**U.S.**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

**Form 10-QSB**

** **

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

** **

**For Quarter Ending June 30, 2002**

 

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

** **

**Voice and Wireless Corporation**

(Exact name of registrant asspecified 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 telephonenumber,  (952) 546-2075**

 

                                                Indicate by Checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or of such shorter period that the registrant was required to filesuch reports), and 2) has been subject to such filing requirements for the past90 days.   Yes ý  No o

 

Indicatethe number of shares outstanding of each of the  issuer’s classes of common stock, as of the latest practicabledate:

 

Issued and outstanding shares of common stock as of August 7, 2002 are11,978,760 common stock at $.001 par value.

 

 

 

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**CAUTIONARYSTATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATESECURITIES LITIGATION REFORM ACT OF 1995**

 

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 looking statementsinclude, but are not limited to, risks associated with the Company’s history oflosses and uncertain profitability, reliance on a large customer, risksassociated 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.

 

 

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**VOICE AND WIRELESS CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEET**

 
| ** **                                                                                                                                                                                                | ** ** | **June 30,********2002** | ** ** | **December  31,  2001** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-------------------------|------------|
|                                                                                                                                                                                                      |       | **(Unaudited)**          |       | **(Audited)**           |       |
| **ASSETS**                                                                                                                                                                                                |       |                     |       |                    |       |
| **Current assets:**                                                                                                                                                                                       |       |                     |       |                    |       |
| Cash                                                                                                                                                                                                      |       | $                        | 4,756      |                    | $          | 9,709 |   |
| Accounts  receivable, net                                                                                                                                                                                 |       | 175,673                  |       | 411,162                 |       |
| Notes  receivable, net                                                                                                                                                                                    |       | 55,000                   |       | 70,000                  |       |
| Inventories                                                                                                                                                                                               |       | 285,108                  |       | 249,398                 |       |
| Other current  assets                                                                                                                                                                                     |       | 86,727                   |       | 301,927                 |       |
| Total current  assets                                                                                                                                                                                     |       | 607,264                  |       | 1,042,196               |       |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **Other  assets:**                                                                                                                                                                                        |       |                     |       |                    |       |
| Property and  equipment, net                                                                                                                                                                              |       | 252,769                  |       | 288,232                 |       |
| Investment in  unconsolidated corporations                                                                                                                                                                |       | 40,000                   |       | 40,000                  |       |
| Goodwill                                                                                                                                                                                                  |       | 193,265                  |       | 0                       |       |
| Intangible  assets, net                                                                                                                                                                                   |       | 257,119                  |       | 221,055                 |       |
| Total other  assets                                                                                                                                                                                       |       | 743,153                  |       | 549,287                 |       |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **TOTAL  ASSETS**                                                                                                                                                                                         |       | $                        | 1,350,417  |                    | $          | 1,591,483 |   |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **LIABILITIES AND STOCKHOLDERS'  EQUITY**                                                                                                                                                                 |       |                     |       |                    |       |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **Current  liabilities:**                                                                                                                                                                                 |       |                     |       |                    |       |
| Checks written  in excess of cash in bank                                                                                                                                                                 |       | $                        | 23,640     |                    | $          | 69,105 |   |
| Current portion  of long-term debt                                                                                                                                                                        |       | 23,642                   |       | 22,932                  |       |
| Revolving credit  facility                                                                                                                                                                                |       | 90,000                   |       | 0                       |       |
| Note  Payable-Officers                                                                                                                                                                                    |       | 22,666                   |       | 0                       |       |
| Accounts payable                                                                                                                                                                                          |       | 245,352                  |       | 248,546                 |       |
| Accrued  consulting fees                                                                                                                                                                                  |       | 0                        |       | 25,685                  |       |
| Accrued expenses                                                                                                                                                                                          |       | 113,931                  |       | 55,504                  |       |
| Total current  liabilities                                                                                                                                                                                |       | 519,231                  |       | 421,772                 |       |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **Long-Term  Liabilities**                                                                                                                                                                                |       |                     |       |                    |       |
| Revolving credit  facility                                                                                                                                                                                |       | 0                        |       | 203,500                 |       |
| Long-term debt,  net                                                                                                                                                                                      |       | 417,647                  |       | 395,554                 |       |
| **Total  liabilities**                                                                                                                                                                                    |       | 936,878                  |       | 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,11,978,760 and 8,938,760 shares issued; 11,463,760  and8,938,760 shares outstanding |       | 7,593,596                |       | 7,221,511               |       |
| Warrants                                                                                                                                                                                                  |       | 633,085                  |       | 628,085                 |       |
| Accumulated  deficit                                                                                                                                                                                      |       | (7,813,142               | )          | (7,278,939              | )          |
| Total  stockholders' equity                                                                                                                                                                               |       | 413,539                  |       | 570,657                 |       |
|                                                                                                                                                                                                      |       |                     |       |                    |       |
| **TOTAL  LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                                                                           |       | $                        | 1,350,417  |                    | $          | 1,591,483 |   |

 

Seeaccompanying notes to the financial statements

 

 

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**VOICE AND WIRELESS CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF OPERATIONS**

 
|                                                                      |       | **Quarter  Ended**       |       | **Six Months  Ended** |       |
|---------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|
| ** **                                                                | ** ** | **June 30,********2002** | ** ** | **June 30,  2001**    | ** ** | **June 30,  2002** | ** ** | **June 30,  2001** | ** ** |
|                                                                      |       | **(Unaudited)**          |       | **(Unaudited)**       |       | **(Unaudited)** |   | **(Unaudited)** |   |
| **Revenues**                                                              |       | $                        | 460,047    |                  | $          | 422,814 |   | $ | 1,301,828 |   | $ | 1,222,719 |   |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Cost  of sales**                                                        |       | 369,639                  |       | 323,244               |       | 939,856 |   | 874,981 |   |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Gross  profit**                                                         |       | 90,408                   |       | 99,570                |       | 361,972 |   | 347,738 |   |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Operating  expenses**                                                   |       | 422,551                  |       | 360,494               |       | 830,805 |   | 779,695 |   |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Loss  from operations**                                                 |       | (332,143                 | )          | (260,924              | )          | (468,833 | ) | (431,957 | ) |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Other  income (expense):**                                              |       |                     |       |                  |       |   |   |   |   |
| Interest income                                                           |       | 0                        |       | 1,688                 |       | 0 |   | 5,001 |   |
| Interest expense                                                          |       | (26,053                  | )          | (9,171                | )          | (49,644 | ) | (18,196 | ) |
| Loss on the sale  of property and equipment                               |       | (15,725                  | )          | 0                     |       | (15,725 | ) | 0 |   |
| Total other  income (expense)                                             |       | (41,778                  | )          | (7,483                | )          | (65,369 | ) | (13,195 | ) |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| Loss before  income taxes                                                 |       | (373,921                 | )          | (268,407              | )          | (534,202 | ) | (445,152 | ) |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| Provision for  income taxes                                               |       | 0                        |       | 0                     |       | 0 |   | 0 |   |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Net  loss**                                                             |       | $                        | (373,921   | )                     | $          | (268,407 | ) | $ | (534,202 | ) | $ | (445,152 | ) |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Basic  and diluted net loss per common share**                          |       | $                        | (0.03      | )                     | $          | (0.03 | ) | $ | (0.05 | ) | $ | (0.05 | ) |
|                                                                      |       |                     |       |                  |       |   |   |   |   |
| **Weighted  average common shares outstanding-********basic and diluted** |       | 10,798,870               |       | 8,938,760             |       | 10,101,661 |   | 8,938,760 |   |

 

**Seeaccompanying notes to the financial statements**

 

** **

**4**

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**VOICE AND WIRELESS CORPORATION ANDSUBSIDIARIES**

**CONSOLIDATEDSTATEMENT OF CASH FLOWS**

 
|                                                                          |       | **Six Months  Ended**    |       |
|-------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                    | ** ** | **June 30,********2002** | ** ** | **June 30,********2001** | ** ** |
|                                                                          |       | **(Unaudited)**          |       | **(Unaudited)** |   |
| **Cash  flows from operating activities:**                                    |       |                     |       |   |   |
| Net loss                                                                      |       | $                        | (534,202   | ) | $ | (445,152 | ) |
| Adjustments to  reconcile net loss tocash flows from  operating activities:   |       |                     |       |   |   |
| Depreciation and  amortization                                                |       | 54,859                   |       | 56,879 |   |
| Amortization of  prepaid consulting fees                                      |       | 220,922                  |       | 0 |   |
| Amortization of  original issue discount                                      |       | 16,924                   |       | 0 |   |
| Loss on the  disposal of fixed assets                                         |       | 15,725                   |       | 0 |   |
| Common stock  issued for consulting services                                  |       | 45,900                   |       | 0 |   |
| Changes in  operating assets and liabilities:                                 |       |                     |       |   |   |
| Accounts  receivable                                                          |       | 235,489                  |       | (103,268 | ) |
| Inventories                                                                   |       | (5,000                   | )          | (24,749 | ) |
| Other current  assets                                                         |       | 1,677                    |       | (29,506 | ) |
| Checks written  in excess of cash in bank                                     |       | (45,465                  | )          | 0 |   |
| Accounts payable                                                              |       | (3,194                   | )          | 40,187 |   |
| Accrued expenses                                                              |       | 58,427                   |       | 4,806 |   |
| Cash flows from  operating activities                                         |       | 62,062                   |       | (500,803 | ) |
|                                                                          |       |                     |       |   |   |
| **Cash  flows from investing activities:**                                    |       |                     |       |   |   |
| Purchases of property  and equipment                                          |       | (3,060                   | )          | (51,360 | ) |
| Proceed from the  sale of property and equipment                              |       | 1,000                    |       | 0 |   |
| Collection on  note receivable                                                |       | 15,000                   |       | 0 |   |
| Cash flows from  investing activities                                         |       | 12,940                   |       | (51,360 | ) |
|                                                                          |       |                     |       |   |   |
| **Cash  flows from financing activities:**                                    |       |                     |       |   |   |
| Net repayment on  revolving credit facility                                   |       | (113,500                 | )          | 25,000 |   |
| Proceeds from  notes payable-officers                                         |       | 22,666                   |       | 0 |   |
| Payment on  long-term debt                                                    |       | (4,121                   | )          | 0 |   |
| Proceeds from  long-term debt and warrants issues                             |       | 15,000                   |       | 48,211 |   |
| Cash flows from  financing activities                                         |       | (79,955                  | )          | 73,211 |   |
|                                                                          |       |                     |       |   |   |
| **Decrease  in cash**                                                         |       | (4,953                   | )          | (478,952 | ) |
|                                                                          |       |                     |       |   |   |
| **Cash,  beginning of period**                                                |       | 9,709                    |       | 486,901 |   |
|                                                                          |       |                     |       |   |   |
| **Cash  , end of period**                                                     |       | $                        | 4,756      |   | $ | 7,949 |   |
|                                                                          |       |                     |       |   |   |
| **Supplemental  cash flow information:**                                      |       |                     |       |   |   |
| Cash paid for interest                                                        |       | $                        | 49,644     |   | $ | 18,196 |   |
| **Noncash  investing and financing activities:**                              |       |                     |       |   |   |
| Issuance of common  stock in exchange of common stockof Econowatt Corporation |       | $                        | 238,000    |   | $ | — |   |
| Issuance of common  stock in exchange of common stockof EMTI Corporation      |       | $                        | 62,500     |   | $ | — |   |
| Issuance of  common stock for accrued consulting services                     |       | $                        | 25,685     |   | $ | — |   |

 

See accompanyingnotes to the financial statements

** **

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** **

**VOICEAND WIRELESS CORPARATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

June 30, 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 and is being amortized on astraight-line basis over seven years. 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 perCommon Share

 

Basic net loss per commonshare is computed by dividing the net loss by the weighted average number ofcommon shares outstanding for the reporting period.  Diluted net loss per share is computed by dividing the net lossby the sum of the weighted average number of common shares outstanding plus alladditional common stock that would have been outstanding if potentiallydilutive common shares related to common share equivalents (stock options and stock warrants) had been issued.  All options and warrants outstanding duringthe period were anti-dilutive.

 

 

**Note 2 —Merger with Econowatt Corporation**

 

On March 6, 2002, the Company completed the exchange of stock withEconowatt Corporation, a Nevada corporation (Econowatt).  In exchange for 10,000 (100%) of the issuedcommon shares of Econowatt’s total 25,000,000 authorized shares, the Companyissued 1,400,000 shares of its common stock for a total value of$238,000.00.  Statement of FinancialAccounting Standards (SFAS) No. 141 “Business Combinations” requires that allbusiness combinations after June 30, 2001 be accounted for under the purchasemethod of accounting.  Therefore, theexchange of stock with Econowatt was accounted for under the purchase method ofaccounting.  As part of the acquisitionthe Company recorded goodwill in the amount of $193,265. Econowatt Corporationhas the exclusive right to market the STABILUXTM energy management systems(www.stabilux.com) in the United States from its manufacturer IREM S.p.A. inItaly.

 

 

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**Note 3 — Purchase of EnergyManagement Technology Incorporated**

 

On June 21, 2002, the Company completed the exchange of stock withEnergy Management Technology Incorporated, a Florida corporation (EMTI) thusadding EMTI as a wholly owned subsidiary of the Company. In exchange for 1,000(100%) of the issued common shares of EMTI’s total 1,000,000 authorized sharesand the license agreement to sell software, the Company issued 625,000 sharesof its common stock for a total value of $62,500. Statement of FinancialAccounting Standards (SFAS) No. 141 “Business Combinations” requires that allbusiness combinations after June 30, 2001 be accounted for under the purchasemethod of accounting.  Therefore, theexchange of stock with EMTI was accounted for under the purchase method ofaccounting. EMTI has the exclusive right to market the FEDS energy managementprogram (www.pnl.gov/FEDS) in the State of California for Pacific NorthwestNational Laboratory, which is operated by Battelle (www.battelle.org) for theU. S. Department of Energy under Contract No.DE-AC06-76RLO1830. In the exchangeBattelle was issued 306,250 shares of the Company’s 144 stock and UTEKCorporation (www.utekcorp.com) was issued 318,750 shares of the Company’s 144stock. The Company also agreed to pay a royalty percentage based upon grossreceipts as defined in the agreement.

 

**Note 4 — Adoption of New AccountingStandards**

 

In June 2001, the Financial Accounting Standards Board issued Statementof Financial Accounting Standards (SFAS)No. 141, “Business Combinations”,effective for acquisitions initiated on or after July 1,2001, and No.142,“Goodwill and Other Intangible Assets”, effective for fiscal years beginningafter December 15, 2001. SFAS No.141 requires that the purchase method ofaccounting be used for all business combinations initiated after June 30,2001,and includes guidance on the initial recognition and measurement of goodwilland other intangible assets arising from business combinations. SFAS No.142indicates that goodwill (and intangible assets deemed to have indefinite lives)will no longer be amortized but will be subject to annual impairment tests.Other intangible assets will continue to be amortized over their useful lives.We adopted these new rules effective January 1, 2002. We will perform therequired goodwill impairment test at the close of the quarter ended September30, 2002 based upon the carrying amount as of January 1, 2002. If it isdetermined there is impairment to goodwill, we will record an adjustment atthat time.

 

# **Components of intangible assets are as follows:**

 

 

7

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|                                        |       | **June 30,  2002**          |       | **December  31,2001**         |       |
|---------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                  | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** |
| Intangible  assets subject to Amortization  |       |                        |       |                          |       |   |   |   |   |
|                                        |       |                        |       |                          |       |   |   |   |   |
| Patents                                     |       | $                           | 40,023     |                          | $          | 5,990 |   | $ | 40,023 |   | $ | 194 |   |
| License                                     |       | $                           | 62,500     |                          | 0          |   | 0 |   | 0 |   |
| Product  development costs                  |       | $                           | 206,341    |                          | $          | 105,219 |   | $ | 206,341 |   | $ | 90,778 |   |
| Debt issuance  costs                        |       | $                           | 46,984     |                          | $          | 10,179 |   | $ | 46,984 |   | $ | 5,481 |   |
| Loan costs                                  |       | $                           | 32,361     |                          | $          | 13,959 |   | $ | 32,361 |   | $ | 12,458 |   |
| Trademark                                   |       | $                           | 5,322      |                          | $          | 1,065 |   | $ | 5,322 |   | $ | 1,065 |   |
|                                        |       |                        |       |                          |       |   |   |   |   |
| Intangible  assets not subject Amortization |       |                        |       |                          |       |   |   |   |   |
| Goodwill                                    |       | $                           | 193,265    |                          | $          | 0 |   | $ | 0 |   | $ | 0 |   |

 

Amortization of intangible assets was $13,470 and $ 8,344 for the threemonths ended June 30, 2002 and 2001, respectively, and $26,040 and $11,744 forthe six months ended June 30, 2002 and 2001, respectively. Amortization expenseis expected to be approximately $33,190 for the remainder of 2002 (a total ofapproximately $59,230 for 2002). Estimated amortization expense of intangibleassets for the years ending December 31, 2002, 2003, 2004, 2005, 2006 andthereafter is $55,063, $67,880, $67,880, $49,877 and $16,568

 

**Note 5 — Stockholders’ Equity**

 

During the quarter endedJune 30, 2002, the Company issued 135,000 shares of restricted common stock forconsulting services, valued at $21,600, completed in 2002. The Company alsoissued 75,000 shares of restricted common stock, valued at $9,000, to anindividual for consulting services rendered through June 30,2002.

 

 

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**Note 6****— NotesPayable-Related Parties**

 

During the quarter theCompany received $22,666 from related parties. These notes are unsecured,non-interest bearing and are due December 31,2002.

 

 

 

 

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PartI.  Financial Information

 

Quarter Ended June 30, 2002

 

GENERAL

 

                The following consolidated financialinformation is submitted in response to the requirements of Form 10-QSB and isprepared in accordance with generally accepted accounting principles in theUnited States of America. Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with generally acceptedaccounting principles in the United States of America have been condensed oromitted, although the Company believes the disclosures that are made areadequate to make the information presented not misleading. Further in theopinion of management, the interim consolidated financial statements reflectfairly 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.

 

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Item1.  Consolidated Financial Statements

 

Theconsolidated balance sheet of Voice and Wireless Corporation (the “Company”) asof the quarter ended June 30, 2002 and the related consolidated statements of operations and cash flows thereto areincorporated herein by reference to the Company’s quarterly report.

 

 

Item2.    Management’sDiscussion and Analysis of Financial 

                Condition and Results ofOperations

 

# Results of Operations 

**(In000’s except per share data)**

 

Highlights:

 

 

|           |   | **Three months****ended June 30,** |   |
|----------------|--------|------------------------------------|--------|
|           |   | **2002**                           |   | **2001** |   | **% Change** |   |
|           |   |                               |   |   |   |   |   |
| Revenue        |   | $                                  | 460    |   | $ | 423 |   | 8.8 | % |
| Gross Profit   |   | 90                                 |   | 100 |   | (10.0 | )% |
| Net Loss       |   | (374                               | )      | (268 | ) | (39.6 | )% |
|           |   |                               |   |   |   |   |   |   |   |
| Loss per share |   | $                                  | (.03   | ) | $ | (.03 | ) |   |   |

 
|           |   | **Six months ended June 30,** |   |
|----------------|--------|-------------------------------|--------|
|           |   | **2002**                      |   | **2001** | ** ** | **% Change** | ** ** |
| Revenue        |   | $                             | 1,302  |   | $ | 1,223 |   | 6.5 | % |
| Gross Profit   |   | 362                           |   | 348 |   | 4.0 | % |
| Net Loss       |   | (534                          | )      | (445 | ) | (20.0 | )% |
|           |   |                          |   |   |   |   |   |
| Loss per share |   | $                             | (.05   | ) | $ | (.05 | ) |   |   |

 

Revenues for the quarter totaled $460k as compared to $423k for thesame quarter in 2001. Although revenues were comparable to those of theprevious year, they were considerable lower than anticipated. We are continuingto see a slow down in the number of construction projects being bid and a delayin time frame for completion of projects. Gross margins continue to bepressured by price-cutting by competitors. Due to engineering problems, we werenot able to ship or record revenue from the ear bud product.

Gross profit for the quarter ended totaled $90k compared to $100k forthe same quarter of 2001. Gross profits were lower than expected due to lowerthan expected revenues.

 

Operating expenses for the quarter totaled $423k as compared to $360kfor the same quarter of 2001. Operating expenses for 2002 included $110k ofamortization of prepaid consulting fees. Excluding this amortization, our netloss would have been $264k as compared to a loss of $268k for the same periodin 2001.

 

During the period relatedparties loaned $22,666 to the Company.

 

11

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These loans arenon-interest bearing and no collateral was pledged for the loan. The Company iscontinuing to seek additional working capital through the sale of convertibledebentures. During July, 2002 the Company sold $34,400.00 of these debentures.

 

On March 14, 2002 theUnited States Patent & Trademark Office published our utility patentapplication for the Low Power Portable Communication System with WirelessReceiver & Methods regarding the same. The utility patent had been filed onApril 4, 2000.

 

On March 15, 2002 theCompany’s design patent for the “transmitter apparatus” was formally allowed bythe United States Patent & Trademark Office. On April 16, 2002 the UnitedStates Patent & Trademark Office formally issued the Company its firstPatent for the Voice & Wireless Ear-BudTM as Patent number D455,835 S andreferred to it as a “Wireless Earpiece”. On April 18, 2002 the European PatentOffice in Munich issued its “International Preliminary Examination Report” andstated that certain of the utility claims met the criteria mentioned in Article33(1)PCT.

 

On July 31, 2002, theWaccamaw Regional Transportation Authority (WRTA), a public corporation andsubdivision of the Counties of Horry and Georgetown and the State of SouthCarolina, Board of Directors unanimously approved a proposed contract withVoice & Wireless Corporation for the installation of its “ProprietaryMicrowave Network”(PMN) on its municipal buses. The contract was signed onAugust 12, 2002. The contract calls for a 90-day demonstration and ifsuccessful, other buses would be installed with the PMN system. The PMNconsists of installing a wireless GPS locator on each bus along with a securitycamera that transmits a real time video back to headquarters, wirelessly. Ifthe demonstration is successful, the WRTA contract could become one of theCompany’s biggest contracts in its 14-year history.

 

Liquidity and CapitalResources

 

Due to the lossessustained by the Company, there has been a significant reduction in workingcapital. As noted above, the Company is continuing to seek additional capitalthrough the sale of convertible debentures. However, there is no guarantee thatthis will happen and if the Company does not see significant revenues from its’Stabilux, Ear-Bud or Proprietary Microwave Network, the ability of the Companyto continue as a going concern will be in doubt.

 

Inflation

 

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

 

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## **CriticalAccounting Policies and Estimates**

The Company believes thefollowing represent its critical accounting policies and estimates:

 

Impairment of Goodwilland other intangibles

 

We periodically evaluateacquired businesses for potential impairment indicators.  Our judgements regarding the existence ofimpairment indicators are based on legal factors, market conditions andoperational performance of our acquired businesses.  Future events could cause us to conclude that impairmentindicators exist and that goodwill and other intangibles associated with ouracquired businesses are impaired. During the period ended June 30, 2002 and 2001, the Company did notrecord any impairment losses related to other intangibles related to acquiredbusinesses.

 

Revenue Recognition

 

We recognize revenue whenproducts are shipped to customers the price is fixed and determinable andcollection is considered probable.  TheSecurities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 101,“Revenue Recognition” provides guidance on the application of accountingpolicies generally accepted in the United States of America to selected revenuerecognition issues. We have concluded that our revenue recognition policy isappropriate and in accordance with accounting principles generally accepted inthe United States of America and SAB No. 101.

 

Recently IssuedAccounting Pronouncements

 

In April 2002, theFinancial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards (SFAS) No. 145, “Rescission of FASB Statements No. 4, 44,and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” TheCompany believes the adoption of SFAS No. 145 will not have a material effecton the Company’s consolidated financial position or results of operations.

 

In June 2002, FASB issuedSFAS No. 146, “Accounting for Costs Associated with Exit or DisposalActivities.” SFAS No. 146 requires recognition of a liability for a costassociated with an exit or disposal activity when the liability is incurredversus the date the Company commits to an exit plan. In addition, SFAS No. 146states the liability should be initially measured at fair value. Therequirements of SFAS No. 146 are effective for exit or disposal activities thatare initiated after December 31, 2002. The Company believes the adoption ofSFAS No. 146 will not have a material effect on the Company’s consolidatedfinancial position or results of operations.

 

 

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**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements.  Certain informationincluded in this Form 10-QSB and other materials filed or to be filed with theSecurities and Exchange Commission (as well as information included in oralstatements or other written statements made or to be made by us) containstatements that are forward-looking.  Anumber of important factors could, individually or in the aggregate, causeactual results to differ materially from those expressed or implied in anyforward-looking statements.  Suchfactors include, but are not limited to, the following:  our ability expand into new markets; ourability to execute our expansion strategy; changes in business strategy ordevelopment plans; availability and terms of capital; competition.  For further information regarding these andother factors, see our Annual Report on Form 10-KSB for the fiscal year endedDecember 31, 2001.

 

 

PartII Other Information

 

Item1.  Legal Proceedings — None

 

Item2.  Changes in Securities

 

On March 6, 2002the Company issued 1,400,000 shares of restricted stock (350,000 to beregistered)in exchange for 100% of EconoWatt Corporation of Nevada, which hasthe exclusive right to market, sell, promote, and distribute the STABILUXTM lineof products in the United States of America. The Company also acquired fiveworking units, furniture, and marketing materials. This was reported under item1B of the 10-KSB filed on April 16, 2002.

 

STABILUXTM is avoltage regulator that stabilizes voltage and manages lighting for variousapplications. STABILUXTM is a proven technology, developed by the Italianmanufacturer IREM S.p.A., and is in use through out Europe and Asia. IREM hasmanufactured and installed more than 550,000 voltage regulators in Europe andAsia since 1965 but has never before marketed the STABILUXTM products in theUSA. STABILUXTM is ETL and FCC certified and IREM is both ISO 9001 and ISO 14001certified. The product has been shown to reduce lighting energy costs by asmuch as 50% in European applications such as grocery stores, parking ramps,large retail stores, and similar facilities. STABILUXTM can be used with allexisting or new lamps, ballasts or energy management systems found in commercial,industrial and governmental facilities. Two STABILUXTM units have been installedin the Boston area since March 2002.

 

On June 21, 2002the Company’s Board authorized and then issued, during July 2002, 75,000 sharesof non-registered stock to a consultant for past services.

 

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On June 21, 2002,the Company completed the exchange of stock with Energy Management TechnologyIncorporated, a Florida corporation (EMTI). In exchange for 1,000 (100%) of theissued common shares of EMTI’s total 1,000,000 authorized shares and thelicense agreement to sell software, the Company issued 625,000 shares of itscommon stock for a total value of $62,500. Statement of Financial AccountingStandards (SFAS) No. 141 “Business Combinations” requires that all businesscombinations after June 30, 2001 be accounted for under the purchase method ofaccounting.  Therefore, the exchange ofstock with EMTI was accounted for under the purchase method of accounting.  As part of the acquisition the Companyrecorded goodwill in the amount of $62,500. EMTI has the exclusive right tomarket the FEDS energy management program (www.pnl.gov/FEDS) in the State ofCalifornia for Pacific Northwest National Laboratory, which is operated by Battelle(www.battelle.org) for the U. S. Department of Energy under ContractNo.DE-AC06-76RLO1830. In the exchange Battelle was issued 306,250 shares of theCompany’s 144 stock and UTEK Corporation (www.utekcorp.com) was issued 318,750shares of the Company’s 144 stock. The Company also agreed to pay a royaltypercentage based upon gross receipts as defined in the agreement. UTEKCorporation is a technology transfer company dedicated to building bridgesbetween university/governmental developed technologies and commercialorganizations. UTEK identifies, licenses, and finances further development ofnew technologies and then transfers them to companies like Voice & WirelessCorporation.

 Item 3. Defaults upon Senior Securities — None

 

Item4.  Submission of Matters to a Voteof Security Holders -  None

 

Item5.  Other Information - None

 

Item6.  Exhibits and Reports that have beenfiled since 1994 on Forms 8-KSB, 10-KSB, and 10-QSB, DEF 14A and the October18, 1995 S-8 filing as described in Item 2 herein. Exhibit 9.9 is thecertification of the CEO and the CFO as required under Section 906 of theSarbanes-Oxley Act of 2002 (Corporate Fraud Bill), which was signed into law onJuly 30, 2002 by President George Bush.

 

SIGNATURES

Pursuantto the requirements of the Securities and Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|   | **Voice and Wireless Corporation** |                                      |
|--------|------------------------------------|-------------------------------------------|
|   |                               |                                      |
|   | /s/  Mark Haggerty                 |     Dated: August 13, 2002 |
|   | Chief  Executive Officer           |                                      |
|   |                               |                                      |
|   | /s/Jeff  Etten, C.F.O.             |     Dated: August_13, 2002 |

 

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