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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB


(MARK ONE)



|X BOX |  | Quarterly report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2001.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------

Or



|BOX |  | Transition Report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the transition period from
 to .
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------

Commission File No. 0-31363

Vocal Communications, Inc.  (Exact Name of Registrant as Specified in its Charter)


|                                                            |                                       |  |  |  |  |  | 
|----------------------------------------------------------- | ------------------------------------- |  |  |  |  |  | 
|Colorado                                                    | 84-1365550                           
|                                                           
|                                                           
|                                                           
|                                                           
|(State or other jurisdiction of                             | I.R.S. Employer Identification Number
|                                                           
|                                                           
|                                                           
|                                                           
|incorporation or organization)
PO Box 5255
Phoenix, Arizona | 85010                                
|                                                           
|                                                           
|                                                           
|                                                           
|(Address of Principal Executive Offices)                    | (Zip Code)                           

Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) if the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes - X BOX          No - BOX

As of June 30,
2001, the registrant had 7,200,000 shares of common stock
outstanding.

1



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##### Table of Contents



Vocal Communications, Inc.
Quarterly Report on Form 10-QSB For the Quarter Ended June 30, 2001
Table of Contents



|                  |  |                                                                                                                                                                                             |  |     
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                  |  |                                                                                                                                                                                             |  | Page
|                  |  |                                                                                                                                                                                             |  |     
|                  |  | Part I  Financial Information                                                                                                                                                              |  |     
|                 
|                 
|                 
|                 
|Item 1            |  | Financial Statements:                                                                                                                                                                       |  | 3   
|                 
|                 
|                 
|                 
|                  |  | Balance Sheets as of June 30, 2001 (unaudited) and December 31, 2000                                                                                                                        |  | 4   
|                 
|                 
|                 
|                 
|                  |  | Statements of Operations for the period from the date of inception, July 14, 2000
through June 30, 2001 (unaudited) and for the three and six month periods ended June
30, 2001 (unaudited) |  | 5   
|                 
|                 
|                 
|                 
|                  |  | Statements of Cash Flows for the period from the date of inception, July 14, 2000
through June 30, 2001 (unaudited) and for the three and six month periods ended June
30, 2001 (unaudited) |  | 6   
|                 
|                 
|                 
|                 
|                  |  | Notes to Financial Statements                                                                                                                                                               |  | 7   
|                 
|                 
|                 
|                 
|Item 2            |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                       |  | 8   
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                             |  |     
|                 
|                 
|                 
|                 
|                  |  | Part II  Other Information                                                                                                                                                                 |  |     
|                 
|                 
|                 
|                 
|Item 1            |  | Legal Proceedings                                                                                                                                                                           |  | 10  
|                 
|                 
|                 
|                 
|Item 2            |  | Changes in Securities and Use of Proceeds                                                                                                                                                   |  | 10  
|                 
|                 
|                 
|                 
|Item 3            |  | Submission of Matters to a Vote of Security Holders                                                                                                                                         |  | 10  
|                 
|                 
|                 
|                 
|Item 4            |  | Other Information                                                                                                                                                                           |  | 10  
|                 
|                 
|                 
|                 
|Item 5
Signatures |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                                                                                                             |  | 11  

2



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TABLE OF CONTENTS



|                         |                                                                                                     |  |  |  |  |  |  | 
|------------------------ | --------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I                  
|                         | Item 1. Financial Information                                                                      
|BALANCE SHEETS          
|STATEMENTS OF OPERATIONS
|STATEMENTS OF CASH FLOWS
|                         | #5
Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations
|                        
|Part II                 
|                        
|                         | Item 1. Legal Proceedings                                                                          
|                         | Item 2. Changes in Securities and Use of Proceeds                                                  
|                         | Item 3. Submission of Matters to a Vote of Security Voters                                         
|                         | Item 4. Other Information                                                                          
|                         | Item 5. Exhibits, Financial Statement Schedules and Reports on Form 8-K                            



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##### Table of Contents






Part I




Item 1.Financial Information



VOCAL COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

For The Six Months Ended
June 30, 2001



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##### Table of Contents






VOCAL COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS


|                                           |                                                                                                      |                      |         |          |         |               |         |          |              |  |  | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------- | ------- | -------- | ------- | ------------- | ------- | -------- | ------------ |  |  | 
|                                           |                                                                                                      |                      |         |          |         | June 30, 2001 |         |          | December 31, | 
|                                           |                                                                                                      |                      |         |          |         | (unaudited)   |         |          | 2000         | 
|                                           |                                                                                                      |                      |         |          |         |               |         |          |              | 
|ASSETS                                     |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|Current Assets:                            |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                            |                      | $       | 1,372    |         |               | $       | 117,048  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses                                                                                     |                      |         |         |         |               |         | 3,565    |             
|                                           |                                                                                                      |                      |         |          |         |              
|                                           |                                                                                                      | Total Current Assets |         |          | 1,372   |               |         |          | 120,613      | 
|                                          
|                                          
|                                          
|                                          
|Intangible assets                         
|                                          
|                                          
|                                          
|                                          
|                                           | Software licenses and development costs, net                                                         |                      |         | 61,121   |         |               |         | 92,168   |             
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                      | Goodwill, net        |         |          | 221,409 |               |         |          | 250,000      | 
|                                           |                                                                                                      |                      |         |          |         |              
|Total Assets                               |                                                                                                      | $                    | 283,902 |          |         | $             | 462,781 |         
|                                           |                                                                                                      |                      |         |          |         |              
|                                           |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|Current Liabilities:                       |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                     |                      |         | 68,916   |         |               |         | 9,034    |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued wages                                                                                        |                      |         | 81,500   |         |               |         |         |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liability                                                                                    |                      |         | 175,000  |         |               |         | 175,000  |             
|                                           |                                                                                                      |                      |         |          |         |              
|Total Current Liabilities                  |                                                                                                      |                      | 325,416 |          |         |               | 184,034 |         
|                                           |                                                                                                      |                      |         |          |         |              
|Commitments:                               |                                                                                                      |                      |        |          |         |               |        |         
|                                          
|                                          
|                                          
|                                          
|Stockholders Equity:                      |                                                                                                      |                      |         |          |         |               |         |         
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, .001 par value, 100,000,000 shares authorized,
7,200,000 shares issued and outstanding |                      |         | 7,200    |         |               |         | 7,200    |             
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid in capital                                                                           |                      |         | 113,800  |         |               |         | 113,800  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock subscribed                                                                              |                      |         | 413,590  |         |               |         | 306,602  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Deficit accumulated during development stage                                                         |                      |         | (576,104 | )       |               |         | (148,855 | )           
|                                           |                                                                                                      |                      |         |          |         |              
|Total Stockholders Equity Deficit         |                                                                                                      |                      | (41,514 | )        |         |               | 278,747 |         
|                                           |                                                                                                      |                      |         |          |         |              
|Total Liabilities and Stockholders Equity |                                                                                                      | $                    | 283,902 |          |         | $             | 462,781 |         
|                                           |                                                                                                      |                      |         |          |         |              

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##### Table of Contents






VOCAL COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS


|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |         |  
|----------------------------------- | ---------------------------------------- | - | ------------- | ------- | ------------- | - | ------------------ | ------- | - | - | --------- | ------- | -
|                                    |                                          |   | Three Months  |         | Six Months    |   | Cumulative        
|                                    |                                          |   | Ended         |         | Ended         |   | During Development
|                                    |                                          |   | June 30, 2001 |         | June 30, 2001 |   | Stage             
|                                    |                                          |   | (unaudited)   |         | (unaudited)   |   | (unaudited)       
|                                    |                                          |   |               |         |               |   |                   
|Revenues                            |                                          | $ |              |         |               | $ |                   |         |   | $ |          |        
|                                   
|                                   
|                                   
|                                   
|Cost of Revenues                    |                                          |   |              |         |               |   |                   |         |   |   |          |        
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        
|Gross Profit                        |                                          |   |              |         |               |   |                   |         |   |   |          |        
|                                   
|                                   
|                                   
|                                   
|General and Administrative Expenses |                                          |   | 270,671       |         |               |   | 404,219            |         |   |   | 551,637   |        
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        
|Net Loss from Operations            |                                          |   | (270,671      | )       |               |   | (404,219           | )       |   |   | (551,637  | )      
|                                   
|                                   
|                                   
|                                   
|Other Income (Expense):             |                                          |   |               |         |               |   |                    |         |   |   |           |        
|                                   
|                                   
|                                   
|                                   
|                                    | Loss on disposition of intangible assets |   |               | (22,391 | )             |   |                    | (22,391 | ) |   |           | (22,391 | )
|                                   
|                                   
|                                   
|                                   
|                                    | Interest income                          |   |               |         |               |   |                    |        |   |   |           | 17      |  
|                                   
|                                   
|                                   
|                                   
|                                    | Interest expense                         |   |               |         |               |   |                    |        |   |   |           | (73     | )
|                                   
|                                   
|                                   
|                                   
|                                    | Foreign currency transaction loss        |   |               | (160    | )             |   |                    | (639    | ) |   |           | (2,020  | )
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        
|Net Loss                            |                                          | $ | (293,222      | )       |               | $ | (427,249           | )       |   | $ | (576,104  | )      
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        
|Basic Loss Per Common Share         |                                          | $ | (0.04         | )       |               | $ | (0.05              | )       |   | $ | (0.07     | )      
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        
|Weighted Average Shares Outstanding |                                          |   | 7,935,560     |         |               |   | 7,879,204          |         |   |   | 7,879,204 |        
|                                    |                                          |   |               |         |               |   |                    |         |   |   |           |        

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VOCAL COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS


|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |   |          |          |          |  
|------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | -------- | ------------- | -------- | ------------- | -------- | ----------------- | -------- | - | -------- | -------- | -------- | -
|                                                  |                                   |                                                                                                         |                                                 |                                           |          | Three Months  |          | Six Months    |          | Cumulative       
|                                                  |                                   |                                                                                                         |                                                 |                                           |          | Ended         |          | Ended         |          | During           
|                                                  |                                   |                                                                                                         |                                                 |                                           |          | June 30, 2001 |          | June 30, 2001 |          | Development Stage
|                                                  |                                   |                                                                                                         |                                                 |                                           |          | (unaudited)   |          | (unaudited)   |          | (unaudited)      
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                  
|Increase (Decrease) in Cash and Cash Equivalents: |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Cash flows from operating activities:                                                                   |                                                 |                                           |          |               |          |               |          |                   |          |   |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Net Loss                                                                                                |                                                 | $                                         | (293,222 | )             |          | $             | (427,249 | )                 |          | $ | (576,104 | )       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Adjustments to reconcile net loss to net
cash used by operating activities:                             |                                                 |                                           |          |               |          |               |          |                   |          |   |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Amortization                                    |                                           |          | 56,710        |          |               |          | 74,468            |          |   |          | 80,293   |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Issuance of stock for services                  |                                           |          |              |          |               |          |                  |          |   |          | 71,000   |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Loss on write-off of acquired intangible assets |                                           |          | 22,391        |          |               |          | 22,391            |          |   |          | 22,391   |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Changes in Assets and Liabilities:                                                                      |                                                 |                                           |          |               |          |               |          |                   |          |   |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Prepaid expenses                                |                                           |          | 3,565         |          |               |          | 3,565             |          |   |          |         |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Accounts payable                                |                                           |          | 63,705        |          |               |          | 59,882            |          |   |          | 68,916   |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Accrued Wages                                   |                                           |          | 59,500        |          |               |          | 81,500            |          |   |          | 81,500   |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                  |                                   |                                                                                                         |                                                 | Net cash used by operating activities     |          |               | (87,351  | )             |          |                   | (185,443 | ) |          |          | (252,004 | )
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Cash flows from investing activities:                                                                   |                                                 |                                           |          |               |          |               |          |                   |          |   |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Purchase of intangible assets                   |                                           |          | (21,055       | )        |               |          | (37,221           | )        |   |          | (160,214 | )       
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         |                                                 | Net cash used by investing activities     |          |               | (21,055  | )             |          |                   | (37,221  | ) |          |          | (160,214 | )
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Cash flows from financing activities:                                                                   |                                                 |                                           |          |               |          |               |          |                   |          |   |          |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         | Proceeds from common stock subscribed           |                                           |          | 100,688       |          |               |          | 106,988           |          |   |          | 413,590  |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   |                                                                                                         |                                                 | Net cash provided by financing activities |          |               | 100,688  |               |          |                   | 106,988  |   |          |          | 413,590  |  
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|Net change in cash and cash equivalents           |                                   |                                                                                                         | (7,718                                          | )                                         |          |               | (115,676 | )             |          |                   | 1,372    |  
|                                                 
|                                                 
|                                                 
|                                                 
|Cash and cash equivalents at beginning of period  |                                   |                                                                                                         | 9,090                                           |                                           |          |               | 117,048  |               |          |                   |         |  
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|Cash and cash equivalents at end of period        |                                   | $                                                                                                       | 1,372                                           |                                           |          | $             | 1,372    |               |          | $                 | 1,372    |  
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|Supplemental disclosure of cash flow information: |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Interest paid                                                                                           |                                                 | $                                         |         |               |          | $             |         |                   |          | $ | 73       |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                  |                                   | Taxes paid                                                                                              |                                                 | $                                         |         |               |          | $             |         |                   |          | $ |         |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                  | Non-cash Investing and Financing: |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |   |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                   | Purchase of goodwill through accrued liabilities                                                        |                                                 | $                                         |         |               |          | $             |         |                   |          | $ | 175,000  |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  
|                                                  |                                   | Issuance of common stock as a commission on the
acquisition agreement with Larsen
  International, Inc. |                                                 | $                                         |         |               |          | $             |         |                   |          | $ | 50,000   |         
|                                                  |                                   |                                                                                                         |                                                 |                                           |          |               |          |               |          |                   |          |  

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##### Table of Contents






VOCAL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 1
Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates:


Basis of Presentation and Interim Financial Statements

The accompanying financial statements of Vocal Communications, Inc. (the
Company) have been prepared in accordance with generally accepted accounting
principles (GAAP), pursuant to the rules and regulations of the Securities
and Exchange Commission, and are unaudited. Accordingly, they do not include
all the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of the results
for the interim periods presented have been made. The results for the six-month
period ended June 30, 2001 may not be indicative of the results for the entire
year. These financial statements should be read in conjunction with the
Companys Annual Report on Form 10-KSB for the fiscal year ended December 31,
2000.

Earnings (Loss) Per Common and Common Equivalent Share

Earnings per share computations do not include the impact of potentially
dilutive securities because of their anti-dilutive effect. Accordingly, only
basic earnings per share has been disclosed which is computed by dividing
income available to common stockholders by the weighted average number of
shares outstanding for the period.

Note 2
Subsequent Event:


During the current quarter, as we continued to beta test our VoIP products and
services, we determined that the HearMe technology platform being used by us
did not offer the flexibility and scalability required by us for our products
and services. Further, on July 30, 2001, HearMe indicated that they would cease
operations altogether. During the period ending December 31, 2000, we had paid
$45,000 to license their technology. These amounts were capitalized at December
31, 2000 and were being amortized over the life of the license agreements.
Consequently, at June 30, 2001, we wrote-off the unamortized portion of the
HearMe licenses which amounted to $22,391. We expect to significantly enhance
the VoIP technology of our products and services by moving away from the HearMe
technology and focusing on the development of new proprietary technology that
we plan to develop.

Note 3
Going Concern:


The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The company has experienced significant losses and negative cash
flows from operations for the period ended June 30, 2001.

There can be no assurances that the Company will be able to continue as a going
concern in view of its financial condition. The Companys continued existence
will depend upon its ability to obtain sufficient additional capital in a
timely manner to fund its operations and to further develop its long-term
business plan. Any inability to obtain additional financing will have a
material adverse effect on the Company, including possibly requiring the
Company to significantly reduce or cease its operations.

These factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

7



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

The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and related notes contained in Part 1, Item 1 of this quarterly
report. This discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. We
may identify these statements by the use of words such as believe, expect,
anticipate, intend, plan and similar expressions. These forward-looking
statements involve several risks and uncertainties and our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of any of these risk factors (see risk factors as previously
disclosed in Part 1, Item 1 of our annual report filed April 16, 2001). These
forward-looking statements speak only as of the date of this quarterly report,
and we caution you not to rely on these statements without also considering the
risks and uncertainties associated with these statements and our business
addressed in our annual report.



Overview

Vocal Communications, Inc. (Vocal) is a communication solutions provider
specializing in audio and voice enabled applications, including direct
pc-to-pc, pc-to-phone, and phone-to-pc solutions. Our
voice-over-internet-protocol (VoIP) products and services are anticipated to
give corporations and organizations the ability to communicate financial
reports, executive and other staffing changes, product updates, or other
pertinent marketing or corporate information in a personalized real-time
interactive format. Vocal is currently developing a suite of software
applications that are expected to enhance both the internally and externally
focused communications efforts of small and medium sized enterprises (smes),
and small and mid-cap public corporations. Our Vocal Suite of VoIP products is
being designed to contain full-duplexing technology, meaning that verbal
discussion may occur at the same time, as in a standard telephone conversation.
Vocals VoIP technology is also being configured to be firewall friendly
allowing our products to operate behind corporate firewalls thereby allowing
anyone to talk to anyone at anytime, this includes multi-party conversations.

We intend to offer a core group of internally and externally focused
communication services to our corporate clients. Our service offerings are
being built around the common goal of establishing solid recurring revenue
streams. These core services, initially focused on assisting corporations
communicate in the areas of sales & marketing, investor relations, public
relations, internal collaboration, and distance learning are currently being
tested in a prototype environment and will include corporate event
broadcasting, marketing & promotion solutions, and interactive customer service
solutions. We expect our products and services to be released in phases
corresponding with technological development and client demand.

Vocals key business strategy is to become a global service provider for
corporate communications. We are planning future releases of German, Dutch and
Cantonese versions of our corporate communications solutions in order to
maximize the utilization of our VoIP technology in any given market.
Additionally, we plan to develop proprietary VoIP applications that are
expected to reduce the overall cost structure of VoIP technology in-general and
launch additional product lines into selected global markets.

Vocal expects the market to lead us to a division structure where our
product and service offerings are anticipated to address specifically focused
activities in a number of different market segments. We have identified more
than 10 related business activities in which we will be able to offer our core
services of voice and audio enabled Broadcasting, Marketing and Customer
Service to our clients. We expect these additional opportunities to
significantly enhance our business diversification and revenue mix.

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Results of Operations:

Revenues

Vocal commenced operations in July of 2000 and is currently in the
developmental stage. As such, most of our efforts are currently dedicated to
activities such as financial planning, raising capital, further developing our
technology, establishing sources of supply, acquiring property, plant and
equipment and other operating assets, and developing our markets. Additionally,
even though we have commenced our principal operations, to date, we have not
generated any revenues from these operations.

We did complete the final development of two of our products, VocalCAST and
Audio Update, in the second quarter and we have commenced sales activities with
regards to these two products. Additionally, Vocal signed agreements with two
of our strategic business partners allowing them and their network of resellers
to include our products and services in their suite of e-marketing solutions.

Cost-of-Sales

Vocal did not incur any cost-of-sales related expenses in the current
period.

General and Administrative Expenses

Total general and administrative expense for the three-month period ending
June 30, 2001 was $270,670. For the six-months ended June 30, 2001, total
general and administrative expense was $404,219. Significant components of
Vocals general and administrative expenses for the three and six month periods
ending June 30, 2001 are broken out as follows:

Three months ending June 30, 2001


| |  | Approximately $110,000 or 41% was incurred for administrative salaries.                            
|- |  | ---------------------------------------------------------------------------------------------------
| |  | Approximately $57,000 or 21% was incurred for amortization expense.                                
| |  | Approximately $48,000 or 18% was incurred for legal fees.                                          
| |  | Approximately $30,000 or 11% was incurred for accounting and filing fees.                          
| |  | Approximately $26,000 or 9% was incurred for all other general and
administrative related expenses.



Six months ending June 30, 2001


| |  | Approximately $189,000 or 47% was incurred for administrative salaries.                             
|- |  | ----------------------------------------------------------------------------------------------------
| |  | Approximately $74,000 or 18% was incurred for amortization expense.                                 
| |  | Approximately $56,000 or 14% was incurred for legal fees.                                           
| |  | Approximately $34,000 or 8% was incurred for accounting and filing fees.                            
| |  | Approximately $51,000 or 13% was incurred for all other general and
administrative related expenses.



Other Income and Expense

Total other expense for the three-month period ending June 30, 2001 was
$23,030. For the six-months ended June 30, 2001, total other expense was
$22,551. Essentially the entire amount for both periods is comprised of $22,391
resulting from the write-off of the unamortized portion of the HearMe licenses
at June 30, 2001. We had previously licensed technology from HearMe, a VoIP
technology provider; however, we determined during the quarter that the HearMe
technology platform being used by us did not offer the flexibility and
scalability required for our products and services. Furthermore, on July 30,
2001, HearMe indicated that they would cease operations altogether.

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Net Loss

Our net loss for the three months ended June 30, 2001 was $293,221. The
net loss for the six months ending June 30, 2001 was $427,249. Vocal is a
development stage entity and to date, we have not generated any revenues.
During the second quarter, we did complete the final development of two of our
products, VocalCAST and Audio Update, and we commenced sales activities with
regards to these two products. Additionally, Vocal signed agreements with two
of our strategic business partners allowing them and their network of resellers
to include our products and services in their suite of e-marketing solutions.



Liquidity and Capital Resources

Since inception in July 2000, we have financed our operations primarily
through the private placement of Vocals common stock. Vocal intends to
continue to raise capital via private placements in accordance with Regulation
S and Regulation D, Rule 506 of the Securities Act of 1933. Additionally, we
anticipate a public offering of Vocals common stock sometime during the
current year. At June 30, 2001, our principal source of liquidity was
approximately $1,400 in cash compared with approximately $117,000 in cash at
December 31, 2000.

We believe that we have the financial resources and products necessary to
generate sufficient capital to meet our anticipated business needs, including
capital expenditures and strategic operating programs, through the current
year. Thereafter, if cash generated by operations is insufficient to satisfy
our liquidity requirements, we may need to seek additional capital by selling
additional equity or through debt financing. Depending on market conditions, we
may consider alternative financing methods even if our financial resources are
adequate to meet our anticipated business requirements. Additionally, any
proposed financing may not be available on terms acceptable to us or at all;
and, the sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders.









Part II









Item 1.Legal Proceedings

Vocal Communications, Inc. was not involved in any legal proceedings
during the period covered by this filing.




Item 2.Changes in Securities and Use of Proceeds

Units of common stock subscribed totaling approximately $107,000 were
sold to investors during the current period.




Item 3.Submission of Matters to a Vote of Security Voters

The following matters were presented and voted on by the board of directors on July 9, 2001:



| |  |  | To reduce the number of corporate officers from 5 to 1.                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | To appoint C. Austin Burrell as the sole corporate officer.                                                                               
|
| |  |  | To reduce the number of shares available for grant, in
accordance with Vocals Incentive Stock Option Plan, from 30,000,000
to 10,000,000.
|
| |  |  | To transact any other business that may properly come before
the meeting or any adjournment of the meeting.                               




Item 4.Other Information

Item not applicable

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Item 5. Exhibits, Financial Statement Schedules and Reports on Form 8-K

|                                                                   |  |      |                           |  |        | 
|------------------------------------------------------------------ |  | ---- | ------------------------- |  | ------ | 
|                                                                   |  |      | Incorporated by Reference
|                                                                   |  |     
|                                                                   |  |      |                           |  | File   | 
|Exhibit Description                                                |  | Form |                           |  | Number | 
|                                                                   |  |      |                           |  |        | 
|No such filings were made during the period covered by this filing



Signatures

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

|                     |                            |                                                      
|-------------------- | -------------------------- | -----------------------------------------------------
|Date: August 8, 2001 | VOCAL COMMUNICATIONS, INC.
|                    
|                    
|                     |                            | By: /s/  C. Austin
Burrell                           
|                     |                            | C. Austin Burrell
        Chairman, President and CEO

11