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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Mark One)

|  |  |                                                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended April 30, 2002.
|  |  |                                                                                                                                        
|o |  | 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              |  | 66-0567491                          
|(State of incorporation) |  | (I.R.S. Employer Identification No.)

1550 Ponce de Leon Avenue, 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 o             No x

Registrant has only been subject to the filing requirements of Section 13
of the Securities Exchange Act of 1934 since its Form 10 became effective on
April 13, 2002.

This form 10-Q/A amends the Companys Form 10-Q filed on June 13 , 2002 in
order to reclassify cellular commissions paid to dealers, previously reported
in selling, general, and administrative expenses, to cost of revenues. Such
reclassification had no impact on net loss. We also expanded our disclosure
regarding special charges recorded in the quarter ended April 30, 2002.

Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the latest practicable date:10,000 shares of Common Stock,
$100.00 par value, as of May 31, 2002.





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TABLE OF CONTENTS



|                               |                                                                                               |                                           |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | Balance Sheets (Unaudited)               
|                               |                                                                                               | Statements of Operations (Unaudited)     
|                               |                                                                                               | Statements of Cash Flows (Unaudited)     
|                               |                                                                                               | Notes to 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.                           
|PART II  OTHER INFORMATION   
|                               | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURE                     



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CORTELCO SYSTEMS PUERTO RICO, INC.
FORM 10-Q/A
QUARTER ENDED APRIL 30, 2002

INDEX

|                                       |  |  |  |         |  |                                                                                       |  |                                                                                             |    |      |   | 
|-------------------------------------- |  |  |  | ------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                                       |  |  |  |         |  |                                                                                       |  |                                                                                             |    | Page
|                                       |  |  |  |         |  |                                                                                       |  |                                                                                             |    |     
|Part I:          FINANCIAL INFORMATION
|                                       |  |  |  | Item 1. |  | Financial Statements                                                                  |  |                                                                                             |    |     
|                                       |  |  |  |         |  |                                                                                       |  | Balance Sheets as of April 30, 2002 and July 31, 2001                                       |    |      | 3 | 
|                                       |  |  |  |         |  |                                                                                       |  | Statements of Operations for the Three Months and
Nine Months ended April 30, 2002 and 2001 |    |      | 4 | 
|                                       |  |  |  |         |  |                                                                                       |  | Statements of Cash Flows for the Nine Months
ended April 30, 2002 and 2001                  |    |      | 5 | 
|                                       |  |  |  |         |  |                                                                                       |  | Notes to Financial Statements                                                               |    |      | 6 | 
|                                       |  |  |  | Item 2. |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  |                                                                                             | 9  |     
|                                       |  |  |  | Item 3. |  | Qualitative and Quantitative Disclosure about Market Risk                             |  |                                                                                             | 20 |     
|Part II:          OTHER INFORMATION   
|                                       |  |  |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                             | 20 |     
|Signature                              |  |  |  |         |  |                                                                                       |  |                                                                                             | 20 |     

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CORTELCO SYSTEMS PUERTO RICO, INC.




PART I  FINANCIAL INFORMATION





ITEM 1.     FINANCIAL STATEMENTS

Cortelco Systems Puerto Rico, Inc.




Balance Sheets (Unaudited)


April 30, 2002 and July 31, 2001
(Dollars in thousands)


|                                     |                                                                                    |                            |     |        |       |           |     |          |        |  |  | 
|------------------------------------ | ---------------------------------------------------------------------------------- | -------------------------- | --- | ------ | ----- | --------- | --- | -------- | ------ |  |  | 
|                                     |                                                                                    |                            |     |        |       | April 30, |     | July 31,
|                                     |                                                                                    |                            |     |        |       | 2002      |     | 2001    
|                                     |                                                                                    |                            |     |        |       |           |     |         
|ASSETS                              
|Current assets:                      |                                                                                    |                            |     |        |       |           |     |         
|                                     | Cash and cash equivalents                                                          |                            | $   | 321    |       |           | $   | 959      |       
|                                     | Trade accounts receivable, net of allowance for doubtful accounts
of $761 and $799 |                            |     | 2,353  |       |           |     | 4,144    |       
|                                     | Due from affiliated entities                                                       |                            |     | 148    |       |           |     | 338      |       
|                                     | Current portion of investment in sales-type leases                                 |                            |     | 93     |       |           |     | 100      |       
|                                     | Inventories                                                                        |                            |     | 3,245  |       |           |     | 3,803    |       
|                                     | Prepaid expenses                                                                   |                            |     | 244    |       |           |     | 380      |       
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total current assets       |     |        | 6,404 |           |     |          | 9,724  | 
|Investment in sales-type leases      |                                                                                    |                            | 63  |        |       |           | 74  |         
|Property and equipment, net          |                                                                                    |                            | 481 |        |       |           | 547 |         
|Goodwill                             |                                                                                    |                            | 382 |        |       |           | 382 |         
|Other                                |                                                                                    |                            | 25  |        |       |           | 25  |         
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total other assets         |     |        | 951   |           |     |          | 1,028  | 
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total                      |     | $      | 7,355 |           |     | $        | 10,752 | 
|                                     |                                                                                    |                            |     |        |       |           |     |         
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                    |                            |     |        |       |           |     |         
|                                     | Trade accounts payable                                                             |                            | $   | 872    |       |           | $   | 1,881    |       
|                                     | Due to affiliated entities                                                         |                            |     | 409    |       |           |     | 2,640    |       
|                                     | Other accrued liabilities                                                          |                            |     | 518    |       |           |     | 635      |       
|                                     | Deferred revenue                                                                   |                            |     | 297    |       |           |     | 406      |       
|                                     | Note payable                                                                       |                            |     | 200    |       |           |     | 787      |       
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total current liabilities  |     |        | 2,296 |           |     |          | 6,349  | 
|Commitments and contingencies        |                                                                                    |                            |    |        |       |           |    |         
|Stockholders equity:                |                                                                                    |                            |     |        |       |           |     |         
|                                     | Common stock                                                                       |                            |     | 1,000  |       |           |     | 1,000    |       
|                                     | Additional paid-in capital                                                         |                            |     | 5,464  |       |           |     | 3,271    |       
|                                     | Retained earnings (accumulated deficit)                                            |                            |     | (1,405 | )     |           |     | 132      |       
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total stockholders equity |     |        | 5,059 |           |     |          | 4,403  | 
|                                     |                                                                                    |                            |     |        |       |           |     |         
|                                     |                                                                                    | Total                      |     | $      | 7,355 |           |     | $        | 10,752 | 
|                                     |                                                                                    |                            |     |        |       |           |     |         

See notes to financial statements.

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Cortelco Systems Puerto Rico, Inc.




Statements of Operations (Unaudited)


For the Three Months and Nine Months Ended April 30, 2002 and 2001
(Dollars in thousands, except per share data)


|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |        |       |         |  
|--------------------------------------------- | -------- | ------------------------------------ | ------------------------- | --- | ------------------ | ------ | ----------------- | ----- | ----- | ------ | ------ | ----- | ----- | ------- | ------ | ------ | ----- | ------- | -
|                                              |          |                                      |                           |     | Three Months Ended |        | Nine Months Ended
|                                              |          |                                      |                           |     | April 30,          |        | April 30,        
|                                              |          |                                      |                           |     |                    |        |                  
|                                              |          |                                      |                           |     | 2002               |        | 2001              |       | 2002  |        | 2001  
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |       
|Net revenues:                                 |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              | Product  |                                      | $                         | 996 |                    |        | $                 | 3,016 |       |        | $      | 5,550 |       |         | $      | 14,358 |      
|                                              | Services |                                      |                           | 773 |                    |        |                   | 721   |       |        |        | 2,583 |       |         |        | 2,095  |      
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              |          |                                      | 1,769                     |     |                    |        | 3,737             |       |       |        | 8,133  |       |       |         | 16,453 |       
|Cost of revenues:                             |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              | Product  |                                      |                           | 979 |                    |        |                   | 2,497 |       |        |        | 4,836 |       |         |        | 12,266 |      
|                                              | Services |                                      |                           | 431 |                    |        |                   | 275   |       |        |        | 1,338 |       |         |        | 1,039  |      
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              |          |                                      | 1,410                     |     |                    |        | 2,772             |       |       |        | 6,174  |       |       |         | 13,305 |       
|Gross profit                                  |          |                                      | 359                       |     |                    |        | 965               |       |       |        | 1,959  |       |       |         | 3,148  |       
|Operating expenses:                           |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              |          | Selling, general, and administrative |                           |     | 1,034              |        |                   |       | 1,160 |        |        |       | 3,058 |         |        |        | 4,085 |        
|                                              |          | Separation costs                     |                           |     | 178                |        |                   |       |      |        |        |       | 428   |         |        |        |      |        
|                                              |          | Special charges                      |                           |     | 50                 |        |                   |       | (62   | )      |        |       | 50    |         |        |        | 151   |        
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Total operating expenses                      |          |                                      | 1,262                     |     |                    |        | 1,098             |       |       |        | 3,536  |       |       |         | 4,236  |       
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Loss from operations                          |          |                                      | (903                      | )   |                    |        | (133              | )     |       |        | (1,577 | )     |       |         | (1,088 | )     
|Interest income                               |          |                                      | (3                        | )   |                    |        | (3                | )     |       |        | (11    | )     |       |         | (12    | )     
|Other expense (income), net                   |          |                                      | 1                         |     |                    |        |                  |       |       |        | (29    | )     |       |         | (2     | )     
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Loss before income tax benefit                |          |                                      | (901                      | )   |                    |        | (130              | )     |       |        | (1,537 | )     |       |         | (1,074 | )     
|Income tax benefit                            |          |                                      |                          |     |                    |        |                  |       |       |        |       |       |       |         |       |       
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Net loss                                      |          | $                                    | (901                      | )   |                    | $      | (130              | )     |       | $      | (1,537 | )     |       | $       | (1,074 | )     
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Net loss per common share                     |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|                                              |          | Basic and Diluted:                   |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |        |       |        
|                                              |          |                                      | Net loss per common share |     | $                  | (90.10 | )                 |       | $     | (13.00 | )      |       | $     | (153.70 | )      |        | $     | (107.40 | )
|                                              |          |                                      |                           |     |                    |        |                   |       |       |        |        |       |       |         |        |       
|Weighted-average number of shares
outstanding |          |                                      | 10                        |     |                    |        | 10                |       |       |        | 10     |       |       |         | 10     |       

See notes to financial statements.

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Cortelco Systems Puerto Rico, Inc.




Statements of Cash Flows (Unaudited)


For the Nine Months Ended April 30, 2002 and 2001
(Dollars in thousands)


|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |        |     |        |      |  
|---------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------- | ------------------------------- | --------------------------------------------------- | --- | ----------------- | ---- | ------ | --- | ------ | ---- | -
|                                               |                                                                             |                                        |                                 |                                                     |     | Nine Months Ended
|                                               |                                                                             |                                        |                                 |                                                     |     | April 30,        
|                                               |                                                                             |                                        |                                 |                                                     |     |                  
|                                               |                                                                             |                                        |                                 |                                                     |     | 2002              |      | 2001  
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|CASH FLOWS FROM OPERATING ACTIVITIES:          |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               | Net loss                                                                    |                                        | $                               | (1,537                                              | )   |                   | $    | (1,074 | )  
|                                               | Adjustments to reconcile net loss to net
cash used in operating activities: |                                        |                                 |                                                     |     |                   |      |        |    
|                                               |                                                                             | Depreciation and amortization          |                                 |                                                     | 144 |                   |      |        | 106 |       
|                                               |                                                                             | Changes in net assets and liabilities: |                                 |                                                     |     |                   |      |        |     |       
|                                               |                                                                             |                                        | Trade accounts receivable       |                                                     |     | 1,791             |      |        |     | 2,660  |     
|                                               |                                                                             |                                        | Due from affiliated entities    |                                                     |     | 190               |      |        |     | (56    | )   
|                                               |                                                                             |                                        | Inventories                     |                                                     |     | 558               |      |        |     | (307   | )   
|                                               |                                                                             |                                        | Other current assets            |                                                     |     | 143               |      |        |     | (14    | )   
|                                               |                                                                             |                                        | Trade accounts payable          |                                                     |     | (1,009            | )    |        |     | (1,414 | )   
|                                               |                                                                             |                                        | Receivable/payable to affiliate |                                                     |     | (31               | )    |        |     | 3      |     
|                                               |                                                                             |                                        | Accrued expenses and other      |                                                     |     | (117              | )    |        |     | (302   | )   
|                                               |                                                                             |                                        | Deferred revenue                |                                                     |     | (110              | )    |        |     |       |     
|                                               |                                                                             |                                        | Other assets and liabilities    |                                                     |     | (6                | )    |        |     | 244    |     
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               |                                                                             |                                        |                                 | Net cash used in operating activities               |     |                   | 16   |        |     |        | (154 | )
|CASH FLOWS FROM INVESTING ACTIVITIES:          |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               | Purchases of property and equipment                                         |                                        |                                 | (78                                                 | )   |                   |      | (137   | )  
|                                               | Investment in sales-type leases                                             |                                        |                                 | 11                                                  |     |                   |      | (173   | )  
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               |                                                                             |                                        |                                 | Net cash provided by (used in) investing activities |     |                   | (67  | )      |     |        | (310 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:          |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               | Advances from parent                                                        |                                        |                                 |                                                    |     |                   |      | 450    |    
|                                               | Increase (decrease) in outside notes                                        |                                        |                                 | (587                                                | )   |                   |      |       |    
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|                                               |                                                                             |                                        |                                 | Net cash used in financing activities               |     |                   | (587 | )      |     |        | 450  |  
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|Net decrease in cash and cash equivalents      |                                                                             |                                        | (638                            | )                                                   |     |                   | (14  | )     
|Cash and cash equivalents, beginning of period |                                                                             |                                        | 959                             |                                                     |     |                   | 644  |       
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       
|Cash and cash equivalents, end of period       |                                                                             | $                                      | 321                             |                                                     |     | $                 | 630  |       
|                                               |                                                                             |                                        |                                 |                                                     |     |                   |      |       

See notes to financial statements.

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Cortelco Systems Puerto Rico, Inc.




Notes to Financial Statements (Unaudited)


For the Three Months and Nine Months Ended April 30, 2002 and 2001
(Dollars in thousands)


1.     BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements of Cortelco
Systems Puerto Rico, Inc. (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP)
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnote disclosures required by GAAP for complete financial
statements. In the opinion of management, the financial statements reflect all
adjustments considered necessary for a fair statement of the results of
operations and financial position for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended July 31, 2001, which are included in the
Form 10 filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. The results of operations for the three and nine months ended
April 30, 2002 are not necessarily indicative of the results to be expected for
the year ending July 31, 2002 or any other interim period.

The Company is a wholly owned subsidiary of eOn Communications
Corporation. On August 28, 2001, the Board of Directors of eOn approved a plan
to spin-off this subsidiary as a separate entity to the stockholders of eOn.

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.

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. 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 be
recognized as assets apart from goodwill. SFAS No. 142 requires that ratable
amortization of goodwill be replaced with periodic tests of the goodwills
impairment and that intangible assets other than goodwill should be amortized
over their useful lives. The Company early adopted SFAS No. 142, effective
August 1, 2001 (see Note 5 for further information).

In August 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 adoption of SFAS No. 143 is
effective for the Company in the first quarter of fiscal year 2003. The Company
does not expect the adoption of SFAS No. 143 to have a significant impact on
the Companys future results of operations or financial position.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes previous
guidance for financial accounting and reporting for the impairment or disposal
of long-lived assets and for segments of a business to be disposed of. The
adoption of SFAS No. 144 is effective for the Company in the first quarter of
fiscal 2003. The Company is currently assessing the impact of SFAS No. 144 on
its results of operations and financial position.

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2.     INVENTORIES

Inventories consist of the following:

|                                                                                                   |                   |   |           |       |          |   |       |       | 
|-------------------------------------------------------------------------------------------------- | ----------------- | - | --------- | ----- | -------- | - | ----- | ----- | 
|                                                                                                   |                   |   | April 30, |       | July 31,
|                                                                                                   |                   |   | 2002      |       | 2001    
|                                                                                                   |                   |   |           |       |         
|(In Thousands)                                                                                     |                   |   |           |       |          |   |       |      
|Purchased components, net of reserve of $305
and $493 for April 30, 2002 and July 31, 2001         |                   | $ | 1,706     |       |          | $ | 2,178 |      
|Components related to installations in process                                                     |                   |   | 61        |       |          |   | 258   |      
|Parts and materials for sale, net of reserve of $252
and $310 for April 30, 2002 and July 31, 2001 |                   |   | 1,478     |       |          |   | 1,367 |      
|                                                                                                   |                   |   |           |       |          |   |       |      
|                                                                                                   | Total inventories |   | $         | 3,245 |          |   | $     | 3,803 | 
|                                                                                                   |                   |   |           |       |          |   |       |      

3.     CHANGES IN STOCKHOLDERS EQUITY

The following represents the changes in stockholders equity for the nine
months ended April 30, 2002:

|                                 |  |                |       |           |  |            |       |       |  |   |        |   |  |   |        |  
|-------------------------------- |  | -------------- | ----- | --------- |  | ---------- | ----- | ----- |  | - | ------ | - |  | - | ------ | -
|                                 |  | (In Thousands)
|                                 |  |               
|                                 |  |                |       |           |  | Capital In |       |       |  |   |        |   |  |  
|                                 |  | Common         |       | Excess of |  | Retained   |       |       |  |  
|                                 |  | Stock          |       | Par Value |  | Earnings   |       | Total
|                                 |  |                |       |           |  |            |       |      
|Balance at July 31, 2001         |  | $              | 1,000 |           |  | $          | 3,271 |       |  | $ | 132    |   |  | $ | 4,403  |  
|Net loss                         |  |                |      |           |  |            |      |       |  |   | (1,537 | ) |  |   | (1,537 | )
|Capital contribution from parent |  |                |      |           |  |            | 2,193 |       |  |   |       |   |  |   | 2,193  |  
|                                 |  |                |       |           |  |            |       |       |  |   |        |   |  |   |        |  
|Balance at April 30, 2002        |  | $              | 1,000 |           |  | $          | 5,464 |       |  | $ | (1,405 | ) |  | $ | 5,059  |  
|                                 |  |                |       |           |  |            |       |       |  |   |        |   |  |   |        |  

During the nine months ended April 30, 2002, the $2.2 million previously
advanced from eOn to CSPR was reclassified as a capital contribution and no
further repayment of the amount is required.

4.     SEGMENT INFORMATION

|                                   |  |                |       |                  |  |       |        |   |  |   |       |  
|---------------------------------- |  | -------------- | ----- | ---------------- |  | ----- | ------ | - |  | - | ----- | -
|                                   |  | Communications |       | Cellular         |  |       |        |  
|                                   |  | Systems        |       | Airtime Services |  | Total
|                                   |  |                |       |                  |  |      
|                                   |  | (in thousands) |       |                  |  |       |        |   |  |  
|Three months ended April 30, 2002: |  |                |       |                  |  |       |        |   |  |   |       |  
|Revenues                           |  | $              | 1,365 |                  |  | $     | 404    |   |  | $ | 1,769 |  
|Net income (loss)                  |  |                | (814  | )                |  |       | (87    | ) |  |   | (901  | )
|Total assets                       |  |                | 6,521 |                  |  |       | 834    |   |  |   | 7,355 |  
|Three months ended April 30, 2001: |  |                |       |                  |  |       |        |   |  |   |       |  
|Revenues                           |  | $              | 3,164 |                  |  | $     | 573    |   |  | $ | 3,737 |  
|Net income (loss)                  |  |                | 877   |                  |  |       | (1,007 | ) |  |   | (130  | )
|Total assets                       |  |                | 7,315 |                  |  |       | 2,115  |   |  |   | 9,430 |  

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|                                  |  |                |        |                  |  |       |        |   |  |   |        |  
|--------------------------------- |  | -------------- | ------ | ---------------- |  | ----- | ------ | - |  | - | ------ | -
|                                  |  | Communications |        | Cellular         |  |       |        |  
|                                  |  | Systems        |        | Airtime Services |  | Total
|                                  |  |                |        |                  |  |      
|                                  |  | (in thousands) |        |                  |  |       |        |   |  |  
|Nine months ended April 30, 2002: |  |                |        |                  |  |       |        |   |  |   |        |  
|Revenues                          |  | $              | 6,680  |                  |  | $     | 1,453  |   |  | $ | 8,133  |  
|Net income (loss)                 |  |                | (1,309 | )                |  |       | (228   | ) |  |   | (1,537 | )
|Nine months ended April 30, 2001: |  |                |        |                  |  |       |        |   |  |   |        |  
|Revenues                          |  | $              | 8,401  |                  |  | $     | 8,052  |   |  | $ | 16,453 |  
|Net income (loss)                 |  |                | (56    | )                |  |       | (1,018 | ) |  |   | (1,074 | )

There have been no differences from the most recent annual financial statements
in the basis of measuring segment profit or loss. There have been no material
changes in the amount of assets of any operating segment since the most recent
annual financial statements.

5.     GOODWILL AND OTHER INTANGIBLES

On August 1, 2001, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which eliminated the amortization of purchased goodwill and
other intangibles with indefinite useful lives. Upon adoption of SFAS No. 142,
the Company performed an impairment test of its goodwill and determined that no
impairment of the recorded goodwill existed. Under SFAS No. 142, goodwill will
be tested for impairment at least annually and more frequently if an event
occurs which indicates the goodwill may be impaired.

Included in intangibles and other assets on the Companys consolidated balance
sheet as of April 30, 2002 are the following acquired intangible assets:

|         |  |                |     |              |  |             |   | 
|-------- |  | -------------- | --- | ------------ |  | ----------- | - | 
|         |  | April 30, 2002
|         |  |               
|         |  | (In Thousands)
|         |  |                |     |              |  | Accumulated
|         |  | Cost           |     | Amortization
|         |  |                |     |             
|Goodwill |  | $              | 382 |              |  | $           |  | 

There was no intangible amortization expense for the nine months ended April
30, 2002 and there is no estimated intangible amortization expense for any
subsequent fiscal years as no amount of previous purchases was allocated to
intangibles.

As a de minimis amount of goodwill amortization expense was recorded in any
previous fiscal period, previously reported net income and earnings per share
information is not changed for the effect of SFAS No. 142.

6.     SEPARATION COSTS

During the nine months ended April 30, 2002, CSPR incurred approximately
$428,000 in accounting and legal fees performed relating to the decision by eOn
Communications to spin-off CSPR as an independent entity.

7.     SPECIAL CHARGES

To reduce costs and improve productivity, CSPR adopted restructuring plans in
the second quarter of fiscal 2001 and the third quarter of fiscal 2002. The
major component of the plans and all of the charges were comprised of estimated
severance payments related to reductions in our workforce. The Company
estimated severance payments for the terminated employees based on factors such
as compensation level and time of service with the Company.

The special charge of $50,000 recorded in the third quarter of fiscal 2002
related to employee termination benefits for six employees. These reductions
took place in our sales and operations functions. No termination payments were
made during the third quarter, and as of April 30, 2002, the remaining amount
of termination benefits recorded as a current liability was $50,000. It is
expected that the majority of these accrued termination benefits will be paid
by July 31, 2002.

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Net workforce reductions under the plan will reduce our future employee
expense. The decrease in costs as a result of the restructuring activities
outlined above will primarily impact wages and benefits in our selling, general
and administrative expense.

8.     RECENT DEVELOPMENTS

On August 28, 2001, the Board of Directors of eOn Communications Corporation
approved a plan to spin-off CSPR as an independent entity headquartered in San
Juan, Puerto Rico. To accomplish the spin-off, eOn intends to declare a special
dividend of the shares of CSPR to its stockholders. A spin-off will not take
place until the stock of CSPR is registered with the Securities and Exchange
Commission, and all other applicable legal requirements are met. It is
currently anticipated that this will occur before the end of fiscal year 2002.




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

This report contains forward-looking statements within the meaning of the
federal securities laws. 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. Forward-looking statements include
statements regarding our anticipated or projected operating performance,
financial results, and liquidity and capital resources. Such statements are
based on managements beliefs, assumptions, and expectations, which in turn are
based on information currently available to management. The information
contained in these forward-looking statements is inherently uncertain, and
CSPRs and its industrys actual results, levels of activity, performance, and
achievements may differ materially due to a number of factors, most of which
are beyond CSPRs ability to predict or control. We also direct your
attention to the risk factors affecting our business that are discussed below.
CSPR disclaims any obligation to update any of the forward-looking statements
contained in this report to reflect any future events or developments. The
following discussions should be read in conjunction with our consolidated
financial statements and the notes included thereto.

Overview

We are 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. Our products help enterprises
communicate more effectively with customers and increase customer satisfaction
and loyalty. We sell both to enterprises in our voice and data communications
business and to individual retail customers in our cellular business.

Our 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 53% of our revenues
in fiscal 2001 and virtually all of the operating loss of the company, while
Cellular Airtime Services represented 47% of revenues and had a small operating
profit. We anticipate that Cellular Airtime Services will decrease as a
percentage of total revenues from the fiscal year 2001 amount because of the
significant revenues that resulted from a new cellular carrier trying to gain
market share in Puerto Rico in the first half of that fiscal year. Cellular
Airtime Services revenues were 18% of our total revenues for the nine months
ended April 30, 2002 and we
anticipate that these revenues will continue to represent a smaller percentage
of the total revenues than in fiscal year 2001. As Communications Systems
revenues will constitute a larger portion of our revenue in the future than in
fiscal 2001, it is important that we continue to add to our product and service
offering and increase our installed base of customers. Service revenues from
our Communications Systems segment have our highest gross margins, greater than
the resale of third-party communications systems equipment or our Cellular
Airtime Services segment.

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While our recent losses have primarily been due to our Communications Systems
segment, we anticipate increasing the revenues in the Communications Systems
segment while trying to closely control our selling, general, and
administrative expenses. We 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. Our recent losses in
the Communications System segment were mainly a result of expanding our sales
and administrative infrastructure following our rapid growth in fiscal 1999 and
the first half of fiscal 2000. In fiscal 2001, we restructured our 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, we will continue to seek acquisition opportunities that allow us to
increase our maintenance revenues in the Communications Systems segment.

We recognize revenues from the communications systems we install upon
completion of the installation services and acceptance by the customer due to
the customized nature of each installation. We recognize revenues upon shipment
for communications systems and cellular telephones shipped to dealers because,
at that point, we have no further obligations to our dealers to either deliver
additional products or perform services. We also recognize revenues upon
shipment for cellular telephones sold to retail customers. We recognize
cellular sales commission revenues when retail contracts are submitted to
cellular carriers and 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, we sell and
service communications systems from eOn, as well as various third-party
communications systems from various manufacturers.

Our operating expenses consist mainly of salaries of our sales, marketing,
service, and administrative personnel and associated overhead. We recognize
these expenses as incurred. As we distribute 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, we anticipate that we will incur additional general
and administrative expenses due to public company reporting requirements that
were previously performed by our parent.

Net revenues in quarters ending January 31 generally decline from the previous
quarter, reflecting seasonal factors that affect some of our customers and the
market for voice and data communication systems in Puerto Rico. Customers in
such markets as call centers and retail outlets have seasonal buying patterns
and do not purchase substantial amounts of equipment during the quarters ending
January 31. An increase in total net revenues from October 31, 1999 to January
31, 2000, however, was due mainly to single-line telephone sales to the Puerto
Rico Telephone Company and is not indicative of the usual seasonal pattern of
our business.

Three Months Ended April 30, 2002 and 2001

Net Revenues

Net revenues decreased 52.7% to $1.8 million in the three months ended April
30, 2002 from $3.7 million in the three months ended April 30, 2001. The
results primarily reflected decreased revenues of approximately $1.8 million
from the Communication Systems segment due to a weaker economic environment,
while revenues from the Cellular Airtime Services segment were substantially
unchanged from the prior year. Communications Systems segment revenues during
the three months ended April 30, 2002 include $0.3 million of revenues from
sales attributable to the portion of our business we acquired from Ochoa
Telecom, an installer of integrated communications systems, in May 2001.

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 62.8% to $0.4 million in the three months ended April 30, 2002 from
$1.0 million in the three months ended April 30, 2001. The decrease resulted
primarily from decreased revenues and a lower gross margin percentage in the
current period. Our gross margins were 20.3% in the three months ended April
30, 2002 and 25.8% in the three months ended April 30, 2001. The reduced gross
margin was primarily due to the unfavorable impact of fixed labor and overhead
resulting from the decline in revenues.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses consist mainly of salaries of our
sales, marketing, service, and administrative personnel and associated
overhead. We recognize these expenses as incurred. As we distribute 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, we anticipate that we
will incur additional general and administrative expenses due to public company
reporting requirements that were previously performed by our parent. Selling,
general and administrative expenses decreased 10.9% to $1.0 million in the
quarter ended April 30, 2002 from $1.2 million in the quarter ended April 30,
2001. 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 $0.2 million in the three months ended April 30, 2002.
These costs represent legal and accounting fees associated with our separation
from eOn.

Special Charges

To reduce costs and improve productivity, CSPR adopted a restructuring plan in
the third quarter of fiscal 2002. The major component of the plan and all of
the charge was comprised of estimated severance payments related to reductions
in our workforce. The Company estimated severance payments for the terminated
employees based on factors such as compensation level and time of service with
the Company.

The special charge of $50,000 recorded in the third quarter of fiscal 2002
related to employee termination benefits for six employees. These reductions
took place in our sales and operations functions. No termination payments were
made during the third quarter, and as of April 30, 2002, the remaining amount
of termination benefits recorded as a current liability was $50,000. It is
expected that the majority of these accrued termination benefits will be paid
by July 31, 2002.

Net workforce reductions under the plan will reduce our future employee
expense. The decrease in costs as a result of the restructuring activities
outlined above will primarily impact wages and benefits in our selling, general
and administrative expense.

Interest Income

Interest income was nominal in the three months ended April 30, 2002 and 2001.
In addition, we had no interest expense in either the three months ended April
30, 2002 or the three months ended April 30, 2001.

Income Tax Expense

We recognized no income tax benefit in the three months ended April 30, 2002 or
the three months ended April 30, 2001 because we cannot conclude that it is
more likely than not that deferred tax assets will be realized in the future.

Nine months ended April 30, 2002 and 2001

Net Revenues

Net revenues decreased 50.6% to $8.1 million in the nine months ended April 30,
2002 from $16.5 million in the nine months ended April 30, 2001. The results
primarily reflected decreased revenues of approximately $6.6 million from the
Cellular Airtime Services segment, while revenues from the Communications
Systems segment reflect decreased revenues of approximately $1.7 million from
the prior year. Communications Systems segment revenues during the nine months
ended April 30, 2002 include $1.3 million of revenues from sales attributable
to the portion of our business we acquired from Ochoa Telecom, an installer of
integrated communications systems, in May 2001. The Cellular Airtime Services
revenues decreased in the current year due mainly to significant revenues in
the prior year associated with a new cellular carrier that was trying to build
market share in Puerto Rico during the first half of fiscal year 2001.

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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. 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 37.8% to $2.0 million in the nine months ended April 30, 2002 from
$3.1 million in the nine months ended April 30, 2001. The decrease resulted
primarily from decreased revenues in the current year. Our gross margins were
24.1% in the nine months ended April 30, 2002 and 19.1% in the nine months
ended April 30, 2001. The gross margin in the nine months ended April 30, 2001
reflected a significantly higher mix of lower margin Cellular Airtime Services
revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and
benefit costs, advertising, and facilities and other overhead expenses incurred
to support our business. Selling, general and administrative expenses decreased
25.1% to $3.1 million in the nine months ended April 30, 2002 from $4.1 million
in the nine months ended April 30, 2001. The decrease was primarily due to
decreased headcount in the Communications Systems and Cellular Airtime Services
segments in fiscal 2002 compared to fiscal 2001. These expenses as a percentage
of revenues increased to 37.6% in the nine months ended April 30, 2002 from
24.8% in the nine months ended April 30, 2001, primarily because the decrease
in the general expenses were not proportionally reduced with the decrease in
revenues.

Separation Costs

Separation costs were $0.4 million in the nine months ended April 30, 2002.
These costs represent legal and accounting fees associated with our separation
from eOn.

Special Charges

To reduce costs and improve productivity, CSPR adopted restructuring plans in
the second quarter of fiscal 2001 and the third quarter of fiscal 2002. The
major component of the plans and all of the charges were comprised of estimated
severance payments related to reductions in our workforce. The Company
estimated severance payments for the terminated employees based on factors such
as compensation level and time of service with the Company.

The special charge of $50,000 recorded in the third quarter of fiscal 2002
related to employee termination benefits for six employees. These reductions
took place in our sales and operations functions. No termination payments were
made during the third quarter, and as of April 30, 2002, the remaining amount
of termination benefits recorded as a current liability was $50,000. It is
expected that the majority of these accrued termination benefits will be paid
by July 31, 2002.

Net workforce reductions under the plan will reduce our future employee
expense. The decrease in costs as a result of the restructuring activities
outlined above will primarily impact wages and benefits in our selling, general
and administrative expense.

Interest Income

Interest income was nominal in the nine months ended April 30, 2002 and 2001.
In addition, we had no interest expense in either the nine months ended April
30, 2002 or the nine months ended April 30, 2001 as we retired our credit
facility in conjunction with the initial public offering of eOn in February
2000.

Income Tax Expense

We recognized no income tax benefit in the nine months ended April 30, 2002 or
the nine months ended April 30, 2001 because we cannot conclude that it is more
likely than not that 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, we funded our 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. See Risk FactorsFollowing the distribution, we will no longer be able
to rely on eOn as a major source of capital funding, which could limit our
ability to grow or sustain our business.

Net cash provided by ( used in) operating activities was $0.0 million for the
nine months ended April 30, 2002. Cash provided by operating activities in the
first nine months of fiscal 2002 was due primarily to increased collections of
receivables, offset by a decrease in accounts payable and the net loss from
operations.

Net cash provided by (used in) investing activities was ($0.1) million for the
nine months ended April 30, 2002, primarily due to expenditures for office
automation.

Net cash provided by (used in) financing activities was ($0.6) million in the
nine months ended April 30, 2002, resulting from repayment of part of the note
payable issued in conjunction with CSPRs acquisition of certain assets from
Ochoa in May 2001. During the nine months ended April 30, 2002, the net
amounts previously advanced from eOn to CSPR were reclassified as capital
contributions and no further repayment of the amounts is required. Cash
provided from financing activities during the nine months ended April 30, 2001
represents $0.5 million in net advances from eOn.

We believe that our available funds will satisfy our projected working capital
and capital expenditure requirements for the next twelve months. To the extent
future revenues are not realized or we grow more rapidly than expected, we may
need additional cash to finance our operating and investing activities.
However, there can be no assurance that any such financing can be achieved.

ADDITIONAL RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

You should carefully consider the risks described below when evaluating
ownership of CSPR stock. 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.

RISKS RELATED TO OUR BUSINESS

If we are unable to raise additional capital on acceptable terms, our ability
to market our products and services and grow and operate our business could be
harmed.

To grow our business, we must continue to make significant investments in
marketing our products and services. We will also need significant working
capital to take advantage of future opportunities and to respond to competitive
pressures or unanticipated requirements. We expect that our existing capital
resources will be sufficient to meet our cash requirements for at least the
next twelve months, although our current resources could be exhausted more
quickly depending on the
payment terms that we are able to negotiate with our vendors and suppliers and
our success in collecting on accounts receivable. 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 we 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.

If we are not able to grow or sustain our traditional private branch exchange
(PBX) market, our business, operating results, and financial condition could be
harmed.

Approximately 40% of our fiscal year 2001 revenues were from sales of PBX
customer premise equipment. Our PBX revenues declined 24% from fiscal year 2000
due mainly to a decline in the overall PBX market and significant Year 2000
upgrade revenues present in fiscal 2000. These revenues comprise approximately
76% of our 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 revenues.

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We may not be able to grow or 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 we are
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 we fail to obtain and market new telecommunication and data products or to
add features to our existing telecommunication and data products, we 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 we are 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.

We face 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 us 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. We cannot
assure you that we 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. We generally
recognize 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 we recognize 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.

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We incur substantial sales and marketing expenses and spend 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 we incur
related sales and marketing expense, which may cause us 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, we believe that sales of telecommunications
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 we are 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.

Unanticipated difficulties in integrating our recent purchase of certain assets
could harm our business.

In May 2001, we purchased certain assets from Ochoa Telecom, a company engaged
in the sale, installation, and maintenance of integrated communications
equipment in Puerto Rico. The assets consisted of product inventory, accounts
receivable, and some computer equipment for the certain Ochoa personnel that we
hired. The purchase was financed through a note payable to Ochoa,
collateralized by the assets acquired. Although sales of Ochoa products since
the date of acquisition have contributed positively to our financial results,
future operating results may be adversely affected if we are not able to
realize continued operating efficiencies through the further consolidation of
certain sales, administrative, and customer service functions.

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

As part of our ongoing business strategy, we may consider additional
acquisitions of, or significant investments in, businesses that offer products,
services and technologies complementary to our own. In particular, we 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.

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If we lose key management personnel, we may not be able to successfully operate
our business.

Our 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. We employ our key
personnel on an at-will basis. We do not maintain key person insurance policies
on any of the members of our executive management team.

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

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

Since we do not have exclusive agreements with our manufacturers, manufacturers
may enter into dealer agreements with our competitors, which may adversely
affect our business.

We distribute and service products designed and manufactured by eOn, Avaya,
Nortel, Hitachi, Mitel, Toshiba, NEC, Cortelco, Nokia, Ericsson, Motorola, and
others. However, we do 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 CSPR, and may adversely affect our business.

If we are unable to establish and maintain satisfactory relationships with the
manufacturers of our products that we expect to sell and service, our business
will suffer.

We acquire all of our products that we 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.

We depend on eOn and a limited number of other third parties to manufacture and
supply our products, and we may be unable to operate our business if those
parties do not perform their obligations.

We expect to rely on eOn and other third-party suppliers for many of the
products that we distribute and service, including telecommunications and data
systems as well as cellular phones and accessories. We do not have long-term
agreements in place with our suppliers and we do not control the time and
resources that these third parties devote to our business. We 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, we 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.

We face many risks in expanding our international operations into the Caribbean
and Latin America

Sales outside of Puerto Rico accounted for approximately 7% of our total
revenues during fiscal 2001. We expect to increase sales to customers outside
Puerto Rico as we establish additional distribution channels in the Caribbean
and Latin America. However, foreign markets for our products may develop more
slowly than currently anticipated. We may not be able to successfully
establish international distribution channels, or we may not be able to hire
the additional personnel necessary to support such distribution channels.

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

As stated above, sales outside of Puerto Rico accounted for approximately 7% of
our total revenues during fiscal 2001. We anticipate that revenue from
international sales will continue to represent a significant portion of our
total revenue. Because of our operations and relationships in other parts of
the Caribbean and in Latin America, 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, particularly in Latin American markets;
| | - |  | ---------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.                                                                  

We currently sell outside Puerto Rico in the Dominican Republic, Panama, and
Costa Rica and continue in attempts to increase our business in these
countries. All our sales are denominated in United States dollars.

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

We are currently subject to one lawsuit regarding an alleged breach of
contract, and four lawsuits regarding employment issues. In the breach of
contract case, the plaintiff alleges that we 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 CSPR was unjustified.
Collectively, the employment law cases allege damages of approximately $9
million. We have analyzed each lawsuit with our legal advisers, and we do 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 we are
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 we 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 we sell are subject to the regulations of the Federal Communications
Commission and Junta Reglamentadora de Telecommunicationes 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 we fail 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
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.

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The products we sell and service may have undetected faults leading to
liability claims, which could harm our business.

The products we sell and service 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 products we sell 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 we are 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. We 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.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF CSPR STOCK

There has never been a trading market for our stock and one may not develop,
which may cause our reported stock prices to be volatile and limit your ability
to sell your shares.

There has been no public market for our stock. After the spin-off from eOn, we
believe the initial trading volume in our stock will be low given the need for
investors to assess our prospects and progress as a public company. In
addition, although it is expected that trades in our common stock will be
reported on the OTC Bulletin Board, our common stock will not be listed on any
securities exchange or quoted on The Nasdaq Stock Market, which may further
limit the trading volume. Relatively small trades in our stock could,
therefore, have a disproportionate effect on our reported stock prices.

The OTC Bulletin Board (the OTCBB) is a regulated quotation service that
displays real-time quotes, last-sale prices and volume information for shares
of stock that are not listed on a national securities exchange or designated
for quotation on The Nasdaq Stock Market. Trades in OTCBB securities will be
displayed only if an institution acting as a market maker for those securities
processes the trade. Although there initially will be at least one institution
acting as a market maker for our shares, that institution will not be obligated
to continue making a market for any specific period of time. Thus, there can be
no assurance that any institution will be acting as a market maker for our
stock at any time. If there is no market maker for our shares and no trades in
those shares are reported, it may be difficult for you to dispose of your
shares or even to obtain accurate quotations as to the market price of your
shares. Moreover, because the order handling rules adopted by the Securities
and Exchange Commission that apply to shares quoted on The Nasdaq Stock Market
do not apply to OTCBB
shares, no market maker will be required to maintain an orderly market in our
shares. Accordingly, an order to sell our shares placed with a market maker may
not be processed until a buyer for the shares is readily available, if at all,
which may further limit your ability to sell your shares at prevailing market
prices.

The stock markets in general, and the markets for telecommunications stocks in
particular, have experienced extreme volatility that has often been unrelated
to the operating performance of particular companies. These broad market
fluctuations may harm the trading prices of our stock. We cannot assure you
that you will be able to resell any of your shares at or above the initial
trading price. Any of these factors could adversely affect the liquidity and
trading prices of our stock.

Substantial sales of our stock may occur immediately following the
distribution, which could cause our stock price to decline.

eOn currently intends to distribute approximately 1,200,000 shares of our
common stock to its stockholders. All of these shares will be freely tradable
without restriction or further registration, unless the shares are owned by one
of our affiliates, as that term is defined in Rule 405 of the Securities Act
of 1933. We are unable to predict whether significant amounts of our stock will
be sold in the open market following the distribution. It is unlikely that a
sufficient number of buyers will be in the market at that time. A number of
factors, including the possibility that the distribution will be taxable to eOn
stockholders as of the record date, may cause the recipients of our shares in
the distribution to resell those shares immediately. Any sales of substantial
amounts of our stock in the public market, or the perception that such sales
might occur, whether as a result of the distribution or otherwise, could harm
the market price of our stock.

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

We currently expect that our stock will fit 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 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.

Future sales of shares may decrease our stock price.

Sales of substantial amounts of our common stock in the public market after our
distribution, including shares issued upon the exercise of outstanding options,
or the perception that such sales could occur, could reduce the market price of
our common stock. These sales also might make it more difficult for us to raise
funds through future offerings of common stock.

Your ownership interest may be diluted and your rights as a stockholder may be
adversely affected if we raise capital through an additional issuance of equity
securities.

If additional capital is raised through the issuance of equity securities, the
percentage ownership of our existing stockholders will decline, stockholders
may experience dilution in net book value per share, and these equity
securities may have rights, preferences or privileges senior to those of the
holders of our common stock. Any debt financing, if available, may involve
covenants limiting or restricting our operations, future opportunities, or
ability to declare and pay any future dividends.

Insiders will have substantial voting control over us after the spin-off from
eOn and 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.

After the spin-off from eOn, we anticipate that our officers, directors and
five percent or greater stockholders will beneficially own or control, directly
or indirectly, approximately 487,869 shares, which in the aggregate will
represent approximately 41% voting interest in the outstanding shares of our
common stock. David S. Lee, our Chairman, will beneficially own or control,
directly or indirectly, approximately 302,000 shares, which in the aggregate
will represent approximately 25% voting interest in the outstanding shares of
our common stock. ChinaVest, Inc. and affiliated entities will beneficially own
or control, directly or indirectly, approximately 178,000 shares, which in the
aggregate will represent approximately 15% voting interest in the outstanding
shares of our common stock. These stockholders may 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.

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 5,000,000 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.

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RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. 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 be
recognized as assets apart from goodwill. SFAS No. 142 requires that ratable
amortization of goodwill be replaced with periodic tests of the goodwills
impairment and that intangible assets other than goodwill should be amortized
over their useful lives. The Company elected to early adopt SFAS No. 142 on
August 1, 2001. Footnote 5 of the financial statements provides additional
discussion regarding the impact to the Companys financial statements as a
result of adopting this statement.

In August 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 adoption of SFAS No. 143 is
effective for the Company in the first quarter of fiscal year 2003. The Company
does not expect the adoption of SFAS No. 143 to have a significant impact on
the Companys future results of operations or financial position.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes previous
guidance for financial accounting and reporting for the impairment or disposal
of long-lived assets and for segments of a business to be disposed of. The
adoption of SFAS No. 144 is effective for the Company in the first quarter of
fiscal 2003. The Company is currently assessing the impact of SFAS No. 144 on
its results of operations and financial position.




ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK.

The majority of our cash and 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 our sales are made in U.S.
dollars and, consequently, we believe that our foreign currency exchange rate
risk is immaterial. We do not have any derivative instruments and do not engage
in hedging transactions.




PART II    OTHER INFORMATION




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



| | (A) |  | Exhibits.           
| | --- |  | --------------------
|
| |     |  | None                
|
| | (B) |  | Reports On Form 8-K.
|
| |     |  | None.               




SIGNATURE

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: | June 24, 2002 |  | \s\ Francisco Sanchez                       
|      |               |  |                                             
|      |               |  | Francisco Sanchez                           
|      |               |  | Vice President, Chief Financial Officer     
|      |               |  | (Principal Financial and Accounting Officer)

20