<PAGE>

================================================================================
                                  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 March 31, 2002


                                       OR

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

    or the transition period from ______________to _______________.

Commission File Number 0-6106

                           UNITED LEISURE CORPORATION
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>

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


                       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
April 30, 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

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>       <C>    <C>                                                                         <C>
PART I.  FINANCIAL INFORMATION
------

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

                  Consolidated Balance Sheet as of March 31, 2002 (Unaudited) and
                  December 31, 2001 ..........................................................   2

                  Consolidated Statements of Operations for the Three Months Ended
                  March 31, 2002 and 2001 (Unaudited) ........................................   3

                  Consolidated Statements of Cash Flows for the Three Months Ended
                  March 31, 2002 and 2001 (Unaudited) ........................................   4

                  Notes to Consolidated Financial Statements (Unaudited) .....................   5


         ITEM 2.  Management's Discussion and Analysis of Financial Condition and
                  Result of Operation ........................................................   6

PART II.  OTHER INFORMATION
-------

         ITEM 1.  Legal Proceedings ..........................................................  13

         ITEM 2.  Changes in Securities ......................................................  13

         ITEM 3.  Defaults Upon Senior Securities ............................................  13

         ITEM 4.  Submission of Matters to a Vote of Security Holders ........................  13

         ITEM 5.  Other Information ..........................................................  14

         ITEM 6.  Exhibits and Reports on Form 8-K ...........................................  14

Signatures ...................................................................................  15
</TABLE>


                                        i


<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 the our control, are
difficult to predict and could cause actual results to differ materially from
those expressed in 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.

                                        1

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS

                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           MARCH 31,         DECEMBER 31,
                                                                      -----------------------------------
                                                                             2002               2001
                                                                      -----------------------------------
                                                                         (UNAUDITED)
<S>                                                                   <C>                 <C>
Assets
Current assets:
 Cash and cash equivalents                                                $1,023,579          $1,645,450
 Receivables                                                                  21,321              19,769
 Due from related parties                                                      7,788               5,995
 Prepaid expense and other current assets                                    102,462             117,829
                                                                      -------------- -------------------
 Total current assets                                                      1,155,150           1,789,043

Property and equipment - net                                                 684,498             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                                                            128,157             128,184
 Deposits and other assets                                                    68,960              68,960
                                                                      -------------- -------------------
Total assets                                                              $2,042,565         $ 2,762,138
                                                                      -------------- -------------------
Liabilities and stockholders' equity
Current liabilities:
 Accounts payable and accrued expenses                                      $518,910             495,793
 Reserve for discontinued operations                                          52,298              84,885
 Reserve for litigation                                                       45,000              45,000
                                                                      -------------- -------------------
 Total current liabilities                                                   616,208             625,678

Minority interest                                                              4,413               4,413

Stockholders' equity
 Preferred stock, $100 par value; authorized -
    100,000 shares; issued and outstanding - none                                  -                  -
 Common stock, $0.01 par value; authorized -
    30,000,000 shares; issued and outstanding -
    20,511,375 shares as of March 31, 2002 and
    December 31, 2001                                                        204,304             204,304

 Additional paid-in capital                                               45,520,375          45,514,075
 Accumulated deficit                                                     (44,213,149)        (43,496,746)
 Accumulated other comprehensive loss                                        (89,586)            (89,586)
                                                                      -------------- -------------------
 Total stockholders' equity                                                1,421,944           2,132,047
                                                                      -------------- -------------------
Total liabilities and stockholders' equity                                $2,042,565          $2,762,138
                                                                      -------------- -------------------
</TABLE>


See accompanying notes to consolidated financial statements

                                        2

<PAGE>

                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED INCOME STATEMENTS
                 FOR THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           2002              2001
                                                      -----------------------------
<S>                                                   <C>              <C>
Revenue                                               $         -       $     3,000

Cost and expenses:
 Direct operating expense                                 407,115           665,566
 Selling, general and administrative                      211,442         1,168,721
 Stock compensation                                         6,300           127,989
 Depreciation and amortization                             46,859            63,302
                                                     ------------------------------
                                                          671,716         2,025,578
                                                     ------------------------------
Other income (loss):
 Interest income                                            4,807            84,807
 Interest expense                                          (1,935)                -
 Other, net                                                 2,441             9,368
                                                     ------------------------------
 Total other income (loss)                                  5,313            94,175
                                                     ------------------------------
Minority interest in loss                                       -            40,435
                                                     ------------------------------
Loss from continuing operations                          (666,403)       (1,887,968)
Loss from discontinued operations                         (50,000)                -
                                                     ------------------------------
Net loss                                                 (716,403)       (1,887,968)

Other comprehensive loss:
 Unrealized holding loss on securities
    available for sale                                          -           (91,253)
  Foreign currency translation loss                             -            (6,205)
                                                      -----------------------------
Comprehensive loss                                    $  (716,403)      $(1,985,426)
                                                      -----------------------------

Weighted average number of common shares outstanding   20,511,375        20,363,222
Basic loss per share:
 Loss per share from continuing operations            $     (0.03)      $     (0.09)
 Loss per share from discontinued operations          $     (0.00)      $     (0.00)
 Total loss per share                                 $     (0.03)      $     (0.09)
</TABLE>


See accompanying notes to consolidated financial statements.

                                        3

<PAGE>

                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE PERIOD ENDED

<TABLE>
<CAPTION>
                                                                      MARCH 31,
                                                         ---------------------------------
                                                             2002                2001
                                                         ---------------------------------
<S>                                                     <C>                   <C>
Operating activities
Net loss                                                 $ (716,403)          $(1,887,968)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Loss from discontinued operations                          50,000                     -
  Depreciation and amortization                              46,859                63,302
  Loss on disposal of assets                                      -                71,433
  Minority share of loss                                          -               (45,357)
  Fair value of options granted to non-employees              6,300               127,989
Changes in operating assets and liabilities:
  Receivables                                                (1,552)                3,226
  Receivables - related party                                (1,793)
  Prepaid expenses and other current assets                  15,367                58,152
  Accounts payable and accrued expenses                      23,117                81,749
Net cash used in continuing operations                     (578,105)           (1,527,474)
Net cash used in discontinued operations                    (44,047)              (94,031)
                                                         ----------- --------------------
Net cash used in operating activities                      (622,152)           (1,621,505)
Investing activities
  Purchases of property and equipment                                             (18,882)
  Increase in deposits and other assets                           -              (110,563)
  Advances to related party                                       -              (285,059)
  Other                                                         281                     -
                                                         ----------- --------------------
Net cash provided by / (used In) investing activities           281              (414,504)

Effect of currency rate changes                                   -                (6,205)
Net increase in cash and cash equivalents                  (621,871)           (2,042,214)
Cash and cash equivalents at beginning of period          1,645,450             7,416,966
                                                         ----------- --------------------
Cash and cash equivalents at end of period               $1,023,579           $ 5,374,752
                                                         ----------- --------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                        4

<PAGE>

                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 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 periods ended March 31, 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, 2001. 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 Intercompany transactions and balances have
been eliminated.

2. CURRENT DEVELOPMENTS

The Company has experienced operating losses. For the period ended March 31,
2002 the Company had cash and cash equivalents of $1,023,579 and an accumulated
deficit of $44,213,149. To conserve its resources, the Company has significantly
curtailed all activities are not directly related to its core technology
business, reduced its staff to a minimum, and reduced capital expenditure. The
Company intends to stop further development of its technologies. The primary
objective over the next year will be to market the technologies that were
developed and refined during the previous years. This may require additional
financing. To accomplish this, the Company may 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 doesn't 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.



                                       5

<PAGE>

3. CONTINGENCIES

On or about February 16, 2001, we terminated the employment contracts of Sonja
Mikic and Chris Riley. It is the Company's position that no further compensation
or benefits are due under those contracts. On or about February 28, 2001, Sonja
Mikic and Christopher Riley (Plaintiffs) filed a lawsuit agianst us, UIT, and
Brian Shuster (collectively, Defendants) in the Superior Court of the State of
California for the County of Los Angeles, West District. Plaintiffs asserted
causes of action for breach of written employment, tortuous breach of contract,
and tortuous interference with contract. Plaintiffs seek compensatory damages in
an unspecified amount against Defendants, punitive damages, attorneys' fees,
costs of suit, and pre- and post- judgment interest as allowed by law.

Plaintiffs essentially allege that their contracts were terminated without cause
and that UIT and United Leisure are in breach of the employment agreements by
not providing the benefits that would accrue to each Plaintiff in the event his
or her employment was terminated without cause. Separately, Plaintiff's
purported rights with respect to their ownership of stock options in UIT also
may be at issue. We believe this lawsuit is without merit in that the employment
agreements were terminated for cause, thereby eliminating Plaintiff's rights to
additional benefits under the agreements. The company is currently engaged in
settlement negotiations.

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

Introduction

Through our subsidiary, United Internet Technologies, Inc. ("UIT"), we are
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 locally,
when connected to a computer, or over the Internet and over other digital
systems, such as cable, television and wireless networks. We have developed
several proprietary technologies: (1) Intelligent Control Interactive
Technology (TM) ("I-C-IT(TM)") ("software"), (2) Digitally Integrated Video
Overlay (TM) ("Divo(TM)") ("software"), and (3) Fiber Optic based bar code
scanning technology. We also have acquired technology from Andy Rifkin's
company, JED Development / Gorilla that enables our smart toys to be completely
wireless from the computer.

During the period ended March 31, 2002, we spent most of our time and resources
in developing and creating working, price competitive prototypes of products
utilizing our newer technologies. Toward the end of 2001 we concluded building
several prototypes of such products and prepared supporting material to market
the technology to potential strategic partners. It is our intention that we will
be able to generate revenues from the sale or licensing of its products and
proprietary technologies. We focused our resources primarily on integrating our
technologies to the smart toy business sector.

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.

                                       6

<PAGE>

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

Revenue Recognition

Revenue is recognized upon delivery of the technology. For arrangements to
deliver the technology requiring significant modification or customization,
revenue is recognized on the percentage-of-completion method.

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 contingent issuance of securities would have an
antidilutive effect on EPS.

Results of Operations

Three Months Period Ended March 31, 2002 Compared to Three Months Period Ended
March 31, 2001

Net Revenues.  For the three months period ended March 31, 2002, we had no
revenues compared to revenues of $3,000 for the three months period ended March
31, 2001, a decrease of $3,000 or 100%. Licensing agreements covering
interactive CD-ROMs created for Promo CD, Inc generated the revenues received in
2001. In 2001 the Company shifted its focus to developing its I-C-IT toy
technology and did not market the CD-ROM technology as aggressively as it had in
the prior year.

Operating Expenses.  Total costs and expenses decreased to $671,716 for the
three months period ended March 31, 2002 from $2,025,578 for the three months
period ended March 31, 2001, a decrease of $1,353,862 or approximately 67%. The
decrease is composed of several components including a decrease in personnel,
consultant fees, legal, non-cash compensation associated with the issuance of
options and overhead.

Selling, general and administrative expenses were $211,442 for the year ended
March 31, 2002 compared to $1,168,721 for the three months period ended March
31, 2001, a decrease of $957,279 or approximately 82%. Non-cash compensations
from option grants decreased by $121,689 to $6,300 or approximately 95%.
Depreciation and amortization for the three months period ended March 31, 2002
was $46,859 compared to $63,302 for the three months period ended March 31,
2001, a decrease of $16,443 or approximately 67%.

For the three months period ended March 31, 2002, we had a net loss of $716,403
including loss from discontinued operations of $50,000, or $0.03 per share,
compared with a net loss of $1,887,968 or $0.09 per share for the three months
period ended March 31, 2001. The decrease in net loss for the three months
period ended March 31, 2002 is primarily attributable to the lack of revenues
and expenses.

Liquidity and Capital Resources

For the three months period ended March 31, 2002 we had cash and cash
equivalents of $1,023,579 and an accumulated deficit of $44,213,149

    Our future capital requirements will depend on various factors including:



                                       7

<PAGE>

1.  The length of time that it takes us to restructure and dispose of our
    remaining children's recreational facilities and the manner of disposition.
2.  The length of time it takes us to get products to the market that generate
    revenues.
3.  The need to hire additional marketing staff and technical support staff.

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 budgeted minimum amounts for the purchase of needed
assets and reduced capital expenditures.

If we are unable to raise additional funds, when needed, through the private
placement of our securities, we may seek financing from affiliated or
unaffiliated third parties. 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 we are unable to sell our securities or obtain sufficient financing to
meet our working capital needs and to repay indebtedness as it becomes due, we
may have to consider such alternatives as selling or pledging portions of our
assets, among other possibilities, in order to meet such obligations.

We intend to stop further development of our technologies. The Company is
transitioning from an R&D model with expensive technology staffing to a
technology marketing company. Our primary objective over the next year will be
to market the technologies that we developed and refined during the previous
years. This may require additional financing from either public or private
sources. To accomplish this, we may raise additional capital by borrowing money
or through a public or private sale of debt or equity securities. We may not be
able to acquire additional financing on favorable terms, or at all.

Factors That Could Impact Future Results

We Have a History of Losses and May Not Be Profitable In the Future.

We have sustained operating losses for the last several years from our previous
traditional business of children's recreational activities. For the three months
period ended March 31, 2002, we had a net loss of $716,403 and an accumulated
deficit of $44,213,149. In addition, we have significant working capital,
research and development requirements and these needs are expected to continue
to be significant.

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 was Research and Development of our 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
intend to dispose of our remaining children's recreational facilities.
Therefore, our business is not presentally 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.

Our Prospects in the Technology Sector Are Difficult to Forecast Because of
Limited Operating History and Capital in our Technology Business.

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 success in 2002 depends upon licensing, or
selling the technologies developed. If our technologies are not successfully
licensed or sold, it could seriously harm our business, results of operations
and financial condition.


                                       8

<PAGE>

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. The market for our
technology is uncertain.

We Will Need Additional Financing

Through UIT, we intend to enter into additional license agreements for our
technology. We expect that these license agreements will generate revenue for
UIT. However, 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.

Depending upon how much money we raise, UIT may have more or less ability to
expand the sale or licensing of our technology business rapidly. 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,
results of operations and financial condition.

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 ability to enter into the online entertainment and smart toy sectors, as
well as the healthcare and medical monitoring device 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 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.



                                       9

<PAGE>

Our Growth and Operating Results Will Be Impaired if the Internet and Online
Commerce Industries Do Not Continue to Grow.

Our ability to earn revenue from our Internet products depends in part upon
increased acceptance of the Internet as a medium for "e-commerce" by consumers.
The Internet may not develop into a viable commercial marketplace as quickly as
some industry estimates suggest. E-commerce on the Internet may not develop to
the extent anticipated. Rapid growth and interest in the Internet and other
online services is a recent development. We do not know if the use of the
Internet for e-commerce will continue to develop or that a large enough number
of consumers will use the Internet and other online services for e-commerce.
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:

..  security
..  reliability of service
..  cost of Internet access
..  how easy it is to use the Internet or e-commerce features on the Internet
..  how easy it is to gain access to the Internet
..  quality of service
..  delays in developing new standards and protocols to handle increased Internet
   traffic
..  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 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.


                                       10

<PAGE>

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.

It is probable that existing broadband technology will eventually develop to
allow streaming video to provide television-quality video in direct competition
with our technology, as well as with other alternative video delivery systems.
While some industry estimates project that such developments may not occur for
the next six to eight years, we do not know if these technological developments
will occur sooner. In any event, over time we will need to respond to
technological innovation in a rapidly changing industry.

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

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. There are
very few cases about the interpretation of these types of law on Internet use.
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


                                       11

<PAGE>

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.

1. The DIVO technology (issued)
2. The Medical Monitoring Technology (issued)
3. The I-C-IT Technology (approved and issue fee paid)

The Company believes that this is a very positive indication of the efforts,
which the Company has made to protect its Intellectual Property rights, and the
fact that such efforts have been highly successful.

With respect to the 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 the core technology of the Company, the Company believes 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.

We Depend on Certain Personnel

An important part of our performance depends upon the services of our senior
management, certain other key personnel, and technical and business consultants.
The loss of their services could have a material adverse effect on our business,
results of operations and financial condition.

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 may also 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.


                                       12

<PAGE>

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, including options exercisable within 60 days, and Brian Shuster owns
4.99% of our common stock, including options exercisable within 60 days.
Therefore, Brian Shuster and members of his family have the ability to control
the outcome of Company actions requiring the approval of our stockholders. These
matters include:

..  election of directors
..  mergers, sales of all or most of our assets; or
..  other change of control of our 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.

                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On or about February 16, 2001, we terminated the employment contracts of Sonja
Mikic and Chris Riley. It is the Company's position that no further compensation
or benefits are due under those contracts. On or about February 28, 2001, Sonja
Mikic and Christopher Riley (Plaintiffs) filed a lawsuit against us, UIT, and
Brian Shuster (collectively, Defendants) in the Superior Court of the State of
California for the County of Los Angeles, West District. Plaintiffs asserted
causes of action for breach of written employment, tortuous breach of contract,
and tortuous interference with contract. Plaintiffs seek compensatory damages in
an unspecified amount against Defendants, punitive damages, attorneys' fees,
costs of suit, and pre- and post- judgment interest as allowed by law.

Plaintiffs essentially allege that their contracts were terminated without cause
and that UIT and United Leisure are in breach of the employment agreements by
not providing the benefits that would accrue to each Plaintiff in the event his
or her employment was terminated without cause. Separately, Plaintiff's
purported rights with respect to their ownership of stock options in UIT also
may be at issue. We believe this lawsuit is without merit in that the employment
agreements were terminated for cause, thereby eliminating Plaintiff's rights to
additional benefits under the agreements. The company is currently engaged in
settlement negotiations.

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




                                       13

<PAGE>



        Not Applicable

ITEM 5. OTHER INFORMATION

        Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     EXHIBITS
        None

(b)     REPORTS ON FORM 8-K
        None

                                       14

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

UNITED LEISURE CORPORATION



By: /s/ Brian Shuster
   --------------------------------------------
President, Chief Executive Officer and Director

Date:  May 13, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the Registrant and in the capacities indicated
have signed this report below.

SIGNATURE                                                    TITLE

/s/   BRIAN SHUSTER                            Chairman of the Board, President,
---------------------------------------        Chief Executive Officer and
                                               Chief Financial Officer
Brian Shuster


SIGNATURE                                      TITLE

/s/   BRIAN SHUSTER                            Chairman of the Board, President,
---------------------------------------        Chief Executive Officer,
                                               Principal Financial and
Brian Shuster                                  Accounting Officer)


/s/   BRIAN SHUSTER                            Chairman of the Board, President,
---------------------------------------        Chief Executive Officer, Chief
                                               Financial Officer, Principal
Brian Shuster                                  Financial and Accounting Officer



/s/   BROOKE JOHNSTON, JR.
-----------------------------

J. Brooke Johnston, Jr.                        Director


/s/   VICTOR A. HOLLANDER
-------------------------

Victor A. Hollander                            Director


/s/   GERALD M.CHIZEVER
-----------------------

Gerald M. Chizever                             Director

                                       15