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 June 30, 1998

                                       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.)

18081 Magnolia Avenue, Fountain Valley, California             92708
         (Address of Principal Executive Offices)           (Zip Code)

                                  714/378-8761
              (Registrant's Telephone Number, Including Area Code)

         Check  whether  the Issuer (1) filed all reports to be filed by Section
13 or 15(d) 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 at least the past 90 days.

                           YES   [X]            NO       [ ]

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.

                    Class                   Outstanding at August 17, 1998
         ---------------------              ------------------------------
          Common Stock, par                     13,918,849 shares
         value $.01 per share

         Transitional Small Business Disclosure Format (check one):

                           YES   [ ]            NO       [X]


<PAGE>



PART I      FINANCIAL INFORMATION

Item 1.     Consolidated Financial Statements


                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          June 30,        December 31,
                                                                                           1998               1997
                                                                                       --------------   --------------
                                                                                        (Unaudited)
                                                                ASSETS
<S>                                                                                     <C>             <C>         
CURRENT ASSETS
     Cash and cash equivalents                                                          $    396,779    $    152,770
     Receivables                                                                              20,404          21,732
     Prepaid expenses and other current assets                                                70,373          59,690
                                                                                        ------------    ------------
            TOTAL CURRENT ASSETS                                                             487,556         234,192

PROPERTY AND EQUIPMENT, Net                                                                2,074,102       2,172,569

INVESTMENT IN UNITED HOTEL - RELATED PARTY                                                 3,518,800       3,633,800
INVESTMENT IN HEP II - RELATED PARTY                                                       1,120,500       1,120,500
INVESTMENT IN GRAND HAVANA - RELATED PARTY                                                   136,300         340,025
LOANS RECEIVABLE FROM GRAND HAVANA - RELATED PARTY                                           573,456         681,643
INVESTMENT IN GENISYS - RELATED PARTY                                                        459,666              --
DUE FROM OFFICER                                                                                  --          12,567
DEPOSITS AND OTHER ASSETS                                                                     79,705          82,043
                                                                                        ------------    ------------
                                                                                        $  8,450,085    $  8,277,339
                                                                                        ============    ============

                                                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

     Notes payable                                                                      $  1,925,000    $  1,925,000
     Accounts payable and accrued expenses                                                 2,027,963       1,387,039
     Deferred revenues                                                                       395,722          32,710
     Deposits and other                                                                       44,927          43,426
     Due to officer                                                                           49,254              --
                                                                                        ------------    ------------
            TOTAL CURRENT LIABILITIES                                                      4,442,866       3,388,175

LONG-TERM DEBT                                                                               842,000         842,000

STOCKHOLDERS' EQUITY

     Preferred stock, $100 par value; authorized - 100,000
        shares; issued and outstanding - none                                                     --              --
     Common stock, $.01 par value; authorized - 30,000,000
        shares; issued and outstanding -  13,918,849 shares at
        June 30, 1998 and 12,618,849 shares at December 31, 1997                             139,188         126,188
     Additional paid-in capital                                                           24,835,168      24,587,188
     Accumulated deficit                                                                 (21,809,137)    (19,923,806)
     Accumulated other comprehensive loss - Unrealized loss on investment                         --        (742,406)
                                                                                        ------------    ------------
            TOTAL STOCKHOLDERS' EQUITY                                                     3,165,219       4,047,164
                                                                                        ------------    ------------
                                                                                        $  8,450,085    $  8,277,339
                                                                                        ============    ============
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                        2


<PAGE>



                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                               ----------------------------------------
                                                                                   June 30,                 June 30,
                                                                                    1998                     1997
                                                                               ----------------          --------------
                                                                                 (Unaudited)              (Unaudited)
<S>                                                                             <C>                      <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                                   $(1,885,331)             $(1,675,644) 
     Adjustments to reconcile net loss to net cash used                                                               
          in operating activities:                                                                                    
              Depreciation and amortization                                          85,514                  373,572  
              Issuance of common stock for services                                  31,300                       --  
              Write-down of investment in Grand Havana                              946,131                           
              Licensing fees                                                             --                           
              Equity in net loss of United Hotel                                    115,000                       --  
              Accrual of interest income on restricted cash                              --                   (9,434) 
              Accrual of interest income on loans receivable                        (21,813)                      --  
              Changes in operating assets and liabilities:                                                            
                  Receivables                                                         1,328                  104,940  
                  Prepaid expenses and other current assets                         (10,683)                (119,692) 
                  Deposits                                                            2,338                   25,699  
                  Accounts payable and accrued expenses                             640,924                  425,586  
                  Accrued expenses due to related party                              61,821                 (312,703) 
                  Deferred revenues                                                 363,012                  463,797  
                                                                                -----------              -----------  
                  NET CASH USED IN OPERATING ACTIVITIES                             329,541                 (723,879) 
                                                                                -----------              -----------  
                                                                                                                      
CASH FLOWS FROM INVESTING ACTIVITIES                                                                                  
     Purchases of property and equipment                                            (35,896)                 (91,472) 
     Investment in Grand Havana                                                          --                 (575,000) 
     Loans receivable from Grand Havana                                                  --                 (775,000) 
     Collection of loan receivable from Grand Havana                                130,000                       --  
     Deposits and other                                                               1,501                  (20,000) 
                                                                                -----------              -----------  
                  NET CASH USED IN INVESTING ACTIVITIES                              95,605               (1,461,472) 
                                                                                -----------              -----------  
                                                                                                                      
                                                                                                                      
CASH FLOWS FROM FINANCING ACTIVITIES                                                                                  
     Sale of common stock                                                           229,680                       --  
                                                                                -----------              -----------  
                  NET CASH PROVIDED BY FINANCING ACTIVITIES                         229,680                       --  
                                                                                -----------              -----------  
                                                                                                                      
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                654,826               (2,185,351) 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      152,770                3,845,653  
                                                                                -----------              -----------  
CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $   807,596              $ 1,660,302  
                                                                                ===========              ===========  
                                                                                                                      
CASH PAID FOR:                                                                                                        
                                                                                                                      
    Interest                                                                    $    48,657              $    42,127  
                                                                                ===========              ===========  
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.
                                        
                                       3


<PAGE>


                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                         Three Months Ended                 Six Months Ended
                                                                      --------------------------------------------------------------
                                                                         June 30,         June 30,       June 30,        June 30,
                                                                          1998             1997           1998            1997
                                                                      -------------   ------------    -----------     -----------
                                                                       (Unaudited)     (Unaudited)    (Unaudited)     (Unaudited)
<S>                                                                   <C>             <C>             <C>             <C>         
REVENUE
     Children's recreational activities                               $    444,584    $    625,873    $    931,493    $  1,170,776
     Licensing fees                                                        410,817              --         410,817              --
     Rentals                                                                    --              --              --          79,383
                                                                      ------------    ------------    ------------    ------------
            TOTAL REVENUE                                                  855,401         625,873       1,342,310       1,250,159

DIRECT OPERATING EXPENSES                                                  765,211       1,063,566       1,433,581       1,921,548
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                               164,071         122,741         301,241         395,468
DEPRECIATION AND AMORTIZATION                                               44,391         183,101          85,514         373,572
                                                                      ------------    ------------    ------------    ------------
                                                                           973,673       1,369,408       1,820,336       2,690,588
                                                                      ------------    ------------    ------------    ------------

LOSS BEFORE OTHER INCOME (EXPENSE)                                        (118,272)       (743,535)       (478,026)     (1,440,429)

OTHER INCOME (EXPENSE)
     Legal costs                                                          (108,504)       (451,289)       (250,450)       (471,422)
     Equity in net loss of United Hotel                                     34,000              --        (115,000)             --
     Realized loss from write-down of investment in Grand Havana          (946,131)             --        (946,131)             --
     Interest income                                                        34,263          74,252          68,708         170,948
     Interest expense                                                      (97,781)        (21,067)       (191,225)        (42,127)
     Sub-lease income                                                        8,732          12,979
     Other, net                                                              6,283          65,825          13,814         107,386
                                                                      ------------    ------------    ------------    ------------
            TOTAL OTHER INCOME (EXPENSE)                                (1,069,138)       (332,279)     (1,407,305)       (235,215)
                                                                      ------------    ------------    ------------    ------------

NET LOSS                                                                (1,187,410)     (1,075,814)     (1,885,331)     (1,675,644)
                                                                      ------------    ------------    ------------    ------------

                    
OTHER COMPREHENSIVE LOSS Unrealized loss on securities:
    Unrealized holding loss on securities arising during the period        (22,700)       (335,642)       (203,725)       (335,642)
    Less: reclassification adjustment for loss realized in net loss        946,131            --           946,131            --
                                                                      ------------    ------------    ------------    ------------
            OTHER COMPREHENSIVE LOSS                                       923,431        (335,642)        742,406        (335,642)
                                                                      ------------    ------------    ------------    ------------

COMPREHENSIVE LOSS                                                    $   (263,979)   $ (1,411,456)   $ (1,142,925)   $ (2,011,286)
                                                                      ============    ============    ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                                                 13,918,849      12,368,849      13,302,182      12,368,849
                                                                      ============    ============    ============    ============

BASIC AND DILUTED LOSS PER SHARE                                      $      (0.09)   $      (0.09)   $      (0.14)   $      (0.14)
                                                                      ============    ============    ============    ============
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       4
<PAGE>
                   UNITED LEISURE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The  interim  consolidated  financial  statements  presented  have been
         prepared by United Leisure  Corporation  (the "Company")  without audit
         and, in the opinion of the  management,  reflect all  adjustments  of a
         normal  recurring  nature  necessary  for a fair  statement  of (a) the
         consolidated  results of operations  for the three and six months ended
         June 30, 1998 and 1997, (b) the consolidated financial position at June
         30, 1998 and (c) the  consolidated  cash flows for the six months ended
         June 30, 1998 and 1997. Interim results are not necessarily  indicative
         of results for a full year.

         The  consolidated  balance sheet  presented as of December 31, 1997 has
         been derived from the consolidated  financial statements that have been
         audited  by  the  Company's   independent   public   accountants.   The
         consolidated  financial statements and notes are condensed as permitted
         by Form 10-QSB and do not contain certain  information  included in the
         annual financial  statements and notes of the Company. The consolidated
         financial  statements  and  notes  included  herein  should  be read in
         conjunction  with the financial  statements  and notes  included in the
         Company's Annual Report on Form 10-KSB.

2.       COMPREHENSIVE INCOME

         The Company  adopted  SFAS No. 131,  "Reporting  Comprehensive  Income"
         effective  January 1, 1998.  Components of comprehensive  income (loss)
         for the Company  include net income  (loss) and changes in the value of
         available-for-sale securities. The interim statements of operations for
         the three and six months  ended  June 30,  1997 were  reclassified  for
         comparative purposes.

         During the three  months ended June 30,  1998,  the Company  realized a
         loss of $946,131 from the  write-down  of its  investment in restricted
         common stock of Grand Havana Enterprises, Inc., an affiliated company.

3.       INVESTMENT IN GENISYS

         As of June 30, 1998,  the  Company's  wholly owned  subsidiary,  United
         Leisure Interactive,  Inc. ("ULI") sold to NetCruise Interactive,  Inc.
         ("NetCruise"),   a  wholly  owned  subsidiary  of  Genisys  Reservation
         Systems,  Inc.  ("Genisys"),  an exclusive  and worldwide and perpetual
         license  for  travel  related   applications  of  certain   interactive
         technology.  In addition, the Company sold certain related intellectual
         properties and computer equipment.

         As   consideration   for  the  sale,  ULI  received  (i)  2,000,000  of
         unregistered  shares  of common  stock of  Genisys,  (ii) a warrant  to
         purchase  up to  800,000  shares of 

                                       5

<PAGE>

         Genisys  common stock at $2.50 per share if the total pretax profits of
         NetCruise for the years 1999, 2000 and 2001 equal or exceed  $5,000,000
         and (iii) a warrant to purchase up to 800,000  shares of Genisys common
         stock at $6.00 per share if the total pretax  profits of NetCruise  for
         the years 1999, 2000 and 2001 equal or exceed $10,000,000.

         ULI's  investment  in Genisys  common stock was accounted for under the
         equity method.  ULI's investment  represents  29.61% of the outstanding
         common stock of Genisys.

         For a period of three years,  Harry  Shuster will serve as Chairman and
         Brian Shuster will serve as President of NetCruise.  In addition,  both
         Harry Shuster and Brian Shuster will serve on the Board of Directors of
         Genisys  for the same  period.  Harry  Shuster is the  Chairman  of the
         Board, President, Chief Executive Officer and a director of the Company
         and Brian Shuster is Executive Vice President, Secretary and a director
         of the  Company.  Brian  Shuster  is the son of  Harry  Shuster.  Brian
         Shuster was issued  warrants to purchase  Genisys  common  stock on the
         same terms as the warrants  issued to ULI,  except that each of the two
         warrants issued to Brian Shuster represents the right to purchase up to
         200,000 shares of Genisys common stock.

         NetCruise  also  assumed  the ULI's lease at 1990  Westwood  Boulevard,
         Penthouse, Los Angeles, California.

5.       STOCKHOLDERS' EQUITY

         In February 1998, the Company issued 100,000 shares of its common stock
         to Transit  Securities,  Inc.  for  advisory  services  rendered to the
         Company.  The shares were valued at $31,300, its fair value at the date
         of issuance.

         In April  1998,  the  Company  sold 10 Units at $26,400  per Unit in an
         offering of securities  exempt from  registration  under the Securities
         Act of 1933.  Each Unit  consists  of 120,000  shares of the  Company's
         common stock and warrants to purchase  60,000 shares at $.27 per share.
         The Company received net proceeds of $229,680 from this offering.

         In April 1998,  the  Company's  Board of  Directors  approved a 6-for-1
         reverse  split  of  its  common  stock.  The  reverse  stock  split  is
         conditioned upon stockholder ratification.

6.       SUBSEQUENT EVENTS

         On July 30, 1998, the Company's "Secured  Convertible  Promissory Note"
         dated as of July 29, 1997 of $1,900,000 to  Westminster  Capital,  Inc.
         ("Westminster") became payable on demand.

                                       6

<PAGE>

         On August 6, 1998,  United  Hotel,  LLC ("United  Hotel"),  a Company's
         equity investee, borrowed $1,100,000 from Westminster.  The Company and
         two other  members  of United  Hotel  executed a  non-recourse  secured
         guaranty  under which each entity  pledged  their  interests  in United
         Hotel as collateral  under the guaranties.  Harry Shuster and two other
         individuals  personally  guaranteed the loan. A default under this loan
         shall  constitute a default under the "Secured  Convertible  Promissory
         Note"  dated as of July 29,  1997.  The  conversion  rights  granted to
         Westminster under the "Secured Convertible Promissory Note" dated as of
         July 29, 1997 was extended until July 31, 2001.





                                       7

<PAGE>

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

         The  following  discussion  should  be read  in  conjunction  with  the
Company's  consolidated  financial  statements  and the notes thereto  appearing
elsewhere in this Quarterly Report on Form 10-QSB.  Certain statements contained
herein  that  are  not  related  to  historical  results,   including,   without
limitation, statements regarding the Company's business strategy and objectives,
future financial  position,  expectations about pending litigation and estimated
cost savings,  are forward-looking  statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the  Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act") and
involve  risks  and  uncertainties.  Although  the  Company  believes  that  the
assumptions on which these forward-looking  statements are based are reasonable,
there can be no assurance  that such  assumptions  will prove to be accurate and
actual   results   could  differ   materially   from  those   discussed  in  the
forward-looking  statements.  Factors  that could  cause or  contribute  to such
differences include, but are not limited to, the risks, uncertainties, costs and
outcome of  pending  litigation  in which the  Company  is  involved,  costs and
uncertainties  associated  with  future  developments,  concerns  regarding  the
Company's liquidity and financial condition,  regulatory  policies,  competition
from other similar  businesses,  and market and general  economic  factors.  All
forward-looking statements contained in this Quarterly Report on Form 10-QSB are
qualified in their entirety by this statement.

OVERVIEW

         During the quarter ended June 30, 1998, the Company's  operations  were
primarily focused in three areas: (i) children's recreational activities,  which
includes the operation of the Company's "Camp Frasier" locations,  "Planet Kids"
locations and "Frasier's Frontier," all located in Southern California; (ii) the
development of the Company's  proprietary  interactive Internet technology;  and
(iii)  investments  in  affiliated  companies.   Unless  the  context  otherwise
indicates,  the  term the  "Company"  as used  herein  includes  United  Leisure
Corporation, a Delaware corporation, and its consolidated subsidiaries.

         Children's Recreational Activities.  The Company currently operates two
Camp Frasier day camp  locations,  which opened for the season  during the third
week of June; three Planet Kids, an indoor multimedia  interactive play learning
center for children; and one Frasier's Frontier, an amusement park, all of which
are located in

 
                                      8

<PAGE>


Southern  California.  The Company does not  currently  anticipate  that it will
expand any of its children's educational and recreational activities.

         Interactive  Technology.  Through its wholly-owned  subsidiary,  United
Leisure  Interactive,  Inc.  ("ULI"),  the Company has  continued to develop its
proprietary  Internet technology (the "Technology").  The first such interactive
multimedia  products were developed as Netcruise,  which allows a person to view
and book various  travel  products on the Internet.  After the end of the second
quarter, on July 23, 1998, the Company,  ULI, Genisys Reservation Systems,  Inc.
("Genisys") and its wholly-owned subsidiary Netcruise Interactive, Inc. ("NII"),
entered  into an  agreement  pursuant to which ULI granted to NII an  exclusive,
world-wide  and  perpetual  license to the  travel-related  applications  of the
Technology and sold to NII certain tangible assets and intellectual  property to
be used in  connection  with the  exploitation  of the licensed  Technology.  In
consideration  therefor,  ULI received (i) 2,000,000 shares of restricted common
stock of Genisys,  (ii) a warrant to  purchase  up to 800,000  shares of Genisys
common  stock at $2.50 per  share if the total  pretax  profits  of NII  ("Total
Pretax  Profits") for the years 1999,  2000 and 2001 equal or exceed  $5,000,000
and (iii) a warrant to purchase up to 800,000  shares of Genisys common stock at
$6.00 per share if the Total Pretax Profits of NII for the years 1999,  2000 and
2001 equal or exceed $10,000,000.

         Investments in and Loans to Grand Havana Enterprises,  Inc. The Company
has an  investment  in the common  stock of, and has made loans to, Grand Havana
Enterprises,  Inc. ("GHEI"),  an affiliate of the Company.  Harry Shuster is the
Chairman  of the Board,  President,  Chief  Executive  Officer  and a  principal
stockholder of GHEI.

         In February 1997, the Company  entered into a financing  agreement with
GHEI pursuant to which the Company agreed to loan GHEI up to $1,250,000 in order
to fund  the  development  of two  private  membership  and  cigar  clubs  being
developed by GHEI.  The loan,  which may be advanced in increments  from time to
time as  requested  by GHEI,  bears  interest at the rate of 8% per annum on the
outstanding principal amount. This loan was not repaid when due on September 30,
1997.  The  financing  agreement  provided  that if the loan was not  repaid  by
September 30, 1997, it would become payable on demand and the Company would then
be entitled to receive an additional  25,000 shares of the common stock of GHEI.
In February  1998,  GHEI issued 25,000 shares of its common stock to the Company
pursuant  to the terms of this  financing  agreement,  which  was  valued by the
Company at  $38,691,  and which  number of shares is  included  in the number of
shares of GHEI common  stock  indicated  above as held by the Company as of June
30, 1998.  The parties agreed to extend the maturity date of advances made under
this  financing  agreement to  September  30,  1998.  At June 30, 1998,  accrued
interest  amounted to $53,456,  and an aggregate of $520,000 in principal amount
remained payable by GHEI to the Company pursuant to this financing agreement.

                                       9

<PAGE>



         As of June 30, 1998,  the Company held 966,666  shares of GHEI's common
stock.  Management of the Company  estimated the fair value of the investment in
GHEI  using the  discounted  last  closing  price of the stock at June 30,  1998
(approximately  75% of $.19, or $.14 per share),  resulting in an aggregate fair
value of  approximately  $136,300 at June 30, 1998.  Because  Management  of the
Company  does not believe that it will recover its  investment  in GHEI,  it has
realized  loss on this  investment  in the amount of  $946,131  during the three
months ended June 30, 1998.

         Investments  in United  Hotel & Casino  L.L.C.  In  January  1997,  the
Company and two California  limited  liability  companies  formed United Hotel &
Casino,  L.L.C.,  a Delaware  limited  liability  company  ("UHC").  The Company
currently  has a 50%  membership  interest in UHC.  The Company has the right to
appoint one member  (who has two  votes),  and the  remaining  members  have the
right, in the aggregate,  to appoint two members (each of whom has one vote), of
the three member Management Committee of UHC.

         On July 29,  1997,  UHC acquired  approximately  8.5 acres of partially
developed  land on the Las Vegas  Strip in Las  Vegas,  Nevada  (the "Las  Vegas
Property").  The Las Vegas Property is located at 3025 Las Vegas Boulevard. Upon
the acquisition of the Las Vegas  Property,  UHC became the lessor of a shopping
center  consisting  of  approximately  20 retailers  and The Silver City Casino,
which is  currently  responsible  for  approximately  50% of the  rental  income
received by UHC from the Las Vegas Property. The Silver City Casino is owned and
operated  by  Circus  Circus  Enterprises,  Inc.  ("Circus  Circus")  and  it is
anticipated  that Circus  Circus will continue to operate this casino on the Las
Vegas  Property.  The  lease  for The  Silver  City  Casino  is due to expire in
October,  1999. UHC currently intends to continue to lease the existing shopping
center on the Las Vegas Property. The Company is evaluating various alternatives
with respect to its investment in UHC, including further  development of the Las
Vegas Property.  No assurance can be given that any particular  alternative will
be pursued or that any agreement will be entered into on terms  favorable to the
Company.

         The  aggregate   purchase   price  for  the  Las  Vegas   Property  was
approximately $23,200,000,  which was paid in the form of (i) cash in the amount
of  approximately  $5,590,000,  (ii) a one-year note in the amount of $1,250,000
and (iii)  assumption of a first deed of trust on the Las Vegas  Property in the
principal  amount  of  approximately   $16,360,000.   The  Company   contributed
approximately  $3,800,000 to the cash payment,  which cash came in part from its
working capital and in part from two different loans, the First Westminster Loan
and the Bibicoff Loan (as defined below).

         Concurrently  with the  closing  of  UHC's  purchase  of the Las  Vegas
Property,  Westminster  made a loan of  $1,900,000  to the  Company  (the "First
Westminster  Loan") to enable the  Company  to meet a portion of its  additional
capital contribution obligation to UHC. The First Westminster Loan was evidenced
by a Secured

                                       10

<PAGE>


Convertible  Promissory Note (the "First Westminster Note") made by the Company.
The First  Westminster  Loan, which bears interest at the rate of 15% per annum,
is due on the earlier to occur of (i) the demand of  Westminster  (which  demand
may be made at any  time  after  July  29,  1998) or (ii)  July  29,  1999  (the
"Maturity Date"). The holder of the First Westminster Note has the right, at any
time prior to the Maturity  Date,  to convert the entire  outstanding  principal
balance of the First Westminster Note into one-half of the Company's  membership
interest in UHC. The conversion  feature of the First  Westminster Note has been
amended to extend the conversion date, as described below. The First Westminster
Note may be prepaid by the  Company  at any time prior to  conversion  and after
July 29, 1998.  One-half of any cash  distributions  which may be made by UHC to
the Company prior to the repayment of the First Westminster Note are required to
be paid to Westminster as a prepayment on the First Westminster Note.

         The First  Westminster Loan is secured by, among other things, a pledge
of stock,  pursuant  to which the  Company  has  pledged  408,333 of the 966,666
shares it owns in GHEI.  As  additional  security,  the  Company  has  granted a
security interest to Westminster,  pursuant to a Security  Agreement dated as of
July 29,  1997,  in the  Company's  50%  membership  interest  in UHC and in the
receivables and certain indebtedness due to the Company from GHEI. Harry Shuster
serves as a member of the Management  Committee of UHC; and also is the Chairman
of the  Board,  President  and  Chief  Executive  Officer,  and  is a  principal
stockholder of, GHEI. In addition,  Harry Shuster and his spouse,  Nita Shuster,
provided  certain other  security  individually  and jointly with respect to the
First Westminster Loan.

         As  additional   consideration   for   Westminster   making  the  First
Westminster  Loan,  the Company  granted  Westminster  a  three-year  warrant to
purchase  150,000 shares of the common stock of the Company at a per share price
equal to the lesser of $.40 or 75% of the  average of the last trade  prices for
the ten trading days immediately  preceding the exercise of the warrants. At the
request of  Westminster,  the  Company  has filed a  registration  statement  to
register the shares of common stock underlying the warrants,  which registration
statement has been declared effective by the Securities and Exchange  Commission
(the "SEC"). The Company additionally  arranged for GHEI to grant to Westminster
a  three-year  warrant to purchase  150,000  shares of the common  stock of GHEI
exercisable  at a per  share  price  equal to the  lesser  of $.75 or 75% of the
average of the last trade prices for the ten trading days immediately  preceding
the exercise of the warrants.

         On August 6, 1998,  Westminster  made a loan of  $1,100,000 to UHC (the
"Second  Westminster  Loan").  The Second  Westminster  Loan is  evidenced  by a
promissory note in the amount of $1,100,000, which bears interest at the rate of
15% per annum and matures on August 1, 1999 (the "Second  Westminster Note"). In
order to induce  Westminster  to make the Second  Westminster  Loan, the Company
agreed to amend the First Westminster Note to provide that the holder of

                                       11

<PAGE>


the First  Westminster  Note now has the  right,  at any time  prior to July 31,
2001,  to  convert  the  entire  outstanding  principal  balance  of  the  First
Westminster Note into one-half of the Company's  membership  interest in UHC. It
was  also  agreed  by  the  parties  that a  default  by UHC  under  the  Second
Westminster  Note will be deemed to be a default by the Company  under the First
Westminster  Note.  Harry Shuster  personally  guaranteed the obligations of UHC
under the Second Westminster Loan and the Company issued a non-recourse guaranty
with joint and several liability, limited to the Company's interest in UHC.

         On  July  29,  1997,  Harvey  Bibicoff,  a  director  of  GHEI,  made a
short-term loan to the Company in the amount of $900,000 (the "Bibicoff  Loan").
The Bibicoff  Loan is evidenced by a promissory  note and bears  interest at the
rate of 10% per annum. As of June 30, 1998,  $25,000 of the principal  amount of
the Bibicoff Loan was outstanding.

         Investments in HEP II L.P. In April 1996,  the Company  acquired 50% of
the  limited  partnership  interests  in  HEP  II  L.P.,  a  California  limited
partnership  ("HEP  II"),  which  was  formed  in  March  1996,  for  a  capital
contribution  in the  amount of  $1,500,000.  HEP II is  engaged  in the  motion
picture  production  business.  The  general  partner  of HEP II is United  Film
Distributors,  Inc., a California  corporation  ("UFD"),  formerly  known as Hit
Entertainment, Inc. As of June 30, 1998, the balance of the Company's investment
in HEP II was $1,120,500.  Harry Shuster,  the Chairman of the Board,  President
and Chief  Executive  Officer of the Company is the Chairman of the Board of UFD
as well as one of its principal  stockholders.  Brian  Shuster,  Executive  Vice
President  and a director  of the  Company,  is the  President  and a  principal
stockholder of UFD, and is the son of Harry Shuster.

         Rental Activities.  Until February 28, 1997, when its Ground Lease with
the Irvine  Company (the "Irvine  Company"),  as landlord (the "Ground  Lease"),
expired,  the  Company's  primary  business  had been to act as a developer  and
manager (rather than as an operator) of  approximately  300 acres of real estate
in Irvine, California (the "Irvine Property").  Since 1986, the Company has been
engaged in protracted and expensive  litigation  involving the Ground Lease with
the Irvine Company, which remains pending (the "Irvine Company Litigation"). See
Part II, Item 1, "Legal Proceedings."

Results of Operations

         Three Months Ended March 31, 1998 Compared to Three Months
Ended March 31, 1997

         The Company's business has historically been highly seasonal,  with the
second  and  third  quarters  of each  year  being  the  strongest  quarters  of
operation.  The Company had total  revenue of $855,401 in the quarter ended June
30, 1998,  compared to total  revenue of $625,873 for the quarter ended June 30,
1997, an increase of $229,528 or  approximately  36.7%.  This  increase  results
primarily

                                       12

<PAGE>


from the recognition of one-time licensing fees in connection with the licensing
of  travel-related   applications  of  the  Company's  interactive   technology,
partially  offset  by  a  decrease  in  revenue  from  children's   recreational
activities.

         Revenue from  children's  recreational  activities was $444,584 for the
quarter ended June 30, 1998, compared to $625,873 for the quarter ended June 30,
1997,  a decrease of  $181,289  or  approximately  29.0%.  This  decrease is due
primarily to a decline in admissions at the Company's Planet Kids locations.

         Licensing fees in the quarter ended June 30, 1998 amounted to $410,817.
This amount represents the book value of 2,000,000 shares of unregistered common
stock of Genisys, which the Company received in connection with the licensing of
travel-related  applications  of  the  Company's  interactive  technology  to  a
wholly-owned subsidiary of Genisys. There were no licensing fees received in the
quarter ended June 30, 1997.

         Total  operating  expenses  decreased  from  $1,369,408 for the quarter
ended June 30, 1997 to $973,673 for the quarter  ended June 30, 1998, a decrease
of $395,735 or approximately 28.9%. This decrease was due primarily to decreases
in  occupancy  expenses as well as a decrease in  depreciation  on property  and
equipment  because of the  write-down  of certain  Planet Kids assets during the
year ended  December  31,  1997,  partially  offset by an  increase  in selling,
general and  administrative  expenses,  which resulted from increases in general
legal expenses and accounting expenses.

         For the quarter ended June 30, 1998, the Company incurred a net loss of
$1,187,410  or ($.09) per share,  as  compared  to a net loss of  $1,075,814  or
($0.09) per share for the quarter ended June 30, 1997.  This increase in loss is
primarily  due to the realized  loss from  write-down  of investment in GHEI, an
affiliate of the Company, in the amount of $946,131, partially offset by revenue
from  licensing  fees in the amount of $410,817 from Genisys,  that amount being
the value of the shares of unregistered  common stock of Genisys received by the
Company in connection with the licensing of  travel-related  applications of the
Company's interactive technology to a wholly-owned subsidiary of Genisys.

         Six Months Ended June 30, 1998 Compared to Six Months Ended
June 30, 1997

         The Company had total revenue of  $1,342,310  in the  six-month  period
ended June 30, 1998,  compared to total revenue of $1,250,159  for the six-month
period ended June 30, 1997, an increase of $92,151 or  approximately  7.4%. This
increase  results  primarily from the recognition of one-time  licensing fees in
connection  with the licensing of  travel-related  applications of the Company's
interactive  technology,  partially  offset  by  a  decreases  in  revenue  from
children's recreational activities and rental activities.

                                       13

<PAGE>


         Total  operating  expenses  decreased from $2,690,588 for the six-month
period ended June 30, 1997 to $1,820,336 for the six-month period ended June 30,
1998,  a decrease of $870,252 or  approximately  32.3%.  This  decrease  was due
primarily  to  decreases  in  occupancy   expenses  and  selling,   general  and
administrative  expenses  associated with the Company's  Ground Lease operations
which  terminated  in February  1997, as well as a decrease in  depreciation  on
property and equipment  because of the  write-down of certain Planet Kids assets
during the year ended December 31, 1997.

         For the six months ended June 30, 1998, the Company incurred a net loss
of  $1,885,331  or ($.14) per share,  as compared to a net loss of $1,675,644 or
($0.14) per share for the quarter ended June 30, 1997.  This increase in loss is
primarily  due to the realized  loss from  write-down  of investment in GHEI, an
affiliate of the Company, in the amount of $946,131, partially offset by revenue
from  licensing  fees in the amount of $410,817 from Genisys,  that amount being
the value of the shares of unregistered  common stock of Genisys received by the
Company in connection with the licensing of  travel-related  applications of the
Company's interactive technology to a wholly-owned subsidiary of Genisys.

Liquidity and Financial Condition

         The Company has relied  primarily on cash flows from operations as well
as from  proceeds  of its public  offering in 1994 to finance  working  capital,
acquisitions  and  improvements in the past several years. The proceeds from the
Company's  1994 public  offering  have been  exhausted  and at June 30, 1998 the
Company had cash and cash  equivalents  in the amount of $396,779  and a working
capital deficit of $3,955,310.

         Due to the fact that the trading  price of the  Company's  common stock
has fallen during recent months, there can be no assurance that the Company will
be able to sell its securities on terms that are  acceptable to the Company.  In
addition,  the  Company  does not  currently  meet the new  minimum  bid listing
requirements (the "New Listing  Requirements")  for maintenance of the Company's
common stock on the SmallCap Market of The Nasdaq Stock Market  ("Nasdaq").  The
New Listing  Requirements  became  effective in February 1998. In June 1998, the
Company was notified that Nasdaq  intended to delist the Company's  common stock
for failure to meet the New Listing  Requirements.  The Company has appealed the
proposed Nasdaq delisting,  which appeal is pending. During the pendency of this
appeal,  the  Company's  common  stock will not be  delisted  by Nasdaq.  If the
Company's  common  stock  is  ultimately   delisted  from  Nasdaq,   it  may  be
automatically eligible to trade on the OTC Bulletin Board.  Nonetheless,  such a
development  could result in the  Company's  having  difficulty  in offering and
selling its securities to prospective investors.

         The Company has prepared and filed with the Securities and
Exchange Commission, and mailed to stockholders of record as of the

                                       14

<PAGE>


close of business on May 6, 1998, an  Information  Statement  (the  "Information
Statement") proposing an amendment to the Company's Certificate of Incorporation
to effect a 1-for-6  reverse  stock  split of the  Company's  common  stock (the
"Reverse Stock Split"). If a majority of the Company's  stockholders  approve of
the  amendment to the Company's  Certificate  of  Incorporation  and the Reverse
Stock  Split is  effected,  it is  expected  that the  minimum  bid price of the
Company's  common  stock on Nasdaq  would be  greater  than $1.00 per share and,
among other  things,  the Company  would be in  compliance  with the New Listing
Requirements.

         However,  since the mailing of the Information  Statement,  the Company
has not sought to obtain the approval of the Company's stockholders to amend the
Company's Certificate of Incorporation and effect the Reverse Stock Split, while
the Company first pursues other alternatives.  However, no definitive  agreement
has been  signed  with  respect  to any such  alternatives  and  there can be no
assurance  that the  Company  will be able to reach  any such  agreement  in the
future  or,  if any  such  agreement  is  reached,  whether  it will be on terms
favorable to the Company.

         If the Company is unable to raise  additional funds through the private
placement  of  its  securities,   it  may  seek  financing  from  affiliated  or
unaffiliated  third  parties.  There  can be no  assurance,  however,  that such
financing would be available to the Company when and if it is needed, or that if
it is available,  that it will be available on terms  acceptable to the Company.
If the Company is unable to sell its securities or obtain  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 its
assets, among other possibilities, in order to meet such obligations.

         The  Company's  future  capital  requirements  will  depend on numerous
factors.  If the Irvine  Company  Litigation  is not  settled and a new trial is
held, the Company  anticipates that it will continue to expend significant funds
on legal expenses.  There are numerous uncertainties associated with the various
aspects of the Irvine Company  Litigation and the outcome of these matters could
have a material adverse impact on the Company's liquidity.

         On July 28, 1997 UHC acquired the Las Vegas  Property.  The Company was
required to make an  additional  capital  contribution  to UHC of  approximately
$3,800,000 in connection  with the  acquisition of the Las Vegas Property and in
connection therewith obtained two loans, one for $1,900,000 from Westminster and
one for $900,000  from Harvey  Bibicoff,  the latter of which  $875,000 has been
repaid.  The First  Westminster  Loan is secured by a significant  amount of the
Company's assets, including its 50% membership interest in UHC and a significant
portion of GHEI's  common  stock which the Company  owns.  Although  the Company
believes  that it will be able to meet this loan  obligation  as it matures from
additional  financing  from  affiliated  or  unaffiliated  sources,  there is no
agreement in place to provide such  financing.  If the Company is unable to meet
the

                                       15

<PAGE>


obligation  under  First  Westminster  Loan as it becomes  due,  the  collateral
pledged by the Company could be foreclosed upon. In addition, the Company issued
a  non-recourse  guaranty  with  joint and  several  liability,  limited  to the
Company's  interest in UHC, in connection with the Second  Westminster Loan made
by Westminster to UHC.

         As of June 30, 1998,  investments in and loans to affiliated companies,
GHEI,  HEP II, UHC and  Genisys,  and  related  parties,  totaled  approximately
$5,808,722  or  approximately  68.7%  of  total  assets.  All of the  affiliated
companies have had substantial  losses and have working capital deficits (except
that Genisys does not have a working capital deficit),  creating liquidity risks
to the Company. If these losses continue, a substantial portion of the Company's
net worth would be impaired or at risk.  Although Management believes that it is
more likely than not that the investments and receivables with related companies
are not impaired, the cumulative losses and liquidity problems of the affiliated
companies create an inherent risk in these assets.

         Although  the Company  believes  that its current  cash and income from
operations,  and repayment to the Company of amounts previously  advanced by the
Company to GHEI,  will  provide the Company  with  sufficient  funds to meet the
Company's  anticipated need for working capital and capital  expenditures for at
least the next 12 months,  there can be no assurance that this will be the case,
in particular  with regard to the various  uncertainties  surrounding the Irvine
Company Litigation and related legal  proceedings.  If the Company is in need of
additional financing, there can be no assurance that the Company will be able to
acquire additional  financing,  or that if such financing is available,  that it
will be available to the Company on favorable terms.

                                       16

<PAGE>



PART II           OTHER INFORMATION

Item 1.           Legal Proceedings

         For  information  with  respect to the action  titled The Splash v. The
Irvine  Company,  et.  al.  (Case  No.  49-12-02),  reference  is  made  to  the
description of such litigation set forth in the Company's  Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997. In June 1998, the California
Court of Appeals has affirmed all  decisions of the trial court and has sent the
matter back for retrial. In view of the inherent uncertainties of litigation, no
prediction can be made as to the outcome of this matter.

         For information  with respect to the action titled Lion Country Safari,
Inc. -- California v. The Irvine Company,  (Case No. 743669),  reference is made
to the description of such  litigation set forth in the Company's  Annual Report
on Form 10-KSB for the fiscal year ended  December 31, 1997.  The appeal in this
action is pending.  In view of the  inherent  uncertainties  of  litigation,  no
predictions can be made as to the outcome of this matter.

         For  information  with respect to the action titled  Irvine  Meadows v.
Shuster,  et. al., (OCSC Case No. 771509),  reference is made to the description
of such  litigation set forth in the Company's  Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997. In June 1998, the plaintiff  received a
grant of summary judgment in its favor,  permanently  enjoining the Company from
removing the  improvements  on the Irvine  Property  relating to the plaintiff's
business.  As the prevailing  party,  the plaintiff is seeking attorney fees and
costs of the litigation. The Company intends to appeal the judgment of the trial
court. In view of the inherent uncertainties of litigation, no prediction can be
made as to the outcome of this matter.

         For information  with respect to the action titled Lion Country Safari,
Inc. -- California v. The Irvine Co. (OCSC Case No.  775923),  reference is made
to the  description  of such  litigation in the Company's  Annual Report on Form
10-KSB for the fiscal  year ended  December  31,  1997.  In  response to certain
motions  made at the outset of trial in April  1998,  the trial judge ruled that
the Company would not be allowed to present its theory of calculating damages at
trial and ruled  against the Company on  alternative  remedies,  at trial.  As a
result of this ruling,  judgment was entered  against the Company in this matter
in June 1998. The Company intends to appeal the judge's decision. In view of the
inherent  uncertainties  of  litigation,  no  prediction  can be  made as to the
outcome of this matter.

         For  information  with respect to the action titled The Splash dba Wild
Rivers v. Harry Shuster,  et. al. (OCSC Case No.  771810),  reference is made to
the description of such litigation in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997. Prior to trial, which was scheduled
for

                                       17

<PAGE>


April 27, 1998,  and following  various  motions made by the parties  before the
trial judge,  the court vacated the trial date and  scheduled a status  hearing,
which  is now  scheduled  for  September  14,  1998.  In  view  of the  inherent
uncertainties of litigation, no prediction can be made as to the outcome of this
matter.

         For information  with respect to the case titled The Irvine Company vs.
Lion Country Safari,  Inc. -- California  (OCSC Case No.  776187),  reference is
made to the  description  of such  litigation in the Company's  Annual Report on
Form  10-KSB for the fiscal year ended  December  31,  1997.  The appeal in this
action is pending.  In view of the  inherent  uncertainties  of  litigation,  no
prediction can be made as to the outcome of this matter.

Item 2.           Changes in Securities

         In April 1998,  the Company  issued 10 units (each unit  consisting  of
120,000 shares of common stock and warrants to purchase  60,000 shares of common
stock at $.27 per share) to Strata Equities Limited,  at $26,400 per unit, in an
offering  pursuant to Regulation S promulgated  under the  Securities  Act, with
aggregate  gross  proceeds  to the  Company of  $264,000.  The  warrants  may be
exercised for a period of five years from  issuance.  The  Regulation S offering
was  placed  through  Baytree  Associates,  Incorporated,  which  received a 10%
commission and a 3%  non-accountable  expense  allowance in connection  with the
Regulation S offering, resulting in net proceeds to the Company of approximately
$229,680.

Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  (4-4)    Warrant to Purchase 600,000 Shares of Common Stock of
                           United  Leisure  Corporation  dated  April  2,  1998,
                           issued to Strata Equities Limited.

                  (27)     Financial Data Schedule

         (b)      Reports on Form 8-K

         The  Company  filed a Current  Report  on Form 8-K  during  the  period
covered by this Quarterly  Report on Form 10-QSB with respect to the issuance of
securities described in Part II, Item 2.

                                       18

<PAGE>



                                   SIGNATURES

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

Date:  August 19, 1998                   UNITED LEISURE CORPORATION



                                         By: /s/ HARRY SHUSTER
                                             -----------------------------------
                                             Harry Shuster,
                                             Chairman of the Board and
                                             Chief Executive Officer
                                             (Principal Financial Officer)


                                       19