<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

  |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

              OF 1934 for the quarterly period ended June 30, 2007

       |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

              For the transition period from __________to _________

                         COMMISSION FILE NUMBER 0-24857

                                TELECONNECT INC.
                                ----------------
        (Exact name of small business issuer as specified in its charter)

          Florida                                          52-2137517
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                   Centro Comercial Camojan Corner, 1(a) plta
                      Camino de Camojan, Urb. Sierra Blanca
                             29603 Marbella - Spain
                    ----------------------------------------
                    (Address of principal executive offices)

                               011-34-95-202-9400
                               ------------------
                           (Issuer's telephone number)


(Former name, former address and former fiscal year, if changed since last
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_| No |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of August 20, 2007: 230,025,383 shares

Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|


                                       1

<PAGE>

                                TELECONNECT INC.
                                      INDEX

PART  I.  FINANCIAL INFORMATION

Item  1.  Financial Statements:


     Condensed Consolidated Balance Sheet as of                              3
        June 30, 2007 (Unaudited)


    Condensed Consolidated Statements of Operations                          4
        for the Three and Nine Months Ended June 30, 2007
        and 2006 (Unaudited)


    Condensed Consolidated Statements of Cash Flows                          5
        for the Nine Months Ended June 30, 2007 and
        2006 (Unaudited)

     Notes to Condensed Consolidated Financial Statements                    6

Item  2.  Management's Discussion and Analysis or Plan of Operations        14

Item  3.  Controls and Procedures                                           18

Item 3A(T).  Controls and Procedures                                        18

PART  II. OTHER INFORMATION

Item  1.  Legal Proceedings                                                 20

Item  2.  Unregistered Sales of Equity Securities and Use of Proceeds       20

Item  3.  Defaults upon Senior Securities                                   20

Item  4.  Submission of Matters to a Vote of Security  Holders              20

Item  5.  Other Information                                                 20

Item  6.  Exhibits                                                          21

Signatures                                                                  21

                                       2

<PAGE>

PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                TELECONNECT INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  June 30, 2007
                                   (Unaudited)

                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                        $    301,000
  Accounts receivable - trade, net of allowance
    for doubtful accounts of $629,000                                   564,000
  Accounts receivable - other                                            34,000
  Inventory                                                              50,000
  Prepaid expenses                                                        1,000
                                                                   ------------
      Total current assets                                              950,000
                                                                   ------------

PROPERTY AND EQUIPMENT, NET                                             338,000

OTHER ASSETS:
  Goodwill                                                              349,000
  Vendor deposits                                                       314,000
  Long-Term Notes Receivable                                            513,000
  Other assets                                                           63,000
                                                                   ------------

                                                                   $  2,527,000
                                                                   ============

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable - trade                                         $  1,173,000
  Accrued liabilities                                                   633,000
  Deposits Held                                                       2,198,000
  Notes payable                                                         162,000
  Loans from related parties                                          2,413,000
  Deferred income                                                     2,015,000
                                                                   ------------

      Total current liabilities                                       8,594,000
                                                                   ------------

STOCKHOLDERS' DEFICIT:
  Preferred stock; par value of $0.001,
    5,000,000 shares authorized, no shares outstanding                       --
  Common stock; par value of $0.001,
    500,000,000 shares authorized, 230,025,383
    shares outstanding                                                  230,000
  Additional paid-in capital                                         22,240,000
  Accumulated (deficit)                                             (25,897,000)
  Other comprehensive income (loss) - effect of
    translation adjustment                                           (2,640,000)
                                                                   ------------

      Total  stockholders'  (deficit)                                (6,067,000)
                                                                   ------------

                                                                   $  2,527,000
                                                                   ============

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                       3

<PAGE>
<TABLE>

                                                         TELECONNECT INC.
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2007 AND 2006
                                                            (Unaudited)


                                                           For three months ended                  For nine months ended
                                                                 June 30,                                 June 30,
                                                     ---------------------------------       ---------------------------------
                                                          2007                2006                2007               2006
                                                     -------------       -------------       -------------       -------------
<S>                                                  <C>                 <C>                 <C>                 <C>
SALES                                                $     980,000       $   1,236,000       $   2,938,000       $   3,582,000
COST OF GOODS SOLD (exclusive of
  depreciation shown separately below)                     889,000             790,000           2,195,000           2,316,000
                                                     -------------       -------------       -------------       -------------
GROSS  PROFIT                                               91,000             446,000             743,000           1,266,000
                                                     -------------       -------------       -------------       -------------

OPERATING EXPENSES:
  Selling, general and administrative expenses           1,385,000             593,000           3,482,000           4,568,000
  Depreciation                                              64,000              58,000             181,000             189,000
                                                     -------------       -------------       -------------       -------------
      Total operating expenses                           1,449,000             651,000           3,663,000           4,757,000

(LOSS) FROM OPERATIONS                                   1,345,000            (205,000)         (2,920,000)         (3,491,000)
                                                     -------------       -------------       -------------       -------------

OTHER INCOME (EXPENSES):
  Debt forgiveness income                                       --                  --           1,259,000                  --
  Other income (expense)                                    46,000             (20,000)             46.000             287,000
  Interest expense                                        (33,000)             (2,000)            (90,000)           (343,000)
                                                     -------------       -------------       -------------       -------------

(LOSS) BEFORE INCOME TAXES                              (1,345,000)           (227,000)         (1,705,000)         (3,547,000)
PROVISION FOR INCOME TAXES                                      --                  --                  --                  --
                                                     -------------       -------------       -------------       -------------

NET (LOSS)                                           $  (1,345,000)      $    (227,000)      $  (1,705,000)      $  (3,547,000)
                                                     =============       =============       =============       =============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
  Net (Loss)                                         $       (0.01)      $       (0.00)      $       (0.01)      $       (0.03)
                                                     =============       =============       =============       =============

AVERAGE COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING                        215,657,251         179,486,022         195,898,020         137,091,975
                                                     =============       =============       =============       =============

THE COMPONENTS OF COMPREHENSIVE LOSS:
  Net (loss)                                         $  (1,345,000)      $    (227,000)      $  (1,705,000)      $  (3,547,000)
  Foreign currency translation adjustment                  100,000            (376,000)           (263,000)           (461,000)
                                                     -------------       -------------       -------------       -------------

COMPREHENSIVE INCOME (LOSS)                          $  (1,245,000)      $    (603,000)      $  (1,968,000)      $  (4,008,000)
                                                     =============       =============       =============       =============

                                       The accompanying notes are an integral part of these
                                           condensed consolidated financial statements.

                                                                4

<PAGE>

                                     TELECONNECT INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE NINE MONTHS ENDED JUNE 30, 2007 AND 2006
                                        (Unaudited)


                                                            2007              2006
                                                        -----------       -----------
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
  Net (loss)                                            $(1,705,000)      $(3,547,000)
  Adjustments to reconcile net (loss) to
    net cash used in operating  activities:
      Depreciation                                          181,000           189,000
      Cancellation of Debt                               (1,259,000)               --
      Non-cash expenditures paid with stock               1,132,000         3,113,000
    Decrease (increase) in operating assets:
      Accounts receivable - trade                            20,000          (169,000)
      Accounts receivable - other                           (24,000)           69,000
      Inventory                                             (28,000)           25,000
      Prepaid expenses                                       37,000           (22,000)
      Vendor and other deposits                               8,000           (11,000)
    Increase (decrease) in operating liabilities:
      Accounts payable and accrued liabilities             (856,000)          (71,000)
      Deposits Held                                       2.198.000                --
      Deferred income and deposits received                 209,000          (268,000)
                                                        -----------       -----------
        Net cash provided by (used in)
          operating activities                              (87,000)         (692,000)
                                                        -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Notes Receivable                                         (482,000)               --
  Purchase of other assets                                  (20,000)               --
  Purchase of Property and Equipment                       (213,000)          (72,000)
                                                        -----------       -----------

    Net cash (used in)investing activities                 (715,000)          (72,000)
                                                        -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Loan proceeds from related parties                        992,000           707,000
  Loan proceeds from bank                                        --           153,000
  Payment on tax agency obligation                          (96,000)         (111,000)
  Payment on loan from bank                                      --          (120,000)
  Payment on loan from related parties                           --          (617,000)
  Proceeds from sale of common stock                             --         1,242,000
                                                        -----------       -----------

   Net cash provided by financing activities                896,000         1,254,000
                                                        -----------       -----------

EFFECT OF EXCHANGE RATE                                       9,000          (461,000)
                                                        -----------       -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                          103,000            29,000
CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                       198,000            70,000
                                                        -----------       -----------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                         $   301,000       $    99,000
                                                        ===========       ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
   Interest                                             $        --       $       566
                                                        ===========       ===========
   Income taxes                                         $        --       $        --
                                                        ===========       ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
   Long-term debt converted to common stock             $        --       $        --
                                                        ===========       ===========
   Common stock issued for interest on
   notes payable                                        $        --       $ 1,796,000
   Common stock issued for conversion of debt           $   289,000                --
                                                        ===========       ===========
   Common stock issued for services received            $ 1,132,000       $ 2,814,000
                                                        ===========       ===========

                   The accompanying notes are an integral part of these
                            consolidated financial statements.
</TABLE>

                                       5

<PAGE>

                        TELECONNECT INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2007
                                   (Unaudited)

1. THE COMPANY

Teleconnect Inc. (the "Company", "Teleconnect", we, us or our) was incorporated
under the laws of the State of Florida on November 23, 1998. The Company is
engaged in the telecommunication industry in Spain and offers telecommunications
services for home and business use. The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
accounting standards generally accepted in the United States ("GAAP") and rules
and regulations of the Securities and Exchange Commission for interim financial
information. The financial statements do not include all information and notes
required by GAAP for complete financial statements. In our opinion, all
adjustments considered necessary for a fair presentation have been included.
Results of the interim periods presented are not necessarily indicative of
results which might be expected for the entire fiscal year.

These interim financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the fiscal year ended September 30,
2006.

The Company's revenues are subject to seasonal variations due to fluctuations in
tourist use of calling cards. The results for the nine months ended June 30,
2007 may not be indicative of results for the fiscal year ending September 30,
2007.

The Company has developed a new rechargeable prepaid telephone calling card.
Other marketing actions are being planned to bring up sales levels to help reach
a monthly breakeven as quickly as possible.

In February 2005, the Board of Directors and shareholders of the Company
approved changing the name of ITS Networks Inc to Teleconnect Inc. in order to
emphasize the nature of the strategic business plan which is to have the Company
be a holding company with international subsidiaries and affiliates in different
countries with similar names, thus taking advantage of the brand recognition and
customer loyalty. The Company will establish Teleconnect Spain as a subsidiary
and will establish other Teleconnect subsidiaries in other European countries.

On March 29, 2006, the Company established a new subsidiary, Teleconnect
Telecom, SL Unipersonal(Telecom) to market its prepaid calling cards in Latin
America. The Company invested 3,000 EURO to establish Telecom.

On June 15th, 2007 the Company bought 100% of Photowizz, a Dutch-based company
which supplies electronic payment Kiosks.

The consolidated financial statements include the accounts of ITS Europe,
Teleconnect Telecom, Photowizz (Mediawizz) and the Company. The Company is a
provider of various telecommunication services and products primarily within
Spain. Significant inter-company balances and transactions have been eliminated
in consolidation.

2. GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.

                                       6

<PAGE>

As shown in the accompanying financial statements, the Company incurred losses
of $(1,705,000) and $(3,547,000) for the nine months ended June 30, 2007 and
2006, respectively. In addition, the Company has incurred substantial losses
since its inception. As of June 30, 2007, the Company had a working capital
deficit of $(7,644,000) and a stockholders' deficit of $(6,067,000). These
factors raise substantial doubt about the Company's ability to continue as a
going concern.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classification of liabilities that might be necessary in the event that the
Company cannot continue as a going concern.

Management anticipates that it will be able to convert certain outstanding debt
into equity and that it will be able to raise additional working capital through
the issuance of stock and through additional loans from investors.

The ability of the Company to continue as a going concern is dependent upon the
Company's ability to attain a satisfactory level of profitability and obtain
suitable and adequate financing. There can be no assurance that management's
plan will be successful.

3. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable -

The Company uses the allowance method to account for uncollectible accounts
receivable. Accounts receivable are presented net of doubtful accounts of
$629,000 at June 30, 2007.

Advertising Costs -

Advertising and sales promotion costs are expensed as incurred. Advertising
expenses totaled $48,124 and $52,187 for respectively for the nine months ended
June 30, 2007 and 2006.

Cash Equivalents -

The Company considers deposits that can be redeemed on demand and investments
that have original maturities of less than three months, when purchased, to be
cash equivalents. Substantially all cash on had at June 30, 2007 was held in
Spanish financial institutions and is not protected by FDIC insurance.

Comprehensive Income -

Comprehensive income consisted entirely of foreign currency translation gains
and losses during the nine months ended June 31, 2007 and 2006.

Consolidation Policy -

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, after elimination of all material
intercompany accounts, transactions, and profits.

Deferred Revenues -

The Company recognizes revenue when earned. The proceeds from the sales of
prepaid calling cards are recorded in the deferred income until such time as the
time is utilized on the cards. Income from each card is recognized on a prorated
basis as a time is utilized on that card.

                                       7

<PAGE>

Earnings per Share -

Basic net income (loss) per common share is computed by dividing net earnings
(loss) applicable to common shareholders by the weighted average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted average number of common shares
outstanding during the period, adjusted for the dilutive affect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options. In periods where losses are reported, the weighted average number
of common shares outstanding excludes common stock equivalents, because their
exclusion would be anti-dilutive.

Estimates -

Preparing that Company's financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contention assets and liabilities at
the date of the financial statements and reporting periods of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Foreign Currency Adjustments -

The financial position and results of substantially all foreign operations are
consolidated using the local currencies in which the Company operates as a
functional currency. Local currency assets and liabilities are translated at the
rates of exchange on the balance sheet date, and local currency revenues and
expenses are translated at the average rates of exchange during the period. The
resulting translation adjustments are recorded directly into a separate
component of shareholders equity.

Income Taxes -

The deferred tax assets and liabilities are recorded for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax losses and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income and in the years in which these temporary differences are expected to be
recovered or settled. The effect of deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment change. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.

In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 is intended to clarify
the accounting for uncertainty in income taxes recognized in a company's
financial statements and prescribes the recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition.

Under FIN 48, evaluation of a tax position is a two-step process. The first step
is to determine whether it is more-likely-than-not that a tax position will be
sustained upon examination, including the resolution of any related appeals or
litigation based on the technical merits of that position. The second step is to
measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement.

                                       8

<PAGE>

Tax positions that previously failed to meet the more-likely-than-not
recognition threshold should be recognized in the first subsequent period in
which the threshold is met. Previously recognized tax positions that no longer
meet the more-likely-than-not criteria should be de-recognized in the first
subsequent financial reporting period in which the threshold is no longer met.

The adoption of FIN 48 at October 1, 2006 did not have a material effect on the
Company's financial position.

Inventories -

Inventories are stated at the lower of cost or market with cost determined on
the first in, first out basis.

New Accounting Pronouncements -

      In February 2006, the FASB issued Statement No. 155, "Accounting for
Certain Hybrid Financial Instruments" ("SFAS No. 155"), which amends FASB
Statements No. 133 and 140. This Statement permits fair value remeasurement for
any hybrid financial instrument containing an embedded derivative that would
otherwise require bifurcation, and broadens a Qualified Special Purpose Entity's
("QSPE") permitted holdings to include passive derivative financial instruments
that pertain to other derivative financial instruments. This Statement is
effective for all financial instruments acquired, issued or subject to a
remeasurement event occurring after the beginning of an entity's first fiscal
year beginning after September 15, 2006. This Statement has no current
applicability to the Company's financial statements.

      In March 2006, the FASB issued Statement No. 156, "Accounting for
Servicing of Financial Assets - an amendment of FASB Statement No. 140" ("SFAS
No. 156"). This Statement is effective for fiscal years beginning after
September 15, 2006. This Statement requires that all separately recognized
servicing assets and servicing liabilities be initially measured at fair value,
if practicable. This Statement has no current applicability to the Company's
financial statements.

      In June 2006, the FASB issued Interpretation 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"), an interpretation of FASB Statement No.
109, "Accounting for Income Taxes." FIN 48 clarifies the accounting and
reporting for income taxes where interpretation of the law is uncertain. FIN 48
prescribes a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of income tax uncertainties with
respect to positions taken or expected to be taken in income tax returns. FIN 48
is effective for fiscal years beginning after December 15, 2006. Management
adopted this Statement on October 1, 2006 and its initial adoption of FIN 48 had
no material impact on the Company's financial position, results of operations,
or cash flows.

      In September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements" ("SFAS No. 157"). SFAS No. 157 addresses how companies should
measure fair value when they are required to use a fair value measure for
recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, with earlier adoption permitted. Management is
assessing the impact of the adoption of this Statement.

      In September 2006, the FASB issued Statement No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans" ("SFAS
No. 158"), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No.
158 requires (a) recognition of the funded status (measured as the difference
between the fair value of the plan assets and the benefit obligation) of a
benefit plan as an asset or liability in the employer's statement of financial
position, (b) measurement of the funded status as of the employer's fiscal
year-end with limited exceptions, and (c) recognition of changes in the funded
status in the year in which the changes occur through comprehensive income. The
requirement to recognize the funded status of a benefit plan and the disclosure


                                       9

<PAGE>

requirements are effective as of the end of the fiscal year ending after
December 15, 2006. The requirement to measure the plan assets and benefit
obligations as of the date of the employer's fiscal year-end statement of
financial position is effective for fiscal years ending after December 15, 2008.
This Statement has no current applicability to the Company's financial
statements.

      In September 2006, the Securities Exchange Commission issued Staff
Accounting Bulletin No. 108 ("SAB No. 108"). SAB No. 108 addresses how the
effects of prior year uncorrected misstatements should be considered when
quantifying misstatements in current year financial statements. SAB No. 108
requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and
qualitative factors. When the effect of initial adoption is material, companies
will record the effect as a cumulative effect adjustment to beginning of year
retained earnings and disclose the nature and amount of each individual error
being corrected in the cumulative adjustment. Implementation of SAB No. 108 had
no material impact on the Company's financial position, results of operations,
or cash flows.

      In February 2007, the Financial Accounting Standards Board issued SFAS No.
159 "The Fair Value Option for Financial Assets and Financial Liabilities." This
statement permits companies to choose to measure many financial assets and
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The Company is
currently assessing the impact of SFAS 159 on its consolidated financial
statements.

4. CONCENTRATION OF CREDIT

The Company extends credit to retailers on the sale of prepaid calling cards.
Substantially all sales are made in Spain. The Company has incurred substantial
losses in the past from the extension of credit but believes that, as of June
30, 2007, its allowance for credit related losses is adequate to cover any
uncollectible receivables.

The Company does not require collateral or other security to support financial
instruments that are subject to credit risk.

As of Juen 30, 2007, three customers accounted for 31.2%, 14.1% and 10.2% of
sales.

5. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, and minor replacements, maintenance, and
repairs are charged to expenses as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gains or losses included in the
results of operation for the respective period.

The Company reviews the carrying value of property and equipment for the
impairment on an annual basis. In cases where undiscounted expected future cash
flows are less than the carrying value, an impairment loss is recognized equal
to an amount by which the carrying value exceeds the fair market value of the
assets. The Company recognized no impairment losses related to the realization
of property and equipment during the nine months ended June 30, 2007 and 2006.

Property and equipment, substantially all of which are located in Spain, at June
30, 2007, were comprised as follows:

                                       10

<PAGE>

Computers and switching systems                                     $ 2,450,000
Furniture and fixtures                                              $   145,000
Transportation equipment                                            $     6,000
                                                                    -----------
Total at cost                                                       $ 2,601,000
                                                                    -----------

Less: Accumulated depreciation
and amortization                                                    $(2,263,000)
                                                                    -----------
Net Property and Equipment                                          $   338,000
                                                                    ===========

The useful lives of property and equipment for purposes of computing
depreciation are as follows:

          Computers and switching systems              5-7 years
          Furniture and fixtures                         7 years
          Transportation equipment                       4 years


All depreciation is computed on a straight line basis over their useful lives.

6. LONG-TERM NOTE RECEIVABLE

On February 22, 2007, the Company entered into a loan agreement with J.
Veenedaal Holding, B.V. ("J.V. Holdings"). This agreement required the Company
to make a 350,000 euro ($513,000) loan to J.V. Holdings with the understanding
that J.V. Holdings would secure certain commercial agreements for the company in
Asia. The loan is for a period of two years and does not specify an interest
rate. As of June 30, 2007, the Company has not accrued any interest income
related to this note. This note is unsecured.


7. LOANS FROM RELATED PARTIES

As of June 30, 2007, the Company had short-term loans totaling $2,413,000 from
shareholders. These loans bear interest at 8% annually, are unsecured, and are
due upon demand. Interest expense of $33,000 and $90,000 was incurred on these
notes during the three and nine months ended June 30, 2007.

During March 2006, the Company agreed to pay loans to an individual totaling
$845,923 (665,400 EUROS) in 12 monthly installments of 55,450.06 EUROS through
February 2007. As stated in the agreement, the loans are no longer bearing
interest at 9%. This agreement was subsequently renegotiated and as of June 30,
2007, the Company still owed 8 monthly payments of 25,000 EUROS each.

8. NOTE PAYABLE

As of June 30, 2007 the Company has a short-term bridge loan of $162,000 from a
potential investor. This note is interest bearing at 4% per 60 days and is due
on demand.

9. OPERATING LEASES

The Company leases various office space and equipment under operating leases
expiring in various years through 2011. Rent expense incurred in operating
leases for the nine months ended June 30, 2007 and 2006 are $151,000 and $99,000
respectively.

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of June 30, 2007 for each of the next
five years and in the aggregate are:

Year ended September 30,                                                Amount
------------------------                                                ------
2007                                                                  $125,000
2008                                                                  $125,000
2009                                                                  $125,000
2010                                                                  $125,000
2011                                                                  $125,000
                                                                      --------
Total Minimum future rental payments                                  $625,000
                                                                      ========

                                       11

<PAGE>

10. LITIGATION AND CONTINGENT LIABILITIES

In the normal course of its operations, the Company may, from time to time, be
named in legal actions seeking monetary damages. While the outcome of these
matters cannot be estimated with certainty, management does not expect, based
upon consultation with legal counsel, that they will have a material effect on
the Company's business or financial condition or results of operations. As of
June 30, 2007, the Company has accrued $138,000 to cover the anticipated cost of
settling several litigation matters.

11. PREFERRED STOCK

The Company has 5,000,000 shares of authorized and unissued Preferred Stock with
par value of $0.001, which is noncumulative and nonparticipating. No shares of
preferred stock were issued and outstanding as of June 30, 2007.

12. STOCK TRANSACTIONS

   On October 11, 2006 the Company issued 180,000 shares of common stock with a
fair market value of $12,600 for services.

   On October 17, 2006 the Company issued 500,000 shares of common stock with a
fair market value of $70,000 for services.

   On February 12, 2007 the Company issued 9,000,000 shares of common stock with
a fair market value of $450,000 for services.

   On February 15, 2007 the Company issued to a shareholder 14,040,000 shares of
common stock at the time he agreed to assume $1,404,000 of debt from a major
creditor. However, the Company subsequently was able to settle this debt for
$289,000. For financial reporting purposes the stock was valued at $289,000 with
an offset against notes due to this shareholder.

   On May 14, 2007, the Company issued 5,000,000 shares of common stock valued
at $200,000 for syndication fees associated with the Stock issuance in the Giga
Matrix acquisition (See note 12).

   On May 14, 2007 the Company issued 15,000,000 shares of common stock with a
fair market value of $600,000 for consulting services.

   On June 15, 2007 the Company issued 5,625,000 shares of common stock with a
fair market value of $281,250 in connection with the purchase of MediaWizz (See
Note 12).

13. EARNINGS (LOSS) PER SHARE

Basic earnings per share amounts are computed based on the weighted average
number of shares outstanding on that date during the applicable periods. The
numbers of shares used in the computations were 215,657,251 and 179,486,022 for
the three months ended June 30, 2007 and 2006, respectively. For the nine months
ended June 30, 2007 and 2006 the shares used in the computations were
195,898,020 and 137,091,553, respectively.

Diluted earnings per share were not disclosed as of June 30, 2007 and 2006 since
the options and warrants outstanding at those dates were antidilutive. Warrants
and options totaling 4,315,000 and 4,755,790 shares were outstanding at June 30,
2007 and 2006, respectively

                                       12

<PAGE>

14. ACQUISITIONS

On June 15, 2007 the Company finalized an agreement to acquire 100% on the
outstanding stock in PhotoWizz BV (MediaWizz), for the issuance of 5,625,000
shares of the Company's common stock valued at $281,250 and (euro)108,000
($148,854).

This acquisition was treated as a purchase. The purchase price was allocated as
follows:

Cash                                              $ 56,000
Accounts receivable                                 13,000
Property and equipment                             129,000
Other assets                                         6,000
Goodwill                                           349,000
Liabilities assumed                               (126,000)
                                                  --------
Total purchase consideration                      $427,000
                                                  ========

In accordance with the terms of the purchase agreement, the Company is obligated
to make an additional 142,000 (euro) in capital contributions at 12,000 (euro)
per month to help finance MediaWizz expansion of operations.


15. PROPOSED ACQUISITIONS

On February 15, 2007, the Company entered into an agreement to issue 52,720,000
shares of the Company's common stock for a 49% interest in Giga Matrix Holdings,
BV, a 150,000 Euro note receivable from Giga and 1,650,000 Euro $(2,197,000) in
cash. As of June 30, 2007, this transaction has not been closed. However, as of
June 30, 2007, the Company had received a deposit of $2,197,000 from the
counterparts to this transaction.

16. CANCELLATION OF DEBT INCOME

The Company entered into an agreement to settle a $1.4 million debt with UNI2
for $289,000 resulting in cancellation of debt income of $1,259,000.

                                       13

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR RESULTS OF OPERATIONS

IN ADDITION TO HISTORICAL INFORMATION, MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS MAY INCLUDE CERTAIN FORWARD-LOOKING STATEMENTS, INCLUDING,
BUT NOT LIMITED TO, THOSE RELATED TO THE GROWTH AND STRATEGIES, FUTURE OPERATING
RESULTS AND FINANCIAL POSITION AS WELL AS ECONOMIC AND MARKET EVENTS AND TRENDS
OF THE COMPANY. ALL FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY, INCLUDING
SUCH STATEMENTS HEREIN, INCLUDE MATERIAL RISKS AND UNCERTAINTIES AND ARE SUBJECT
TO CHANGE BASED ON FACTORS BEYOND THE CONTROL OF THE COMPANY. ACCORDINGLY, THE
COMPANY'S ACTUAL RESULTS AND FINANCIAL POSITION COULD DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED IN ANY FORWARD-LOOKING STATEMENT AS A RESULT OF
VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION FACTORS DESCRIBED IN THE COMPANY'S
PREVIOUS FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION REGARDING RISKS
AFFECTING THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of the Company's consolidated financial condition and
results of operations should be read in connection with the Company's condensed
consolidated financial statements and notes thereto appearing elsewhere herein.
Factors that could cause or contribute to differences from the condensed
consolidated financial statements include, but are not limited to, risks and
uncertainties related to the need for additional funds, the growth of its
operations and the ability of the Company to operate profitably.

SIGNIFICANT ACCOUNTING ESTIMATES AND POLICIES

Going Concern. These financial statements have been prepared assuming the
Company is a going concern. As of June 30, 2007, the Company has negative
working capital of $(7,644,000) and a deficit net worth of $(6,067,000). This
gives rise to substantial doubts about the Company's ability to continue as a
going concern. The financial statements do not reflect any adjustments which
might be required should the Company discontinue as a going concern.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash equivalents.
There are cash equivalents of $301,000 at June 30, 2007.

CONSOLIDATION POLICIES - The accompanying consolidated financial statements
include the accounts of the Company and all of its wholly owned and majority
owned subsidiaries. Intercompany transactions and balances have been eliminated
in consolidation.

REVENUE RECOGNITION - Revenues from the sale of prepaid calling cards are
recognized at the time the cards are used. Unused time is reflected in deferred
revenue until the time is utilized or the card reaches its expiration date. The
Company had deferred revenues of $2,015,000 as of June 30, 2006.

INVENTORY - Inventory consists primarily of unused calling cards. Inventories
are stated at the lower of cost determined on the first in first out method, or
market, whichever is less.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets. Maintenance and repairs are charged to operations when incurred.

                                       14

<PAGE>

IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates its long-lived assets to
determine whether later events and circumstances warrant revised estimates of
useful lives or a reduction in carrying value due to impairment.

INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to determine deferred tax
assets and liabilities. Deferred tax assets and liabilities are determined based
upon the differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are assumed to reverse.

LOSS PER SHARE - Loss per common and common equivalent share is computed based
on the weighted average number of common shares outstanding.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

FOREIGN CURRENCY TRANSLATION/TRANSACTIONS - The assets and liabilities of ITS
Europe and Teleconnect whose functional currency is the Euro, are generally
translated into US dollars at the June 30, 2006 exchange rate for assets and
liabilities and at the historical exchange rate on stockholders' equity. The
revenues and expenses are translated at average exchange rates for the periods.
Resulting translation adjustments are accumulated and reflected as a separate
component of stockholders' equity.

NEW ACCOUNTING PRONOUNCEMENTS - SFAS 151, SFAS 152, SFAS 153 and SFAS 154 SFAS
No. 151, Inventory Costs - an amendment of ARB No. 4 and SFAS No. 152,
Accounting for Real Estate Time-Sharing Transactions - an amendment of FASB
Statements No. 66 and 67, SFAS No. 153, Exchange of Non-monetary Assets - an
amendment of APB Opinion No. 29 and SFAS No. 154, Accounting Changes and Error
Corrections - a replacement of APB No. 20 and SFAS 3 were recently issued. SFAS
No. 123(R), 151, 152, and 153 have no current applicability to the Company and
have no effect on the consolidated financial statements.

In December 2004, the FASB issued a revision of SFAS No. 123 "Share-Based
Payment". The statement establishes standards for the accounting for
transactions in which an entity exchanges its equity investments for goods and
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of those
equity instruments. The statement does not change the accounting guidance for
share-based payments with parties other than employees.

The statement requires a public entity to measure the cost of employee service
received in exchange for an award of equity instruments based on the grant-date
fair value of the award (with limited exception). That cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award (usually the vesting period). A public entity will
initially measure the cost of employee services received in exchange for an
award of liability instrument based on its current fair value; the fair value of
that award will be remeasured subsequently at each reporting date through the
settlement date. Changes in fair value during the requisite service period will
be recognized as compensation over that period.

The grant-date for fair value of employee share options and similar instruments
will be estimated using option-pricing models adjusted for the unique
characteristics of these instruments. The statement is effective for the
quarters beginning December 15, 2005.

                                       15

<PAGE>

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006

We incurred a $(1,345,000) net loss for the three months ended June 30, 2007 as
compared to a net loss of $(227,000) during the comparable period in 2006. A
comparison of revenues and expenses for the two periods is as follows:

REVENUES

Sales for the three months ended June 30, 2007 decreased 20.7% to $980,000 from
$1,236,000 for the quarter ended June 30, 2006. The decrease in sales is due to
a decline in the volume of calls placed in 2007 as compared to 2006.

COST OF GOODS SOLD

Cost of goods sold increased 12,5% to $889,000 during the three months ended
June 30, 2007 from $790,000 during the same period in 2006. The increase in cost
of goods sold is attributable primarily to the higher cost associated to some of
the newer products and services without receiving the corresponding increase of
sales due to ramp up times. Cost of goods sold as a percentage of sales for the
three month period ended June 30, 2007 increased by 26.8% from 63.9% to 90.7%.

GROSS PROFIT

Gross Profit for the three months ended June 30, 2007 decreased 79.6% to $91,000
from $446,000 during the same period in 2006. This is due to the reduction in
sales without the corresponding reduction in costs of goods sold. Gross profit
as a percentage of sales for the three month period ended June 30, 2007
decreased by 26.8% from 36.1% (2006) to 9.3% (2007).

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased 133.6% to $1,385,000
during the three months ended June 30, 2007 as compared to $593,000 for the
comparable period in 2006. The increase is due primarily to the issuance of
15,000,000 shares of common stock valued at $600,000 for consulting services.

DEPRECIATION

Depreciation expense increased 10.3% to $64,000 during the three months ended
June 30, 2007 as compared to $58,000 for the comparable period in 2006. This
increase is due to property additions during the current year.

INTEREST EXPENSE

The Company incurred interest expense of $33,000 during the three months ended
June 30, 2007 as compared to $2,000 during the comparable period in 2006.
Interest expense increased due to increased borrowing during 2007.

                                       16

<PAGE>

COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 2007 AND 2006

We incurred a $(1,705,000) net loss for the nine months ended June 30, 2007 as
compared to a net loss of $(3,547,000) during the comparable period in 2006. A
comparison of revenues and expenses for the two periods is as follows:

REVENUES

Sales for the nine months ended June 30, 2006 decreased 17.98% to $2,938,000
from $3,582,000 for the nine months ended June 30, 2006. This decrease is due to
a decline in the volume of calls placed by customers in 2007 as compared to
2006.

COST OF GOODS SOLD

Cost of goods sold decreased 5.2% to $2,195,000 during the nine months ended
June, 2007 from $2,316,000 during the same period in 2006. The decrease in cost
of goods sold is attributable primarily to the lower sales volume offset in part
by higher carrier charges per call. This effect was dampened by the additional
costs incurred in products and services which have not yet ramped up in sales..
Cost of good sold as a percentage of sales for the nine month period ended June
30, 2007 increased by 10.0% from 64.7% to 74.7%.

GROSS PROFIT

Gross Profit for the nine months ended June 30, 2007 decreased 41.3% to $743,000
from $1,266,000 during the same period in 2006. Gross profit as a percentage of
sales for the nine month period ended June 30, 2007 decreased 10.0% from 35.3%
in 2006 to 25.3% in 2007.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased 23.8% to $3,482,000
during the nine months ended June 30, 2007 as compared to $4,568,000 for the
comparable period in 2006. Of the $3,482,000, $1,132,000 is due to the Common
Stock issued to consultants for services and other expenses. As such, the
selling, general and administrative expenses would have been $2,315,000. If the
stock bonuses to employees are not considered for the year 2006, that is
$2,200,000, the selling, general and administrative expense would have been
$2,368,000 during the nine months ended June 30, 2006. Hence for the nine month
period ending June 30, 2007, there would have been a reduction of $18,000 in
selling, general and administrative expense from the comparable period in 2006.

DEPRECIATION

Depreciation expense decreased 4.2% to $181,000 during the nine months ended
June 30, 2007 as compared to $189,000 for the comparable period in 2006.

INTEREST EXPENSE

The Company incurred interest expense of $90,000 during the nine months ended
June 30, 2007 as compared to $343,000 during the comparable period in 2006. The
decrease is due to high interest rates paid in 2006 for certain short term
loans.

                                       17

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2007, the Company has negative working capital of $(7,644,000)
and a deficit net worth of $6,067,000. This gives rise to substantial doubts
about the Company's ability to continue as a going concern. The financial
statements do not reflect any adjustments which might be required should the
Company discontinue as a going concern.

The ability of the Company to satisfy its obligations will depend in part upon
its ability to raise funds through the sale of additional shares of its Common
Stock, increase borrowings, and in part upon its ability to reach a profitable
level of operations of which there can be no assurances.

During the 2005, 2006 fiscal years and into 2007, the Company's management
focused on improving margins on its prepaid business by reducing operating costs
and reducing outstanding debt. As a result, it has decreased its debt and looked
for additional debt/equity funding. Its telephone services have been redefined
as a part of a new marketing mix and certain services relaunched with a raw
image and brand name associated with the prepaid telephone card business of
Teleconnect. The Company has constantly focused on reducing its operating costs
to a minimum and is still taking measures which will further reduce its monthly
expenses.

The Company's capital resources have been provided primarily by capital
contributions from stockholders, stockholder loans, the exchange of outstanding
debt into Common Stock of the Company, and services rendered in exchange for
Common Stock.

The Company intends to sell its Common Stock and/or borrow additional funds from
investors to invest in the launch of new services, pay debts and for general
working capital. However, there is no assurance that such capital will be
raised, and the Company may seek bank financing and other sources of financing
to complete the payment of additional debts of Teleconnect.

ITEM 3. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer/Principal
Accounting Officer (collectively, the Certifying Officers) are responsible for
establishing and maintaining disclosure controls and procedures for the Company.
Such officers have concluded (based upon their evaluation of these controls and
procedures as of a date within 90 days of the filing of this report) that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in this report is
accumulated and communicated to the Company's management, including its
principal executive officers as appropriate, to allow timely decisions regarding
required disclosure.

The Certifying Officers also have indicated that there were no significant
changes in the Company's internal controls or other factors that could
significantly affect such controls subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.

ITEM 3A(T). CONTROLS AND PROCEDURES

MANAGEMENT'S INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's internal control over financial reporting disclosure, financial
controls, and reporting procedures are designed to ensure that information
required to be disclosed in our reports and filed or submitted under the
Securities Exchange Act of 1934 (the "Exchange Act") is accurately recorded,
processed, summarized, and reported, according to the rules and regulations and
within the time periods proscribed by the Exchange Act. The Company believes
that its internal controls and procedures relating to its financial reporting
are designed to provide reasonable assurance of achieving the Company's goals of
compliance with the Exchange Act. However, the design of any system of financial
control is based upon certain assumptions about the likelihood of future events
and is affected by the amount of resources available to a company and inherent
risks within any control procedure. There can be no assurance that any design


                                       18

<PAGE>

will succeed in achieving its stated objectives under all future events, no
matter how remote, or that the degree of compliance with the policies or
procedures may not deteriorate. Because of the inherent limitations in financial
disclosure, controls, and procedures, the Company may not be able to prevent or
detect all misstatements or failures to comply with the Exchange Act.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives.

The Company's internal control over financial reporting disclosure, financial
controls, and reporting procedures are designed by, or under the supervision of,
the Company's Chief Executive Officer and President, and the Company's Treasurer
and Chief Financial and Accounting Officer. The Company's Chief Executive
Officer and President, the Company's Treasurer and Chief Financial and
Accounting Officer, the board of directors, management, and other personnel, are
involved in implementing the Company's internal control over financial reporting
disclosure, financial controls, and reporting procedures in an effort to provide
reasonable assurance regarding the reliability of financial reporting, the
preparation of financial statements, and the structural flexibility required to
effectuate such procedures.

The Company's internal control over financial reporting disclosure, financial
controls, and reporting procedures are consistent with generally accepted
accounting principles, and includes those policies and procedures that:

      (1)   pertain to the maintenance of records in reasonable detail and
            accurately and fairly reflect the transactions and dispositions of
            the assets of the Company;

      (2)   provide reasonable assurance that transactions are recorded as
            necessary to permit preparation of financial statements in
            accordance with generally accepted accounting principles, and that
            receipts and expenditures of the Company are being made only with
            the authorization of the management and directors of the Company;
            and

      (3)   provide reasonable assurance regarding prevention or timely
            detection of unauthorized acquisition, use, or disposition of the
            Company's assets, or unauthorized transactions, that could have a
            material effect on the Company's financial statements.

The Certifying Officers are aware of no changes in the Company's financial
reporting disclosure, financial controls, or reporting procedures during the
quarter ended June 30, 2007, that could materially affect the Company's ability
to comply with the Exchange Act. The Certifying Officers are aware of no
instances during the quarter ended June 30, 2007, whereby the Company's internal
control over financial reporting disclosure, financial controls, and reporting
procedures revealed any deficiency or material weakness requiring corrective
action by the Company.

                                       19

<PAGE>

PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of its operations, the Company may, from time to time, be
named in legal actions seeking monetary damages. While the outcome of these
matters cannot be estimated with certainty, management does not expect, based
upon consultation with legal counsel, that they will have a material effect on
the Company's business or financial condition or results of operations. As of
June 30, 2006, the Company has accrued $138,000 to cover the anticipated cost of
settling several litigation matters.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 11, 2006 the Company issued 180,000 shares of common stock with a
fair market value of $12,600 for services.

On October 17, 2006 the Company issued 500,000 shares of common stock with a
fair market value of $70,000 for services.

On February 12, 2007 the Company issued 9,000,000 shares of common stock with a
fair marker value of $450,000 for services.

On February 15, 2007 the Company issued to a shareholder 14,040,000 shares of
common stock at the time he agreed to assume $1,404,000 of debt from a major
creditor. However, the Company subsequently was able to settle this debt for
$289,000. For financial reporting purposes the stock was valued at $289,000 with
an offset against notes due to this shareholder.

On May 14, 2007, the Company issued 5,000,000 shares of common stock valued at
$200,000 for syndication fees associated with the Stock issuance in the Giga
matrix acquisition (See note 12).

On May 14, 2007, the Company issued 15,000,000 shares of common stock with a
fair market value of $600,000 for consulting services.

On June 15, 2007 the Company issued 5,625,000 shares of common stock with a fair
market value of $281,250 in connection with the purchase of MediaWizz (See Note
12).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

NONE

ITEM 5. OTHER INFORMATION

None

                                       20

<PAGE>

ITEM 6. EXHIBITS

31.1  Certification of Gustavo Gomez

31.2  Certification of Alfonso de Borbon

32    Certification of Gustavo Gomez and Alfonso de Borbon








                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


AUGUST 20,  2007


TELECONNECT  INC.


BY: /S/ GUSTAVO GOMEZ                    BY: /S/ ALFONSO DE BORBON
    ---------------------------              -------------------------
    GUSTAVO GOMEZ, DIRECTOR,                 ALFONSO DE BORBON,
    CHIEF EXECUTIVE OFFICER,                 DIRECTOR, EXECUTIVE VICE
    PRESIDENT, CHIEF FINANCIAL               PRESIDENT AND CHIEF OPERATING
    OFFICER AND TREASURER                    OFFICER


                                       21

<PAGE>



INDEX TO EXHIBITS



Exhibit No.            Description
-----------            -----------

31.1          Certification of Gustavo Gomez

31.2          Certification of Alfonso de Borbon

32            Certification of Gustavo Gomez and Alfonso de Borbon




                                       22