U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

(Mark  One)

[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  No.  0-27649
                       -------


                        UPGRADE INTERNATIONAL CORPORATION
        (Exact name of small business issuer as specified in its charter)

                      Washington                   58-2441311
           -------------------------------     --------------------
           (State or other jurisdiction of      (I.R.S.  Employer
           incorporation or  organization)     Identification No.)

            1411 FOURTH AVENUE - SUITE 629 SEATTLE, WASHINGTON  98101
                    (Address of principal executive offices)

                                 (206) 903-3116
                (Issuer's telephone number, including area code)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 12 months (or for such shorter
period  that the Registrant was required to file such reports), and (2) has been
subject  to  such  filing  requirements  for  the  past  90  days.

                                YES   x        NO
                                     ---           ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of July 31, 2001, 24,024,615 shares
of  common  stock,  $.0001  par  value  were  outstanding.

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


                                        1
<PAGE>
                                      INDEX

PART  I  -  Financial  Information                                         Page

Item  1.    Financial  Statements
--------    ---------------------

Consolidated  balance  sheets  at September 30, 2000 (audited) and
June 30, 2001 (unaudited)

Consolidated statements of operations for the nine months and three
months ended June 30, 2001 and 2000 and cumulative since inception
(February 5, 1997) through June  30,  2001  (unaudited)

Consolidated statement of cash flows for the nine months ended June
30, 2001 and 2000 and cumulative since inception (February 5, 1997)
through  June  30,  2001  (unaudited)

Notes  to  the  Financial  Statements  (unaudited)


Item  2.     Management's Discussion and Analysis or Plan of Operation
--------     ---------------------------------------------------------

PART  II  -  Other  Information

Item  1.  Legal  Proceedings
--------  -------------------

Item  2.  Changes  In  Securities  and  Use  of  Proceeds
--------  -----------------------------------------------

Item  5.  Other  Information
--------  ------------------

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

Signatures


                                        2
<PAGE>
<TABLE>
<CAPTION>
                        Upgrade International Corporation and Subsidiaries
                                 (A development stage enterprise)

                                    CONSOLIDATED BALANCE SHEETS

                                              ASSETS

                                                                     September 30,     June 30,
                                                                         2000            2001
                                                                    ---------------  -------------
<S>                                                                 <C>              <C>
CURRENT ASSETS                                                                         (unaudited)
  Cash and cash equivalents                                         $      398,989   $    107,919
  Restricted deposit                                                       805,687        300,000
  Subscription receivable                                                   32,725              -
  Due from related party                                                         -        130,000
  Equipment held for resale                                                      -      3,054,125
  Prepaid expenses, deposits and other                                     121,491        358,245
                                                                    ---------------  -------------

      Total current assets                                               1,358,892      3,950,289

PROPERTY AND EQUIPMENT - AT COST,
  less accumulated depreciation and amortization                         1,791,257      2,093,076

EQUIPMENT UNDER CONSTRUCTION                                             3,301,625              -

ADVANCES TO THE PATHWAYS GROUP, INC                                      1,900,825              -
  less allowance for uncollectible advances of $0. and
  $3,399,780, respectively

ADVANCES TO ROCKSTER, INC.                                                       -        950,000

OTHER ASSETS
  Intangible and deferred assets, net of accumulated amortization          370,206        622,606
  Deposits & notes                                                         328,051        332,845
                                                                    ---------------  -------------
      Total assets                                                  $    9,050,856   $  7,948,816
                                                                    ===============  =============

                            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                                  $    1,993,796   $  4,496,134
  Accrued liabilities                                                      733,241      2,151,140
  Bridge loans                                                             799,177        434,259
  Notes payable                                                                  -        431,453
  Equipment purchase contract payable                                    2,307,025      1,850,000
  Royalty fee payable to Card Tech, Inc., net                              487,500        975,000
  Payable to related parties                                               175,240      1,170,560
                                                                    ---------------  -------------

      Total current liabilities                                          6,495,979     11,508,546

NOTES PAYABLE, net of unamortized discount                                       -        890,322

CONVERTIBLE DEBENTURES, net of unamortized discount                        809,043      1,662,973

MINORITY INTEREST                                                                -              -

COMMITMENTS AND CONTINGENCIES                                                    -              -

STOCKHOLDERS' EQUITY (DEFICIT)
  Common stock - $.001 par value, 50,000,000 shares authorized              20,341         23,725
  Stock subscriptions                                                      323,640        711,012
  Additional paid in capital                                            36,925,837     50,829,216
  Receivable from stockholders of subsidiary                              (266,621)      (266,621)
  Accumulated development stage deficit                                (35,257,363)   (57,410,357)
                                                                    ---------------  -------------
                                                                         1,745,834     (6,113,025)
                                                                    ---------------  -------------
Total liabilities and stockholders' equity (deficit)                $    9,050,856   $  7,948,816
                                                                    ===============  =============
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                    Upgrade International Corporation and Subsidiaries
                                             (A development stage enterprise)

                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                                       (unaudited)


                                                                                                         Cumulative
                                                         Nine months             Three months            results of
                                                        ended June 30,           ended June 30,        operations since
                                                  -------------------------  -----------------------      inception
                                                      2000         2001         2000         2001     (February 5, 1997)
                                                  ------------  -----------  -----------  ----------  -------------------
<S>                                               <C>           <C>          <C>          <C>         <C>
Costs and expenses
  Research and development                        $ 2,523,486   $ 5,030,133  $  654,359   $1,490,718  $       13,180,805
  Purchased in-process research and development       425,800             -           -            -           5,971,603
  Sales and marketing                               1,115,910     1,276,559     187,375      140,908           4,891,522
  General and administrative                        8,666,055     8,519,784   4,276,125    1,430,092          19,667,791
                                                  ------------  -----------  -----------  ----------  -------------------
                                                   12,731,251    14,826,476   5,117,859    3,061,718          43,711,721
Other expenses (income)
  Equity in losses of UltraCard                             -             -           -            -           1,264,316
  Interest expense                                    588,858     3,733,448      68,214    2,706,606           4,697,442
  Provision for uncollectible advances                      -     3,399,780                3,339,780           3,399,780
  Other, net                                          209,299       193,290     295,790      106,504             435,438
                                                  ------------  -----------  -----------  ----------  -------------------
                                                      798,157     7,326,518     364,004    6,212,890           9,796,976

Minority interest in losses of subsidiaries        (1,758,371)            -     (71,038)           -          (2,115,135)
                                                  ------------  -----------  -----------  ----------  -------------------

NET LOSS                                          $11,771,037   $22,152,994  $5,410,825   $9,274,608  $       51,393,562
                                                  ============  ===========  ===========  ==========  ===================

LOSS PER COMMON
  SHARE-BASIC AND DILUTED                         $      0.64   $      1.01  $     0.28   $     0.39  $             4.12
                                                  ============  ===========  ===========  ==========  ===================
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                        Upgrade International Corporation and Subsidiaries
                                                 (A development stage enterprise)

                                                 STATEMENT OF STOCKHOLDERS' EQUITY

                                            Nine months ended June 30, 2001 (unaudited)


                                                                                         Receivable
                                                                                           from        Accumulated
                          Voting common stock  Common stock subscribed     Additional   Stockholders   Development
                          -------------------  -------------------------    paid-in          of          stage
                            Shares    Amount     Shares        Amount       Capital      subsidiary      deficit         Total
                          ----------  -------  -----------  ------------  ------------  ------------  -------------  -------------
<S>                       <C>         <C>      <C>          <C>           <C>           <C>           <C>            <C>
Balances at
  October 1, 2000         20,340,610  $20,341     102,609   $   323,640   $36,925,837   $  (266,621)  $(35,257,363)  $  1,745,834

Issuance of shares in
  October 2000
  subscribed to shares
  in May 2000                102,609      102    (102,609)     (323,640)      323,538             -              -              -

Issuance of common
  shares at $10.50 per
  share in October 2000,
  net of costs               142,860      143           -             -     1,349,857             -              -      1,350,000

Shares subscribed to
  at $6.00 per share in
  October 2000, net
  of costs                         -        -     258,333     1,070,000      (100,000)            -              -        970,000

Allocation of debenture
  proceeds to
  common stock               167,768      168                                 444,435                                     444,603

Allocation of
  debenture proceeds
  to common
  stock warrants                   -        -           -             -       829,551             -              -        829,551

Allocation of debenture
  proceeds to
  beneficial
  conversion feature               -        -           -             -     1,051,096             -              -      1,051,096

Allocation of
  promissory note
  proceeds to
  common stock                40,000       40           -             -       136,167             -              -        136,207

Common stock
  subscribed to at $4.00
  per share in
  December 2000                    -        -     125,000       500,000             -             -              -        500,000

Common shares
  subscribed at $2.00
per share in
  December 2000, net
  of issuance costs                -        -     389,129       778,257      (102,208)            -              -        676,049

Common shares
  subscribed in
  December 2000
  at $0.25 through
  the exercise of
  stock warrants                   -        -      20,000         5,000             -             -              -          5,000


                                        5
<PAGE>
                                                      "Continued"
Issuance of common
  shares at $2.02 per
  share pursuant to
  conversion of
  debentuer                  107,981      108                                 218,014             -              -        218,122

Issuance of common
  shares pursuant to
  warrant exercise
  at $0.25 per share                              200,000        50,000                           -              -         50,000

Shares subscribed to
  at $2.50 per share
  in January 2001,
  net of costs                     -        -     200,000       500,000       (50,000)            -              -        450,000

Modification of
  warrants                         -        -           -             -     2,414,000             -              -      2,414,000

Issuance of common
  shares at $1.43
  per share pursuant
  to conversion
  of debentures              307,509      307           -             -       438,049             -              -        438,356

Shares subscribed to
  at $2.50 per share
  in February 2001
  net of costs                                     80,000       200,000       (20,000)                                    180,000

Common shares
  subscribed at $3.75
  per share as
  additional
  consideration
  on debt                          -        -      16,267        61,001                           -              -         61,001

Common shares
  subscribed at $3.31
  as additional
  consideration on debt                            18,429        61,001                           -              -         61,001

Common stock issued
in March 2001 for
  shares previously
  subscribed                 253,334      254    (253,334)     (925,000)      924,746             -              -              -

Warrants issued with a
strike price of $6.00
  per share as
  additional
  compensation
  on debt                          -        -                                   7,708             -              -          7,708

Warrants issued with
a Strike price of $3.75
  per share as
  additional
  compensation
  on debt                          -        -                                  14,659             -              -         14,659

Warrants issued with
a Strike price of $3.31
  per share as
  additional
  compensation
  on debt                                   -           -             -        12,715             -              -         12,715

Issuance of common
  shares at $2.00 per
  share net of
  financing costs                                 828,496     1,656,992        (5,000)            -              -      1,651,952

Placement fees accrued
  on prior financings                                                        (831,133)                                   (831,133)

Allocation of debenture
Proceeds to beneficial
Conversion feature                 -        -           -             -       790,369             -              -        790,369

Adjustment to
  remeasurement of
  attorney stock
  options
                                                                             (510,315)                                   (510,315)

The accompanying notes are an integral part of this statement.


                                        6
<PAGE>
                                                      "Continued"
Issuance of common
Stock in April for
shares previously
subscribed                 1,606,721    1,607  (1,606,721)   (3,703,442)    3,701,835             -              -              -

Common stock
subscribed at $2.00 per
share in April                     -        -      15,000        30,000             -             -              -         30,000

Common stock
subscribed at $1.74 per
share  pursuant to
conversion of
debentures
in June 2001                       -               12,784        22,203             -             -              -         22,203

Common stock
subscribed at $2.70
per  share in
connection
with debt in
June 2001                          -               50,000       135,000             -             -              -        135,000

Common stock
subscribed at $2.32
to $2.83 per share
from April through
June 2001 as
additional
financing fees                     -               47,490       125,000             -             -              -        125,000

Shares issued pursuant
to conversion of
debentures
at $1.25 per share            82,000       82           -             -       102,418             -              -        102,500

Shares issued pursuant
to conversion of
debentures
at $1.74                     115,606      116           -             -       200,692             -              -        200,808

Shares issued pursuant
to conversion of
debentures at $1.00           29,433       29           -             -        29,404             -              -         29,433

Shares subscribed in
April, 2001 for $2.00
per share pursuant to
private placement net
of stock issue costs         375,000      375           -             -       649,625             -              -        650,000

Issuance of warrants
issued at $2.03 to $3.75
as  additional
financing fees                     -        -           -             -     1,383,353             -              -      1,383,353

Allocation of debenture
proceeds to beneficial
conversion feature                 -        -           -             -       281,843             -              -        281,843

Allocation of debenture
proceeds to cashless
exercise warrants                  -        -           -             -        48,487             -              -         48,487

Common stock
subscribed in lieu of
 loan origination fees             -        -      50,000       145,000             -             -              -        145,000

Common stock issued
at $3.19 per share from
April through June 2001
as additional
financing fees                53,185       53           -             -       169,474             -              -        169,527

Net consolidated loss
for the nine months
ended June 30, 2001                -        -           -             -             -             -    (22,152,994)   (22,152,994)
                          ----------  -------  -----------  ------------  ------------  ------------  -------------  -------------

Balances
June 30, 2001             23,724,616  $23,725     450,873   $   711,012    50,829,216   $  (266,621)  $(57,410,357)  $  6,113,025
                          ==========  =======  ===========  ============  ============  ============  =============  =============
</TABLE>

The  accompanying  notes  are  an  integral  part  of  this  statement.


                                        7
<PAGE>
<TABLE>
<CAPTION>
                                Upgrade International Corporation and Subsidiaries
                                         (A development stage enterprise)

                                CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


                                                                      Nine months ended
                                                                           June 30,               Cumulative
                                                                ----------------------------    since inception
                                                                    2000           2001       (February 5, 1997)
                                                                -------------  -------------  -------------------
<S>                                                             <C>            <C>            <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
  Net loss                                                      $(11,771,037)  $(22,152,994)  $      (51,393,562)
  Adjustments to reconcile net loss to net
    cash used in operating activities
    Depreciation and amortization                                    159,888        531,544              833,396
    Amortization of beneficial conversion feature
      and debenture discount                                         522,208      1,884,151            2,693,194
    Allowance for potentially uncollectible advances                       -      3,399,780            3,399,780
    Loss on sale of property and equipment                                 -         29,904               29,904
    Adjustment to receivables from subsidiary shareholders                 -              -              133,379
    Write off of option costs                                              -              -               76,250
    Equity in loss of UltraCard                                            -              -            1,264,316
    Common stock subscribed for financing fees                             -        416,529              416,529
    Purchased in-process research and
      development                                                    425,800              -            5,971,603
    Warrants and options issued for services                       1,387,170      1,903,685            5,134,175
    Warrants issued for interest on notes payable                          -              -
    Warrants issued for financing fees                                     -      1,418,433            1,418,433
    Shares issued for services                                       242,900              -              298,650
    Expenses incurred through loan assumption                              -              -              470,005
    Stock of subsidiary issued in exchange for
      contribution of intellectual property charged to expense             -              -              125,000
    Minority interest                                             (1,758,371)             -           (2,115,135)
    Changes in assets and liabilities:                                     -              -
      Prepaid expenses, deposits and other                          (201,264)      (274,976)             583,734
      Accounts payable and accrued liabilities                       315,435      4,400,180            6,197,804
                                                                -------------  -------------  -------------------

        Net cash used in operating activities                    (10,677,271)    (8,443,764)         (24,462,545)

Cash flows from investing activities
  Advances to The Pathways Group, Inc.                                     -     (1,498,955)          (3,383,955)
  Advances to Rockster, Inc.                                               -       (950,000)            (950,000)
  Payments on equipment under construction                                 -              -           (1,200,000)
  Acquisition of property and equipment, net                        (687,348)      (587,063)          (1,707,947)
  Acquisition of Centurion Technologies, Inc.,
net of cash acquired                                                       -              -           (1,000,000)
  Acquisition of UltraCard, Inc., net of cash acquired              (260,300)             -           (5,571,105)
  Acquisition of additional equity interest in eForNet
      from a minority shareholder                                   (200,000)             -             (200,000)
  Note due from related party                                              -       (130,000)            (130,000)
  Proceeds from sale of property and equipment                             -              -               52,593
  Acquisition deposit                                             (1,225,000)       (15,000)             (15,000)
  Additions to intangible assets                                     (71,927)       (66,470)            (183,648)
                                                                -------------  -------------  -------------------

        Net cash used in investing activities                     (2,444,575)    (3,247,488)         (14,289,062)

Cash flows from financing activities
  Proceeds from sale of common stock and stock subscriptions       7,731,798      6,255,614           32,779,064
  Borrowings, net of loan costs and repayments                       832,681      5,945,251            9,616,789
  Principal payments on borrowings                                         -     (1,361,370)          (4,004,113)
  Release of restricted cash                                               -        505,687              505,687
  Purchase of collateral on subsidary's letter of credit                   -              -             (805,687)
  Proceeds from exercise of stock options and warrants                     -         55,000              767,786
                                                                -------------  -------------  -------------------
        Net cash provided by
          financing activities                                     8,564,479     11,400,182           38,859,526
                                                                -------------  -------------  -------------------

Net increase (decrease) in cash and cash equivalents              (4,557,367)      (291,070)             107,919

Cash and cash equivalents at the beginning of the period           4,781,330        398,989                    -
                                                                -------------  -------------  -------------------
Cash and cash equivalents at the end of the period              $    223,963   $    107,919   $          107,919
                                                                =============  =============  ===================
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


                                        8
<PAGE>
                           UPGRADE INTERNATIONAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000
                                   (UNAUDITED)


NOTE  A  -  FINANCIAL  STATEMENTS

The  unaudited  consolidated  financial  statements  of  the  Company  and  its
subsidiaries  have  been  prepared  by  the  Company  pursuant  to the rules and
regulations  of the Securities and Exchange Commission.  Certain information and
footnote  disclosures  normally  included  in  financial  statements prepared in
accordance  with  generally  accepted  accounting  principles  (GAAP)  have been
condensed  or  omitted  pursuant  to such rules and regulations.  The results of
operations  for interim periods are not necessarily indicative of the results to
be  expected  for  the  entire fiscal year ending September 30, 2001.  This form
10-QSB  should be read in conjunction with the form 10-KSB that includes audited
consolidated financial statements for the year ended September 30, 2000 and 1999
and  the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended and since inception (February 5, 1997) filed
on  January  16,  2001  and the form 10-QSB that included consolidated financial
results for the six months ended March 31, 2001 and 2000, filed on May 21, 2001.


NOTE  B  -  BASIS  OF  PRESENTATION

The  Company  consolidates all companies in which it has a controlling financial
interest.  This  generally  occurs  when  the  Company owns more than 50% of the
outstanding  voting  shares  of  the  company.  The  Company  also  consolidates
50%-owned companies in which it has voting control through agreements with other
shareholders.  Investments  in  Companies  where  the  Company  has  significant
influence  through  ownership  of  20%  to 50% of the investors voting shares or
contractual  arrangements  are  accounted  for  by  the  equity  method.

The  balance  sheet  as  of  June  30, 2001 and September 30, 2000, reflects the
consolidated  financial  position  of  the  Company  and  its  subsidiaries
(Subsidiaries)  as  follows:  UltraCard,  Inc.  (UltraCard);  cQue  Corporation
(formerly  Centurion  Technologies,  Inc.);  CTI  Acquisition Corporation (CTI);
Global  CyberSystems,  Inc.  (Global);  EforNet  Corporation  (EforNet);  Global
Cybersystems  SA. (GCSA) and Global Cybersystems PLC (GCPLC).  The statements of
operations  and  cash  flows  for  the  nine months ended June 30, 2001 and 2000
include  the  consolidated  results  of  the  Company and its Subsidiaries.  All
significant  intercompany  balances  and  transactions  have  been eliminated in
consolidation.  Minority  interest  represents  the  minority  stockholders'
proportionate  share  in  the equity of the Company's consolidated Subsidiaries.
The  losses  incurred  by a subsidiary are allocated on a proportionate basis to
minority  interest until the carrying amount of minority interest is eliminated.
Further  losses  are  then  included  in  the  net  loss  of  the  Company.


                                        9
<PAGE>
               Upgrade International Corporation and Subsidiaries
                        (A development stage enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE  C  -  LOSS  PER  COMMON  SHARE

Basic  loss  per  share  is  computed  by  dividing the net loss by the weighted
average  number  of  common  shares  outstanding during the period. The weighted
average  number of shares outstanding was 21,829,283 and 18,323,267 for the nine
months  ended  June  30, 2001 and 2000, respectively,  23,610,401 and 19,324,375
for  the  three months ended June 30, 2001 and 2000, respectively and 12,481,773
since  inception  (February  5,  1997)  through June 30, 2001.  Diluted loss per
share for all periods presented equaled basic loss per share due to antidilutive
effect  of  the  potentially issueable common stock equivalents.  As of June 30,
2001,  total  warrants  and  options of  6,115,959 were not included in loss per
share  computations  due  to  the  antidilutive  effect.

NOTE  D  -  MANAGEMENT  PLANS

The  Company  is  a  development  stage enterprise as defined under Statement of
Financial  Accounting  Standards  No.  7.  The  Company  is devoting its present
efforts  into establishing a new business in the information technology industry
and,  is  currently  in  the  process  of  identifying  markets and establishing
applications  for  its  technologies.  The  process  of commercialization of the
Company's  core  technology  is  focused  upon  the  development  of  that  core
technology, the UltraCard and read/write device.  In addition, the Company is in
the  process of acquiring strategically aligned businesses to facilitate certain
applications  of the Company's core technology.  To date,  no operating revenues
have been generated.  The Company's operations to date have consumed substantial
and  increasing  amounts  of  cash.  The  Company's  negative  cash  flow  from
operations  is expected to continue and to accelerate in the foreseeable future.
The development of the Company's technology and potential products will continue
to  require  a  commitment  of  substantial  funds. The Company expects that its
existing and expected financings will be adequate to satisfy the requirements of
its  current  and  planned  operations  until  the  end  of  fiscal  year  2001.

However, the rate at which the Company expends its resources is variable, may be
accelerated,  and  will  depend on many factors.  The Company will need to raise
substantial  additional  capital  to  fund  its  operations  and  may  seek such
additional funding through public or private equity or debt financing. There can
be  no  assurance  that  such additional funding will be available on acceptable
terms,  if  at  all.  The  Company's  continued  existence as a going concern is
ultimately  dependent  upon  its  ability  to  secure  additional  funding  for
completing  and  marketing  its  technology  and  the  success  of  its  future
operations.

During  the  three  months  ended  June  30,  2001,  the  Company  completed the
following  debt  and  equity  transactions:

During  March and April 2001, the Company completed the issuance of  convertible
debentures  aggregating $825,500, bearing interest at a rate of 8% per annum and
convertible  into the common stock of the Company at a conversion ratio of $1.25
per  share.  The  convertible  debentures  are due October 15, 2001.  During the
period  debentures  aggregating  $102,500  had been converted into common stock.


                                       10
<PAGE>
During  April  2001,  the  Company completed a private placement of common stock
aggregating  $780,000 at a price of $2.00 per share.  In addition UltraCard Inc.
received  proceeds pursuant to a subscription agreement aggregating $175,000 for
the  sale  of  common  stock  at  a  price  of  $7.00  per  share.

During  the  month  of  June  2001, the Company borrowed a further $450,000 from
existing  shareholders  pursuant to certain 30 day note agreements. Interest and
penalties  are  required  under  the  terms  of  the notes payable every 30 days
comprised  of  10%  interest, 10% payable in share capital and warrants equal to
32.5% of the loan value at a current market strike price. In addition, as a cost
of the financing, the Company granted a $50,000 note payable, 50,000 shares, and
warrants  entitling  the  holder  to  purchase 162,500 shares of common stock at
$2.00  per share. The warrants are exercisable immediately and expire five years
from  the  date  of  grant.

During  June  2001,  the  Company  completed  a  further issuance of convertible
debentures  aggregating $239,685, bearing interest at a rate of 8% per annum and
convertible  into the common stock of the Company at a conversion ratio of $1.50
per  share.  The  convertible  debentures  are  due  October  15,  2001.

During  the  quarter  ended June 30,  2001,  additional bridge loans aggregating
$354,675  were  provided  to the Company by shareholders, resulting in aggregate
bridge  loans  of  $436,859.  These  bridge  loans are to be settled through the
issuance  of  common  stock,  on  terms  to  be  determined.

In May and June 2001, the Company issued 29,433 and 115,606 shares of its common
stock  at  $1.00  and  $1.73  per  share  upon  conversion  of  debentures.

Subsequent  to the period end the Company borrowed a further $1.1 million from a
related  party.  The  loan  is subject to 10% interest along with convertibility
provisions  to  common  stock  of  the  Company  on  terms  to  be  determined.

The  Company  is  actively  pursuing  new  investment  into  the  Company.  This
financing may take the form of equity, convertible debentures and other types of
debt.


NOTE  E  -  ACQUISITIONS

On  September 8, 2000 the Company signed an Agreement and Plan of Reorganization
("Agreement")  to  acquire  100%  of The Pathways Group, Inc. The Company loaned
operating  capital to Pathways during the course of the acquisition transaction.
On  February  15,  2001 the Company delivered notice to The Pathways Group, Inc.
terminating the merger agreement between the two companies. The balance of funds
loaned to Pathways by the Company in the amount of approximately $3.4 million is
collateralized  by a blanket assignment over the Pathways assets. The Company is
in  the  process  of  filing  a  claim for the recovery of the amounts loaned to
Pathways. However, as of June 30,2001, the Company set up an allowance to offset
advances  due from Pathways due to the potential that the funds advanced may not
be  recoverable.
On  December  11,  2000  the  Company  entered  into  a letter of intent for the
acquisition  of  a  majority  position  in entertainment distribution technology
developer  Rockster, Inc. Under the terms of the agreement, Upgrade will acquire
an  ownership interest of 57 percent of Rockster from the Company. The Companies
are  working  towards  the  development  of  a definitive agreement. To date the
Company  has  non-secured advances aggregating $950,000 to Rockster. The Company
believes  the  advances  will  be  recovered  through  the  acquisition.


                                       11
<PAGE>
NOTE  F  -  COMMITMENTS

In  the prior fiscal year, a subsidiary of the Company entered into an agreement
with  SciVac,  Inc.  to build a sputtering machine as a part of its research and
development  activities  for  an  amount of $3,000,000. As of June 30, 2001, the
subsidiary  had  paid $1,200,000 and recorded a liability for the amounts billed
but  unpaid  as  of June 30, 2001 equaling $1,800,000. The sputtering machine is
expected  to  be  sold within the next fiscal year to a contract manufacturer to
facilitate the production of shims used in the UltraCard. The sputtering machine
is  reflected  as  a  current  asset  on  the  balance  sheet  of  the  Company.

In  the  prior  period  the  Company reported the lease of a new facility in Los
Angeles.  The Company has expended $125,000 during the recent quarter ended June
30,  2001,  on  leasehold  improvements  towards the completion of the facility.
Currently  Rockster  Inc.  is  occupying  the  premises.

On  October  10,  1997,  Ultracard licensed the rights to two technology patents
from  Cardtech,  Inc.  (Cardtech). Ultracard's president is also the controlling
stockholder of Cardtech. Ultracard is required to pay Cardtech a minimum royalty
fee  of $650,000. Royalty fees are due on January 1 of each calender year. As of
March 31, 2001, $1,300,000 for both the calendar year 2000 and 2001 royalty fees
remained unpaid, causing Ultracard to be past due on the agreement. Cardtech has
deferred  the  required  2000  and  2001  payments  to  September  30,  2001. In
consideration  for  the  deferral,  Ultracard  has  granted a patent mortgage to
Cardtech  on  all  its  intellectual  properties.


                                       12
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS

Certain statements contained in this Quarterly Report on Form 10-QSB, including,
without  limitation,  statements containing the words "believes, " anticipates,"
"estimates," "expects," and words of similar import, constitute "forward looking
statements."  You  should  not  place  undue  reliance on these forward- looking
statements.  Our  actual  results could differ materially from those anticipated
in these forward- looking statements for many reasons, including the risks faced
by us described in this Quarterly Report and in other documents we file with the
Securities  and  Exchange  Commission.

Net  losses  aggregated  $22.2  million  in the first nine months of the current
fiscal year ending June 30, 2001 compared with an $11.8 million net loss for the
corresponding  period  of  the  prior  fiscal  year.  This  increase in net loss
reflects  a  continued  and  growing  level  of  investment  into  the Companies
technology, production processes and the development of commercialization of the
Companies  core  technology.  Research  and  development  expenditures more than
doubled  in  the  current  fiscal  year compared to the prior year, comprising a
large  part of the increased expenditures as the Company nears the completion of
a  production  ready  product.

In the preceding quarter the Company announced that it had terminated the merger
agreement  with  Pathways.  Advances  of  $3.4 million dollars have been made to
Pathways  by the Company as of June 30, 2001. The Company has collateralized the
amounts due from Pathways by way of a general security over the Pathways assets.
The  collectability  of  the  amounts  due  from  Pathways  are  potentially
unrecoverable  and  accordingly  the  Company  has  provided  an  allowance  for
collection  of  the  amount  due in the quarter ended June 30, 2001. The Company
plans  to  actively  pursue  collections.

The  Company  has  been  able  to reduce its general and administrative costs by
$2.85  million  compared to the corresponding 3-month period in the prior fiscal
year.  This  reduction  is  comprised  of  lower  legal  costs,  and  reduced
compensation  components  related to key employee warrant issuances. The Company
has  experienced  significantly  higher  interest  expense  as  a result of debt
financing  entered into during the current and past quarter.  UltraCard Inc. has
again  increased  its research and development expenditures by $0.8 million over
the  corresponding  prior  period  in  a  concentrated  effort  to  complete  a
commercialized  version  of  its  high  memory capacity UltraCard and read write
device.  These  increasing  expenditures  reflect  the Company's focused efforts
upon  completing  its  research  and  development initiatives, while at the same
time,  establishing  production  processes  and specifications to facilitate the
Company  to  engage  others  to produce the UltraCard and its read write device.
The other significant operating subsidiary cQue (formerly Centurion) contributed
only  6%  of  the  total  loss  reflecting  the focus of the consolidated groups
efforts  to complete the UltraCard technology.  For the near future research and
development expenditures are expected to increase to meet the Company's numerous
potential  market  opportunities.  All of the Company's research and development
costs  have  been  expensed  as  incurred.

In  an  effort to accelerate the Company's market penetration with the UltraCard
and  related products, and in order to augment internally developed research and
development  initiatives,  the  Company  will  license  technology  from  other
businesses,  engage others to develop components and/or acquire other businesses
as  an  alternative  to internal research and development and marketing efforts.
The marketplace is beginning to recognize the UltraCard as a leader and superior
product  in the smart card industry and management are focused upon accelerating
the  Companies  access  to  this  multi-billion  dollar  marketplace.

Sales  and  marketing  expenditures  have increased by approximately $161,000 as
compared  to  the  nine  month  period ended June 30, 2000, as the Company nears
completion  of  UltraCard's  products.  Sales  and  marketing  expenditures  are


                                       13
<PAGE>
associated  with  the Company's attendance at trade shows and industry awareness
programs  as  the  Company  builds market awareness to establish and develop new
markets  and  prepare  for  effective  product  launches  for products which are
nearing  the  first  phase  of  completion.


LIQUIDITY  AND  CAPITAL  RESOURCES

Cash  and  equivalents were approximately $108,000 at June 30, 2001. The Company
is managing tight cash flows in providing funding for an aggressive research and
development  program  at UltraCard while developing acquisitions in the software
development  area  of  business.  Cash flows from financing activities of $ 11.4
million  in  the current period represents a 34 % increase in the capital raised
in  the  corresponding  period  of  the  preceding  year.  In  light of the more
restrictive  financial  conditions at the current time this fact speaks well for
the Companies ability to manage and continue to grow through economic downturns.
The  proceeds were used as to operations $8.4 million, with the balance of $ 3.2
million  allocated  to  investing  activities  for  acquisitions  in  process of
Rockster  Inc.  and  the  development  of  the  UltraCard,  Upgrade and Rockster
facilities.

The  Company  has experienced a significant increase in its current liabilities,
increasing  from  $6.5 million in September 2000 to $11.5 million as at June 30,
2001. The Company has relied upon trade creditors to extend payment terms, while
it aggressively pursues equity and debt capital from sources internationally. At
the date of this report, negotiations for the sale of additional debt and equity
securities  in  amounts  in  excess  of  $50  Million  dollars  are  underway.

In  order  for  the  Company  to meet the funding requirements from its investee
Companies  and  to  meet  ongoing  operating requirements, it will have to raise
additional financing.  The Company expects that its existing and planned capital
resources  will  be  adequate  to  satisfy  the  requirements of the current and
planned operations until the end of the current fiscal year. However the rate at
which  the  Company  expends  its resources is variable, may be accelerated, and
will  depend  on  many  factors.  The  Company  will  need  to raise substantial
additional  capital  to fund its operations and may seek such additional funding
through  public or private equity or debt financing, or through the licensing of
its  technology.  There can be no assurance that such additional funding will be
available  on acceptable terms, if at all.  The Company's continued existence as
a  going  concern  is ultimately dependent upon its ability to secure additional
funding  for  completing  and  marketing  its  technology and the success of its
future  operations.


                                       14
<PAGE>
PART  II  Other  Information

Item  1.  Legal  Proceedings
--------

Upgrade,  its  president,  Daniel  S.  Bland,  and  Chief  Operating & Financial
Officer,  Howard  Jaffe,  are  defendants in The Pathways Group, Inc. v. Upgrade
                                             -----------------------------------
International  Corporation  et al., Superior Court of the State of California in
----------------------------------
for the County of Sonoma. The complaint, filed August 3, 2001, alleges breach of
merger  and  collateral agreements between Upgrade and plaintiff, breach of oral
argument,  fraud,  and  negligent material misrepresentation, and seeks specific
performance  of  the  agreements,  an  injunction  against exercising provisions
pursuant  to  the  merger  agreement  whereby  Upgrade  could  obtain control of
Pathways.  Specifically,  the  complaint  alleges that Upgrade failed to provide
interim  financing  to  Pathways  pending  consummation  of  the proposed merger
transaction,  and  prevented  Pathways  from  obtaining  alternate  sources  of
financing.  Upgrade  believes that the plaintiff's allegations are without legal
or  factual  basis  and  intends  to vigorously defend the lawsuit. Upgrade also
intends  to file a counterclaim against Pathways, its Board of Directors and all
Executive  Officers,  for moneys due and owing from funds advanced, fraud in the
inducement as well as other misrepresentations made by Pathways to Upgrade. As a
result,  upgrade  recorded  a provision for the advances made to Pathways in the
event  those  amounts  prove  to  be  uncollectible.

Item  2.  Changes  in  Securities  and  Use  of  Proceeds
--------

During  the  three  months  ended  June  30, 2001, the Company sold unregistered
securities  as  follows:

     In  April,  2001, Upgrade completed a private placement offering of 175,000
shares  of  its common stock at a price of $4.00 per share for total proceeds of
$700,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Securities Act of 1933 (the "Act"),
due  to  the  foreign  nationality  of  the  investor.

     In  April,  2001, Upgrade completed a private placement offering of 390,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$780,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Securities Act of 1933 (the "Act"),
due  to  the  foreign  nationality  of  the  investors.

     In  April,  2001,  Upgrade completed a private placement offering of 25,000
shares  of  its common stock at a price of $6.00 per share for total proceeds of
$150,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Act, due to the foreign nationality
of  the  investor.

     In  April,  2001, Upgrade completed a private placement offering of 183,334
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$366,668.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Act, due to the foreign nationality
of  the  investor.

     In  April,  2001,  Upgrade completed a private placement offering of 41,666
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$83,332. The offer and sale of securities was made pursuant to an exemption from
registration  under  Regulation  S of the Act, due to the foreign nationality of
the  investor.

     In  April,  2001,  Upgrade completed a private placement offering of 80,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$160,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Act, due to the foreign nationality
of  the  investor.


                                       15
<PAGE>
     In  April,  2001, Upgrade completed a private placement offering of 200,000
shares  of  its common stock at a price of $2.50 per share for total proceeds of
$500,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Act, due to the foreign nationality
of  the  investor.

     In  April,  2001, Upgrade completed a private placement offering of 616,721
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$1,233,442.  The  offer and sale of securities was made pursuant to an exemption
from  registration under Regulation S of the Act, due to the foreign nationality
of  the  investor.

     In  April  2001, Upgrade issued a $825,500 convertible debenture that bears
8%  simple  interest  and  is due October 15, 2001. The debenture is convertible
into  shares  of  Upgrade's common stock at $1.25. The issuance was exempt under
Rule  506  under  and  Section  4(2)  of  the  Act.

     In  April,  2001,  Upgrade completed a private placement offering of 80,000
shares  of  its common stock at a price of $2.50 per share for total proceeds of
$200,000. The offer and sale was exempt under Rule 506 under and Section 4(2) of
the  Act.

     In  April,  2001, Upgrade completed a private placement offering of 205,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$410,000. The offer and sale was exempt under Rule 506 under and Section 4(2) of
the  Act.

     In  April,  2001, Upgrade completed a private placement offering of 375,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$750,000. The offer and sale was exempt under Rule 506 under and Section 4(2) of
the  Act.

     In  April,  2001,  Upgrade  issued  53,185  shares  of its common stock for
services  performed.  The  issuance  was exempt under Rule 506 under and Section
4(2)  of  the  Act and Regulation S of the Act due to the foreign nationality of
the  investor.

     In  May,  2001, Upgrade issued 32,000 shares of its common stock at a price
of  $1.25  per  share pursuant to the conversion of debentures. The issuance was
exempt  under  Rule  506  under  and  Section  4(2)  of  the  Act.

     In  May,  2001, Upgrade issued 40,000 shares of its common stock at a price
of  $1.25  per share pursuant to the conversion of debentures.  The issuance was
exempt  under  Rule  506  under  and  Section  4(2)  of  the  Act.

     In  May,  2001, Upgrade issued 10,000 shares of its common stock at a price
of  $1.25  per  share pursuant to the conversion of debentures. The issuance was
exempt  under  Rule  506  under  and  Section  4(2)  of  the  Act.

     In  May,  2001, Upgrade issued 29,433 shares of its common stock at a price
of  $1.00 per share pursuant to the conversion of debentures. As reported in the
Company's  Form  10-QSB for the period ended December 31, 2000, the issuance was
exempt  under  Rule  506  under  and  Section  4(2)  of  the  Act.

     In June, 2001, Upgrade issued 115,606 shares of its common stock at a price
of  $1.74 per share pursuant to the conversion of debentures. As reported in the
Company's  Form  10-QSB for the period ended December 31, 2000, the issuance was
exempt  under  Rule  506  under  and  Section  4(2)  of  the  Act.


                                       16
<PAGE>
     In June 2001, Upgrade issued a $239,685 convertible debenture that bears 8%
simple  interest  and is due October 15, 2001. The debenture is convertible into
shares  of  Upgrade's common stock at $1.50.  The issuance was exempt under Rule
506  under  and  Section  4(2)  of  the  Act.

     In  June,  2001,  Upgrade issued 50,000 shares of its common stock for loan
fees.  The  issuance was exempt under Rule 506 under and Section 4(2) of the Act
and  Regulation  S  of  the  Act due to the foreign nationality of the investor.

     In  June,  2001,  Upgrade  completed a private placement offering of 15,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$30,000. The offer and sale of securities was made pursuant to an exemption from
registration  under  Regulation  S of the Act, due to the foreign nationality of
the  investor.

     In  June,  2001,  Upgrade issued warrants to purchase 162,500 shares of its
common  stock  at  $2.00 per share. The warrants are exercisable immediately and
expire five years from date of grant. The issuance was exempt under Regulation S
of  the  Act  due  to  the  foreign  nationality  of  the  investor.

     In  June,  2001,  Upgrade  issued  50,000 shares of its common stock for at
$2.70 a share for total proceeds of $135,000, in connection with the issuance of
a  debenture.  The  issuance was exempt under Rule 506 under and Section 4(2) of
the  Act  and  Regulation  S  of  the  Act due to the foreign nationality of the
investor.

     In  June,  2001, Upgrade issued 47,490 shares of its common stock for total
proceeds  of  $125,000  as  part  of a loan penalty fee. The issuance was exempt
under Rule 506 under and Section 4(2) of the Act and Regulation S of the Act due
to  the  foreign  nationality  of  the  investor.

     In  June, 2001, Upgrade issued 12,784 shares of its common stock at a price
of  $1.74 per share pursuant to the conversion of debentures, for total proceeds
of $22,206. The issuance was exempt under Rule 506 under and Section 4(2) of the
Act  and Regulation S of the Act due to the foreign nationality of the investor.


Item  6.       Exhibits
--------

     Exhibit  No.          Description
     ------------          -----------



                                        Upgrade International Corporation



Date:  August 19, 2001                  /s/ Daniel  Bland
                                        ----------------------------------------
                                        Daniel  Bland,  President  and  Chief
                                        Executive  Officer,  and  Secretary


Date:  August 19, 2001                  /s/ Howard  A.  Jaffe
                                        ----------------------------------------
                                        Howard  A.  Jaffe, Chief Operating and
                                        Financial  Officer


                                       17
<PAGE>