**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

### **Form 10-QSB**

** **

**Quarterly ReportUnder Section 13 or 15(d)**

**of the Securitiesexchange Act of 1934**

** **

**ForQuarter Ending September 30, 2001**

** **

**CommissionFile Number #33-38119-C**

 

### **Voice and Wireless Corporation**

(Exactname of registrant as specified in its charter)

 

| **Minnesota**                                                |   | **41-1610632**                     |
|--------------------------------------------------------------|--------|------------------------------------|
| (State  or other jurisdiction of incorporation)              |   | (IRS  Employer Identification No.) |
|                                                         |   |                               |
| **Suite 654, 600 South   Highway 169, Minneapolis, MN** |   | **55426**                          |
| (Address  of principal executive offices)                    |   | (Zip  code)                        |

 

Registrant'stelephone number,  **(952) 546-2075**

 

Indicate by Check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or of such shorter periodthat the registrant was required to file such reports), and 2) has been subjectto such filing requirements for the past 90 days.           Yes ý                    No o

 

Indicate the number of shares outstanding of each ofthe  issuer's classes of common stock,as of the latest practicable date:

 

Outstanding shares are 8,938,760 of common stock no parvalue.

 

 

**CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR”PROVISIONS**

**OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995**

 

Statements in this discussion which arenot historical facts may be considered “forward looking statements” within themeaning of Section 21E of the Securities Act of 1934, as amended, includingprojected sales based upon orders, estimated cost savings and savings that maybe generated from restructuring. The words “believe”, “expect”, “anticipate”,“estimate”, and similar expressions identify forward looking statements.

 

Any forward looking statement involvesrisks and uncertainties that could cause actual events or results to differ,perhaps materially, from the events described in the forward lookingstatements. Readers are cautioned not to place undue reliance on these forwardlooking statements. The Company undertakes no obligation to publicly update orrevise any forward looking statement, whether as a result of new information,future events or otherwise. The risks associated with the Company’s forwardlooking statements include, but are not limited to, risks associated with theCompany’s history of losses and uncertain profitability, reliance on a largecustomer, risks associated with competition, general economic conditions,reliance on key management and production people, future capital needs,dilution, effects of outstanding notes and convertible debentures, limitedpublic market, low stock price, and lack of liquidity.

 

The followingdiscussion and analysis should be read in conjunction with the consolidatedfinancial statements, related notes and other information included in thisquarterly report on Form 10-QSB.

 

Part I.      Financial Information

 

Quarter Ended September 30, 2001

 

GENERAL

 

                The following consolidatedfinancial information is submitted in response to the requirements of Form10-QSB and is prepared in accordance with generally accepted accounting principles.Certain information and footnote disclosures normally included in financialstatements prepared in accordance with generally accepted accounting principleshave been condensed or omitted, although the Company believes the disclosuresmade are adequate to make the information presented not misleading. Further inthe opinion of management, the interim consolidated financial statementsreflect fairly the financial position and results of operations for the periodindicated.

 

                The results of operations forthe quarter ended as stated above are not necessarily indicative of results tobe expected for the entire fiscal year ending December 31st.

 

Item 1.    Consolidated Financial Statements

 

The consolidatedbalance sheet of Voice and Wireless Corporation (the "Company") as ofthe quarter ended September 30, 2001 and the relatedconsolidated statements of operations andcash flows thereto are incorporated herein by reference to the Company'squarterly report.

 

 

Item 2.    Management's Discussion and Analysis ofFinancial Condition and Results of Operations

 

Results of Operations 

**(In 000’s except per share data)**

 

Highlights:            **Quarter ended September 30,**

** **
|            |   | **2001** |   | **2000** |   | **% Change** |   |
|-----------------|--------|----------|--------|----------|--------|--------------|--------|
|            |   |     |   |     |   |         |   |
| Revenue         |   | $        | 428    |     | $      | 645          |   | (33.6 | )% |
| Gross  Profit   |   | 79       |   | 191      |   | (58.6        | )%     |
| Net  Loss       |   | (337     | )      | (236     | )      | (42.8        | )%     |
|            |   |     |   |     |   |         |   |
| Loss  per share |   | $        | (0.04  | )        | $      | (.03         | )      |   |   |

 

                                **Year to Dateended September 30,**

 
|            |   | **2001** |   | **2000** |   | **% Change** |   |
|-----------------|--------|----------|--------|----------|--------|--------------|--------|
|            |   |     |   |     |   |         |   |
| Revenue         |   | $        | 1,651  |     | $      | 2,603        |   | (36.6 | )% |
| Gross  Profit   |   | 426      |   | 876      |   | (51.4        | )%     |
| Net  Loss       |   | (783     | )      | (581     | )      | (34.7        | )%     |
|            |   |     |   |     |   |         |   |
| Loss  per share |   | (.09     | )      | (.07     | )      |         |   |
|                 |        |          |        |          |        |              |        |  |  |

 

Revenues for the quarter totaled $428k ascompared to $645k for the same quarter in 2000.The slowing of the economy hashad a negative impact in the number of projects being started. We are continuingto see heavy competition for those projects being bid which has caused marginsto be cut in order to win projects. Additionally, we have seen delays in thestart of projects which also caused the reduction in revenues. Revenues forMail Call, Inc. (Mail Call) were minimal. The delays in the introduction of theCompany’s earbud product also caused revenues to be lower than expected.Revenues are expected to increase in the fourth quarter due to a considerablebacklog of orders. We also anticipate the first shipments of the Company’searbud product in the fourth quarter, which will have a positive impact onrevenues.

 

Gross profit for the quarter endedtotaled $79k compared to $191k for the same quarter of 2000. The decrease ingross profit percentage is directly related to lower revenues, pricing pressurefrom competitors and the underutilization of our production workers.

 

Operating expenses for the quartertotaled $404k as compared to $431k for the same quarter of 2000. The variancein operating expenses is related to the lower volume of revenues experienced in2001.

 

During the period the Company issued$182,500 in 5 year convertible debentures to accredited investors. Thesedebentures bear interest at a rate of 8% per year and can be converted to the Company’scommon stock by the holder at a conversion price of $1.25 per share after July31, 2002. Interest is paid monthly.

 

The Company alsoissued warrants to three groups in exchange for providing services in 2001 and2002 in the areas of investment banking, marketing, advertising and publicrelations. These warrants can be exercised over five years for a total of1,050,000 shares of common stock at prices ranging from $1.25 to $12.50 pershare.

 

Inflation

 

                The rate of inflation can have asignificant impact on the Company's operations because of increases in woodproduct costs. The Company bids most projects and can not pass all of the costincreases to our customers.

 

Part II   Other Information

 

Item 1.    Legal Proceedings - None

Item 2.    Changes in Securities - None

Item 3.    Defaults upon Senior Securities – None

Item 4.    Submission of Matters to a Vote of SecurityHolders – None

Item 5.    Other Information – None

Item 6.    Exhibitsand Reports that have been filed since 1994 on Forms 8-KSB, 10-KSB, and 10-QSB,DEF 14A and the October 18, 1995 S-8 filing as described in Item 2 herein.

 

 

SIGNATURES

 

Pursuant to therequirements of the Securities and Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|         |                         |   | **Voice and Wireless  Corporation** |
|--------------|------------------------------|--------|-------------------------------------|
|         |                         |   |                                |   |
|         |                         |   |                                |   |
|         | /s/  Jeff Etten, C.F.O. |   | /s/  Mark Haggerty             |   |
|         |                         |   | Chief  Executive Officer            |   |
|         |                         |   |                                |   |
|         |                         |   |                                |   |
|         |                         |   |                                |   |
| Dated:  | November  13, 2001           |   |                                |   |
|         | Minneapolis,  Minnesota      |   |                                |   |

 

**VOICE AND WIRELESS CORPORATIONAND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

 
|                                       |   | **September 30,** |      | **December 31,** |   |
|--------------------------------------------|--------|-------------------|-----------|------------------|--------|
|                                       |   | **2001**          |      | **2000**         |   |
|                                       |   | **(Unaudited)**   |      |             |   |
| **ASSETS**                                 |   |              |      |             |   |
| **Current assets:**                        |   |              |      |             |   |
| Cash  and cash equivalents                 |   | $                 | 5,114     |             | $      | 486,901 |   |
| Accounts  receivable, net                  |   | 320,502           |      | 167,171          |   |
| Inventories                                |   | 301,592           |      | 271,746          |   |
| Other  current assets                      |   | 43,731            |      | 27,080           |   |
| Total  current assets                      |   | 670,939           |      | 952,898          |   |
|                                       |   |              |      |             |   |
| **Other  assets:**                         |   |              |      |             |   |
| Note  receivable, net                      |   | 55,000            |      | 55,000           |   |
| Investment  in oil and gas properties, net |   | 58,797            |      | 61,796           |   |
| Property  and equipment, net               |   | 304,345           |      | 291,648          |   |
| Intangibles,  net                          |   | 855,960           |      | 849,350          |   |
| Investment  in unconsolidated corporations |   | 50,000            |      | 50,000           |   |
| Total  other assets                        |   | 1,324,102         |      | 1,307,794        |   |
|                                       |   |              |      |             |   |
|                                       |   | $                 | 1,995,041 |             | $      | 2,260,692 |   |
|                                       |   |              |      |             |   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**   |   |              |      |             |   |
|                                       |   |              |      |             |   |
| **Current  liabilities:**                  |   |              |      |             |   |
| Current  portion of long-term debt         |   | $                 | 21,000    |             | $      | 8,070 |   |
| Line  of credit                            |   | 95,000            |      | 0                |   |
| Accounts  payable                          |   | 203,582           |      | 30,446           |   |
| Accrued  expenses                          |   | 48,776            |      | 26,951           |   |
| Total  current liabilities                 |   | 368,358           |      | 65,467           |   |
|                                       |   |              |      |             |   |
| Long-term  debt, net of current portion    |   | 317,769           |      | 336,257          |   |
| Convertible  Deferred Debentures           |   | 232,500           |      | 0                |   |
| Total  liabilities                         |   | 918,627           |      | 401,724          |   |
|                                       |   |              |      |             |   |
| **Stockholders'  equity:**                 |   |              |      |             |   |
| Common  stock                              |   | 7,221,511         |      | 7,221,511        |   |
| Accumulated  deficit                       |   | (6,145,097        | )         | (5,362,543       | )      |
| Total  stockholders' equity                |   | 1,076,414         |      | 1,858,968        |   |
|                                       |   |              |      |             |   |
|                                       |   | $                 | 1,995,041 |             | $      | 2,260,692 |   |

 

 

**VOICE AND WIRELESS CORPORATIONAND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OFOPERATIONS**

 
|                                            |   | **Quarter Ended** |     | **Nine Months Ended** |   |
|-------------------------------------------------|--------|-------------------|----------|-----------------------|--------|
|                                            |   | **September 30,** |     | **September 30,**     |   | **September 30,** |   | **September 30,** |   |
|                                            |   | **2001**          |     | **2000**              |   | **2001** |   | **2000** |   |
|                                            |   | **(Unaudited)**   |     | **(Unaudited)**       |   | **(Unaudited)** |   | **(Unaudited)** |   |
|                                            |   |              |     |                  |   |   |   |   |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Revenues**                                    |   | $                 | 427,799  |                  | $      | 644,849 |   | $ | 1,650,518 |   | $ | 2,602,915 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Cost of sales**                               |   | 349,283           |     | 453,977               |   | 1,224,264 |   | 1,726,319 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Gross  profit**                               |   | 78,516            |     | 190,872               |   | 426,254 |   | 876,596 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Operating  expenses**                         |   | 403,786           |     | 431,564               |   | 1,183,481 |   | 1,589,995 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Loss  from operations**                  |   | (325,270          | )        | (240,692              | )      | (757,227 | ) | (713,399 | ) |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Other  income (expense):**                    |   |              |     |                  |   |   |   |   |   |
| Interest  income                                |   | 673               |     | 30,104                |   | 5,674 |   | 70,437 |   |
| Interest  expense                               |   | (12,805           | )        | (23,317               | )      | (31,001 | ) | (79,491 | ) |
| Other  income                                   |   | 0                 |     | (2,174                | )      | 0 |   | 0 |   |
| Minority  interest in loss of subsidiary        |   | 0                 |     | 0                     |   | 0 |   | 141,763 |   |
| Total  other income (expense)                   |   | (12,132           | )        | 4,613                 |   | (25,327 | ) | 132,709 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| Loss  before income taxes                       |   | (337,402          | )        | (236,079              | )      | (782,554 | ) | (580,690 | ) |
|                                            |   |              |     |                  |   |   |   |   |   |
| Provision  for income taxes                     |   | 0                 |     | 0                     |   | 0 |   | 0 |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Net loss**                                    |   | $                 | (337,402 | )                     | $      | (236,079 | ) | $ | (782,554 | ) | $ | (580,690 | ) |
|                                            |   |              |     |                  |   |   |   |   |   |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Basic  net loss  per common share**      |   | $                 | (0.04    | )                     | $      | (0.03 | ) | $ | (0.09 | ) | $ | (0.07 | ) |
|                                            |   |              |     |                  |   |   |   |   |   |
| **Weighted  average common shares outstanding** |   | 8,938,760         |     | 8,937,601             |   | 8,938,760 |   | 8,172,294 |   |

 

**VOICE AND WIRELESS CORPORATIONAND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
|                                                                        |   | **Nine Months Ended** |     |
|-----------------------------------------------------------------------------|--------|-----------------------|----------|
|                                                                        |   | **September 30,**     |     | **September 30,** |   |
|                                                                        |   | **2001**              |     | **2000** |   |
|                                                                        |   | **(Unaudited)**       |     | **(Unaudited)** |   |
| **Cash  flows from operating activities:**                                  |   |                  |     |   |   |
| Net  loss                                                                   |   | $                     | (782,554 | ) | $ | (580,690 | ) |
| Adjustments  to reconcile net loss to cash flows from operating activities: |   |                  |     |   |   |
| Depreciation,  depletion and amortization                                   |   | 90,093                |     | 120,535 |   |
| Minority  interest in loss of subsidiary                                    |   | 0                     |     | (141,763 | ) |
| Changes  in operating assets and liabilities:                               |   |                  |     |   |   |
| Accounts  receivable                                                        |   | (153,331              | )        | 53,555 |   |
| Inventories                                                                 |   | (29,846               | )        | 9,000 |   |
| Other  current assets                                                       |   | (16,651               | )        | (8,835 | ) |
| Accounts  payable                                                           |   | 173,142               |     | (69,846 | ) |
| Accrued  expenses                                                           |   | 21,825                |     | (52,988 | ) |
| Cash  flows from operating activities                                       |   | (697,322              | )        | (671,032 | ) |
|                                                                        |   |                  |     |   |   |
| **Cash  flows from investing activities:**                                  |   |                  |     |   |   |
| Advances  on note receivable                                                |   | 0                     |     | (180,000 | ) |
| Purchases  of property and equipment                                        |   | (106,401              | )        | (85,287 | ) |
| Investments  in unconsolidated corporations                                 |   | 0                     |     | (146,741 | ) |
| Cash  flows from investing activities                                       |   | (106,401              | )        | (412,028 | ) |
|                                                                        |   |                  |     |   |   |
| **Cash  flows from financing activities:**                                  |   |                  |     |   |   |
| Increase  (decrease) in line of credit                                      |   | 95,000                |     | 0 |   |
| Payments  on long-term debt                                                 |   | (1,838                | )        | (152,567 | ) |
| Payments  on capital lease obligations                                      |   | 0                     |     | (5,282 | ) |
| Proceeds  from long term debt                                               |   | 228,774               |     | 0 |   |
| Net  proceeds from sale of common stock                                     |   | 0                     |     | 798,025 |   |
| Proceeds  from exercise of stock options and warrants                       |   | 0                     |     | 118,767 |   |
| Collection  on stock subscriptions receivable                               |   | 0                     |     | 62,797 |   |
| Cash  flows from financing activities                                       |   | 321,936               |     | 821,740 |   |
|                                                                        |   |                  |     |   |   |
| **Decrease in cash and cash equivalents**                                   |   | (481,787              | )        | (261,320 | ) |
|                                                                        |   |                  |     |   |   |
| **Cash  and cash equivalents, beginning of period**                         |   | 486,901               |     | 1,026,036 |   |
|                                                                        |   |                  |     |   |   |
| **Cash  and cash equivalents, end of period**                               |   | $                     | 5,114    |   | $ | 764,716 |   |
|                                                                        |   |                  |     |   |   |
| **Noncash  investing and financing activities:**                            |   |                  |     |   |   |
| Debt  converted to common stock                                             |   | $                     | 0        |   | $ | 282,076 |   |
| Issuance  of common stock for Mail Call stock                               |   | $                     | 0        |   | $ | 1,135,000 |   |