**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

**Form 10-QSB**

 

| **Quarterly Report Under Section  13 or 15(d) of the Securities exchange Act of 1934** |
|----------------------------------------------------------------------------------------|

 

**For Quarter Ending March 31, 2002**

 

**Commission File Number #33-38119-C**

 

**Voice and Wireless Corporation**

 

(Exact name 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’s telephone  number,     ** (952) 546-2075** |

 

Indicateby Check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or of such shorter period that the registrant was requiredto file such reports), and 2) has been subject to such filing requirements forthe past 90 days.

 

Yes    ý                 No    o

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date:

 

Issuedshares as of May 10, 2002 are 11,078,760 common stock at no par value. Thereare 10,628,760 shares outstanding as of May 10, 2002. 

 

 

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**CAUTIONARY STATEMENT FOR PURPOSES OFTHE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF1995**

 

Statements in thisdiscussion which are not historical facts may be considered “forward lookingstatements” within the meaning of Section 21E of the Securities Act of 1934, asamended, including projected sales based upon orders, estimated cost savingsand savings that may be generated from restructuring. The words “believe”,“expect”, “anticipate”, “estimate”, and similar expressions identify forwardlooking statements. Any forward looking statement involves risks anduncertainties that could cause actual events or results to differ, perhapsmaterially, from the events described in the forward looking statements.Readers are cautioned not to place undue reliance on these forward lookingstatements. The Company undertakes no obligation to publicly update or reviseany forward looking statement, whether as a result of new information, futureevents or otherwise. The risks associated with the Company’s forward lookingstatements include, but are not limited to, risks associated with the Company’shistory of losses and uncertain profitability, reliance on a large customer,risks associated with competition, general economic conditions, reliance on keymanagement and production people, future capital needs, dilution, effects ofoutstanding notes and convertible debentures, limited public market, low stockprice, and lack of liquidity.

 

Thefollowing discussion and analysis should be read in conjunction with theconsolidated financial statements, related notes and other information includedin this quarterly report on Form 10-QSB. 

 

PartI.  Financial Information

 

Quarter Ended March 31, 2002

 

GENERAL

 

Thefollowing consolidated financial information is submitted in response to therequirements of Form 10-QSB and is prepared in accordance with generallyaccepted accounting principles. Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted, although theCompany believes the disclosures that are made are adequate to make theinformation presented not misleading. Further in the opinion of management, theinterim consolidated financial statements reflect fairly the financial positionand results of operations for the period indicated.

 

Theresults of operations for the quarter ended as stated above are not necessarilyindicative of results to be expected for the entire fiscal year ending December31st.

 

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Item1.  Consolidated Financial Statements

 

Theconsolidated balance sheet of Voice and Wireless Corporation (the “Company”) asof the quarter ended March 31, 2002 and the related consolidatedstatements of operations and cash flowsthereto are incorporated herein by reference to the Company’s quarterly report.

 

Item2.  Management’s Discussion andAnalysis of Financial Condition and Results of Operations

 

Results of Operations 

**(In000’s except per share data)**

 

Highlights:

 
|           |   | **Quarter ended March 31,** |   |
|----------------|--------|-----------------------------|--------|
|           |   | **2002**                    |   | **2001** |   | **% Change** |   |
| Revenue        |   | $                           | 842    |   | $ | 800 |   | 5.0 | % |
| Gross Profit   |   | 272                         |   | 248 |   | 11.0 | % |
| Net Loss       |   | (160                        | )      | (177 | ) | 9.0 | % |
| Loss per share |   | $                           | (.02   | ) | $ | (.02 | ) |   |   |

 

 

Revenues for the quartertotaled $842k as compared to $800k for the same quarter in 2001. Although thefirst quarter was in line with the previous year, we continue to see a slowdown in the rate of customer orders due to various reasons. The slowing of theeconomy has resulted in fewer projects being started. With fewer projects beingbid, competitors are cutting prices, which has had a negative impact on grossmargins. Due to engineering problems, we were not able to ship or recordrevenue from the ear bud product.

 

Gross profit for thequarter ended totaled $272k compared to $248k for the same quarter of 2001.Gross profits were lower than expected due to increased labor costs,specifically overtime, in the 1st quarter. This increase was due tothe fact that two significant projects that the company had anticipatedcompleting in the later part of 2001 were delayed until the first part of 2002.This added approximately $25k in costs thus reducing margins by the sameamount.

 

Operating expenses for the quarter totaled $408k as compared to $419kfor the same quarter of 2001. Operating expenses for 2002 included $110k ofamortization of prepaid consulting fees. Excluding this amortization, our netloss would have been $50k or 72% less than the loss for the same period of2001.

 

 

3

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During the period the Company issued $15,000 in 5 year convertibledebentures to two individuals. These debentures bear interest at a rate of 7%per year and can be converted to the Company’s common stock by the holder at aconversion price of $0.15 per share during the term of the Debenture. Interestis paid monthly.

 

On March 14, 2002 the United States Patent & Trademark Officepublished our utility patent application for the Low Power PortableCommunication System with Wireless Receiver & Methods regarding the same.The utility patent had been filed on April 4, 2000. 

 

On March 15, 2002 the Company’s design patent for the transmitter wasformally allowed by the United States Patent & Trademark Office. On April16, 2002 the United States Patent & Trademark Office formally issued theCompany its first Patent for the Voice & Wireless Ear-BudTM as Patent numberD455,835 S.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2002 the Company had working capital of approximately$387k as compared with approximately $620k for the end of the last fiscal year.There are two major components to the reduction in working capital; theincrease in current liabilities related to the revolving line of credit and theamortization of prepaid consulting fees. In regards to the line of credit, theCompany does not foresee that it will not be renewed upon its expiration inJanuary of 2003.

 

The increases in accounts receivable and accounts payable during thequarter ended March 31, 2002 were directly related to the increase in businessgenerated in the quarter.

 

The Company raised an additional $15k through the sales of convertibledebentures during the quarter. We are continuing to seek additional workingcapital through the sale of debentures to investors.

 

Revenues from the sales of the Stabilux product should be achievedstarting in the third quarter. This will have a positive impact on cash flowsand working capital.

 

To continue operating, we anticipate that additional debt or equityfinancing will be required during the next twelve months. However, there is noassurance that additional financing will be available on terms acceptable orfavorable to the Company.

 

Inflation

 

Therate of inflation can have a significant impact on the Company’s operationsbecause of increase in wood product costs. The Company bids most projects andcan not pass all of the cost increases to our customers.

 

4

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**Critical Accounting Policies andEstimates**

The Company believes the following represent its critical accountingpolicies and estimates:

 

Impairment of Goodwill and other intangibles

 

We periodically evaluate acquired businesses for potential impairmentindicators.  Our judgements regardingthe existence of impairment indicators are based on legal factors, marketconditions and operational performance of our acquired businesses.  Future events could cause us to concludethat impairment indicators exist and that goodwill and other intangiblesassociated with our acquired businesses are impaired.  During the quarter ended March 31, 2002 and 2001, the Company didnot record any impairment losses related to other intangibles related toacquired businesses.

 

Revenue Recognition

 

We recognize revenue when products are shipped to customers the priceis fixed and determinable and collection is considered probable.  The Securities and Exchange Commission’sStaff Accounting Bulletin (SAB) No. 101, “Revenue Recognition” providesguidance on the application of accounting policies generally accepted in theUnited States of America to selected revenue recognition issues. We haveconcluded that our revenue recognition policy is appropriate and in accordancewith accounting principles generally accepted in the United States of Americaand SAB No. 101. 

 

**SPECIAL NOTE REGARDINGFORWARD-LOOKING STATEMENTS**

The Private Securities Litigation Reform Act of 1995 provides a “safeharbor” for forward-looking statements. Certain information included in this Form 10-QSB and other materialsfiled or to be filed with the Securities and Exchange Commission (as well asinformation included in oral statements or other written statements made or tobe made by us) contain statements that are forward-looking.  A number of important factors could,individually or in the aggregate, cause actual results to differ materiallyfrom those expressed or implied in any forward-looking statements.  Such factors include, but are not limitedto, the following:  our ability expandinto new markets; our ability to execute our expansion strategy; changes inbusiness strategy or development plans; availability and terms of capital;competition.  For further informationregarding these and other factors, see our Annual Report on Form 10-KSB for thefiscal year ended December 31, 2001.

 

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Part II  Other Information

 

Item 1.  Legal Proceedings– None

 

Item 2.  Changes inSecurities

 

During the period the Company issued 2,140,000 shares of restrictedstock of which 405,000 shares of stock have not vested nor has it beendelivered to the recipient. The total number of shares of issued andoutstanding stock increased from 8,938,760 on December 31, 2001 to 10,628,760shares of stock on March 31, 2002.

 

On March 6, 2002 the Company issued 1,400,000 shares of restrictedstock (350,000 to be registered in a U-3 filing)in exchange for 100% ofEconoWatt Corporation of Nevada, which has the exclusive right to market, sell,promote, and distribute the STABILUXTM line of products in the United States ofAmerica. The Company also acquired five working units, furniture, and marketingmaterials. This was reported under item 1B of the 10-KSB filed on April 16,2002.

 

STABILUXTM is a voltage regulator that stabilizes voltage and manageslighting for various applications.  STABILUXTMis a proven technology, developed by the Italian manufacturer IREM S.p.A., andis in use through out Europe and Asia. IREM has manufactured and installed more than 550,000 voltage regulatorsin Europe and Asia since 1965 but has never before marketed the STABILUXTMproducts in the USA.  STABILUXTM is ETLand FCC certified and IREM is both ISO 9001 and ISO 14001 certified. Theproduct has been shown to reduce lighting energy costs by as much as 50% inEuropean applications such as grocery stores, parking ramps, large retailstores, and similar facilities. STABILUXTM can be used with all existing or newlamps, ballasts or energy management systems found in commercial, industrialand governmental facilities.

 

On March 15, 2002 the Company issued 200,000 shares of non-registeredstock to a consultant for services.

 

On March 15, 2002 another 540,000 shares of non-registered stock wereissued to UTEK Corporation, an American Stock Exchange consulting firm. 45,000shares are to be earned each month for services rendered. As of March 31, 200290,000 shares of stock had been earned by UTEK Corporation. The Company has aright to terminate this agreement, at which time a potion of these shares wouldbe retained by the Company. UTEK Corporation is a technology transfer companydedicated to building bridges between university/governmental developedtechnologies and commercial organizations. UTEK identifies, licenses, andfinances further development of new technologies and then transfers them tocompanies like Voice & Wireless Corporation.

 

Item 3.  Defaults upon SeniorSecurities – None

 

Item 4.  Submission ofMatters to a Vote of Security Holders – None

 

6

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Item 5.  Other Information– None

 

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

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
|   |                    | **Voice and Wireless Corporation** |
|--------|-------------------------|------------------------------------|
|   |                    |                               |
|   |                    |                               |
|   | /s/ Mark Haggerty       |                               |
|   | Chief Executive Officer |                               |
|   |                    |                               |
|   |                    |                               |
|   |                    |                               |
|   | /s/Jeff Etten, C.F.O.   |                               |
|   |                    |                               |
|   |                    |                               |
| Dated: | May 15, 2002            |                               |
|   | Minneapolis, Minnesota  |
|        |                         |                                    |  |  |

 

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**VOICEAND WIRELESS CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEET**

 
|                                                                                                                                             |   | **March 31  2002** |      | **December  31,  2001** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|-------------------------|--------|
|                                                                                                                                             |   | **(Unaudited)**    |      | **(audited)**           |   |
| **ASSETS**                                                                                                                                       |   |               |      |                    |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Current  assets:**                                                                                                                             |   |               |      |                    |   |
| Cash                                                                                                                                             |   | $                  | 53,981    |                    | $      | 9,709 |   |
| Accounts  receivable                                                                                                                             |   | 482,808            |      | 411,162                 |   |
| Notes  receivable, net                                                                                                                           |   | 55,000             |      | 70,000                  |   |
| Inventories                                                                                                                                      |   | 280,108            |      | 249,398                 |   |
| Other current  assets                                                                                                                            |   | 204,426            |      | 301,927                 |   |
| Total current  assets                                                                                                                            |   | 1,076,323          |      | 1,042,196               |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Other  assets:**                                                                                                                               |   |               |      |                    |   |
| Property and  equipment, net                                                                                                                     |   | 279,370            |      | 288,232                 |   |
| Goodwill                                                                                                                                         |   | 193,265            |      | 0                       |   |
| Intangibles, net                                                                                                                                 |   | 207,885            |      | 221,055                 |   |
| Investment in  unconsolidated corporations                                                                                                       |   | 40,000             |      | 40,000                  |   |
| Total other  assets                                                                                                                              |   | 720,520            |      | 549,287                 |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Total  Assets**                                                                                                                                |   | $                  | 1,796,843 |                    | $      | 1,591,483 |   |
|                                                                                                                                             |   |               |      |                    |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                   |   |               |      |                    |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Current  liabilities:**                                                                                                                        |   |               |      |                    |   |
| Checks written  in excess of cash in bank                                                                                                        |   | $                  | 0         |                    | $      | 69,105 |   |
| Revolving credit  facility                                                                                                                       |   | 200,000            |      | 0                       |   |
| Current portion  of long-term debt                                                                                                               |   | 22,932             |      | 22,932                  |   |
| Accounts payable                                                                                                                                 |   | 389,019            |      | 248,546                 |   |
| Accrued  Consulting fees                                                                                                                         |   | 0                  |      | 25,685                  |   |
| Accrued expenses                                                                                                                                 |   | 77,477             |      | 55,504                  |   |
| Total current  liabilities                                                                                                                       |   | 689,428            |      | 421,772                 |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Long-term  Liabilities**                                                                                                                       |   |               |      |                    |   |
| Revolving credit  facility                                                                                                                       |   | 0                  |      | 203,500                 |   |
| Long-term debt,  net                                                                                                                             |   | 418,055            |      | 395,554                 |   |
| Total  liabilities                                                                                                                               |   | 1,107,483          |      | 1,020,826               |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Stockholders’  equity:**                                                                                                                  |   |               |      |                    |   |
| Capital stock,  no par value, 50,000,000 shares authorized:                                                                                      |   |               |      |                    |   |
| Common stock, no par  value, 40,000,000 shares authorized, 11,078,760 and 8,938,760 shares issued ;  10,628,760 and 8,938,760 shares outstanding |   | 7,500,496          |      | 7,221,511               |   |
| Warrants                                                                                                                                         |   | 628,085            |      | 628,085                 |   |
| Accumulated  deficit                                                                                                                             |   | (7,439,221         | )         | (7,278,939              | )      |
| Total  stockholders’ equity                                                                                                                 |   | 689,360            |      | 570,657                 |   |
|                                                                                                                                             |   |               |      |                    |   |
| **Total  Liabilities and Stockholders’ Equity**                                                                                             |   | $                  | 1,796,843 |                    | $      | 1,591,483 |   |

 

See accompanying notes to consolidated financial statements.

 

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**VOICEAND WIRELESS CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

 
|                                                                      |   | **Quarter  Ended** |     |
|---------------------------------------------------------------------------|--------|--------------------|----------|
|                                                                      |   | **March 31  2002** |     | **March 31  2001** |   |
|                                                                      |   | **(Unaudited)**    |     | **(Unaudited)** |   |
| **Revenues**                                                              |   | $                  | 841,781  |   | $ | 799,905 |   |
|                                                                      |   |               |     |   |   |
| **Cost  of sales**                                                        |   | 570,217            |     | 551,737 |   |
|                                                                      |   |               |     |   |   |
| Gross profit                                                              |   | 271,564            |     | 248,168 |   |
|                                                                      |   |               |     |   |   |
| **Operating  expenses**                                                   |   | 408,254            |     | 419,201 |   |
|                                                                      |   |               |     |   |   |
| Loss from  operations                                                     |   | (136,690           | )        | (171,033 | ) |
|                                                                      |   |               |     |   |   |
| **Other  income (expense):**                                              |   |               |     |   |   |
| Interest income                                                           |   | 0                  |     | 3,313 |   |
| Interest expense                                                          |   | (23,591            | )        | (9,025 | ) |
| Total other  income (expense)                                             |   | (23,591            | )        | (5,712 | ) |
|                                                                      |   |               |     |   |   |
| Loss before  income taxes                                                 |   | (160,281           | )        | (176,745 | ) |
|                                                                      |   |               |     |   |   |
| Benefit from  income taxes                                                |   | —             |     | — |   |
|                                                                      |   |               |     |   |   |
| **Net  loss**                                                             |   | $                  | (160,281 | ) | $ | (176,745 | ) |
|                                                                      |   |               |     |   |   |
| **Basic  and diluted net loss per common share**                          |   | $                  | (0.02    | ) | $ | (0.02 | ) |
|                                                                      |   |               |     |   |   |
| **Shares  used in computing basic and diluted Net loss per common share** |   | 9,396,704          |     | 8,938,760 |   |

 

See accompanying notes to consolidated financial statements.

 

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**VOICEAND WIRELESS CORPORATION AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
|                                                                                      |   | **Three  Months Ended** |     |
|-------------------------------------------------------------------------------------------|--------|-------------------------|----------|
|                                                                                      |   | **March 31,  2002**     |     | **March 31,  2001** |   |
|                                                                                      |   | **(Unaudited)**         |     | **(Unaudited)** |   |
|                                                                                      |   |                    |     |   |   |
| **Cash  flows from operating activities:**                                                |   |                    |     |   |   |
| Net loss                                                                                  |   | $                       | (160,281 | ) | $ | (176,745 | ) |
| Adjustments to  reconcile net loss to cash flows from operating activities:               |   |                    |     |   |   |
| Depreciation and  amortization                                                            |   | 28,657                  |     | 48,718 |   |
| Amortization of  Prepaid Consulting Fees                                                  |   | 110,460                 |     | 0 |   |
| Amortization of  Original Issue Discount                                                  |   | 9,337                   |     | 0 |   |
| Common Stock  issued for consulting services                                              |   | 15,300                  |     | 0 |   |
| Changes in  operating assets and liabilities:                                             |   |                    |     |   |   |
| Accounts  receivable                                                                      |   | (71,646                 | )        | (215,573 | ) |
| Other current  assets                                                                     |   | (5,559                  | )        | (7,636 | ) |
| Checks written  in excess of cash in bank                                                 |   | (69,105                 | )        | 0 |   |
| Accounts payable                                                                          |   | 140,471                 |     | 85,106 |   |
| Accrued expenses                                                                          |   | 21,974                  |     | 62,372 |   |
| Cash flows from  operating activities                                                     |   | 19,608                  |     | (203,758 | ) |
|                                                                                      |   |                    |     |   |   |
| **Cash  flows from investing activities:**                                                |   |                    |     |   |   |
| Purchases of  property and equipment                                                      |   | 0                       |     | (61,988 | ) |
| Collection on  Note Receivable                                                            |   | 15,000                  |     | 0 |   |
| Cash flows from  investing activities                                                     |   | 15,000                  |     | (61,988 | ) |
|                                                                                      |   |                    |     |   |   |
| **Cash  flows from financing activities:**                                                |   |                    |     |   |   |
| Net repayment on  line of credit                                                          |   | (3,500                  | )        | 0 |   |
| Payments on  long-term debt                                                               |   | (1,836                  | )        | (1,936 | ) |
| Proceeds from  long term debt and warrants issued                                         |   | 15,000                  |     | 0 |   |
| Net proceeds  from sale of common stock                                                   |   | 0                       |     | (315 | ) |
| Cash flows from  financing activities                                                     |   | 9,664                   |     | (2,251 | ) |
|                                                                                      |   |                    |     |   |   |
| **Net  change in cash**                                                                   |   | 44,272                  |     | (267,997 | ) |
|                                                                                      |   |                    |     |   |   |
| **Cash  - beginning of period**                                                           |   | 9,709                   |     | 486,901 |   |
|                                                                                      |   |                    |     |   |   |
| **Cash  - end of period**                                                                 |   | $                       | 53,981   |   | $ | 218,904 |   |
|                                                                                      |   |                    |     |   |   |
| **Supplemental  cash flows information:**                                                 |   |                    |     |   |   |
| Cash paid for  interest                                                                   |   | $                       | 23,591   |   | $ | 9,025 |   |
| **Noncash  investing and financing activities:**                                          |   |                    |     |   |   |
| Issuance of  common stock in exchange of common for common stock of Econowatt Corporation |   | 238,000                 |     | — |   |
| Issuance of  common stock for accrued consulting services                                 |   | 25,685                  |     | — |   |

 

See accompanying notes to consolidated financial statements.

 

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**VOICEAND WIRELESS CORPORATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

March 31, 2002 and 2001

 

**Note 1 – Significant AccountingPolicies**

 

Revenue Recognition

 

The Company recognizes revenue from sales at the time that ownershiptransfer to the customer, principally at shipment of the product.

 

Goodwill

 

Goodwill represents the excess of acquisition costs over the fairmarket value of identifiable net assets acquired.  The carrying value of goodwill is reviewed if the facts andcircumstances suggest that it may be impaired. If the review indicates that goodwill will not be recoverable, than thecarrying value of goodwill will be reduced by the amount not recoverable.

 

Net Loss per Common Share

 

Basic net loss per common share is computed by dividing the net loss bythe weighted average number of common shares outstanding for the reportingperiod.  Diluted net loss per share iscomputed by dividing the net loss by the sum of the weighted average number ofcommon shares outstanding plus all additional common stock that would have beenoutstanding if potentially dilutive common shares related to common  share equivalents (stock options and stockwarrants) had been issued.  All optionsand warrants outstanding during the period were anti-dilutive.

 

**Note 2 – Merger with EconowattCorporation**

 

In March 2002, the Company completed the exchange of stock with EconowattCorporation (Econowatt).  In exchangefor 10,000,000 (100%) of the issued common shares of Econowatt’s total25,000,000 authorized shares, the Company issued 1,400,000 shares of its commonstock valued at $0.17 per share, the average closing bid and ask price for theCompany's common stock ten trading days before March 6, 2002 (the effectivedate of the acquisition of Econowatt). Statement of Financial Accounting Standards (SFAS) No. 141 “BusinessCombinations” requires that all business combinations after June 30, 2001 beaccounted for under the purchase method of accounting.  Therefore, the exchange of stock withEconowatt was accounted for under the purchase method of accounting.  As part of the acquisition the Companyrecorded goodwill in the amount of $193,265.

 

Following is a consolidated balance sheetsummarizing the amounts assigned to the assets acquired at the date ofacquisition:

 

|                   |   | **Econowatt** |    |
|------------------------|--------|---------------|---------|
| Inventories            |   | $             | 30,710  |   |
| Other current assets   |   | 7,400         |    |
| Property and equipment |   | 6,625         |    |
| Goodwill               |   | 193,265       |    |
| Net purchase price     |   | $             | 238,000 |   |

 

 

Since there were no material revenues or expensesfor Econowatt in either 2001 or 2002, the Company is not presenting  pro forma consolidated results ofoperations.

11

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**Note 3 – Stockholders’ Equity**

 

During the quarter ended March 31, 2002, the Company issued 200,000shares of common stock to an individual for consulting services valued at$25,685, which had been accrued at December 31, 2001. In addition, 90,000shares of common stock for consulting services valued at $15,300 completed in2002. 

 

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