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  DECEMBER  31,  2000
                                    -------------------

[ ]     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 February 15, 2001, 21,155,161
shares  of  common  stock,  $.0001  par  value  were  outstanding.

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


<PAGE>
                                      INDEX


PART  I  -  Financial  Information                                          Page

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

Consolidated balance sheets at December 31, 2000 and September 30, 2000

Consolidated statements of operations for the three months ended
 December 31, 2000  and  1999

Consolidated statement of cash flows for the three months ended December 31,
2000  and  1999

Notes  to  the  Financial  Statements


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


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

                                    CONSOLIDATED BALANCE SHEETS

                                              ASSETS


                                                                    September 30,    December 31,
                                                                   ---------------  --------------
                                                                        2000             2000
                                                                   ---------------  --------------
<S>                                                                <C>              <C>
CURRENT ASSETS                                                                         (unaudited)
  Cash and cash equivalents                                        $      398,989   $      79,395
  Restricted deposit                                                      805,687         300,000
  Subscriptions receivable                                                 32,725         100,000
  Prepaid expenses, deposits and other                                    121,491         377,607
                                                                   ---------------  --------------
     Total current assets                                               1,358,892         857,002

PROPERTY AND EQUIPMENT - AT COST,
  less accumulated depreciation and amortization                        1,791,257       2,111,363

EQUIPMENT UNDER CONSTRUCTION                                            3,301,625       3,301,625

ADVANCES TO THE PATHWAYS GROUP, INC                                     1,900,825       3,165,780

ADVANCES TO ROCKSTER, INC.                                                      -         150,000

OTHER ASSETS
  Intangible and deferred assets, net of accumulated amortization         370,206         637,053
  Deposits                                                                328,051         343,051
                                                                   ---------------  --------------

        Total assets                                               $    9,050,856   $  10,565,874
                                                                   ===============  ==============


                                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                                 $    1,993,796   $   2,778,751
  Accrued liabilities                                                     733,241         990,335
  Bridge loans                                                            799,177         227,944
  Equipment purchase contract payable                                   2,307,025       2,258,300
  Royalty fee payable to CardTech, Inc., net                              487,500         650,000
  Payable to related parties                                              175,240         344,607
  Notes payable, net of unamortized discount                                    -         358,021
                                                                   ---------------  --------------
       Total current liabilities                                        6,495,979       7,607,958

CONVERTIBLE DEBENTURES, net of unamortized discount                       809,043         978,630

COMMITMENTS AND CONTINGENCIES                                                   -               -

STOCKHOLDERS' EQUITY
  Common stock - $.001 par value, 50,000,000 shares authorized             20,341          20,794
  Common stock subscribed                                                 323,640       2,353,257
  Additional paid in capital                                           36,925,837      40,185,588
  Receivable from stockholders of subsidiary                             (266,621)       (266,621)
  Accumulated development stage deficit                               (35,257,363)    (40,313,732)
                                                                   ---------------  --------------
                                                                        1,745,834       1,979,286
                                                                   ---------------  --------------

        Total liabilities and stockholders' equity                 $    9,050,856   $  10,565,874
                                                                   ===============  ==============
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


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

                       CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

                                                                              Cumulative
                                                    Three months ended        results of
                                                        December 31,        operations since
                                                  -----------------------       inception
                                                     1999         2000     (February 5, 1997)
                                                  -----------  ----------  -------------------
<S>                                               <C>          <C>         <C>
Costs and expenses
  Research and development                        $  759,808   $2,414,425  $       10,565,097
  Purchased in-process research and development      156,200            -           5,971,603
  Sales and marketing                                742,983      713,837           4,328,800
  General and administrative                       1,719,244    1,599,790          12,747,797
                                                  -----------  ----------  -------------------
                                                   3,378,235    4,728,052          33,613,297
Other expenses (income)
  Equity in losses of UltraCard                            -            -           1,264,316
  Interest expense                                   456,751      303,112           1,267,606
  Other, net                                         (40,859)      24,705             266,853
                                                  -----------  ----------  -------------------
                                                     415,892      328,317           2,798,775
                                                  -----------  ----------  -------------------

Minority interest in losses of subsidiaries         (863,570)           -          (2,115,135)
                                                  -----------  ----------  -------------------
NET LOSS                                          $2,930,557   $5,056,369  $       34,296,937
                                                  ===========  ==========  ===================
LOSS PER COMMON
  SHARE-BASIC AND DILUTED                         $     0.16   $     0.24  $             3.03
                                                  ===========  ==========  ===================
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


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

                                          STATEMENT OF STOCKHOLDERS' EQUITY

                                   Three months ended December 31, 2000 (unaudited)


                          Voting common stock  Common stock subscribed   Additional   Receivable from  Accumulated
                          -------------------  ----------------------     paid-in     Stockholders     Development
                            Shares    Amount    Shares      Amount        Capital     of subsidiary    stage deficit
                          ----------  -------  ---------  -----------  ------------  ---------------  ---------------
<S>                       <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)

Issuance of shares in
  October 2000,
  subscribed to 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                -                -

Shares subscribed to at
  $6.00 per share in
  October 2000, net
  of costs                         -        -   233,333      920,000      (100,000)               -                -


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

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

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

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

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

Common stock
  subscribed at $2.00
  per share in
   December  2000,
   net of costs                    -        -   464,128      928,257      (102,208)               -                -

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

Adjustment to market
  of options granted
  for services in April
  2000                                      -         -            -      (672,685)               -                -

Net consolidated loss
  for the three months
  ended June 30, 2000              -        -         -            -             -                -       (5,056,369)

Balances at Dec. 31,
 2000                     20,793,847  $20,794   842,461   $2,353,257   $40,185,588   $    ( 266,621)  $  (40,313,732)

                             Total
                          ------------
<S>                       <C>
Balances at October 1,
  2000                      1,745,834

Issuance of shares in
  October 2000,
  subscribed to in May
  2000                              -

Issuance of common
  shares at $10.50 per
  share in October
  2000, net of costs        1,350,000

Shares subscribed to at
  $6.00 per share in
  October 2000, net
  of costs                    820,000


Allocation of debenture
  proceeds to
  common stock                444,603

Allocation of debenture
  proceeds to
  common stock
  warrants                    829,551

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

Allocation of
  promissory note
  proceeds to
  common stock                136,207

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

Common stock
  subscribed at $2.00
  per share in
   December  2000,
   net of costs               826,049

Common stock
  subscribed to in
  December 2000 at
  $0.25 through
  exercise of stock
  warrants                      5,000

Adjustment to market
  of options granted
  for services in April
  2000                       (672,685)

Net consolidated loss
  for the three months
  ended June 30, 2000      (5,056,369)
                          ------------
Balances at Dec. 31,
 2000                     $ 1,979,286
                          ============
</TABLE>

The  accompanying  notes  are  an  integral  part  of  this  statement.


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

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)



                                                                                   Three months ended
                                                                                       December 31,             Cumulative
                                                                                --------------------------     since inception
                                                                                    1999          2000      (February 5, 1997)
                                                                                ------------  ------------  -------------------
<S>                                                                             <C>           <C>           <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
  Net loss                                                                      $(2,930,557)  $(5,056,369)  $      (34,296,937)
  Adjustments to reconcile net loss to net
    cash used in operating activities
    Depreciation and amortization                                                    30,266       140,999              442,851
    Amortization of beneficial conversion feature and debenture discount            400,000       263,815            1,072,858
    Adjustment to receivable from subsidiary's shareholders                               -             -              133,379
    Write off of option cost                                                              -             -               76,250
    Equity in loss of UltraCard                                                           -             -            1,264,316
    Purchased in-process research and
      development                                                                   156,200             -            5,971,603
    Warrants and options issued for services                                              -      (672,685)           2,557,805
    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                                                              (863,570)            -           (2,115,135)
    Changes in assets and liabilities:
      Prepaid expenses, deposits and other                                          155,308      (272,516)             586,194
      Accounts payable and accrued liabilities                                     (267,518)    1,155,823            2,953,447
                                                                                ------------  ------------  -------------------
        Net cash used in operating activities                                    (3,039,851)   (4,440,933)         (20,459,714)

Cash flows from investing activities
  Advances to The Pathways Group, Inc.                                                    -    (1,264,955)          (3,149,955)
  Advances to Rockster, Inc.                                                              -      (150,000)            (150,000)
  Payments on equipment under construction                                                -             -           (1,200,000)
  Acquisition of property and equipment, net                                       (392,571)     (403,144)          (1,068,291)
  Acquisition of cQue
      net of cash acquired                                                                -             -           (1,403,144)
  Acquisition of UltraCard, Inc., net of cash acquired                             (190,000)            -           (5,571,105)
  Acquisition of additional equity interest in EForNet
      from a minority shareholder                                                         -             -             (200,000)
  Acquisition deposit                                                                     -       (15,000)             (15,000)
  Additions to intangible assets                                                       (611)      (55,658)            (172,836)
                                                                                ------------  ------------  -------------------
        Net cash used in investing activities                                      (583,182)   (1,888,757)         (12,930,331)

Cash flows from financing activities
  Proceeds from sale of common stock and stock subscriptions                      1,700,811     3,428,774           29,952,224
  Borrowings, net of loan costs                                                   1,000,000     3,107,880            6,779,418
  Principal payments on borrowings                                                 (314,605)   (1,037,245)          (3,679,988)
  Purchase of collateral on subsidiary's letter of credit                                 -             -             (805,687)
  Proceed from release of collateral on subsidiary's letter of credit                     -       505,687              505,687
  Proceeds from exercise of stock options and warrants                                    -         5,000              717,786
        Net cash provided by                                                    ------------  ------------  -------------------
                financing activities                                              2,386,206     6,010,096           33,469,440
                                                                                ------------  ------------  -------------------
Net increase (decrease) in cash and cash equivalents                             (1,236,827)     (319,594)              79,395

Cash and cash equivalents at beginning of  period                                 4,781,330       398,989                    -
                                                                                ------------  ------------  -------------------
Cash and cash equivalents at end of period                                      $ 3,544,503   $    79,395   $           79,395
                                                                                ============  ============  ===================
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


<PAGE>
               UPGRADE INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (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).


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 December 31, 2000 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 three months ended December 31, 1999, reflect
the  consolidated  results  of  operations and cash flows of the Company and the
results of the subsidiaries beginning on the dates the Company acquired control.
The  statements of operations and cash flows for the three months ended December
31,  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.


<PAGE>
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 20,966,989 and 18,388,001 for the three
months  ended  December  31,  2000 and 1999, respectively,  and 11,317,056 since
inception  (February 5, 1997) through December 31, 2000.  Diluted loss per share
for  all  periods  presented  equaled  basic  loss per share due to antidilutive
effect  of  the potentially dilutive securities.  At December 31, 2000 and 1999,
the  Company had 5,371,869 and 4,426,543 in additional common stock equivalents.

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.  Accordingly, 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 the second quarter 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.


In  October 2000, the Company issued 142,860 shares at $10.50 per share pursuant
to Regulation "S" for aggregate gross proceeds to the Company of $1,500,000.  In
November  2000, the Company issued 233,333 shares at $6.00 per share pursuant to
Regulation  "S"  for  aggregate  gross  proceeds  to the Company of  $1,399,998.

During  November  2000,  the Company entered into agreements for the issuance of
convertible  subordinated  debentures  aggregating  $2,325,250.  The convertible
subordinated  debentures provide for 8% interest payable on the principal amount
of  the  debenture,  have  a  term  of  18  months and provide for an additional
compensation comprised of 7% of the principal amount of each debenture in common
stock  based  upon  a  $6.00 share price, and warrants with a $6.00 strike price
equaling to 10% of the value of each debenture.  Two debentures in the aggregate
amount  of  $750,000  also  provided  for  finder's  fees aggregating 10% of the
debenture,  payable  7%  in  cash  and  3% in shares calculated on a $4.50 share
price.  Pursuant  to  the agreements, the Company issued additional compensation
and  finder's  fees  aggregating  as  follows:  cash of $52,500; common stock of
167,768  shares;  and  five  year warrants to acquire 334,406 common shares at a
purchase price of $6.00 per share.  Additional compensation equal to 2% to 3% of
the  conversion  shares  is payable in common stock in the event that the common
stock  underlying  the  convertible  debentures  is not registered by January 1,
2001.


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999


NOTE  D  -  MANAGEMENT  PLANS  -  Continued

In  December  2000,  the Company borrowed $400,000 pursuant to the terms of four
promissory  notes. The notes have a term of 30 days, and bear interest at a rate
of  10%  per  annum.  In the event that the loans are not repaid on the maturity
date,  a  penalty  charge  will  be  due and payable, comprised of 10% interest,
12.5% warrant coverage at market and 20% warrant coverage at $6.00 per share.

In  December 2000, the  Company  raised  an aggregate  $1,326,049 in two private
placements.

In  January and February 2001, the Company completed subscription agreements for
a further 280,000 shares at $2.50 per share yielding net proceeds to the Company
of  $700,000  and  a  further  766,613  shares at $2.00 per share yielding gross
proceeds  to  the  Company  of  $1,533,226.

On  December  15, 2000 the Company announced a letter of intent to acquire a 57%
interest  In  Rockster  Inc.  To  date  the  Company has provided funding in the
amount  of  US  dollars  to  Rockster provided under the terms of the agreement.

The  Company  is  actively  pursuing  new  investment  into  the Company.  These
financings  will take the form of equity, convertible debentures and other types
of  debt.  The  Company  expects  to  close  on  at  least  $20 million of these
activities  in  the  second  quarter  of  fiscal  year  2001.

NOTE  E  -  COMMITMENTS

During  February 28, 2000, a subsidiary of the Company entered into an agreement
with  SciVac,  Inc.  to  build  a sputtering machine for use in its research and
development  activities  in  the amount of $3,000,000.  As of December 31, 2000,
the  subsidiary  had  paid  $1,200,000  and recorded a liability for the amounts
billed  but  unpaid  as  of  December 31, 2000 equaling $2,307,025, inclusive of
sales  tax.  The  machine  is  currently being modified to meet the subsidiary's
technical  specifications  and  has  not  been  accepted  by  the  Company.


NOTE  F  -  CONTINGENCIES

The  class  action  lawsuits filed during February and March 2000, in the United
States  District Court against the Company and its President alleging securities


<PAGE>
violations  were  dismissed, with prejudice by the United States District Court.
The court further declined to exercise jurisdiction for causes of action brought
under  Washington  state  law  and  accordingly  dismissed  those claims without
prejudice.

NOTE  G  -  SUBSEQUENT  EVENTS

On  September 8, 2000 the Company signed an Agreement and Plan of Reorganization
to acquire 100% of The Pathways Group, Inc.  ("Pathways").  It was proposed that
the shareholders of Pathways receive one Upgrade International Corporation share
for  each  14.3 shares of Pathways, subject to adjustment.  On February 15, 2001
the  Company  delivered  notice  to  Pathways  terminating  the merger agreement
between  the  two  companies.  As of December 31, 2000, the Company had advanced
$3,165,780  under  the  terms of the agreement.  These advances are secured by a
note  agreement  and a blanket assignment over the Pathways' assets.  Because of
Pathways'  unstable  financial  position, it is possible that some or all of the
aforementioned  advances will not be repaid.  However, the company believes that
there  is  sufficient volume the assets of Pathways in orders for the Company to
recover  the  amount  advanced  to  Pathways.  As  a result, the Company has not
recorded  an  allowance for any potential losses that may be incurred to recover
the  carrying  amount  of  these  advances  as  of  December  31,  2000.

On  January  16,  2001,  the Company discontinued negotiations with Cards & More
GMBH,  for  the  acquisition of 60% of that Company announced in September 2000.

On  January  and  February  of  2001  the  Company  received proceeds and signed
subscription  agreements  for the issuances of 250,000 shares at $2.50 per share
yielding  net  proceeds  to  the  Company  of  $700,000.

On  January  4,  2001  a  debenture holder converted $200,000 in debt due by the
Company  in  exchange  for  107,981  shares in the capital stock of the Company.


<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 $5.0 million in the first quarter of fiscal 2001 compared
with  a $2.9 million net loss for the corresponding period of fiscal 2000.  This
reflects  a  continued  and  growing  level  of  investment  into  the Company's
technology,  production  processes  and  industrialization  opportunities.  This
increase  in  the net loss compared to the prior year is largely attributable to
the  operations  of the Company's subsidiary, UltraCard, Inc. whose research and
development  expenditures  increased  by  $1.6 million over the comparable prior
period. 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
two  significant  operating  subsidiaries  EforNet and cQue (formerly Centurion)
contributed  11.9%  of  the  total  loss  reflecting  expenses  associated  with
developing  software  and  smart  card initiatives. A significant portion of the
increase in research and development expenditures was due to the addition of new
personnel,  prototype  development  and  contracts  with  external  research and
development  contractors.

During  the  quarter,  EforNet  suspended  its research and development program,
however the developments achieved prior to the discontinuance of the program are
being  maintained  and  protected  and  will  be  further  developed  within the
Company's developing infrastructure.  It is expected that EforNet will reconvene
its  efforts  during  this  fiscal  year.

For  the  near  future  research and development expenditures are expected to be
maintained  and to increase to meet  the  Company's  numerous  potential  market
opportunities.  All of the Company's research and development costs are 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's focused upon accelerating
the  Company's  access  to  this  multi-billion  dollar  marketplace.

General  and  administrative  expenses  have  decreased from $1.7 million in the
first  quarter  of fiscal 2000 to $1.6 million for the corresponding three-month
period  ended  December  31,  2000.  During  the  current  quarter  the  Company
experienced reduction in administrative costs associated with the discontinuance
of  EforNet  operations.

Sales  and  marketing  expenditures have remained constant at approximately $0.7
million  per  quarter. In both years the costs are 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  currently  under  development.


<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

Cash  and  equivalents  were  approximately  $80,000  at  December  31,  2000, a
decrease  of  $320,000 from approximately $400,000 from September 30, 2000.  The
Company  is  managing  tight  cash  flows in providing funding for an aggressive
research  and development program at UltraCard while funding acquisitions in the
software  development area of business.  Cash flows from financing activities of
$6.0  million  almost  triple the volume experienced in the first quarter of the
preceding  year. $4.4 million of the proceeds were used for operations, with the
balance  allocated  to  investing  activities  associated  with  then  pending
acquisitions. The Company has been successful raising capital for the last three
years  since its inception; however, there is no assurance that its fund raising
will  continue  to  be  a  success.

In  order  for  the  Company  to  meet  funding  requirements  from its investee
companies  and  to  meet  ongoing operating requirements, it will need to obtain
additional  financing.  The  Company expects that its existing capital resources
will  be  adequate  to  satisfy  the  requirements  of  the  current and planned
operations  until  the  end  of  the  second quarter 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.

PART  II     Other  Information

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

In  Re  Upgrade  International Corporation Securities Litigation, U.S.  District
Court,  Western  District  of  Washington  at  Seattle, c/a #C00-0298, the class
action  against  Upgrade  and  its president, Daniel S.  Bland, was dismissed by
court  order  dated  February  9,  2000.  The  federal  claims  portions  of the
complaint were dismissed with prejudice; the state claims were dismissed without
prejudice.

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

     A.     Recent  Sales  of  Unregistered  Securities

During  the  three  months ended December 31, 2000 the Company sold unregistered
securities  as  follows:

In  October  2000,  Upgrade  completed  a  private placement offering of 142,860
shares  of  its  common  stock  at  a  price of $10.50 per share for total gross
proceeds of $1,500,000. 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  October  2000,  Upgrade  completed  a  private placement offering of 233,333
shares  of  its common stock to four investors at a price of $6.00 per share for
total  gross  proceeds  of  approximately  $1,400,000.  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.

On  November  15,  2000,  Upgrade issued a $1,075,250 convertible debenture that
bears  8%  simple interest and is due eighteen months from date of issuance. The
debenture  is convertible into shares of Upgrade's common stock at the lesser of
75% of the mean closing bid price of the Company's stock based upon the 5 lowest
closing bid prices during the 20 consecutive trading days prior to conversion or
$6.00. These  issuances were exempt under Rule 506 under and Section 4(2) of the
Act.


<PAGE>
On November 16, 2000, Upgrade issued a $500,000 convertible debenture that bears
8%  simple  interest  and  is  due  eighteen  months  from date of issuance. The
debenture  is convertible into shares of Upgrade's common stock at the lesser of
75% of the mean closing bid price of the Company's stock based upon the 5 lowest
closing bid prices during the 20 consecutive trading days prior to conversion or
$6.00. These  issuances were exempt under Rule 506 under and Section 4(2) of the
Act.

On November 24, 2000, Upgrade issued a $250,000 convertible debenture that bears
8%  simple  interest  and  is  due  eighteen  months  from date of issuance. The
debenture  is convertible into shares of Upgrade's common stock at the lesser of
75% of the mean closing bid price of the Company's stock based upon the 5 lowest
closing bid prices during the 20 consecutive trading days prior to conversion or
$6.00. These  issuances were exempt under Rule 506 under and Section 4(2) of the
Act.

On  November  24,  2000, Upgrade issued a $500,000 convertible debenture to that
bears  8%  simple interest and is due eighteen months from date of issuance. The
debenture  is convertible into shares of Upgrade's common stock at the lesser of
75% of the mean closing bid price of the Company's stock based upon the 5 lowest
closing bid prices during the 20 consecutive trading days prior to conversion or
$6.00. These  issuances were exempt under Rule 506 under and Section 4(2) of the
Act.

In  December 2000, the Company completed a private placement offering of 125,000
shares  of  its common stock at a price of $4.00 per share for gross 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 December 2000, the Company completed a private placement of 464,128 shares of
its  common  stock  at  a price of $2.00 per share for net proceeds of $826,049.

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

          A.     Termination  of  Cards  &  More  Letter  of  Intent

On  January  16,  2001,  the Company and Cards & More Plastikkartenvertrieb GmbH
terminated  their letter of intent pursuant to which Upgrade would have acquired
60%  of  Cards  &  More  in  a  cash  transaction.

          B.     Termination  of  Pathways  Agreement and Plan of Reorganization

On  February  15,  2001,  the  Company  terminated  the  Agreement  and  Plan of
Reorganization  dated  September  8,  2000  by  and  between the Company and The
Pathways  Group, Inc.  pursuant to which the Company would have acquired 100% of
Pathways  in  an  all-share  transaction.

Pursuant  to  the  requirements  of the Securities and Exchange Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.


                                    Upgrade International Corporation


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


                                    /s/  Howard A. Jaffe
                                    ----------------------------------
                                    Howard A. Jaffe, Chief Operating
                                    and  Financial Officer


<PAGE>