===============================================================================
                                  UNITED STATES
                       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 September 30, 2002


                                       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 0-6106


                           UNITED LEISURE CORPORATION
             (Exact name of registrant as specified in its charter)

                 Delaware                                13 - 2652243
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                  Identification No.)

                       1990 Westwood Boulevard, Penthouse
                       Los Angeles, California 90025-4650
          (Address, including zip code, of principal executive offices)

                                 (310) 441-0900
              (Registrant's telephone number, including area code)
           Securities registered under Section 12(b) of the Act: None

              Securities registered under Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of Class)


Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [_]


The number of shares of the Registrant's Common Stock outstanding as of November
14, 2002 was 20,511,375 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

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

===============================================================================



<PAGE>


                           UNITED LEISURE CORPORATION

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX

                                                                            Page
PART I.  FINANCIAL INFORMATION

         ITEM 1.  Financial Statements........................................4

                  Condensed Consolidated Balance Sheet as of
                  September 30, 2002 (Unaudited) and
                  December 31, 2001 (audited).................................4

                  Condensed Consolidated Statements of Operations
                  for the Three and Nine Months Ended
                  September 30, 2002 and 2001 (Unaudited).....................5

                  Condensed Consolidated Statements of Cash Flows
                  for the Nine Months Ended September 30, 2002
                  and 2001 (Unaudited)........................................6

                  Notes to Condensed Consolidated Financial Statements
                  (Unaudited).................................................7

         ITEM 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations..............11

         ITEM 3.  Control and Procedures.....................................23

PART II. OTHER INFORMATION

         ITEM 1.  Legal Proceedings..........................................24

         ITEM 2.  Changes in Securities......................................24

         ITEM 3.  Defaults Upon Senior Securities............................24

         ITEM 4.  Submission of Matters to a Vote of Security Holders........24

         ITEM 5.  Other Information..........................................24

         ITEM 6.  Exhibits and Reports on Form 8-K...........................24

Signatures.................................................................. 25

Certifications...............................................................26



                                     Page 2
<PAGE>


                          PART I: FINANCIAL INFORMATION

This Quarterly Report on Form 10-QSB includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. These include, among
others, the statements about our plans and strategies under the headings
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." When used in this document and the documents incorporated herein by
reference, the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates," or similar expressions are intended to identify, in certain
circumstances, forward-looking statements. Forward-looking statements are not
guarantees of future performance and are subject to certain risks,
uncertainties, and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed in the forward-looking statements. Although it is not possible
to itemize all of the factors and specific events that could affect the outlook
of a technology company like ours operating in a competitive environment,
factors that could significantly impact expected results include: the acceptance
of our technology; the effect of national and local economic conditions; our
outstanding indebtedness; the loss of key employees; competition from
technologies developed by other companies; the ability to attract and retain
employees; delays in completing the development of our new products caused by a
lack of capital or external causes beyond our reasonable control; and the
ability to identify and consummate relationships with strategic partners, as
well as risks set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors That Could Impact Future Results,"
included in this report and in our annual report on Form 10-KSB filed on April
1, 2002. Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
cannot assure that such plans, intentions or expectations will be achieved.
Actual results may differ materially from the forward-looking statements made in
this Quarterly Report on Form 10-QSB. We do not intend to update any
forward-looking statements, and we hereby disclaim any obligation to update such
forward-looking statements.



                                     Page 3
<PAGE>



ITEM 1.  FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
           UNITED LEISURE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS

                                                                         September 30,     December 31,
                                                                             2002              2001
                                                                          (unaudited)       (audited)
                                                                         -------------    -------------
<S>                                                                      <C>              <C>
Assets
Current assets:
    Cash and cash equivalents                                            $    80,448      $  1,645,450
    Receivables                                                                    -            19,769
    Due from related parties                                                       -             5,995
    Prepaid expense and other current assets                                  56,295           117,829
                                                                         -------------    -------------
    Total current assets                                                     136,743         1,789,043

Property and equipment - net                                                 120,261           731,611

Net assets of discontinued operations                                              -            38,540

Investment in Grand Havana at fair value - related party                       5,800             5,800

Other assets:
    Capitalized cost                                                         146,834           128,184
    Deposits and other assets                                                 38,976            68,960
                                                                         -------------    -------------
Total                                                                    $   448,614      $  2,762,138
                                                                         =============    =============
Liabilities and stockholders' equity
Current liabilities:
    Accounts payable and accrued expenses                                $   626,670      $    495,793
    Reserve for discontinued operations                                      565,579            84,885
    Reserve for litigation                                                         -            45,000
    Due to related parties                                                         -                 -
                                                                         -------------    -------------
    Total current liabilities                                              1,192,249           625,678

Minority interest                                                                  -             4,413

Stockholders' equity (deficit)
    Preferred stock, $100 par value; authorized - 100,000 shares;                  -                 -
       issued and outstanding - none
    Common stock, $0.01 par value; authorized - 30,000,000 shares;           204,304           204,304
       issued and outstanding, 20,511,375 shares in 2002 and 2001
    Additional paid-in capital                                            45,520,375        45,514,075
    Accumulated deficit                                                  (46,435,447)      (43,496,746)
    Accumulated other comprehensive loss                                     (32,867)          (89,586)
                                                                         -------------    -------------
    Total stockholders' equity (deficit)                                    (743,635)        2,132,047
                                                                         -------------    -------------
Total                                                                    $   448,614      $  2,762,138
                                                                         =============    =============
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements



                                     Page 4
<PAGE>



<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)

                                                 THREE MONTHS ENDED SEPTEMBER 30,   NINE MONTHS ENDED SEPTEMBER 30,
                                                      2002              2001             2002             2001
                                                  (unaudited)       (unaudited)      (unaudited)       (unaudited)
                                                 -------------     --------------   --------------    -------------
<S>                                              <C>               <C>               <C>              <C>
Revenue - licensing fees                         $          -      $      2,095      $          -     $     24,874

Cost and expenses:
   Direct operating expense                           439,001           285,190         1,121,885        1,141,107
   Selling, general and administrative                112,391           762,450           591,463        3,326,013
   Stock compensation                                       -           (26,000)            6,300           41,793
   Depreciation and amortization                       47,094            56,666           141,377          167,033
                                                 -------------     -------------     -------------    -------------
                                                      598,486         1,078,306         1,861,025        4,675,946
                                                 -------------     -------------     -------------    -------------
Other income (loss):
   Interest income                                      1,088            29,468            10,595          163,731
   Interest expense                                       (16)                -            (2,396)               -
   Loss on impairment of fixed assets                (500,000)                -          (500,000)               -
   Other, net                                              84             3,536             2,890           26,368
                                                 -------------     -------------     -------------    -------------
   Total other income (loss)                         (498,844)           33,004          (488,911)         190,099
                                                 -------------     -------------     -------------    -------------
Minority interest in loss                                   -            30,683                 -          (90,188)
                                                 -------------     -------------     -------------    -------------
Loss from continuing operations                    (1,097,330)       (1,012,524)       (2,349,936)      (4,370,785)
Loss from discontinued operations                           -          (365,000)         (588,765)        (465,000)
                                                 -------------     -------------     -------------    -------------
Net loss                                           (1,097,330)       (1,377,524)       (2,938,701)      (4,835,785)

Other comprehensive loss:
   Unrealized holding loss on securities
      available for sale                                    -           (28,833)                -          (96,086)
   Foreign currency translation loss                        -               945                 -          (20,983)
                                                 -------------     -------------     -------------    -------------
Comprehensive loss                               $ (1,097,330)     $ (1,405,412)     $ (2,938,701)    $ (4,952,854)
                                                 =============     =============     =============    =============

Weighted average number of common shares
   outstanding                                     20,511,375        20,511,375        20,511,375       20,419,027
Basic loss per share:
   Loss per share from continuing operations     $      (0.05)     $      (0.05)     $      (0.11)    $      (0.21)
   Loss per share from discontinued operations   $          -      $      (0.02)     $      (0.03)    $      (0.02)
   Total loss per share                          $      (0.05)     $      (0.07)     $      (0.14)    $      (0.23)
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements



                                     Page 5
<PAGE>



<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED
(Unaudited)

                                                                        SEPTEMBER 30,
                                                                  2002                2001
                                                               (unaudited)         (unaudited)
                                                              -------------       -------------
<S>                                                           <C>                 <C>
Cash flows from operating activities
Net loss                                                      $ (2,938,701)       $ (4,835,785)
Adjustments to reconcile net loss to net cash
    used in operating activities:
      Loss from discontinued operations                            588,765             465,000
      Loss on impairment of fixed assets                           500,000
      Depreciation and amortization                                141,377             167,033
      Loss on disposal of assets                                         -             110,538
      Bad debt expense                                              62,140
      Minority share of loss                                             -             (90,188)
      Fair value of options granted to non-employees                 6,300              41,793
Changes in operating assets and liabilities:
      Receivables                                                  (42,371)             16,435
      Receivables - related party                                    5,995
      Prepaid expenses and other current assets                     56,703              83,467
      Deposit and other assets                                      (7,283)
      Accounts payable and accrued expenses                        168,008             174,699
      Reserve for litigation                                       (45,000)                  -
                                                              -------------       -------------
Net cash used in continuing operations                          (1,504,067)         (3,867,008)
Net cash used in discontinued operations                           (12,258)           (553,066)
                                                              -------------       -------------
Net cash used in operating activities                           (1,516,325)         (4,420,074)

Cash flows from Investing activities
      Purchases of property and equipment                          (30,027)            (51,635)
      Increase in deposits and other assets                        (18,650)           (143,825)
      Advances to related party                                          -            (285,059)
                                                              -------------       -------------
Net cash used in investing activities                              (48,677)           (480,519)

Cash flows from Financing Activities
      Exercise of options and warrants                                   -              24,565
                                                              -------------       -------------
Net cash provided by investing activities                                -              24,565
Effect of currency rate changes                                          -             (33,583)
                                                              -------------       -------------
Net increase in cash and cash equivalents                       (1,565,002)         (4,909,611)
Cash and cash equivalents at beginning of year                   1,645,450           7,416,966
                                                              -------------       -------------
Cash and cash equivalents at end of year                      $     80,448        $  2,507,355
                                                              =============       =============
</TABLE>


See accompanying Notes to Condensed Consolidated Financial Statements



                                     Page 6
<PAGE>



                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2002


1.      BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements reflect the results
of operations for United Leisure Corporation (the "Company" or "we") and its
wholly owned subsidiaries and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals and
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months and nine months ended September 30, 2002,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Annual Report on Form
10-KSB for the year ended December 31, 2001, filed with the Securities and
Exchange Commission (the "SEC") on April 1, 2002. Current and future financial
statements may not be directly comparable to the Company's historical financial
statements.

Through our subsidiary, United Internet Technologies, Inc. ("UIT"), we have
engaged in the business of developing technologies that allow a wide range of
electronic devices, such as smart toys, medical devices, household and business
appliances and consumer electronics, to communicate and be controlled over the
Internet and over other digital systems, such as cable, television and wireless
networks. We have developed two proprietary technologies: (1) Intelligent
Control Interactive Technology ("I-C-IT"(TM)) ("software") and (2) Digitally
Integrated Video Overlay ("Divo"(TM)) ("software"). These technologies enable
certain businesses to transition their traditional product lines into the
interactive world. Our objective is to create solutions for specific business
sectors by customizing our I-C-IT platform, allowing these technologies to be
embedded in a wide range of electronic devices.

The condensed consolidated financial statements include the accounts of United
Leisure Corporation and its majority-owned subsidiaries. All inter-company
transactions and balances have been eliminated.

Going Concern Issues

In connection with the audit for the year ended December 31, 2001, we received a
report from our independent certified public accountants that includes an
explanatory paragraph describing uncertainty in our ability to continue as a
going concern. Our financial statements included herein contemplate our ability
to continue and as such do not include any adjustments that might result from
this uncertainty. These financial statements should be read in conjunction with
the Company's December 31, 2001 audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB.



                                     Page 7
<PAGE>



2. CURRENT DEVELOPMENTS

The Company has experienced and continues to experience operating losses. For
the period ended September 30, 2002, the Company had cash and cash equivalents
of $80,448. To conserve its resources, the Company has significantly curtailed
all activities that are not directly related to its core technology business,
reduced its staff to a minimum, and reduced capital expenditures. The primary
objective will be to continue to market the Company's proprietary technologies
to potential strategic partners. This will require additional financing. To
accomplish this, the Company will endeavor to raise additional funding by
borrowing money or through a public or private sale of debt or equity
securities. Such financing, however, may not be available when and if it is
needed, or if available, it may not be available on acceptable terms. If the
Company is unable to sell its securities or obtain sufficient financing to meet
its working capital needs and to repay indebtedness as it becomes due, the
Company may have to consider such alternatives as selling or pledging portions
of the assets, among other possibilities, in order to meet such obligations. If
the Company does not continue as an ongoing concern, the amounts shown in the
financial statements may not be realized at their stated value. The financial
statements have no adjustments recorded for such an event.

See Note 4 for a description of a proposed $25 million private placement of
Common Stock.

3. CONTINGENCIES

In the normal course of business, we are subject to various claims and legal
actions. We believe that we will not be adversely materially affected by the
ultimate outcome of any of these matters, either individually or in the
aggregate.

4. PRIVATE PLACEMENT

On July 27, 2002, the Company entered into a Common Stock Purchase Agreement,
pursuant to which, upon closing, the Company will sell a control block of its
Common Stock for $25 million in cash, or a purchase price of $.50 per share, to
Dr. Andreas Ohle, a German investor. After closing, the investor will own
approximately 70% of the Company's outstanding Common Stock. Consummation of the
transaction is subject to the satisfaction of certain conditions, including the
increase of the Company's authorized Common Stock to 100,000,000 shares through
an Amendment to the Company's Certificate of Incorporation. The majority of the
stockholders of the Company have consented to the increase of the authorized
shares of Common Stock to enable this transaction to take place. The Company
will mail an Information Statement to its stockholders to inform them of the
proposed amendment to the Certificate of Incorporation as required by Delaware
law and the applicable securities laws once the funds have been sent to an
escrow account. The closing of the private placement will occur as soon as the
Company is able to comply with the applicable securities laws. As of November
19, 2002, the private placement has not yet closed and the Company has received
no funding. The Company has had continued assurances in writing from the
investor that he indeed will fund this placement. We do not believe that Dr.
Ohle will follow through with his signed agreement, and as a backup, the company
is seeking other sources of funding. If we are unable to obtain financing on
terms



                                     Page 8
<PAGE>



acceptable to us, or at all, we will not be able to accomplish any or all of our
initiatives and could be forced to consider steps that would protect our assets
against our creditors.

5. DISCONTINUED OPERATIONS

During the nine months ended September 30, 2002, the Company received a
three-day notice to pay rent or quit on a facility that the Company had
previously vacated. The lease agreement allows the Company to sub-lease the
facilities; although the Company is making an effort to sublease the facility,
the landlord has continued to remove the lease signs. The Company will still
continue to attempt to sub-lease the facility. Since the Company has
discontinued these operations and vacated the property, the Company has accrued
the remaining rental payments due through 2005, or approximately $15,000 per
month or $500,000.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations." This statement addresses financial accounting and
reporting for business combinations and supersedes Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations," and SFAS No. 38, "Accounting
for Pre-Acquisition Contingencies of Purchased Enterprises." All business
combinations in the scope of this statement are to be accounted for using one
method, the purchase method. The provisions of this statement apply to all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method for those business combinations is prohibited. This
statement also applies to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001 or later. The
Company does not expect adoption of SFAS No. 141 to have a material impact, if
any, on its financial position or results of operations.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
"Intangible Assets." It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. It is effective for fiscal years beginning after December
15, 2001. Early application is permitted for entities with fiscal years
beginning after March 15, 2001, provided that the first interim financial
statements have not been issued previously. The Company does not expect adoption
of SFAS No. 142 to have a material impact, if any, on its financial position or
results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development, and/or the normal operation of long-lived assets, except for
certain obligations of lessees. The Company does not expect adoption of SFAS No.
143 to have a material impact, if any, on its financial position or results of
operations.



                                     Page 9
<PAGE>



In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. This
statement replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," the accounting and
reporting provisions of APB No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual, and Infrequently Occurring Events and Transactions," for the disposal
of a segment of a business, and amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. During the quarter
ended September 30, 2002, the Company has impaired its property and equipment by
$500,000. The Company will continue to review its long lived assets for
impairment in future periods.

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies,
and simplifies existing accounting pronouncements. This statement rescinds SFAS
No. 4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. As a result, the criteria in APB No. 30 will now be used to
classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and is no longer
necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been rescinded as it
is no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain
lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-lease transactions.
This statement also makes technical corrections to existing pronouncements.
While those corrections are not substantive in nature, in some instances, they
may change accounting practice. The Company does not expect adoption of SFAS No.
145 to have a material impact, if any, on its financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost, as defined, was recognized at the date of an
entity's commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002 with earlier application encouraged. The Company does not expect adoption
of SFAS No. 146 to have a material impact, if any, on its financial position or
results of operations.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In



                                    Page 10
<PAGE>



addition, this statement amends SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," to include certain financial institution-related
intangible assets. This statement is not applicable to the Company.

7. SUBSEQUENT EVENTS

On October 9, 2002, the Company announced that its wholly owned subsidiary,
United Internet Technologies had executed a strategic agreement with Los
Angeles-based NYKO Technologies to develop peripheral products that will
incorporate UIT's proprietary technology and integrate with video game
platforms. On November 15, 2002, NYKO sent UIT a letter advising UIT that it
will not follow through with its contractual obligations. The arrangement called
for NYKO to fund development and distribute UIT's second generation of Brilliant
Toys that connect to video game platforms. The letter from NYKO informed the
Company that they would not move forward unless UIT agrees to participate in the
development phase, and that UIT can prove that the product will be successful.
The letter to UIT is completely contradictory to the terms signed in the
agreement, and UIT will seek legal counsel to make sure that the agreement is
enforced.

On November 11, 2002, AOL picked up delivery of the first order of UIT's
product. Based on the Purchase Order, UIT expects to receive payment within 30
days after delivery.

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

INTRODUCTION

During the period ended September 30, 2002, we spent most of our time and
resources in developing and creating working, price competitive prototypes of
products utilizing our newer technologies and marketing products and our
technology to potential strategic partners. With our proprietary technology we
have developed a line of "Brilliant Toys" that sit next to or on top of a
computer monitor and can be programmed to come alive when the user launches AOL,
MSN, Yahoo or any Instant Messenger. These toys are actually "network nodes"
disguised as toys. They can speak with unlimited vocabulary and can even
translate languages through almost any networked environment.

The "Brilliant Toys" can:

     o    Communicate with unlimited speech

     o    Translate languages

     o    Read e-mail

     o    Teach the user how to use the computer

     o    Move animatronically and speak in sync

     o    Read unlimited stories

     o    Interact with on-line games

     o    Educate

     o    Entertain

     o    Interact with other toys in other homes over the Internet through IM
          rooms



                                    Page 11
<PAGE>



     o    Interact with all forms of digital content including videos,
          television programming, DVD's, and mobile phones

     o    Be controlled and communicate through wireless communication devices.

The toys can interact with almost all forms of digital content, including real
time IM and chat. In fact, users all over the world can chat (Instant Message)
in real time and the toys will speak in the recipient's language. As the toys do
this, their mouths and bodies will move in sync with the words.

Within the last several months, we have received approvals for patents on
several of our core technologies and the first generation of "Brilliant Toys."
In November of this year, we shipped our first purchase order for 10,000 units
to AOL and AOL accepted delivery on November 11, 2002. We expect to receive
payment for this order within 30 days from the date of delivery. The product
will be available on November 26, 2002, for sale on AOL.

AOL plans to market these toys in the $19-$25 retail range per toy. These toys
together with an on-line portal, marry interactivity, entertainment,
communication and education in a way that we believe has never been done before.
The toys have the potential to generate retail revenues as well as subsequent
additional revenues from the sale of download enhancements for the "Brilliant
Toy." As an example, a user of the "Brilliant Toy" will be able to go on-line
and download new software, including games, educational software, language
translation software and other upgrades. We plan to make these downloads
available for a price of $4.99 per download. AOL is preparing a site dedicated
to these technologies. The site will be on the AOL Kids Only section. The
software downloads will be available for free at first.

We have been engaged in multiple negotiations with various other potential
strategic partners. We have already concluded an arrangement with AOL to bundle
the AOL software with our products and to receive revenues from users that sign
up for the AOL service that purchase our "Brilliant Toys."

The first two products that will be made exclusively for AOL are the Looney
Tunes Characters, Bugs Bunny and Daffy Duck. The Looney Tunes Interactive
Characters are expected to be available on November 26, 2002, for sale on AOL.
The product was scheduled to release earlier, but was delayed due to the port
strike in Los Angeles.

OUR TECHNOLOGY BUSINESS RELIES ON THE ENFORCEMENT OF OUR INTELLECTUAL PROPERTY
RIGHTS.

We have been issued or approved for issuance on the following patents:

1.   The DIVO technology (issued)

2.   The Medical Monitoring Technology (issued)

3.   The I-C-IT Technology (approved and issue fee paid)

4.   System for Remotely Controlling an Animatronics Device in a Chat
     Environment Utilizing Control Signals Sent by A Remote Device Over The
     Internet (issued)



                                    Page 12
<PAGE>



We have six applications remaining; we are still waiting for Office Actions for
all but one of these cases. However, given that they, for the most part, depend
upon our core technology, we believe that most, if not all, of the presently
pending applications will support claims, which will be allowed to proceed to
issuance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

We believe the following critical accounting policies affect our more
significant judgments and estimates used in preparation of our consolidated
financial statements.

REVENUE RECOGNITION

The Company recognizes revenue from sales at the time of delivery.

In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" to provide guidance on the recognition, presentation, and disclosure
of revenue in financial statements. Changes in accounting to apply the guidance
in SAB No. 101 may be accounted for as a change in accounting principle
effective April 1, 2000. SAB No. 101 has not had a material effect on the
Company's revenue recognition and results of operations.

EARNINGS PER SHARE

Basic Earning Per Share (EPS) is calculated by dividing income available to
common stockholders (the numerator) by the weighted-average number of common
shares outstanding (the denominator) during the period. The computation of
diluted EPS is similar to the computation of basic EPS except the denominator is
increased to include the number of additional common shares outstanding if the
dilutive potential common shares (securities such as options, warrants,
convertible securities, or contingent stock agreements) had been issued. In
addition, in computing the dilutive effect of convertible securities, the
numerator is adjusted to add back (a) any convertible preferred dividends and
(b) the after-tax amount of interest recognized in the period associated with
any convertible debt. The computation of diluted EPS shall not assume
conversion, exercise, or that the contingent issuance of securities would have
an antidilutive effect on EPS.



                                    Page 13
<PAGE>



RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2001

NET REVENUES. For the three months ended September 30, 2002, we had no revenues
compared to revenues of $2,095 for the three months period ended September 30,
2001, a decrease of $2,095 or 100%. Licensing agreements covering interactive
CD-ROMs created for Promo CD, Inc. generated the revenues received in 2001. In
2001, we shifted our focus to developing our I-C-IT toy technology and did not
market the CD-ROM technology as we had in the prior year.

OPERATING EXPENSES. We incurred direct operating expenses of $439,001 for the
three months ended September 30, 2002 as compared to $285,190 for the three
months ended September 30, 2001. These operating expenses primarily consist of
payroll and consulting costs incurred in the development of our technologies and
prototypes.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. We incurred selling, general and
administrative expenses of $112,391 for the three months ended September 30,
2002 as compared to $762,450 for the three months ended September 30, 2001, a
decrease of $650,059 or approximately 85%. Our selling, general and
administrative expenses consist of payroll, travel, legal, accounting and other
professional costs. The decrease in costs relates primarily to decreased payroll
costs and legal costs during the period as compared to the comparable period in
2001.

LOSS ON IMPAIRMENT ON FIXED ASSETS. For the three months ended September
30,2002, we incurred an impairment expense of $500,000 compared with an expense
of $0 for the three months ended September 30, 2001. This was as a result of an
impairment review by management of property and equipment.

NET LOSS. For the three months ended September 30, 2002, we had a net loss of
$1,097,330, or $0.05 per share, compared with a net loss of $1,405,412 or $0.07
per share for the three months ended September 30, 2001. The net loss for the
three months ended September 30, 2002, is primarily attributable to the lack of
revenues and the continued expenditure of costs and expenses incurred in
connection with our continued development of our Internet technology business
and related products.

NON-CASH EXPENSES. For the three months ended September 30, 2002, non-cash
compensation from stock option grants was $0 compared to $-26,000 for the three
months ended September 30, 2001. Depreciation and amortization for the three
months ended September 30, 2002 was $47,094 compared to $56,666 for the three
months ended September 30, 2001, a decrease of $9,572 or approximately 17%.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001

NET REVENUES. For the nine months ended September 30, 2002, we had no revenues
compared to revenues of $24,874 for the nine months ended September 30, 2001, a
decrease of $24,874 or 100%. Licensing agreements covering interactive CD-ROMs
created for Promo CD, Inc.



                                    Page 14
<PAGE>


generated the revenues received in 2001. In 2002 we shifted our focus to
developing our I-C-IT toy technology and did not market the CD-ROM technology as
we had in the prior year.

OPERATING EXPENSES. The direct expenses decreased to $1,121,885 for the nine
months ended September 30, 2002 from $1,141,107 for the nine months period ended
September 30, 2001, a decrease of $19,222 or approximately 2%. The decrease is a
result of several components including a decrease in personnel, consultant fees,
legal, and overhead.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The expenses were $591,463 for the
nine months ended September 30, 2002 compared to $3,326,013 for the nine months
ended September 30, 2001, a decrease of $2,734,550 or approximately 82%,
primarily due to a decrease in payroll.

NET LOSS. For the nine months period ended September 30, 2002, we had a net loss
of $2,938,701 or $0.11 per share, including a loss from discontinued operations
of $ 588,765 or $0.03 per share, compared with a net loss of $4,835,785,
including a loss from discontinued operations of $465,000 or $0.00 per share for
the nine months ended September 30, 2001. The decrease in net loss for the nine
months period ended September 30, 2002, is due to restructuring and reducing
overhead and expenditures incurred in connection with our continued development
of our Internet technology business and related products.

NON-CASH EXPENSES. For the nine months ended September 30, 2002, non-cash
compensation from stock option grants was decreased from $41,793 to $6,300 or
approximately 85%. Depreciation and amortization for the nine months ended
September 30, 2002 was $141,377 compared to $167,033 for the nine months ended
September 30, 2001, a decrease of $ 25,656 or approximately 15%.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2002, we had cash and cash equivalents
of $80,448 and an accumulated deficit of $46,435,447.

Our future capital requirements will depend on various factors including:

1.   The length of time that it takes us to dispose of our remaining children's
     recreational facility and the manner of disposition. We have closed two of
     the Planet Kids facilities. There is one facility remaining for which the
     we are responsible for rents. Since we have discontinued these operations
     and vacated the property we have accrued the remaining rental payments due
     through 2005, or approximately $15,000 per month or $500,000.

2.   We tried to sublease the facility but we had trouble working with the
     landlord.

3.   The length of time it takes us to get products to the market that generate
     revenues.

4.   The need to hire additional marketing staff and technical support staff.

5.   Our ability to consummate new relationships with strategic partners.

We have significantly curtailed all activities that are not directly related to
the development and promotion of our core technology business. The results of
this management refocus are substantially reduced expenditure levels budgeted
for the year 2002. We have minimum amounts for the purchase of needed assets and
reduced capital expenditures.



                                    Page 15
<PAGE>



Our auditors have included an explanatory paragraph relating to our ability to
continue as a going concern as of our fiscal year ended December 31, 2001, in
their Report of Certified Public Accountants included in our audited financial
statements contained in our Form 10-KSB. For the year ended December 31, 2001,
we incurred a net loss of $5,461,800 and negative cash flows from operations of
approximately $5,256,000. The auditors considered that these factors raise
substantial doubt about our ability to continue as a going concern.

We cannot forecast revenues from our technology business accurately. This is
because of the limited operating history of our technology business and the
rapidly developing nature of the technology market.

If we are unable to generate revenue from our business operations or raise
additional funds when needed or on favorable terms, UIT may not be able to
continue developing our technology business. That would seriously harm our
business, and have a direct impact on the results of operations and financial
condition, and we are unlikely to survive beyond December 31, 2002.

PRIVATE PLACEMENT

On July 27, 2002, we entered into a Common Stock Purchase Agreement, pursuant to
which the Company will sell a control block of its Common Stock for $25 million
in cash, for a purchase price of $.50 per share, to Dr. Andreas Ohle, a German
investor. After closing, the investor will own approximately 70% of our
outstanding Common Stock. Consummation of the transaction is subject to the
satisfaction of certain conditions, including the increase of our authorized
Common Stock to 100,000,000 shares through an Amendment to our Certificate of
Incorporation. The majority of our stockholders have consented to the increase
of the authorized shares of Common Stock to enable this transaction to take
place. We will mail an Information Statement to our stockholders to inform them
of the proposed amendment to the Certificate of Incorporation as required by
Delaware law and the applicable securities laws once the funds have been
transferred to an escrow account. The closing of the private placement will
occur as soon as the we are able to comply with the applicable securities laws.
As of November 19, 2002 the Private Placement had not yet been funded, despite
the fact that the due date for funding has passed. However, we have had
continued assurances in writing from the investor that he indeed will fund this
placement. We do not believe that Dr. Ohle will follow through with his signed
agreement, and as a backup, we are seeking other sources of funding. If we are
unable to obtain financing on terms acceptable to us, or at all, we will not be
able to accomplish any or all of our initiatives and could be forced to consider
steps that would protect our assets against our creditors.

FACTORS THAT COULD IMPACT FUTURE RESULTS

THERE IS DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have experienced significant operating losses in the current and prior years.
Our cash and short-term investment balances have continued to decline since
December 31, 2001, and we expect to experience further declining balances. At
September 30, we only had $80,448 of cash. We have been unable to pay all of our
creditors and certain other obligations in accordance with their terms. We
expect that our cash on hand and short-term investments, together with cash
generated by operations, cannot sufficiently fund future operating losses and
capital



                                    Page 16
<PAGE>



requirements. If we are unable to obtain financing on terms acceptable to us, or
at all, we will not be able to accomplish any or all of our initiatives and
could be forced to consider steps that would protect our assets against our
creditors.

WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.

For the three months ended September 30, 2002, we had a net loss of $1,097,330
and an accumulated deficit of $46,435,447. In addition, we have significant
working capital requirements for marketing and selling our technologies, and
these needs are expected to continue to be significant. Accordingly we will
continue to experience additional losses in fiscal 2002 and 2003.

OUR BUSINESS MAY LACK SUFFICIENT DIVERSIFICATION AND MAY AFFECT OUR ABILITY TO
SPREAD THE RISK OF ANY DOWNTURN IN THE TECHNOLOGY SECTOR.

Our primary business in 2001 and 2002 was research and development of our I-C-IT
hardware and software. These activities are conducted through our wholly owned
subsidiary, United Internet Technologies, Inc. (UIT). Our interactive technology
business has been our primary business focus since 1998 and our operations from
that business are limited in scope and duration. In October 2000, our Board of
Directors decided to discontinue our other businesses of (i) children's
recreational activities and (ii) making investments in affiliated companies. We
have disposed of two of the three children's recreational facilities. We have
one facility left and are in the process of trying to sublease the facility.
Therefore, our business is not presently sufficiently diversified to spread the
risk of any downturn in the growth of the Internet or in the development and
licensing of our interactive Internet technology.

FUTURE REVENUES ARE UNCERTAIN.

We cannot forecast revenues from our technology business accurately. This is
because of the limited operating history of our technology business and the
rapidly developing nature of the technology market.

WE WILL NEED ADDITIONAL FINANCING

Through UIT, we intend to sell products incorporating our technologies and/or
enter into additional license agreements for our technology. We expect that
these license agreements will generate revenue for UIT. It is not known whether
we will be successful in entering into additional license agreements. If license
agreements and other arrangements do not generate enough revenue, we will need
to raise capital, possibly through the sale of our stock, stock of UIT, or other
securities in public or private offerings. It is not known whether we would be
successful in raising additional money in the future.

If the potential investor fails to fund the $25 million dollar investment or we
are unable to obtain other funding on terms acceptable to us, or at all, or if
we are not able immediately to recognize significant revenues from sales of our
products, we may not be able to accomplish any or all of our initiatives and
could be forced to consider steps that would protect our assets against our
creditors and we may not be able to survive post year end. The Private Placement
has not yet



                                    Page 17
<PAGE>



been funded, despite the fact that the due date for funding has passed. However,
we have had continued assurances in writing from the investor that he indeed
will fund this placement. We do not believe that the investor will follow
through with his signed agreement. As a backup, we are seeking other sources of
funding, but we have not identified any new sources of funding.

WE HAVE NOT HAD AN ANNUAL STOCKHOLDERS MEETING.

Our bylaws require us to have and annual stockholders meeting to elect directors
each year. We have not held an annual meeting for several years. Pursuant to
Delaware law, the Court of Chancery may summarily order a meeting to be held
upon the application of any stockholder or director.

FUTURE STRATEGIC ALLIANCES INVOLVE RISK FOR US.

To be successful, we will need to enter into strategic alliances and license
agreements with companies in the media, entertainment and technology sectors.
However, we do not know if we will be able to enter into any such agreements or
if any agreements entered into will be favorable to us. If additional agreements
are not entered into, the cost of introducing new applications of our technology
in the marketplace may be prohibitive under our current business plan and
capitalization.

UNANTICIPATED TECHNOLOGICAL PROBLEMS MAY AFFECT OUR ABILITY TO MEET OUR RELEASE
AND DELIVERY SCHEDULES AND ADVERSELY AFFECT OUR OVERALL FINANCIAL CONDITION.

All of our products undergo thorough quality assurance testing prior to release.
But, we cannot anticipate all of the technological and other issues that may
arise in connection with our future product development. We may be unable to
meet delivery commitments if technological or other development issues arise in
connection with our continued product development and enhancement. Our
reputation may suffer if we fail to meet our release and delivery schedules or
if our products upon release do not perform as expected. We cannot assure you
that we will be able to fix any new problems that arise in a timely or cost
effective manner, or at all. If unexpected problems continue to arise, and we
are unable to resolve them timely or at all, we may be unable meet our release
and delivery schedules, our reputation may suffer, it may become more difficult
forming strategic alliances with distribution and other partners, and our
results of operations and financial condition could be materially and adversely
affected.

OUR TECHNOLOGY MAY NOT BE COMMERCIALLY ACCEPTED, WHICH WILL ADVERSELY AFFECT OUR
REVENUES AND PROFITABILITY.

Our technology subsidiary, UIT, was formed to develop and market our proprietary
interactive Internet technology and related products. So far, UIT's operations
have been limited to developing, marketing and licensing a small number of
applications of our technology. Our ability to successfully compete in the
online entertainment and "Brilliant Toy" sectors, establish brand recognition,
and compete effectively depend upon many factors, including broad commercial
acceptance of products embedded with our technology. The commercial success of
products embedded with our technology depends upon the quality and acceptance of
other competing products and technologies, capabilities of our competitors to
provide more widely



                                    Page 18
<PAGE>



accepted products and technologies, our ability to secure licensing agreements
with third parties, general economic conditions and other tangible and
intangible factors, all of which can change and cannot be predicted with
certainty. We cannot assure that new products embedded with our technology will
achieve significant market acceptance or will generate significant revenue. If
we are unable to license our technology to third parties or the marketplace does
not broadly accept our products embedded with our technology, our results of
operations and financial condition could be materially and adversely affected.

OUR GROWTH AND OPERATING RESULTS WILL BE IMPAIRED IF THE INTERNET AND ONLINE
COMMERCE INDUSTRIES DO NOT CONTINUE TO GROW.

Because global commerce on the Internet is still new and evolving, we cannot
predict the extent to which the Internet will be a viable commercial
marketplace. In addition, there are several factors that could have an impact on
the growth of e-commerce. These include:

o    security

o    reliability of service

o    cost of Internet access

o    how easy it is to use the Internet or e-commerce features on the Internet

o    how easy it is to gain access to the Internet

o    quality of service

o    delays in developing new standards and protocols to handle increased
     Internet traffic

o    increased governmental regulation

Slow growth of e-commerce on the Internet for these or any other reasons could
have a material adverse effect on our business, results of operations and
financial condition.

We depend upon Web browsers, Internet Service Providers and Online Service
Providers to allow Internet users to access UIT's own Web sites and Web sites of
UIT's licensees. From time to time, users may experience difficulties accessing
or using Web sites due to system failures or delays, which are not related to
UIT's systems. These difficulties may negatively affect audio and video quality
or result in interruption of video delivery. Any significant delays or failure
of service could reduce the attractiveness of our technology and applications to
our licensees, users, advertisers and content providers. Any of these events
could seriously harm our business, results of operations and financial
condition.

OUR TECHNOLOGY BUSINESS FACES SECURITY RISKS.

Even though we employ security measures, UIT's Web sites and the Web sites of
UIT's licensees may be vulnerable to unauthorized access, computer viruses,
Trojan horses, worms and other disruptions. A party who is able to circumvent
security measures could misappropriate proprietary information or cause
interruptions in UIT's or its licensees' Internet operations. Internet Service
Providers and Online Service Providers have experienced, and may in the future
experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, their own current and former employees or
others. We may be required to spend significant capital or other resources to
protect against the threat of security breaches or to solve



                                    Page 19
<PAGE>



problems caused by these sorts of security breaches. Although UIT intends to
continue to implement industry-standard security measures, we do not know if the
measures implemented by UIT will be circumvented in the future. Eliminating
computer viruses, Trojan horses and worms and solving other security problems
may require interruptions or delays in service to users who access UIT's or its
licensees' Web sites. Any of these things could seriously harm our business,
results of operations and financial condition.

WE ARE SUBJECT TO INTENSE COMPETITION.

There is significant competition in the evolving market for video delivery on
the Internet. Our primary competitors and we have each approached Internet video
delivery using different technologies. Many of our competitors have
substantially greater financial, marketing, personnel and other resources than
we have. Our management believes that the barriers to enter this market are
relatively high and there is significant lead-time required to market a
competitive Internet video delivery technology.

There is significant competition for content development and broadcasting on the
Internet. The largest competitors in the content development and broadcast area
are Broadcast.com, Inc. and RealNetworks, Inc. These, and many other competitors
in the content development and broadcast area, have substantially greater assets
then we do. We expect competition in this area to remain strong and to increase
further.

FAILURE TO ADAPT TO TECHNOLOGICAL CHANGE COULD ADVERSELY AFFECT OUR EARNINGS.

The Internet, computer hardware and software markets, and the field of
e-commerce, all are undergoing rapid technological changes. Newer technologies,
techniques or products could be developed which might perform functions similar
to our technology and which operate as efficiently and easily, or which solve
the problem of long download times for multimedia files in other ways. For
example, a new technological advance that allows faster downloading of
information from computer networks, or the development of entirely new methods
of data transmission, could seriously harm our business, results of operations
and financial condition.

BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR OUR
RESULTS OF OPERATIONS.

It is likely that new laws and regulations will be adopted in the United States
and elsewhere covering a wide range of Internet-related issues. This could
include broadcast license fees, music licensing, copyrights, privacy, pricing,
sales taxes, and characteristics and quality of Internet services. It is also
possible that laws could be passed that may apply to us in the areas of content,
network security, encryption, privacy protection, electronic authentication or
"digital" signatures, illegal and harmful content, access charges and
re-transmission activities. If restrictive laws or regulations are adopted, it
could slow Internet growth. If certain laws or regulations apply to us and the
type of technology business or service we provide, it could expose us to
significant liabilities associated with the content on UIT's Web sites, and
possibly for the content on the Web sites of UIT's licensees. We do not know if
laws will be adopted that apply to our business on the Internet. If such laws
and regulations are adopted, we do not know if they will affect our business.
Any new legislation or regulation or enforcement of existing



                                    Page 20
<PAGE>


laws and regulations could limit the growth of the Internet, increase our cost
of doing business or increase our legal exposure.

Several federal laws could have an impact on our business. The Digital
Millennium Copyright Act is intended to reduce the liability of online service
providers for listing or linking to third-party Websites that include materials
that infringe copyrights or other rights of others. The Children's Online
Protection Act and the Children's Online Privacy Protection Act are intended to
restrict the distribution of certain materials deemed harmful to children and
impose additional restrictions on the ability of online services to collect user
information from minors. In addition, the Protection of Children From Sexual
Predators Act of 1998 requires online service providers to report evidence of
violations of federal child pornography laws under certain circumstances. Such
legislation may impose significant additional costs on our business or subject
us to additional liabilities.

There are also uncertainties about how existing laws in other areas apply to the
Internet. Some of these laws deal with such issues as property ownership, libel,
taxation, defamation and personal privacy. The majority of these laws were
adopted before the widespread use of the Internet. Therefore, they do not
address the unique issues of the Internet and related technologies. If such laws
apply to the Internet, it could limit growth of the Internet and could seriously
harm our business, results of operations and financial condition.

Congress enacted the Communications Decency Act in 1996. The U.S. Supreme Court
ruled that certain sections of that Act which would have imposed criminal
penalties on anyone distributing "indecent" material to minors over the Internet
were unconstitutional. We do not know if similar laws will be adopted and
upheld. Even though we do not currently distribute the types of materials on the
Internet that the Act may have considered illegal, we do not know how any future
laws or regulations regarding decency might be interpreted. In addition to the
potential for liability, these types of laws could also damage the growth of the
Internet generally, which would have the effect of decreasing the demand for our
technology and its applications. Any of these developments could seriously harm
our business, results of operations and financial condition. So far, we have not
required our licensees to indemnify us for this type of liability and we do not
have insurance for this type of liability.

If we are considered to be a distributor of Internet content, we face potential
liability for negligence, copyright, patent, trademark, defamation, indecency
and other claims. These types of lawsuits have been brought against Internet
content distributors. In addition, we could be liable for the broadcast content,
or unauthorized duplication of broadcast content. So far, we have not required
our licensees to indemnify us for this type of liability. Any liability that is
not covered by insurance or an indemnification by a licensee could seriously
harm our business, results of operations and financial condition. At present, we
do not have insurance for this type of liability.

OUR TECHNOLOGY BUSINESS RELIES ON THE ENFORCEMENT OF OUR INTELLECTUAL PROPERTY
RIGHTS.

We have been issued or approved for issuance on the following patents.



                                    Page 21
<PAGE>



1.   The DIVO technology (issued)

2.   The Medical Monitoring Technology (issued)

3.   The I-C-IT Technology (approved and issue fee paid)

4.   System for Remotely Controlling an Animatronics Device in a Chat
Environment Utilizing Control Signals Sent by A Remote Device Over The Internet
(issued)

We have six applications remaining; we are still waiting for Office Actions for
all but one of these cases. However, given that they, for the most part, depend
upon our core technology, we believe that most, if not all, of the presently
pending applications will support claims, which will be allowed to proceed to
issuance.

Our copyrights, trademarks, trade secrets and other intellectual property rights
are critical to our success. We rely on copyright and trademark laws, trade
secret protection, and confidentiality and non-disclosure agreements with our
employees and third parties to protect our proprietary rights. We do not know if
these steps will be adequate. We do not know if we will be able to obtain
trademark registrations for our marks in the United States or other countries.
We do not know if third parties will infringe upon or misappropriate our
copyrights, trademarks, service marks and other intellectual proprietary rights.
None of our marks or rights is registered at present. In addition, meaningful
copyright and trademark protection may be unenforceable or limited in certain
countries. In the future, it is possible that we would have to sue to protect
our copyrights, trademarks, trade secrets and other intellectual property
rights. We cannot give any assurance as to our ability to enforce our rights or
the outcome of any suits to protect those rights.

UIT generally enters into nondisclosure agreements with its employees and
consultants. UIT also limits access to and distribution of its software,
sensitive documents and other proprietary information. We do not know if the
steps taken by UIT to prevent misappropriation of its proprietary information
will be successful. If these agreements are breached we do not know if we will
have adequate remedies available, or if the agreements themselves would be
enforceable. Even with the precautions taken by UIT, it might be possible for a
third party to copy, obtain and use, our proprietary information without
authorization. It is also possible that competitors will independently develop
our trade secrets.

SALES OF ADDITIONAL SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET MAY CAUSE
OUR STOCK PRICE TO FALL AND DILUTE OUR STOCKHOLDERS' INTERESTS.

If we raise additional funds by selling common stock or other equity securities,
the interests of current stockholders would be diluted. We also may issue common
stock, options or warrants to purchase our common stock to provide incentives to
officers, employees, consultants, advisors and other people who perform services
for us. Stock that is issued when options and warrants are exercised will dilute
our present stockholders' ownership percentage in our Company.

CONTROL OF OUR COMPANY BY CERTAIN STOCKHOLDERS

Brian Shuster - Chairman of the Board, President, and Chief Executive Officer of
our Company - and certain of his relatives are principal stockholders of our
Company. Harry Shuster, the father of Brian Shuster, owns 25.28% of our common
stock, and Brian Shuster owns 4.99% of



                                    Page 22
<PAGE>


our common stock, including options exercisable within 60 days. Therefore, Brian
Shuster and members of his family have the ability to influence the outcome of
Company actions requiring the approval of our stockholders. These matters
include:

o    election of directors

o    mergers, sales of all or most of our assets; or

o    other change of control of our Company.

See ITEM 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS-LIQUIDITY AND CAPITAL RESOURCES" for a description of a
proposed $25 million private placement of Common Stock, the confirmation of
which will constitute a change of control of the company.

WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK.

We have not paid dividends on our common stock in the past and we do not expect
to declare dividends on our common stock in the foreseeable future. We intend to
continue to retain earnings for use in the operation and expansion of our
business. Dividend policy in the future is at the discretion of our Board of
Directors and will depend upon our financial condition, results of operations,
capital requirements and other factors that the Board of Directors considers
relevant. We are not a party to any agreement restricting the payment of
dividends and we have not had a shareholder meeting

ITEM 3. CONTROL AND PROCEDURES

(a)  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

     Within the 90 days prior to the date of this report, we carried out an
     evaluation, under the supervision and with the participation of the
     Company's management, including our Chief Executive Officer, of the
     effectiveness of the design and operation of our disclosure controls and
     procedures pursuant to Exchange Act Rule 13a-14. Based upon that
     evaluation, the Chief Executive Officer concluded that our disclosure
     controls and procedures are effective in timely alerting them to material
     information relating to us required to be included in our periodic SEC
     filings.

(b)  CHANGES IN INTERNAL CONTROLS.

     No significant changes were made in our internal controls or in other
     factors that could significantly affect these controls subsequent to the
     date of their evaluation.



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<PAGE>



                           PART II: OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

During the nine months ended September 30, 2002, we received a three-day notice
to pay rent or quit on a facility that we had previously vacated. The lease
agreement allows us to sub-lease the facilities, although we have had difficulty
working with the landlord to find a sub-tenant as the landlord has hindered us
from sub-leasing the facility. Since we have discontinued these operations and
vacated the property, we have accrued the remaining rental payments due through
2005, or approximately $15,000 per month or $500,000.

In the normal course of business, we are subject to various claims and legal
actions. We believe that we will not be adversely materially affected by the
ultimate outcome of any of these matters, either individually or in the
aggregate.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not Applicable

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not Applicable

ITEM 5.  OTHER INFORMATION

         Not Applicable

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         EXHIBITS

         99.1  Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               dated November 19, 2002.

         REPORTS ON FORM 8-K

         The Company filed a Current Report on FORM 8-K on July 23, 2002 to
report a change in its independent public accountants.



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<PAGE>



                                   SIGNATURES

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.


UNITED LEISURE CORPORATION


By:  /S/ BRIAN SHUSTER
   -----------------------------------
Brian Shuster
President, Chief Executive Officer and
Acting Chief Financial Offier


Date:  November  19, 2002



                                    Page 25
<PAGE>



       STATEMENT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                                       BY
           CHIEF EXECUTIVE OFFICER AND ACTING CHIEF FINANCIAL OFFICER
       REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS

I, Brian Shuster, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of United Leisure
Corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.   Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

     a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly



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<PAGE>



affect internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

Date:  November 19, 2002


                                             /S/ BRIAN SHUSTER
                                            -----------------------------------
                                            Brian Shuster
                                            Chief Executive Officer and
                                            Acting Chief Financial Officer




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