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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

|           |  |                                                                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                                          
|[X]        |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarter ended January 31, 2003.         
|           |  |                                                                                                                                          
|[  ]       |  | Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______ to ______

Commission file number 000-49626

CORTELCO SYSTEMS PUERTO RICO, INC.

(Exact name of registrant as specified in its charter)


|                                     |  |                                                
|------------------------------------ |  | -----------------------------------------------
|PUERTO RICO
(State of incorporation) |  | 66-0567491
(I.R.S. Employer Identification No.)

1550 Ponce de Leon Ave. Suite 100, San Juan, Puerto Rico, 00926
(Address of principal executive office)

(787) 758-0000
(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. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the latest practicable date: 1,204,557 shares of Common
Stock, $0.01 par value, as of January 31, 2003.





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CORTELCO SYSTEMS PUERTO RICO, INC.
FORM 10-Q
QUARTER ENDED JANUARY 31, 2003
`

INDEX

|                              |                                                                                               |                                                                                                        |    |      |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | -- | ---- | - | 
|                              |                                                                                               |                                                                                                        |    | Page
|                              |                                                                                               |                                                                                                        |    |     
|Part I: FINANCIAL INFORMATION |                                                                                               |                                                                                                        |    |     
|                              | Item 1. Financial Statements (Unaudited)                                                      |                                                                                                        |    |      |  
|                              |                                                                                               | Condensed Balance Sheets as of January 31, 2003
and July 31, 2002                                      |    |      | 3 | 
|                              |                                                                                               | Condensed Statements of Operations for the Three Months
and Six Months ended January 31, 2003 and 2002 |    |      | 4 | 
|                              |                                                                                               | Condensed Statement of Changes in Stockholders Equity
for the Six Months ended January 31, 2003       |    |      | 5 | 
|                              |                                                                                               | Condensed Statements of Cash Flows for the Six Months
ended January 31, 2003 and 2002                  |    |      | 6 | 
|                              |                                                                                               | Notes to Condensed Financial Statements                                                                |    |      | 7 | 
|                              | Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                        |    | 14   |  
|                              | Item 3. Qualitative and Quantitative Disclosure about Market Risk                             |                                                                                                        |    | 26   |  
|                              | Item 4. Controls and Procedures                                                               |                                                                                                        |    | 26   |  
|Part II: OTHER INFORMATION    |                                                                                               |                                                                                                        |    |     
|                              | Item 1.
Legal Proceedings                                                                     |                                                                                                        |    | 27   |  
|                              | Item 2.
Changes in Securities                                                                 |                                                                                                        |    | 27   |  
|                              | Item 3.
Defaults upon Senior Securities                                                       |                                                                                                        |    | 27   |  
|                              | Item 4.
Submission of Matters to a Vote of Securities Holders                                 |                                                                                                        |    | 27   |  
|                              | Item 5.
Other Information                                                                     |                                                                                                        |    | 27   |  
|                              | Item 6.
Exhibits and Reports on Form 8-K                                                      |                                                                                                        |    | 27   |  
|SIGNATURES                    |                                                                                               |                                                                                                        | 28 |     

2



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|                                             |                                                                                                    |                                                                    |  |  |  |  |  | 
|-------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION              
|                                             | ITEM  1.    FINANCIAL STATEMENTS (UNAUDITED)                                                      
|                                             |                                                                                                    | Condensed Balance Sheets (Unaudited)                              
|                                             |                                                                                                    | Condensed Statements of Operations (Unaudited)                    
|                                             |                                                                                                    | Condensed Statement of Changes in Stockholders Equity (Unaudited)
|                                             |                                                                                                    | Condensed Statements of Cash Flows (Unaudited)                    
|                                             |                                                                                                    | Notes to Condensed Financial Statements (Unaudited)               
|                                             | ITEM  2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                                             | ITEM  3.    QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK                             
|                                             | ITEM  4.    CONTROLS AND PROCEDURES                                                               
|PART II  OTHER INFORMATION                 
|SIGNATURES                                  
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



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CORTELCO SYSTEMS PUERTO RICO, INC.
PART I  FINANCIAL INFORMATION




ITEM  1.    FINANCIAL STATEMENTS (UNAUDITED)

Cortelco Systems Puerto Rico, Inc.




Condensed Balance Sheets(Unaudited)

January 31, 2003 and July 31, 2002

(Dollars in thousands)

|                                 |                                                                                                               |                                      |        |        |             |  |          |        |   |  | 
|-------------------------------- | ------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------ | ------ | ----------- |  | -------- | ------ | - |  | 
|                                 |                                                                                                               |                                      |        |        | January 31, |  | July 31,
|                                 |                                                                                                               |                                      |        |        | 2003        |  | 2002    
|                                 |                                                                                                               |                                      |        |        |             |  |         
|                                 |                                                                                                               |                                      | ASSETS |        |             |  |          |        |   |  | 
|Current assets:                  |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Cash and cash equivalents                                                                                     |                                      | $      | 69     |             |  | $        | 333    |  
|                                 | Trade accounts receivable, net of allowance
for doubtful accounts of $762 and $864, respectively              |                                      |        | 1,936  |             |  |          | 2,016  |  
|                                 | Due from affiliated entities                                                                                  |                                      |        | 216    |             |  |          | 187    |  
|                                 | Current portion of investment in sales-type leases                                                            |                                      |        | 74     |             |  |          | 82     |  
|                                 | Inventories                                                                                                   |                                      |        | 2,733  |             |  |          | 2,989  |  
|                                 | Prepaid expenses                                                                                              |                                      |        | 186    |             |  |          | 296    |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Total current assets                                                                                          |                                      |        | 5,214  |             |  |          | 5,903  |  
|Investment in Sales-Types Leases |                                                                                                               |                                      | 13     |        |             |  | 47       |       
|Property and equipment, net      |                                                                                                               |                                      | 465    |        |             |  | 489      |       
|Goodwill                         |                                                                                                               |                                      | 382    |        |             |  | 382      |       
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Total                                                                                                         |                                      | $      | 6,074  |             |  | $        | 6,821  |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 |                                                                                                               | LIABILITIES AND STOCKHOLDERS EQUITY |        |        |             |  |          |        |   | 
|Current liabilities:             |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Trade accounts payable                                                                                        |                                      | $      | 1,116  |             |  | $        | 1,262  |  
|                                 | Due to affiliated entities                                                                                    |                                      |        | 202    |             |  |          | 147    |  
|                                 | Other accrued liabilities                                                                                     |                                      |        | 526    |             |  |          | 671    |  
|                                 | Deferred revenue                                                                                              |                                      |        | 265    |             |  |          | 315    |  
|                                 | Note payable                                                                                                  |                                      |        | 25     |             |  |          | 50     |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Total current liabilities                                                                                     |                                      |        | 2,134  |             |  |          | 2,445  |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|Commitments and Contingencies    |                                                                                                               |                                      |        |        |             |  |          |       
|Stockholders equity:            |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Preferred stock, par value $0.01 per share; authorized,
10,000,000 shares, no shares issued                   |                                      |        |       |             |  |          |       |  
|                                 | Common stock, par value $0.01 per share, 5,000,000 shares
authorized; 1,204,557 shares issued and outstanding |                                      |        | 12     |             |  |          | 12     |  
|                                 | Capital in excess of par value                                                                                |                                      |        | 6,865  |             |  |          | 6,865  |  
|                                 | Retained earnings(deficit)                                                                                    |                                      |        | (2,937 | )           |  |          | (2,501 | )
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Total stockholders equity                                                                                    |                                      |        | 3,940  |             |  |          | 4,376  |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       
|                                 | Total                                                                                                         |                                      | $      | 6,074  |             |  | $        | 6,821  |  
|                                 |                                                                                                               |                                      |        |        |             |  |          |       

See notes to condensed financial statements

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Cortelco Systems Puerto Rico, Inc.

Condensed Statements of Operations(Unaudited)

For the Three Months and Six Months Ended January 31, 2003 and 2002

(Dollars in thousands, except per share data)

|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|------------------------------------------- | ---------------------------------- | - | ------------------ | ----- | ---------------- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                            |                                    |   | Three Months Ended |       | Six Months Ended
|                                            |                                    |   | January 31,        |       | January 31,     
|                                            |                                    |   |                    |       |                 
|                                            |                                    |   | 2003               |       | 2002             |   | 2003  |       | 2002
|                                            |                                    |   |                    |       |                  |   |       |       |     
|Net revenues:                               |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Products                           |   | $                  | 800   |                  |   | $     | 1,645 |      |   | $     | 2,153 |  |   | $     | 4,547 | 
|                                            | Services                           |   |                    | 934   |                  |   |       | 838   |      |   |       | 1,818 |  |   |       | 1,816 | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Total net revenues                 |   |                    | 1,734 |                  |   |       | 2,483 |      |   |       | 3,971 |  |   |       | 6,363 | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Cost of revenues:                           |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Products                           |   |                    | 694   |                  |   |       | 1,510 |      |   |       | 1,800 |  |   |       | 3,845 | 
|                                            | Services                           |   |                    | 517   |                  |   |       | 421   |      |   |       | 1,041 |  |   |       | 908   | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Total cost of revenues             |   |                    | 1,211 |                  |   |       | 1,931 |      |   |       | 2,841 |  |   |       | 4,753 | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Gross profit                                |                                    |   | 523                |       |                  |   | 552   |       |      |   | 1,130 |       |  |   | 1,610 |      
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Operating expenses:                         |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Selling, general,
& administrative |   |                    | 761   |                  |   |       | 959   |      |   |       | 1,579 |  |   |       | 2,004 | 
|                                            | Separation costs                   |   |                    |      |                  |   |       | 167   |      |   |       |      |  |   |       | 250   | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                            | Total operating expenses           |   |                    | 761   |                  |   |       | 1,126 |      |   |       | 1,579 |  |   |       | 2,254 | 
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Loss from operations                        |                                    |   | (238               | )     |                  |   | (574  | )     |      |   | (449  | )     |  |   | (644  | )    
|Interest income                             |                                    |   | 7                  |       |                  |   | 4     |       |      |   | 13    |       |  |   | 8     |      
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Loss before income taxes                    |                                    |   | (231               | )     |                  |   | (570  | )     |      |   | (436  | )     |  |   | (636  | )    
|Income tax                                  |                                    |   |                   |       |                  |   |      |       |      |   |      |       |  |   |      |      
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Net loss                                    |                                    | $ | (231               | )     |                  | $ | (570  | )     |      | $ | (436  | )     |  | $ | (636  | )    
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|Basic and diluted net loss
per common share |                                    | $ | (0.19              | )     |                  | $ | (0.47 | )     |      | $ | (0.36 | )     |  | $ | (0.53 | )    
|                                            |                                    |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      

See notes to condensed financial statements

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Cortelco Systems Puerto Rico, Inc.

Condensed Statement of Changes in Stockholders Equity(Unaudited)

For the Six Months Ended January 31, 2003

(Dollars in thousands, except per share data)

|                            |  |              |           |            |  |           |    |           |  |       |       |  |  |   |        |   |  |   |       |  
|--------------------------- |  | ------------ | --------- | ---------- |  | --------- | -- | --------- |  | ----- | ----- |  |  | - | ------ | - |  | - | ----- | -
|                            |  | Common Stock |           | Capital in |  | Retained  |    |           |  |      
|                            |  |              |           | Excess of  |  | Earnings  |    |           |  |      
|                            |  | Shares       |           | Amount     |  | Par Value |    | (Deficit) |  | Total
|                            |  |              |           |            |  |           |    |           |  |      
|Balance at July 31, 2002    |  |              | 1,204,557 |            |  | $         | 12 |           |  | $     | 6,865 |  |  | $ | (2,501 | ) |  | $ | 4,376 |  
|Net loss                    |  |              |           |            |  |           |    |           |  |       |       |  |  |   | (436   | ) |  |   | (436  | )
|                            |  |              |           |            |  |           |    |           |  |       |       |  |  |   |        |   |  |   |       |  
|Balance at January 31, 2003 |  |              | 1,204,557 |            |  | $         | 12 |           |  | $     | 6,865 |  |  | $ | (2,937 | ) |  | $ | 3,940 |  
|                            |  |              |           |            |  |           |    |           |  |       |       |  |  |   |        |   |  |   |       |  

See notes to condensed financial statements

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Cortelco Systems Puerto Rico, Inc.

Condensed Statements of Cash Flows(Unaudited)

For the Six Months Ended January 31, 2003 and 2002

(Dollars in thousands)

|                                               |                                                                             |   |                  |      |      |   |      |      |  
|---------------------------------------------- | --------------------------------------------------------------------------- | - | ---------------- | ---- | ---- | - | ---- | ---- | -
|                                               |                                                                             |   | Six Months Ended
|                                               |                                                                             |   | January 31,     
|                                               |                                                                             |   |                 
|                                               |                                                                             |   | 2003             |      | 2002
|                                               |                                                                             |   |                  |      |     
|CASH FLOWS FROM OPERATING ACTIVITIES:          |                                                                             |   |                  |      |      |   |      |     
|                                               | Net loss                                                                    |   | $                | (436 | )    |   | $    | (636 | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|                                               | Adjustments to reconcile net loss to net cash
used in operating activities: |   |                  |      |      |   |      |      |  
|                                               | Depreciation and amortization                                               |   |                  | 72   |      |   |      | 96   |  
|                                               | Changes in operating assets and liabilities:                                |   |                  |      |      |   |      |      |  
|                                               | Decrease (increase) in:                                                     |   |                  |      |      |   |      |      |  
|                                               | Trade accounts receivables                                                  |   |                  | 80   |      |   |      | 354  |  
|                                               | Due from affiliated entities                                                |   |                  | (29  | )    |   |      | 195  |  
|                                               | Inventories                                                                 |   |                  | 256  |      |   |      | 504  |  
|                                               | Prepaid expenses                                                            |   |                  | 110  |      |   |      | 90   |  
|                                               | Increase (decrease) in:                                                     |   |                  |      |      |   |      |      |  
|                                               | Trade accounts payable                                                      |   |                  | (146 | )    |   |      | (469 | )
|                                               | Due to affiliated entities                                                  |   |                  | 55   |      |   |      | 133  |  
|                                               | Accrued liabilities                                                         |   |                  | (145 | )    |   |      | (247 | )
|                                               | Deferred revenue                                                            |   |                  | (50  | )    |   |      | (58  | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|                                               | Total adjustments                                                           |   |                  | 203  |      |   |      | 598  |  
|                                               |                                                                             |   |                  |      |      |   |      |     
|                                               | Net cash used in operating activities                                       |   |                  | (233 | )    |   |      | (38  | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|CASH FLOWS FROM INVESTING ACTIVITIES:          |                                                                             |   |                  |      |      |   |      |     
|                                               | Capital expenditures                                                        |   |                  | (48  | )    |   |      | (60  | )
|                                               | Net decrease (increase) in investment in
sales-type leases                  |   |                  | 42   |      |   |      | (9   | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|                                               | Net cash used in investing activities                                       |   |                  | (6   | )    |   |      | (69  | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|CASH FLOWS USED IN FINANCING ACTIVITIES:       |                                                                             |   |                  |      |      |   |      |     
|                                               | Payment on promissory note                                                  |   |                  | (25  | )    |   |      | (387 | )
|                                               |                                                                             |   |                  |      |      |   |      |     
|NET CHANGE IN CASH AND CASH EQUIVALENTS        |                                                                             |   | (264             | )    |      |   | (494 | )   
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |                                                                             |   | 333              |      |      |   | 959  |     
|                                               |                                                                             |   |                  |      |      |   |      |     
|CASH AND CASH EQUIVALENTS, END OF PERIOD       |                                                                             | $ | 69               |      |      | $ | 465  |     
|                                               |                                                                             |   |                  |      |      |   |      |     

See notes to condensed financial statements

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Cortelco Systems Puerto Rico, Inc.

Notes to Condensed Financial Statements(Unaudited)

For the Six Months Ended January 31, 2003 and 2002

Basis of Presentation

The accompanying unaudited condensed financial statements have been
prepared by Cortelco Systems Puerto Rico, Inc. (CSPR or the Company). It
is Managements opinion that these statements include all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly
the financial position, results of operations, and cash flows as of January 31,
2003 and for all periods presented.

CSPR, a Puerto Rico corporation, was a wholly-owned subsidiary of eOn
Communications Corporation (eOn) through July 30, 2002. Effective July 31,
2002, CSPR was spun-off from eOn to the eOn stockholders. Each holder of eOn
common stock received one share of CSPR common stock for every ten shares of
eOn common stock held as of July 22, 2002, which was the record date of the
distribution. After such spin-off, CSPR became an independent entity
headquartered in San Juan, Puerto Rico. CSPRs operations include the sale of
cellular telephones and cellular airtime and of integrated communications and
data equipment in Puerto Rico.

Certain information and footnote disclosures normally included in the
annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes as of July 31, 2002 and
2001 and for the periods then ended, which are included in the Annual Report on
Form 10-K for the year ended July 31, 2002 filed with the Securities and
Exchange Commission.

Significant Accounting Policies

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

Product Warranties The Company provides warranties to the customers to
replace or repair certain products from the date of purchase or the date of
installation depending on the contract terms. Costs associated with these
warranty programs are estimated and accrued at the time of sale on the basis of
expected net future costs. Under the Financial Accounting Standards Board
(FASB) Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission
of FASB interpretation No. 34, the Company is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The Company
has not yet determined the impact that this interpretation will have on its results of operations or financial
position.

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Inventory Obsolescence CSPR carries inventories at the lower of cost or
market. This policy depends on the timely identification of those items
included in inventory whose market price may have declined below carrying
value, such as slow-moving or obsolete items, and we record any necessary
write-offs. The Company performs an analysis of slow-moving or obsolete
inventory on a quarterly basis, and any necessary write-offs, which could
potentially be significant, are included as a deduction from earnings in the
period in which the evaluations are completed.

Allowance for Doubtful Accounts The allowance for doubtful accounts is an
amount that management believes will be adequate to absorb losses on existing
accounts receivable that are considered uncollectible based on evaluations of
collectibility of accounts receivable and prior credit experience. Because of
uncertainties inherent in the estimation process and the future availability of
additional information, managements estimate of credit losses inherent in the
existing accounts receivable and the related allowance may change in the near
term.

Going Concern and Management Plan The accompanying condensed financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Companys significant revenue decrease and
resulting loss from operations in fiscal year 2002 and in the six months ended
January 31, 2003, and its lack of financing resources raise substantial doubt
about its ability to continue as a going concern. Management plans include
continuing with the reduction of operating costs and expenses and the increase
in sales. During the month of January 2003, the Company began moving its
operations to a new location and this will represent savings of approximately
$175,000 for the next two quarters. To increase sales, CSPR jointly with OEM
suppliers is developing an aggressive plan that includes visits to our current
customers base in order to offer new technologies to help them in the
productivity, security and reductions of their telecommunications expenses.
Some of these products are IP Office, Unify Messenger and Digital Video
Recording (DVR). Also, the Company is increasing its maintenance service
contracts with designated salespersons to generate maintenance contracts for
new customers and continuing the renewal of the existing customers contracts.
The Companys goal is to improve cash flows and to ultimately generate
operating profits. To improve cash flows, management created a task force
between the finance and sales department. The task force is oriented to
analyze disputed balances, visit the customers, and resolve issues in order to
improve the collection process of past due invoices. The finance department
together with the operations department will create a task force that will be
working to sell any excess or slow moving inventory to the secondary market.
However, no assurances can be given that the Company will be successful in
achieving profitability and positive cash flows. The condensed financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Recent Accounting Pronouncements

In June 2001, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations. SFAS No. 141 requires that all
business combinations be accounted for under the purchase method only and that
certain acquired intangible assets in a business combination initiated after
June 30, 2001 be recognized as assets apart from goodwill. Adoption of SFAS
No. 141 did not have a significant effect on the Companys results of
operations or financial position.

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In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets(SFAS 142). SFAS No. 142 eliminates the amortization of goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Identifiable intangible assets with a determinable useful life
will continue to be amortized. The amortization provisions apply to goodwill
and other intangible assets acquired after June 30, 2001. Goodwill and other
intangible assets acquired prior to June 30, 2001 will be affected upon
adoption. The Company adopted SFAS No. 142 effective August 1, 2001, and
performed an impairment test of its existing goodwill based on a fair value
concept. It is managements assessment that goodwill impairment did not result
upon adoption. As of January 31, 2003 and July 31, 2002, the Company has net
unamortized goodwill of $382,000.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. The Company was required to
implement SFAS No. 143 on August 1, 2002. Adoption of SFAS No. 143 did not
have a significant effect on the Companys results of operations or financial
position.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. However, SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 for (a) recognition and measurement of the
impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. The Company was required to
implement SFAS No. 144 on August 1, 2002. Adoption of SFAS No. 144 did not
have a significant effect on the Companys results of operations or financial
position.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB No. 4, 44
and 64, Amendment of SFAS No. 13, and Technical Corrections. SFAS No. 145
rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt 
an amendment of APB Opinion No. 30, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the
criteria in Opinion No. 30 will now be used to classify those gains and losses.
This amendment was effective on August 1, 2002. SFAS No. 145 did not have a
significant effect on the Companys financial condition or results of
operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated With Exit or Disposal Activities. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value only when the liability is incurred. SFAS
No. 146 also establishes that fair value is the objective for initial
measurement of the liability. SFAS No. 146 applies to costs associated with an
exit activity but does not involve an entity newly acquired in a business
combination or with a disposal activity covered by SFAS No. 144. SFAS No. 146
does not apply to costs associated with a retirement of long-lived assets
covered by SFAS No. 143. The Company is required to implement SFAS No. 146 for
exit or disposal activities that are initiated after December 31, 2002. The
Company has not yet determined the impact that this statement will have on its
results of operations or financial position.

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Revenue Recognition

The Company recognizes revenues from the communications systems segment
upon completion of installation services and acceptance by the
customer due to the customized nature of each installation. The Company recognizes revenues upon
shipment of equipment to customers for communications systems and cellular
telephones shipped to dealers because, at that point, the Company has no
further obligations to our dealers to either deliver additional products or
perform services. Also the Company recognizes revenues upon shipment for
cellular telephones sold to retail customers and recognizes cellular sales
commission revenues when retail contracts are submitted to cellular carriers
and recognizes revenues for resold cellular airtime when the customer uses the
airtime. Revenues from communications systems service contracts are recognized
over the life of the individual contracts. Currently, the Company sells and
services communications systems purchased from eOn, as well as various
third-party communications systems from various manufacturers.

Special Charges

To reduce costs and improve productivity, the Company adopted a
restructuring plan in the second quarter of fiscal year 2001. The plan, which
included headcount reductions and office space consolidation, was effectively
amended in fiscal year 2002. The majority of the restructuring plan was
completed by July 31, 2002. The remaining expenditures for the restructuring
plan are expected to be substantially complete by July 2003.

The following table summarizes the activity relating to the special
charges during the first and second quarter of fiscal 2003 and the associated
liabilities at January 31, 2003 (in thousands):

|                     |  |               |     |              |  |                  |    |         |  |   |    |  |  |   |     | 
|-------------------- |  | ------------- | --- | ------------ |  | ---------------- | -- | ------- |  | - | -- |  |  | - | --- | 
|                     |  |               |     |              |  | Fiscal Year 2003 |    |         |  |  
|                     |  | July 31, 2002 |     | Expenditures |  | January 31, 2003
|                     |  | Liability     |     |              |  | Liability       
|                     |  | Balance       |     | Q1           |  | Q2               |    | Balance
|                     |  |               |     |              |  |                  |    |        
|Termination benefits |  | $             | 288 |              |  | $                | 34 |         |  | $ | 38 |  |  | $ | 216 | 

The liability for restructuring charges of $216,000 as of January 31,
2003, is included in other accrued liabilities.

Separation Costs

During fiscal 2002, legal and accounting fees associated with our
separation from eOn were classified as a separate component of operating
expenses under the caption Separation costs. The Company does not expect to
incur any additional such costs during the balance of fiscal year 2003.

Income (Loss) per Common Share

The Company reports its earnings per share (EPS) using Financial
Accounting Standards Board (FASB) Statement No. 128, Earnings Per Share
(SFAS 128). SFAS 128 requires dual presentation of basic and diluted EPS.
Basic EPS is computed by dividing income (loss) attributable to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock.

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On July 31, 2002, CSPR issued 1,194,557 shares of common stock to effect
the spin-off to eOn shareholders. The weighted average number of shares
outstanding for the period ended January 31, 2002 has been adjusted to give
effect to eOns distribution to eOns shareholders of all the Companys shares
held by eOn on the basis of one share of the Companys stock for every ten
shares of eOn common stock outstanding as if such distribution had occurred as
of the beginning of the earliest period presented.

The computations of basic and diluted loss per share were as follows:

|                                                     |  |                       |           |                       |  |      |           |      |  |   |           |   |  |   |           |  
|---------------------------------------------------- |  | --------------------- | --------- | --------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                     |  | Three Months Ended    |           | Six Months Ended     
|                                                     |  | January 31,           |           | January 31,          
|                                                     |  |                       |           |                      
|                                                     |  | 2003                  |           | 2002                  |  | 2003 |           | 2002
|                                                     |  |                       |           |                       |  |      |           |     
|                                                     |  | (In thousands, except |           | (In thousands, except
|                                                     |  | per share data)       |           | per share data)      
|Basic and diluted loss per share:                    |  |                       |           |                       |  |      |           |      |  |   |           |   |  |   |           |  
|Loss from operations                                 |  | $                     | (231      | )                     |  | $    | (570      | )    |  | $ | (436      | ) |  | $ | (636      | )
|                                                     |  |                       |           |                       |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted average number of common
shares outstanding |  |                       | 1,204,557 |                       |  |      | 1,204,557 |      |  |   | 1,204,557 |   |  |   | 1,204,557 |  
|Loss from operations per share                       |  | $                     | (0.19     | )                     |  | $    | (0.47     | )    |  | $ | (0.36     | ) |  | $ | (0.53     | )
|                                                     |  |                       |           |                       |  |      |           |      |  |   |           |   |  |   |           |  

Inventories

Inventories consist of the following:

|                                                            |                   |   |                |       |          |   |       |       | 
|----------------------------------------------------------- | ----------------- | - | -------------- | ----- | -------- | - | ----- | ----- | 
|                                                            |                   |   | January 31,    |       | July 31,
|                                                            |                   |   | 2003           |       | 2002    
|                                                            |                   |   |                |       |         
|                                                            |                   |   | (In thousands)
|Purchased components                                        |                   | $ | 1,229          |       |          | $ | 1,487 |      
|Components and materials related to
installation in process |                   |   | 49             |       |          |   | 36    |      
|Parts and Materials for sales                               |                   |   | 1,455          |       |          |   | 1,466 |      
|                                                            |                   |   |                |       |          |   |       |      
|                                                            | Total inventories |   | $              | 2,733 |          |   | $     | 2,989 | 
|                                                            |                   |   |                |       |          |   |       |      

Accounting for Goodwill

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets(SFAS 142). SFAS No. 142 eliminates the amortization of goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Identifiable intangible assets with a determinable useful life
will continue to be amortized. The amortization provisions apply to goodwill
and other intangible assets acquired after June 30, 2001. Goodwill and other intangible assets
acquired prior to June 30, 2001 will be affected upon adoption.

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Goodwill of $382,000 had been recorded in conjunction with the assets
acquisition of Ochoa Telecom in May 14, 2001. The Company adopted SFAS No. 142
effective August 1, 2001, and performed an impairment test of its existing
goodwill based on a fair value concept. The adoption of SFAS No. 142 did not
have a significant impact on the Companys results of operations or financial
position during fiscal year 2002 or in the six months ended January 31, 2003.
As of January 31, 2003 and July 31, 2002, the Company has net unamortized
goodwill of $382,000.

Contingencies

CSPR is a defendant in lawsuits arising out of the ordinary course of
business. Management, based on advice from legal counsel, is of the opinion
that the ultimate resolution of these matters will not have a material effect
on CSPRs financial position or result of operations.

Segment Information

CSPRs reportable segments are Communications Systems and Cellular Airtime
Services, each of which offers different products and services. Each segment
requires different technology and marketing strategies. The Communications
Systems segment offers communications solutions that address voice and data
network switching while the Cellular Airtime Services segment resells cellular
airtime and cellular telephones in Puerto Rico.

Unaudited segment information for

Three months ended January 31, 2003

|                              |  |                |       |          |  |          |     |  |  |   |       |  
|----------------------------- |  | -------------- | ----- | -------- |  | -------- | --- |  |  | - | ----- | -
|                              |  |                |       |          |  | Cellular |     |  |  |  
|                              |  | Communications |       | Airtime  |  |          |     | 
|                              |  | Systems        |       | Services |  | Total   
|                              |  |                |       |          |  |         
|                              |  | (In thousands)
|Revenues                      |  | $              | 1,488 |          |  | $        | 246 |  |  | $ | 1,734 |  
|Income (loss) from operations |  |                | (290  | )        |  |          | 52  |  |  |   | (238  | )
|Interest income               |  |                | 7     |          |  |          |    |  |  |   | 7     |  
|Provision for income taxes    |  |                |      |          |  |          |    |  |  |   |      |  
|Net income (loss)             |  |                | (283  | )        |  |          | 52  |  |  |   | (231  | )

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Three months ended January 31, 2002

|                           |  |                |       |          |  |          |     |   |  |   |       |  
|-------------------------- |  | -------------- | ----- | -------- |  | -------- | --- | - |  | - | ----- | -
|                           |  |                |       |          |  | Cellular |     |   |  |  
|                           |  | Communications |       | Airtime  |  |          |     |  
|                           |  | Systems        |       | Services |  | Total   
|                           |  |                |       |          |  |         
|                           |  | (In thousands)
|Revenues                   |  | $              | 1,998 |          |  | $        | 485 |   |  | $ | 2,483 |  
|Loss from operations       |  |                | (507  | )        |  |          | (67 | ) |  |   | (574  | )
|Interest income            |  |                | 4     |          |  |          |    |   |  |   | 4     |  
|Provision for income taxes |  |                |      |          |  |          |    |   |  |   |      |  
|Net loss                   |  |                | (503  | )        |  |          | (67 | ) |  |   | (570  | )

Unaudited segment information for

Six months ended January 31, 2003

|                              |  |                |       |          |  |          |     |   |  |   |       |  
|----------------------------- |  | -------------- | ----- | -------- |  | -------- | --- | - |  | - | ----- | -
|                              |  |                |       |          |  | Cellular |     |   |  |  
|                              |  | Communications |       | Airtime  |  |          |     |  
|                              |  | Systems        |       | Services |  | Total   
|                              |  |                |       |          |  |         
|                              |  | (In thousands)
|Revenues                      |  | $              | 3,492 |          |  | $        | 479 |   |  | $ | 3,971 |  
|Loss from operations          |  |                | (428  | )        |  |          | (21 | ) |  |   | (449  | )
|Interest income               |  |                | 13    |          |  |          |    |   |  |   | 13    |  
|Provision for income taxes    |  |                |      |          |  |          |    |   |  |   |      |  
|Net loss                      |  |                | (415  | )        |  |          | (21 | ) |  |   | (436  | )
|Total assets                  |  |                | 5,681 |          |  |          | 393 |   |  |   | 6,074 |  
|Capital expenditures          |  |                | 48    |          |  |          |    |   |  |   | 48    |  
|Depreciation and amortization |  |                | 68    |          |  |          | 4   |   |  |   | 72    |  

Six months ended January 31, 2002

|                              |  |                |       |          |  |          |       |   |  |   |       |  
|----------------------------- |  | -------------- | ----- | -------- |  | -------- | ----- | - |  | - | ----- | -
|                              |  |                |       |          |  | Cellular |       |   |  |  
|                              |  | Communications |       | Airtime  |  |          |       |  
|                              |  | Systems        |       | Services |  | Total   
|                              |  |                |       |          |  |         
|                              |  | (In thousands)
|Revenues                      |  | $              | 5,234 |          |  | $        | 1,129 |   |  | $ | 6,363 |  
|Loss from operations          |  |                | (585  | )        |  |          | (59   | ) |  |   | (644  | )
|Interest income               |  |                | 8     |          |  |          |      |   |  |   | 8     |  
|Provision for income taxes    |  |                |      |          |  |          |      |   |  |   |      |  
|Net loss                      |  |                | (577  | )        |  |          | (59   | ) |  |   | (636  | )
|Total assets                  |  |                | 7,915 |          |  |          | 1,173 |   |  |   | 9,088 |  
|Capital expenditures          |  |                | 60    |          |  |          |      |   |  |   | 60    |  
|Depreciation and amortization |  |                | 90    |          |  |          | 6     |   |  |   | 96    |  

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

This report contains unaudited forward-looking statements within the
meaning of the federal securities laws. Unaudited forward-looking statements
are those that express managements views of future events, developments, and
trends.
In some cases, these statements may be identified by terminology such as may,
will, should, expects, plans, intends, anticipates, believes,
estimates, predicts, potential, or continue or the negative of such
terms and other comparable expressions. Unaudited forward-looking statements
include statements regarding our anticipated or projected operating
performance, financial results, liquidity and capital resources. These
statements are based on managements beliefs, assumptions, and expectations,
which in turn are based on the information currently available to management.
Information contained in these unaudited forward-looking statements is
inherently uncertain, and our actual operating performance, financial results,
liquidity, and capital resources may differ materially due to a number of
factors, most of which are beyond our ability to predict or control. The
Company also directs your attention to the risk factors affecting our business
that are discussed elsewhere at the end of this Item. CSPR disclaims any
obligation to update any of the unaudited forward-looking statements contained
in this report to reflect any future events or developments. The following
discussions should be read in conjunction with our unaudited financial
statements and the notes included thereto.

Overview

The Company is a value-added reseller of numerous third-party brands of
voice and data communication systems as well as cellular telephones and
airtime. Most of our business is conducted in Puerto Rico, although we also
sell communications systems in the Caribbean and Latin America. The Companys
products help enterprises communicate more effectively with customers and
increase customer satisfaction and loyalty. The Company sells both to
enterprises in our voice and data communications business and to individual
retail customers in our cellular business.

The Companys reportable segments are Communications Systems and Cellular
Airtime Services, each of which offers different products and services. Each
segment requires different technology and marketing strategies. The
Communications Systems segment offers communications solutions that address
voice and data network switching while the Cellular Airtime Services segment
resells cellular airtime and cellular telephones in Puerto Rico. The
Communications Systems segment revenues are comprised mostly of sales of PBX
customer premise equipment. The Communications Systems segment represented 82%
of our revenues in fiscal year 2002 and 90% of the operating loss of the
Company, while Cellular Airtime Service represented 18% of revenues and 10% of
the operating loss. Cellular Airtime Services revenues were 12% of our total
revenues for the six months ended January 31, 2003 and we anticipate that these
revenues will continue to represent a smaller percentage of the total revenues
than in fiscal year 2002. As Communications Systems revenues will constitute a
larger portion of our revenue in the future than in fiscal year 2002, it is
important that we continue to add to our product and service offering and
increase our installed base of customers. In the period ended January 31,
2003, the resale of third-party communications systems equipment from our
Communications Systems segment have our highest gross margins, greater than
Service revenues or our Cellular Airtime Services segment.

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While the Companys recent losses have primarily been due to our
Communications Systems segment, CSPR anticipates increasing the revenues in the Communications Systems segment while trying to closely control our selling,
general, and administrative expenses. The Company will continually look for
ways to increase our installed base of customers via acquisitions or by
distributing new types of voice and data communications products as our highest
gross margins are from service revenues in our Communications Systems segment.
The Companys recent losses in the Communications System segment were mainly a
result of expanding our sales and administrative infrastructure following our
rapid growth in fiscal year 1999 and the first half of fiscal year 2000. In
fiscal year 2001, CSPR restructured the business to address the downward cycle
in the telecommunications industry and began to look for ways to increase our
higher margin business by acquiring certain assets of Ochoa Telecom in Puerto
Rico. While the telecommunications market has continued to be depressed in
Puerto Rico due to macroeconomic factors in the country, CSPR will continue to
seek acquisition opportunities that allow us to increase our maintenance
revenues in the Communications Systems segment.

THREE MONTHS ENDED JANUARY 31, 2003 AND 2002

The following discussion provides information about the Companys
operations, as an independent company for the period of three months ended
January 31, 2003 and as a wholly-owned subsidiary of eOn for the three months
ended January 31, 2002.

Net Revenues

Net revenues decreased 30.2% to $1.7 million in the three months ended
January 31, 2003 from $2.5 million in the three months ended January 31, 2002.
The results primarily reflected decreased revenues of approximately $0.5
million from the Communication Systems segment due to economical recession
factors that affect many of our multinational customers and the market for
voice and data communication systems in Puerto Rico. Customers in such markets
as call centers and retail outlets have been postponing the purchases of
capital assets during the period. Also the revenues of Cellular Airtime
Services segment decreased approximately $0.2 million due to a general decline
in demand.

Cost of Revenues and Gross Profit

Cost of revenues consists primarily of purchases from our equipment
manufacturers and other suppliers and costs incurred for final assembly,
quality assurance and installation of our systems. For cellular contracts
submitted to the carriers from our authorized dealers, any commissions paid to
the dealer are also included as a component of cost of revenues. Gross profit
decreased 5.3% to $523,000 in the three months ended January 31, 2003 from
$552,000 in the three months ended January 31, 2002. The decrease resulted
primarily from decreased revenues and a lower gross margin percentage in the
current period. CSPRs gross margins were 30.2% in the three months ended
January 31, 2003 and 22.2% in the three months ended January 31, 2002. The
increased gross margin was primarily due to the favorable impact of reductions
of costs and productivity improvements resulting from the restructuring plan
adopted by the Company.

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Selling General and Administrative

The operating expenses consist mainly of salaries of our sales, marketing, service, and administrative personnel and associated overhead. CSPR recognizes these expenses as incurred. As the Company distributes the products of third
parties and do not sell any products that we design or develop ourselves, we do
not incur any costs for research and development. While we have essentially
operated as a stand-alone entity from our parent due to our location in Puerto
Rico, with separate audits, legal counsel, corporate officers, and accounting
and administrative functions, we have not previously operated as a stand-alone
public company. Therefore, CSPR anticipates that it will incur additional
general and administrative expenses due to public company reporting
requirements that were previously performed by our parent. However, selling,
general and administrative expenses decreased 20.6% to $0.8 million in the
quarter ended January 31, 2003 from $1.0 million in the quarter ended January
31, 2002. The decrease was primarily due to reductions in personnel,
facilities, and associated overhead resulting from the implementation of the
Companys restructuring plan.

Separation Costs

During the three months ended January 31, 2002, CSPR incurred
approximately $167,000 in legal and accounting fees associated with the
separation from eOn. The Company incurred no separation cost in the three
months ending January 31, 2003 and expects to incur no additional such costs
during the balance of fiscal year 2003.

Interest and Other Income and Expenses

No material amount was recorded in the three months ended January 31, 2003
or the three months ended January 31, 2002.

Income Tax Benefit (Expense)

No income tax benefit was recognized in the three months ended January 31,
2003 or the three months ended January 31, 2002 because CSPR cannot conclude
that it is more likely than not that its deferred tax assets will be realized
in the future.

SIX MONTHS ENDED JANUARY 31, 2003 AND 2002

The following discussion provides information about the Companys
operations, as an independent company for the period of six months ended
January 31, 2003 and as a wholly-owned subsidiary of eOn for the six months
ended January 31, 2002.

Net Revenues

Net revenues decreased 37.6% to $4 million in the six months ended January
31, 2003 from $6.4 million in the six months ended January 31, 2002, reflecting
economical recession factors that affect many of our multinational customers
and the market for voice and data communication systems in Puerto Rico.
Customers in such markets as call centers and retail outlets have been
postponing the purchases of capital assets during the period.

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Cost of Revenues and Gross Profit

Cost of revenues consists primarily of purchases from our equipment
manufacturers and other suppliers and costs incurred for final assembly,
quality assurance and installation of our systems. Gross profit decreased 29.8% to
$1.1 million in the six months ended January 31, 2003 from $1.6 million in the
six months ended January 31, 2002. The decrease resulted basically from
decreased revenues in Cellular Airtime Services segment and in the
Communications Systems segment. Companys gross margins were 28.5% in the six
months ended January 31, 2003 and 25.3% in the same period last year. The
increased gross margin was primarily due to the favorable impact of reductions
of costs and productivity improvements resulting from the restructuring plan
adopted by the Company.

Selling, General and Administrative

The operating expenses consist mainly of salaries of our sales, marketing,
service, and administrative personnel and associated overhead. CSPR recognizes
these expenses as incurred. As the Company distributes the products of third
parties and do not sell any products that the Company design or develop
ourselves, the Company does not incur any costs for research and development.
Before the spin-off from eOn the Company essentially operated as a stand-alone
entity from our parent due to our location in Puerto Rico, with separate
audits, legal counsel, corporate officers, and accounting and administrative
functions. CSPR has not previously operated as a stand-alone public company.
Therefore, CSPR anticipates that it will incur additional general and
administrative expenses due to public company reporting requirements that were
previously performed by our parent. However, selling, general and
administrative expenses decreased 21.2% to $1.6 million in the six months ended
January 31, 2003 from $2.0 million in the six months ended January 31, 2002.
The decrease was primarily due to reductions in personnel, facilities, and
associated overhead resulting from the implementation of our restructuring
plan.

Separation Costs

Separation costs were $250,000 in the six months ended January 31, 2002,
representing legal and accounting fees associated with the Companys separation
from eOn. CSPR incurred no separation costs in the six months ended January
31, 2003 and expects to incur no additional such costs during the balance of
fiscal year 2003.

Interest and Other Income and Expenses

No material amount was recorded in the six months ended January 31, 2003
or the six months ended January 31, 2002.

Income Tax Benefit (Expenses)

No income tax benefit
was recognized in the six months ended January 31, 2003 or the six
months ended January 31, 2002 because the Company cannot conclude
that it is more likely than not that its deferred tax assets will be
realized in the future.

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LIQUIDITY AND CAPITAL RESOURCES

Prior to the initial public offering of eOn, the Company funded its
operations primarily through cash generated from operations and periodic
borrowings under our former revolving credit facility. Subsequent to the
initial public offering, eOn periodically provided funds through parent-subsidiary
loans as our credit facility was retired with funds from the initial public
offering. The last funds received from eOn were in November 2000 and we have
funded all cash requirements and loan repayments to eOn of $2.25 million since
that date from operating revenues. However, as our business continues to grow,
we may need additional capital. Such capital may not be available on favorable
terms or at all.

The Companys significant revenue decrease and resulting loss from
operations in fiscal year 2002 and in the six months ended January 31, 2003,
and its lack of financing resources raise substantial doubt about its ability
to continue as a going concern. Management plans include continuing with the
reduction of operating costs and expenses and the increase in sales. During
the month of January 2003, the Company began moving its operations to a new
location and this will represent savings of approximately $175,000 for the next
two quarters. To increase sales, CSPR jointly with OEM suppliers is
developing an aggressive plan that includes visits to our current customers base in
order to offer new technologies to help them in the productivity, security and
reductions of their telecommunications expenses. Some of these products are IP
Office, Unify Messenger and Digital Video Recording (DVR). Also, the Company
is increasing its maintenance service contracts with designated salespersons to
generate maintenance contracts for new customers and continuing the renewal of
the existing customers contracts. The Companys goal is to improve cash flows
and to ultimately generate operating profits. To improve cash flows,
management created a task force between the finance and sales department. The
task force is oriented to analyze disputed balances, visit the customers, and
resolve issues in order to improve the collection process of past due invoices.
The finance department together with the operations department will create a
task force that will be working to sell any excess or slow moving inventory to
the secondary market. However, no assurances can be given that the Company
will be successful in achieving profitability and positive cash flows. The
magnitude of our future capital requirements will depend on many factors,
including, among others, investments in working capital, and the amount of
income generated by operations. If we need to raise additional capital, that
capital may not be available on acceptable terms, or at all. If the Company
cannot raise necessary additional capital on acceptable terms, we may not be
able to successfully market our products and services, take advantage of future
opportunities, respond to competitive pressures or unanticipated requirements
or even continue operating our business.

Net cash used in operating activities was approximately $233,000 and
$38,000 for the six months ended January 31, 2003 and 2002, respectively. Cash
used by operating activities in the first six months of this fiscal year
resulted primarily from the net loss from operations partially offset by a
decrease in the level of inventory and prepaid expenses, and a smaller decrease
in liabilities than 2002.

Net cash used in investing activities was approximately $6,000 for the six
months ended January 31, 2003 and $69,000 for the same period prior fiscal
year. Cash used in investing activities in this six months of the current
fiscal year consisted primarily of cash used for capital expenditures offset by
a decrease in the investment in sales-type leases.

Net cash used in financing activities was approximately $25,000 and
$387,000 in the six months ended January 31, 2003 and 2002, respectively. Cash
used in financing activities in the six months ended January 31, 2003 and 2002
represents repayments of part of the note payable issued for the acquisition of
certain
assets acquired from Ochoa Telecom in May 2001.

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ADDITIONAL RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

You should carefully consider the risks set forth in this 10Q,
particularly the risk that we may not be able to continue operations as
described in Liquidity and Capital Resources and the risk factors described
below when evaluating CSPR. If any of the following risks occur, CSPRs
business, operating results and financial condition could be seriously harmed.
Additional risks and uncertainties that CSPR is presently not aware of could
also impair its business, operating results and financial condition.

If the Company is not able to sustain our traditional private branch exchange
(PBX) market, our business, operating results and financial condition will be
harmed.

Approximately 41.7% and 37.6% of CSPR revenues for fiscal year 2002 and
2001, respectively, were from sales of PBX customer premise equipment. The
Companys PBX revenues declined 56.6% from fiscal year 2000 to fiscal year 2002
due mainly to a decline in the overall PBX market and significant Year 2000
upgrade revenues. These revenues comprise approximately 56.3% of the Company
Communications Systems segment revenues, as virtually all enterprise voice
communications systems sold worldwide today are PBXs. The remainder of the
segment revenues is service revenue.

The Company may not be able to sustain our PBX market revenues because the
traditional PBX market is declining. One reason for the decline of the
traditional PBX market is the emergence of voice switching platforms based on
standard PCs and the continued introduction of IP based voice and data
communications devices by many of the large equipment manufacturers such as
Nortel Networks, Avaya, Mitel, NEC, Toshiba, Panasonic, and Siemens. If CSPR is
not able to grow or sustain our traditional PBX revenues or properly train our
personnel to sell and service the newer products developed by these companies,
our business, operating results and financial condition could be harmed.

If the Company fails to obtain and market new telecommunication and data
products or to add features to our existing telecommunication and data
products, the Company may not be able to generate sufficient revenues to
sustain our business.

Our success is highly dependent upon the continued successful timely
introduction of new telecommunication and data products and new models of our
existing telecommunications and data products containing additional features.
The markets for our products are characterized by rapid technological change,
frequent new product introductions, uncertain product life cycles and changing
customer requirements. The rapid change in customers requirements and the
constant introduction of new products by our suppliers could cause
technological obsolescence of some of our inventory, which could harm our
business, operating results and financial condition.

The success of new products and new models with additional features
depends on a number of factors, including strategic allocation of limited
financial and technical resources, accurate forecasting of consumer demand, and
market and industry acceptance of our products and services. If CSPR is unable
to successfully train our sales and technical personnel to sell and service the
new telecommunications and data products developed by our equipment
manufacturers, our business, operating results, and financial condition could
be harmed.

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CSPR faces intense competition from participants in the telecommunications and
data value-added reseller markets, which may impair our revenues and ability to
obtain new customers and maintain existing customers.

The telecommunications and data value-added reseller markets are intensely
competitive and rapidly evolving. In addition, there are few barriers to entry
into the telecommunications and data value-added reseller markets, and new
entrants to these markets may develop and offer products that will compete
directly with our products and services. Rapid technological innovation and
intense price competition characterize the markets, and the competition for new
customers and for retention of existing customers is intense.

Some of the products and services provided by the Company are available
through competitors with long operating histories in our markets and many of
these products are already familiar to and accepted by consumers. Many of the
manufacturers and distributors of these competing telecommunication and data
products and services have substantially greater brand recognition, market
presence, distribution channels, advertising and marketing budgets and
promotional and other strategic partners than us.

Actions by our competitors could result in price reductions, reduced
margins and loss of market share, any of which would damage our business. CSPR
cannot assure you that the Company will be able to compete successfully against
these competitors.

The lengthy sales cycles of some of our products and the difficulty in
predicting the timing of our sales may cause fluctuations in our quarterly
operating results.

The uncertainty of our sales cycle makes the timing of sales difficult to
predict and may cause fluctuations in our quarterly operating results. Our
sales cycles generally vary from one to twelve months based on the size of the
system to be installed and the various requirements of our potential customers.
The purchase of our products may involve a significant commitment of our
customers time, personnel, financial, and other resources. The Company
generally recognizes revenues on the date of shipment for communications
systems and cellular telephones shipped to dealers and upon completion of
installation for communications systems sold directly to end users. For
cellular sales commission revenues the Company recognizes revenues when retail
contracts are submitted to cellular carriers. Resold cellular airtime is
recognized as revenues as the airtime is actually used. Also, it is difficult
to predict the timing of indirect sales because we have little control over the
selling activities of our dealers and value-added resellers.

The Company incurs substantial sales and marketing expenses and spends
significant management time before customers place orders with us, if at all.
Revenues from a specific customer may not be recognized in the quarter in which
CSPR incurs related sales and marketing expense, which may cause CSPR to miss
our revenue or earnings expectations.

Seasonal trends may cause our quarterly operating results to fluctuate, which
may adversely affect the market price of our stock.

Telecommunications product sales have traditionally been much lower in
Puerto Rico, our main market, during the winter holiday season than during
other times of the year due to the potential business disruption caused by
installing new communications systems, and the extended winter holiday season
present in Puerto Rico due to local custom. Although predicting consumer
demand for our products will be very difficult, the Company believes that sales
of telecommunications

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systems will be disproportionately low during this period when compared to
other times of the year due to the factors above and the seasonal buying
patterns of many of our customers. Any fluctuation in our quarterly operating
results may cause the market price of our stock to decline, and that decline
may be substantial if the fluctuation is caused by factors other than
anticipated seasonal buying patterns of customers. Finally, if CSPR is unable
to accurately forecast and respond to consumer demand for our
telecommunications systems, our reputation and brand may suffer, and the market
price of our stock would likely fall.

Any future business acquisitions may disrupt our business, dilute stockholder
value or distract management attention.

As part of our ongoing business strategy, the Company may consider
additional acquisitions of, or significant investments in, businesses that
offer products, services and technologies complementary to our own. In
particular, CSPR may pursue acquisitions and strategic alliances as a means of
acquiring additional brands of communications systems to sell and service.
Such acquisitions could materially adversely affect our operating results and
the price of our stock. Acquisitions also entail numerous risks, including:



| |  | difficulty of assimilating the operations, products and personnel of the
acquired businesses;                                       
|- |  | ------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | potential disruption of our ongoing business;                                                                                       
| 
| |  | unanticipated costs associated with the acquisition;                                                                                
| 
| |  | inability of management to manage the financial and strategic position of
acquired or developed products, services and technologies;
| 
| |  | inability to maintain uniform standards, controls, policies and procedures;
and                                                     
| 
| |  | impairment of relationships with employees and customers that may occur as a
result of integration of the acquired business.        

To the extent that shares of our stock or other rights to purchase stock
are issued in connection with any future acquisitions, dilution to our existing
stockholders will result and our earnings per share may suffer. Any future
acquisitions or strategic investments may not generate additional revenue or
provide any benefit to our business, and we may not achieve a satisfactory
return on our investment in any acquired businesses.

If the Company loses key management personnel, we may not be able to
successfully operate the business.

CSPRs future performance will be substantially dependent on the continued
services of our senior management, especially our President and Chief Executive
Officer, Sergio R. Moren, and other key personnel. The loss of any members of
our executive management team and our inability to hire additional executive
management could harm our business and results of operations. The Company
employs our key personnel on an at-will basis. CSPR does not maintain key
person insurance policies on any of the members of our executive management
team.

The Company may be unable to hire and retain sales, marketing, and service
personnel to execute our business strategy.

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Competition for highly qualified personnel is intense due to the limited
number of people available with the necessary technical skills, and CSPR may
not be able to attract, assimilate or retain such personnel. If the Company
cannot attract, hire and retain sufficient qualified personnel, the Company may
not be able to successfully market, sell, or service new products.

Since the Company does not have exclusive agreements with the manufacturers,
manufacturers may enter into dealer agreements with our competitors, which may
adversely affect our business.

CSPR distributes and services products designed and manufactured by eOn,
Avaya, Nortel, Hitachi, Mitel, Toshiba, NEC, Cortelco, Nokia, Ericsson,
Motorola, and others. However, the Company does not have exclusive
distribution agreements with these companies and have competitors in our major
markets that sell the same products. Our customers often have the option of
purchasing similar communications systems from other distributors in our
markets. A decision by the manufacturer to sell to other dealers in our market
increases competitive pressures on the Company, and may adversely affect our
business.

If the Company is unable to establish and maintain satisfactory relationships
with the manufacturers of our products that the Company expects to sell and
service, our business will suffer.

The Company acquires all of our products that sell from manufacturers
pursuant to the terms of distribution agreements. The loss of our distribution
agreements with our product manufacturers would reduce our revenues, increase
obsolescence risk to our existing inventory, and materially harm our business.

CSPR depends on a limited number of third parties to manufacture and supply our
products, and may be unable to operate the business if those parties do not
perform their obligations.

The Company expects to rely on third-party suppliers for many of the
products that it distribute and service, including telecommunications and data
systems as well as cellular phones and accessories. CSPR does not have
long-term agreements in place with our suppliers and does not control the time
and resources that these third parties devote to our business. CSPR cannot be
sure that these parties will perform their obligations as expected or that any
revenue, cost savings or other benefits will be derived from the efforts of
these parties. If any of our third party suppliers breaches or terminates its
agreement with us or otherwise fails to perform its obligations in a timely
manner, CSPR may be delayed or prevented from delivering some of our products
and services. Because our relationships with these parties are non-exclusive,
they may also support products or services that compete directly with ours or
offer similar or greater support to our competitors. Any of these events could
require us to undertake unforeseen additional responsibilities or devote
additional resources to deliver our products and services. This outcome would
harm our ability to compete effectively and perform our services.

The Company faces many risks in expanding its international operations into the
Caribbean.

Sales outside of Puerto Rico accounted for approximately 7.7% of our total
revenues during fiscal year 2002. The Company expects to increase sales to
customers outside Puerto Rico and establish additional distribution channels in
the Caribbean. However, foreign markets for our products may develop more
slowly than currently anticipated. CSPR may not be able to successfully
establish international distribution channels, or may not be able to hire the
additional personnel necessary to support such distribution channels.

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CSPR future results could be harmed by economic, political, regulatory and
other risks associated with the reliance on international sales and operations.

As stated above, sales outside of Puerto Rico accounted for approximately
7.7% of our total revenues during fiscal year 2002. Because of the operations
and relationships in other parts of the Caribbean, and our reliance on foreign
third-party manufacturing, assembly and testing operations, we are subject to
the risks of conducting business outside of Puerto Rico, including:



| |  | changes in a specific countrys or regions political or economic conditions;
|- |  | -----------------------------------------------------------------------------
| 
| |  | trade protection measures and import or export licensing requirements;       
| 
| |  | potentially negative consequences from changes in tax laws;                  
| 
| |  | difficulty in managing widespread sales and customer service operations; and 
| 
| |  | less effective protection of intellectual property.                          

CSPR is currently involved in litigation, which, if resolved unfavorably, could
have a material adverse effect on our business.

CSPR is currently subject to one lawsuit regarding an alleged breach of
contract, three lawsuits regarding employment issues, and a fifth lawsuit in
which the Company was included as a Third Party Defendant. In the breach of
contract case, the plaintiff alleges that CPRS breached the terms of our
contract by ceasing to supply services to the plaintiff, and the plaintiff
seeks damages of approximately $854,430. In the employment lawsuits, each of
the plaintiffs are former employees of our company, and they each allege under
various theories of law that their dismissal from employment by the Company was
unjustified. Collectively, the employment law cases allege damages of
approximately $13 million. Regarding the fifth lawsuit, the Company believes
that this litigation is without merit and filed a motion for the court to order
our dismissal. CSPR has analyzed each lawsuit with our legal advisors, and the
Company does not believe that any of these cases will result in an unfavorable
outcome that would have a material adverse effect upon our business. However,
in the event of one or more unfavorable determinations against us, such
litigation could have a material adverse effect on our business by harming
earnings if the Company is liable for a significant monetary judgment, by
harming our reputation with our customers through any adverse publicity
generated from an unfavorable determination, or by adversely affecting our
relationship with current and prospective employees of our company.

Laws or regulations that govern the telecommunications industry and copyrighted
works could expose us to legal action if the Company fail to comply or could
require us to change our business.

Because our products and services provide our customers with access to the
public telephone system and other methods of electronic communication, the
products CSPR sells are subject to the regulations of the Federal
Communications Commission and Junta Reglamentadora de Telecomunicaciones de
Puerto Rico, relating to consumer products that connect to the public telephone
network and electronic emissions of consumer products.

Changes in the regulatory climate or the enforcement or interpretation of
existing laws could expose us to legal action if the Company fails to comply.
In addition, any of these regulatory bodies could promulgate new regulations or
interpret existing regulations in a manner that would cause us to incur

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significant compliance costs or force us to alter the features or functionality
of our products and services.

Product defects, system failures or interruptions may have a negative impact on
our revenues, damage our reputation and decrease our ability to attract new
customers.

Errors and product defects can result in significant warranty and repair
problems, which could cause customer relations problems. Correcting product
defects requires significant time and resources, which could delay product
releases and affect market acceptance of our products. Any delivery by us of
products with undetected material product defects could harm our credibility
and market acceptance of our products.

The products the Company sells and services may have undetected faults leading
to liability claims, which could harm our business.

The products the Company sells and services may contain undetected faults
or failures. Any failures of these products could result in significant losses
to our customers, particularly in mission-critical applications. A failure
could also result in product returns and the loss of, or delay in, market
acceptance of our products. In addition, any failure of the product CSPR sells
could result in claims against us. Our purchase agreements with our customers
typically contain provisions designed to limit our exposure to potential
product liability claims. Although CSPR is unaware of any specific laws or
cases that would invalidate our purchase agreement limitation of liability
provisions, there is a risk that such provisions may not be effective as a
result of federal, state or local laws or ordinances or unfavorable judicial
decisions in Puerto Rico or other countries. CSPR maintain insurance to
protect against certain claims associated with the use of our products, but our
insurance coverage may not adequately cover all possible claims asserted
against us. In addition, even claims that ultimately are unsuccessful could be
expensive to defend and consume management time and resources.

Our charter contains certain anti-takeover provisions that may discourage
take-over attempts and may reduce our stock price.

Our board of directors has the authority to issue up to 10,000,000 shares
of preferred stock and to determine the preferences, rights and privileges of
those shares without any further vote or action by the stockholders. The
rights of the holders of any preferred stock that may be issued in the future
may harm the rights of the holders of common stock. Certain provisions of our
certificate of incorporation and bylaws may make it more difficult for a third
party to acquire control of us without the consent of our board of directors,
even if such changes were favored by a majority of the stockholders. These
include provisions that provide for a staggered board of directors, prohibit
stockholders from taking action by written consent and restrict the ability of
stockholders to call special meetings.

Our stock is subject to the requirements for penny stocks, which could
adversely affect your ability to sell and the market price of your shares.

The Company believes our stock fits the definition of a penny stock. The
Securities Exchange Act of 1934 defines a penny stock as any equity security
that is not traded on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market and that has a market price of less than
$5.00 per share, with certain exceptions. Penny stocks are subject to Rule 15g
under the Securities Exchange Act of 1934, which imposes additional sales
practice requirements on

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broker-dealers who sell such securities. In general, a broker-dealer, prior to
a transaction in a penny stock, must deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the
penny stock market. The broker-dealer must provide the customer with current
bid and offer quotations for the penny stock, information about the commission
payable to the broker-dealer and its salesperson in the transaction and monthly
statements that disclose recent price information for each penny stock in the
customers account. Finally, prior to any transaction in a penny stock, the
broker-dealer must make a special written suitability determination for the
purchaser and receive the purchasers written consent to the transaction prior
to sale. All of these requirements may restrict your ability to sell our stock
and could limit the trading volume of our stock and adversely affect the price
investors are willing to pay for our stock.

Insiders have substantial voting control over us, which could delay or prevent
us from engaging in a change of control transaction and you from selling our
shares at a premium to the shares then current market value.

Our officers, directors and five percent or greater stockholders
beneficially own or control, directly or indirectly, approximately 487,869
shares, which in the aggregate represents approximately 41% voting interest in
the outstanding shares of our common stock. These stockholders have the
ability to control all matters submitted to our stockholders for approval,
including the election and removal of directors and the approval of any
business combinations.

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ITEM  3.    QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

The majority of our cash equivalents are invested in variable rate
instruments with frequent rate resets. Because these securities have short
effective maturities, we believe the market risk for such holdings is
insignificant. In addition, the vast majority of the Companys sales are made
in U.S. dollars, and consequently, the Company believes that our foreign
exchange rate risk is immaterial. The Company does not have any derivative
instruments and do not engage in hedging transactions.




ITEM  4.    CONTROLS AND PROCEDURES

Within the 90-day period preceding the filing of this Quarterly Report on
Form 10-Q, an evaluation was performed under the supervision of and with the
participation of the Companys management, including the Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the
design and operation of the Companys disclosure controls and procedures.
Based on that evaluation, the Companys management, including the CEO and CFO,
concluded that the design and operation of the Companys disclosure controls
and procedures were effective to ensure that material information relating to
CSPR is made known to such officers by others within CSPR, particularly during
the period this quarterly report and prepared, in order to allow timely
decisions regarding required disclosure. There have been no significant
changes in the Companys internal control or in other factors that could
significantly affect internal controls subsequent to the date of their
evaluation.

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PART II  OTHER INFORMATION

ITEM  1.    LEGAL PROCEEDINGS

None.

ITEM  2.    CHANGES IN SECURITIES

None.

ITEM  3.    DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM  5.    OTHER INFORMATION

None.

ITEM  6.    EXHIBITS AND REPORTS ON FORM 8-K.



| | (A) |  | Exhibits.
| | --- |  | ---------

|            |  |                                                               
|----------- |  | --------------------------------------------------------------
|Exhibit No. |  | Description                                                   
|            |  |                                                               
|99.1        |  | Certificate of Chief Executive officer under 18
U.S.C. § 1350 
|99.2        |  | Certificate of Chief Financial Officers under 18
U.S.C. § 1350



| | (B) |  | Reports On Form 8-K.
| | --- |  | --------------------

None.

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SIGNATURES

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

|                      |  |  |  |                                                                                                                                          
|--------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------
|                      |  |  |  | Cortelco Systems Puerto Rico, Inc.                                                                                                       
|                      |  |  |  |                                                                                                                                          
|Date:  March 14, 2003 |  |  |  | /s/ Francisco Sanchez                                                                                                                    
|                      |  |  |  |                                                                                                                                          
|                      |  |  |  | Francisco Sanchez, Vice President
Chief Financial Officer, Secretary
Duly Authorized Officer
(Principal Financial and Accounting Officer)

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I, Sergio Moren, Chief Executive Officer of Cortelco Systems Puerto Rico, Inc.
certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Cortelco Systems
Puerto Rico, Inc.;                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.                                                                                                                        



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



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weakness in
internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      



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

|                     |  |                                     
|-------------------- |  | ------------------------------------
|Date: March 14, 2003 |  | /s/ Sergio Moren                    
|                     |  |                                     
|                     |  | Sergio Moren
Chief Executive Officer

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I, Francisco Sánchez, Chief Financial Officer of Cortelco Systems Puerto Rico,
Inc. certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Cortelco Systems
Puerto Rico, Inc.;                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.                                                                                                                        



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



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weakness in
internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      



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

|                     |  |                                          
|-------------------- |  | -----------------------------------------
|Date: March 14, 2003 |  | /s/ Francisco Sanchez                    
|                     |  |                                          
|                     |  | Francisco Sanchez
Chief Financial Officer

30