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  MARCH  31,  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 April 30, 2001, 23,122,576
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 September 30, 2000 (audited) and March 31, 2001
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of operations for the six months and three months ended
March  31,  2001  and  2000  (unaudited) . . . . . . . . . . . . . . . . . . . .

Consolidated statement of cash flows for the six months ended March 31, 2001 and
2000  (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


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

                               CONSOLIDATED  BALANCE  SHEETS

                                            ASSETS

                                                                  September 30,      March 31,
                                                                      2000             2001
                                                                 ---------------  -------------
<S>                                                              <C>              <C>
CURRENT ASSETS                                                                      (unaudited)
   Cash and cash equivalents                                     $       398,989  $    600,661
   Restricted deposit                                                    805,687       300,000
   Subscription receivable                                                32,725             -
   Note receivable from related party                                          -       130,000
   Equipment held for sale                                                     -     3,054,125
   Prepaid expenses, deposits and other                                  121,491       356,355
                                                                 ---------------  -------------

         Total current assets                                          1,358,892     4,441,141

PROPERTY AND EQUIPMENT - AT COST,
   less accumulated depreciation and amortization                      1,791,257     2,041,116

EQUIPMENT UNDER CONSTRUCTION                                           3,301,625             -

ADVANCES TO THE PATHWAYS GROUP, INC                                    1,900,825     3,250,780

ADVANCES TO ROCKSTER, INC.                                                     -       560,000

OTHER ASSETS
   Intangible and deferred assets, net of accumulated amortization       370,206       580,769
   Deposits and other                                                    328,051       332,845
                                                                 ---------------  -------------

         Total assets                                            $     9,050,856  $ 11,206,651
                                                                 ===============  =============

                       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Accounts payable                                              $    1,993,796   $  4,073,049
   Accrued liabilities                                                  733,241      1,463,571
   Bridge loans                                                         799,177         82,185
   Notes payable                                                              -        481,231
   Equipment purchase contract payable                                2,307,025      1,850,000
   Royalty fee payable to Card Tech, Inc., net                          487,500        812,500
   Payable to related parties                                           175,240      1,259,840
                                                                 ---------------  -------------

         Total current liabilities                                    6,495,979     10,022,376

NOTES PAYABLE, net of unamortized discount                                    -        400,000

CONVERTIBLE DEBENTURES, net of unamortized discount                     809,043      1,035,858

MINORITY INTEREST                                                             -              -

COMMITMENTS AND CONTINGENCIES                                                 -              -

STOCKHOLDERS' EQUITY (DEFICIT)
   Common stock - $.001 par value, 50,000,000 shares authorized          20,341         21,463
   Stock subscriptions                                                  323,640      3,957,239
   Additional paid in capital                                        36,925,837     44,172,085
   Receivable from stockholders of subsidiary                          (266,621)      (266,621)
   Accumulated development stage deficit                            (35,257,363)   (48,135,749)
                                                                 ---------------  -------------
                                                                      1,745,834       (251,583)
                                                                 ---------------  -------------

Total liabilities and stockholders' equity (deficit)             $    9,050,856   $ 11,206,651
                                                                 ===============  =============
</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
                                                 Six months ended March 31,          March 31,             operations since
                                                --------------------------  --------------------------        inception
                                                    2000          2001          2000          2001       (February 5, 1997)
                                                ------------  ------------  ------------  ------------  -------------------
<S>                                             <C>           <C>           <C>           <C>           <C>
Costs and expenses                               (unaudited)   (unaudited)   (unaudited)   (unaudited)       (unaudited)
   Research and development                     $ 1,869,127   $  3,539,415  $ 1,109,319   $  1,124,990  $       11,690,087
   Purchased in-process research and development    425,800              -      269,600              -           5,971,603
   Sales and marketing                              928,535      1,135,651      185,552        421,814           4,750,614
   General and administrative                     4,389,930      7,089,692    2,670,686      5,489,902          18,237,699
                                                ------------  ------------  ------------  ------------  -------------------
                                                  7,613,392     11,764,758    4,235,157      7,036,706          40,650,003
Other expenses (income)
   Equity in losses of UltraCard                          -              -            -                          1,264,316
   Interest expense                                 520,644      1,026,842       63,893        723,230           1,990,836
   Other, net                                       (86,491)        86,786      (45,632)        62,081             328,934
                                                ------------  ------------  ------------  ------------  -------------------
                                                    434,153      1,113,628       18,261        785,311           3,584,086

Minority interest in losses
  of subsidiaries                                (1,687,333)             -     (823,763)             -          (2,115,135)
                                                ------------  ------------  ------------  ------------  -------------------

NET LOSS                                        $ 6,360,212   $ 12,878,386  $ 3,429,655   $  7,822,017  $       42,118,954
                                                ============  ============  ============  ============  ===================

LOSS PER COMMON
   SHARE-BASIC AND DILUTED                      $      0.38   $       0.62  $      0.18   $       0.37  $             3.54
                                                ============  ============  ============  ============  ===================
</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

                                           Six months ended March 31, 2001 (unaudited)


                          Voting common stock  Common stock subscribed Additional  Receivable from     Accumulated
                          -------------------  ---------------------     paid-in      Stockholder      Development
                            Shares    Amount    Shares      Amount       Capital      of subsidiary    stage 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                         -        -   233,333     920,000      (100,000)               -                -        820,000

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                   -        -   464,128     928,257      (102,208)               -                -        826,049

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


                                       4
<PAGE>
Issuance of common
  shares at $2.02 per
  share pursuant to
  conversion of
  debenture                  107,981      108         -           -       218,014                -                -        218,122

Common shares
  subscribed pursuant
  to warrant exercise at
  $0.25 per share                  -        -   200,000      50,000             -                -                -         50,000

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

Modification of warrants
  granted to officer                -       -         -           -      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

Common 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
  finance fees                      -       -    16,267       61,001             -               -                -         61,001

Common shares
  subscribed at $3.31 as
  additional finance fees           -       -    18,429       61,001             -               -                -         61,001

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

Warrants issued with a
Strike price of $3.31 to
  $6.00 per share as
  additional finance fees           -       -          -           -         35,082              -                -         35,082

Common   shares
  subscribed at $2.00
  per share net of
  replacement costs                 -       -     828,496  1,656,980         (5,000)             -                -      1,651,980

Placement fees accrued
  on prior financings               -       -          -           -       (921,133)             -                -       (921,133)

Allocation of debenture
  proceeds to beneficial
  conversion feature                -       -          -           -        790,369              -                -        790,369

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

Net consolidated loss for
  the six months ended
  March 31, 2001                    -        -         -           -              -              -      (12,878,386)   (12,878,386)
                           ----------  -------  ---------  ----------  ------------  ---------------  ---------------  ------------

Balances March 31, 2001    21,462,671  $21,463  1,932,319  $3,957,239    44,172,085  $    (266,621)    $(48,135,749)   $  (251,583)
                           ==========  =======  =========  ==========  ============  ===============  ===============  ============
</TABLE>

The  accompanying  notes  are  an  integral  part  of  this  statement.


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

                                 CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS  (unaudited)


                                                                                Six months ended
                                                                                    March 31,               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                                                                 $(6,360,212)  $(12,878,386)  $      (42,118,954)
  Adjustments to reconcile net loss to net
    cash used in operating activities
    Depreciation and amortization                                              102,993        297,683              599,535
    Amortization of beneficial conversion feature and debenture discount       477,745        963,023            1,772,066
    Loss on sale of property and equipment                                           -          3,883                3,883
    Adjustment to receivable from subsidiary's shareholders                                                        133,379
    Write off of option cost                                                                                        76,250
    Common stock subscribed for financing fees                                       -        122,002              122,002
    Equity in loss of UltraCard                                                                                  1,264,316
    Purchased in-process research and
      development                                                              425,800              -            5,971,603
    Warrants and options issued for services                                   339,500      1,903,685            5,134,175
    Warrants issued for financing fees                                               -         35,082               35,082
    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                                                       (1,687,333)             -           (2,115,135)
    Changes in assets and liabilities:
      Prepaid expenses, deposits and other                                    (148,167)      (251,264)             607,446
      Accounts payable and accrued liabilities                                (200,072)     3,127,025            4,924,649
                                                                           ------------  ------------   -------------------

              Net cash used in operating activities                         (6,806,846)    (6,677,267)         (22,696,048)

Cash flows from investing activities
    Advances to The Pathways Group, Inc.                                             -     (1,349,955)          (3,234,955)
    Advances to Rockster, Inc.                                                       -       (560,000)            (560,000)
    Payments on equipment under construction                                (1,200,000)             -           (1,200,000)
    Acquisition of property and equipment, net                                (446,641)      (429,364)          (1,550,248)
    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)
    Additions to note receivable from related party                                  -       (130,000)            (130,000)
    Proceeds from sale of property and equipment                                                                    52,593
    Acquisition deposit                                                              -        (15,000)             (15,000)
    Additions to intangible assets                                              (1,084)       (65,490)            (182,668)
                                                                           ------------  ------------   -------------------
              Net cash used in investing activities                         (2,108,025)    (2,549,809)         (13,591,383)

Cash flows from financing activities
    Proceeds from sale of common stock and stock subscriptions               6,258,844      5,575,614           32,099,064
    Borrowings, net of loan costs                                              930,000      4,604,039            8,275,577
    Principal payments on borrowings                                          (367,628)    (1,311,592)          (3,954,335)
    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                      6,821,216      9,428,748           36,888,092
                                                                           ------------  -------------  -------------------

Net increase (decrease) in cash and cash equivalents                        (2,093,655)       201,672              600,661

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                         $ 2,687,675   $    600,661   $          600,661
                                                                           ============  =============  ===================
</TABLE>

The  accompanying  notes  are  an  integral  part  of  these  statements.


                                       4
<PAGE>
                           UPGRADE INTERNATIONAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2001
                                   (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  (GAPP)  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
filed  on  January  16,2001  and  the  form  10-QSB  that  included consolidated
financial results for the three months ended December 31,2000 and 1999, filed on
February  20,  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  March 31, 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 six months ended March 31, 2001, 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 six months ended March 31, 2001
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 20,938,724 and 21,191,279 for the six
and  three  months ended March 31, 2001, respectively, 16,905,166 and 19,147,677
for  the  six and three months ended March 31, 2000, respectively and 11,891,020
since  inception  (February  5,  1997) through March 31, 2001.  Diluted loss per
share for all periods presented equaled basic loss per share due to antidilutive
effect  of  the  potentially  dilutive  securities.  As of March 31, 2001, total
warrants  and  options  of  5,745,830  were  not  included  in  loss  per  share
computations  due  to  their  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 being facilitated in part through the acquisition
of  strategically  aligned Companies in the information technology industry.  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 at least
the  end  of  second  quarter  of  fiscal  year  2002.

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  March  31,  2001,  the  Company completed the
following  debt  and  equity  transactions:

          A  debtholder  converted  $218,122 and $438,356, respectively, in then
     outstanding  convertible  debentures  (including  $18,122  and  38,356,
     respectively,  in  accrued interest) into 107,981 and 307,509 shares of the
     Company's  common  stock  at  $2.02  and  $1.43  per  share pursuant to the
     original  debenture  terms.

          The  Company  issued  200,000  shares of its common stock at $0.25 per
     share  pursuant  to  a  warrant  exercise  for  gross  proceeds of $50,000.

          The  Company  completed a private placement offering of 280,000 shares
     of  its  common  stock  at  $2.50 per share for gross proceeds of $700,000.

          The  Company  completed a private placement offering of 828,496 shares
     of  its  common  stock at $2.00 per share for gross proceeds of $1,656,980.


<PAGE>
The  Company  is  actively  pursuing  various  financing  opportunities.  Such
financing  could  take  the  form  of  equity,  debt,  or  other hybrid types of
securities.

NOTE  E  -  DEBT

In  March  2001, the Company issued $790,369 in subordinated debentures that are
convertible  immediately into common stock.  The debentures bear simple interest
at  8%  per  annum,  are  due May 31, 2001 and are collateralized by UltraCard's
interest  in  the  equipment  held  for  sale.

In  March  2001, the Company issued 16,267 and 18,429 shares of its common stock
at  $3.75  and $3.31 per share as additional financing fees under the terms of a
modified  promissory  note.  In  addition, under the terms of the aforementioned
note,  the  Company  granted  warrants  entitling the holder to purchase 20,277,
40,664  and  23,034  shares  of  its  common stock at $3.75, $6.00 and $3.31 per
share, respectively. The warrants are exercisable immediately and expire 90 days
from  the  date  of  grant.

In  March  2001,  the  Company  obtained  a  12.5% simple interest mortgage loan
totaling  $400,000.  The  loan calls for interest only monthly payments with the
first  payment  due  May 1, 2001 and principal plus unpaid interest due February
2002.  The  loan  is  collateralized  by  the  condominiums  owned by UltraCard.


NOTE  F  -  ACQUISITIONS

On  September 8, 2000 the Company signed an Agreement and Plan of Reorganization
("Agreement") to acquire 100% of The Pathways Group, Inc. (Pathways) On February
15,  2001  the  Company  delivered  notice  to  Pathways  terminating the merger
agreement  between  the  two Companies.  The advances to Pathways by the Company
are  secured  by  a  blanket  assignment  over  the Pathways assets.  Management
believes  the  advances  are  fully  recoverable.

On  December  11,  2000  the  Company entered into a letter of intent to acquire
majority  interest  totaling  57  percent  in  Rockster,  Inc.  (Rockster),  an
entertainment  distribution  technology  developer. The Company and Rockster are
currently  in  the  process  of  developing  a  definitive  agreement.

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

NOTE  G  -  COMMITMENTS


The  Company has a contract with SciVac, Inc. (SciVac) to purchase and install a
sputtering  machine  for  $3,000,000.  As  of  March  31,  2001, the Company has
advanced  $1,200,000  to  SciVac under this contract and recorded a liability of
$1,800,000.  The  Company decided that it no longer requires the machine for its
operations.  As  a  result,  the Company has entered into an oral agreement with
SciVac, whereas, SciVac will market and sell the sputtering machine on behalf of
the  Company.  This  asset  is  classified  in  the  accompanying  condensed
consolidated  balance  sheet  as  equipment  held  for  sale  in  the  amount of
$3,054,125.  The  Company  believes  it  will realize the carrying amount of the
asset  in  a  sale  during  2001.

On  March  13,  2001,  the  Company entered into an operating lease agreement to
lease  a  28,500 square foot facility in Los Angeles, California.  The agreement
calls  for  monthly  payment  of  $43,200  commencing August 1, 2001.  The lease
terminates  August  1,  2011.


<PAGE>
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 annual
royalty  fee  of  $650,000.  Royalty  fees are due on January 1 of each calendar
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 June 30, 2001.  In
consideration  for  the  deferral,  UltraCard  has  granted a patent mortgage to
CardTech  on  all  its  intellectual  property.

NOTE  H  -  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
violations  were  dismissed, with prejudice by the United States District Court.
Plaintiffs  appealed  the Court's order, and the defendants filed a cross appeal
seeking sanctions. The parties have since entered into a stipulated agreement to
dismiss  their  appeals.

NOTE  I  -  SUBSEQUENT  EVENTS

During  April, 2001, the Company issued common stock at $2 per share for a total
of  $1,030,000.  The  offer  and  sales  of  securities  was made pursuant to an
exemption  from  registration  under  Regulation S of the Securities Act of 1933
(Act),  due  to  the  foreign  nationality  of  the  investors.

During  May, 2001 to the date of this report, the Company issued common stock at
$2 per share for a total of $196,000. The offer and sales of securities was made
pursuant to an exemption from registration under Regulation S of the Act, due to
the  foreign  nationality  of  the  investors.


<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  $12.9  million  in  the first six months of the current
fiscal  year ending September 30, 2001 compared with a $6.3 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 Company's
technology, production processes and the development of commercialization of the
Companies  core  technology  through  the  acquisition of application companies.
During the quarter, the Company's subsidiary, UltraCard Inc. has completed their
move  into  new  facilities  in  Los  Gatos  completing the consolidation of the
operations  into  one  location.  Significant  administrative  costs  have  been
incurred in reorganizing the Company's acquisitions of application companies and
in  their  capital  raising initiatives. UltraCard Inc., has again increased its
research  and  development  expenditures  by $2.1 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 3% of the total
loss  reflecting  the  focus  of the consolidated groups efforts to complete the
UltraCard  technology.  During  the six month period, EforNet discontinued their
research and development program in light of acquisitions being developed during
the period, however the developments that they had achieved are being maintained
and  protected  and  will  be  further developed within the Company's developing
infrastructure.  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.
For  the  near  future, research and development expenditures are expected to be
increased to meet the Company's numerous potential market opportunities.  All of
the  Company's  research  and  development  costs  are  expensed  as  incurred.

The  net  loss  for  the three month period ended March 31, 2001 of $7.8 million
represents  a  $4.4  million increase over the corresponding period in the prior
year.  A significant portion of this increased loss ($2.98 million) is comprised
of  non-cash  financing  costs associated with warrants issued for services, the
extension  of  warrants previously issued, debenture discounts and common shares
issued  for financing fees. The additional increase is comprised of a step up in
sales and marketing expenditures of $240,000 reflecting the Company's increasing
efforts  to raise market awareness of its products and potential. The balance of
the increase is allocated to general and administrative expenditures incurred by
the  growing  group  of  companies.

Interest expense has also increased significantly as the result of the valuation
of  shares and warrants issued in relation to unpaid notes and debentures issued
during  the  period.

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


<PAGE>
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 decreased by approximately $0.3 million
from  the  prior  quarter  as  the  prior  quarter  costs  included a technology
symposium  in  San  Francisco,  in which the Companies in the consolidated Group
showcased  their  products  to  investors,  industry  and  the  media. Sales and
marketing  expenditures  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.


LIQUIDITY  AND  CAPITAL  RESOURCES

Cash  and equivalents were approximately $400,000 at March 31, 2001, an increase
of approximately $500,000 from December 31, 2000.  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 $9.4 million in the
current  six month period represents a 38% increase in the capital raised in the
corresponding  period  of  the  preceding  year.  The  proceeds  were  used  for
operations  of  $6.7  million,  with  the  balance  of $2.5 million allocated to
investing  activities  for  acquisitions in process of Pathways and Rockster and
the development of the UltraCard facilities. The Company is successfully raising
capital  on  an  ongoing  basis  as  it  has done for the last three years since
inception.

In  order  for  the  Company  to meet the funding requirements from its investee
Companies  and  to meet ongoing operating requirements, the Company 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.


<PAGE>
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  dated  February  9,  2001. Plaintiffs appealed the court's order, and the
defendants  filed  a  cross  appeal  seeking  sanctions.  The parties have since
entered  into  a  stipulated  agreement  to  dismiss  their  appeals.

Lewis  v.  The  Pathways Group, Inc. and Upgrade International Corporation, U.S.
--------------------------------------------------------------------------
District  Court, Western District of Washington at Seattle, c/a #C01-0600R.  The
complaint alleges copyright infringement, misappropriation of trade secrets, and
tortuous  interference  with  business expectancies against Upgrade by virtue of
the  proposed  merger  between  Upgrade  and  The  Pathways  Group, which merger
proposal  was  terminated  by Upgrade on February 15, 2001.  The complaint seeks
injunctive relief and unspecified damages.

The  Company  filed  an answer on May 17, 2001.  Management believes the case is
without  merit  and  intends  to  defend  it  vigorously.


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

During  the  three  months  ended  March 31, 2001, the Company sold unregistered
securities  as  follows:

     In  January  2001,  Upgrade  issued 107,981 shares of its common stock at a
price  of $2.02 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 Securities Act
of  1933  (the  "Act").

     In  January  2001,  Upgrade  issued 200,000 shares of its common stock at a
price  of $0.25 per share pursuant to the exercise of warrants. The issuance was
exempt from registration pursuant to Regulation S of the Securities Act of 1933,
due  to  the  foreign  nationality  of  the  investor.

     In  January 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  January 2001, Upgrade completed a private placement offering of 265,000
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$530,000.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration  under Regulation S of the Securities Act of 1933, due to the
foreign  nationality  of  the  investor.

     In  February  2001,  Upgrade issued 307,509 shares of its common stock at a
price  of $1.43 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.


<PAGE>
     In February 2001, Upgrade completed a private placement offering of 358,496
shares  of  its common stock at a price of $2.00 per share for total proceeds of
$716,980.  The  offer  and  sale of securities was made pursuant to an exemption
from  registration  under Regulation S of the Securities Act of 1933, due to the
foreign  nationality  of  the  investor.

     In  February 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  March  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  March 2001, Upgrade issued 16,267 shares of its common stock at a price
of  $3.75  per  share  in lieu of financing fees under the terms of a promissory
note.  The issuance was exempt under Rule 506 under and Section 4(2) of the Act.

     In  March 2001, Upgrade issued 18,429 shares of its common stock at a price
of  $3.31  per  share  in lieu of financing fees under the terms of a promissory
note.  The issuance was exempt under Rule 506 under and Section 4(2) of the Act.

     In  March  2001,  Upgrade  issued warrants to purchase 20,277 shares of its
common  stock  at an exercise price of $3.75 per share in lieu of financing fees
under  the  terms  of  a promissory note. The issuance was exempt under Rule 506
under  and  Section  4(2)  of  the  Act.

     In  March  2001,  Upgrade  issued warrants to purchase 40,664 shares of its
common  stock  at an exercise price of $6.00 per share in lieu of financing fees
under  the  terms  of  a promissory note. The issuance was exempt under Rule 506
under  and  Section  4(2)  of  the  Act.

     In  March  2001,  Upgrade  issued warrants to purchase 23,034 shares of its
common  stock at an exercise price of $3.31 per share as additional compensation
under  the  terms  of  a promissory note. The issuance was exempt under Rule 506
under  and  Section  4(2)  of  the  Act.

Item  4.          Submission  of  Matters  to  a  Vote  of  Security  Holders
-------

On  March  27,  2001,  the Company held its Annual Meeting of Shareholders.  The
shareholders  voted  on  and  approved  the  following  matters, with the voting
results  indicated:

     Election  of  Directors:

          Daniel  S.  Bland,  Class  3  (term  expiring  2004)

          For:     11,273,980           Withheld  Vote:     123,068

          Malcolm  P.  Burke,  Class  3  (term  expiring  2004)


<PAGE>
     For:     11,277,580           Withheld  Vote:     119,468

     Ronald  P.  Erickson,  Class  2  (term  expiring  2003)
     For:     11,132,474           Withheld  Vote:     264,574

     Howard  A.  Jaffe,  Class  2  (term  expiring  2003)
     For:     11,271,930           Withheld  Vote:     125,118

     For  approval  of  the  Company's  2000  Omnibus  Stock  Option  Plan

     For          Against     Abstain     Broker  Non-Votes
     ---          -------     -------     -----------------
     7,127,515     63,314      60,055      4,146,164

     The  appointment  of  Grant  Thornton,  L.L.P. as the Company's independent
     auditors  for  the  fiscal  year  2001.

     For          Against     Abstain     Broker  Non-Votes
     ---          -------     -------     -----------------
     11,353,455    13,801      29,792       9,758,113

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.

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

     Exhibit  No.          Description
     ------------          -----------
     10.1                  Form  of  Debenture
     10.2                  Form  of  Promissory  Note



                                Upgrade  International  Corporation


Date:  May  15,  2001           ------------------------------------------------
                                Daniel  Bland,  President  and  Chief  Executive
                                Officer,  and  Secretary


Date:  May  15,  2001           ------------------------------------------------
                                Howard  A.  Jaffe,  Chief  Operating  and
                                Financial Officer


<PAGE>