FORM 10-QSB SECURITIES AND EXCHANGE COMMISSIONWashington,
DC 20549  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
 For the quarterly period ended March 31,
2001 Commission file number 0-230 17 CHOICETEL CORPORATION 
 (Exact name
of registrant as specified in its charter)  Minnesota
  41-1649949(State of
  jurisdiction or
  IRS
  Employer ID No.incorporation
  of organization)15500 Wayzata Blvd., Wayzata, Minnesota
  55391(Address
  of principal executive offices)
  (Zip Code)
   Registraint's telephone number, including
  area code
  952-249-1802  N/A(Former
  name, former address and former fiscal year if changed from last report)9724 10th Ave. North, Plymouth, MN
  55441(Former
  address of principal executive offices)
  (Zip Code)
  Registrants
  former telephone number, including area code
  763-544-1260  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.
                    Yesx      
No    ̈ As of date
of filing, the Company has 3,294,481 shares outstanding. 
 
 CHOICETEL COMMUNICATIONS, INC.

Form 10-QSB Index
May 15, 2001





Part
  I:
  Financial
  InformationItem
  1.
  Financial
  StatementsConsolidated
  Balance Sheet - December 31, 2000 and March 31, 2001Consolidated Statements of
  Operations - Three months ended March 31, 2000 and 2001Consolidated Statements of Cash Flows - Three months ended March
  31, 2000 and 2001Notes
  to Consolidated Financial StatementsItem
  2.
  Management's
  Discussion and AnalysisPart
  II:
  Other
  InformationItem
  1.
  Legal
  ProceedingsItem
  6.
  Exhibits
  and Reports on Form 8-K(a)      Reports on 8-K



Signature

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



CHOICETEL
  COMMUNICATIONS, INC.Date:
  May 15, 2001
  By:
  /s/ Jack S. KohlerJack S. KohlerVice President and Chief Financial
  Officer


CONDENSED CONSOLIDATEDCHOICETEL
  COMMUNICATIONS, INC.
  BALANCE
  SHEETSAND SUBSIDIARIES(Unaudited)12/31/2000
  3/31/2001Assets:Current assets:Cash and cash equivalents
  $495,312
  $359,749Investments
  2,203,306
  2,305,323Receivables
  521,072
  646,938Prepaid and other assets
  88,167
  47,311Deferred taxes
  1,873,000
  1,870,336Total current assets
  5,180,857
  5,229,657Property and equipment, net
  239,500
  219,986Net assets of discontinued operations
  1,943,228
  2,015,343$7,363,585
  $7,464,986Liabilities and shareholders' equity:Current liabilities:Accounts payable
  $1,788,235
  $1,657,796Accrued expenses
  207,841
  462,462Notes payable
  
  104,000Total current liabilities
  1,996,076
  2,224,258Shareholders' equity
  5,367,509
  5,240,728$7,363,585
  $7,464,986
  See
notes to condensed consolidated financial statements. CONDENSED CONSOLIDATEDCHOICETEL
  COMMUNICATIONS, INC.
  STATEMENTS
  OF OPERATIONSAND
  SUBSIDIARIES
  THREE MONTHS ENDED
  MARCH 31(Unaudited)2001
  2000Revenue
  $14,658
  $89,861Cost of sales
  65,110
  69,153Gross margin
  (50,452)
  20,708Selling, general and administrative
  expenses
  285,006
  286,729Operating loss
  (335,457)
  (266,021)Other income (expense)Investment income
  102,017Interest income, net
  5,512
  36,488Loss from continuing operations before
  income tax benefit
  (228,288)
  (229,533)Minority interest
  
  106,408Income tax expense (benefit)
  (91,315)Loss from continuing operations
  (136,973)
  (123,125)Income
  from discontinued operations (net of $82,713 income tax expense in 2001)
  147,966Net income (loss)
  $10,993
  $(123,125)Earnings (loss) per share:Continuing operations, basic and diluted
  $(0.04)
  $(0.04)Discontinued operations, basic and diluted
  $0.04
  $(0.00)Net income (loss), basic and diluted
  $0.00
  $(0.04)Weighted average number of shares
  outstanding:Basic
  3,375,935
  2,973,466Diluted
  3,375,935
  2,973,466

See notes to condensed consolidated
financial statements.

CONDENSED CONSOLIDATEDCHOICETEL
  COMMUNICATIONS, INC.
  STATEMENTS
  OF CASH FLOWSAND
  SUBSIDIARIES
  THREE MONTHS ENDED MARCH 31(UNAUDITED)2001
  2000Cash flows from operating activities:Net income (loss)
  $10,993
  $(123,125)Adjustments to reconcile net income
  (loss) to net cash provided by operating activities:Deferred taxes
  2,664
  39,448Depreciation and amortization
  66,361
  1,663Unrealized gain on investments
  (102,017)Minority interest loss
  
  (106,408)Changes in operating assets and liabilities:Receivables
  (125,866)
  681,353Prepaid expenses
  33,674
  (124,591)Accounts payable
  (130,439)
  191,413Refundable income tax
  
  (300,000)Deferred loss
  
  398,677Accrued expenses
  231,340
  (271,439)Income tax payable
  
  (221,000)Cash in phones
  3,850Net cash provided by operating activities
  (9,440)
  165,991Cash flows from investing activities:Purchase of equipment
  (111,863)
  (309,687)Proceeds from sale of equipment
  19,514Proceeds from sale of equipment and rental contracts
  
  1,960,176Net cash provided by (used in) investing activities
  (92,349)
  1,650,489Cash flows from financing activities:Collection of subscription receivable
  
  225,000Issuance of short-term debt
  104,000Repurchase of common stock
  (137,774)Principal payments on long-term debt
  
  (387,475)Net cash provided by (used in) financing activities
  (33,774)
  (162,475)Net increase (decrease) in cash and
  cash equivalents
  $(135,563)
  $1,654,005Cash and cash equivalents, beginning
  495,312
  2,323,344Cash and cash equivalents, ending
  $359,749
  $3,977,349Supplemental disclosure of cash flow
  information:Cash paid for interest
  $843
  $845Cash paid for income taxes
  
  $320,000Common stock issued for accrued expenses
  
  $93,121

See
notes to condensed consolidated financial statements.

CHOICETEL COMMUNICATIONS, INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements1.          Basis of presentation, nature of
business and discontinued operations:

Basis
of Presentation:

The
condensed consolidated financial statements of the Company for the three-month
period ended March 31, 2001 and 2000 have been prepared by the Company without
audit by the Companys independent auditors. 
In the opinion of the Companys management, all adjustments necessary to
present fairly the financial position, results of operations, and cash flows of
the Company as of March 31, 2001 and for the periods then ended have been
made.  Those adjustments consist only of
normal and recurring adjustments.  The
condensed consolidated balance sheet of the Company as of December 31, 2000 has
been derived from the audited consolidated balance sheet of the Company as of
that date.Certain
information and note disclosures normally included in the Companys annual
financial statements have been condensed or omitted.  These condensed consolidated financial statements should be read
in conjunction with a reading of the financial statements and notes thereto
included in the Company Form 10-K annual report for 2000 filed with the
Securities and Exchange Commission.The
results of operations for the three month period ended March 31, 2001 are not
necessarily indicative of the results to be expected in a full year.Nature
of business:

ChoiceTel
Communications, Inc., and Subsidiary (the Company) includes an 80% owned
subsidiary, Advants, Inc. (formerly Public Internet Access Holdings
Corporation).  The Company was in the
business of providing pay phone services in several states and Puerto Rico. In
December 1999 pursuant to a shareholders' meeting, the Company decided to sell
its pay phone operations.  Advants is in
the business of providing public internet access through kiosks located in high
traffic areas such as gas stations and supermarkets.  Advants has had minimal revenue since inception and has incurred
large expenses for hardware and software development.Advants
total liabilities exceed total assets by approximately $1.7 million at December
31, 2000 and $2.0 million at March 31, 2001. 
Advants operations in 2001 have substantially decreased and in April
2001 Advants disposed of certain assets to help pay certain creditors.  Choicetel Communications, Inc. does not
intend to further fund Advants operations and although the results of Advants
are consolidated in conformance with generally accepted accounting principles,
management believes that Choicetel Communications, Inc.'s financial exposure
regarding its subsidiary is generally limited to the amount of its investment
in the subsidiarys stock (see note 4 regarding contingencies).  The condensed balance sheets of Advants as
of December 31, 2000 and March 31, 2001 is as follows:2001
  2000Property
  and equipment
  $219,986
  $239,500Other
  assets
  3,185
  4,200Total
  assets
  $223,171
  $243,700Payables
  and accrued expenses
  $1,913,805
  $1,782,000Due
  to Choicetel Communications
  276,221
  172,000Equity
  (1,966,955)
  (1,710,300)Total
  liabilities and shareholder equity
  $223,171
  $243,700

Discontinued
operations:

The
Company decided to discontinue its pay phone operations in December 1999
(measurement date).  The Company has
estimated it will realize an overall gain on the disposal of discontinued
operations and accordingly, has not recorded a loss from the measurement date.The
  net assets of the discontinued operations consist of the following as of
  March 31:2001
  2000Cash
  $81,764
  $112,752Accounts
  receivable
  
  40,805Prepaid
  expenses
  147,069
  162,502Property
  and equipment, net
  2,144,276
  1,708,246Deferred
  loss
  
  970,211Accrued
  expenses
  (357,766)
  (513,558)$2,015,343
  $2,480,958



2.          Property and equipment:2001
  2000Office
  equipment
  $18,486
  $28,427Kiosks
  151,500
  348,724Accumulated
  depreciation
  
  (12,402)169,986
  364,749In
  process software
  50,000
  56,577$219,986
  $421,326

3.          Notes payable:
  2001
  2000Note to a bank in the original amount of
  $75,000, secured by the assets of Advants, Inc.  Interest is 11% and is due on 
  April 2, 2001.
  $74,000Note
  to LS Enterprises, secured by the assets of Advants, Inc.  Interest is 20% and was due on March 2,
  2001.
  30,000Total
  $104,000$104,0004.          Commitments and contingencies:

Phone
locations:

The
Company rents phone locations from merchants and property owners under varying
lease terms, usually ten years, generally cancelable by the Company upon 30
days notice.Leases:

The
Company leases its offices in Puerto Rico under operating leases expiring in
May 2001 and has a renewal option. The Company leases its corporate offices in
Wayzata, Minnesota under a lease expiring in April 2002.  Rent expense was $40,360 for the year ended
December 31, 2000.  The future minimum
lease payment is $48,420 for the year ending December 31, 2001.Advants
leases its office space under an operating lease expiring in 2003.  Rent expense was $90,000 for the year ended
December 31, 2000.  The future minimum
lease payment is $96,000 for the year ending December 31, 2001.Contingencies:

Puerto
Rico line charges:The Company has an
ongoing dispute with the Puerto Rican Telephone Company (PRTC) related to the
period March 1998 to July 2000.  Both
parties are currently attempting to reconcile outstanding balances but remain
in disagreement.  The PRTC, in its most
recent written communication, claims the Company owes $250,000.  The Companys own analysis shows that the
PRTC owes the Company a $120,000 refund. 
At December 31, 2000 and at March 31, 2001 the Company has accrued a
$250,000 liability, which it believes is adequate to resolve this matter.Dial
around Compensation:

The Company receives
compensation for dial around activity related to its pay phones.  The rates are set by the Federal
Communications Commission and are subject to change both prospectively and
retroactively.5.          Restatement of 2000 statement of
operations:

The
2000 statement of operations has been changed to reflect $36,488 of interest
income that had previously been included in deferred loss on sale of
discontinued operations.Item
  2.MANAGEMENT'S DISCUSSION AND
  ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONSExcept for historical information contained in this Report,
information contained in this Form 10-KSB contains forward–looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as may, will, expect, plan, estimate, or continue or the negative
thereof or other variations thereon or comparable terminology.  There are certain important factors that
could cause results to differ materially from those anticipated by some of
these forward-looking statements, including without limitation, the effects of
changes in economic conditions and certain of the Risk Factors entitled Competition,
Other Regulatory Factors, Technological Change and New Services,
Dependence Upon Third-Party Providers, Service Interruptions; Equipment
Failures, Reliance on Single Brand of Payphones, and Reliance on Key
Personnel contained in the Companys Prospectus dated November 10, 1997
included in the Registration Statement on Form SB-2 filed with the Securities
and Exchange Commission (Registration No. 333-29969).  Such Risk Factors are incorporated herein by reference.  Investors are cautioned  that all forward-looking statements involve
risk and uncertainty.General

The Company derives revenue from
three principal sources: coin calls, non-coin calls and dial-around calls.  Coin calls represent calls paid for with
coins deposited in the telephone.  The
Company recognizes coin revenue in the amount deposited.  Non-coin calls are calls charged to a
customer credit card or billed to the called party (collect calls). These calls
are routed to and processed by an operator service provider (OSP).
Compensation for Dial-Around calls is paid by long-distance carriers when
consumers access a long-distance carrier directly by dialing an access number,
or by dialing an 800 number, or by using a non-billable calling card.

The principal costs related to
ongoing operation of the Companys payphones include telephone line charges,
consisting of payments made by the Company to telephone companies and
long-distance carriers for access charges and use of their networks; commission
payments to Site Providers; and service, repair and maintenance costs.

The Companys internet subsidiary
(Advants, Inc.) derives revenue from three principal sources: sales of kiosks
to third-party venders, user fees collected in cash or credit card at the
kiosk, and sponsorship revenues from affiliates, sponsors and advertisers.  All revenue is recognized as received, net
of processing charges.  The principal
costs related to ongoing operation include telephone line charges, connectivity
charges for internet access and commission payments to site providers.

Three
months ended March 31, 2001 compared to three months ended March  31, 2000.

Continuing
Operations

The after tax loss on continuing
operations, for the three months ended March 31, 2001 was $137,000 compared to
a loss of $123,000 for the three months ended March 31, 2000.  Continuing operations includes the effect of
consolidating Advants Inc.s operations with the Companys other investing
activities.  All payphone related
activity is reported as discontinued operations.  As long as the Company owns a controlling percentage ownership of
Advants, Inc. stock, it will report the consolidated operations as continuing.

Choicetel has decided to make no
additional investments or loans to Advants as it does not believe Advants can successfully
access the necessary capital to effectively implement its business model.  Advants is currently looking for additional
funding as it is without sufficient working capital to continue operations.

Advants revenues for the period
ended March 31, 2001 were $15,000 compared to $90,000 for the period ended
March 31, 2000.  User fees were $15,000
in 2001, compared to $4,000 in 2000. 
The number of terminals in service increased from 6 to 210.  Revenue in the 2000 period also included
$86,000 in equipment sales to a third party vender. The cost of service in the
2001 period was $65,000 compared to $69,000 in 2000, which included $65,000
cost of equipment sold.

Advantss SG&A spending in the
2001 period was $285,000 compared to $289,000 in 2000.  Spending was incurred to develop, deploy and
support a national network of public access internet terminals.

During the 2001 period, other
income and expense includes $102,000 earned by Choicetel on its investment in
Whitebox Arbitrage Trading LLP, and $5,000 interest earned by Choicetel from
investing excess cash balances in money market accounts.

Discontinued
Operations

The after tax gain from
discontinued operations for the three months ended March 31, 2001 was $148,000
compared to a deferred gain of $175,000 in the 2000 period.  Total Revenue for 2001 was $991,000 compared
to $1,060,000 in 2000. The Company operated an average of 1,550 payphones
during 2001in Puerto Rico.  This
compares to 2,050 phones in 2000, located primarily in Pennsylvania and Puerto Rico.

During the 2001 period the Company
operated an average of 1,550 phones in Puerto Rico compared to 1,100 for the
2000 period.  Revenue from the Puerto
Rico route in 2001 was $951,000 compared to $805,000 in 2000.  Puerto Rico coin revenue in the 2001 period
was $517,000 compared to $486,000 in 2000, an increase of $31,000 or 6.4%.  This increase was due to the greater number
of phones in service; however, the phones did not match, on a per phone basis,
the coin revenue of the previous years period.  Noncoin commission revenue from operator service providers was
$208,000 in 2001 compared to $213,000 in 2000, a decrease of $5,000 or 2.5%.
Dial around compensation in 2001 was $226,000 compared to $106,000 in 2000, an
increase of $120,000 or 110%.  Dial-around
revenue in 2001 includes anticipated remittances from the Puerto Rican
Telephone Company, which were not anticipated in the 2000 period.

Cost of service for the Company was
$334,000 in 2001 compared to $444,000 in 2000. 
Cost of service for routes disposed of by March 31, 2001 was $104,000 in
2000.

Cost of service for the Puerto Rico
route was $334,000 in 2001, compared to $340,000 in 2000.  Cost of service in 2001 includes telephone
line charges of $264,000 compared to $259,000 in 2000.  During 2001 the company recognized the
benefit of a reduced tariff for line charges in Puerto Rico.  Cost of service also includes commission to
location site providers of $70,000 compared to $80,000 in 2000.

Sales, General, and Admin
(SG&A) was $360,000 in 2001 compared to $737,000 in 2000.  SG&A in 2001 includes $207,000 (57.5%)
related to the Puerto Rico route, and $153,000 (42.5%) related to Corporate
Overhead.

Puerto Rico SG&A in 2001 was
$207,000 compared to $224,000 in 2000, a decrease of $17,000 or 7.6%.  During 2001, the Company improved its
procedures to identify and capitalize SG&A expenses incurred to install
phones.

Corporate SG&A includes the
cost of Corporate officers, the Corporate offices, and other recurring expenses
related to maintaining the corporate entity, such as directors compensation,
shareholder services, and audit and reporting expenses.  Corporate SG&A in 2001 was $153,000
compared to $156,000 in 2000.

EBITDA was $297,000 in 2001
compared to a loss of $122,000 in 2000. 
EBITDA from the Puerto Rico route was $410,000 in 2001 compared to
$241,000 in 2000.

Depreciation and amortization
totaled $66,000 in 2001 compared to $97,000 in 2000.  During 2000 the Company recognized a $500,000 gain related to
settling its sales tax dispute with the Minnesota Department of Revenue.

Three
months ended March 31, 2000 compared to three months ended March 31 1999.

Total revenue for the three months
ended March 31, 2000, were $90,000 compared to virtually no activity in the
1999 period.  This revenue was composed
of approximately $86,000 in equipment sales to third-party venders and
approximately $4,000 in user fees at the companys 6 kiosks.

The cost of sales for the three
months ended March 31, 2000 were $69,000 representing $65,000 in cost of goods
sold and $4,000 in line charges, internet service fees and site provider
commissions.  Selling, general and
administrative ("SG&A") expenses were $287,000 and were spent to
begin implementing the Companys strategy for public internet access terminals.

Discontinued
operations earned $175,000 in the 2000 period compared to a loss of $99,000 in
the 1999 period. Because management estimates that the final disposal of all
payphone assets will be a gain, the loss on the discontinued operations is
being deferred.



LIQUIDITY
AND CAPITAL RESOURCES

For the three months ended March
31, 2000, the Company's operating activities used $9,000.  Investments in equipment used $112,000. In
addition the Company used $138,000 to repurchase its common stock.  Activities were funded with a $19,000 sale
of equipment and the issuance of short-term debt of $104,000, resulting in a
$136,000 decrease in cash balances.

On
July 26, the Board of Directors authorized the Company to repurchase up to 5%
of the outstanding common stock of the Company at market rates, and on January
26, 2001 the Board of Directors authorized the Company to repurchase an
additional 10% of the outstanding common stock.  From January through May 10 2001, the Company purchased 241,418
shares for $409,508.



Part II
- Other Information



Item 1.
Legal Proceedings

In November 2000, a suit was commenced in Hennepin
County, Minnesota District Court by TKI Consulting against Advants, Inc. and
Choicetel Communications, Inc.  TKI was
a software provider to Advants and is suing, for breach of contract, for
approximately $750,000.  While Choicetel
Communications is not a party to the contract, the plaintiff is seeking to hold
the Company liable for the alleged debt of Advants.  Choicetel has answered the complaint and denied the claim.  An additional suit was filed on April 3,
2001 in Ramsey County, Minnesota District Courty by Tomato Land Displays
seeking damages in excess of $50,000 from Advants for alleged services
provided.  While Choicetel
Communications is not a party to the transaction, the plaintiff is seeking to
hold the Company liable for the alleged debt of Advants.

Item 6.
Reports on Form 8-K

On February 28, 2001 the Company
announced it had ceased further funding on its 80% owned subsidiary and would
classify its investments in the subsidiary as impaired at December 31, 2000.
The Company also announced that the Board of Directors had authorized the
Company to repurchase an additional 10% of its outstanding common stock.