--------------------------------------------------------------------------------

                       THE FOLLOWING ITEMS WERE THE SUBJECT OF A FORM 12B-25 AND
                  ARE INCLUDED HEREIN: (A) PART I, ITEM 1 (FINANCIAL STATEMENTS)
                      AND PART I, ITEM 2 (MANAGEMENT'S DISCUSSION AND ANALYSIS).

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                           ---------------------------



                               AMENDMENT NO. 1 TO
                                   FORM 10-QSB

(Mark One)

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

                  For the quarterly period ended June 30, 2000

                                       OR

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

                  For the transition period from            to

                        Commission file number: 333-6440

                              Q-SEVEN SYSTEMS, INC.

        (Exact Name of Small Business Issuer as Specified in its Charter)

                                      Utah
                         (State or Other Jurisdiction of
                         Incorporation or Organization)

                    Mittelstr. 11-13, 40789 Monheim, Germany
                    (Address of Principal Executive Offices)
                                   87-0567618

                                (I.R.S. Employer
                               Identification No.)

                                011-49-2173-39220
                           (Issuer's Telephone Number)

     Check whether the issuer: (1) has 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 |_| NO |X|

     The number of shares  outstanding of the issuer's common stock,  $0.001 par
value, as of April 11, 2001 was 12,500,000.

     Transitional Small Business Disclosure Format:               YES |_| NO |X|
--------------------------------------------------------------------------------





<PAGE>



                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.


                      Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
                           Consolidated Balance Sheets

                                     ASSETS

<TABLE>
<CAPTION>
                                                                              June 30,            December 31,
                                                                                2000                  1999
                                                                         -----------------     -----------------
                                                                             (Unaudited)
<S>                                                                     <C>                   <C>
CURRENT ASSETS

   Cash and cash equivalent                                              $          97,302     $          57,534
   Accounts receivable                                                             356,651               388,112
   Interest receivable - related party                                               6,263                -
   Due from related party                                                           12,319                -
                                                                         -----------------     -----------------

     Total Current Assets                                                          472,535               445,646
                                                                         -----------------     -----------------

FIXED ASSETS, NET                                                                      508                   622
                                                                         -----------------     -----------------

     TOTAL ASSETS                                                        $         473,043     $         446,268
                                                                         =================     =================


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

   Accounts payable                                                      $         203,795     $         200,571
   Accrued expenses                                                                253,203               167,073
   Income taxes payable                                                             35,674                35,674
   Investor deposit                                                                250,000                -
                                                                         -----------------     -----------------

     Total Current Liabilities                                                     742,672               403,318
                                                                         -----------------     -----------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)

   Preferred stock, 50,000,000 shares authorized
    of $0.001 par value, no shares issued or outstanding                            -                     -
   Common stock, 100,000,000 shares authorized of
    $0.001 par value, 12,500,000 shares issued and
    outstanding                                                                     12,500                12,500
   Additional paid-in capital (deficit)                                             (8,343)               (8,343)
   Retained earnings (deficit)                                                    (273,786)               38,793
                                                                         -----------------     -----------------

     Total Stockholders' Equity (Deficit)                                         (269,629)               42,950
                                                                         -----------------     -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $         473,043     $         446,268
                                                                         =================     =================
</TABLE>





<PAGE>



                      Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              For the                                 For the
                                                          Six Months Ended                        Three Months Ended
                                                              June 30,                                June 30,
                                               ----------------------------------------------------------------------------
                                                     2000               1999                2000                1999
                                               -----------------  ------------------  ------------------  -----------------
<S>                                           <C>                <C>                 <C>                 <C>
NET SALES                                      $       1,051,154  $          434,917  $          595,344  $         224,248

COST OF SALES                                            461,628             181,093             247,815             68,679
                                               -----------------  ------------------  ------------------  -----------------

GROSS PROFIT                                             589,526             253,824             347,529            155,569
                                               -----------------  ------------------  ------------------  -----------------

OPERATING EXPENSES

   Selling, general and administrative                   904,079             211,676             644,187            103,732
   Depreciation and amortization                             114                  68                  57                 68
                                               -----------------  ------------------  ------------------  -----------------

     Total Operating Expenses                            904,193             211,744             644,244            103,800
                                               -----------------  ------------------  ------------------  -----------------

NET INCOME (LOSS) FROM
 OPERATIONS                                             (314,667)             42,080            (296,715)            51,769

OTHER INCOME                                               2,088              -                    1,044             -
                                               -----------------  ------------------  ------------------  -----------------

NET LOSS BEFORE INCOME
 TAXES                                                  (312,579)             42,080            (295,671)            51,769

INCOME TAXES                                              -                   -                   -                  -
                                               -----------------  ------------------  ------------------  -----------------

NET INCOME (LOSS)                              $        (312,579) $           42,080  $         (295,671) $          51,769
                                               =================  ==================  ==================  =================

BASIC INCOME (LOSS) PER
 SHARE                                         $           (0.03) $             0.00  $            (0.02) $            0.00
                                               =================  ==================  ==================  =================

WEIGHTED AVERAGE NUMBER
 OF SHARES                                            12,500,000          12,500,000          12,500,000         12,500,000
                                               =================  ==================  ==================  =================
</TABLE>





<PAGE>



                      Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY

            Consolidated Statements of Stockholders' Equity (Deficit)


<TABLE>
<CAPTION>
                                                                                Additional
                                                    Common Stock                  Paid-In           Retained
                                         -----------------------------------      Capital           Earnings
                                               Shares            Amount          (Deficit)          (Deficit)
                                         -----------------  ----------------  -----------------  -----------------
<S>                                     <C>                <C>               <C>                <C>
Balance, December 31, 1998                       7,900,000  $          7,900  $          53,525  $          72,010

Recapitalization                                 4,600,000             4,600            (75,265)            -

Capital contribution                                -                 -                  13,397             -

Net loss for the year ended
 December 31, 1999                                  -                 -                  -                 (33,217)
                                         -----------------  ----------------  -----------------  -----------------

Balance, December 31, 1999                      12,500,000            12,500             (8,343)            38,793

Net loss for the six months
 ended June 30, 2000
 (unaudited)                                        -                 -                  -                (312,579)
                                         -----------------  ----------------  -----------------  -----------------

Balance, June 30, 2000
 (unaudited)                                    12,500,000  $         12,500  $          (8,343) $         273,786
                                         =================  ================  =================  =================
</TABLE>





<PAGE>



                      Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             For the                                 For the
                                                        Six Months Ended                        Three Months Ended
                                                            June 30,                                June 30,
                                               ----------------------------------------------------------------------------
                                                     2000               1999                2000                1999
                                               -----------------  ------------------  ------------------  -----------------
<S>                                           <C>                <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES

   Net income (loss)                           $        (312,579) $           42,080  $         (295,671) $          51,769
   Adjustments to reconcile net loss to
    net cash provided by operating
    activities:
     Depreciation                                            114                  68                  57                 68
     Increase in interest receivable                      (6,263)             -                   (1,044)            -
     Decrease (increase) in due from
      related parties                                    (12,319)             -                   12,245             -
     Decrease (increase) in accounts
      receivable                                          31,461             (59,249)             63,742            (28,885)
     Increase (decrease) in accounts
      payable                                              3,224              31,446               6,259            (22,182)
     Increase (decrease) in accrued
      expenses                                            86,130              -                   (2,529)            -
                                               -----------------  ------------------  ------------------  -----------------

       Cash Provided by Operating

        Activities                                      (210,232)             14,345            (216,941)               770
                                               -----------------  ------------------  ------------------  -----------------

CASH FLOWS PROVIDED BY
 INVESTING ACTIVITIES                                     -                   -                   -                  -
                                               -----------------  ------------------  ------------------  -----------------

CASH FLOWS FROM FINANCING
 ACTIVITIES

   Investor deposit                                      250,000              -                   -                  -
   Capital contribution                                   -                   13,397              -                  -
                                               -----------------  ------------------  ------------------  -----------------

       Cash Provided by Financing

        Activities                                       250,000              13,397              -                  -
                                               -----------------  ------------------  ------------------  -----------------

NET INCREASE IN CASH                                      39,768              27,742            (216,941)               770

CASH AT BEGINNING OF PERIOD                               57,534                   4             314,243             26,976
                                               -----------------  ------------------  ------------------  -----------------

CASH AT END OF PERIOD                          $          97,302  $           27,746  $           97,302  $          27,746
                                               =================  ==================  ==================  =================

SUPPLEMENTAL CASH FLOW
 INFORMATION

Cash paid for:

   Interest                                    $          -       $           -       $           -       $          -
   Income taxes                                $          -       $           -       $           -       $          -
</TABLE>





<PAGE>


                      Q-SEVEN SYSTEMS, INC. AND SUBSIDIARY
                 Notes to the Consolidated Financial Statements
                                  June 30, 2000

NOTE 1 -      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              The  accompanying  consolidated  financial  statements  have  been
              prepared  by  the  Company   without  audit.  In  the  opinion  of
              management,  all adjustments  (which include only normal recurring
              adjustments)  necessary to present fairly the financial  position,
              results of operations and cash flows at June 30, 2000 and 1999 and
              for all periods presented have been made.

              Certain information and footnote  disclosures normally included in
              consolidated  financial  statements  prepared in  accordance  with
              generally  accepted  accounting  principles have been condensed or
              omitted.  It  is  suggested  that  these  condensed   consolidated
              financial  statements  be read in  conjunction  with the financial
              statements  and notes thereto  included in the Company's  December
              31, 1999 audited consolidated financial statements. The results of
              operations  for  periods  ended  June  30,  2000  and 1999 are not
              necessarily  indicative  of the  operating  results  for the  full
              years.

<PAGE>


Item 2.  Management's Discussion and Analysis.

     OVERVIEW

     Q-Seven Systems,  Inc., a Utah corporation  ("our company," "we," or "us"),
engages  directly and through its  subsidiaries in two lines of Internet related
businesses:

     o    the sale of licenses  to the Q-Seven  User  Management  Software  (the
          "User Management Software" or "our software"); and

     o    the operation of six Internet adult entertainment websites.

     For accounting purposes, the acquisition (the "Q-Seven Nevada Acquisition")
in May 1999 by our  company  of  Q-Seven  Systems,  Inc.,  a Nevada  corporation
("Q-Seven  Nevada"),  is  considered  an  acquisition  of our company by Q-Seven
Nevada and its wholly owned direct  subsidiary X-Real  Intertainment,  Inc. Ltd.
("X-Real").  Due to this  accounting  treatment,  all  results  which  relate to
periods prior to the Q-Seven  Nevada  Acquisition  solely reflect the results of
Q-Seven Nevada and its wholly owned subsidiary  X-Real.  Any results that relate
to the  operations of our company prior to the Q-Seven Nevada  Acquisition  were
eliminated.  The reader  should  keep this in mind when  reading  the  following
discussion and comparing our interim  financial  statements for the period ended
June 30, 2000 to financial  statements of our company  relating to periods prior
to the Q-Seven Nevada  Acquisition.  The following  discussion should be read in
conjunction with our financial statements for the period ended June 30, 2000 and
the notes thereto.

     CONSOLIDATED RESULTS OF OPERATIONS

Revenues

     The following  table and  discussion  highlights our revenues for the three
and six months ended June 30, 2000 and 1999:


<TABLE>
<CAPTION>
                                                    Three Months Ended                              Six Months Ended
                                                        June 30,                                       June 30,

                                               2000                     1999                  2000                     1999
                                        ------------------     --------------------    ------------------      -------------------
<S>                                   <C>           <C>        <C>          <C>       <C>           <C>       <C>           <C>
Revenues from the sale of licenses      $121,874      20.5%           $0         0%     $221,874     21.1%            $0        0%
to the User Management Software

Revenues from X-Real's adult            $473,470      79.5%     $224,248       100%     $829,280     78.9%      $434,917      100%
entertainment websites
Other revenues                                $0         0%           $0         0%           $0        0%            $0        0%


Total revenues                          $595,344       100%     $224,248       100%   $1,051,154      100%      $434,917      100%
</TABLE>

     For the three months ended June 30, 2000, our total revenues increased from
$224,248 to $595,344,  or  approximately  166%, over the three months ended June
30, 1999. For the six months ended June 30, 2000,  our total revenues  increased
from $434,917 to $1,051,154,  or approximately 141.7%, over the six months ended
June 30, 1999. For the three months ended June 30, 2000,  revenues from the sale
of our software were $121,874,  or approximately 20.5% of our total revenues for
that period,  whereas revenues from X-Real's adult  entertainment  websites were
$473,470,  or approximately 79.5% of our total revenues for that period. For the
six months ended June 30,  2000,  revenues  from the sale of our  software  were
$221,874, or approximately 21.1% of our total revenues for that period,  whereas
revenues  from  X-Real's  adult   entertainment   websites  were  $829,280,   or
approximately 78.9% of our total revenues for that period. For the three and six
months ended June 30,  1999,  we generated  100% of our revenues  from  X-Real's
adult entertainment business. We commenced selling licenses to our software only
in September  1999 and,  accordingly,  did not  generate any revenues  from this
business in the three and six months ended June 30, 1999.

     For the three months ended June 30, 2000,  our net income (loss)  decreased
from $51,769 to  $(295,671)  over the three months ended June 30, 1999.  For the
six months ended June 30, 2000, our net income (loss)  decreased from $42,080 to
$(312,579) over the six months ended June 30, 1999.

                        User Management Software Revenues

     For the  three  months  ended  June  30,  2000,  revenues  from the sale of
licenses to our  software  increased  from $0 to $121,874  over the three months
ended June 30, 1999. Similarly, for the six months ended June 30, 2000, revenues
from the sale of licenses to our software increased from $0 to $221,874 over the
six months ended June 30, 1999. In the second quarter of 2000,  Q-Seven  Systems
GmbH  concentrated on research and  development  with regard to existing and new
modules of the User  Management  Software,  while we continued to concentrate on
selling licenses to the casino module of the User Management  Software.  Q-Seven
Systems  GmbH is not a  subsidiary  of our  company,  but is  owned  by  Messrs.
Kriependorf, Kamp and Cordt, our officers, directors and principal shareholders.

     During the three months  ended June 30, 2000,  we only sold one new license
to our  software.  This  license  was  sold in May  2000 to KGMB  Ltd.  Sales of
licenses to our software  slowed in the three  months  ended June 30, 2000.  Our
management  believes  that the slowdown has been  primarily  caused by increased
competition  in the gaming  software  market and an increased  number of vendors
which have recently entered this market. Due to the multitude of vendors and the
availability of many different  types of gaming  software,  potential  customers
seem to be postponing the purchase of gaming software, possibly until it becomes
clear which vendors will dominate the market and which gaming  software will set
the standards.

     From  September 1999 to June 30, 2000, we sold in total six licenses to the
casino module of our software to the following customers:

     o    Advanced Media Group;
     o    Setec Astronomy Ltd.;
     o    Futura Internet Services Ltd.;
     o    World Network Ltd. (formerly known as Worldcraft Ltd.);
     o    Global Net Gamble Limited; and
     o    KGMB Ltd.

     From June 30, 2000 to the date of this amended  quarterly  report,  we sold
one further license to our gaming  software.  This license was sold in September
2000.

     Not all of the fees relating to these license sales have been paid in full.
Instalment  payments  relating to the sale of licenses to Advanced  Media Group,
Setec  Astronomy  Ltd.,  World Network Ltd.,  Global Net Gamble Limited and KGMB
Ltd., aggregating  approximately  $806,000, are not yet due. Instalment payments
relating to the sale of licenses to Setec Astonomy Ltd.,  World Network Ltd. and
Global Net Gamble Limited,  aggregating  approximately $179,000, were overdue as
of April 11, 2001.

     In December  2000,  Q-Seven  Systems GmbH  completed  the  development  and
testing of a new module of our software,  the Q-7 Auction  Module,  which is now
available for licensing to our  customers.  The auction  module allows  Internet
content  providers to host internet  auctions on their websites while  utilizing
other components of our software,  e.g., the Q-7 User Account Management Server,
the Q-7 Billing Module or the Q-7 Casino  Module.  As of April 11, 2001, we have
not yet sold any licenses to the new auction module of our software.

     As  previously  reported,  on May 24, 2000,  we entered into a  preliminary
agreement with Omni Software Systems, Inc. ("Omni Software"), in which we agreed
to grant Omni Software a non-exclusive license to sell to its customers the User
Management  System of our software in combination with a gaming module developed
by Omni  Software.  Although our  agreement  with Omni Software has not formally
been  terminated,  our  management  does not expect  that any  business  will be
transacted  under this  agreement.  After the  execution of the  agreement,  any
contact between Omni Software and us ceased completely,  although our management
repeatedly,  but  unsuccessfully,  attempted to contact  representatives of Omni
Software.  Our  management  does not know why Omni Software has not responded to
our inquiries, or whether that company is still in existence.

     In July  2000,  we  developed  plans to  establish  a network  of  regional
distributors  for our  software  and to allocate to each  distributor  a certain
territory  in which it would market our software on a  non-exclusive  basis.  At
this time,  we do not plan to  continue  our  efforts to develop a  distribution
network.  We have, however,  based on an oral agreement,  retained a distributor
for  the  Turkey  and  Cyprus  regions.  This  distributor  receives  from  us a
commission  for its  services,  the amount of which equals a  percentage  of the
revenues that we generate from the sale of licenses to our software  arranged by
this distributor.  Our management believes that this distributor will help us to
increase the market  penetration  with respect to our software in the Turkey and
Cyprus  regions,  enhance  our  presence  in these  regions and reduce our sales
related expenses with respect to licenses sold in these regions.

     We have  attended the following  tradeshows at which we have  presented our
software:  Online Gaming  Symposium (May 2000),  Montreal,  Canada,  Interactive
Casino Exhibition  (September 2000), London, United Kingdom and Interactive (IA)
2000 (January  2001),  New Orleans,  Louisiana.  Contacts made by our management
during these tradeshows led to discussions and  negotiations  with potential new
customers.  No  assurance  can  be  made  that  any  of  these  discussions  and
negotiations will ultimately result in the sale of new licenses to our software.

     On May 10,  2000,  the House  Banking  Committee  Chairman  James A.  Leach
(R-Iowa) and the  committee's  ranking  Democrat,  Rep. John J. LaFalce  (N.Y.),
introduced  legislation,  the Internet  Gambling  Funding  Prohibition Act (H.R.
4419),  that would prohibit the use of credit cards,  checks, or electronic fund
transfers in internet  gambling.  The bill,  intended to complement the Internet
Gambling  Prohibition  Act (H.R.  3125),  which the  House  Judiciary  Committee
approved in April 2000,  would extend a current ban on gambling  over  telephone
lines to the Internet. The House Banking Committee approved on June 28, 2000 the
Internet Gambling Funding  Prohibition Act (H.R. 4419) with an amendment offered
by Rep. John E. Sweeney (R-N.Y.), applying the restrictions only to betting that
is unlawful under state or federal law. The House voted on the Internet Gambling
Prohibition  Act  (H.R.  3125)  on July  17,  2000.  It was  considered  under a
suspension rule, which meant that it required a two-thirds  majority to pass. It
failed  by a  vote  of  245  to  159.  The  bill's  sponsor  Rep.  Bob  Godlatte
(R-Virginia)  said he expects it to be  returned  to the floor soon under  rules
that  require a simple  majority for  passage.  On February 12, 2001,  Mr. Leach
reintroduced legislation, the Unlawful Internet Gambling Funding Prohibition Act
(H.R.  556),  which is  substantially  similar to H.R.  4419.  H.R. 556 has been
referred  to the House  Financial  Services  Committee  and the House  Judiciary
Committee.  If any of these bills were enacted,  it could affect the interest of
our customers and  potential  customers in our gaming module  software and could
have a material adverse effect on our business,  revenues, operating results and
financial condition.

                          Adult Entertainment Revenues

     Revenues  generated  by X-Real  from fees  charged  to viewers of its adult
entertainment  websites  increased by  approximately  111%, from $224,248 in the
three  months ended June 30, 1999 to $473,470 in the three months ended June 30,
2000. For the six months ended June 30, 2000,  revenues  increased from $434,917
to  $829,280,  or  approximately  91%,  over the six months ended June 30, 1999.
These revenue increases were primarily  attributable to the addition,  in spring
1999, of two new websites to X-Real's adult entertainment business and increased
subscriptions  for X-Real's  websites as a result of an  affiliate  program with
webmasters  which advertise  X-Real's  websites for a percentage of the revenues
generated by X-Real as a result of such advertising.

     We have previously  reported that X-Real, in March 2000, received the first
tranche  of  an  investment   (the   "Infobridge   Investment")   by  Infobridge
International Ltd.  ("Infobridge").  The balance of the Infobridge Investment in
an amount of DM 500,000 (which equals approximately $226,400 on the basis of the
Federal  Reserve  Bank of New York April 11,  2001 noon  buying rate of Euro 1 =
$0.8856 and the fixed  exchange  rate of Euro 1 = DM 1.95583),  has not yet been
paid to X-Real and X-Real  has not yet  issued any shares to  Infobridge.  Funds
from the first tranche of the Infobridge  Investement have been used to redesign
and  transform  one of X-Real's six  websites  into a portal site from which its
other five websites are accessible. Although our management on February 24, 2001
requested  that   Infobridge  pay  to  X-Real  the  balance  of  the  Infobridge
Investment,  no payment has yet been received. Our management has been unable to
determine  why  Infobridge  has not  made  the  agreed  payment.  Provided  that
Infobridge makes the requested payment,  X-Real will issue shares to Infobridge,
the number of which will be slightly  lower than the number of shares  currently
indirectly  owned by us.  X-Real plans to utilize the  remaining  funds from the
first  tranche  of the  Infobridge  Investment  and the  remaining  funds  to be
received in connection  with the Infobridge  Investment to improve the marketing
for  X-Real's  services and  products,  including  the launch of an  advertising
campaign  for the  redesigned  portal site.  There can be no assurance  that the
remainder  of the  Infobridge  Investment  will be paid to  X-Real  or that  the
contemplated marketing and advertising activities will have any positive effects
on X-Real's  business.  There is also a risk that we could be asked to repay the
first tranche of the Infobridge Investment,  if the Infobridge Investment is not
completed  as  planned.  If we would  have to repay  the  first  tranche  of the
Infobridge  Investment,  this  could  have  a  material  adverse  effect  on our
business, revenues, operating results and financial condition.

     COSTS AND EXPENSES

     The following table and discussion highlight our costs and expenses for the
three and six months ended June 30, 2000 and June 30, 1999:

<TABLE>
<CAPTION>
                                          Three Months Ended                                 Six Months Ended
                                               June 30,                                          June 30,

                                        2000                    1999                   2000                        1999
                               --------------------      -----------------     --------------------        ------------------
<S>                           <C>         <C>         <C>          <C>        <C>          <C>           <C>          <C>
Total revenues                 $595,344        100%      $224,248      100%    $1,051,154       100%       $434,917      100%


Cost of sales                  $247,815       41.6%       $68,679     30.6%      $461,628      43.9%       $181,093     41.6%
Operating expenses:
     Selling, general and      $644,187      108.2%      $103,732     46.3%      $904,679      86.1%       $211,744     48.7%
     administrative
     Depreciation and               $57       0.01%           $68     0.03%          $114      0.01%            $68     0.02%
     amortization

Total costs and expenses       $892,059      149.8%      $172,479     76.9%    $1,365,821     129.9%       $392,837     90.3%
</TABLE>

Cost of Sales

     Cost of sales for the three and six  months  ended June 30,  2000  includes
primarily costs  associated  with the  management,  operation and maintenance of
X-Real's adult entertainment  websites,  computer and network equipment costs in
connection with X-Real's  servers and royalties paid to Q-Seven Systems GmbH for
our right to license the User Management  Software.  Cost of sales for the three
and six months ended June 30, 1999 includes the same items, except for royalties
paid to Q-Seven Systems GmbH.

     For the three  months  ended June 30, 2000,  cost of sales  increased  from
$68,679 to $247,815,  or approximately  260.8%, over the three months ended June
30, 1999,  and  increased as a percentage of total  revenues from  approximately
30.6% to  approximately  41.6%.  For the six months ended June 30, 2000, cost of
sales increased from $181,093 to $461,628, or approximately 254.9%, over the six
months ended June 30, 2000, and increased as a percentage of total revenues from
approximately 41.6% to approximately 43.9%.

     The  increase  in cost of sales in the three and six months  ended June 30,
2000  compared  to  the  same  periods  ended  June  30,  1999,   was  primarily
attributable  to  increased  costs  associated  with the  operation  of X-Real's
websites due to the addition,  in spring 1999,  of two new webpages  and,  since
September  1999,  the payment of a royalty fee to Q-Seven  Systems  GmbH for our
right to license the User  Management  Software to our customers.  Approximately
$138,128, or approximately 55.7% of our total cost of sales for the three months
ended June 30, 2000,  are  attributable  to the operation of X-Real's  websites,
whereas approximately  $109,687, or 44.3%, relate to the sale of licenses to our
software.  Approximately  $261,941,  or approximately 56.7% of our total cost of
sales for the six months ended June 30, 2000, are  attributable to the operation
of X-Real's websites,  whereas  approximately  $199,687, or approximately 43.3%,
relate to the sale of our software.

     Our management expects that our cost of sales relating to X-Real's websites
is likely to decrease if the  Infobridge  Investment is completed,  since in all
likelihood we would own only slightly more than 50% of X-Real's stock thereafter
and,  consequently,  would  participate only in approximately 50% of the cost of
sales relating to X-Real's websites.

Selling, General and Administrative

     Selling,  general and administrative  expenses for the three and six months
ended June 30,  2000  consist  primarily  of legal and  accounting  expenses  in
connection with the compliance with periodic  reporting  requirements  under the
securities  laws,  advertising  costs for  X-Real's  websites  and certain  non-
recurring expenses discussed below.

     Selling,  general and administrative  expenses  increased  substantially by
approximately  620.6% from  $103,800 in the three  months ended June 30, 1999 to
$644,187 in the three months ended June 30, 2000.  For the six months ended June
30, 2000, selling,  general and administrative  expenses increased from $211,676
to $904,079, or approximately  427.15%, over the six months ended June 30, 1999.
The substantial increase in our selling,  general and administrative expenses is
illustrated  by the  proportion  of these  expenses to our total  revenues.  Our
selling,  general and administrative  expenses as a percentage of total revenues
in the three and six months  ended June 30, 2000 were  approximately  108.2% and
86.1%, respectively, as compared to approximately 46.3% and 48.7%, respectively,
in the three and six months ended June 30, 1999. In the three months ended March
31, 2000 and the twelve months ended December 31, 1999 our selling,  general and
administrative expenses as a percentage of total revenues were approximately 57%
in both periods.

     The  substantial  increase  in  our  selling,  general  and  administrative
expenses  in the  three  and  six  months  ended  June  30,  2000  is  primarily
attributable to the following factors:

     o    increased  legal  and  accounting  expenses  in  connection  with  the
          compliance  with  periodic  reporting   requirements  under  the  U.S.
          securities  laws  (since  there  is a lag  in  billing  us  for  legal
          services,  the bills we have  actually  received  may not  reflect all
          costs of this type which we may incur);

     o    increased advertising expenses relating to X-Real's websites;

     o    non-recurring expenses of approximately $100,000 incurred in April and
          May 2000 when three of  X-Real's  six  websites  were  redesigned  and
          relaunched;

     o    non-recurring  expenses of approximately $82,000 incurred in April and
          May 2000 in connection  with the  termination of an agreement  between
          X-Real and Alice Jay Productions,  Inc., as more fully discussed below
          in Part  II,  Item 5 "Other  Information"  of this  amended  quarterly
          report; and

     o    the payment in April 2000 of commissions  totaling  $46,000 to certain
          freelance  workers  employed by X-Real to provide  website  management
          services,  which  commissions  related to  services  provided by these
          freelance worker during the twelve months ended March 31, 2000.

Depreciation and Amortization

     For the three  months ended June 30, 2000,  depreciation  and  amortization
expenses  decreased  from $68 to $57,  or  approximately  16.2%,  over the three
months ended June 30, 1999. For the six months ended June 30, 2000, depreciation
and amortization  expenses  increased from $68 to $114, or approximately  67.7%,
over the six months ended June 30, 1999.

     LIQUIDITY AND CAPITAL RESOURCES

     We have been and are currently  financing our operations  primarily through
cash generated from operating activities.  In the period ended June 30, 2000, we
have also  resorted to cash  provided  by  financing  activities  to finance our
operations,  i.e.,  funds from the first  tranche of the  Infobridge  Investment
received in March 2000. As discussed  below, our company has faced, and is still
experiencing, liquidity problems.

     Net cash  provided by (used in) operating  activities  was  $(210,232)  and
$14,345 in the six months ended June 30, 2000 and June 30,  1999,  respectively,
and  decreased  substantially  primarily  due to a  substantial  decrease in net
income before taxes.  Net cash  provided by (used in) operating  activities  was
$(216,941)  and $770 in the three  months ended June 30, 2000 and June 30, 1999,
respectively,  and  decreased  substantially  primarily  due  to  a  substantial
decrease in net income before taxes.  Net cash provided by financing  activities
was  $250,000  and $13,397  for the six months  ended June 30, 2000 and June 30,
1999, respectively,  and increased primarily due to the receipt in March 2000 of
the first tranche of the Infobridge Investment.  No cash was provided by or used
in  financing  activities  in the three  months ended June 30, 2000 and June 30,
1999. We had cash and cash equivalents of $314,243 at March 31, 2000 compared to
cash and cash  equivalents  of $97,302 at June 30,  2000.  At June 30,  2000 and
April 11, 2001, no unused lines of credit were available to our company.

     Our cash flow in the three  months  ended  June 30,  2000 was  affected  by
delays  in the  receipt  of  payments  from  Cyberotic  Media AG  ("Cyberotic").
Cyberotic,  at that time,  was the  reseller of services  provided by  EuroDebit
Systems  GmbH  ("EuroDebit"),  the  company  which at that  time  processed  and
collected credit card and electronic on-line debit-entry  payments from X-Real's
customers.  EuroDebit's  services  were  provided to X-Real  pursuant to an oral
agreement between X-Real and Cyberotic. From January 2000 through December 2000,
funds collected from X-Real's  customers in an aggregate amount of approximately
DM 888,000  (which  equals  approximately  $402,086  on the basis of the Federal
Reserve Bank of New York April 11, 2001 noon buying rate of Euro 1 = $0.8856 and
the fixed  exchange rate of Euro 1 = DM 1.95583) were not  transferred to X-Real
within the time frame  provided  for in the oral  agreement  between  X-Real and
Cyberotic. The delay in transferring such funds was caused by liquidity problems
at Cyberotic.  X-Real has not taken any action against  Cyberotic to enforce the
payment of the overdue  balances,  interest or damages in connection  with these
late  payments.  At June 30,  2000  and  April  11,  2001,  X-Real  had past due
receivables due from Cyberotic in an amount of  approximately  DM 480,000 (which
equals  approximately  $234,254 on the basis of the Federal  Reserve Bank of New
York June 30, 2000 noon  buying rate of Euro 1 = $0.9545 and the fixed  exchange
rate of Euro 1 = DM 1.95583) and approximately $407,943, respectively. EuroDebit
ceased processing and collecting credit card and electronic on-line  debit-entry
payments for X-Real on December  15, 2000,  at which time all of its assets were
acquired by  Pay@EuroDebit  GmbH (formerly  known as E-Click Net Commerce GmbH).
Since that time,  all such payments have been processed and collected for X-Real
by   Pay@EuroDebit   GmbH  based  on  an  oral  agreement   between  X-Real  and
Pay@EuroDebit  GmbH.   EuroDebit  and  Cyberotic  are  currently  in  insolvency
proceedings in Germany,  and our management does not expect that any amounts due
to  X-Real  from  Cyberotic  will  be  recoverable.  EuroDebit  is a  90%  owned
subsidiary of EuroDebit Systems,  Inc., a company of which Messrs.  Kriependorf,
Kamp and Cordt,  our principal  shareholders,  officers and  directors,  are the
principal  shareholders.  Mr. Kamp was the Chief Financial  Officer of EuroDebit
Systems,  Inc.  until  November  2000  and is still  the  managing  director  of
EuroDebit.  Cyberotic is a company  controlled  by Messrs.  Kamp and Cordt;  Mr.
Kriependorf is the chairman of Cyberotic's supervisory board.

     Although Pay@EuroDebit started processing and collecting electronic on-line
debit-entry  and credit card payments  from  X-Real's  customers on December 15,
2000,  only one payment in the amount of DM 56,000 (which  equals  approximately
$25,357 on the basis of the Federal Reserve Bank of New York April 11, 2001 noon
buying  rate of Euro 1 =  $0.8856  and the  fixed  exchange  rate of Euro 1 = DM
1.95583)  was  received  on April 11,  2001.  At this time,  X-Real has past due
receivables due from  Pay@EuroDebit GmbH in an aggregate amount of approximately
DM 364,000  (which  equals  approximately  $164,819  on the basis of the Federal
Reserve Bank of New York April 11, 2001 noon buying rate of Euro 1 = $0.8856 and
the  fixed  exchange  rate  of  Euro  1 = DM  1.95583).  Our  management  is  in
discussions with  Pay@EuroDebit  GmbH to cause them to make the overdue payments
to X-Real. No legal  proceedings have yet been initiated  against  Pay@EuroDebit
GmbH.  However,  our management is discussing these issues with our attorneys in
Germany.  Although  Pay@EuroDebit  GmbH currently provides services to X-Real at
approximately  the same  price as such  services  were  previously  provided  by
Cyberotic  and  EuroDebit,  the price for such services is likely to increase in
the near  future.  There  is also a risk  that  Pay@EuroDebit  could  decide  to
discontinue  providing  services to X-Real, in particular if we were to initiate
legal  proceedings  against them for their failure to timely transfer  collected
funds to X-Real.  While our management has already  identified  other  companies
which could provide processing and collection  services to X-Real at the current
cost level, the change from Pay@EuroDebit GmbH to a new processing company could
be  difficult  or even  impossible  to  achieve.  Pay@EuroDebit  GmbH has in its
possession  unique   electronic  data  containing   information  about  X-Real's
customers. This data is essential for the processing and collection of recurring
payments from X-Real's customers.  Our management believes that this data is the
property of our company.  However, if Pay@EuroDebit GmbH would refuse to provide
or delay the provision of this data to us or a new processing  company  selected
by us,  it might  not be  possible,  temporarily  or  indefinitely,  to  process
continuing  payments to be made by existing customers of X-Real. If this were to
occur,  it could  have a  material  adverse  effect on our  business,  revenues,
operating results and financial condition.

     Our current assets increased by $26,889, or approximately 6%, from $445,646
at June 30,  1999 to $472,535 at June 30,  2000,  while our current  liabilities
increased by $339,354,  or approximately 84.1%, from $403,318 to $742,672,  over
the same period. The increase in current assets was primarily attributable to an
increase  in cash and  accounts  receivable  generated  by our  operations.  The
increase in our current  liabilities was primarily due to an increase in accrued
expenses and accounts  payable  resulting from our  operations.  At December 31,
1999  our  current   assets  and   liabilities   were   $445,646  and  $403,318,
respectively,   and  at  March  31,  2000  they  were   $764,419  and  $738,942,
respectively.  Based on the  foregoing,  our  working  capital at June 30,  2000
decreased to  $(270,137)  from $25,477 at March 31, 2000 and $42,328 at December
31, 1999. Our fixed assets at June 30, 2000 consisted of office equipment valued
at $508.

     Due to the  decrease  in the  amount  of  cash  available  to us and in our
working  capital,  our company has faced,  and is still  experiencing  liquidity
problems and, consequently,  has not been able to make timely payments to all of
our creditors.  As of June 30, 2000 and April 11, 2001, we had past due payables
in the amount of $168,000 and $120,000,  respectively. Among the creditors which
we have  not  been  able to pay on a  timely  basis  are  our  auditors  and the
accounting  firm which assists us in preparing our financial  statements as well
as our legal  advisers.  This has  resulted  in delays  in the  preparation  and
completion of our interim  financial  statements  for the periods ended June 30,
2000 and September 30, 2000 and our  financial  statements  for the period ended
December 31, 2000. Due to these delays,  we have been unable to file on a timely
basis complete reports with the United States Securities and Exchange Commission
(the  "Commission")  for the quarterly periods ended June 30, 2000 and September
30, 2000 and the fiscal year ended  December 31, 2000.  There is a risk that the
Commission  might commence  enforcement  proceedings  against us because of this
failure,  in  particular  if we should  be  unable  to file or amend  delinquent
reports in a timely manner or if we should  continue to fail  complying with our
periodic filing  obligations.  There is also a risk that the NASD, based on NASD
Rule 6530,  will determine that our shares are no longer  eligible for quotation
on the OTC Bulletin Board, if we do not file all of our delinquent  reports with
the SEC or if we should  continue  failing to comply  with our  periodic  filing
obligations.  See also Part II,  Item 5 "Other  Information  - Change of Trading
Symbol."

     Our  management  believes that our  liquidity  problems in the three months
ended June 30, 2000 have been primarily caused by the following  factors,  which
have been discussed above in more detail:

     o    slow sales of our software since March 31, 2000;

     o    substantially  increased operating expenses for the three months ended
          June 30, 2000; and

     o    delays in the receipt of payments  from the company which in the three
          months ended June 30, 2000 processed and collected  electronic on-line
          debit-entry and credit card payments from X-Real's customers.

     If the Infobridge Investment is completed, cash generated by the activities
of X-Real may become even less  available to us,  because  dividends  and deemed
dividends  will then  have to be  shared  proportionally  with  Infobridge.  Our
management  is  currently  exploring  different  steps to address our  liquidity
problems,  reduce our net loss in future  periods  and  provide us with cash and
working  capital  sufficient  to fund both  delinquent  balances and our ongoing
operations. The following are among the steps our management is considering:

     o    We are in discussions  with Q-Seven Systems GmbH regarding a reduction
          of the  royalty  fee that we have to pay them for the right to license
          the User Management Software to our customers. Currently, this royalty
          fee is equal to 90% of the revenues  that we generate from the sale of
          licenses to our software.

     o    We plan on escalating our efforts (e.g., by attending more tradeshows)
          to sell additional  licenses to our software to increase the amount of
          our revenues.

     o    We plan to take steps to ensure and, if necessary,  enforce the timely
          payment of balances due from the company which  processes and collects
          credit card and electronic on-line debit-entry  payments from X-Real's
          customers.

     o    We would also consider raising funds by issuing and selling,  publicly
          or privately,  additional  equity securities to one or more interested
          purchasers if this opportunity were to arise.

     There can be no assurance that any of these measures will be successful and
sufficiently improve our liquidity and cash flow. If our liquidity and cash flow
problems  persist,  some  or all of our  creditors  may  decide  to  discontinue
providing  services to us and/or enforce their claims for payment against us. In
addition,  we would in all  likelihood  be unable to  comply  with our  periodic
reporting  requirement  and  would  continue  to face the risk of  becoming  the
subject of  enforcement  proceedings  by the Commission as well as the risk that
our shares will no longer be eligible for  quotation on the OTC Bulletin  Board.
If one or more of these events were to occur,  it could have a material  adverse
effect on our business, revenues, operating results and financial condition.

     FORWARD LOOKING STATEMENTS

     This  report and other oral and written  statements  made by our company to
the public  contain and  incorporate  by  reference  forward-looking  statements
within the meaning of the "safe  harbor"  provisions  of the Private  Securities
Litigation  Reform Act of 1995. They use such words as "may," "will,"  "expect,"
"believe,"  "plan"  and other  similar  terminology.  In  particular  statements
regarding  the  following  subjects are  forward-looking:  future  financial and
operating results; new and developing markets, products,  services, features and
content;  the anticipated steps to reduce our liquidity problems and the effects
of such steps; regulatory  developments;  plans to attend additional tradeshows;
future  developments  with respect to the  processing  and collection of on-line
debit-entry and credit card payments from X-Real's  customers;  and the progress
with respect to and the completion of the Infobridge Investment. Forward-looking
statements reflect our management's  current expectations or beliefs and involve
a number of risks and uncertainties. Actual results could differ materially from
those  described  in the  forward-looking  statements.  Some of the  factors and
uncertainties  that  could  cause  actual  results  to  differ  materially  are:
Commission  enforcement  proceedings  against our company;  determination by the
NASD that our shares are no longer  eligible  for  quotation on the OTC Bulletin
Board; continued cash flow and liquidity problems; failure of Pay@EuroDebit GmbH
to pay to X-Real on a timely basis the funds collected from X-Real's  customers;
failure of Pay@EuroDebit GmbH to provide us or a new processing company selected
by us with the data  necessary to process  electronic  on-line  debit-entry  and
credit card payments by X-Real's  customers;  success of operating  initiatives,
advertising and promotional efforts, continuing Year 2000 compliance efforts, as
well as changes in global and local business and economic  conditions;  currency
exchange and  interest  rates;  labor and other  operating  costs;  political or
economic  instability  in  local  markets;  competition;  consumer  preferences,
spending patterns and demographic trends; legislation and government regulation,
including  regulation  affecting  online-gaming  and  adult  entertainment;  and
accounting policies and practices.


                                     PART II
                                OTHER INFORMATION

Item 5.  Other Information.

     CHANGES IN OUR BOARD OF DIRECTORS

     On March 26, 2001,  Olaf Cordt  resigned from our board of directors.  At a
special meeting held on March 26, 2001, our board of directors voted to fill the
vacancy by electing Mr. Hans Ludger Kuhnen to the board.

     AMENDMENT AND RESTATEMENT OF BY-LAWS

     On June 28, 2000, by unanimous  written  consent of our Board of Directors,
we  amended  and  restated  our  By-Laws.  For a complete  understanding  of the
amendments,  please refer to our Amended and Restated By-Laws,  which were filed
as Exhibit 3.2 to our quarterly  report on Form 10-QSB for the period ended June
30, 2000 and are incorporated herein by reference.

     TERMINATION OF AGREEMENT BETWEEN X-REAL AND ALICE JAY PRODUCTIONS, INC.

     Pursuant to an oral  agreement  between  X-Real and Alice Jay  Productions,
Inc. ("AJP"),  made in April, 1999, AJP had agreed to provide webdesign,  server
hosting and  programming  services to X-Real,  and deliver  content for X-Real's
websites. X-Real had agreed to pay AJP a commission equal to 30% of the revenues
generated by three of X-Real's websites. Upon X-Real's request, AJP agreed to an
early  termination  of this  agreement  as of March 31, 2000 in exchange for the
payment by X-Real of a termination  fee in an amount of  approximately  $82,000.
This  termination  fee was paid by X-Real to AJP in April  and May,  2000.  From
April 2000 through January 2001, all webdesign, server hosting,  programming and
content delivery services have exclusively been provided to X-Real by Cyberotic,
a  company  controlled  by  Messrs.   Kamp  and  Cordt,  two  of  our  principal
shareholders,  officers and  directors;  Mr.  Kriependorf,  one of our principal
shareholders, officers and directors, is the chairman of Cyberotic's supervisory
board. AJP is an affiliate of Bernard Schaer, a principal  shareholder,  officer
and  director  of  EuroDebit  Systems,  Inc.,  a company in which our  principal
shareholders,  officers and directors, Messrs. Kriependorf, Kamp and Cordt, hold
a  substantial  interest.  Cyberotic  stopped  providing  services  to X-Real in
January 2001,  when  insolvency  proceedings in Germany were  initiated  against
Cyberotic. Since that time, webdesign,  server hosting,  programming and content
delivery  services have been handled for X-Real by employees of Q-Seven  Systems
GmbH.  X-Real pays a fee of  approximately  $10,000 per month to Q-Seven Systems
GmbH for these  services.  If it  should  become  necessary  to  acquire  new or
additional  content for X-Real's adult  entertainment  websites,  we will in all
likelyhood have to pay a higher price for such content than was paid for content
purchased  with the help of  Cyberotic,  because  certain  discounts  which were
available to Cyberotic will not be available to X-Real or Q-Seven Systems GmbH.

     CHANGE OF TRADING SYMBOL

     On April 11, 2001, the OTC Bulletin Board announced that it will change our
trading symbol  effective April 16, 2001 from "QSSY" to "QSSYE" to indicate that
our common stock trading under this symbol will be ineligible  for quotation and
subject to removal from the OTC Bulletin  Board in 30 calendar  days if the NASD
does  not  receive  information  that we are  current  in our  public  reporting
obligations.

     DEVELOPMENTS AFTER JUNE 30, 2000

     In order to make  its  relevance  clearer,  certain  information  regarding
events which occurred  after June 30, 2000 is set forth in Item 2  (Management's
Discussion  and  Analysis)  of  Part I of  this  report  under  the  subheadings
"Consolidated  Results of  Operations  -  User  Management  Software  Revenues,"
"Consolidated  Results  of  Operations  -  Adult   Entertainment  Revenues"  and
"Liquidity  and  Capital  Resources" and is incorporated by reference  into this
Item 5 of Part II of this report.

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

     (a)  Index to Exhibits

<TABLE>
<CAPTION>
                                                                         Incorporated by Reference

    Exhibit                                                            Form           Date       Exhibit         Filed
     Number                   Exhibit Description                      Type          Filed        Number        Herewith
    --------                 ---------------------                    ------        -------      --------      ---------
<S>             <C>                                                <C>          <C>             <C>           <C>

         3.1     Articles of Incorporation, as amended                  10-QSB      8/16/99         3.1

         3.2     Amended and Restated By-laws as                        10-QSB      8/14/00         3.2
                 currently in effect

         3.3     Form of Stock Certificate                                 8-A     10/29/99         3.3

        10.1     License Agreement between Q-Seven                      10-QSB      8/16/99        10.1
                 Systems GmbH and Q-Seven Nevada

        10.2     Agreement and Plan of Share Exchange                      8-K       6/9/99         III
                 dated May 24, 1999

        10.3     Consulting Agreement dated May 27, 1999                10-KSB      4/14/00        10.3
                 between Q-Seven Systems, Inc. and Mr.
                 Barry A. Ellsworth

        10.4     Termination Agreement dated April 17,                  10-QSB      5/16/00        10.4
                 2000 between Q-Seven Systems, Inc. and
                 Mr. Barry A. Ellsworth

        10.5     Agreement dated May 24, 2000 between Q-              10-QSB/A      5/26/00        10.5
                 Seven Systems, Inc. and Omni Software
                 Systems, Inc.*
</TABLE>

--------
*    Certain  material  from this  agreement  has been omitted and  confidential
     treatment  has been  requested  therefor  pursuant  to Rule 24b-2 under the
     Securities Exchange Act of 1934, as amended.  All such omitted material has
     been filed separately with the Commission.

(b)  Reports on Form 8-K

     We  filed a  Current  Report  on Form 8-K on April  11,  2001,  in which we
reported information under Items 1, 5 and 7.




<PAGE>


     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


     Date:  April 19, 2001                    /s/ Philipp S. Kriependorf
					      _________________________
                                              Philipp S. Kriependorf
                                              President, Chief Executive Officer
                                              and Chief Financial Officer