errors and defects could result in
adverse  product  reviews and a loss of, or delay in,  market  acceptance of our
products.

         TO DEVELOP  PRODUCTS THAT CONSUMERS  DESIRE,  WE MUST MAKE  SUBSTANTIAL
INVESTMENTS IN RESEARCH AND DEVELOPMENT TO KEEP UP WITH THE RAPID  TECHNOLOGICAL
DEVELOPMENTS  THAT ARE TYPICAL IN OUR INDUSTRY.  The software  market and the PC
industry are subject to rapid  technological  developments.  To develop products
that  consumers  desire,  we must  continually  improve and enhance our existing
products  and  technologies  and  develop new  products  and  technologies  that
incorporate these technological developments.  We cannot be certain that we will
have the financial and technical resources available to make these improvements.
We must make improvements to our technology while remaining competitive in terms
of performance and price.  This will require us to make  investments in research
and  development,  often times well in advance of the widespread  release of the
products in the market and any revenues these products may generate.

         OUR STOCK PRICE AND TRADING VOLUME FLUCTUATE WIDELY AND MAY CONTINUE TO
DO SO IN THE FUTURE. AS A RESULT, WE MAY EXPERIENCE  SIGNIFICANT DECLINES IN OUR
STOCK PRICE.  The market  price and trading  volume of our common  stock,  which
trades  on  the  American  Stock  Exchange,  has  been  subject  to  substantial
volatility,  which  is  likely  to  continue.  This  volatility  may  result  in
significant  declines in the price of our common  stock.  Factors that may cause
these fluctuations include:

         o        variations in quarterly operating results;

         o        the gain or loss of significant contracts;

         o        changes in management;

         o        announcements of technological  innovations or new products by
                  us or our competitors;

         o        recommendations by securities industry analysts;

         o        dilution to existing stockholders  resulting from the issuance
                  of additional shares of common stock; and

         o        short sales and hedging of our common stock.

         Additionally,  the  stock  market  has  experienced  extreme  price and
trading volume fluctuations that have affected the market price of securities of
many technology companies.  These fluctuations have, at times, been unrelated to
the operating  performances  of the specific  companies whose stock is affected.
The  market  price and  trading  volume of our  stock  may be  subject  to these
fluctuations.


                                       19


<PAGE>


         IF  OUR  STOCK  DOES  NOT  SUSTAIN  A   SIGNIFICANT   TRADING   VOLUME,
STOCKHOLDERS  MAY BE UNABLE TO SELL LARGE  POSITIONS IN OUR COMMON STOCK. In the
past,  our common  stock has not  experienced  significant  trading  volume on a
consistent  basis and has not been actively  followed by stock market  analysts.
The average  trading  volume in our common stock may not increase or sustain its
current  levels.  As a result,  we cannot be certain  that an  adequate  trading
market will exist to permit  stockholders  to sell large positions in our common
stock.

         FLUCTUATIONS IN OPERATING  RESULTS MAY RESULT IN UNEXPECTED  REDUCTIONS
IN REVENUE AND STOCK PRICE VOLATILITY. We operate in an industry that is subject
to significant  fluctuations in operating results from quarter to quarter, which
may lead to  unexpected  reductions  in  revenues  and stock  price  volatility.
Factors that may influence our quarterly operating results include:

         o        the  introduction  or  enhancement  of software  products  and
                  technology by us and our competitors;

         o        the use by animators  of our  toolsets to create  b3d-produced
                  content;

         o        the market's acceptance of our 3D Brilliant Banner advertising
                  format; and

         o        our  ability  to operate  and  expand our Altnet  peer-to-peer
                  business.

         Additionally,  a  majority  of the unit  sales for a product  typically
occurs in the  quarter in which the  product  is  introduced.  As a result,  our
revenues  may  increase  significantly  in a  quarter  in which a major  product
introduction occurs and may decline in following quarters.

         DECREASES IN THE PRICE OF OUR COMMON STOCK COULD  INCREASE  SHORT SALES
OF OUR COMMON STOCK BY THIRD PARTIES,  WHICH COULD RESULT IN FURTHER  REDUCTIONS
IN THE PRICE OF OUR COMMON STOCK. Our sales of common stock at a discount to the
market price of our common  stock,  which may be  necessary to raise  additional
capital to fund  operations,  could result in  reductions in the market price of
our common  stock.  Downward  pressure  on the price of our common  stock  could
encourage short sales of the stock by third parties.  Material  amounts of short
selling could place further downward  pressure on the market price of the common
stock.  A short  sale is a sale of stock  that is not owned by the  seller.  The
seller  borrows the stock for  delivery at the time of the short sale,  and buys
back the stock when it is necessary to return the borrowed shares.  If the price
of the common stock declines between the time the seller sells the stock and the
time the seller subsequently  repurchases the common stock, then the seller sold
the shares for a higher  price than he  purchased  the shares and may  realize a
profit.

         WE  WILL  NOT  BE  ABLE  TO  GENERATE  SIGNIFICANT  REVENUES  FROM  OUR
TECHNOLOGY  BUSINESS IF OUR B3D TOOLSET DOES NOT ACHIEVE MARKET ACCEPTANCE.  Our
b3d toolset may have programming errors, may be incompatible with other software
or hardware  products in the market,  may face slow adoption in the  marketplace
and may face competition from other toolmakers. Other factors that influence our
ability to generate revenues from our b3d toolset include:

         o        our marketing strategies;

         o        the quality of our products and competing products;

         o        critical reviews;

         o        the  availability of alternative  forms of  entertainment  and
                  leisure time activities;

         o        our  ability  to sell  advertising  and  sponsorships  for the
                  content;


                                       20


<PAGE>


         o        our  ability to  increase  the  installed  base of our Digital
                  Projector, which is necessary to view b3d-produced content;

         o        our  b3d  toolset  may  contain  features,   functionality  or
                  workflow  conventions  that may not be widely  accepted by our
                  target audience;

         o        our ability to  continue  to develop,  enhance and deliver the
                  toolset in accordance with established milestones; and

         o        the marketplace's reluctance to adopt a new toolset.

         OUR  PROPRIETARY  TECHNOLOGY  MAY  NOT  BE  ADEQUATELY  PROTECTED  FROM
UNAUTHORIZED  USE BY OTHERS,  WHICH  COULD  INCREASE  OUR  LITIGATION  COSTS AND
ADVERSELY  AFFECT OUR SALES.  Our  ability to compete  with other  entertainment
software companies depends in part upon our proprietary technology. Unauthorized
use by others of our  proprietary  technology  could  result in an  increase  in
competing  products and a reduction in our sales. We rely on trademark,  patent,
trade  secret and  copyright  laws to protect  our  technology,  and require all
employees and third-party developers to sign nondisclosure agreements. We cannot
be certain,  however,  that these precautions will provide meaningful protection
from unauthorized use by others. We do not copy-protect our software,  so it may
be possible for  unauthorized  third  parties to copy our products or to reverse
engineer or otherwise  obtain and use information that we regard as proprietary.
Our  customers  may take  inadequate  precautions  to  protect  our  proprietary
information.  If we  must  pursue  litigation  in  the  future  to  enforce  our
intellectual  property rights,  to protect our trade secrets or to determine the
validity and scope of the proprietary  rights of others,  we may not prevail and
will likely make  substantial  expenditures  and divert valuable  resources.  In
addition,  many foreign  countries' laws may not protect us from improper use of
our proprietary  technologies overseas. We may not have adequate remedies if our
proprietary rights are breached or our trade secrets are disclosed.

         IF OUR PRODUCTS  INFRINGE ANY PROPRIETARY  RIGHTS OF OTHERS,  A LAWSUIT
MAY BE BROUGHT  AGAINST US THAT COULD REQUIRE US TO PAY LARGE LEGAL EXPENSES AND
JUDGMENTS AND REDESIGN OR DISCONTINUE  SELLING OUR PRODUCT.  We believe that our
products,  including  our software  tools,  do not  infringe any valid  existing
proprietary rights of third parties. Any infringement claims,  however,  whether
or not  meritorious,  could result in costly  litigation  or require us to enter
into  royalty or licensing  agreements.  If we are found to have  infringed  the
proprietary rights of others, we could be required to pay damages,  redesign the
products or  discontinue  their sale.  Any of these  outcomes,  individually  or
collectively, could have a material adverse effect on our business and financial
condition.

         WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE
PRICE  OF OUR  COMMON  STOCK.  Our  ability  to issue up to  700,000  shares  of
preferred  stock and some  provisions of our  certificate of  incorporation  and
bylaws and of  Delaware  law could make it more  difficult  for a third party to
make an unsolicited  takeover  attempt of us. These  anti-takeover  measures may
depress  the price of our  common  stock by making  third  parties  less able to
acquire  us by  offering  to  purchase  shares of our stock at a premium  to its
market price. Our Board of Directors can issue up to 700,000 shares of preferred
stock and determine the price, rights, preferences, privileges and restrictions,
including  voting rights,  of those shares without any further vote or action by
our  stockholders.  Our Board of Directors  could issue the preferred stock with
voting,  liquidation,  dividend and other  rights  superior to the rights of our
common stock.  The rights of holders of our common stock will be subject to, and
may be adversely affected by, the rights of


                                       21


<PAGE>


holders  of the share  purchase  rights and of any  preferred  stock that may be
issued in the future. The issuance of preferred stock, while providing desirable
flexibility  in  connection  with  possible  acquisitions  and  other  corporate
purposes,  could make it more  difficult for a third party to acquire a majority
of our outstanding voting stock.


                                       22


<PAGE>


                                     PART II

                                OTHER INFORMATION



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits - The following exhibits are filed as part of this report:


         10.1     Common Stock and Warrant  Purchase  Agreement dated August 26,
                  2002,  by  and  among  Registrant  and  Harris  Toibb,  Markev
                  Services,  LLC,  Ronald  Lachman,  David Wilson,  Bob Haya and
                  Scott Hergott.*
         10.2     Form of Warrant to Purchase  Common Stock from August 26, 2002
                  financing.*
         10.3     Warrant to  Purchase  Common  Stock,  dated  August 28,  2002,
                  issued in favor of SRO Consulting, Inc.*
         10.4     Letter Agreement,  dated August 19, 2002,  between  Registrant
                  and Europlay Capital Advisors, LLC.*
         10.5     Letter Agreement,  dated October 2, 2002, among Registrant and
                  the holders of  Registrant's  Secured  Convertible  Promissory
                  Notes.*
         10.6     Form of Amendment Number One to Secured Convertible Promissory
                  Note dated as of December 19, 2001.*
         10.7     Form of Amendment Number Two to Secured Convertible Promissory
                  Note dated as of May 23, 2001.*
         10.8     Form  of  Warrant  issued  in  connection  with  extension  of
                  maturity date of Secured Convertible Promissory Notes.*
         10.9     Contractor,   Confidential  Information  and  Non-Solicitation
                  Agreement,  dated as of February 2002,  between Registrant and
                  Abe Sher.*
         99.1     Certificate of our Chief Executive Officer and Chief Financial
                  Officer pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002.

         *   Previously reported on Form 10-QSB.

(b)      Reports on Form 8-K:

         None


                                       23


<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          BRILLIANT DIGITAL ENTERTAINMENT, INC.


Date:  July 3, 2003                         /s/ Tyler Tarr
                                          ----------------------------
                                          By:  Tyler Tarr
                                          Its: Chief Financial Officer
                                               (Principal Financial
                                               and Accounting Officer)


                                       24


<PAGE>


                        Certification of CEO Pursuant to
                 Securities Exchange Act Rules 13a-14 and 15d-14
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Kevin Bermeister, certify that:

         1. I have reviewed this quarterly  report on Form 10-QSB/A of Brilliant
Digital Entertainment, Inc.;

         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 officers 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  officers 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  officers 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:    July 3, 2003

                                                      /s/ Kevin Bermeister
                                                     -----------------------
                                                     Kevin Bermeister
                                                     Chief Executive Officer


                                       25


<PAGE>


                        Certification of CFO Pursuant to
                 Securities Exchange Act Rules 13a-14 and 15d-14
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Tyler Tarr, certify that:

         1. I have reviewed this quarterly  report on Form 10-QSB/A of Brilliant
Digital Entertainment, Inc.;

         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 officers 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  officers 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  officers 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:    July 3, 2003

                                                      /s/ Tyler Tarr
                                                     -----------------------
                                                     Tyler Tarr
                                                     Chief Financial Officer


                                       26