Air Water International Corp – ‘10KSB’ for 9/30/02

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Annual Report — Small Business   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report                                         50    221K 
 2: EX-10.12    Consulting Agreement                                   9     45K 
 3: EX-99.1     Zwebner Certification                                  1      5K 
 4: EX-99.2     Orgil Certification                                    1      5K 

10KSB   —   Annual Report
Document Table of Contents

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 U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-KSB

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

For the fiscal year ended September 30, 2002                      

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

     For the transition period from __________________ to __________________

Commission file number: 000-30405                                               

Universal Communication Systems, Inc.   
----------------------------------------
(Name of small business issuer in its charter)

Nevada                                 860887822  
------                                 ---------  
 (State or other jurisdiction of        (I.R.S. Employer Identification No.)
incorporation or organization)                                            

407 Lincoln Road, Ste 6K, Miami Beach, Florida                          33139   
-------------------------------------------                             -----   
  (Address of principal executive offices)                          (Zip Code)

------------------------------------------------                        -----   
  (Address of former principal executive offices)                   (Zip Code)

Issuer's telephone number: (305) 672-6344                                       

Name of each exchange on which registered:  OTC Bulletin Board under the trading
                       symbol UCSY

Securities registered under Section 12(b) of the Act:  None                     

Securities registered under Section 12(g) of the Exchange Act:                  

 Common Stock, $.001 par value per share
(Title of class)

        Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 [ ].                                                                 

     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be         
contained, to the best of registrant's knowledge, in definitive proxy or        
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10KSB. [ ]                                        

Issuer's revenues for its most recent fiscal year:  $0                          

Aggregate market value of voting stock held by non-affiliates of the issuer as  
of December 30, 2002: $231,921                                                  

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 7,209,155 shares of common stock as  
of December 30, 2002.                                                           

Documents incorporated by reference:        None.                               

Transitional Small Business Disclosure Format:  Yes [ ]  No  [X]                

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 Universal Communication Systems, Inc.

 Index to Annual
 Report on Form 10-KSB
For The Fiscal Year Ended September 30, 2002

                                                                            Page

ITEM 1.    DESCRIPTION OF BUSINESS.............................................3

ITEM 2.    DESCRIPTION OF PROPERTY.............................................6

ITEM 3.    LEGAL MATTERS.......................................................6

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................7

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............7

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS..........9

ITEM 7.    FINANCIAL STATEMENTS...............................................17

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING          
             AND FINANCIAL DISCLOSURE.............. ..........................17

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;        
             COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT ...............18

ITEM 10.   EXECUTIVE COMPENSATION.............................................19

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....19

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................20

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K...................................21

ITEM 14.   CONTROLS AND PROCEDURES............................................23

SIGNATURES....................................................................24

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PART I

Introductory Statement                                                          
----------------------                                                          

All statements contained herein that are not historical facts,
including but not limited to, statements regarding the Company's current        
business strategy, the Company's projected sources and uses of cash, and the    
Company's plans for future development and operations, are based upon current   
expectations. These statements are forward-looking in nature and involve a      
number of risks and uncertainties. Actual results may differ materially. Among  
the factors that could cause actual results to differ materially are the        
following: the availability of sufficient capital to finance our business plans 
on terms satisfactory to us; competitive factors; changes in labor, equipment   
and capital costs; changes in regulations affecting our business; future        
acquisitions or strategic partnerships; general business and economic           
conditions; and factors described from time to time in the reports filed by us  
with the Securities and Exchange Commission. Readers are cautioned not to place 
undue reliance on any such forward-looking statements, which statements are made
pursuant to the Private Litigation Reform Act of 1995 and, as a result, are     
pertinent only as of the date made.                                             

       All of the share price information presented herein has been adjusted
to reflect the 1 for 1,000 reverse split of our outstanding common stock        
effective August 23, 2002.                                                      

ITEM 1.  DESCRIPTION OF BUSINESS                                                

Introduction                                                                    

      In February of 1997, Worldwide Wireless, Inc., a Nevada corporation,
was formed to coordinate the operations of TSI Technologies, Inc., a Nevada     
corporation, and National Micro Vision Systems, Inc., a Nevada corporation. Its 
purpose was to complete the development of its patented advanced distributed    
wireless telephone and network designs and to finance, manufacture, and market  
these units and systems. TSI Technologies, Inc. was the research and development
company formed for the purpose of creating and developing the distributed       
wireless call processing system. National Micro Vision Systems, Inc. was formed 
to operate a network of wireless Internet sites. In April of 1998, Worldwide    
Wireless, Inc., TSI Technologies, Inc. and National Micro Vision Systems, Inc.  
acquired Upland Properties, Inc., a Nevada corporation, for stock and           
transferred their assets to Upland Properties, Inc. Upland Properties, Inc. then
changed its name to World Wide Wireless Communications, Inc. and began trading  
on the OTC Bulletin Board (OTC:BB)under the symbol WLGS.                        

During the fiscal year ended September 30, 2002, we moved our offices     
from Oakland, California to Miami Beach, Florida and changed our name to        
Universal Communication Systems, Inc. We then changed our OTC:BB symbol to UCSI 
(and after our one-to-one-thousand reverse stock split, to UCSY).               

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  On November 1, 2001, we changed management. On June 12, 2002, we
entered into a letter of intent to acquire Card Universal Corporation, Inc., a  
privately held development stage Florida corporation in the business of         
providing and marketing prepaid "Stored Money Cards." Management is currently   
evaluating its options as to the future plans for the Company, its operations   
and assets.                                                                     

Our strategy                                                                    

        We will require short-term outside investment on a continuing basis to
finance our current operations and capital expenditures. If we do not obtain    
short term financing we may not be able to continue as a viable concern. We do  
not have a bank line of credit and there can be no assurance that any required  
or desired financing will be available through bank borrowings, debt, or equity 
offerings, or otherwise, on acceptable terms. If future financing requirements  
are satisfied through the issuance of equity securities, investors may          
experience significant dilution in the net book value per share of common stock.

 Under the auspices of new management, we have made considerable
progress in restructuring prior obligations and removing debt. We are actively  
engaged in a number of efforts to revise our business plan to develop new       
revenue sources and direction for the Company. We plan to de-emphasize our      
participation in the wireless internet market, sell assets for                  
cash and/or advance our remaining businesses through joint ventures, continue   
our negotiations with creditors to compromise, extend, convert and/or forgive   
debt, and seek new businesses that can take advantage of our extensive          
shareholder base and status as a public company.                                

    On February 10, 2000 we acquired all of the shares of Digital Way,
S.A., a Peruvian telecommunications company. In June of 2001, we received a     
notice of default from the sellers of Digital Way, claiming a breach of the     
terms of our purchase agreement. On May 10, 2002, we executed a settlement      
agreement with those sellers. Under the terms of the agreement, we re-aligned   
the stock ownership of Digital Way, by returning 73% of the common shares owned 
by us to the former owners. In addition, we retained a 50% interest in the first
$6.2 million of equity value of Digital Way, in the event of a sale or other    
disposition. Any value beyond the first $6.2 million will be divided based on   
shareholdings. Our chairman, Michael Zwebner, remains on the Board of Directors 
of Digital Way, S. A. The settlement agreement fully cancels all debts, claims  
and counter claims between us and the sellers, and allows for future co-        
operation in the ongoing development or sale of Digital Way. Although we have   
reached this settlement, management of Digital Way has not provided the         
necessary financial information for Digital Way to be included in our financial 
reporting, and the results of the Company's investment in Digital Way is unclear
at this time. The Company has fully impaired this investment.                   

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In early 2000, we entered into a joint venture with World T.V.
Communication Co. Ltd., a Thai corporation, to provide high speed, wireless,    
broadband internet and related services in Bangkok and other major areas in     
Thailand. World T.V. Communication Co. Ltd., currently owns frequencies in      
Bangkok and throughout "up-country" Thailand. In May 2001, our                  
partners in Thailand expressed concerns about our ability to satisfy our        
contractual obligations under their respective contracts. Due to our present    
financial condition as outlined above, we are unable to fulfill these           
obligations. The Company has abandoned what interest it has in Thailand.        

        We previously applied for licenses in the 3.5 GHz range in Germany and
the Czech Republic. We had also entered into a joint venture to develop internet
access in India. We are no longer pursuing these markets.                       

       Although we initiated negotiations with businesses in Puerto Rico and
Portugal in 1999, no further negotiations or affiliations are currently pending 
in those areas. On July 20, 2001, WSI, Inc., a Puerto Rican corporation, and    
its principal officer and shareholder Howard Hager, filed suit against the      
Company in the U.S. District Court in Puerto Rico for breach of contract and    
damages in the amount of $4,675,000. The claims arise out of an alleged         
agreement on the part of the Company to acquire WSI and provide it with         
substantial financing. A default judgment was entered in WSI's favor. On        
November 26, 2002 a settlement agreement was reached with Mr. Hager and the     
trustee in bankruptcy for WSI. Under the agreement, we issued $200,000 in value 
of shares of common stock, which are restricted from sale for a one-year period.
In addition to the stock, $50,000 will be paid to the trustee of WSI in two     
installments of $25,000 each, and a two year consulting contract, valued at     
$120,000, has been signed with Mr. Hager. The settlement has a total cost of    
$370,000.                                                                       

Patents/Intellectual Property                                                   

        We have received patent number 6,055,429 from the United States Patent
and Trademark Office for our distributed wireless call processing system. The   
major feature of this system is that it allows individual cell phones and other 
communication units to amplify signals, thereby reducing the need for repeater  
stations. The system allows every handset itself to serve as a mobile, low-power
repeater site, and each unit facilitates the operation of the entire local      
network within a radius of 10-20 miles. A whole continent populated with these  
units would theoretically have no need for infrastructure support of any kind.  
In practice, we or parties to whom we license the system will build widely      
scattered gateway sites that will serve to introduce local signals into long    
lines, international and satellite service providers and introduce data signals 
into destination networks while providing a medium for our generation of an     
ongoing revenue stream. We are looking to license this technology to a third    
party developer in order to potentially create a royalty stream of income.      
However, we cannot guarantee that we will enter into such an agreement.         

        We do not have other patents pending pertaining to other technologies.

Employees                                                                       

As of January 14, 2003, we had no full time employees in the  
United States.                                                                  

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ITEM 2.  DESCRIPTION OF PROPERTY                                                

     We own no real estate. Effective February 1, 2002, we leased a 1400
square foot corporate and administrative office facility at 407 Lincoln Road,   
Suite 6K, Miami Beach, FL 33139. The lease provides for a three-year term. The  
lease terms call for a monthly rent of $2,300 for the initial six months, $2,600
per month for the following six months and $3,300 thereafter. The lease may be  
cancelled with ninety days notice after the first year.                         

ITEM 3.  LEGAL MATTERS                                                          

   On August 26, 1999, we filed suit against Credit Bancorp, in U.S.
District Court in San Francisco, regarding improprieties on the part of Credit  
Bancorp relating to a loan. The case was settled on October 11, 1999. As part of
the settlement agreement, Credit Bancorp agreed to convert the original loans   
granted to us to a convertible debenture in the amount of $740,000. On October  
11, 1999, we issued a convertible unsecured debenture for $740,000 to Credit    
Bancorp in settlement of this obligation. The terms of this convertible         
unsecured debenture are 7% interest per annum payable, semiannually on the last 
day of February and September, with the principal due September 30, 2002. All   
amounts of unpaid principal and accrued interest of this debenture are          
convertible at any time at the conversion price of $1,600 per share of          
unregistered, restricted shares of our common stock. Credit Bancorp has agreed  
to convert principal and accrued interest owing on the debenture into 483       
shares of our common stock.                                                     

      In November 1999, the SEC filed suit against Credit Bancorp alleging
violations of various securities laws in connection with its actions in relation
to us and others, and seeking various forms of relief including disgorgement of 
its illegal gains. A receiver has been appointed to administer the affairs of   
Credit Bancorp. We have been informed that the appointed receiver denies that   
such a conversion request was made and the Company may be subject to further    
liability.                                                                      

         The Securities and Exchange Commission commenced an informal inquiry on
the Company in August, 2000. We have voluntarily complied with their requests   
for information and we intend to fully cooperate with the inquiry. No further   
requests have been made since that date.                                        

        In December 1999, we entered into an amended lease agreement regarding
a lease for the license covering Concord, California and the surrounding area.  
We have received a Notice of Default from the lessor. The Notice of             
Default is based on a requirement in the amended agreement that the balance of  
the purchase price for the assignment of the license be paid by December 1,     
2000. Our management has been advised by counsel that payment of the balance of 
the purchase price prior to the FCC's consent to the assignment of the license  
may constitute a premature assignment in violation of the FCC's rules. The      
assignment application has not been filed with the FCC for the FCC to make a    
definitive ruling on this issue. At this point, no formal legal action has been 
taken by the lessor. We are no longer pursuing the license or the lease of the  
facility.                                                                       

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  On July 20, 2001, WSI, Inc., a Puerto Rican corporation, and its
principal officer and shareholder Howard Hager, filed suit against the Company  
in the U.S. District Court in Puerto Rico for breach of contract and damages in 
the amount of $4,675,000. The claims arise out of an alleged agreement on the   
part of the Company to acquire WSI and provide it with substantial financing. As
previously noted, we reached a settlement with all parties on November 26, 2002.

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

        No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the security holders through the            
solicitation of proxies or otherwise.                                           

 PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS               

     Prior to April 3, 2002, our common stock was traded on the over the
counter Bulletin Board market under the symbol "WLGS". From April 4, 2002       
through August 22, 2002 our common stock was traded on the over the counter     
Bulletin Board market under the symbol "UCSI". From August 23, 2002 to the      
present, our common stock is trading on the over the counter Bulletin Board     
market under the symbol "UCSY".                                                 

The following table sets forth the range of high and low closing                
bid prices for each period indicated as reported by the National Association of 
Securities Dealers composite feed or other qualified interdealer quotation      
medium. The quotations provided reflect inter-dealer prices, without            
retail mark-up, mark-down or commission and may not represent actual            
transactions. All of the share price information presented below has been       
adjusted to reflect the 1 for 1,000 reverse split of our outstanding common     
stock effective August 23, 2002.                                                

Price Range for Common Stock                                                    
----------------------------                                                    

FISCAL YEAR SEPT 30, 2002           High                Low                     
               --------           --------
First Quarter                   $21.000             $5.599                
Second Quarter                   14.000              2.000                
Third Quarter                    10.000              0.799                
Fourth Quarter                    2.700              0.100                

FISCAL YEAR SEPT 30, 2001           High                Low                     
               --------           --------
First Quarter                  $750.000           $180.000                
Second Quarter                  335.000             75.000                
Third Quarter                    68.000             19.000                
Fourth Quarter                   20.000              4.500                

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       Since our shares began trading on the OTC Bulletin Board in 1997, the
prices for our shares have fluctuated widely. There may be many factors which   
may explain these variations, but we believe that the following are some of     
these factors:                                                                  

o        the demand for our common stock;                     

o        the number of market makers for our common stock;    

       o        developments in the market for broadband Internet access and
wireless transmission in particular; and    

     o        changes in the performance of the stock market in general.

     In recent years, the stock market has experienced extreme price and
volume fluctuations that have had a substantial effect on the market prices for 
many telecommunications, Internet and emerging growth companies such as ours,   
which may be unrelated to the operating performances of the specific companies. 
Companies that have experienced volatility in the market price of their stock   
have been the object of securities class action litigation. If we become the    
object of securities class action litigation, it could result in substantial    
costs and a diversion of our management's attention and resources and have an   
adverse effect on our business, financial condition and results of operations.  
In addition, holders of shares of our common stock could suffer substantial     
losses as a result of fluctuations and declines in the stock price.             

       There are approximately 358 holders of record and an estimated 12,000
holders in street name of our common stock as of September 30, 2002.            

       The trading of our shares is subject to limitations set forth in Rule
15g-9 of the Securities Exchange Act. This rule imposes sales practice          
requirements on broker-dealers who sell so-called penny stocks to persons other 
than established customers, accredited investors or institutional investors.    
Accredited investors are generally defined to include individuals with a net    
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000   
together with their spouses during the previous two years and expected annual   
income of that amount during the current year. For sales of shares to other     
persons, broker-dealers must make special suitability determinations, and obtain
the written consent of the purchaser to the sale prior to consummating the sale 
and are generally prohibited from making cold-calls or other unsolicited        
inquiries to purchasers without complying with these rules. These rules may     
adversely affect the ability of broker-dealers and others to sell our shares or 
to sell shares in the secondary market.                                         

      No cash dividends have been declared to date on our Company's common
stock. We expect that all earnings, if any, will be retained to finance the     
growth of our Company and that no cash dividends will be paid for the           
foreseeable future.                                                             

         On May 21, 2002, stockholders approved a measure to increase the number
of authorized common shares from 300 million to 800 million.                    

Sales of Unregistered Securities                                                
--------------------------------                                                

     We have issued and sold unregistered securities as set forth below.

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         On February 21, 2002, the Company issued 13,254 shares in settlement of
an advance received November 1, 2001, in the amount of $40,000 pursuant to the  
Company's draw-down notice to Grenville Finance Ltd. in connection with the     
common stock purchase agreement dated January 26, 2001, evidencing an equity    
draw down facility between the Company and Grenville Finance Ltd. Union         
Atlantic, LC is due $3,600 as a placement fee on this transaction. These        
securities were issued in a transaction exempt from registration under the      
Securities Act of 1933 in reliance on Section 4(2) of the Securities Act of     
1933.                                                                           

     On June 17, 2002, the Company issued 20,000 shares in settlement of
advances received during fiscal year ended September 30, 2001, in the amount of 
$93,500. These shares were issued in connection with the common stock purchase  
agreement dated January 26, 2001, evidencing an equity draw down facility       
between the Company and Grenville Finance Ltd. The Company has not been provided
with settlement information necessary to determine the pricing period of the    
equity draw down. These securities were issued in a transaction exempt from     
registration under the Securities Act of 1933 in reliance on Section 4(2) of the
Securities Act of 1933.                                                         

        In addition, we have issued and sold unregistered securities that have
not previously been reported as set forth below. An underwriter was not utilized
in any of these transactions. The recipients of securities in each transaction  
represented their intention to acquire the securities without a view to         
distribution. All the issued securities were restricted securities under Rule   
144, Reg. D or Reg. S regulations, and appropriate restrictive legends were     
affixed to the securities in each transaction.                                  

  On April 25, 2002, we issued 11,000 shares of common stock under
private placement subscriptions at $3.18 per share, based on the average closing
price for the three days prior to April 25, 2002, at a 25 percent discount.     
These securities were issued in transactions exempt from registration under the 
Securities Act of 1933 in reliance on Sections 4(2) and 4(6) of the Securities  
Act of 1933.                                                                    

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS             

         The following should be read in conjunction with the "Risk Factors" and
the "Financial Statements" and the Notes thereto.                               

Current Financial Condition and New Management                                  
----------------------------------------------                                  

        We will require short-term outside investment on a continuing basis to
finance our current operations and capital expenditures. If we do not obtain    
short term financing we may not be able to continue as a viable                 
concern. We do not have a bank line of credit and there can be no assurance that
any required or desired financing will be available through bank borrowings,    
debt, or equity offerings, or otherwise, on acceptable terms. If future         
financing requirements are satisfied through the issuance of equity securities, 
investors may experience significant dilution in the net book value per share of
common stock.                                                                   

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         In light of our current financial condition, we recently announced that
we are actively engaged in a number of efforts to revise our business plan in   
order to develop a viable alternative in today's difficult funding environment. 
Following an extensive review of our assets, operations and capital structure   
and continuing conversations with our creditors and staff, we have come to the  
conclusion that we will be best served by a redirection of our strategic plan.  
We plan to de-emphasize our participation in the wireless internet market, sell 
assets for cash, continue our negotiations with creditors to compromise, extend,
convert and/or forgive debt, and move forward through joint ventures or seek new
businesses that can take advantage of our extensive shareholder base and status 
as a public company. All these activities will require capital and management.  

     If we cannot successfully integrate a new business plan in the near
future, our current financial condition may dictate more drastic alternatives   
including, but not limited to, suspending operations or filing for court        
protection. As previously noted, we have recently changed management and entered
into a letter of intent to acquire Card Universal Corporation, Inc. Management  
is currently evaluating its options as to the future plans for the company, its 
operations and assets.                                                          

Results of Operations                                                           
---------------------                                                           

        We did not generate any revenues during fiscal 2002 and 2001. However,
our Peruvian subsidiary had revenues which are not reported as a result of a    
lack of cooperation from our subsidiary's management.                           

    We are currently in negotiations with our prior partners in India.
Because we are not certain how these negotiations will conclude, we have        
recognized an impairment loss for the remaining deposits paid.                  

On November 1, 2001, we signed a non-binding letter of intent 
to acquire Hard Disc Cafe, Inc., a privately held Florida corporation           
which intended to develop and license themed internet cafes. On August 4, 2002, 
Hard Disc Caf, Inc. ceased all operations. All parties agreed to unwind the     
transaction. In connection with this transaction, we had advanced a total of    
$146,154 to Hard Disc Caf, Inc. Of this amount, we anticipate receiving $35,456 
and accordingly we recorded a loss of $110,698 on these advances in 2002.       

         General and administrative expenses were reduced from $6,502,509 in the
fiscal year ended September 30, 2001 to $807,033 in the fiscal year ended       
September 30, 2002. This reduction was a result of the Company's reducing       
expenses, as it re-evaluates its business plan and ceases its active pursuit of 
MMDS licenses and frequency spectrum throughout the world.                      

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General and administrative expenses for the fiscal years ended
September 30, 2002 and 2001 were comprised of the following items:              

                                         2002             2001
                                         ----             ----

Consultants and outside services              $  484,843        $  914,540      
Depreciation                                      22,036           349,097      
Engineering                                            -           107,221      
FCC licensing and site expenses                    1,338           127,627      
Financing costs and fund raising expense           5,501         2,547,269      
Insurance                                              -           139,190      
Legal expense                                     85,059           494,930      
Miscellaneous and other expenses                  27,644           361,936      
Professional fees                                 91,570           386,131      
Rent                                              37,462           163,026      
Salaries                                          14,614           523,582      
Telephone                                          5,924            89,186      
Travel                                            31,042           298,774      
                                         ---------         ---------
                                        $  807,033        $6,502,509

        Financing costs and fund raising expenses of $2,547,269 for the fiscal
year ended September 30, 2001, included penalties paid to bond holders in the   
amount of $2,128,000 for failure to meet the covenants and conditions of the    
debt instruments.                                                               

Liquidity and Capital Resources                                                 
-------------------------------                                                 

     As of September 30, 2002 our total working capital was deficient in
the amount of $2,151,285. Because we have not received any revenues from        
operations and do not anticipate receiving any revenues in the near term from   
operations, we will need to obtain substantial funding from external sources    
over the next twelve months to finance our current operations.                  

        Since we began operations, we have generated virtually no revenues and
have incurred substantial expenditures and operating losses. We expect to       
continue to experience losses from operations while we develop our new business 
plan. In view of this fact, our auditors have stated in their report for the    
fiscal year ended September 30, 2002 that there is substantial doubt about our  
ability to continue as a going concern, dependent upon our ability to meet our  
future financing requirements, and the success of our future operations, the    
outcome of which cannot be determined at this time. In order to finance our     
working capital requirements, we are currently negotiating equity investments   
with several sophisticated investors, but there can be no assurance that we will
obtain this capital or that it will be obtained on terms favorable to us. If we 
do not obtain short term financing we may not be able to continue as a viable   
concern. We do not have a bank line of credit and there can be no assurance that
any required or desired financing will be available through bank borrowings,    
debt, or equity offerings, or otherwise, on acceptable terms. If future         
financing requirements are satisfied through the issuance of equity securities, 
investors may experience significant dilution in the net book value per share of
common stock.                                                                   

        During the fiscal years ended September 30, 2002 and 2001, we received
equity investments and advances of $383,291 and $3,747,681 respectively. These  
investments and advances were in the form of issuance of our common stock and   
debentures in various private placements plus loans from related parties. We    
have obtained financing primarily from the following sources, and believe that  
our primary source of financing during the next 12 months will come from similar
sources.                                                                        

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         On April 14, 2000, we entered into a Securities Purchase Agreement with
six investors, for the purchase of investment units, consisting of common stock,
common stock purchase warrants, 4% subordinated debentures and preferred stock, 
all of which are described below. Pursuant to the Securities Purchase Agreement,
these investors purchased 760 shares of common stock, warrants to purchase      
3,600 shares of common stock and subordinated debentures with a principal       
amount of $3,280,000 for a total price of $4,800,000.                           

    On August 10, 2000, we agreed with the investors to modify certain
terms of the earlier funding agreement. Under the new terms of this agreement,  
we issued an additional 1,368 shares of common stock to the investors, in       
exchange for $1,920,000 and the investors' forbearance of certain rights under  
the original agreement. The conversion price of the subordinated debentures was 
amended to the lesser of 110% of the average per share market value for the five
consecutive trading days immediately preceding the original issue date and 85%  
of the average per share market value for the five consecutive trading days     
immediately prior to the conversion date. We also agreed to change the floor    
price to $1,000 for the period between August 10, 2000 and October 14, 2000,    
$640 for the period between October 14, 2000 and April 14, 2001, and zero       
thereafter. Furthermore, the exercise price of the warrants to purchase         
our shares was changed to $2,000 per share.                                     

      On November 15, 2000, the investors agreed to modify the transaction
documents in accordance with our request and agreed to waive any breach of the  
original Securities Purchase Agreement and the first amendment by us which      
occurred prior to the closing date of this Second Amendment. In consideration   
for these concessions, we agreed to increase the principal amount of the        
debentures held by the investors to $6,720,000 and to issue 3,996 additional    
restricted shares of common stock to the investors. The investors have returned 
to the Company 760 previously issued shares of common stock in exchange for     
the issuance of new debenture certificates reflecting the increase in the       
principal amount. Under this agreement, the selling shareholders may convert the
debentures at a conversion price equal to the lesser of $640.00 per common share
and an amount equal to 85% of the average of the closing trading prices of the  
common stock for the five consecutive trading days immediately prior to the     
conversion. The conversion price is not subject to a floor price. The investors 
have waived any previous breach by us of the Registration Rights Agreement or of
the original Securities Purchase Agreement.                                     

         We signed a common stock purchase agreement with Grenville Finance Ltd.
dated January 26, 2001 for the future issuance and purchase of our common stock.
The common stock purchase agreement establishes what is sometimes termed an     
equity line of credit or an equity draw-down facility. Grenville Finance Ltd.   
committed up to $50 million to purchase our common stock over a twenty-four     
month period. Once every 22 trading days, we may request a draw down of up to   
$1,500,000 of the committed money, subject to a formula based on the average    
common stock price and average trading volume, setting the maximum amount of any
request for any given draw down. Each draw-down must be at least $50,000, and   
there must be a seven-trading-day waiting period between draw-downs. The amount 
of money that Grenville Finance Ltd. will provide to us, and the number of      
shares we will issue to Grenville Finance Ltd. in return for that money, is     
settled twice during a 22-day trading period following the draw-down request    
based on the formula in the common stock purchase agreement. Grenville Finance  
Ltd. will receive a fifteen-percent discount to the volume weighted average     
stock price for that 22-day period. We will receive the amount of the draw down 
less an escrow agent fee of $750 for each draw down amount and an 8% placement  

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fee payable to the placement agent, Union Atlantic, LC, which introduced us to  
Grenville Finance Ltd. In addition, Grenville Finance Ltd. will receive a three 
year warrant to purchase up to 15,000 shares of our common stock at an          
exercise price of $265.00 per share. We may not be able to draw down at all if  
we fail to meet certain preconditions set out in the equity line of credit      
agreement.                                                                      

       On February 11, 2001, we entered into a Stock Purchase Agreement with
two investors for the purchase of 4,000 shares of common stock we offered       
at $125.00 per share through a Post Effective Amendment to our Form SB-2        
Registration Statement. The total purchase price was $500,000.                  

 On March 29, 2001, we entered into a Senior Secured Convertible
Debentures and Warrants Purchase Agreement with several investors. The investors
agreed to purchase $750,000 principal amount of 8% convertible debentures and we
agreed to issue warrants to purchase 50 shares of common stock for each         
$100,000 principal amount purchased by the investors and issued warrants to     
purchase a total of 375 shares. The exercise price on the warrants shall be     
115% of the average of the five closing bid prices immediately prior to March   
29, 2001. The term of the warrants is for three years. Under the agreement, we  
also agreed to remove the floor price on the 4% convertible debentures          
previously issued and to decrease the price of the warrants to $101.20.         

       On June 7, 2001 the Company and several investors agreed to amend the
March 29, 2001 Senior Secured Convertible Debentures and Warrants Purchase      
Agreement. The investors agreed to purchase $200,000 principal amount of 8%     
senior convertible debentures. The Company also agreed to issue letter warrants 
to purchase up to $125,000 divided by 85% of the average of the three lowest bid
prices during the 22 trading days prior to June 7, 2001.                        

         On September 27, 2001 the Company and several investors agreed to amend
the March 29, 2001 Senior Secured Convertible Debentures and Warrants Purchase  
Agreement. The investors agreed to purchase $60,000 principal amount of 8%      
senior convertible debentures. No warrants were involved in this amendment to   
the Senior Secured Convertible Debentures and Warrants Purchase Agreement.      

        On February 15, 2002 the Company and several investors agreed to amend
the March 29, 2001 Senior Secured Convertible Debentures and Warrants Purchase  
Agreement. The investors agreed to purchase $180,000 principal amount of 8%     
senior convertible debentures. No warrants were involved in this amendment to   
the Senior Secured Convertible Debentures and Warrants Purchase Agreement.      

During the fiscal year ended September 30, 2002, the Company sold 45,254 shares 
of its common stock for net cash proceeds of $173,500. The Company issued       
4,898,636 shares of common stock in conversion of outstanding debentures for an 
aggregate value of $2,616,436. The Company also issued 584,011 shares of its    
common stock for services at an aggregate value of $573,485. Stock issued for   
services was at the reported market price for the shares at the time of         
issuance.                                                                       

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Plan of Operations                                                              
------------------                                                              

         We are considering alternatives to our present business strategy, which
include, but are not limited to, modifications of our business plan and the     
possible sale or licensing of certain assets. Specific components of the        
modified new business plan could include a significant reduction in our selling,
general and administrative expenses, additional equity investment,              
recapitalization and additions to the current management of the company. We     
cannot provide assurance that implementing the modified business plan, even with
the successful execution of all the components of the new plan, will lead the   
Company to profitability.                                                       

     Due to the substantial operating losses previously incurred and the
current projected future operating losses, we will require new sources of       
funding in the form of equity or debt financing in order to execute our current 
business plan. However, there is no certainty that additional financing of any  
kind will be forthcoming in amounts sufficient to allow the Company to continue 
to operate its business.                                                        

        As of January 14, 2003, we are unable to pay normal operating expenses
and we are currently in the process of negotiating partial payments in exchange 
for an agreement to forbear collections and stay litigation.                    

     Management is hopeful that it can continue to reach agreements with
vendors and foreign partners to resolve disputes and balances due. Management   
hopes that once these issues are dealt with and the acquisition of Card         
Universal Corporation is consummated, this will provide for the financial       
stability of the Company. No assurances can be made that these events will      
successfully take place. Management expects to meet minimal operating expenses  
during this period, through a combination of loans, sale of assets and private  
placement funds.                                                                

Risk Factors                                                                    
------------                                                                    

- We will require additional capital in the short term to remain a going concern

        We will require short term outside investment on a continuing basis to
finance our current operations and any expansion of activities. Since we began  
operations, we have generated virtually no revenues and have incurred           
substantial expenditures. We expect to continue to experience losses from       
operations while we develop new revenue sources, consummate acquisitions and    
develop other technologies. In view of this fact, our auditors have stated in   
their report for the period ended September 30, 2002 that our ability to meet   
our future financing requirements, and the success of our future operations,    
cannot be determined at this time. In order to finance our working capital      
requirements we are negotiating existing equity investments and new investments,
but there can be no assurance that we will obtain this capital or that it will  
be obtained on terms favorable to us. If we do not obtain short term financing  
we may not be able to continue as a viable concern. We do not have a bank line  
of credit and there can be no assurance that any required or desired financing  
will be available through bank borrowings, debt, or equity offerings, or        
otherwise, on acceptable terms. If future financing requirements are satisfied  
through the issuance of equity securities, investors may experience significant 
dilution in the net book value per share of common stock.                       

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- Our new distributed wireless call processing system technology is unproven and
may not function as anticipated.                                                

       Our distributed wireless call processing system technology remains in
the development phase and we have not yet developed a fully functional prototype
of that technology. We cannot be certain when we will be able to complete       
development of that system and whether that system will work in the manner      
anticipated when development is completed. Furthermore, we cannot be certain    
whether the system will receive substantial market acceptance assuming that it  
is developed. For these reasons, although we believe that our distributed       
wireless call process system is promising, an investor should not assume that   
the system will be available or will contribute positively to our business      
prospects or financial condition.                                               

         We are subject to the requirements that we receive regulatory approvals
from those countries in which we do business, the delay or denial of which can  
reduce our revenues and adversely affect our foreign operations.                

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- We are dependent on the services of key individuals and the loss of any of    
these individuals could significantly affect our ability to operate our business

- We may be unable to protect our intellectual property rights                  

       Our success depends in part on our ability to protect our proprietary
technologies. We rely on a combination of patent, copyright and trademark laws, 
trade secrets and confidentiality and other contractual provisions to establish 
and protect our proprietary rights. We have received one patent from the United 
States Patent and Trademark Office pertaining to the distributed wireless call  
processing system and may file for additional patents in the future. However,   
our patents may not be of sufficient scope or strength, others may independently
develop similar technologies or products, duplicate any of our products or      
design around our patents, and the patents may not provide us competitive       
advantages. Litigation, which could result in substantial costs and diversion of
effort by us, may also be necessary to enforce any patents issued or licensed to
us or to determine the scope and validity of third-party proprietary rights. Any
such litigation, regardless of outcome, could be expensive and time consuming,  
and adverse determinations in any such litigation could seriously harm our      
business.                                                                       

       We have not yet sought patent protection for the distributed wireless
call processing system in any country other than the United States, nor have we 
sought to register our trademarks in those countries in which we currently do or
intend to do business. The laws of other countries vary with respect to         
intellectual property protection, and some jurisdictions may provide            
substantially less protection than those of the United States. As a consequence,
our ability to protect our intellectual property and prevent competitors from   
using our intellectual property may be much more limited.                       

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- Other risk issues                                                             

        We have pursued, are currently pursuing and, in the future may pursue,
new technologies and businesses internally and through acquisitions and         
combinations which involve significant risks. Any such acquisition or           
combination may involve, among other things, the issuance of equity securities, 
the payment of cash, the incurrence of contingent liabilities and the           
amortization of expenses related to goodwill and other intangible assets, and   
transaction costs, which have adversely affected, or may adversely affect, our  
business' results of operations and financial condition. Our ability to         
integrate and organize any new businesses and/or products, whether internally   
developed or obtained by acquisition or combination, will likely require        
significant expansion of our operations. There is no assurance that we will have
or be able to obtain the necessary resources to satisfactorily effect such      
expansion, and the failure to do so could have a material adverse effect on our 
business, financial condition and results of operations. In addition future     
acquisitions and or combinations by the Company involve risks of, among other   
things, entering markets or segments in which we have no or limited prior       
experience, the potential loss of key employees of the acquired company and/or  
difficulty, delay or failure in the integration of the operations, management,  
personnel and business of any such new business with our business and operating 
and financial difficulties of any new or newly combined operations, any of which
could have a materially adverse effect on our business, financial condition and 
results of operations. Moreover, there can be no assurance that the anticipated 
benefits of any specific acquisition or of any internally developed new business
segment or business combination will be realized.                               

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            

See Index to Financial Statements on page F-1.                

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                          

     There have been no changes in or disagreements with our independent
auditors regarding accounting and financial disclosure required to be reported  
under this item.                                                                

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PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;          
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT             

        Our executive officers and directors and their ages as of December 28,
2002 are as follows:                                                            

Name                       Age   Position                  Period of Service    
-----                      ---   --------                  -----------------    
Michael J. Zwebner......   48    Chairman of the Board     November 2001 -      
                   and CEO                   present

Curtis Orgil...........    51    CFO and Director          November 2001 -      
                                             present
Ramsey Sweis............   37    Director                  May 1998 - present   
Alexander Walker, Jr. ..   75    Director                  November 2001 -      
                                             present

         Certain biographical information concerning the Directors and executive
officers of the Company as of December 28, 2002 is set forth below. Such        
information was furnished by them to the Company.                               

      Michael Zwebner has served as a Director since November, 2001 and is
the Chairman of the Board of Directors. He is the founder of Talk Visual        
Corporation and has served as a Director and its Chairman of the Board of       
Directors since September, 1998 until March, 2002. Mr. Zwebner is the President 
of Card Universal Corporation, a privately held Florida corporation which we    
have issued a letter of intent to acquire. From 1974 to 1986, Mr. Zwebner       
founded and ran a travel and tourism company and a charter airline, specializing
in the areas of air charter travel, wholesale ticketing and general business and
tourist travel. From 1986 to 1990, Mr. Zwebner owned and operated several real  
estate companies as well as managed a chain of five family restaurants and      
related catering services in England. From 1991 to 1997, Mr. Zwebner founded and
served as Vice-President of Cardcall International Holdings Inc. (USA) and      
Operating Manager of Cardcall (UK) Ltd. for which he designed and developed     
telecommunications and marketing concepts and organized the prepaid phone card  
operations. Mr. Zwebner also coordinated corporate finance activities for       
Cardcall. In February of 1997, Mr. Zwebner negotiated and secured the           
sale/merger of the Cardcall Group to DCI Telecommunications Inc., a             
publicly-held entity based in Connecticut. In addition, in February of 1988, Mr.
Zwebner negotiated the creation of a multi-million dollar joint venture between 
Cardcaller Canada Inc. with Datawave Systems Inc. of Vancouver, Canada.         

Mr. Walker has served as a Director of the Company since      
November, 2001. He also serves on the Board of Directors of Film World, Inc. and
Entertech Media Group, Inc. Since 1968 Mr. Walker has served as Chairman of the 
Board of the Nevada Agency and Trust Company in Reno, Nevada, a licensed and    
registered Trust Company and Transfer Agent in business since 1903. He received 
his B.A. from Waynesburg College in 1950 and his J.D. from the University of    
Pittsburgh School of Law in 1952. From 1956 to date, he has maintained a private
practice as an Attorney.                                                        

         Curtis A. Orgil has served as a Director of the Company since November,
2001. He received his Bachelor of Science degree in 1974 from Brigham Young     
University. He worked for Deloitte Haskins & Sells in Salt Lake City, Utah.     
Later he transferred to Reno, Nevada where he helped establish their new office.
While in Reno, Mr. Orgil was the Partner-in-Charge of the tax department there  
and was the senior tax partner in the state of Nevada. While with Deloitte, Mr. 
Orgil was on its National Industry Teams for Qualified Retirement Plans and     
Agribusiness. Since 1995, he has been a principal with Bartig, Basler & Ray,    
CPA's, Inc., a regional accounting firm with headquarters in Sacramento,        

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California. He is the treasurer of the Northern Nevada International Center and 
of the BYU Management Society of Northern Nevada. He has chaired the Taxation   
Committee for the Nevada Society of Certified Public Accountants. He is a former
treasurer and board member of the Nevada Museum of Art, the American Lung       
Association of Reno, the Economic Development Authority of Western Nevada, and  
the Northern Nevada Development Authority. He was a founding board member of the
Nevada World Trade Council and was a member of the Advisory Council for the     
University of Nevada, Reno College of Business.                                 

   Ramsey Sweis has served as a Director since May, 1998. He has had
extensive experience in management and in the product design industry. He has   
been a leader and developer of high performance teams by enabling, training and 
motivating team members. In the recent past he has provided computer and        
engineering services to General Motors and Chrysler Corporation. In connection  
with those activities Mr. Sweis has developed designs between engineering,      
prototype models, tooling and vendor sources. Mr. Sweis resides in Roseville,   
Michigan. He currently serves as a Program Manager for Hanke Training & Design  
of Clawson Michigan. From 1997 to 1999 Mr. Sweis served as a designer for       
Computer and Engineering Services of Auburn Hills, Michigan. From 1991 to 1997, 
Mr. Sweis was a design leader for Megatech Engineering of Warren, Michigan,     
contracted to General Motors of Warren, Michigan.                               

Director Compensation                                                           

        Directors do not have a plan of compensation for serving as directors,
except that the following common stock grants were issued for the fiscal year   
ended September 30, 2002:                                                       

Number of                     
Shares                    
Name                      Granted                                               
---------------       ---------------                                           
Alex Walker, Jr.            57,000                                              
Curtis Orgil                51,000                                              
Ramsey Sweis                52,000                                              

Limitation of Liability and Indemnification Matters                             

       Our Bylaws provide that we may indemnify any director, officer, agent
or employee against all expenses and liabilities, including counsel fees,       
reasonably incurred by or imposed upon them in connection with any proceeding in
which they may become involved by reason of their being or having been a        
director, officer, employee or agent of our Company. Moreover, our Bylaws       
provide that we shall have the right to purchase and maintain insurance on      
behalf of any such persons whether or not we would have the power to indemnify  
such person against the liability insured against. Insofar as indemnification   
may be afforded for liabilities arising under the Securities Act, we have been  
informed that, in the opinion of the Securities and Exchange Commission, such   
indemnification is against public policy as expressed in the Securities Act and 
is therefore unenforceable.                                                     

Compliance with Section 16(a) of the Securities Exchange Act of 1934            

   Section 16(a) of the Securities Exchange Act of 1934 requires our
Company's officers and directors, and persons who own more than 10% of a        
registered class of our Company's equity securities, to file reports of         
ownership and changes in ownership with respect to the securities of our Company
with the SEC and to furnish copies of these reports to our Company. We believe  
that during fiscal year 2002, Alex Walker, Ramsey Sweis and Curtis Orgil have   
not filed the required Form 4s.                                                 

ITEM 10. EXECUTIVE COMPENSATION                                                 

Employment Agreements                                                           

    There are no employment agreements in force at September 30, 2002.

 The Company entered into a three year consulting agreement with
Overseas Communications Limited on November 2, 2001, for the management and     
business advisory services provided by Mr. Michael Zwebner, Chairman and CEO of 
the Company. The Agreement calls for an annual salary of $240,000, payable in   
cash or the Company's common stock. For the fiscal year ended September 30,     
2002, the Company paid $20,000 in cash and issued 365,966 shares of common stock
under this agreement.                                                           

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

         The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 30, 2002, by:                      

       o        each person who is known by us to own beneficially more than
     5% of the outstanding shares of our common stock;

o        each of our directors; and                           

o        all our directors and executive officers as a group. 

   Applicable ownership is based on 7,209,155 shares of common stock
outstanding as of December 30, 2002. Beneficial ownership is determined in      
accordance with the rules of the SEC. Shares of common stock subject to options 
or warrants that are presently exercisable or exercisable within 60 days of     
December 30, 2002 are deemed outstanding for the purpose of computing the       
percentage ownership of the person or entity holding options or warrants, but   
are not treated as outstanding for the purpose of computing the percentage      
ownership of any other person or entity.                                        

     The persons listed below have sole voting and investment power with
respect to all shares of common stock shown as being beneficially owned by them,
subject to community property laws, where applicable. The number of shares      
column in the table includes shares issuable upon exercise of options and       
warrants exercisable within 60 days of December 30, 2002. The number of options 
and warrants exercisable within 60 days of December 30, 2002 are listed in the  
shares issuable upon exercise of options or warrants column. The address of all 
directors and officers is care of Universal Communication Systems, Inc., 407    
Lincoln Road, Suite 6K, Miami Beach, Florida 33139.                             

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                                                                [Download Table]

                                                              Shares Issuable   
Name of Named Executive Officer,   Number of     Percentage    Upon Exercise of 
Director, or Beneficial Owner       Shares       Ownership   Options or Warrants
------------------------------     --------      ----------   ------------------
                                                                                
Michael J. Zwebner (4)              119,358 (1)      1.7%             0         

Alexander Walker, Jr. (4)            57,000            *              0         

Ramsey Sweis (4)                     58,061            *          1,600 (2)     

Curtis Orgil (4)                     51,000            *              0         

Executive Officers and Directors    285,419          4.0%                       
 as a Group                                                                     

Amro International S. A.          2,513,530        34.87%        16,463 (3)     
c/o Ultra Finance Ltd.                                                          
Grossmuenster Platz 26,                                                         
Zurich, Switzerland CH8022                                                      

Esquire Trading & Finance Inc.    1,151,000        15.97%             0         
Schutzengelstrasse 36                                                           
Baar, Switzerland CH6342                                                        

-------------------------------------------                                     
* Less than 1%                                                                  

(1)  Includes 23 shares beneficially held by Overseas Communications Limited    
and 115,943 shares beneficially held by Overseas Development Holdings 
Limited.                                                              

(2)  The 1,600 shares subject to options are immediately exercisable.           

(3)  Represents shares convertible under convertible debentures held.           

(4)  The address of each such person is c/o the Company, 407 Lincoln Rd., Ste   
6K, Miami Beach, FL 33140                                             

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

      Commencing November 1, 2001, we engaged the services of the Chairman
Michael Zwebner under a consulting agreement through Overseas Development       
Holdings Corporation, a foreign corporation. The annual payment is $240,000.    
Overseas Development Holdings Corporation is 33% owned by our Chairman.         

        Alexander Walker, Jr., a Director and the Secretary of our company, is
Chairman of the Board and a shareholder of Nevada Agency and Trust Company, our 
transfer agent since November 6, 2001. During the fiscal year ended September   
30, 2002, we incurred fees aggregating $4,334 to Nevada Agency and Trust        
Company.                                                                        

        Separate from compensation noted above as a Director, Ramsey Sweis was
issued 6,061 shares of common stock at a transaction price of $3.75 per share   
for a total value of $22,729 in payment of expenses and for services rendered   
for the Company in connection with his consulting services.                     

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        On November 1, 2001, the Company signed a non-binding letter of intent
to acquire Hard Disc Cafe, Inc., a privately held Florida corporation which     
intended to develop and license themed internet cafes. Terms called for the     
Company to pay $1,250,000 in cash and 25,000 shares of common stock. On August  
4, 2002, Hard Disc Caf, Inc. ceased all operations of the company. By mutual    
consent, all parties agreed to unwind the transaction. In connection with this  
transaction, the Company had advanced a total of $146,154 to Hard Disc Caf,     
Inc. Of this amount, the Company anticipates receiving $35,456 and accordingly  
has recorded a loss of $110,698 on these advances. Michael Zwebner, our Chairman
and CEO is the president and a major stockholder of Hard Disc Caf, Inc.         

    On June 12, 2002, the Company entered into a non-binding letter of
intent to acquire Card Universal Corporation, a privately held development stage
Florida corporation in the business of providing and marketing prepaid "Stored  
Money Cards." The acquisition value is estimated at $3 million, subject to a    
third party independent valuation. Michael Zwebner, our Chairman and CEO is the 
president and a major stockholder of Card Universal Corporation, Inc.           

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)  Exhibits                                                 

ITEM (601)                    DOCUMENT                                    
----------                    --------                                    
*    3.1     Articles of Incorporation.                                     

*    3.2     Amendment to Articles of Incorporation                         

*    3.3     Amendment to Articles of Incorporation.                        

*    3.4     By-laws.                                                       

*****  3.5     Amendment to Articles of Incorporation.                          

*    4.1     Form of Certificate Evidencing shares of Common Stock of World 
Wide Wireless Communications, Inc.                

*    4.2     Convertible Unsecured Debenture for $740,000 issued by World   
   Wide Wireless Communications, Inc. to Credit Bancorp.

 *    10.1    Stock Purchase Agreement dated November 30, 1999 Between Infotel
      Argentina S.A. and Universal Communication Systems, Inc.

 *    10.2    Agreement for Purchase of All Outstanding Shares of Digital Way,
           S.A. by Universal Communication Systems, Inc., dated February
29, 2000.                                         

*    10.3    Security Purchase Agreement Among World Wide Wireless          
    Communications, Inc. and the Purchasers Named Therein.

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*    10.4    Registration Rights Agreements Among World Wide Wireless       
    Communications, Inc. and the Purchasers Named Therein.

*    10.5    Escrow Agreement Among the Purchasers Named Therein, the       
    Representative of the Purchasers and the Escrow Agent.

*    10.6    Form of Debenture of Universal Communication Systems, Inc.     
    with Respect to the 4% Convertible Debenture Due 2005.

 *    10.7    Form of Warrant to Purchase Shares of World Wide Communications,
Inc. Issued in the Offering.                      

****  10.8    Amendment to the Securities Purchase Agreement entered into     
        between World Wide Wireless Communications and the selling
shareholders named therein.                       

***   10.9    Second Amendment to the Securities Purchase Agreement entered   
             into between World Wide Wireless Communications and the selling
shareholders name therein.                        

****  10.10   Agreement between Universal Communication Systems, Inc. and     
Mr. Neelam Kumar Oswal.                           

***   10.11   World Wide Communications, Inc. Incentive Stock Option Plan     

     10.12   Agreement between Overseas Communication Limited and World Wide
Wireless Communications, Inc.                     

*    21.1    Subsidiaries                                                   

99.1    Certification                                             

99.2    Certification                                             
------------------                                                              

*  Filed with the registration statement on Form SB-2 with
   the Securities and Exchange Commission on May 31, 2000.

**  Filed with the registration statement on Form SB-2 with 
    the Securities and Exchange Commission on June 30, 2000.

***  Filed with the registration statement on Form SB-2 with  
  the Securities and Exchange Commission on December 15,
2000.                                               

****  Filed with Form 10-KSB for the period September 30, 2000. 

*****  Filed with Form DEF14A on April 25, 2002.                  

(b)  We filed no Form 8-Ks during the fourth quarter.         

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ITEM 14. CONTROLS AND PROCEDURES                                                

Within the 90 days prior to the date of this report, we carried out an          
evaluation, under the supervision and with the participation of our management, 
including our Chief Executive Officer and Chief Financial Officer, of the       
effectiveness of the design and operation of our disclosure controls and        
procedures. Based upon that evaluation, our Chief Executive Officer and Chief   
Financial Officer concluded that our disclosure controls and procedures are     
effective in timely alerting such officers to material information relating to  
our Company required to be included in our periodic filings with the Commission.
There were no significant changes in our internal controls or in other factors  
that could significantly affect these controls subsequent to the date of this   
evaluation.                                                                     

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SIGNATURES

       In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the    
undersigned, thereunto duly authorized, on February 13, 2003.                   

                                 Universal Communication Systems, Inc.

                     By:   /s/ MICHAEL ZWEBNER
                          ------------------
                          Michael J. Zwebner
                               Chief Executive Officer

       In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of   
the Registrant in the capacities indicated on February 13, 2003:                

                                                                [Download Table]


Signature                          Title                             Date       
---------                          -----                             ----       
                                                                                
/s/ MICHAEL J. ZWEBNER   Director, Chief Executive Officer,    February 13, 2003
----------------------   and Chairman of the Board (Principal                   
Michael J. Zwebner       Financial and Accounting Officer)                      

/s/ ALEXANDER WALKER JR  Director and Secretary                February 13, 2003
-----------------------                                                         
Alexander Walker, Jr.                                                           

/s/ RAMSEY SWEIS         Director                              February 13, 2003
---------------------                                                           
Ramsey Sweis                                                                    

/s/ CURTIS ORGIL         Director and Chief Financial Officer  February 13, 2003
-----------------------                                                         
Curtis Orgil                                                                    

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CERTIFICATION   

I, Michael J. Zwebner, certify that:                          

1.       I have reviewed this annual report on Form 10-KSB of 
Universal Communication Systems, Inc.;                                          

         2.       Based on my knowledge, this annual 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 
annual report;                                                                  

     3.       Based on my knowledge, the financial statements, and other
financial information included in this annual 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 annual report.  

       4.       I am 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 annual 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 annual report (the "Evaluation Date"); and                  

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

        5.       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 functions):                               

          (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.       I have indicated in this annual report whether 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:  February 13, 2003                                                        

By:  /s/ Michael J. Zwebner                                                     
---------------------------------------------------------                 
Michael J. Zwebner, President and Chief Executive Officer                 
(Principal Executive Officer)                                             

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CERTIFICATION   

I, Curtis Orgil, certify that:                                

1.       I have reviewed this annual report on Form 10-KSB of 
Universal Communication Systems, Inc.;                                          

         2.       Based on my knowledge, this annual 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 
annual report;                                                                  

     3.       Based on my knowledge, the financial statements, and other
financial information included in this annual 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 annual report.  

       4.       I am 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 annual 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 annual report (the "Evaluation Date"); and                  

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

        5.       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 functions):                               

          (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.       I have indicated in this annual report whether 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:  February 13, 2003                                                        

By:  /s/ Curtis Orgil                                                           
---------------------------------------------------------                 
Curtis Orgil, Chief Financial Officer                                     
(Principal Financial and Accounting                                       
Officer)                                                                  

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 Index to Financial Statements

                                                                Page

Independent Auditor's Report                                       F-2 - F-3    

Balance Sheet                                                         F-4       

Statements of Operations                                              F-5       

Statements of Stockholders' Equity                                    F-6       

Statements of Cash Flows                                           F-7 - F-8    

Notes to the Financial Statements                                     F-9       

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                                                        [Enlarge/Download Table]


                                                                                      
                              REUBEN E. PRICE & CO.                  MEMBER           
REUBEN E. PRICE,         PUBLIC ACCOUNTANCY CORPORATION      AMERICAN INSTITUTE OF    
C.P.A. (1904-1986)                FOUNDED 1942            CERTIFIED PUBLIC ACCOUNTANTS
     ------                    703 MARKET STREET                   --------           
RICHARD A. PRICE, C.P.A.    SAN FRANCISCO, CA 94103         SECURITIES AND EXCHANGE   
                                   --------               COMMISSION PRACTICE SECTION 
                               (415) 982-3556             OF THE AMERICAN INSTITUTE OF
                             FAX (415) 957-1178          CERTIFIED PUBLIC ACCOUNTANTS 
                                                                   ---------          
                                                              CALIFORNIA SOCIETY OF   
                                                          CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

Board of Directors                                                              
Universal Communication Systems, Inc.                                           

We have audited the accompanying balance sheet of Universal Communication       
Systems, Inc. (the Company), as of September 30, 2002, and the                  
related statements of operations, statements of stockholders' equity and        
statements of cash flows, for the years ended September 30, 2002 and 2001. The  
financial statements of Universal Communication Systems, Inc. are the           
responsibility of management. Our responsibility is to express an opinion on    
these financial statements based on our audits.                                 

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free  
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement       
presentation. We believe that our audits provide a reasonable basis for our     
opinion.                                                                        

In our opinion, the financial statements of Universal Communication Systems,    
Inc. as referred to above, present fairly, in all material respects, the        
financial position of Universal Communication Systems, Inc., as                 
of September 30, 2002 and the results of its operations, stockholders' equity   
and cash flows for the years ended September 30, 2002 and 2001 in conformity    
with accounting principles generally accepted in the United States.             

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Board of Directors                                                              
Universal Communication Systems, Inc.                                           
February 6, 2003                                                                
Page 2                                                                          

The accompanying financial statements have been prepared assuming that the      
Company will continue as a going concern. As discussed in Note 2, the Company   
has suffered recurring losses that raise substantial doubt about its ability to 
continue as a going concern. Realization of a major portion of the assets is    
dependent upon the Company's ability to meet its future financing requirements, 
and the success of future operations, the outcome of which cannot be determined 
at this time. Management's plans in regard to these matters are also described  
in Note 2. The financial statements do not include any adjustments that might   
result from the outcome of this uncertainty.                                    

Reuben E. Price & Co.                                                           
February 6, 2003                                                                

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Balance Sheet           

                                                        [Enlarge/Download Table]

                                                                              September 30,
                                                                                  2002     
                                                                              ------------ 

                                     Assets                                                
                                                                                           
Current Assets:                                                                            
   Cash & cash equivalents                                                    $        874 
                                                                              ------------ 
        Total Current Assets                                                           874 
                                                                              ------------ 
Due from related party, net                                                         35,456 
                                                                              ------------ 

Fixed Assets:                                                                              
   Equipment                                                                        25,259 
   Furniture and fixtures                                                            1,917 
   Less: Accumulated depreciation & amortization                                   (15,889)
                                                                              ------------ 
        Total Fixed Assets                                                          11,287 
                                                                              ------------ 
Investment in Digital Way (Peru), net of impairment                                     -- 
                                                                              ------------ 
Other Assets                                                                        11,250 
                                                                              ------------ 
            Total Assets                                                      $     58,867 
                                                                              ============ 

                      Liabilities and Stockholders' Deficit                                

Current Liabilities:                                                                       
   Current maturities of convertible debentures                               $    886,449 
   Accounts payable, trade                                                       1,078,941 
   Accrued expenses                                                                156,978 
   Due to related party                                                             29,791 
                                                                              ------------ 
       Total Current Liabilities                                                 2,152,159 
                                                                              ------------ 
Long Term Liabilities:                                                                     
    Note payable                                                                   254,237 
    Convertible debentures, net of current maturities                            4,123,415 
                                                                              ------------ 
       Total Long Term Liabilities                                               4,377,652 
                                                                              ------------ 
            Total Liabilities                                                    6,529,811 
                                                                              ------------ 

Commitments and Contingencies                                                           -- 

Stockholders' Deficit                                                                      
   Preferred stock, par value $.001 per share, 10,000,000 shares authorized,               
      no shares issued and outstanding                                                  -- 
   Common stock, par value $.001 per share,                                                
      800,000,000 shares authorized, 5,967,990 shares                                      
      issued and outstanding                                                         5,968 
   Additional paid-in capital                                                   23,071,546 
   Accumulated deficit                                                         (29,548,458)
                                                                              ------------ 

       Net Stockholders' Deficit                                                (6,470,944)
                                                                              ------------ 
             Total Liabilities and Stockholders' Deficit                      $     58,867 
                                                                              ============ 

The accompanying notes are an integral part of these financial statements.

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Statements of Operations

                                                        [Enlarge/Download Table]


                                                                  For the Year Ended            
                                                                     September 30,              

                                                            2002                      2001      
                                                       -------------              ------------- 
                                                                                                
Revenue                                                $          --              $          -- 
Cost of goods sold                                                --                         -- 
                                                       -------------              ------------- 
Gross Profit                                                      --                         -- 
                                                       -------------              ------------- 
Operating Expenses:                                                                             
    General and administrative                               807,033                  6,502,509 
    Impairment losses                                        128,706                  6,252,760 
                                                       -------------              ------------- 
        Total Operating Expenses                             935,739                 12,755,269 
                                                       -------------              ------------- 
Operating Loss                                              (935,739)               (12,755,269)
                                                       -------------              ------------- 
Other Income / (Expense):                                                                       
    Interest and dividend income                                  --                     46,386 
    Interest (expense)                                      (334,953)                  (294,600)
                                                       -------------              ------------- 
        Total Other Income (Expense)                        (334,953)                  (248,214)

                                                       -------------              ------------- 
Net Loss Applicable to Common Shares                   $  (1,270,692)             $ (13,003,483)

Other Comprehensive Loss:                                                                       
    Foreign currency translation                                  --                   (117,874)
                                                       -------------              ------------- 
Total Comprehensive Loss                               $  (1,270,692)             $ (13,121,357)
                                                       =============              ============= 

Basic and Diluted Net Loss per Common Share            $       (5.54)              $    (122.27)
                                                       =============              ============= 

Basic and Diluted Weighted Average Shares Outstanding        229,239                    107,316 
                                                       =============              ============= 

The accompanying notes are an integral part of these financial statements.

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Statements of Stockholders' Equity
 For the Years Ended September 30, 2002 and 2001

                                                        [Enlarge/Download Table]

                                             Common Stock (a)                                                                 
                                         ------------------------                                 Accumulated                 
                                                                     Additional                      Other                    
                                                                     Paid-in       Accumulated    Comprehensive     Total     
                                          Shares         Amount      Capital(a)      Deficit         Income         Equity    
                                       ------------   ------------  ------------   ------------   ------------   ------------ 
                                                                                                                              
Balance, September 30, 2000                  86,264             86    17,155,508    (15,155,249)        (1,160)     1,999,185 
Common stock issued in private                                                                                                
    placement between $5.00                                                                                                   
    and $535.00 per share                    26,328             26     1,277,655             --             --      1,277,681 
Conversion of debentures                                                                                                      
    for common stock between                                                                                                  
    $5.00 and $135.00 per share              24,171             24     1,018,342             --             --      1,018,366 
Common stock issued for services                                                                                              
    at $125.00 and $400.00 per                                                                                                
    share                                     1,230              1       258,249             --             --        258,250 
Additional paid-in capital,                                                                                                   
    stock options                                --             --         4,200             --             --          4,200 
Net loss for the fiscal year                                                                                                  
    ended, September 30, 2001                    --             --            --    (13,003,483)            --    (13,003,483)
 Other comprehensive income:                                                                                                  
    Foreign currency adjustment                  --             --            --             --       (117,874)      (117,874)
                                       ------------   ------------  ------------   ------------   ------------   ------------ 

Balance, September 30, 2001                 137,993   $        137  $ 19,713,954   $(28,158,732)  $   (119,034)  $ (8,563,675)

Common stock issued in private                                                                                                
    placement between $3.00                                                                                                   
    and $5.00  per share                     45,254             45       173,455             --             --        173,500 
Conversion of debentures                                                                                                      
    for common stock between                                                                                                  
    $0.50 and $4.00 per share             4,898,636          4,899     2,611,537             --             --      2,616,436 

Eliminate foreign currency adjustment            --             --            --       (119,034)       119,034             -- 

Common stock issued for services                                                                                              
    at $0.20 and $15.00 per share           584,011            584       572,903             --             --        573,487 

One for one thousand reverse split,                                                                                           
    Fractional shares adjustment              2,096              3            (3)            --             --             -- 

Common stock issued in escrow                                                                                                 
    to secure debt                          300,000            300          (300)            --             --             -- 

Net loss for the fiscal year                                                                                                  
    ended, September 30, 2002                    --             --            --     (1,270,692)            --     (1,270,692)
                                       ------------   ------------  ------------   ------------   ------------   ------------ 
Balance, September 30, 2002               5,967,990   $      5,968  $ 23,071,546   $(29,548,458)  $         --   $ (6,470,944)
                                       ============   ============  ============   ============   ============   ============ 

Note (a): All amounts prior to August 23, 2002 have been adjusted for the one-  
for-one-thousand reverse stock split.                                           

The accompanying notes are an integral part of these financial statements.

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Statements of Cash Flows

                                                        [Enlarge/Download Table]


                                                                      For the Year Ended            
                                                                         September 30,              
                                                                 2002                     2001      
                                                             ------------             ------------  
                                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES:                                                               
    Net Loss                                                  $(1,270,692)            $(13,003,483) 
    Adjustments to reconcile net loss from operations                                               
      to net cash used by operating activities:                                                     
       Common stock issued for services                           573,485                  258,250  
       Charge to earnings for beneficial                                                            
           conversion of capital stock                                 --                  157,278  
       Stock options revaluation                                       --                    4,200  
       Impairment loss                                            128,706                6,252,760  
       Depreciation and amortization expense                       22,036                  349,062  
       Interest payable added to principal of debentures          246,341                  240,514  
       Foreign currency loss                                           --                 (117,874) 
       Loss on write down of assets                               190,066                       --  
    Changes in assets and liabilities:                                                              
       Decrease (Increase) in inventory                            48,991                  701,467  
       Decrease (Increase) in other current assets                     --                  399,300  
       Decrease (Increase) in other assets                         (4,600)                  19,170  
       Increase (Decrease) in accrued                                                               
           expenses and accounts payable                         (343,459)                 (397,175)
                                                             ------------             ------------  

       Net Cash (Used) by Operating Activities                   (409,126)              (5,136,531) 
                                                             ------------             ------------  

CASH FLOWS FROM INVESTING ACTIVITIES:                                                               
       Purchase of fixed assets                                    (1,917)                (358,632) 
       Refund (receivable) collected                                   --                  500,000  
       Advances to related parties                                (35,456)                      --  
       Advances to former subsidiaries                                 --               (1,859,586) 
                                                             ------------             ------------  

       Net Cash (Used) by Investing Activities                    (37,373)              (1,718,218) 
                                                             ------------             ------------  

CASH FLOWS FROM FINANCING ACTIVITIES:                                                               
    Proceeds from convertible debentures                               --                2,470,000  
    Proceeds from the issuance of senior secured                                                    
      convertible debentures, net                                 240,000                       --  
    Proceeds from issuance of common stock                        173,500                1,277,681  
    Due from related party                                         29,791                       --  
                                                             ------------             ------------  

       Net Cash Provided by Financing Activities                  443,291                3,747,681  
                                                             ------------             ------------  

NET INCREASE (DECREASE) IN CASH AND CASH                                                            
EQUIVALENTS                                                  $     (3,208)            $ (3,107,068) 

                                              - continued -                                         

The accompanying notes are an integral part of these financial statements.

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Statements of Cash Flows

                                                        [Enlarge/Download Table]


                                                                    For the Year Ended           
                                                                      September 30,              
                                                                2002                   2001      
                                                            -----------              ----------- 
                                                                                                 
                                             - continued -                                       

NET INCREASE (DECREASE) IN CASH AND CASH                                                         
    EQUIVALENTS                                             $    (3,208)             $(3,107,068)
CASH AND CASH EQUIVALENTS                                                                        
    AT BEGINNING OF PERIOD                                        4,082                3,111,150 
                                                            -----------              ----------- 

CASH AND CASH EQUIVALENTS                                                                        
    AT END OF YEAR                                          $       874              $     4,082 
                                                            ===========              =========== 
SUPPLEMENTAL DISCLOSURES OF CASH:                                                                
       Interest paid                                        $        --              $        -- 
       Income taxes paid                                    $        --              $        -- 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND                                                
    FINANCING ACTIVITIES:                                                                        
       Interest accrued on debentures, added to                                                  
       the principal of the debentures                      $   246,341              $   240,514 
       Debentures converted to capital stock                $ 2,616,436              $ 1,018,366 


The accompanying notes are an integral part of these financial statements.

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 Universal Communication Systems, Inc.
 Notes to the Financial Statements
September 30, 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Background                                                                      
------------                                                                    

         The Company is actively engaged in efforts to revise its business plan,
      de-emphasize participation in the wireless internet market, and seek
new business activities.                                      

Reclassification                                                                
-----------------                                                               

   Certain amounts from the year ended September 30, 2001, have been
reclassified to agree with the presentation for the year ended
September 30, 2002.                                           

Cash Equivalents                                                                
----------------                                                                

        For purposes of the Statement of Cash Flows, the Company considers all
        highly liquid investments with an original maturity of three months or
       less to be cash equivalents. Balances in bank accounts may, from time
to time, exceed federal insured limits.                       

Fixed Assets                                                                    
------------                                                                    

     Furniture, fixtures and equipment are depreciated over their useful
         lives of 5 to 10 years, using the straight-line method of depreciation.
Leasehold improvements are amortized over a 5-year period that
         coincides with the initial period of the lease, using the straight-line
       method of amortization. Amortizable intangibles, consisting primarily
of software, are amortized over a two year period.            

Long-Lived Assets                                                               
-----------------                                                               

   The Company reviews its long-lived assets on a quarterly basis to
    determine any impairment in accordance with Statement of Financial
      Accounting Standards (SFAS) No. 121. The Company will adopt SFAS No.
     144, which supersedes SFAS No 121, in the year ending September 30,
2003.  The Company does not expect any material effect in its 
adoption.                                                     

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 Universal Communication Systems, Inc.
 Notes to the Financial Statements
September 30, 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

Estimates                                                                       
---------                                                                       

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the
       date of the financial statements and the reported amounts of revenues
       and expenses during the reporting period. Actual results could differ
from those estimates.                                         

Fair Value of Financial Instruments                                             
-----------------------------------                                             

         For cash, cash equivalents, other assets, accounts payable, and accrued
     expenses, the carrying amounts in the Balance Sheet represent their
  fair market value. The carrying amount of the debentures payable
       approximates fair value because of similar current rates at which the
  Company could borrow funds with consistent remaining maturities.

Segment Information                                                             
-------------------                                                             

     The Company adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related 
 Information" (SFAS No. 131) in 1999. This statement establishes
        standards for the reporting of information about operating segments in
     annual and interim financial statements and requires restatement of
 prior year information. The Company has no reportable operating
segments for the years ending September 30, 2002 and 2001.    

Comprehensive Income and Foreign Currency Translation                           
-----------------------------------------------------                           

   As of October 1, 1999 the Company adopted FASB Statement No. 130,
 Reporting Comprehensive Income. The financial statements of the
     Company's former foreign subsidiaries were measured using the local
      currency as the functional currency. Assets and liabilities of these
         former subsidiaries were translated at exchange rates as of the balance
       sheet date. Revenues and expenses were translated at average rates of
exchange in effect during the year. The resulting cumulative  
  translation adjustments were recorded as a separate component of
stockholders' equity.                                         

Recent Accounting Pronouncements                                                
--------------------------------                                                

  The Company has adopted SFAS No. 133, "Accounting for Derivative
        Instruments and Hedging Activities", and SFAS No. 137, "Accounting for
         Derivative Instruments and Hedging Activities-Deferral of the Effective
    Date of FASB No. 133", in the year ended September 30, 2001. These
         pronouncements establish methods of accounting for derivative financial
         instruments and hedging activities related to those instruments as well
        as other hedging activities. To date, the Company has not entered into
any derivative financial instruments or hedging activities.   

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 Notes to the Financial Statements
September 30, 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

        The Financial Accounting Standards Board has established the following
new pronouncements, none of which will materially affect the  
   Company: SFAS No. 134, "Accounting for Mortgage-Backed Securities
        Retained after the Securitization of Mortgage Loans Held for Sale by a
      Mortgage Banking Enterprise - an amendment of SFAS No. 65 (effective
        for fiscal quarters beginning after December 15, 1998)," SFAS No. 135,
     "Rescission of SFAS No. 75 and Technical Corrections (effective for
fiscal years ending after December 15, 1999)," SFAS No. 137,  
 "Accounting for Derivative Instruments and Hedging Activities -
       Deferral of the Effective Date of SFAS No. 133 - an amendment of SFAS
       No. 133 (effective June 1999)," SFAS No. 138, "Accounting for Certain
         Derivative Instruments and Certain Hedging Activities - an amendment of
   SFAS No. 133 (effective for fiscal years beginning after June 15,
         2000)," SFAS No. 139, "Rescission of SFAS No. 53 and amendments to SFAS
 No. 63, 89, and 121 (effective for fiscal years beginning after
  December 15, 2000)," SFAS No. 140, "Accounting for Transfers and
      Servicing of Financial Assets and Extinguishments of Liabilities - a
    replacement of SFAS No. 125 (effective for certain disclosures for
        fiscal years ending after December 15, 2000)," SFAS No. 141, "Business
     Combinations," which eliminates the pooling-of-interests method for
    business combinations initiated after June 30, 2001, SFAS No. 142,
    "Goodwill and Other Intangible Assets" (effective for fiscal years
      beginning after March 15, 2001), which enhances disclosure for these
       assets subsequent to their acquisition, SFAS No. 143, "Accounting for
 Asset Retirement Obligations," which is effective for financial
   statements issued for fiscal years beginning after June 15, 2002.

   In August 2001, the FASB issued SFAS No. 144, "Accounting for the
  Impairment or Disposal of Long-Lived Assets", which is effective
        January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for
     the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
   Disposed Of", and a portion of APB Opinion No. 30, "Reporting the
     Results of Operations". This statement provides a single accounting
 model for long-lived assets to be disposed of and significantly
        changes the criteria that would have to be met to classify an asset as
held-for-sale. Classification as held-for-sale is an important
     distinction since such assets are not depreciated and are stated at
  the lower of fair value and carrying amount. This statement also
        requires expected future operating losses from discontinued operations
    to be displayed in the period(s) in which the losses are incurred,
   rather than as of the measurement date as presently required. The
    Company does not anticipate that the adoption of SFAS No. 144 will
      have any effect on the Company's financial statement presentation or
disclosures.                                                  

   In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
        Associated with Exit or Disposal Activities," which requires companies
     to recognize costs associated with exit or disposal activities when
      they are incurred rather than at the date of a commitment to an exit
    or disposal plan. Such costs covered by the standard include lease
 termination costs and certain employee severance costs that are

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 Universal Communication Systems, Inc.
 Notes to the Financial Statements
September 30, 2002

associated with a restructuring, discontinued operation, plant
        closing, or other exit or disposal activity. SFAS No. 146 replaces the
   previous accounting guidance provided by the Emerging Issues Task
   Force Issue No. 94-3, "Liability Recognition for Certain Employee
     Termination Benefits and Other Costs to Exit an Activity (including
    Certain Costs Incurred in a Restructuring)." SFAS No. 146 is to be
      applied prospectively to exit or disposal activities initiated after
      December 31, 2002. The Company does not anticipate that the adoption
 of SFAS No. 146 will have any effect on the Company's financial
statement presentation or disclosures.                        

Reverse Stock Split                                                             
-------------------                                                             

     The Company completed a one-for-one-thousand reverse stock split on
    August 23, 2002. All share and per share information reflects this
reverse stock split.                                          

Basic and Diluted Net Loss Per Share                                            
------------------------------------                                            

The calculation of basic and diluted net loss per share is in 
      accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share".                                         

NOTE 2 - GOING CONCERN AND SIGNIFICANT RISKS AND UNCERTAINTIES                  

 The Company's financial statements are prepared using generally
    accepted accounting principles applicable to a going concern which
       contemplates the realization of assets and liquidation of liabilities
      in the normal course of business. The Company has experienced losses
   since inception, and had an accumulated deficit of $29,548,458 at
         September 30, 2002. Net losses are expected for the foreseeable future.
    As such, there is substantial doubt as to the Company's ability to
        continue as a going concern. Management is considering alternatives to
         its business strategy, including modifications of its business plan and
   possible sale or licensing of certain assets. Simultaneously, the
     Company is continuing to secure additional capital through sales of
         common stock through the current operating cycle. There is no assurance
that management will be successful in its efforts.            

NOTE 3 - ACQUISITIONS                                                           

Argentina                                                                       
---------                                                                       

      On December 31, 1999, the Company acquired a 51% interest in Infotel
       Argentina S.A., a Buenos Aires based company which owns Multi-channel
         Multipoint Distribution Service (MMDS) licenses in eight of the largest
         Argentine cities including Buenos Aires. The price was $1,500,000, made
    up of $900,000 in cash and $600,000 in Company stock. Infotel also
       engaged in telephone system integration and engineering projects. The

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 Notes to the Financial Statements
September 30, 2002

NOTE 3 - ACQUISITIONS (continued)                                               

   minority interest holders have closed the offices and removed all
         assets. Management recorded an impairment loss on the entire investment
in the fiscal year ended September 30, 2001.                  

Peru                                                                            
----                                                                            

         On February 29, 2000, the Company purchased 100% of Digital Way S.A., a
Peruvian telecommunications company. The price was $1,300,000,
      comprised of $400,000 in cash and $900,000 in Company stock. Digital
       Way S.A., holds MMDS licenses in the Lima-Callao area. It holds local
and international long distance telephone licenses.           

        In June of 2001, the Company received a notice of default from Digital
        Way, claiming breach of the terms of the Company's purchase agreement.
       The Company reached an agreement with Digital Way's management on May
        10, 2002, and as part of the agreement relinquished 73% of the Digital
   Way stock. Although this agreement has been signed, Digital Way's
  accounts have not been made available to the Company. Management
    recognized an impairment of the Company's investment of $4,444,608
during the fiscal year ended September 30, 2001.              

India                                                                           
-----                                                                           

     In June 2000, the Company entered into an agreement with a group of
      Indian businessmen to establish a joint venture, World Wide Wireless
       Communications (India) Ltd., to establish fixed wireless data service
        in India. A deposit of $ 248,350 was posted with the Indian government
    as part of the process of applying for both frequency and internet
     service provider licenses. Management has recovered $70,694 of this
deposit and has determined that the remaining amount cannot be
        recovered. Management has abandoned any further pursuit of business in
India.                                                        

Thailand                                                                        
--------                                                                        

       In May 2000, the Company entered into a joint venture with World Star
    T.V. Communication Co. Ltd. (WSTV), a Thai corporation, to provide
         fixed wireless data services in Thailand. WSTV currently owns frequency
        licenses in Bangkok and other major areas in Thailand. As of September
   30, 2000, $146,662 was invested, and is shown as part of Deposits
     in Acquisition. In August 2000 the Company entered into a Letter of
         Intent with E-Z Net Co. Ltd. of Bangkok for E-Z Net to provide internet
  service provider services to the new joint venture. The required
 governmental approvals are pending. Due to uncertainties in the
Company's                                                     

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 Notes to the Financial Statements
September 30, 2002

NOTE 3 - ACQUISITIONS (continued)                                               

ability to complete the transaction, management recognized an 
     impairment of the investment in the amount of $73,331 in the fiscal
year ended September 30, 2001.                                

El Salvador                                                                     
-----------                                                                     

        On March 11, 2000, the Company entered into a letter of intent with El
       Salvador Telecomuniciones S.A. de C.V. for the purpose of acquiring a
        25% ownership interest in that company in El Salvador. Pursuant to the
    terms of the letter of intent, the Company paid $1,000,000 to that
         company as an advance payment of the purchase price, which was to total
      $3,500,000. The agreement provided that the purchase was conditioned
        upon the Company's acquisition of certain licenses, and the occurrence
         of certain other conditions that were not met. As a result, the Company
was refunded the advance payment.                             

Hard Disc Caf, Inc.                                                             
--------------------                                                            

        On November 1, 2001, the Company signed a non-binding letter of intent
       to acquire Hard Disk Cafe, Inc., a privately held Florida corporation
    which intended to develop and license themed internet cafes. Terms
        called for the Company to pay $1,250,000 in cash and 25 million shares
      of common stock. On August 4, 2002, management of the Hard Disc Caf,
   Inc. ceased all operations of the company. By mutual consent, all
   parties agreed to unwind the transaction. In connection with this
        transaction, the Company had advanced a total of $146,154 to Hard Disc
     Caf, Inc. Of this amount, the Company anticipates receiving $35,456
    and accordingly has recorded a loss of $110,698 on these advances.

Card Universal Corporation, Inc.                                                
--------------------------------                                                

    On June 12, 2002, the Company entered into a non-binding letter of
      intent to acquire Card Universal Corporation, Inc., a privately held
        development stage Florida corporation in the business of providing and
  marketing prepaid "Stored Money Cards." The acquisition value is
      estimated at 3 million dollars, subject to a third party independent
valuation.                                                    

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 Notes to the Financial Statements
September 30, 2002

NOTE 4 - COMMITMENTS AND CONTINGENCIES                                          

Litigation                                                                      
----------                                                                      

       In November 1998, the Company and its predecessor affiliates filed an
         action against the lessor of its leases for the Concord and San Marcos,
      California multipoint distribution service channels. Thereafter, the
  lessor cross-complained against the Company and its predecessors
alleging breach of contract. On December 9, 1999, a settlement
        agreement was signed, which provided for the Company to pay $87,375 to
    the lessor, in the fiscal years ended September 30 1998, 1999, and
        2000. Under terms of the settlement agreement, the Company also had an
     option to purchase the Concord and San Marcos leases for a price of
         $250,000 each, less lease payments already made. The Company elected to
        exercise the option to purchase the Concord lease, and the appropriate
transfer procedure has been initiated with the U.S. Federal   
     Communications Commission (FCC) which is still pending. The Company
       believes that under current FCC regulations it is not required to pay
         the $250,000 purchase price until such time as the FCC has approved the
        transfer of the license. Management has abandoned the pursuit of these
leases and licenses.                                          

      The Company borrowed from Credit Bancorp $328,000 in August 1999 and
      $412,000 in October 1999. The terms of this loan are 7% interest per
        annum payable, semiannually on the last day of February and September,
    with the principal due September 30, 2002. On August 26, 1999, the
      Company filed suit against Credit Bancorp, in U.S. District Court in
      San Francisco, regarding improprieties on the part of Credit Bancorp
       relating to the August 1999 loan. The case was settled on October 11,
     1999. As part of the settlement agreement, Credit Bancorp agreed to
    convert the original loans granted to the Company to a convertible
       debenture in the amount of $740,000. On October 11, 1999, the Company
         issued a convertible unsecured debenture for $740,000 to Credit Bancorp
 in settlement of this obligation. The terms of this convertible
       unsecured debenture are 7% interest per annum payable semiannually on
the last day of February and September, with the principal due
     September 30, 2002. Credit Bancorp's receiver agreed to convert the
    principal and accrued interest owing on the debenture into 482,734
shares (pre-reverse split)                                    

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 Notes to the Financial Statements
September 30, 2002

NOTE 4 - COMMITMENTS AND CONTINGENCIES (continued)                              

         of the Company's stock during the fiscal year ended September 30, 2000.
As of December 12, 2002, the Company has not issued the stock.

     On April 19, 2001, the Company was served with a complaint alleging
unjust enrichment and a violation of California Business and  
      Professions Code by Broad Horizons, Inc., a Florida corporation. The
       complaint stems from allegations that the Company improperly received
monetary benefits from the Company's intended acquisition of  
       Comunicacoes 100Fio, Ltda, a Brazilian corporation, and the Company's
  subsequent relations with Luis Cuza, a former vice-president and
        director of Broad Horizons, Inc., and a former member of the Company's
     board of directors. The Company denies the allegations and plans to
file a response to the complaint. Management believes that the
  resolution of this matter will not have a material effect on the
Company's financial statements.                               

  On July 20, 2001, WSI, Inc., a Puerto Rican corporation, and its
        principal officer and shareholder Howard Hager, filed suit against the
 Company in the U.S. District Court in Puerto Rico for breach of
        contract and damages in the amount of $4,675,000. The claims arise out
       of an alleged agreement on the part of the Company to acquire WSI and
provide it with substantial financing. A default judgment was 
     entered in WSI's favor. On November 26, 2002, the Company reached a
        settlement agreement with WSI and Mr. Hager. The Company has agreed to
        issue $200,000 of common stock, pay $50,000 to the trustee of WSI, and
        has executed a two year consulting agreement with Mr. Hager, valued at
$120,000. All claims have been cancelled under this agreement.

Operating Leases                                                                
----------------                                                                

      The Company leases its executive and administrative offices under an
     operating lease with a term of three years. The lease is cancelable
    after the first year with ninety days notice. Future minimum lease
payments required under this lease are as follows at          
September 30, 2002:                                           

Fiscal year                                                   
Ending September 30,                                          
--------------------                                          

2003                 $36,800                        
2004                  39,600                        
2005                  13,200                        
-------   
$89,600   

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 Notes to the Financial Statements
September 30, 2002

Management Agreement                                                            
--------------------                                                            

        The Company entered into a three year consulting agreement with Overseas
  Communications Limited on November 2, 2001, for the management and
        business advisory services provided by Mr. Michael Zwebner, Chairman and
CEO of the Company. The Agreement calls for a monthly payment of
      $20,000, payable in cash or the Company's common stock. For the fiscal
   year ended September 30, 2002, the Company paid $20,000 in cash and
issued 365,966 shares of common stock under this agreement.     

Settlement Agreement                                                            
---------------------                                                           

         As described more fully in Note 11, below, the Company has entered into
      a settlement agreement with the Andrew Corporation, formerly a major
       supplier to the Company. The related note payable for $300,000 is due
       and payable on April 15, 2004, and is to be secured by 300,000 shares
         of the Company's stock. In the event that the $300,000 is not paid when
       due, and if the security's value does not equal or exceed $300,000 at
      that time, then the previous balance of $1,400,000 will again be due
and payable.                                                  

NOTE 5 - STOCKHOLDERS EQUITY                                                    

         On May 21, 2002, stockholders approved a measure to increase the number
of authorized common shares from 300 million to 800 million.  

  The Company's Board of Directors approved a one-for-one-thousand
        reverse stock split, effective August 23, 2002. Fractional shares were
         rounded to the next share. All share and per share information reflects
this reverse stock split.                                     

   During the fiscal year ended September 30, 2001, the Company sold
26,328 shares of its common stock for net cash proceeds of    
 $1,277,681. The Company issued 24,171 shares of common stock in
conversion of outstanding debentures for an aggregate value of
$1,018,366. The Company also issued 1,230 shares of its common
        stock for services at an aggregate value of $258,250. Stock issued for
         services was at the reported market price for the shares at the time of
issuance.                                                     

   During the fiscal year ended September 30, 2002, the Company sold
45,254 shares of its common stock for net cash proceeds of    
  $173,500. The Company issued 4,898,636 shares of common stock in
conversion of outstanding debentures for an aggregate value of
  $2,616,436. The Company also issued 584,011 shares of its common
        stock for services at an aggregate value of $573,485. Stock issued for
         services was at the reported market price for the shares at the time of
issuance.                                                     

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Universal Communication Systems, Inc.   
 Notes to the Financial Statements
September 30, 2002

NOTE 6 - INCOME TAXES                                                           

        A reconciliation between the actual income tax benefit and the federal
statutory rate follows:                                       

                                                        [Enlarge/Download Table]

                                                        Fiscal years ended September 30,         
                                                      2002                          2001         
                                               -------------------        ---------------------  
                                               Amount           %            Amount          %   
                                               ------          ---           ------         ---  
                                                                                                 
Computed income tax benefit at statutory     $  446,833         34 %      $ 4,461,000        34 %
rate                                                                                             
Tax benefit reserved for doubtful valuation    (446,833)       (34)%       (4,461,000)      (34)%
                                             -----------                    ----------           

Income tax benefit                                       None                          None      
                                                         ----                          ----      

   At September 30, 2002, the Company had a net operating loss carry
        forward for federal tax purposes of approximately $28,600,000 which if
       unused to offset future taxable income, will expire between the years
2011 to 2021. A valuation allowance has been recognized to    
  offset the related deferred tax assets due to the uncertainty of
realizing any benefit therefrom.                              

        Under section 382 of the Internal Revenue Code, the utilization of net
       operating loss carryforwards is limited after an ownership change, as
    defined, to an annual amount equal to the market value of the loss
    corporation's outstanding stock immediately before the date of the
         ownership change multiplied by the highest Federal long-term tax exempt
       rate in effect for any month in the 3 calendar month period ending in
       the calendar month in which the ownership change occurred. Due to the
  ownership changes as a result of the May 1998 reorganization and
         subsequent stock issuances, any future realization of the Company's net
operating losses will be severely limited.                    

    Significant components of the Company's deferred tax assets are as
follows:                                                      

                                                  2002              2001
                                                  ----              ----
        Net operating loss carryforwards         $28,000,000       $21,906,000

         Valuation allowance                      (28,000,000)      (21,906,000)
                                                  ----------        ----------
     Net deferred tax assets                      None              None
                                                  ----              ----

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Universal Communication Systems, Inc.   
 Notes to the Financial Statements
September 30, 2002

NOTE 7 - NET LOSS PER COMMON SHARE                                              

       Net loss per common share, basic and diluted, has been computed using
       weighted average common shares outstanding. The effect of outstanding
stock options and warrants has been excluded from the dilutive
computation, as their inclusion would be anti-dilutive.       

                                                                [Download Table]

                                                  Fiscal Year Ended       
                                                    September 30,         
                                                2002              2001    
                                                ----              ----    
                                                                          
Net loss                                  $  (1,270,692)     $(13,003,483)
                                          =============      ============ 

Weighted average number of common shares        229,239           107,316 
                                          =============      ============ 
Basic and diluted loss per share          $       (5.54)     $    (122.27)
                                          =============      ============ 

    The following common stock equivalents have been excluded from the
 dilutive computation, as their inclusion would be anti-dilutive

   Stock options                   7,950         3,750
   Convertible warrants           20,121         3,600
                                  ------         -----
                                  28,071         7,350

NOTE 8 - STOCK OPTION PLANS                                                     

Nonstatutory Stock Options                                                      
--------------------------                                                      

      The Company has issued stock options under Nonstatutory stock option
     agreements. The options are granted at the fair market value of the
         shares at the date the option is granted. The options are granted for a
     period of 5 years, and are fully exercisable during the term of the
option period or within thirty (30) days of the participant's 
resignation or termination.                                   

    Combined transactions in non-employee options for the fiscal years
ended September 30, 2002 and 2001 are as follows:             

                                                        [Enlarge/Download Table]

                                              2002                   2001               
                                              ----                   ----               
                                                    Average                             
                                   Number of        Exercise  Number of      Average    
                                    Shares           Price     Shares     Exercise Price
                                     -----           ------    -------    --------------

                                                                                        
Options outstanding October 1        1,650           $95.00        600        $95.00    
Granted                                 --               --      1,050         15.00    
Cancelled/Expired                       --               --         --            --    
Exercised                               --               --         --            --    
                                     -----           ------    -------        ------    
Options outstanding, September 30    1,650           $95.00      1,650        $95.00    
                                     =====           ======    =======        ======    

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 Notes to the Financial Statements
September 30, 2002

NOTE 8 - STOCK OPTION PLANS (continued)                                         

Incentive Stock Plan                                                            
--------------------                                                            

      The Company adopted an incentive stock plan on August 5, 1998, which
    was approved by the shareholders on March 1, 2001. The options are
     granted at the fair market value of the shares at the date that the
      option is granted. The options are granted for a period of 10 years,
        and are exercisable after one year from the date of grant, at a vested
     rate of 20% per year during the term of the option period or within
       thirty (30) days of the participant's resignation or termination. The
       number of shares of stock covered by each outstanding option, and the
       exercise price per share thereof set forth in each such option, shall
         be proportionately adjusted for any stock split, and or stock dividend.
    All such options were being treated as non-statutory stock options
  until the incentive stock plan was approved by the shareholders.

      Combined transactions in employee options for the fiscal years ended
September 30, 2002 and 2001 are as follows:                   

                                                        [Enlarge/Download Table]

                                             2002                         2001             
                                             ----                         ----             
                                                    Average                                
                                   Number of       Exercise      Number of      Average    
                                    Shares          Price         Shares     Exercise Price
                                                                                           
Options outstanding October 1       6,300           $602.00      3,250           $ 95.00   
Granted                                 0              0         3,050             15.00   
Cancelled/Expired                       0              0             0             0       
Exercised                               0              0             0             0       
                                    -------------------------------------------------------
Options outstanding, September 30   6,300           $602.00      6,300           $318.00   
                                    =====           =======      =====           =======   

Compensation Costs                                                              

The Company applies APB Opinion 25 in accounting for its stock
        compensation plans discussed above. Accordingly, no compensation costs
        have been recognized for these plans in 2002 or 2001. Had compensation
   costs been determined on the basis of fair value pursuant to FASB
Statement No. 123, net loss and loss per share would have been
increased as follows:                                         

                                                                [Download Table]

                                        2002          2001     
                                        ----          ----     
                                                               
Net loss:                                                      
           As reported             $( 1,314,215)  $(13,121,000)
                                    ============    ===========
           Pro forma               $( 1,314,215)  $(13,171,600)
                                   =============   =========== 
Basic and diluted loss per share:                              

           As reported               $(5.73)        $(122.27)  
                                     =======        =========  
           Pro forma                 $(5.73)        $(122.27)  
                                     =======        =========  

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Universal Communication Systems, Inc.   
 Notes to the Financial Statements
September 30, 2002

NOTE 8 - STOCK OPTION PLANS (continued)                                         

      The fair value of each option granted is estimated on the grant date
       using the Black-Scholes model. The following assumptions were made in
estimating fair value:                                        

Assumption                                   Plans            
----------                                   -----            

Dividend yield                                     0%         
Risk-free interest rate                            4%         
Expected life                              5/10 years         
Expected volatility                               97%         

NOTE 9 - SECURITIES PURCHASE AGREEMENTS AND DEBENTURES                          

   On April 14, 2000, the Company entered into a Securities Purchase
     Agreement with six investors, for the purchase of investment units,
consisting of common stock, common stock purchase warrants, 4%
         subordinated debentures and preferred stock. Pursuant to the Securities
  Purchase Agreement, the investors purchased 760 shares of common
stock, warrants to purchase 3,600 shares of common stock, and 
      subordinated debentures with a principal amount of $3,280,000, for a
total amount of $4,800,000.                                   

     On August 10, 2000, the Company agreed with the investors to modify
        certain terms of the earlier funding agreement. Under the new terms of
         this agreement, the Company agreed to issue an additional 608 shares of
  common stock to the investors and subordinated debentures with a
principal amount of $1,312,000, in exchange for $1,920,000 and
 the investors' forbearance of certain rights under the original
    agreement. The conversion price of the subordinated debentures was
         amended to the lesser of 110% of the average per share market value for
      the five consecutive trading days immediately preceding the original
       issue date and 85% of the average per share market value for the five
        consecutive trading days immediately prior to the conversion date. The
        Company also agreed to change the floor price to $1,000 for the period
   between August 10, 2000 and October 14, 2000, $640 for the period
  between October 14, 2000 and April 14, 2001 and zero thereafter.

      On November 15, 2000, the investors agreed to modify the transaction
        documents in accordance with the Company's request and agreed to waive
     any breach of the original Securities Purchase Second Amendment. In
         consideration for these concessions, the Company agreed to increase the
         principal amount of the debentures held by the investors. The investors
     have returned to the Company 760 previously issued shares of common
     stock in exchange for the issuance of new debentures reflecting the
     increase in the principal amount. Under this agreement, the selling
        shareholders may convert the debentures at a conversion price equal to
      85% of the average of the closing trading prices of the common stock
for the five consecutive trading days immediately prior to the
conversion.                                                   

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 Notes to the Financial Statements
September 30, 2002

NOTE 9 - SECURITIES PURCHASE AGREEMENTS AND DEBENTURES (continued)              

 The Company entered into a common stock purchase agreement with
       Grenville Finance Ltd. dated January 26, 2001 for the future issuance
       and purchase of the Company's common stock. The common stock purchase
         agreement establishes what is sometimes termed an equity line of credit
         or an equity draw-down facility. Grenville Finance Ltd. committed up to
       $50 million to purchase the Company's common stock over a twenty-four
     month period. Once every 22 trading days, the Company may request a
    draw-down of up to $1,500,000 of the committed money, subject to a
     formula based on the average common stock price and average trading
      volume, setting the maximum amount of any request for any given draw
    down. Each draw down must be at least $50,000, and there must be a
    seven trading day waiting period between draw-downs. The amount of
         money that Grenville Finance Ltd. will provide and the number of shares
     the Company will issue to Grenville Finance Ltd. in return for that
     money is settled twice during a 22 day trading period following the
     draw down request based on the formula in the common stock purchase
  agreement. Grenville Finance Ltd. will receive a fifteen percent
     discount to the volume weighted average stock price for that 22 day
      period. The Company will receive the amount of the draw down less an
        escrow agent fee of $750 for each draw-down amount and an 8% placement
      fee payable to the placement agent, Union Atlantic, LC. In addition,
         Grenville Finance Ltd. will receive a three year warrant to purchase up
     to 15,000 shares of the Company's common stock at an exercise price
of $265 per share.                                            

On February 11,2001, the Company entered into a Stock Purchase
  Agreement with two investors for the purchase of 4,000 shares of
   common stock offered at $125 per share through its Post Effective
         Amendment to Form SB-2 Registration Statement. The total purchase price
was $500,000.                                                 

On March 29, 2001, the Company entered into a Senior Secured  
     Convertible Debentures and Warrants Purchase Agreement with several
   investors. The investors agreed to purchase $750 principal amount
       of 8% convertible debentures and the Company agreed to issue warrants
   to purchase 50 shares of common stock for each $100,000 principal
     amount purchased by the investors and issued warrants to purchase a
  total of 375 shares. The exercise price on the warrants shall be
         115% of the average of the five closing bid prices immediately prior to
        March 29, 2001. The term of the warrants is for three years. Under the
        agreement, the Company also agreed to remove the floor price on the 4%
       convertible debentures previously issued and to decrease the price of
        the warrants to $101.20. In addition, the Company pledged certain U.S.
licenses and leases as collateral against these debentures.   

       On June 7, 2001 the Company and several investors agreed to amend the
   March 29, 2001 Senior Secured Convertible Debentures and Warrants
         Purchase Agreement. The investors agreed to purchase $200,000 principal
        amount of 8% senior convertible debentures. The Company also agreed to
        issue letter warrants to purchase up to $125,000 divided by 85% of the
         average of the three lowest bid prices during the 22 trading days prior
to June 7, 2001.                                              

        On August 17, 2001, the Company received aggregate proceeds of $60,000
         pursuant to the Company's draw down notice to Grenville Finance Ltd. in
       connection with the common stock purchase agreement dated January 26,
       2001, evidencing an equity draw-down facility between the Company and
     Grenville Finance Ltd. This notice offered to sell up to $60,000 of
    common stock to Grenville Finance Ltd. Based on the formula in the
      stock purchase agreement, during the 22-day period beginning October
         10, 2001 and ending November 22, 2001. Grenville Finance Ltd. purchased
12,000 shares of the Company's common stock.                  

         On September 27, 2001 the Company and several investors agreed to amend
       the March 29, 2001 Senior Secured Convertible Debentures and Warrants
        Purchase Agreement. The investors agreed to purchase $60,000 principal
       amount of 8% senior convertible debentures. No warrants were involved
    in this amendment to the Senior Secured Convertible Debentures and
    Warrants Purchase Agreement. The convertible debentures, including
accrued interest, are due February through April 2005.        

F-22

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 Universal Communication Systems, Inc.
 Notes to the Financial Statements
September 30, 2002

NOTE 9 - SECURITIES PURCHASE AGREEMENTS AND DEBENTURES (continued)              

        On February 21, 2002 the Company and several investors agreed to amend
       the March 29, 2001 Senior Secured Convertible Debentures and Warrants
         Purchase Agreement. The investors agreed to purchase $180,000 principal
       amount of 8% senior convertible debentures. No warrants were involved
    in this amendment to the Senior Secured Convertible Debentures and
    Warrants Purchase Agreement. The convertible debentures, including
accrued interest, are due February through April 2005.        

      On June 13, 2001, the Company issued a draw-down notice to Grenville
     Finance Ltd. in connection with the common stock purchase agreement
         dated January 26, 2001, evidencing an equity draw down facility between
       the Company and Grenville Finance Ltd. This notice offered to sell up
    to $130,000 of common stock to Grenville Finance Ltd. based on the
   formula in the stock purchase agreement, during the 22-day period
         beginning on June 13, 2001 and ending on July 16, 2001, but at not less
than $15 per share. As part of the Company's draw-down notice,
       Grenville Finance Ltd. purchased 7,092 shares of the Company's common
         stock. These purchases resulted in aggregate proceeds of $130,000 being
paid and released from escrow by Grenville Finance Ltd.       

    The maturities of long term debt are shown in the following table:

                   Due in 2003                             $   886,449
                   Due in 2004                                 254,237
                   Due in 2005                               4,123,415
                                                           -----------
                                                           $ 5,264,101
                    Less current maturities                    (886,449)
                                                           -----------
                   Total long term                         $ 4,377,652
                                                           ===========

NOTE 10 - SETTLEMENT AGREEMENT AND NOTE PAYABLE                                 

      On January 14, 2001, the Company entered into a Settlement Agreement
 with its systems integrator, Andrew Corporation, to repay costs
       incurred in purchasing their services and equipment in an approximate
    amount of $1,400,000. Under the Loan Agreement, Andrew received an
        initial payment of $100,000 and was scheduled to receive an additional
         $100,000 each month until the loan was repaid. In addition, the Company
        issued a Company warrant to purchase no less than 200 and no more than
        500 shares of the Company's common stock. The warrants are exercisable
    until January 24, 2005 at an exercise price of $230 per share. The
       warrants were issued in lieu of interest, and the Company is required
      to register the shares underlying the warrants. Further, on July 23,
        2001, the Company entered into an agreement with Andrew to resolve all
   remaining indebtedness. This agreement required the return of all
        equipment previously shipped to Argentina, most of which has been held
         in the duty free zone in La Plata, Argentina, as well as some inventory
       held in the U.S. The equipment in Argentina has not yet been returned
     to Andrew. The Company has not been able to locate the equipment in
   Argentina. On September 3, 2002, the Company reached a settlement
    agreement with Andrew Corporation for all amounts due. The Company
      issued a note in the amount of $300,000 due eighteen months from the
     date of issue. The note bears no interest and is secured by 300,000
      shares of the Company's common stock. The agreement further provides
        that if the $300,000 is not paid when due, and if the security's value
        does not equal or exceed $300,000 on the due date, then the settlement
will be void and the entire $1,400,000 will again be due.     

F-23

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 Universal Communication Systems, Inc.
 Notes to the Financial Statements
September 30, 2002

NOTE 11 - CONVERSION OF DEBENTURES                                              

      Commencing on February 5, 2002 through September 30, 2002, debenture
       holders exercised their option to convert $2,492,885 of 4% debentures
      and $123,551 of 8% debentures into 4,898,636 shares of common stock.

NOTE 12 - RELATED PARTY TRANSACTIONS                                            

   As described in Note 3 above, the Company had advanced a total of
       $146,154 to Hard Disc Caf, Inc., of which only $35,456 is expected to
be repaid. Michael Zwebner, the Company's CEO, is the majority
shareholder of the Hard Disc Caf, Inc.                        

Mr. Zwebner is also the majority shareholder of Card Universal
    Corporation, Inc., with which the Company entered into a letter of
        intent to acquire Card Universal, at an estimated value of $3 million,
as discussed in Note 3 above.                                 

      Mr. Zwebner has also advanced certain funds to the Company, of which
$29,791 outstanding at September 30, 2002                     

F-24

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB’ Filing		Date		First		Last			Other Filings
		1/24/05		49
		4/15/04		43
		9/30/03		35					10KSB,  10KSB/A,  4,  8-K/A,  NTN 10K
Filed on:		2/14/03
		2/13/03		24		26
		2/6/03		29
		1/14/03		5		14
		12/31/02		38					10QSB,  NT 10-Q
		12/30/02		1		19			NT 10-K
		12/28/02		18
		12/12/02		42
		11/26/02		5		42			3
For Period End:		9/30/02		1		50			3,  NT 10-K
		9/3/02		49
		8/23/02		3		43
		8/22/02		7
		8/4/02		10		40
		6/17/02		9
		6/15/02		37
		6/12/02		4		40
		5/21/02		8		43			DEF 14A,  PRE 14A
		5/10/02		4		39
		4/25/02		9		22			DEF 14A
		4/4/02		7
		4/3/02		7
		2/21/02		9		49
		2/15/02		13
		2/5/02		50
		2/1/02		6
		1/1/02		37					4
		11/22/01		48
		11/6/01		20
		11/2/01		19		43
		11/1/01		4		40			3
		10/10/01		48
		9/30/01		9		46			10KSB,  10KSB/A,  NT 10-K
		9/27/01		13		48
		8/17/01		48
		7/23/01		49
		7/20/01		5		42
		7/16/01		49
		6/30/01		37					10QSB,  NT 10-Q
		6/13/01		49
		6/7/01		13		48
		4/19/01		42
		4/14/01		12		47
		3/29/01		13		49			8-K
		3/15/01		37					SB-2
		3/1/01		46					DEF 14A,  PRE 14A
		2/11/01		13
		1/26/01		9		49			POS AM
		1/14/01		49
		12/15/00		22		37			SB-2/A
		12/1/00		6
		11/15/00		12		47
		10/14/00		12		47
		9/30/00		22		42			10KSB,  ARS
		8/10/00		12		47
		6/30/00		22					10QSB,  SB-2/A
		6/15/00		37
		5/31/00		22					SB-2
		4/14/00		12		47
		3/11/00		40
		2/29/00		21		39
		2/10/00		4
		12/31/99		38
		12/15/99		37
		12/9/99		41
		11/30/99		21
		10/11/99		6		41
		10/1/99		36
		8/26/99		6		41
		12/15/98		37
		8/5/98		46
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