##### Table of Contents

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U.S. Securities and Exchange
Commission


Washington, D.C. 20549





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FORM 10-QSB





(Mark One)





|x |  | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2002.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------




| ̈ |  | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
 to
|- |  | ---------------------------------------------------------------------------------------------------------------------------




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FULLPLAY MEDIA SYSTEMS, INC.


(Exact name of small business issuer as specified in its charter)





Commission file number:
0-25373





WASHINGTON

87-0434226(State or other jurisdictionof incorporation or organization)

(IRS Employer Identification No.)





12600 SE 38th Street, Suite 150


Bellevue, WA 98006


(Address of principal executive offices)





(425) 653-5505


(Issuers
telephone number)





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Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.    Yes  x    No  ̈





APPLICABLE ONLY TO CORPORATE ISSUERS:





State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: As of November 13, 2002, the Registrant had 19,309,976 shares
of Common Stock outstanding.





TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check
one):    Yes  ̈ No  x





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##### Table of Contents

FULLPLAY MEDIA SYSTEMS, INC.


QUARTERLY REPORT ON FORM 10-QSB


Table of Contents





Page NumberPart I

FINANCIAL INFORMATIONItem 1.

Financial Statements (Unaudited)Condensed Consolidated Balance SheetsSeptember 30, 2002 and December 31, 2001

3Condensed Consolidated Statements of OperationsThree and nine months ended September 30, 2002 and 2001

4Condensed Consolidated Statements of Cash FlowsNine months ended September 30, 2002 and 2001

5Notes to Condensed Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

8Item 3.

Controls and Procedures

10Part II

OTHER INFORMATIONItem 1.

Legal Proceedings

11Item 2.

Changes in Securities and use of Proceeds

11Item 3.

Defaults upon Senior Securities

11Item 4.

Submission of Matters to a Vote of Security Holders

11Item 5.

Other Information

11Item 6.

Exhibits and Reports on Form 8-K

11Signature

12




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##### Table of Contents

PART IFINANCIAL INFORMATION





Item 1.    Financial Statements (Unaudited).





FULLPLAY MEDIA SYSTEMS, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS





September 30, 2002


December 31, 2001ASSETSCurrent AssetsCash and cash equivalents

$
1,401,033


$
1,203,847Certificate of deposit


102,382



100,367Accounts receivable


2,020,983



372,420Inventory


2,489,248Prepaid expenses and other current assets


1,187,092



110,809Total current assets


7,200,738



1,787,443Furniture and Equipment, at cost, less accumulated depreciation of $369,343 and $288,213


227,107



279,506Other Non-Current Assets


77,998



76,757Total Assets

$
7,505,843


$
2,143,706LIABILITIES, REDEEMABLE PREFERREDSTOCK, AND STOCKHOLDERS EQUITY (DEFICIT)Current LiabilitiesAccounts payable

$
5,087,368


$
336,229Accrued expenses


188,322



165,243Unearned revenue


1,088,444



55,000Total current liabilities


6,364,134



556,472Redeemable preferred stock


2,474,834



2,271,302Stockholders Equity (Deficit)Common stock


191,850



149,676Additional paid-in capital


10,946,325



8,823,738Accumulated deficit


(12,471,300
)


(9,657,482
)Total stockholders deficit


(1,333,125
)


(684,068
)Total liabilities, redeemable preferred stock and stockholders deficit

$
7,505,843


$
2,143,706





See accompanying notes to condensed consolidated financial statements.




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FULLPLAY MEDIA SYSTEMS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS





Three Months Ended


Nine Months EndedSeptember 30, 2002


September 30, 2001


September 30, 2002


September 30, 2001RevenuesProduct Sales

$
3,246,224


$



$
3,246,224


$
Services and Licenses


3,300



1,049,613



348,053



2,636,7123,249,524



1,049,613



3,594,277



2,636,712ExpensesCost of Product Sales


3,003,426







3,003,426Research and Development


832,253



1,051,846



2,107,992



2,699,239Selling, general and administrative


329,458



170,384



1,307,568



809,5004,165,137



1,222,230



6,418,986



3,508,739Loss from operations


(915,613
)


(172,617
)


(2,824,709
)


(872,027
)Interest income, net


5,230



15,723



10,891



32,768Net loss

$
(910,383
)

$
(156,894
)

$
(2,813,818
)

$
(839,259
)Basic and diluted loss per share

$
(0.05
)

$
(0.01
)

$
(0.17
)

$
(0.06
)Weighted average common shares outstanding


19,102,166



14,952,602



16,763,973



14,952,602





See accompanying notes to condensed consolidated financial statements.




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FULLPLAY MEDIA SYSTEMS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





Nine Months EndedSeptember 30, 2002


September 30, 2001Cash Flows from Operating ActivitiesNet loss

$
(2,813,818
)

$
(839,259
)Adjustments to reconcile net loss to net cash used in operating activities:Interest earned on certificate of deposit


(2,015
)


(3,850
)Stock compensation


76,694



2,291Depreciation


81,129



70,155Changes in operating assets and liabilitiesAccounts receivable


(1,648,563
)


(487,877
)Inventory


(2,489,248
)


Prepaid expenses and other assets


(1,077,525
)


(81,103
)Accounts payable and accrued expenses


4,774,218



170,240Unearned revenue


1,033,444



28,169Net cash used in operating activities


(2,065,684
)


(1,141,234
)Cash Used in Investing Activitiespurchases of furniture and equipment


(28,730
)


(122,145
)Cash Flows from Financing ActivitiesProceeds from issuance of preferred stock and warrants to acquire preferred stock, net of issuance costs


245,087



2,453,802Proceeds from issuance of common stock and warrants to acquire common stock, net of issuance costs


2,046,513



Net cash provided by financing activities


2,291,600



2,453,802Net increase in cash


197,186



1,190,423Cash and cash equivalents, beginning of period


1,203,847



351,501Cash and cash equivalents, end of period

$
1,401,033


$
1,541,924





See accompanying notes to condensed consolidated financial statements.




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FULLPLAY MEDIA SYSTEMS, INC.


Notes To Condensed Consolidated Financial Statements





Note 1.    Basis of Presentation.





The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include all disclosures necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. The unaudited condensed consolidated financial statements include the accounts of Fullplay Media Systems, Inc.
(Fullplay or the Company) and its wholly-owned subsidiary Avatar Interactive, Inc. Significant intercompany transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. The
operating results for interim periods are unaudited and are not necessarily an indication of the results to be expected for the full fiscal year. In the opinion of management, the financial statements reflect all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of operating results.





The financial statements have been
prepared on the going concern basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred significant losses and
negative cash flow from operations in each of the last two years and for the nine month period ended September 30, 2002. As of September 30, 2002 the Company had an accumulated deficit of $12,471,300, working capital of $836,604 and a $100,000
available line of credit. The Company will require additional funds in the near term, either through revenues not in the current backlog or through capital financing. Based on its expected spending levels and the timing of the spending and expected
revenues, the Company believes it will have sufficient cash to sustain operations at least through January 31, 2003. This estimated date could be earlier if the Company is required to make expenditures to fulfill component purchases in connection
with customer contracts earlier than expected, if there are unexpected expenditures, if suppliers or service providers require prepayment for goods or services, and for various other reasons. Management is in the process of attempting to raise
capital and has hired an investment bank to aid in those efforts. However, there can be no assurance financing will be available and if it is, it may be highly dilutive and otherwise on terms not favorable to the Company and its shareholders.
Raising capital has become increasingly difficult for many companies. The Company may have to curtail operations including significantly reducing the number of its employees and its overhead expenses. However, such steps will not eliminate the
Companys need for additional funds in the very near term. Failure to succeed in efforts to obtain additional funds would result in the Companys inability to continue as a going concern. The Company may be required to seek a sale or
merger of the Company, its business, or its assets on terms not favorable to its shareholders. There can be no assurance that any of these efforts will be successful.





These consolidated unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2001
included in the Companys Form 10-KSB filed April 1, 2002.





Certain reclassifications have been made to the 2001 balances to conform
with the 2002 presentation.





Note 2.    Inventory





Inventory consisting of finished goods is recorded at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis.





Note 3.    Revenue Recognition





Product revenues: Product revenues consist of sales of our Interactive Merchandising System (IMS), a software driven device for in-store sampling and previewing of CDs, DVDs, and video games. The Company recognizes
revenue for its interactive merchandising system in accordance with the American Institute of Certified Public Accountants Statement of Position, 97-2, Software Revenue Recognition (SOP-97-2). IMS contracts typically
constitute multiple-element arrangements in which vendor specific objective evidence (VSOE) is required for all undelivered elements in order to recognize revenue for delivered elements. The Company does not have VSOE for any elements
other than post-contract customer support (PCS). As such, revenue is deferred on delivered elements until the only remaining undelivered element is PCS. PCS is recognized ratably over the PCS term and is classified as service revenues.
Direct costs related to delivered elements for which revenue recognition criteria are not met are capitalized and included in prepaid expenses and other current assets. Such direct costs amounted to $929,032 at September 30, 2002 and nil at December
31, 2001.




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Service revenues: Service revenues consist primarily of short-term engineering services and the PCS
element of IMS arrangements. The Company recognizes service revenues for engineering engagements once the services have been performed.





Software license fees: Revenue from software licensed to original equipment manufacturers (OEM) is generally recognized when the OEM ships its product incorporating the Companys software to the end user.





Customer reimbursement of direct expenditures made by the Company, which are due the company under contractual terms, are recorded as revenue at the
time such expenditures are made.





Unearned revenue represents payments received from customers prior to product delivery or service
performance or prior to having met other revenue recognition criteria in accordance with SOP 97-2.





In all cases, revenue is not
recognized until persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collectibility is probable.





Note 4.    Per Share Information





Basic loss per
share is computed by dividing net loss by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially
dilutive common shares. Potentially dilutive common shares at September 30, 2002, consist of 8,970,349 shares issuable to holders of outstanding employee stock options, 1,978,415 shares issuable upon conversion of preferred stock, 1,246,062 shares
issuable upon conversion of common stock warrants and 989,207 shares issuable upon conversion of Series A Preferred Stock which underlie currently outstanding warrants to acquire Series A Preferred Stock. Accordingly, because these shares are
antidilutive in the periods presented, they are not included in the calculation of diluted loss per share and, therefore, basic and diluted loss per share are the same.





Note 5.    Capital Funding





Series A Preferred Stock
Offering





In January 2002, the Company sold to an accredited investor 179,856 shares of Series A Preferred Stock (Preferred
Stock) for gross proceeds of $250,000. The sale included warrants exercisable until April 6, 2006 to purchase 89,928 shares of Preferred Stock at an exercise price of $1.67 per share. The Preferred Stock holders have been granted certain
demand registration rights.





Common Stock Offering





In May, June and September 2002, the Company sold 4,153,542 shares of common stock at prices ranging from $0.50 to 0.57 per share to a number of accredited investors in a series of separate
transactions for gross proceeds to the Company of $2,163,513. In connection with those sales, the Company issued five-year warrants to purchase 1,246,062 shares of common stock at an exercise price equal to 130% of the common stock sales price per
share. The investors received varying demand registration rights. For certain investors representing $1,013,456 of the gross proceeds, the Company agreed to file with the Securities Exchange Commission a shelf registration statement covering resale
of the common stock held by the investors. If the Company did not cause the registration statement to be declared effective under Securities Act of 1933, as amended (the Securities Act) by November 3, 2002, the Company would be obligated
to pay these investors 2% of their investment on that date and every 30 days thereafter until the registration statement is declared effective under the Securities Act. For the remaining investors, the Company has agreed to use its best efforts to
register the resale of their common stock. As of November 13, 2002, no registration statement had been filed in connection with this offering and, therefore, as of that date, the company has incurred an obligation of $20,269 which will recur on a
monthly basis until a registration statement is declared effective.





Note 6.    Litigation





In August 2000, a lawsuit was filed in King County Superior Court against the Company, two former board members and the former CEO and chairman of the
board (John Guarino and Ryan Smith vs. Interactive Objects, Inc., et al.). The lawsuit was brought forth by two founders of the Company (Plaintiffs) who, in 1999, agreed to sell the majority of their shares of Company stock back to the Company. They
claimed that they were induced to sell through fraudulent representations and omissions. The Plaintiffs sought in excess of $25 million in damages.





On March 18, 2002, the King County Superior Court dismissed all claims against the Company in this matter. On May 13, 2002 the Court awarded the Company $429,000 in fees and costs from the Plaintiffs which earns interest at 12% from
the award date. The Plaintiffs have appealed this case to the Washington State Court of Appeals. On June 11, 2002, based on the nature of the courts ruling, the Company made a demand for coverage to its insurance carrier who had previously
denied coverage. The insurance carrier once again denied coverage. No receivable related to the award of fees and costs has been recorded as the case is under appeal. Because of the nature of the litigation process, the Company is not able to
predict with certainty the final outcome of this matter.




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





FULLPLAY MEDIA SYSTEMS, INC.


MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND RESULTS OF OPERATIONS





Statement of Forward-Looking Information





This discussion and analysis should be read together with our
condensed consolidated financial statements and related notes appearing in Item 1, above. This report contains both objective historical information and subjective forward-looking statements that are subject to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, and bear certain risks and uncertainties that could cause actual results to differ materially from those projected. Generally, forward-looking statements are prefaced by the words:
believe, expect, intend, anticipate, and similar expressions, but their absence does not mean that a statement is not forward-looking. Numerous factors both within and outside our control could affect
our actual results, including, but not limited to, the factors set forth in the Risk Factors, and Description of Business discussions in our Annual Report on Form 10-KSB for the year ended December 31, 2001. These risk
factors, among others, could cause results to differ materially from those presently anticipated by us. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We
undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of anticipated events.





General





We primarily focus on developing digital media products for commercial and home use and providing engineering and development services in the area of digital media.





We entered the digital media market through the development of Mobile Audio Player software for Microsoft in March and April 1999. This was the first stereo playback software for the Palm-size PC
market in the digital music industry.





During 2000, we completed the transition from primarily a website and other computer system
consulting services business to a business focused on digital audio. During 2001, through our development efforts, we added to our products and services digital video and still image technology.





We have designed a state of the art multimedia kiosk type interactive merchandising system (IMS). IMS offers retailers a powerful new software driven solution for in-store
sampling and previewing of CDs, DVDs, and video games. Fullplays IMS includes interactive, media preview stations that are mountable on walls, waterfall racks, or end caps, allowing retailers to place multiple stations throughout the store.
IMS can also include server software that distributes content from a central location, and gives retailers tools to design custom preview experiences in support of specific promotions and initiatives.





We have partnered with content providers to extend our IMS offering to include the audio and video content that will be played by the IMS, giving us the ability
to offer our customers the full solution to their in-store sampling needs.





In April 2002, we announced the signing of a contract for the
sale of 16,000 IMS preview stations to Trans World Entertainment Corporation, the nations largest mall-based specialty music retailer (Trans World). The system is part of an overall strategic initiative to re-brand Trans
Worlds 650 mall-based specialty stores and its web site under a single, unified brand, FYE (For Your Entertainment).





We contracted
with Flextronics International USA, Inc., one of the worlds largest contract manufacturers, to build the Trans World devices to our specifications.





Shipping of the devices and peripheral equipment began in the final days of June 2002 and is expected to be completed in the fourth quarter of 2002.





In addition, during 2002 we have continued the development of our Fullplay  Digital Audio Jukebox (DJ) and expect to begin selling this product when and if sufficient financing is obtained to fund the working capital requirements for launching this consumer product.





DJ is a consumer electronic device that can convert existing CDs, cassette tapes and LPs to MP3 files and store them on its internal hard disk drive.
It can connect to home PCs in order to download music from the Internet, and as a standalone unit, the DJ plays standard audio format CDs as well as MP3, WMA and AAC digital format CDs. It can also encode (record) CDs and other analog music into a
variety of MP3 sample rate formats (i.e. differing levels of compression) and store this music on its hard drive, providing high quality digital music playback. To date, we have not sold any DJs under either the Fullplay  name or private label.




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In addition to the above product offerings, we continue to offer our engineering and development
services to selected strategic customers.





For more detailed information regarding our products and services, our customers and markets,
and other aspects of our business, see our Annual Report on Form 10-KSB for the year ended December 31, 2001.





Results of
OperationsThree and nine months ended September 30, 2002 compared to the three and nine months ended September 30, 2001





Revenues.    Revenues for the three and nine months ended September 30, 2002 were $3,249,524 and $3,594,277, respectively, compared to $1,049,613 and $2,636,712 for the three and nine months ended September
30, 2001, respectively. This increase in revenues for the comparative three and nine month periods is due to our recognition of revenues associated with the delivery of our IMS devices to Trans World. We expect revenues for the fourth quarter to
exceed $6 million.





Depending on the contracts we have performed in any given quarter, we have experienced significant concentration of
revenues from one or a small number of customers. We expect this trend to continue until we are successful in selling our own consumer electronic products to a wide variety of customers, if ever. There can be no assurance as to future revenue levels
in total or from a particular customer. During the three months ended September 30, 2002, virtually all of our revenues came from one customer. During the nine months ended September 30, 2001, 86% of our revenues came from three customers, each
individually accounting for more than 10% of our revenues.





Cost of Product Sales.    Cost of product sales
includes the direct costs of manufacturing IMS devices. Cost of product sales were $3,003,426 for both the three and nine months ended September 30, 2002. Gross margins are reflective of our aggressive pricing associated with obtaining our first IMS
sales contract. We expect gross margins for the fourth quarter of 2002 to be similar to those for the three months ended September 30, 2002. Gross margins on subsequent IMS sales are expected to improve over those achieved with our first customer,
Trans World.





Research and Development.    Research and development expenses for the three and nine months
ended September 30, 2002 were $832,253 and $2,107,992, respectively, compared to $1,051,846 and $2,699,239 incurred in the three and nine months ended September 30, 2001, respectively. The decrease in research and development expenses is primarily
due to higher expenses in 2001 associated with the initial development of the IMS devices.





Selling, General and Administrative
Expenses.    Selling, general and administrative (SG&A) expenses for the three and nine months ended September 30, 2002 were $329,458 and $1,307,568, respectively, compared to $170,684 and $809,500 during the
same respective periods in the prior year. The increase in SG&A expenses for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 was primarily a result of a refund received during the three months
ended September 30, 2001 for overpaid B&O taxes primarily relating to years preceding 2001. The increase in SG&A expenses for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 was the result of the
aforementioned B&O tax refund as well as significant litigation costs incurred in the first quarter of 2002 in successfully defending a lawsuit which was tried in February and March 2002. The court awarded us $429,000 in fees and costs from the
plaintiffs in this matter which earns interest at 12% from the May 18, 2002 award date. No receivable for the award has been recorded as the case is under appeal.





Interest Income, Net.    Interest income, net for the three and nine months ended September 30, 2002 was $5,230 and $10,891, respectively, compared to $15,723 and $32,768 for
the respective three and nine months ended September 30, 2001. The decrease during the comparable periods is primarily attributable to lower interest rates on invested cash and cash equivalent balances as well as lower average invested balances
during 2002.





Net Loss.    The Company had net losses of $910,383 and $2,813,818, respectively for the three
and nine months ended September 30, 2002 compared to net losses of $156,894 and $839,259, respectively, for the same periods in 2001. The increase in net loss during 2002 is the result of the lower margin revenues in 2002 and fluctuations in
operating expenses described above.





Liquidity and Capital Resources





At September 30, 2002, the Company had cash and cash equivalents of $1,401,033, working capital of $836,604, and an available line of credit of $100,000 secured by a certificate of deposit.
The Company will require additional funds in the near term, either through revenues not in the current backlog or through capital financing. Based on its expected spending levels and the timing of the spending and expected revenues, the Company
believes it will have sufficient cash to sustain operations at least through January 31, 2003. This estimated date could be earlier if the Company is required to make expenditures to fulfill component purchases in connection with customer contracts
earlier than expected, if there are unexpected expenditures, if suppliers or service providers require prepayment for goods or services, and for various other reasons. Management is in the process of attempting to raise capital and has hired an
investment bank to aid in those efforts. However, there can be no assurance financing will be




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available and if it is, it may be highly dilutive and otherwise on terms not favorable to the Company and its shareholders. Raising capital has become increasingly difficult for many companies.
The Company may have to curtail operations including significantly reducing the number of its employees and its overhead expenses. However, such steps will not eliminate the Companys need for additional funds in the very near term. Failure to
succeed in efforts to obtain additional funds, either through revenues or financing, would result in the Companys inability to continue as a going concern. The Company may be required to seek a sale or merger of the Company, its business, or
its assets on terms not favorable to its shareholders. There can be no assurance that any of these efforts will be successful.





Cash used
in operating activities was $2,065,684 during the nine months ended September 30, 2002, compared to cash used in operating activities of $1,141,234 in the first nine months of 2001. The increase is primarily due to the higher net loss during the
first nine months of 2002 than in the same period in 2001 offset by fluctuations in operating assets and liabilities.





During the first
nine months of 2002 and 2001, investing activities used net cash of $28,730 and $122,145, respectively, consisting entirely of purchases of furniture and equipment.





Cash provided by financing activities of $2,291,600 in the first nine months of 2002 consisted of net proceeds of $245,087 from the issuance of Series A Preferred Stock and net proceeds of $2,046,513
from the issuance of common stock. Cash provided by financing activities of $2,453,802 in the first nine months of 2001 resulted entirely from net proceeds from the sale of Series A Preferred Stock.





Item 3.    Controls and Procedures





Evaluation of disclosure controls and
procedures.    Based upon their evaluation of the Companys disclosure controls and procedures as of a date within 90 days of the filing of this quarterly report on Form 10-QSB (Evaluation Date), the Chief
Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective.





Changes in
internal controls.    There were no significant changes in the Companys internal controls, or to the Companys knowledge, other factors that could significantly affect the Companys disclosure controls and
procedures subsequent to the Evaluation Date.




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PART IIOTHER INFORMATION





Item 1.    Legal Proceedings





Except as described in the Part II, Item 1 of the
Companys 10-QSB for the quarters ended June 30,2002 and March 31, 2002, there have been no material developments in legal proceedings involving the Company or its subsidiary since those reported in our Annual Report on Form 10-KSB for the year
ended December 31, 2001.





Item 2.    Changes in Securities and Use of Proceeds.





(c)    The
following is a description of the equity securities sold by the Company during the quarter ended September 30, 2002 that were not registered under the Securities Act:





In September 2002, the Company sold 100,000 shares of common stock at $0.50 per share to an accredited investor for gross proceeds in the amount of $50,000. The sale
included five-year warrants to acquire 30% of the number of common shares sold at 130% of the sales price per share. The Company has agreed to use its best efforts to register the resale of this common stock.





These securities were offered and sold in a private transaction without registration under the Securities Act of 1933, as amended (the
Act), in reliance upon the exemption from registration provided by Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder. The investor represented his intention to acquire the securities for investment only and not
with a view to or for distribution. In connection with his purchase, an appropriate legend was placed on the certificates representing the common stock with respect to transfer and resale and will be placed on the shares issuable upon exercise of
the warrants. The investor received, or had adequate access to information about the Company, including all Company reports filed with the SEC pursuant to the Securities Exchange Act of 1934.





Item 3.    Defaults upon Senior Securities.





None.





Item 4.    Submission of Matters to a Vote of Security Holders.





None





Item 5.    Other Information.





The Companys 2002 Annual Meeting of Shareholders will
be held on November 20, 2002.





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





| | (a) |  | Exhibits.
| | --- |  | ---------




Exhibit 3.1

Amended and Restated BylawsExhibit 99.1

Certification Pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)Exhibit 99.2

Certification Pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)





| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------




Form 8-K filed July 15, 2002 announcing the 2002 annual meeting of shareholders scheduled for November 20, 2002 and giving notice of applicable deadlines for shareholder proposals and matters to be brought before the meeting of
shareholders.




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SIGNATURE





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





FULLPLAY MEDIA SYSTEMS, INC.Dated: November 13, 2002



By:

/S/    RICHARD P.
BARBERRichard P. Barber Vice
President of Finance, CFO, Secretary and Treasurer




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CERTIFICATIONS





I, Dennis Tevlin, Chief Executive Officer, certify that:





|1. |  | I have reviewed this quarterly report on Form 10-QSB of Fullplay Media Systems, Inc.;
|-- |  | -------------------------------------------------------------------------------------




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




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




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




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




| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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




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




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




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




|6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date: November 13, 2002



By:

/S/    DENNIS TEVLINDennis Tevlin Chief Executive Officer




13




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##### Table of Contents




I, Richard Barber, Chief Financial Officer, certify that:





|1. |  | I have reviewed this quarterly report on Form 10-QSB of Fullplay Media Systems, Inc.;
|-- |  | -------------------------------------------------------------------------------------




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




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




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




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




| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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




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




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




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




|6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date: November 13, 2002



By:

/S/    RICHARD P. BARBERRichard P. Barber Chief Financial Officer




14