UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                               Washington, DC 20549

                                   FORM 10-QSB

[X]   Quarterly Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the quarterly period ended September 30, 2001

[ ]   Transition Report pursuant to 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the transition period from __________ to __________

      Commission File Number 0-26341

                                PC-EPHONE, INC.
                                ---------------
         (Exact name of Small Business Issuer as specified in its charter)

Nevada                                            98-0197707
----------------------------------               -------------
(State or other jurisdiction of                  (IRS Employer
incorporation)                                 Identification No.)

   5375 Mira Sorrento Place, Suite 290, San Diego, California USA 92121
   ---------------------------------------------------------------------
               (Address of principal executive offices)
               ----------------------------------------

                              858-550-2020
                              ------------
                      (Issuer's telephone number)
                      ---------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (X) Yes   ( ) No

There were 16,197,039 common shares outstanding of as of October 31, 2001.

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


<PAGE>


                      PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

GENERAL

PC-EPhone, Inc.'s (the "Company's") un-audited financial statements for the nine
months ended September 30, 2001 are included with this Form 10-QSB. The
un-audited financial statements for the nine months ended September 30, 2001
include:

     (a)   Consolidated Balance Sheets as of September 30, 2001 and December 31,
           2000;
     (b)   Consolidated Statements of Loss and Deficit - for the three month and
           nine month periods ended September 30, 2001 and September 30, 2000;
     (c)   Consolidated Statements of Cash Flows - for the nine months ended
           September 30, 2001 and September 30, 2000;
     (d)   Consolidated Statements of Changes in Shareholders' Equity - for the
           nine months ended September 30, 2001 and the year ended December 31,
           2000;
     (e)   Notes to Consolidated Financial Statements

The un-audited financial statements have been prepared in accordance with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B and, therefore,
do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the nine months ended September 30, 2001 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2001.




<PAGE>

                              PC-EPHONE, INC.
                      (formerly Newlands Oil & Gas Inc.)
                          CONSOLIDATED BALANCE SHEETS
                   September 30, 2001 and December 31, 2000
                           (Stated in US Dollars)
                                (Unaudited)
                                 ---------

                                  ASSETS             September 30   December 31,
                                                         2001           2000
                                                         ----           ----
Current
   Cash                                              $       150    $    81,780
   Accounts receivable                                     8,721           -
   Prepaid expenses and deposits                          65,897         35,016
   Inventory                                              16,112           -
                                                     -----------    -----------
                                                          90,880        116,796

Loans receivable                                          20,000         20,000
Capital assets                                            47,640         23,884
Distribution rights - Note 3                           8,241,280      9,230,233
                                                     -----------    -----------

                                                     $ 8,399,800    $ 9,390,913
                                                     ===========    ===========

                                LIABILITIES
                                -----------
Current
   Accounts payable                                  $   318,670    $   157,591
   Note payable                                           16,352        120,000
   Convertible debentures payable - Note 5               554,882           -
   Advances payable                                      464,257           -
                                                     -----------    -----------

                                                       1,354,161        277,591
                                                     -----------    -----------

                            STOCKHOLDERS' EQUITY
                            --------------------

Capital stock - Notes 4 and 8                             16,197         16,122
Additional paid-in capital                            10,455,153     10,054,336
Deficit                                               (3,425,711)      (957,136)
                                                     -----------    -----------

                                                       7,045,639      9,113,322
                                                     -----------    -----------

                                                     $ 8,399,800    $ 9,390,913
                                                     ===========    ===========

Continuance of Operations - Note 1 (a)
Commitments - Notes 3 and 4
Contingent Liability - Note 6


APPROVED BY THE DIRECTORS:



/s/ Douglas Yee,           Director          /s/ Terrence King,         Director
-----------------------------------          -----------------------------------

                         SEE ACCOMPANYING NOTES

<PAGE>

                              PC-EPHONE, INC.
                      (formerly Newlands Oil & Gas Inc.)
                 CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
      for the nine and three month periods ended September 30, 2001 and 2000
                           (Stated in US Dollars)
                                 (Unaudited)
                                  ---------
<TABLE>
<CAPTION>
                                                        3 months ended September                 9 months ended September
                                                                   30,                                      30,
                                                        2001                2000                2001                2000
                                                        ----                ----                ----                ----
<S>                                                 <C>                <C>                <C>                <C>
General and Administrative Expenses
   Accounting and audit                             $     1,360        $     1,872        $    21,357        $     5,348
   Amortization of capital assets                         3,333               -                 7,175               -
   Amortization of distribution rights                  329,651               -               988,953               -
   Consulting                                           143,482             14,000            546,429             56,000
   Filing                                                 4,692                210             13,310              1,010
   Insurance                                             15,654               -                15,654               -
   Interest on convertible debentures                     4,882               -                 4,882               -
   Legal fees                                            44,931              4,074            136,201             10,185
   Marketing and promotion                                7,605               -                77,532               -
   Office and telephone                                  30,974                705             74,939              1,069
   Product testing                                         -                  -                17,769               -
   Rent                                                   6,275                678             36,630              2,739
   Salaries and benefits                                186,511               -               186,511               -
   Transfer agent                                         1,226                820              4,628              1,793
   Travel                                                27,110               -               137,853               -
                                                    -----------        -----------        -----------        -----------
Net loss before other                                   807,686             22,359          2,269,823             78,144
Other
   Non-cash compensation charge                            -                  -               201,892               -
   Exploration and development expenses                    -                  -                  -                21,960
   Write-off of oil and gas property                       -                  -                  -                73,000
   Interest income                                          (14)               (33)            (3,140)              (189)
                                                    -----------        -----------        -----------        -----------

Net loss for the period                                 807,672             22,326          2,468,575            172,915
Deficit, beginning of the period                      2,618,039            419,085            957,136            268,496
                                                    -----------        -----------        -----------        -----------

Deficit, end of the period                          $ 3,425,711        $   441,411        $ 3,425,711        $   441,411
                                                    ===========        ===========        ===========        ===========

Net loss per share                                  $     0.050        $     0.002        $     0.153        $     0.015
                                                    ===========        ===========        ===========        ===========

Weighted average number of shares
 outstanding                                         16,191,269         11,297,167         16,143,387         11,297,167
                                                    ===========        ===========        ===========        ===========
</TABLE>

                         SEE ACCOMPANYING NOTES

<PAGE>

                              PC-EPHONE, INC.
                      (formerly Newlands Oil & Gas Inc.)
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
           for the nine month periods ended September 30, 2001 and 2000
                          (Stated in US Dollars)
                               (Unaudited)
                                ---------


                                                   9 months ended September 30,
                                                        2001         2000
                                                        ----         ----
Cash Flows from (used in) Operating Activities
   Net loss for the period                           $(2,468,575)   $  (172,915)
   Less: items not involving cash:
   Amortization of capital assets                          7,175           -
   Amortization of distribution rights                   988,953           -
   Non-cash compensation charge                          201,892           -
   Write-off of oil and gas property                        -            73,000
Changes in non-cash working capital balances
 related to
  Operations
   Accounts receivable                                    (8,721)         3,734
   Prepaid expenses and deposits                         (30,881)          -
   Inventory                                             (16,112)          -
   Accounts payable                                      170,080         92,157
   Note payable                                          (13,648)          -
   Convertible debenture accrued interest                  4,882           -
   Advances payable                                      464,257           -
                                                     -----------    -----------

                                                        (700,698)        (4,024)
                                                     -----------    -----------

Cash Flows used in Investing Activity
   Acquisition of capital assets                         (30,932)          -
                                                     -----------    -----------


Cash Flows used in Financing Activities
   Convertible debenture proceeds                        550,000           -
   Increase in capital stock                                  33           -
   Increase in additional paid-in capital                 99,967           -
                                                     -----------    -----------

                                                         650,000           -
                                                     -----------    -----------

Net decrease in cash during the period                   (81,630)        (4,024)

Cash, beginning of the period                             81,780          4,409
                                                     -----------    -----------

Cash, end of the period                              $       150    $       385
                                                     ===========    ===========

Non-cash Transactions - Note 7

                         SEE ACCOMPANYING NOTES

<PAGE>

                              PC-EPHONE, INC.
                      (formerly Newlands Oil & Gas Inc.)
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
               for the nine month period ended September 30, 2001
                    and for the year ended December 31, 2000
                           (Stated in US Dollars)
                                (Unaudited)
                                 ---------
<TABLE>
<CAPTION>
                                                                           Additional
                                             Common Shares                  Paid-in
                                             -------------
                                           #            Par Value            Capital        Deficit         Total
                                       ----------       ----------        ----------       ----------     ----------
<S>                                   <C>               <C>               <C>              <C>            <C>
Balance, December 31, 1999            10,047,167        $     10,047      $    140,661     $   (268,496)  $   (117,788)
Issued pursuant to debt settlement
 agreements - $0.10                    2,500,000               2,500           247,500             -           250,000
Issued pursuant to acquisition of
 distribution rights - $2.70           3,500,000               3,500         9,446,500             -         9,450,000
Issued for cash pursuant to
 subscription agreements - $3.00          75,000                  75           224,925             -           225,000
- commission                                -                   -               (5,250)            -            (5,250)
Net loss for the year                       -                   -                 -            (688,640)      (688,640)
                                      ----------        ------------      ------------     ------------   ------------
Balance, December 31, 2000            16,122,167              16,122        10,054,336         (957,136)     9,113,322

Issued for cash pursuant to
 subscription agreements - $3.00          63,333                  63           189,937             -           190,000
Issued pursuant to a debt settlement
 agreement - $0.78                        11,539                  12             8,988             -             9,000
Non-cash compensation charge                -                   -              201,892             -           201,892
Net loss for the period                     -                   -                 -          (2,468,575)    (2,468,575)
                                      ----------        ------------      ------------     ------------   ------------

Balance, September 30, 2001           16,197,039        $     16,197      $ 10,455,153     $ (3,425,711)  $  7,045,639
                                      ==========        ============      ============     ============   ============
</TABLE>

                         SEE ACCOMPANYING NOTES

<PAGE>


                              PC-EPHONE, INC.
                      (formerly Newlands Oil & Gas Inc.)
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2001
                           (Stated in US Dollars)
                                 (Unaudited)
                                  ---------

Note 1   General
         -------

         (a)   Continuance of Operations

               These consolidated financial statements have been prepared on a
               going concern basis. The Company has a working capital deficiency
               of $1,263,281 as at September 30, 2001 and has an accumulated
               deficit of $3,425,711 since incorporation. Its ability to
               continue as a going concern is dependent upon its ability to
               generate profitable operations in the future and/or to obtain the
               necessary financing to meet its obligations and repay its
               liabilities arising from normal business operations when they
               come due. The outcome of these matters cannot be predicted with
               any certainty at this time. The Company has historically
               satisfied its capital needs primarily by issuing equity
               securities and arranging loans. Management plans to continue to
               provide for its capital needs during the year ending December 31,
               2001 by the issuance of equity securities, the arranging of loans
               and the continued development of sales of the PC-EPhone. These
               consolidated financial statements do not include any adjustments
               to the amounts and classifications of assets and liabilities that
               may be necessary should the Company be unable to continue as a
               going concern.

         (b)   Interim Statements

               While the information presented in the accompanying interim nine
               months consolidated financial statements is unaudited, it
               includes all adjustments which are, in the opinion of management,
               necessary to present fairly the financial position, results of
               operations and cash flows for the interim period presented. All
               adjustments are of a normal recurring nature. It is suggested
               that these interim financial statements be read in conjunction
               with the Company's December 31, 2000 annual audited consolidated
               financial statements.

Note 2   Summary of Significant Accounting Policies
         ------------------------------------------

         These consolidated financial statements have been prepared in
         accordance with accounting principles generally accepted in the United
         States of America. Because a precise determination of many assets and
         liabilities is dependent upon future events, the preparation of
         financial statements for a period necessarily involves the use of
         estimates which have been made using careful judgement. Actual results
         may differ from these estimates.

         The consolidated financial statements have, in management's opinion,
         been properly prepared within reasonable limits of materiality and
         within the framework of the significant accounting policies summarized
         below:

<PAGE>

Note 2   Summary of Significant Accounting Policies - (cont'd)
         ------------------------------------------

         (a)   Principles of Consolidation

               These consolidated financial statements include the accounts of
               the Company and its wholly owned subsidiaries, PC-EPhone Ltd. and
               PC-EPhone Canada Enterprises Inc. The Company accounts for its
               acquisitions by the purchase method. All intercompany
               transactions and balances have been eliminated on consolidation.

         (b)   Capital Assets and Amortization
               -------------------------------

               Capital assets are recorded at cost. The Company provides for
               amortization using the straight- line method at the following
               annual rates:

                       Office furniture and equipment       5 years
                       Computer equipment                   4 years

               Website development costs are expensed as incurred.

         (c)   Inventory
               ---------

               Inventory is valued at the lower of cost and net realizable
               value.

         (d)   Distribution Rights and Amortization

               Distribution rights are recorded at the fair value of the non-
               cash consideration paid for these rights (Note 3). The Company
               provides for amortization on a straight-line basis over the term
               of the distribution agreement (86 months). In accordance with
               Statement of Financial Accounting Standards No. 121, "Accounting
               for the Impairment of Long-lived Assets and for Long-lived Assets
               to be Disposed Of", the distribution rights will be reviewed for
               impairment on a continuous basis throughout the term of the
               distribution agreement whenever changes in circumstances indicate
               the carrying value of the asset may not be recoverable. An
               impairment loss would be recognized in the period it is
               determined.

         (e)   Foreign Currency Translation

               Foreign currency transactions are translated into U.S. dollars,
               the functional and reporting currency, by the use of the exchange
               rate in effect at the date of the transaction, in accordance with
               Statement of Financial Accounting Standards No. 52, "Foreign
               Currency Translation". At each balance sheet date, recorded
               balances that are denominated in a currency other than US dollars
               are adjusted to reflect the current exchange rate.

<PAGE>

Note 2   Summary of Significant Accounting Policies - (cont'd)
         ------------------------------------------

         (f)   Basic Loss per Share
               --------------------

               The Company reports basic loss per share in accordance with
               Statement of Financial Accounting Standards No. 128, "Earnings
               Per Share". Basic loss per share is computed using the weighted
               average number of shares outstanding during the periods. Diluted
               loss per share has not been provided as it would be antidilutive.

         (g)   Impairment of Long-lived Assets
               -------------------------------

               The Company reports the impairment of long-lived assets and
               certain identifiable intangibles in accordance with Statement of
               Financial Accounting Standards No. 121, "Accounting for the
               Impairment of Long-lived Assets and for Long-lived Assets to be
               Disposed Of". Certain long-lived assets and identifiable
               intangibles held by the Company are reviewed for impairment
               whenever assets or changes in circumstances indicate the carrying
               amount of an asset may not be recoverable. Accordingly, an
               impairment loss is recognized in the period it is determined.

         (h)   Income Taxes
               ------------

               The Company uses the liability method of accounting for income
               taxes pursuant to Statement of Financial Accounting Standards,
               No. 109 "Accounting for Income Taxes".

         (i)   Fair Value of Financial Instruments
               -----------------------------------

               The carrying values of cash, accounts receivable, loan
               receivable, accounts payable, note payable, advances payable and
               convertible debentures payable approximate fair value because of
               the short maturity of those instruments.

         (j)   Revenue Recognition
               -------------------

               Revenue from product sales is recognized when it is earned, the
               product has been shipped and collection is reasonably assured.

         (k)   Stock-based Compensation
               ------------------------

               The Company has accounted for stock-based compensation for non-
               employees and has provided the disclosures required under SFAS
               No. 123, "Accounting for Stock-based Compensation".

         (l)   Convertible Debt
               ----------------

               The Company has accounted for convertible debt as required by APB
               Option No. 14, "Accounting for Convertible Debt and Debt Issued
               with Stock Purchase Warrants".

<PAGE>

Note 3   Distribution Rights - Note 2 (d)
         -------------------

                                                            Net Carrying Amount
                                             Accumulated   Sept. 30,   Dec. 31,
                                  Cost      Amortization     2001        2000
                                  ----      ------------     ----        ----
         Distribution rights   $9,450,000  $1,208,720   $8,241,280   $9,230,233
                               ==========  ==========   ==========   ==========

         (a)(i)   By a distribution agreement dated November 6, 2000 and amended
                  February 8, 2001 with Cyberbank Corp. ("Cyberbank"), a Korean
                  Corporation, PC-EPhone Ltd. was granted the exclusive right to
                  market, distribute and sell, within the United States and
                  Canada, a wireless handheld device which performs internet,
                  personal computer, cellular phone and organizer functions (the
                  "PC-EPhone").

                  In consideration for these rights, the Company, on behalf of
                  PC-EPhone Ltd., issued 3,500,000 common shares to Cyberbank,
                  valued at $2.70 per share for total non-cash consideration of
                  $9,450,000 (Note 2 (d)). As a condition of maintaining the
                  rights, PC-EPhone Ltd. must purchase from Cyberbank a minimum
                  of 500,000 units annually upon Cyberbank receiving written
                  approval for the PC-Ephone by the US Federal Communications
                  Commission, which occurred on April 27, 2001.

                  The Company granted Cyberbank share purchase warrants
                  entitling Cyberbank the right to acquire 2,500,000 common
                  shares at $3.20 per share. These warrants are exercisable
                  during the period November 1, 2001 to December 31, 2001.
                  PC-EPhone Ltd. has agreed to issue two binding purchase orders
                  to Cyberbank for a total of $25,300,000, to be paid with cash
                  of $2,000,000 and letters of credit totalling $23,300,000. As
                  at September 30, 2001, this agreement is in default as the
                  Company has not paid the $2,000,000 cash obligation that was
                  due on May 21, 2001.

                  The term of this distribution agreement ends December 31, 2007
                  and will automatically renew from year to year thereafter.

<PAGE>

Note 3   Distribution Rights - Note 2 (d) - (cont'd)
         -------------------

           (ii)   By a warrant agreement dated November 6, 2000, Cyberbank
                  granted the Company warrants to purchase the number of common
                  shares as determined below at $223.54 per share. The warrants
                  are exercisable during the period from November 1, 2001 to
                  December 31, 2001.

                  The ultimate number of Cyberbank warrants to be issued to the
                  Company is to be determined based on the following:

                     If the Average Trading Price of the Company's common shares
                     is greater than or equal to $6.00 per share, 35,789
                     Cyberbank warrants will be issued;

                     If the Average Trading Price of the Company's common shares
                     is less than $6.00 per share, then the number of Cyberbank
                     warrants shall be determined as follows:

                     Number of Warrants = 35,789 Warrants X (Average Trading
                     Price/$6.00)

                  The "Average Trading Price" of the Company's common shares
                  means the average trading price of the common stock of the
                  Company for the twenty trading days prior to November 1, 2001
                  determined based on the closing price on each trading day.

         (b)   By a subdistributor agreement dated November 15, 2000 with
               FutureCom Global, Inc. ("FutureCom"), PC-EPhone Ltd. granted
               FutureCom the exclusive right to market, distribute and sell,
               within the United States and Canada, the PC-EPhone. As a
               condition of maintaining these rights, FutureCom was required
               to purchase from PC-EPhone Ltd. a minimum of 250,000 units
               quarterly, once Cyberbank had received written approval for the
               PC-EPhone by the US Federal Communications Commission. On July
               5, 2001, the Company terminated its agreement with FutureCom.

         (c)   On February 9, 2001 the Company, Cyberbank and FutureCom entered
               into a tri-party agreement (the "Tri-Party Agreement") that
               clarified some of the terms of the contractual relationships
               among the three companies. On July 5, 2001, FutureCom, rights
               and obligations were terminated.

<PAGE>

Note 4   Capital Stock - Note 5
         -------------

            (a)   Authorized:

                  50,000,000 common shares , $0.001 par value
                  1,000,000 preferred shares, $0.01 par value

            (b)   Warrants:

                  At September 30, 2001, there were share purchase warrants
                  outstanding entitling the holder thereof the right to purchase
                  2,500,000 common shares of the Company at $3.20 per share.
                  These warrants are exercisable during the period November 1,
                  2001 to December 31, 2001.

         (c)   Stock-based Compensation:

               At September 30, 2001, 62,500 stock options are outstanding to
               consultants of the Company. Each option entitles the holder
               thereof the right to acquire one common share of the Company at
               $3.00 per share. The options granted have terms ranging from 6 to
               20 months.

               Presented below is a summary of the stock option activity during
               the period:

                                                           Number of    Weighted
                                                            Stock        Average
                                                            -----
                                                           Options        Price
                                                           -------        -----
               Balance, December 31, 2000                      -            -
               Granted                                      225,000       $3.00
               Exercised                                       -            -
               Cancelled                                   (162,500)     ($3.00)
                                                           --------      ------
               Balance, September 30, 2001                   62,500       $3.00
                                                           ========      ======

               The number of stock options vested at September 30, 2001 is
               62,500.

               Pursuant to APBO No. 25, a non-cash compensation charge
               associated with consultants' options has been recorded in the
               consolidated financial statements. The total compensation charge
               determined based on the number of stock options originally
               expected to vest (75,000 stock options) was $257,684. As 62,500
               stock options have actually vested at September 30, 2001, the
               Company has expensed $201,892 as a non-cash compensation charge.
               The remaining balance of the total compensation charge will not
               be charged as these stock options were cancelled during the
               period.

<PAGE>

Note 4   Capital Stock - Note 5 - (cont'd)
         -------------

         (c)   Stock-based Compensation: - (cont'd)

               The fair value of the options granted was estimated on the date
               of the grant using the Black-Scholes option-pricing model with
               the following assumptions:

               Expected dividend yield   0.0%
               Expected volatility      49.0%
               Risk-free interest rate   4.8%
               Expected term in years    1-2

               The stock options outstanding at September 30, 2001 expire as
               follows:

                               Number              Expiry
                            Of Options              Date
                            ----------              ----
                               12,500          November 30, 2001
                               50,000          February 1, 2003
                             --------
                               62,500
                             ========

Note 5   Convertible Debentures Payable
         ------------------------------

         The Company closed a subordinated convertible debenture (the
         "Debenture") offering for a total aggregate amount of $550,000. The
         Debenture bears interest at 6% per annum payable on a quarterly basis
         until conversion or at maturity on August 8, 2002. The holder of the
         Debenture may convert at $1.25 per share on or before February 8, 2002
         or during the subsequent six months on or before August 8, 2002, at
         $0.50 per share. The Company may also demand conversion of the
         Debenture at one-half of the conversion price if the Company's common
         shares close at a price greater than $3.75 per share for ten
         consecutive trading days, and the Company may demand conversion at the
         conversion price if the Company's common shares close at a price
         greater than $5.75 per share for ten consecutive trading days.

Note 6   Contingent Liability
         --------------------

         A statement of claim has been filed against the Company and its
         subsidiary, PC-EPhone Canada Enterprises Inc., claiming breach of
         contract. Management of the Company is of the opinion that the claim is
         without foundation or merit and that the Company's subsidiary will
         likely be successful in its defence of the claim. The amount claimed is
         $39,910. Any settlement resulting from the resolution of this
         contingency will be accounted for in the period of settlement. On July
         11, 2001, $16,624 was garnished from the Company's bank account.

<PAGE>

Note 7   Non-Cash Transactions
         ---------------------

         Investing and financing activities that do not have a direct impact on
         current cash flows are excluded from the statement of cash flows.
         During the nine months ended September 30, 2001 and 2000, the following
         transactions were excluded from the statements of cash flows:

         September 30, 2001:

         i)  the Company issued 30,000 common shares at $3.00 per share pursuant
             to a subscription agreement, paid for by the settlement of a
             portion ($90,000) of the note payable outstanding.

         ii) the Company issued 11,539 common shares at $0.78 per share pursuant
             to a debt settlement agreement on accounts payable totalling
             $9,000.

         September 30, 2000:

         i)  the Company issued 2,500,000 common shares at $0.10 per share as
             settlement of loans payable totalling $86,000 and accounts payable
             totalling $164,000.

Note 8     Subsequent Event
           ----------------

           On November 8, 2001, the Company received bridge financing from
           Cyberbank in the amount of $190,000. The Company and Cyberbank have
           agreed that the instrument underlying these funds will be a
           subordinated convertible debenture (the "Cyberbank Debenture")
           providing for a total aggregate amount of $490,000 to the Company.
           The Cyberbank Debenture as currently negotiated matures in one year
           and shall bear no interest unless the Company defaults on one of the
           terms of the Cyberbank Debenture, in which case any amounts owing
           would bear interest of 10% per annum from the date of default until
           repayment or such time as the event of default is cured. The funds
           are voluntarily convertible by Cyberbank into the Company's common
           stock at a price of $0.50 per share at any time before the Cyberbank
           Debenture matures. The Company cannot force conversion. The Cyberbank
           Debenture transaction is to be closed in 3 stage payments of $190,000
           (paid), $150,000 and $150,000, however there can be no assurances.

<PAGE>

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

Results of Operation

During the nine months ended September 30, 2001, the Company has been actively
working towards obtaining approval for the PC-EPhone device from wireless
network carriers. The Company continues to be progressing in this regard but
until approvals have been granted, the Company is restricted in its ability to
generate revenue.

General and administrative expenses increased by $2,191,679 in the nine months
ending September 30, 2001 compared to the same period in 2000, which primarily
reflects an increase in: (a) marketing and promotion expenses; (b) travel
expenses; (c) consulting fees expenses; (d) salaries and benefit expenses
associated with the increase in the number of employees; (e) amortization
expense associated with the distribution rights obtained from Cyberbank; (f)
non-cash expenses associated with the granting of options (at fair value) to
consultants; (g) legal fees associated with an increase in securities filings
and corporate activities; and (h) general office expenses. Since the Company
did not initiate its new business until the latter part of year 2000, the
Company expected general and administrative expenses to increase in 2001
compared to year 2000 to reflect an increase in active operations.

In the nine months ended September 30, 2001, the Company attended the Consumer
Electronics Show in Las Vegas, the CTIA show in Las Vegas, the CEBIT trade show
in Germany, as well as the PC Expo trade show in New York, all of which were the
primary causes of the increase in marketing and promotion expenses as well as
the increase in travel expenses. Consulting fees expenses as well as salaries
and benefit expenses increased due to the additional efforts associated with
attempts to raise financing, the efforts to develop the distribution network for
the PC-EPhone, the efforts to obtain wireless network carrier approval, and the
opening of our San Diego office. The amortization of the distribution rights is
on a straight-line basis over the term of the agreement. In the nine months
ended September 30, 2001, nine of 86 months were amortized. Legal fees
increased due to an increase in corporate activities and filings along with
efforts to raise financing. Expenses are expected to increase for the remainder
of the year due to increased advertising, increased attendance by the Company at
trade shows, primarily Comdex Fall in Las Vegas, additional management fees and
salaries, as well as an increase in corporate filings and legal fees. As of the
nine months ended September 30, 2001, there were 62,500 outstanding and vested
options. The Company reported an expense of $201,892, based on the fair value of
62,500 vested options.

The Company realized a net loss in the nine months ended September 30, 2001 of
$2,468,575 or $0.153 per share, and a net loss of $807,672 or $0.05 per share in
the three months ended September 30, 2001, compared to a net loss of $172,915 or
$0.015 per share, and $22,326 or $ 0.002 per share in the respective periods in
2000.

Liquidity and Capital Resources

As of September 30, 2001, the Company had a working capital deficit of
$1,263,281 compared to a deficit of $160,795 at December 31, 2000. The Company

<PAGE>

has been unable to secure any short-term bank financing to address the working
capital deficiency and does not expect to be able to secure such bank financing
unless operations increase. The Company has been financing its operations
primarily from related-party loans and the subordinated convertible debenture,
which closed in the third quarter of 2001. Significant additional financing is
required immediately in order to meet the Company's cash needs. The Company's
expenses and cash requirements have been steadily increasing throughout the nine
months ended September 30, 2001, however the Company's cash inflows have not
been keeping pace mainly due to lack of revenue.

The Company, through PC-EPhone, Ltd., is obligated by the Distribution Agreement
to sell a minimum of 500,000 PC-EPhones during each 12-month period beginning
from April 30, 2001. In addition, PC-EPhone Ltd., has agreed to issue two
binding purchase orders to Cyberbank for a total of $25,300,000 to be paid with
cash of $2,000,000 and letters of credit totalling $23,300,000. The first
purchase order was completed in fiscal 2000. On February 8, 2001 the Company
executed a letter agreement with Cyberbank, whereby Cyberbank deferred the
second purchase until fifteen (15) business days after Cyberbank forwards final,
written confirmation of FCC approval to the Company, which occurred on April 30,
2001. The Company's obligation to pay the $2,000,000 was due on May 21, 2001,
however the obligation has not yet been met. The Company is in negotiations and
discussions with Cyberbank to revise and modify the respective companies' rights
and obligations under the Distribution Agreement.

The Company will need to increase its liquidity and capital resources to
purchase bulk inventory to fulfill large orders and, therefore, will need to
obtain additional financing for that purpose. If the Company is able in the
future to demonstrate its creditworthiness, it is anticipated that some
financing of inventory purchases will occur through the use of letters of
credit, but there is no guarantee that such financing can be obtained.

In the second quarter of 2001, Cyberbank Corp. was granted FCC approval and
Industry Canada approval of the PC-EPhone, which enables PC-EPhone units to be
sold in the United States and Canada. The Company did commence initial
marketing efforts in the third quarter of 2001. However, the PC-EPhones must
also obtain carrier approval in order for all of the features of the product to
be completely available.  If carrier approvals are not granted, the Company
will not be able to effectively generate significant sales of the PC-EPhone,
thus precluding development of substantial revenues. The Company's ability to
continue as a going concern is dependent on its ability to raise capital,
arrange loans or continue development of sales of the PC-EPhone to sustain
operations. These factors, particularly with respect to the Company's lack of
established source of revenue, raise substantial doubt that the Company will be
able to continue as a going concern. The Company expects carrier approvals to
be forthcoming, however there can be no assurance in this regard.

Other

On July 5, 2001, the Company, through its wholly owned subsidiary, PC-EPhone
Ltd., terminated the Subdistribution Agreement between PC-EPhone Ltd. and
FutureCom Global, Inc. ("FutureCom") dated November 15, 2000, along with the
amendments in the Tri-Party Agreement dated February 9, 2001.

<PAGE>

Pursuant to section 7 of the Tri-Party Agreement (among PC-EPhone Ltd.,
Cyberbank, and FutureCom), FutureCom was obligated to issue a purchase order and
a $50 million Standby Letter of Credit or Standby Letters of Credit on or before
February 28, 2001. As of July 5, 2001, no such letter(s) of credit had been
issued to Cyberbank Corp. or to PC-EPhone Ltd. Therefore, PC-EPhone Ltd.
terminated the Subdistribution Agreement and the Tri-Party Agreement.

On August 8, 2001, the Company closed a subordinated convertible debenture (the
"Debenture") offering for a total aggregate amount of $550,000. The Debentures
bear interest at rate of 6% per annum payable on a quarterly basis until
conversion or maturity which is one year from the date of issuance. The holder
of the Debentures may voluntarily convert at $1.25 per share during the first
six months after closing, and during the subsequent six months, they may
voluntarily convert at $0.50 per share. The Company may also demand conversion
of the Debentures at one-half of the conversion price if the Company's common
shares close at above $3.75 per share for ten consecutive trading days, and the
Company may demand conversion at the conversion price if the Company's common
shares close at above $5.75 per share for ten consecutive trading days.

Subsequent Events

On November 8, 2001, the Company received bridge financing from Cyberbank Corp.
("Cyberbank") in the amount of $190,000. The Company is expecting to receive an
additional $300,000 from Cyberbank in the upcoming months.  The Company and
Cyberbank have agreed that the instrument underlying these funds will be a
subordinated convertible debenture (the "Cyberbank Debenture") providing for a
total aggregate amount of $490,000 to the Company.   The Cyberbank Debenture as
currently negotiated matures in one year and shall bear no interest unless the
Company defaults on one of the terms of the Cyberbank Debenture, in which case
any amounts owing would bear interest of 10% per annum from the date of default
until repayment or such time as the event of default is cured.  The funds are
voluntarily convertible by Cyberbank into the Company's common stock at a price
of $0.50 per share at any time before the Cyberbank Debenture matures.  The
Company cannot force conversion.  The Cyberbank Debenture transaction is to be
closed in 3 stage payments of $190,000 (paid), $150,000 and $150,000, however
there can be no assurance that the Company will receive the second or third
tranches.

Item 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is not materially exposed to foreign currency and interest rate
changes as it deals primarily in U.S. dollars and has very few loans
outstanding. However, Cyberbank may be subject to foreign currency risks and
interest rate changes in connection with its dealings with its suppliers who may
be based in foreign countries.

The Company does not currently hedge the foreign currency exposure that results
from the translation of foreign subsidiary financial statements into U.S.
dollars in consolidation. The Company intends to assess the need to utilize
financial instruments to hedge foreign currency exposures on an ongoing basis.

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PART II - OTHER INFORMATION

Item 1    LEGAL PROCEEDINGS.

No material legal proceedings.


Item 2    CHANGES IN SECURITIES AND USE OF PROCEEDS.

On August 8, 2001, the Company closed a subordinated convertible debenture (the
Debenture") offering for a total aggregate amount of $550,000. The Debentures
bear interest at rate of 6% per annum payable on a quarterly basis until
conversion or maturity which is one year from the date of issuance. The holder
of the Debentures may voluntarily convert at $1.25 per share during the first
six months after closing, and during the subsequent six months, they may
voluntarily convert at $0.50 per share. The Company may also demand conversion
of the Debentures at one-half of the conversion price if the Company's common
shares close at above $3.75 per share for ten consecutive trading days, and the
Company may demand conversion at the conversion price if the Company's common
shares close at above $5.75 per share for ten consecutive trading days. With
respect to such issuances, the Company relies upon the exemption from
registration provided by Rule 506 under Regulation D promulgated under the
Securities Act of 1933, as amended.

On August 25, 2001, the Company issued 11,539 restricted common shares to a
consultant of the Company at $0.78 per share in lieu of $9,000 of consulting
fees. The Company relied upon the exemption from registration provided under
Section 4(2) of the Securities Act of 1933 as amended with respect to the
issuance of the foregoing securities.

In August 2001, the Company' board of directors adopted a Stock Option Plan. As
of November 14, 2001, no options have yet been granted pursuant to this Stock
Option Plan.


Item 3    DEFAULTS UPON SENIOR SECURITIES.

None.


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

None.


Item 5    OTHER INFORMATION.

On July 5, 2001, the Company, through its wholly owned subsidiary, PC-EPhone
Ltd., terminated the Subdistribution Agreement between PC-EPhone Ltd. and
FutureCom dated November 15, 2000, along with the amendments in the Tri-Party
Agreement dated February 9, 2001.

<PAGE>

Pursuant to section 7 of the Tri-Party Agreement (among PC-EPhone Ltd.,
Cyberbank, and FutureCom), FutureCom was obligated to issue a purchase order and
a $50 million Standby Letter of Credit or Standby Letters of Credit on or before
February 28, 2001. As of July 5, 2001, no such letter(s) of credit had been
issued to Cyberbank Corp. or to PC-EPhone Ltd. Therefore, PC-EPhone Ltd.
terminated the Subdistribution Agreement and the Tri-Party Agreement.

Also on July 5, 2001, Negar Towfigh resigned as a Director of the Company, but
remains on as Corporate Secretary. On the same day the Board of Directors
appointed Mr. Meltzer, the existing President and CEO, as a Director of the
Company.

On September 27, 2001, the Company launched the PC-ESolutions business unit,
which specializes in increasing productivity and efficiency in the work place by
creating technological solutions. The goal of PC-ESolutions is to provide the
Company with an additional source of revenue by offering software applications,
hardware, and accessories by way of referral arrangements. PC-ESolutions was
established to leverage the technology of the PC-EPhone by taking the concept
one step further and providing mobile software applications, solutions,
accessories and operating systems.

During the third quarter ended September 30, 2001, the Company entered into an
exclusive licensing agreement with Wicom Networks, an emerging wireless
development company, to provide 802.11 Access Points, ASIC Chips, PCMCIA cards
and wireless internet phone systems. The agreement is subject to approval by
the board of directors of both companies.

Also during the third quarter, the Company signed an agreement with Cyberbank
which grants the Company the rights to co-develop Cyberbank's future products
and allows the Company to act as a representative for Cyberbank in identifying
third parties who may have an interest in obtaining a license for Cyberbank's
intellectual property. The agreement allows the Company to go beyond the scope
of a distribution company.

Item 6    EXHIBITS AND REPORTS ON FORM 8-K

11.3   A report on Form 8K was filed with the Securities & Exchange Commission
       on July 19, 2001. This report described the termination of the
       Subdistribution Agreement between the Company and FutureCom, along with
       the termination of the amendments in the Tri-Party Agreement. Also
       disclosed was the resignation of Negar Towfigh as a Director of the
       Company and the appointment of David Meltzer as a Director.


<PAGE>

SIGNATURES

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

Date: November 14, 2001

PC-EPHONE, INC.



By: /s/ Douglas Yee

Douglas Yee
Chief Financial Officer & Director


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