<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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

                                 FORM 10-QSB/A

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

(Mark One)

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

     For the quarterly period ended September 30, 2000

                                      OR

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

For the transition period from __________ to _________.

COMMISSION FILE NUMBER 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 Identification No.)
incorporation or organization)

                      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)

         Indicate by check mark whether the issuer (1) has 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 [_]

         Indicate the number of shares outstanding of each class of the issuer's
classes of common stock, as of the latest practicable date.

             CLASS                                         OUTSTANDING
             -----                                         -----------
          Common Stock, par value                          20,410,375 shares, as
          $0.01 per share.                                 of November 6, 2000

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


================================================================================
<PAGE>

                  UNITED LEISURE CORPORATION AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
PART I.  FINANCIAL INFORMATION

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

                  Condensed Consolidated Balance Sheets,
                  September 30, 2000 (unaudited)
                  and December 31, 1999 (audited)..........................    1

                  Condensed Consolidated Unaudited
                  Statements of Operations and Comprehensive Income (Loss)
                  for the Three Months Ended September 30, 2000 and 1999
                  and Nine Months Ended September 30, 2000 and
                  1999.....................................................    2

                  Condensed Consolidated Unaudited Statements
                  of Cash Flows for the Nine Months
                  Ended September 30, 2000 and 1999........................    3

                  Notes to Condensed Consolidated
                  Unaudited Financial Statements...........................    4

         ITEM 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations......................    8

PART II. OTHER INFORMATION

         ITEM 1   Legal Proceedings........................................   15

         ITEM 2.  Changes in Securities....................................   15

         ITEM 3.  Defaults Upon Senior Securities..........................   15

         ITEM 4.  Submission of Matters to a Vote of
                  Security Holders.........................................   15

         ITEM 5.  Other Information........................................   15

         ITEM 6.  Exhibits and Reports on Form 8-K.........................   15

SIGNATURE..................................................................   16
</TABLE>
<PAGE>

                         PART 1. FINANCIAL INFORMATION

                           ITEM 1. FINANCIAL STATEMENTS

                  UNITED LEISURE CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,                DECEMBER 31,
                                                                     2000                        1999
                                                                 -------------                ------------
                                                                  (UNAUDITED)
                                                                   (RESTATED)
<S>                                                              <C>                          <C>
                                                    ASSETS

Current Assets:
 Cash and cash equivalents                                       $    9,725,952               $  1,998,059
 Receivables                                                              4,917                     88,540
 Deferred production cost                                                     -                    115,027
 Prepaid expenses and other current assets                              194,438                     75,208
                                                                 --------------               ------------

 Total current assets                                                 9,925,307                  2,276,834
                                                                 --------------               ------------

Property and Equipment, net of accumulated
 depreciation of $132,702 (2000) and $65,504 (1999)                     809,890                    181,765
                                                                 --------------               ------------

Investments
   Investment in HEPII at equity - related party                        100,000                    100,000
   Investment in Grand Havana at fair value - related party             105,753                    101,500
                                                                 --------------               ------------
Total investments                                                       205,753                    201,500
                                                                 --------------               ------------

Other Assets
   Loan Receivable from Grand Havana - related party                    830,722                    779,680
   Loan Receivable from other - related party                            72,131                     46,387
   Patent costs                                                         155,709                          -
   Capitalized development Costs                                        488,507                          -
   Due from former officer                                                    -                     81,027
   Deposits and other assets                                             80,618                     61,689
                                                                 --------------               ------------
Total other assets                                                    1,627,687                    968,783
                                                                 --------------               ------------

Total Assets                                                     $   12,568,637               $  3,628,882
                                                                 ==============               ============

<CAPTION>
                                          LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                              <C>                          <C>
Current Liabilities:
 Accounts payable and accrued expenses                           $      773,170               $    751,976
 Due to related parties                                                  98,498                    141,774
 Deferred revenues                                                        8,549                    235,923
 Deposits and other                                                       3,412                      2,612
                                                                 --------------               ------------
 Total current liabilities                                              883,629                  1,132,285

Minority interest                                                       180,661                          -

Stockholders' equity:
 Preferred stock                                                              -                          -
 Common stock, $.01 par value, authorized                               202,766                    161,468
  30,000,000 shares, issued and outstanding
  20,357,589 shares in 2000 and 16,230,868 in 1999
  Additional paid in capital                                         44,032,530                 26,892,688
  Accumulated deficit                                               (32,799,578)               (24,620,392)
  Accumulated other comprehensive income                                 68,629                     62,833
                                                                 --------------               ------------

  Total stockholders' equity                                         11,504,347                  2,496,597
                                                                 --------------               ------------

                                                                 $   12,568,637               $  3,628,882
                                                                 ==============               ============
</TABLE>

           See notes to condensed consolidated financial statements.
<PAGE>

                  UNITED LEISURE CORPORATION AND SUBSIDIARIES

     CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                   SEPTEMBER 30,                         SEPTEMBER 30,
                                                   -------------                         -------------
                                              2000                1999              2000               1999
                                              ----                ----              ----               ----
                                           (RESTATED)                            (RESTATED)
<S>                                       <C>                 <C>               <C>                <C>
Revenue
  Recreational and corporate
   activities                             $    222,539        $    295,575      $    700,049       $    897,115
  License fees                                       -              40,000           701,567            240,000
                                          ------------        ------------      ------------       ------------
Total Revenue                                  222,539             335,575         1,401,616          1,137,115

Expenses
  Direct operating expenses                  1,539,468             644,900         3,416,652          2,162,791
  Selling, general and administrative          601,888             936,914         2,687,330          1,771,655
  Non-cash stock compensation                3,721,567             237,700         4,336,827            237,700
  Depreciation and amortization                 39,896              24,302            67,199            110,129
                                          ------------        ------------      ------------       ------------

Total expenses                               5,902,819           1,843,816        10,508,008          4,282,275
                                          ------------        ------------      ------------       ------------

Loss before other income (expense)          (5,680,280)         (1,508,241)       (9,106,392)        (3,145,160)

Other income (expense):
 Litigation settlement                               -             (57,789)           (5,000)          (242,789)
 Equity in net loss of United Hotel                  -             (87,597)                -           (133,932)
 Equity in net loss of Netcruise                     -                   -                 -           (210,133)
 Loss on sale of assets                              -            (705,265)                -           (705,265)
 Gain on Sale of investment in
  Netcruise                                          -                   -           600,000                  -
 Interest income                               136,051              42,514           375,904            122,515
 Interest expense                               (2,126)           (157,961)          (71,916)          (370,462)
 Other, net                                      4,647             136,917            28,218            101,946
                                          ------------        ------------      ------------       ------------
Total other income (expense)                   138,572            (829,181)          927,206         (1,438,120)
                                          ------------        ------------      ------------       ------------

 Net loss                                   (5,541,708)         (2,337,422)       (8,179,186)        (4,583,280)

Other comprehensive income (loss):
Foreign currency translation loss                1,543                   -             1,543                  -
 Unrealized holding gain (loss) on
securities arising during the period           (30,160)                  -             4,253                  -
                                          ------------        ------------      ------------       ------------

Comprehensive Loss                        $ (5,570,325)       $ (2,337,422)     $ (8,173,390)      $ (4,583,280)
                                          ============        ============      ============       ============

Weighted Average number of common
shareds outstanding                         20,216,903          16,090,193        19,493,093         15,390,966
                                          ============        ============      ============       ============

Basic and diluted loss per common
share:                                    $      (0.27)       $      (0.15)     $      (0.42)      $      (0.30)
                                          ============        ============      ============       ============
</TABLE>

           See notes to condensed consolidated financial statements

                                       2

<PAGE>

                  UNITED LEISURE CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                                      -------------
                                                                               2000                   1999
                                                                               ----                   ----
                                                                            (RESTATED)
<S>                                                                        <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                   $ (8,179,186)          $ (4,583,280)
Adjustments to reconcile net loss to net cash
used in operating activities:
  Depreciation and amortization                                                  67,199                110,129
  Loss on termination of lease                                                        -                 45,333
  Non-cash compensation expense                                               4,336,827                237,700
  Loss on sale of assets                                                              -                705,265
  Equity in net loss of United Hotel                                                  -                133,932
  Equity in net loss of Netcruise                                                     -                210,133
  Accrual of interest income from related parties                               (51,042)                     -
Changes in operating assets and liabilities
  Receivables                                                                    83,623                 17,191
  Deferred Production cost                                                      115,027                      -
  Prepaid expenses and other current assets                                    (119,230)               (33,150)
  Patent costs                                                                 (155,709)                     -
(Decrease) increase:
  Accrued interest                                                                    -                (20,436)
  Accounts payable                                                               21,194                627,756
  Accrued Expenses due to related parties                                                               63,414
  Deferred revenue                                                             (227,374)                 8,888
  Deposits                                                                          800                 (3,041)
  Litigation Settlement                                                               -                176,842
                                                                           ------------           ------------
Net cash used in operating activities                                        (4,107,871)            (2,303,324)
                                                                           ------------           ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment                                             (695,324)               (65,584)
Distribution from United Hotel                                                        -                149,999
Collections from disposition of assets held for sale and from fixed
assets                                                                                -              1,092,088
Investments and loans to Grand Havana                                            (4,253)              (113,473)
Advances to related parties                                                     (25,744)                88,690
Due to related parties                                                          (43,276)                     -
Due from officer                                                                 81,027                      -
Development Costs                                                              (488,507)                     -
Deposits and other                                                              (18,929)                10,757
                                                                           ------------           ------------
Net cash used in investing activities                                        (1,195,006)             1,162,477
                                                                           ------------           ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock                                                          5,701,949              1,500,000
Proceeds from Minority shareholders                                             558,799                      -
Payment on Long Term Debt                                                                             (842,000)
Common Stock Issued for Warrants and Options exercised                        6,764,226                186,300
                                                                           ------------           ------------
Net cash provided by financing activities                                    13,024,974                844,300
                                                                           ------------           ------------
Effect of currency rate changes                                                   5,796                      -
                                                                           ------------           ------------
Net decrease (increase) in cash and cash equivalents                          7,727,893               (296,547)
Cash and cash equivalents at beginning of period                              1,998,059                799,369
                                                                           ------------           ------------
Cash and cash equivalents at end of period                                 $  9,725,952           $    502,822
                                                                           ============           ============
</TABLE>

           See notes to condensed consolidated financial statements.

                                       3

<PAGE>

                          UNITED LEISURE CORPORATION
  NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (UNAUDITED)
                              SEPTEMBER 30, 2000

1        BASIS OF PRESENTATION

The interim condensed consolidated unaudited financial statements presented have
been prepared by United Leisure Corporation (the "Company" or "ULC") without
audit and, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair presentation of (a) the consolidated
results of operations for the three and nine months ended September 30, 2000 and
1999, (b) the consolidated financial position at September 30, 2000 and December
31, 1999, and (c) the consolidated cash flows for the nine months ended
September 30, 2000 and 1999. The results of operations for the interim periods
are not necessarily indicative of results for the full year. The consolidated
balance sheet of the Company at December 31, 1999 was derived from the audited
consolidated balance sheet at that date. The condensed consolidated unaudited
financial statements and notes are condensed as permitted by Form 10-QSB and do
not contain certain information included in the Annual Report of the Company.
The condensed consolidated unaudited financial statements and notes included
herein should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999.

2.       RESTATEMENT

During the three months ended September 30, 2000, the Company issued certain
stock options to non-employees which it had initially valued at $1,222,567. The
Company subsequently determined that the fair value of those options granted
during the three months ended September 30, 2000 should have been $3,721,567
based on the Black-Scholes pricing Model. The Company also determined direct
operating expenses for the three and nine month periods ending September 30,
2000 were understated by $615,260. In addition, the Company has determined that
a receivable due from an investor in its consolidated German subsidiary should
be offset against additional paid in capital, with a proportional decrease to
minority interest. The Company has determined the effect of these deductions on
its previously issued financial statements and has restated the accompanying
financial statements for the three and nine months ended September 30, 2000.

    The effect of the restatement on direct operating costs, non-cash
compensation expense, net loss, and basic and diluted loss per common share for
the three and nine months ended September 30, 2000 is as follows:

<TABLE>
<CAPTION>
                                        Three Months Ended                Nine Months Ended
                                        September 30, 2000               September 30, 2000
                                        ------------------               ------------------
                                           (Unaudited)                      (Unaudited)

                                      As Originally       As          As Originally     As
                                        Reported       Restated       Reported       Restated
                                        --------       --------       --------       --------
<S>                                <C>              <C>            <C>           <C>
Direct operating expenses          $     924,208    $ 1,539,468    $ 2,801,392   $  3,416,652
Non-cash compensation expense          1,222,567      3,721,567      1,837,827      4,336,827
Net Loss                              (2,427,448)    (5,541,708)    (5,064,926)    (8,179,186)
Basis and diluted loss
 Per share                                 (0.12)         (0.27)         (0.26)         (0.42)
</TABLE>


    The effect of the restatement on due from related parties and stockholders
equity as of September 30, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                As Originally     As
                                                                  Reported     Restated
                                                                  --------     ---------
                                                                 (Unaudited)  (Unaudited)
<S>                                                            <C>            <C>
Loans Receivable from other - related party                    $   409,406    $   72,131
Minority interest                                                  306,814       180,661
Stockholders' equity                                            11,715,469    11,504,347
</TABLE>

                                       4
<PAGE>

3.       STOCKHOLDERS' EQUITY

In January 2000, the Company sold a total of 2,240,000 shares of its common
stock for a total consideration of $5,600,000, or $2.50 per share, to five
accredited investors. The offer and sale of the shares was exempt from the
registration provisions of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 4(2) of the Act. No general forms of advertising were used
in connection with the issuance of the shares. The purchasers acquired the
shares for their own account. Each purchaser was, prior to the sale of the
Company's securities, fully informed and advised about such matters concerning
the Company as its business, financial affairs and other matters.

From February 2000 to March 2000, options and warrants to purchase a total of
195,000 shares of common stock of the Company were exercised at prices ranging
from $0.23 to $1.50 per share for a total of $126,950. The options and warrants
were granted between 1988 and 1999 to employees of the Company and to certain
third parties in connection with certain services rendered by them to the
Company. The issuance of shares of common stock upon exercise of the options and
warrants was exempt from the registration provisions of the Act pursuant to
Section 4(2) thereof. The option and warrant holders acquired the shares for
their own account.

During the three months ended June 30, 2000, 1,049,959 Class A Warrants were
exercised at an exercise price of $4.00 each, resulting in proceeds of
$4,199,836 to the Company.

During the three months ended September 30, 2000, 591,762 Class A Warrants were
exercised at an exercise price of $4.00 each, resulting in proceeds of
$2,367,048 to the Company. During the three months ended September 30, 2000,
options to purchase a total of 50,000 shares of common stock of the Company were
exercised at prices ranging from $0.30 to $0.75 per share for a total of
$26,250. The options were granted in 1988 and 1990 to an individual in
connection with services rendered to the Company.

During the three months ended September 30, 2000, in a cashless exercise,
options and warrants exercised by a consultant of the company resulted in the
issuance of 48,153 shares. The options and warrants were granted to the
consultant of the Company in connection with certain services rendered by the
consultant to the Company. The issuance of shares of common stock upon exercise
of the options and warrants was exempt from the registration provisions of the
Act pursuant to Section 4(2) thereof. The option and warrant holder acquired the
shares for his own account.

In November 1999 and January 2000, the Company's subsidiary, United Internet
Technologies, Inc. ("UIT"), granted options to purchase 4,250,000 shares and
665,000 shares, respectively, of its common stock to employees, officers and a
member of the advisory board of UIT. In May and June 2000, UIT granted options
to purchase an aggregate of 1,302,500 shares of its common stock to employees
and members of the advisory board of UIT. During the three months ended
September 30, 2000, UIT granted options to purchase 370,000 shares of its common
stock to its employees and to the management and employees of its German
subsidiary.


4.       SEGMENT INFORMATION

The Company operates in two business segments: developing and licensing Internet
technology and recreational and corporate activities. Recreational and corporate
activities consist of summer day camps and children's play-learning centers
known as Planet Kids. Segment operating loss is defined as total segment revenue
reduced by operating expenses identifiable to that business segment. Corporate
expenses include general corporate administrative costs. The accounting policies
of the reportable segments are the same as those described in the summary of
significant accounting policies. There are no intersegment sales.

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                            INTERNET         RECREATIONAL AND        CONSOLIDATED
                                                            TECHNOLOGY       CORPORATE
<S>                                                        <C>               <C>                  <C>
NINE MONTHS ENDED SEPTEMBER 30, 2000
Revenue.................................................   $   701,567       $     700,049        $    1,401,616
Direct Operating Expense................................    (2,304,547)         (1,112,105)           (3,416,652)
Selling, General and Administrative Expense.............    (2,071,976)           (615,354)           (2,687,330)
Non-Cash Compensation Expense...........................    (4,336,827)                  -            (4,336,827)
Loss from operations....................................    (7,327,628)         (1,778,764)           (9,106,392)
Assets..................................................     9,651,067           2,917,570            12,568,637

NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenue.................................................       240,000             897,115             1,137,115
Direct Operating Expense................................      (716,558)         (1,446,233)           (2,162,791)
Selling, General and Administrative Expense.............      (816,041)           (955,614)           (1,771,655)
Non-Cash Compensation Expense...........................      (209,250)            (28,450)             (237,700)
Loss from operations....................................    (1,709,983)         (1,435,177)           (3,145,160)
Assets..................................................       498,374           5,245,319             5,743,693
</TABLE>


5        INVESTMENT IN AND LOAN RECEIVABLE FROM GRAND HAVANA

On September 30, 2000, the quoted market value of the Company's investment in
Grand Havana was $105,753. The Company recorded changes in the market value in
Other Comprehensive Income. The valuation represents a mathematical calculation
based on the closing quotation published by the OTC Bulletin Board for the
common stock of Grand Havana and is not necessarily indicative of the amount
that could be realized upon sale.

An additional $18,699 in Loan Receivable from Grand Havana represents accrued
interest income for the three months ended September 30, 2000 and reimbursable
health insurance premiums and information technology costs paid by the Company.

6        DUE FROM FORMER OFFICER

Changes in Due from Former Officer represent net changes in amounts due to and
from Harry Shuster, which arose from accrued interest income and accrued
interest expense.


7        DUE FROM RELATED PARTIES

<TABLE>
<CAPTION>
Due from Related Parties is composed of the following items at September 30:      2000         1999
<S>                                                                             <C>          <C>
Due from 1990 Westwood Boulevard, Inc........................................   $ 32,131     $ 31,387
Due from Grand Havana Enterprises, Inc.......................................          -       (5,000)
Due from Officer.............................................................     20,000            -
Due from Consultant..........................................................     20,000       20,000
                                                                                --------     --------
Total Due from Related Parties...............................................   $ 72,131     $ 46,387
                                                                                ========     ========
</TABLE>

8.       DUE TO RELATED PARTIES

Changes in Due to Related Parties represent payments to Brian Shuster of $65,000
for consulting fees earned in 1999, but not paid at that time, and advances to
Grand Havana of $21,724.

9.       CAPITALIZATION OF DEVELOPMENT COSTS FOR SOFTWARE HELD FOR SALE

Costsincurred in creating computer software products held for sale are charged
to expense when incurred as research and development until technological
feasibility has been established for the product. Technological feasibility is
established upon the completion of a working prototype. Thereafter, all software
production costs are capitalized and subsequently reported at the lower of
unamortized cost or net realizable value. Capitalized costs are amortized based
on current and future revenue for each product with an annual minimum equal to
the straight-line amortization over the remaining estimated economic life of the
product.

                                       6
<PAGE>

10.      PATENTS, TRADEMARKS, PROPRIETARY TECHNOLOGY AND OTHER INTANGIBLES

Patents, trademarks, proprietary technology and other intangibles are carried at
cost less accumulated amortization, which is calculated on a straight-line basis
over the estimated useful lives of the assets, not to exceed 17 years. Legal
fees and other costs to defend these assets are charged as prepaid until the
final outcome of the defense and are capitalized only if the defense is
successful; otherwise, these fees and costs are expensed as incurred.

11.      SUBSEQUENT EVENTS

On October 3, 2000, the Company extended the expiration date of its issued and
outstanding Class A Redeemable Common Stock Purchase Warrants to 5 p.m. EDT on
May 9, 2002. As of October 2, 2000, 3,303,279 Class A Warrants were outstanding.
The exercise price of the Class A Warrants is $4.00.

In October 2000, management determined to divest all of the Company's remaining
non-technology businesses. Management concluded that these operations were not
strategically compatible with the Company's core internet-technology business.
Management believes that the opportunity in its core business requires singular
focus of management time and resources. As a result, the decision was made to
divest non-core businesses. These non-core businesses consist of the Company's
Planet Kids business and its investments in Grand Havana, HEP II Limited
Partnership and certain other investments. The Company is currently evaluating
various alternatives for disposition of these businesses.

Net assets and liabilities related to the operations to be discontinued were
$1,170,781 and $341,865, respectively, at September 30, 2000, and $5,000,054 and
$2,819,838, respectively, at December 31, 1999. Net loss from operations to be
discontinued was $(1,778,764) for the nine months ended September 30, 2000.
Revenues generated by the operations to be discontinued were $700,049 for the
nine months ended September 30, 2000.

12. LITIGATION

On January 17, 2001 we announced that all litigation with Broadbridge Media, LLC
and Hyperlock Technologies, Inc. has been settled, with all claims and
counterclaims voluntarily dismissed. The settlement specifically covers the
patent litigation between the parties under the jurisdiction of the United
States District Court for the Northern District of Illinois, Eastern Division.
Specifically, the cases being voluntarily dismissed are Case No. 99C 3778,
Hyperlock Technologies, Inc. v. United Internet Technologies, Inc., and Case No.
00 C 2311, United Leisure and United Internet Technologies v. Broadbridge Media,
LLC and Hyperlock Technologies, Inc.

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, tortious breach of contract,
and tortious interference with contract.

On or about April 26, 2001, Plaintiffs filed a first amended complaint wherein
they withdrew their causes of action for tortious breach of contract, but
asserted new claims of fraud against both corporate entities. 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, Plaintiffs'
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 Plaintiffs' rights to
additional benefits under the agreements.

This action is in a very early stage of litigation and the parties are beginning
the discovery process. The plaintiffs' depositions have begun, and the
deposition of Mr. Brian Shuster, the Company's Chairman of the Board, initially
scheduled to take place on May 30, 2001, has been rescheduled to a later date.

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.

                                       7
<PAGE>

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

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes a number of forward-looking statements regarding
events and financial trends that may affect our future operating results and
financial position. These statements can be identified by the use of such words
as "may," "expect," "believe," "anticipate," "intend" and similar expressions.
These statements involve risks and uncertainties that could cause our actual
results to differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, costs and uncertainties associated
with future developments, concerns regarding our liquidity and financial
condition, regulatory policies, competition from other similar businesses, and
market and general economic factors. We undertake no obligation to publicly
release the result of any revision of these forward-looking statements to
reflect events or circumstances after the date they are made or to reflect the
occurrence of unanticipated events. The following discussion should be read in
conjunction with our condensed consolidated unaudited financial statements and
the notes thereto appearing elsewhere in this Quarterly Report on Form 10-QSB/A.

     Quarterly operating results have varied significantly in the past and can
be expected to vary in the future. Results of operations for any particular
quarter are not necessarily indicative of results of operations for a full year.

OVERVIEW

     Through our subsidiary, United Internet Technologies, Inc. ("UIT"), we are
primarily engaged in the business of developing technologies that control and
enable a wide range of devices, such as household and business appliances and
monitoring devices 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) an Intelligent Control Interactive
Technology(TM) (I-C-IT(TM)) platform and (2) Digitally Integrated Video
Overlay(TM) ("DIVO(TM)").

     UIT has developed Intelligent Control Interactive Technology(TM) ("I-C-
IT(TM)"), a proprietary platform of hardware and software for networking devices
through various digital delivery systems such as the Internet, cable, television
and wireless networks. Devices empowered with I-C-IT technology become
networkable. This means that these devices can communicate with the user and/or
other devices and be accessed and controlled by the user or other devices from a
remote location. The I-C-IT enabled products are built to function in low
bandwidth environments suitable for consumer markets. Management's intention is
to expand the I-C-IT platform by developing new applications for different
industry sectors serving specific business needs.

     Digitally Integrated Video Overlay(TM) (DIVO(TM)) is a technology that
allows high-quality video to be delivered over the Internet while connected with
a standard dial-up telephone line. DIVO files are activated by a server that can
instruct any computer's CD-ROM or DVD-ROM drive and have it activate video files
that have been locally stored on a CD-ROM or DVD-ROM. This process integrates
video material into a website. Once the DIVO software has been downloaded to the
personal computer, the video content can be updated by passive download or
through the distribution of additional CD-ROMs/DVDs. DIVO technology enhances
the web presentation experience and management believes that it is suitable for
the entertainment, travel, shopping, corporate and educational markets.

     In the past, we have generally licensed the DIVO technology to large
customers as part of turnkey projects custom-designed for each individual
customer. For instance, we licensed an application of the DIVO technology for
television to NBC, an application of the technology for wrestling and related
activities to World Championship Wrestling, Inc. ("WCW") and travel-related
applications of the technology to Netcruise.com., Inc. (formerly known as
Genisys Reservation Systems, Inc.). We have determined to focus our efforts on
technology development and licensing and move away from inclusive turnkey web
management projects for individual customers. We believe that the development of

                                       8
<PAGE>

licensable versions of our DIVO(TM) technologies will lead to higher margin
product and service offerings. Turnkey licensing efforts were reduced while we
focused our efforts on developing our new licensable DIVO software application.
We began offering a licensable software version of our DIVO technology in August
2000.

     In July 2000 we formed a subsidiary in Germany, Interactive Internet
Technologies GmbH ("IIT"). We have invested US$28,302 in, and contributed a non-
exclusive license to market our technologies in Europe to, IIT and we retained a
61.11% ownership interest. IIT raised total capital of $964,496. IIT is
primarily engaged in the marketing of our DIVO technology in Europe. IIT's
investors, not including us, have committed to funding a further US$1,000,000
into IIT.

     Before February 1997, our primary business was to act as a developer and
manager of facilities for recreational and corporate activities. As part of our
decision to reorient our business to developing and licensing our technology, we
closed some of these facilities. In August 1999, we sold real property located
in El Cajon, California, which was previously used for some of our recreational
and corporate activities. In October 1999, we sold our real estate holdings in
Las Vegas, Nevada.

     In October 2000, we determined to divest all of our remaining non-
technology businesses. We concluded that these operations were not strategically
compatible with our core internet-technology business. We believe that the
opportunity in our core business requires singular focus of our time and
resources. As a result, we decided to divest our non-core businesses. These non-
core businesses consist of our Planet Kids business and our investments in Grand
Havana, HEP II, Limited Partnership and certain other investments. We are
currently evaluating various alternatives for disposition of these businesses.

CLASS A WARRANT EXTENSION

On October 3, 2000 we extended the expiration date of our issued and outstanding
Class A Redeemable Common Stock Purchase Warrants to 5 p.m. EDT on May 9, 2002.
As of October 2, 2000, there were 3,303,279 Class A Warrants outstanding. The
exercise price of the Class A Warrants is $4.00.


RESULTS OF OPERATIONS

                THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
                      THREE MONTHS ENDED SEPTEMBER 30, 1999

Revenues

     We had total revenues of $222,539 for the quarter ended September 30, 2000,
compared to total revenues of $335,575 for the quarter ended September 30, 1999,
a decrease of $113,036 or approximately 34%. This decrease was attributable to
recreational and corporate activities, which we have determined to discontinue.

     We have determined to focus our efforts on technology development and
licensing and move away from inclusive turnkey web management projects for
individual customers. We believe that the development of licensable versions of
our DIVO(TM) technologies will lead to higher margin product and service
offerings. Turnkey licensing efforts were reduced while we focused our efforts
on developing our new licensable DIVO software application. We began offering a
licensable software version of our DIVO technology in August 2000. In October
2000, we announced a restructuring to focus on our core technology business. We
intend to divest all of our remaining non-technology assets, which include our
recreational and corporate activities. Accordingly, these businesses will be
classified as discontinued operations in our future financial statements and are
not indicative of future revenue streams.

                                       9
<PAGE>

     LICENSING FEES. We had no revenues from licensing fees for the quarter
ended September 30, 2000, compared to $40,000 or for the quarter ended September
30, 1999. This is a direct consequence of our change in business model,
involving a refocusing of our DIVO(TM) technology licensing strategy from
providing turnkey licensing projects to creating a licensable software product.
We believe that the development of licensable versions of our DIVO(TM)
technologies will lead to higher margin product and service offerings in the
future. Turnkey licensing efforts were reduced while we focused our efforts on
developing our new licensable DIVO software application. We began offering a
licensable software version of our DIVO technology in August 2000.

     RECREATIONAL AND CORPORATE ACTIVITIES. In October 2000, we announced our
intention to restructure our operations by divesting all of our remaining non-
technology assets, which include our recreational and corporate activities.
Accordingly, these businesses will be classified as discontinued operations in
our future financial statements and are not indicative of future revenue
streams. Revenues from recreational and corporate activities were $222,539 for
the quarter ended September 30, 2000, compared to $295,575 for the quarter ended
September 30, 1999, a decrease of $73,036 or approximately 25%.

Operating Expenses

     Total operating expenses were $5,902,819 for the quarter ended September
30, 2000 compared to $1,843,816 for the quarter ended September 30, 1999, an
increase of $4,059,103, or approximately 220%. Of this increase, $3,721,567 is
due to a non-cash compensation charge related to options to purchase shares of
UIT common stock granted to members of UIT's advisory board. Excluding this non-
cash compensation charge, operating expenses were $2,181,252 for the quarter
ended September 30, 2000 compared to $1,606,116 for the quarter ended September
30, 1999, an increase of $575,136.

     DIRECT OPERATING EXPENSES. Direct operating expenses were $1,539,468 for
the quarter ended September 30, 2000 compared to $644,900 for the quarter ended
September 30, 1999, an increase of $894,568 or approximately 139%. This increase
is primarily due to increased expenditures incurred in connection with the
build-up of our Internet technology business. Increased expenses in connection
with our recreational and corporate activities contributed to the increase in
direct operating expenses. As previously stated, in connection with our decision
to restructure and divest our remaining non-technology assets, the expenses
incurred in connection with our recreational and corporate activities are not
indicative of the future.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $601,888 for the quarter ended September 30, 2000
compared to $936,914 for the quarter ended September 30, 1999, a decrease of
$335,026 or approximately 36%. This decrease was primarily due to decreased
expenses in connection with our recreational and corporate activities and to the
decrease of expenses in connection with expenses connected to turnkey licensing
projects. These decreases were partially offset by our increased selling,
general and administrative expenses in connection with the development of our I-
C-IT technology platform, increased marketing expenditures related to our
DIVO(TM) technology and increased personnel costs as a result of the build-up of
employees in our Internet technology business.

     NON-CASH COMPENSATION EXPENSE. We had non-cash compensation expense of
$3,721,567 for the quarter ended September 30, 2000, compared to $237,700 non-
cash compensation expense for the quarter ended September 30, 1999. This
increase of $3,483,867, or approximately 1470%, was due to options to purchase
shares of our subsidiary's common stock granted to members of UIT's advisory
board and other consultants. The expense was determined by use of the Black
Scholes valuation method.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
$39,896 for the quarter ended September 30, 2000 compared to $24,302 for the
quarter ended September 30, 1999, an increase of $15,594 or approximately 64%.
This increase was due to increased capital expenditures by our subsidiary, UIT,
partially offset by a reduced depreciable asset base and a result of the

                                       10
<PAGE>

sale of certain assets from our recreational and corporate activities.

Other Income

     Other income consists of interest income, interest expense, gain on sale,
and litigation settlement. During the quarter ended September 30, 2000, other
income was $138,572 compared to other expense of $829,181 for the quarter ended
September 30, 1999, an increase of $967,753. This increase was primarily due to
an increase in interest income of $93,537 and the absence in the third quarter
of 2000 of an approximately $700,000 loss on sale of assets, which had been
recorded in the third quarter of 1999.

Net Loss

     For the reasons stated above, for the quarter ended September 30, 2000, the
Company had a net loss of ($5,541,708) or ($0.27) per share as compared to a net
loss of ($2,337,422) or ($0.15) per share for the quarter ended September 30,
1999.

               NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
                     NINE MONTHS ENDED SEPTEMBER 30, 1999

Revenues

     We had total revenues of $1,401,616 for the nine months ended September 30,
2000, compared to total revenues of $1,137,115 for the nine months ended
September 30, 1999, an increase of $264,501 or approximately 23%. The increase
in total revenue was attributable to increased licensing revenues. We earned
$700,000 in licensing revenues in the first quarter of 2000 pursuant to a
licensing agreement related to interactive CD-ROM's utilizing our DIVO
technology, which we created for Teen People Magazine and Nordstrom, Inc. As
part of a change in strategy, we have decided to focus our efforts on technology
development and move away from inclusive turnkey projects for individual
customers. We believe that the development of licensable versions of our
DIVO(TM) technology will lead to higher margin product and service offerings.

     Turnkey licensing efforts were reduced while we refocused our efforts on
developing our DIVO licensable software application. We began offering a
licensable software version of our DIVO technology in August 2000. In October
2000, we announced a restructuring to focus on our core technology business. We
intend to divest all of our remaining non-technology assets, which include our
recreational and corporate activities. Accordingly, these businesses will be
classified as discontinued operations in our future financial statements and are
not indicative of future revenue streams.

     LICENSING FEES. Revenues from licensing fees were $701,567 for the nine
months ended September 30, 2000, compared to $240,000 for the nine months ended
September 30, 1999, an increase of $461,567 or approximately 192%. The increase
is primarily from $700,000 in licensing revenues generated in the first quarter
of 2000 pursuant to a licensing agreement for interactive CD-ROM's utilizing our
DIVO technology, which we created for Teen People Magazine and Nordstrom, Inc.
We had no licensing revenues during the third quarter of 2000. This resulted
from our decision to refocus our licensing strategy from providing customized
turnkey licensing projects for individual customers to development of a
licensable DIVO software product. We began offering a licensable software
version of our DIVO technology in August 2000.

     RECREATIONAL AND CORPORATE ACTIVITIES. In October 2000, we announced our
intention to restructure our operations by divesting all of our remaining non-
technology assets, which include our recreational and corporate activities.
Accordingly, these businesses will be classified as discontinued operations in
the future financial statements and are not indicative of future revenue
streams. Revenue from recreational and corporate activities for the nine months
ended September 30, 2000 were $700,049 compared to $897,115 for the nine months
ended September 30, 1999, a decrease of $197,066 or approximately 22%. This is
the result of our reorientation to focus on our Internet technology business
while moving away from our historical emphasis on recreational and corporate
activities.

                                       11
<PAGE>

Operating Expenses

     Total operating expenses increased to $10,508,008 for the nine months ended
September 30, 2000, from $4,282,275 for the nine months ended September 30,
1999, an increase of $6,225,733 or approximately 145%. Of this increase,
$4,336,827 is due to a non-cash compensation charge related to options to
purchase shares of UIT common stock granted to members of UIT's advisory board
and consultants. Excluding this non-cash compensation charge, operating expenses
were $6,171,181 for the nine months ended September 30, 2000 compared to
$4,044,575 for the nine months ended September 30, 1999, an increase of
$2,126,606 or approximately 53%. The balance of the increase was primarily due
to increased expenses incurred in connection with the refocusing of our Internet
technology licensing strategy and development of the I-C-IT(TM) technology
platform, increased marketing expenditures related to our DIVO(TM) technology,
and increased personnel costs as a result of a significant build-up of employees
in the Internet technology business. For the nine months, the headcount in our
Internet technology business grew by nineteen people to a total of thirty-seven
at September 30, 2000.

     DIRECT OPERATING EXPENSES. Direct operating expenses were $3,416,652 for
the nine months ended September 30, 2000 compared to $2,162,791 for the nine
months ended September 30, 1999, an increase of $1,253,861 or approximately 58%.
This increase is primarily due to expenses incurred in connection with the Teen
People Magazine project in the first quarter of 2000.

     SELLING,GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $2,687,330 for the nine months ended September 30,
2000 compared to $1,771,655 for the nine months ended September 30, 1999, an
increase of $915,675 or approximately 52%. This increase was primarily due to
increased expenses in connection with the development of the I-C-IT(TM)
technology platform, increased marketing expenditures related to our DIVO(TM)
technology and increased personnel costs as a result of a build-up of employees
in our Internet technology business.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
$67,199 for the nine months ended September 30, 2000 compared to $110,129 for
the nine months ended September 30, 1999, a decrease of $42,930 or approximately
39%. This decrease was due to a reduced depreciable asset base as a result of a
sale of certain assets from our recreational and corporate activities.

     NON-CASH COMPENSATION EXPENSE. Non-cash compensation expenses were
$4,336,827 for the nine months ended September 30, 2000, compared to $237,700
for the nine months ended September 30, 1999, an increase of $4,099,127 or
approximately 1722%. This increase is due to options to purchase shares of UIT
common stock granted to members of UIT's advisory board and consultants. The
expense was determined by use of the Black Scholes valuation method.

Other Income

     Other income consists of interest income, interest expense, gain on sale,
and litigation settlement. During the nine months ended September 30, 2000,
other income was $927,206 compared to other expense of $1,438,120 for the nine
months ended September 30, 1999, an increase of $2,365,326. This increase was
primarily due to the gain of $600,000 during the nine months ended September 30,
2000 on the sale of our investment in Netcruise.com, Inc. (formerly known as
Genisys Reservation Systems, Inc.). We received the Netcruise.com, Inc. shares
as compensation for the licensing of our technology in a prior year. The
remainder of the increase in other income resulted from the absence, in the nine
months ended September 30, 2000, of an approximately $700,000 loss on sale of
assets, which had been recorded in the nine months ended September 30, 1999 and
an increase in interest income of $253,389.

Net Loss

     For the reasons stated above, for the nine months ended September 30, 2000,
we had a net loss of ($8,179,186) or ($0.42) per share, compared to a net loss
of $(4,583,280) or ($0.30) per share for the nine months ended September 30,
1999.

                                       12
<PAGE>

LIQUIDITY AND FINANCIAL CONDITION

          We are experiencing operating losses. At September 30, 2000, we had
cash and cash equivalents of $9,725,952 and working capital of $9,041,678,
compared to cash and cash equivalents of $1,998,059 and working capital of
$1,144,549 at December 31, 1999. These increases were in cash of $7,727,893 or
approximately 387% and in working capital of $7,897,129 or approximately 690%.
These increases are primarily due to the increase in cash generated from the
sale of common stock and the exercise of warrants and options for common stock
and a reduction in current liabilities during the nine months ended September
30, 2000.

          Net cash used in operating activities was $4,107,871 for the nine
months ended September 30, 2000, compared to $2,303,324 for the nine months
ended September 30, 1999. This increase is primarily due to higher selling,
general and administrative and direct operating expenses in connection with the
build up of our Internet technology business, development of the I-C-IT(TM)
technology platform, increased marketing expenditures related to our DIVO(TM)
technology, increased personnel costs related to the build-up of employees in
the Internet technology business and increased legal and consulting expenses.

          Net cash used in investing activities was $1,014,345 for the nine
months ended September 30, 2000, compared to net cash generated from investing
activities of $1,162,477 for the nine months ended September 30, 1999. This
increase in cash used in investing activities is primarily due to an increase in
purchases of equipment, organizational build up of UIT and capitalized
development costs in connection with our Internet technology business.

          Net cash provided by financing activities was $12,844,313 for the nine
months ended September 30, 2000, compared to $844,300 for the nine months ended
September 30, 1999. This increase is due to a private placement of our common
stock in January 2000 and to issuances of common stock upon exercise of
outstanding Class A Warrants and stock options.

          Our future capital requirements will depend on various factors,
including:

          1.   The number of applications using our technology that we determine
               to develop; and

          2.   Our need to hire additional executive, technical and marketing
               personnel in connection with our Internet technology business.

          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. There can be no assurance, however, that such
financing would be available to us when and if it is needed, or that if it is
available, that it will be available on terms acceptable to us. If we are unable
to sell our securities or obtain financing to meet our working capital needs, 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 believe that our primary sources for cash over the next twelve
months will be our current cash and income from investments, and the exercise of
outstanding warrants. Although we believe these sources will provide us with
sufficient funds to meet our anticipated working capital and capital
expenditures needs for at least the next twelve months, there can be no
assurance that this will be the case. With respect to the warrants, there can be
no assurance that holders of warrants will exercise in a sufficient number to
generate significant cash for us.

          We wish to expand our development and marketing capabilities for our
Internet technology. While the continued development of some applications can be
funded from internal sources, more aggressive development and marketing 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. There can be no assurance,
however,

                                       13
<PAGE>

that we will be able to acquire additional financing on favorable terms, or at
all.

YEAR 2000 COMPLIANCE

          We did not experience any material business interruption as a result
of the Year 2000 issue. Our own software applications functioned well and we did
not experience any problems with the software applications of our suppliers and
vendors. We will continue to monitor our critical computer applications
throughout the Year 2000 to ensure that any Year 2000 matters that may arise are
addressed promptly.

NEW ACCOUNTING STANDARDS

          In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 ("SFAS No. 133"), "Accounting for Derivative Investments and Hedging
Activities," which establishes standards for the accounting for derivative
transactions and the derivative portion of certain other contracts. SFAS No. 133
will become effective for our fiscal year beginning January 1, 2001. We believe
that SFAS No. 133 will not have a material effect on our financial statements.

          In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. We adopted SAB 101 as
required in the second quarter of 2000. We have evaluated the effect of the
adoption and have determined that financial results for the fiscal year 2000
will not be materially affected.

EURO CONVERSION

          A single currency called the Euro was introduced in Europe on January
1, 1999. Eleven of the fifteen member countries of the European Union adopted
the Euro as their common legal currency as of that date. Fixed conversion rates
between these participating countries' existing currencies (the "legacy
currencies") and the Euro were also established as of that date. The legacy
currencies will remain legal tender as denominations of the Euro until at least
January 1, 2002 (but not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or the
participating country's legacy currency.

          We will convert our European operations to the Euro prior to January
1, 2002. We do not anticipate any business interruption during this conversion
and do not anticipate a material cost of conversion.

FOREIGN CURRENCY

          We are exposed to the effect of foreign currency exchange rate
fluctuations on the U.S. dollar value of foreign currency-denominated operating
revenues and expenses. Our largest exposure comes from the Deutsch Mark and the
Euro. We have not hedged our exposure in foreign currency exchange rate risk.

                                       14
<PAGE>

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On January 17, 2001 we announced that all litigation with Broadbridge Media, LLC
and Hyperlock Technologies, Inc. has been settled, with all claims and
counterclaims voluntarily dismissed. The settlement specifically covers the
patent litigation between the parties under the jurisdiction of the United
States District Court for the Northern District of Illinois, Eastern Division.
Specifically, the cases being voluntarily dismissed are Case No. 99C 3778,
Hyperlock Technologies, Inc. v. United Internet Technologies, Inc., and Case No.
00 C 2311, United Leisure and United Internet Technologies v. Broadbridge Media,
LLC and Hyperlock Technologies, Inc.

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, tortious breach of contract,
and tortious interference with contract.

On or about April 26, 2001, Plaintiffs filed a first amended complaint wherein
they withdrew their causes of action for tortious breach of contract, but
asserted new claims of fraud against both corporate entities. 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, Plaintiffs'
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 Plaintiffs' rights to
additional benefits under the agreements.

This action is in a very early stage of litigation and the parties are beginning
the discovery process. The plaintiffs' depositions have begun, and the
deposition of Mr. Brian Shuster, the Company's Chairman of the Board, initially
scheduled to take place on May 30, 2001, has been rescheduled to a later date.

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


                  (a)  Not Applicable.

                  (b)  Not Applicable.

                  (c)  During the quarter ended September 30, 2000, consultants
to the Company exercised options and warrants to purchase an aggregate of 48,153
shares of common stock previously granted to them by the Company. The options
were exercised in a cashless exercise and resulted in no cash proceeds to the
Company. These sales were made in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act, on the basis that the
transactions did not involve a public offering. The agreements pursuant to which
the options and warrants were granted to the employees and consultants contained
representations as to their investment intent and imposed substantial
restrictions upon transfer of the securities received upon exercise.

                  (d)  Not Applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not Applicable.

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

         Not Applicable.

ITEM 5.  OTHER INFORMATION

         Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  EXHIBITS

         (b)  REPORTS ON FORM 8-K

         Not Applicable.

                                       15
<PAGE>

                                   SIGNATURE

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


                                           UNITED LEISURE CORPORATION
                                           (Registrant)


June 6, 2001                              BY: /S/ BRIAN SHUSTER
                                                  --------------------------
                                                  Brian Shuster
                                                  Chairman of the Board and
                                                  Chief Executive Officer
                                                  (Principal Executive
                                                  Officer and Principal
                                                  Financial Officer)

                                       16