United
States


Securities
and Exchange Commission


Washington,
D.C. 20549





FORM
10-Q








x  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For the
quarterly period ended March 31, 2010





or





o  TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For the
transition period from ______________ to ________________





Commission
File Number: 0-24857





Teleconnect
Inc.


(Exact
name of registrant issuer as specified in its charter)




Florida
                
                90-0294361(State
      or other jurisdiction of
                
                (I.R.S.
      Employer Identification No.)incorporation
      or organization)




Oude Vest
4


4811 HT
Breda


The
Netherlands





(Address
of principal executive offices)





Registrant’s
telephone number, including area code:   011-31-
06-30048023





___________________________N/A_________________________________


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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes  x   No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes 
o   No
o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company in
Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer   oNon-accelerated
      filer   o
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  o   No x





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes  o No
o





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 4,953,700 shares of common stock at
May 11, 2010.










TELECONNECT
INC.




INDEX




PART
                          I
                          FINANCIAL
      INFORMATIONItem
                          1.
                          Financial
      Statements:Condensed
      Consolidated Balance Sheets as of March31,
      2010 (unaudited) and September 30, 2009
                          3-4Condensed
      Consolidated Statements of Operations forthe
      three and six months ended March 31, 2010 and 2009(Unaudited)
                          5Condensed
      Consolidated Statements of Cash Flows forthe
      three and  six months ended March 31, 2010 and
    2009(Unaudited)
                          6Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                          7Item
                          2.
                          Management's
      Discussion and Analysis of Financial Condition andResults
      of Operations
                          10Item
                          3.
                          Quantitative
      and Qualitative Disclosure About Market Risk
                          12Item
                          4.
                          Controls
      and Procedures
                          13PART
                          II
                          OTHER
      INFORMATIONItem
                          1.
                          Legal
      Proceedings
                          14Item
                          1A.
                          Risk
      Factors (not applicable)
                          14Item
                          2.
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          14Item
                          3.
                          Defaults
      Upon Senior Securities
                          14Item
                          4.
                          Submission
      of Matters to a Vote of Security Holders (not applicable)
                          14Item
                          5.
                          Other
      Information
                          14Item
                          6.
                          Exhibits
                          14Signatures
                          15





2






PART I FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS




TELECONNECT, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




PAGE 1 of
2




March
      31,
                                                                          2010
                                                                        
                                                                        
                                                                        September
      30,
                                                                          2009(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                                                        
                                                                        $
                                                                        12,703
                                                                        
                                                                        
                                                                        $
                                                                        15,652Accounts
      receivable - trade
                                                                        
                                                                        
                                                                        3,961
                                                                        
                                                                        
                                                                        
                                                                        2,911Due
      from Giga Matrix Holding B.V.
                                                                        
                                                                        
                                                                        381,909
                                                                        
                                                                        
                                                                        
                                                                        530,992Inventory,
      work in progress (net of reserve for slow moving inventory
                                                                            of
      $136,857 and $139,109 at March 31, 2010 and September 30,
      2009,respectively)
                                                                        
                                                                        
                                                                        1,152,707
                                                                        
                                                                        
                                                                        
                                                                        1,419,522Prepaid
      taxes
                                                                        
                                                                        
                                                                        14,999
                                                                        
                                                                        
                                                                        
                                                                        -Prepaid
      expenses
                                                                        
                                                                        
                                                                        7,331
                                                                        
                                                                        
                                                                        
                                                                        6,994Asset
      of discontinued operations
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        632,804Total
      current assets
                                                                        
                                                                        
                                                                        1,573,610
                                                                        
                                                                        
                                                                        
                                                                        2,608,875PROPERTY
      AND EQUIPMENT, NET
                                                                        
                                                                        
                                                                        9,175
                                                                        
                                                                        
                                                                        
                                                                        14,574OTHER
      ASSETS:Investment
      in Giga Matrix Holdings B.V.
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Goodwill
                                                                        
                                                                        
                                                                        419,092
                                                                        
                                                                        
                                                                        
                                                                        455,283Long-term
      notes receivable (net of allowance for bad debts
                                                                          of
      $590,224 and $591,010 in March 31, 2010 and September 30, 2009,
      respectively)
                                                                        
                                                                        
                                                                        53,916
                                                                        
                                                                        
                                                                        
                                                                        58,572Assets
      of discontinued operations
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        628,028$
                                                                        2,055,793
                                                                        
                                                                        
                                                                        $
                                                                        3,765,332
  See
accompanying Notes to Condensed Consolidated Financial
Statements.
  3
  TELECONNECT, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
   PAGE 2 of
2
  March
      31,
                                                  
                                                  
                                                  September
      30,2010
                                                  
                                                  
                                                  2009(Unaudited)LIABILITIESCURRENT
      LIABILITIES:Accounts
      payable - trade
                                                  
                                                  $
                                                  98,017
                                                  
                                                  
                                                  $
                                                  106,155Accrued
      liabilities
                                                  
                                                  
                                                  92,692
                                                  
                                                  
                                                  
                                                  101,406Notes
      payable
                                                  
                                                  
                                                  161,748
                                                  
                                                  
                                                  
                                                  175,716Income
      Taxes payable
                                                  
                                                  
                                                  130,000
                                                  
                                                  
                                                  
                                                  130,000Loans
      from related parties
                                                  
                                                  
                                                  2,491,776
                                                  
                                                  
                                                  
                                                  2,274,440Liabilities
      of discontinued operations
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  4,377,269Total
      current liabilities
                                                  
                                                  
                                                  2,974,233
                                                  
                                                  
                                                  
                                                  7,164,986STOCKHOLDERS'
      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,
                                                    4,953,700 shares
      outstanding as of March 31, 2010
                                                    and
      September 30, 2009
                                                  
                                                  
                                                  4,954
                                                  
                                                  
                                                  
                                                  4,954Additional
      paid-in capital
                                                  
                                                  
                                                  31,511,257
                                                  
                                                  
                                                  
                                                  31,511,257Accumulated
      deficit
                                                  
                                                  
                                                  (29,462,572
                                                  )
                                                  
                                                  
                                                  (31,992,430
                                                  )Accumulated
      other comprehensive loss
                                                  
                                                  
                                                  (2,972,079
                                                  )
                                                  
                                                  
                                                  (2,923,435
                                                  )Total
      stockholders' deficit
                                                  
                                                  
                                                  (918,440
                                                  )
                                                  
                                                  
                                                  (3,399,654
                                                  )$
                                                  2,055,793
                                                  
                                                  
                                                  $
                                                  3,765,332


See
accompanying Notes to Condensed Consolidated Financial
Statements.






4




TELECONNECT,
      INC.CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
  For
      the three months ended
                                        
                                        
                                        For
      the six months endedMarch
      31,
                                        
                                        
                                        March
      31,2010
                                        
                                        
                                        2009
                                        
                                        
                                        2010
                                        
                                        
                                        2009SALES
                                        
                                        $
                                        111
                                        
                                        
                                        $
                                        95,061
                                        
                                        
                                        $
                                        234,510
                                        
                                        
                                        $
                                        150,335COST
      OF SALES
                                        
                                        
                                        13,773
                                        
                                        
                                        
                                        107,417
                                        
                                        
                                        
                                        183,906
                                        
                                        
                                        
                                        163,683GROSS
      (LOSS) INCOME
                                        
                                        
                                        (13,662
                                        )
                                        
                                        
                                        (12,356
                                        )
                                        
                                        
                                        50,604
                                        
                                        
                                        
                                        (13,348
                                        )OPERATING
      EXPENSES:Selling,
      general and administrative expenses
                                        
                                        
                                        224,049
                                        
                                        
                                        
                                        351,115
                                        
                                        
                                        
                                        599,649
                                        
                                        
                                        
                                        587,840Depreciation
                                        
                                        
                                        761
                                        
                                        
                                        
                                        7,717
                                        
                                        
                                        
                                        1,454
                                        
                                        
                                        
                                        15,629Total
      operating expenses
                                        
                                        
                                        224,810
                                        
                                        
                                        
                                        358,832
                                        
                                        
                                        
                                        601,103
                                        
                                        
                                        
                                        603,469LOSS
      FROM CONTINUING OPERATIONS
                                        
                                        
                                        (238,472
                                        )
                                        
                                        
                                        (371,188
                                        )
                                        
                                        
                                        (550,499
                                        )
                                        
                                        
                                        (616,817
                                        )OTHER
      INCOME (EXPENSES):Other
      income (expense)
                                        
                                        
                                        10,417
                                        
                                        
                                        
                                        7,509
                                        
                                        
                                        
                                        17,951
                                        
                                        
                                        
                                        15,018Loss
      on investment
                                        
                                        
                                        (103,503
                                        )
                                        
                                        
                                        (44,626
                                        )
                                        
                                        
                                        (103,503
                                        )
                                        
                                        
                                        (44,626
                                        )Interest
      expense - related parties
                                        
                                        
                                        (4,154
                                        )
                                        
                                        
                                        (19,293
                                        )
                                        
                                        
                                        (8,584
                                        )
                                        
                                        
                                        (53,357
                                        )LOSS
      FROM CONTINUING OPERTIONS BEFORE INCOME TAXES
                                        
                                        
                                        (335,712
                                        )
                                        
                                        
                                        (427,598
                                        )
                                        
                                        
                                        (644,635
                                        )
                                        
                                        
                                        (699,782
                                        )PROVISION
      FOR INCOME TAXES
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -NET
      LOSS BEFORE DISCONTINUED OPERATIONS
                                        
                                        
                                        (335,712
                                        )
                                        
                                        
                                        (427,598
                                        )
                                        
                                        
                                        (644,635
                                        )
                                        
                                        
                                        (699,782
                                        )NET
      INCOME FROM DISCONTINUED OPERATIONS
                                        
                                        
                                        -
                                        
                                        
                                        
                                        114,737
                                        
                                        
                                        
                                        3,174,493
                                        
                                        
                                        
                                        37,489NET
      (LOSS) INCOME
                                        
                                        $
                                        (335,712
                                        )
                                        
                                        $
                                        (312,861
                                        )
                                        
                                        $
                                        2,529,858
                                        
                                        
                                        $
                                        (662,293
                                        )BASIC
      AND DILUTED (LOSS) INCOME PER SHARE:From
      continuing operations
                                        
                                        $
                                        (0.07
                                        )
                                        
                                        $
                                        (0.11
                                        )
                                        
                                        $
                                        (0.13
                                        )
                                        
                                        $
                                        (0.20
                                        )From
      discontiued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        0.03
                                        
                                        
                                        
                                        0.64
                                        
                                        
                                        
                                        0.01Total
                                        
                                        $
                                        (0.07
                                        )
                                        
                                        $
                                        (0.08
                                        )
                                        
                                        $
                                        0.51
                                        
                                        
                                        $
                                        (0.19
                                        )AVERAGE
      COMMON AND COMMONEQUIVALENT
      SHARES OUTSTANDING
                                        
                                        
                                        4,953,700
                                        
                                        
                                        
                                        3,787,089
                                        
                                        
                                        
                                        4,953,700
                                        
                                        
                                        
                                        3,551,995THE
      COMPONENTS OF COMPREHENSIVE INCOME (LOSS):Net
      (Loss) Income
                                        
                                        $
                                        (335,712
                                        )
                                        
                                        $
                                        (312,861
                                        )
                                        
                                        $
                                        2,529,858
                                        
                                        
                                        $
                                        (662,293
                                        )Foreign
      currency translation adjustment
                                        
                                        
                                        41,649
                                        
                                        
                                        
                                        501,492
                                        
                                        
                                        
                                        (73,703
                                        )
                                        
                                        
                                        614,180Tax
      effect on currency translation
                                        
                                        
                                        (14,161
                                        )
                                        
                                        
                                        (170,507
                                        )
                                        
                                        
                                        25,059
                                        
                                        
                                        
                                        (208,821
                                        )COMPREHENSIVE
      (LOSS) INCOME
                                        
                                        $
                                        (308,224
                                        )
                                        
                                        $
                                        18,124
                                        
                                        
                                        $
                                        2,481,214
                                        
                                        
                                        $
                                        (256,934
                                        )
  See
accompanying Notes to Condensed Consolidated Financial
Statements.





5


TELECONNECT,
      INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFOR
      THE SIX MONTHS ENDED MARCH 31,(Unaudited)


2010
                                
                                
                                2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                                
                                $
                                2,529,858
                                
                                
                                $
                                (662,293
                                )Adjustments
      to reconcile net income (loss) tonet
      cash used in operating activities:Depreciation
                                
                                
                                1,454
                                
                                
                                
                                15,629Loss
      on equity investments
                                
                                
                                103,503
                                
                                
                                
                                44,626Bad
      debt expense
                                
                                
                                17,900
                                
                                
                                
                                -Gain
      on sale of subsidiaries
                                
                                
                                (3,200,137
                                )
                                
                                
                                -Change
      in operating assets and liabilitiesAccounts
      receivable - trade
                                
                                
                                (1,281
                                )
                                
                                
                                44,953Accrued
      interest receivable
                                
                                
                                (17,900
                                )
                                
                                
                                -Inventory
                                
                                
                                153,974
                                
                                
                                
                                (43,736
                                )Prepaid
      expenses
                                
                                
                                (893
                                )
                                
                                
                                (8,448
                                )Prepaid
      taxes
                                
                                
                                (14,999
                                )
                                
                                
                                16,464Accounts
      payable
                                
                                
                                300
                                
                                
                                
                                (79,913
                                )Accrued
      liabilities and income taxes payable
                                
                                
                                (653
                                )
                                
                                
                                22,024Operating
      cash flows from discontinued operations
                                
                                
                                -
                                
                                
                                
                                (179,570
                                )Net
      cash used in operating activities
                                
                                
                                (428,874
                                )
                                
                                
                                (830,264
                                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Advances
      to equity investment
                                
                                
                                -
                                
                                
                                
                                (47,003
                                )Proceeds
      from disposal of equipment
                                
                                
                                2,786
                                
                                
                                
                                -Purchase
      of property and equipment
                                
                                
                                -
                                
                                
                                
                                (3,287
                                )Investing
      activities of discontinued operations
                                
                                
                                -
                                
                                
                                
                                106,445Net
      cash provided by investing activities
                                
                                
                                2,786
                                
                                
                                
                                56,155CASH
      FLOWS FROM FINANCING ACTIVITIES:Loan
      proceeds from related parties
                                
                                
                                401,506
                                
                                
                                
                                628,316Payments
      on capital leases
                                
                                
                                -
                                
                                
                                
                                (23,905
                                )Net
      cash provided by financing activities
                                
                                
                                401,506
                                
                                
                                
                                604,411EFFECT
      OF EXCHANGE RATE
                                
                                
                                21,633
                                
                                
                                
                                139,472NET
      DECREASE IN CASH
                                
                                
                                (2,949
                                )
                                
                                
                                (30,226
                                )CASH,
      BEGINNING OF YEAR
                                
                                
                                15,652
                                
                                
                                
                                48,342CASH,
      END OF YEAR
                                
                                $
                                12,703
                                
                                
                                $
                                18,116SUPPLEMENTAL
      DISCLOSURE OF NONCASH TRANSACTIONS:Common
      stock issued for conversion of debt and accrued interest
                                
                                $
                                -
                                
                                
                                $
                                2,111,271
 See accompanying Notes to
Condensed Consolidated Financial
Statements.


6





TELECONNECT,
INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





March
31, 2010





1.
BASIS OF PRESENTATION





The accompanying unaudited condensed
consolidated financial statements of Teleconnect, Inc. (the “Company”) have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and pursuant
to the rules and regulations of the Securities and Exchange
Commission.  Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements.  In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included.  Operating results for the three and six month periods ended
March 31, 2010 are not
necessarily indicative of the results that may be expected for the full
year.





The
condensed consolidated financial statements include the accounts of Teleconnect,
Inc. and its subsidiary PhotoWizz BV (“MediaWizz”) for the three and six months
ended March 31, 2010 and Teleconnect Spain, Teleconnect Telecom and Recarganet
for the period beginning October 1, 2009 and ending November 25, 2009; date at
which these subsidiaries were sold.  For the three and six months
ended March 31, 2009 the consolidated financial statements include the accounts
of the Company and its subsidiaries ITS Europe, Teleconnect Spain, Teleconnect
Telecom, PhotoWizz BV (“MediaWizz”), and Recarganet.  All significant
inter-company balances and transactions have been eliminated.





The balance sheet at September 30,
2009 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by GAAP for complete financial
statements.





For
further information, refer to the consolidated financial statements and notes
thereto included in the Company’s annual report on Form 10-K for the year ended
September 30, 2009.





The
carrying amounts of cash, accounts (and related party) receivables, accounts
payable and notes payable, are considered by management to be their estimated
fair values due to their short term or contractual maturities.




We have evaluated subsequent events
that have occurred since March 31, 2010 through May 12,
2010.




2.
RECENTLY ISSUED ACCOUNTING STANDARDS




In
December 2009, the FASB issued amendments toexisting accounting
guidance to address the elimination of the concept of a qualifying special
purpose entity. The amendment also replaces the quantitative-based risks and
rewards calculation for determining which enterprise has a controlling financial
interest in a variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a variable interest
entity and the obligation to absorb losses of the entity or the right to receive
benefits from the entity. Additionally, the amendment provides more timely and
useful information about an enterprise’s involvement with a variable interest
entity. The Company adopted this guidance in the first quarter of 2010, and it
did not have a material impact on our financial condition, results of operations
or cash flows.





3.
DISCONTINUED OPERATIONS





In March
2009, the Company entered into an agreement to sell ITS Europe, Teleconnect
Spain, Teleconnect Telecom and Recarganet to certain employees and officers of
Teleconnect Spain with the Company retaining 10% of Teleconnect Spain. The sale
of ITS Europe to certain employees and officers of Teleconnect Spain for €1 and
the assumption of ITS Europe debts was completed on May 14,
2009.  Teleconnect Spain, Teleconnect Telecom and Recarganet were
officially sold on November 25, 2009, resulting in a gain on the sale of
subsidiaries of $3,200,137.





Due to
continuing losses at Teleconnect Spain, the Company considered the 10% interest
retained to be impaired and assigned no value to it.





Summarized
financial information (which consists principally of Teleconnect Spain) included
in discontinued operations is as follows for the period October 1, 2009 to
November 25, 2009, and the three and six month period ended March 31, 2009,
respectively:





7





October
      1, 2009to
                    
                    
                    Three
      months ended
                    
                    
                    Six
      months endedNovember 25, 2009
                    
                    
                    March 31, 2009
                    
                    
                    March 31, 2009Sales
                    
                    $
                    586,479
                    
                    
                    $
                    979,188
                    
                    
                    $
                    1,839,108Cost
      of sales
                    
                    
                    364,021
                    
                    
                    
                    742,304
                    
                    
                    
                    1,389,698Gross
      profit
                    
                    
                    222,458
                    
                    
                    
                    236,884
                    
                    
                    
                    449,410Selling,
      general and administrative expenses
                    
                    
                    218,695
                    
                    
                    
                    429,715
                    
                    
                    
                    752,960Depreciation
                    
                    
                    7,466
                    
                    
                    
                    9,126
                    
                    
                    
                    34,854Operating
      loss
                    
                    
                    (3,703
                    )
                    
                    
                    (201,957
                    )
                    
                    
                    (338,404
                    )Gain
      on sale
                    
                    
                    3,200,137
                    
                    
                    
                    -
                    
                    
                    
                    -Other
      (expense) income
                    
                    
                    (21,941
                    )
                    
                    
                    316,694
                    
                    
                    
                    375,893Income
      from discontinued operations
                    
                    $
                    3,174,493
                    
                    
                    $
                    114,737
                    
                    
                    $
                    37,489





The net
liabilities of discontinued operations (which consists principally of
Teleconnect Spain), which are included in the consolidated balance sheets as
assets and liabilities of discontinued operations, consist of the following at
March 31, 2010 compared to September 30, 2009:





2010
                          
                          
                          2009Cash
                          
                          $
                          -
                          
                          
                          $
                          23,938Accounts
      receivable - trade, net of allowancefor
      doubtful accounts of $714,782 at September 30, 2009
                          
                          
                          -
                          
                          
                          
                          385,914Accounts
      receivable - other
                          
                          
                          -
                          
                          
                          
                          207,953Inventory
                          
                          
                          -
                          
                          
                          
                          12,631Prepaid
      expenses
                          
                          
                          -
                          
                          
                          
                          2,368Current
      assets of discontinued operations
                          
                          
                          -
                          
                          
                          
                          632,804Property
      and equipement, net
                          
                          
                          -
                          
                          
                          
                          385,820Vendor
      deposits
                          
                          
                          -
                          
                          
                          
                          242,208Other
      assets of discontinued operations
                          
                          
                          -
                          
                          
                          
                          628,028Accounts
      payable
                          
                          
                          -
                          
                          
                          
                          1,372,068Accrued
      liabilities
                          
                          
                          -
                          
                          
                          
                          189,246Taxes
      payable
                          
                          
                          -
                          
                          
                          
                          342,231Notes
      payable
                          
                          
                          -
                          
                          
                          
                          146,430Due
      to related parties
                          
                          
                          -
                          
                          
                          
                          259,181Deferred
      income
                          
                          
                          -
                          
                          
                          
                          2,068,113Liabilities
      of discontinued operations
                          
                          
                          -
                          
                          
                          
                          4,377,269Long-term
      liabilities of discontinued operations
                          
                          
                          -
                          
                          
                          
                          -Net
      liabilities of discontinued operations
                          
                          $
                          -
                          
                          
                          $
                          3,116,437







Substantially
all interest expense is allocated to the ongoing operations of the parent
company.





4.
LOANS FROM RELATED PARTIES





During
the six months ended March 31, 2010 and 2009 the Company obtained approximately
$402,000 and $628,000 respectively, in additional short term loans from
shareholders, net of currency translation adjustments. These loans bear interest
between 4% and 8% annually, are unsecured and due upon demand.





5.
INCOME TAXES





The
Company has not recorded any income tax expense or benefit for the three and six
months ended March 31, 2010 and 2009. For the six months ended March 31, 2010
taxable income was offset by the use of net operating losses from prior periods.
For the three and six months ended March 31, 2009 the Company recorded an income
tax valuation allowance equal to the benefit of any income tax carryforward
because of the uncertain nature of realization.




8





6.
LOSS ON INVESTMENT





The
Company accounts for its investment in Giga Matrix Holding, BV (“Giga”),
including amounts due from Giga, under the equity method and recognized losses
of $103,503 and $44,626 for the six months ended March 31, 2010 and 2009,
respectively.  The Company has advances to Giga $485,412 and $530,992
at March 31, 2010 and 2009, respectively, with the $103,503 of current year
losses reserved against the balance at March 31, 2010.





7.
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. Stock options for
1,000,000 shares that were outstanding at March 31, 2009 have not been included
in diluted earnings per share as their inclusion would have been
anti-dilutive.  There were no stock options outstanding as of March
31, 2010.





The
following reconciles the components of the earnings (loss) per share computation
for the three months ended March 31:





2010
                        
                        
                        2009Basic
      and diluted (loss) income per share computationNumerator:Net
      loss from continuing operations
                        
                        $
                        (335,712
                        )
                        
                        $
                        (427,598
                        )Net
      income (loss) from discontinued operations
                        
                        $
                        -
                        
                        
                        $
                        114,737Net
      (loss) income
                        
                        $
                        (335,712
                        )
                        
                        $
                        (312,861
                        )Denominator:Weighted
      average common shares Outstanding
                        
                        
                        4,953,700
                        
                        
                        
                        3,787,089Basic
      and diluted (loss) income per share:From
      continuing operations
                        
                        $
                        (0.07
                        )
                        
                        $
                        (0.11
                        )From
      discontinued operations
                        
                        $
                        (0.00
                        )
                        
                        $
                        0.03Total
                        
                        $
                        (0.07
                        )
                        
                        $
                        (0.08
                        )





The
following reconciles the components of the earnings (loss) per share computation
for the six months ended March 31:





2010
                        
                        
                        2009Basic
      and diluted (loss) income per share computationNumerator:Net
      loss from continuing operations
                        
                        $
                        (644,635
                        )
                        
                        $
                        (699,782
                        )Net
      income (loss) from discontinued operations
                        
                        $
                        3,174,493
                        
                        
                        $
                        37,489Net
      (loss) income
                        
                        $
                        2,529,828
                        
                        
                        $
                        (662,293
                        )Denominator:Weighted
      average common shares Outstanding
                        
                        
                        4,953,700
                        
                        
                        
                        3,551,995Basic
      and diluted (loss) income per share:From
      continuing operations
                        
                        $
                        (0.13
                        )
                        
                        $
                        (0.20
                        )From
      discontinued operations
                        
                        $
                        0.64
                        
                        
                        $
                        0.01Total
                        
                        $
                        0.51
                        
                        
                        $
                        (0.19
                        )





In November 2009, the Company’s shareholders
approved a 1-for-100 reverse stock split of the Company’s common
stock.   This reverse stock split has been reflected
retroactively for all periods presented in these condensed consolidated
financial statements.





8.
SUBSEQUENT EVENTS





On May 3,
2010 the Company signed a letter of intent to acquire 100% of Hollandsche
Exploitatie Maatschappij BV (HEM) in The Netherlands. The purchase price
contemplated by the letter of intent is 12% of the outstanding common stock of
the Company, post emission.   Both parties agreed to pursue a
Company shareholder’s meeting by the end of June, 2010 to approve a final
purchase agreement.  HEM, established in 2007, developed an age
validation system, “Ageviewers”, which utilizes the Company’s products in its
processes.




9
.. GOING CONCERN





The
accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business.  The Company’s recent losses and cash
requirements, among other things, may indicate the Company will be unable to
continue as a going concern for a reasonable period of
time.  Management is currently controlling expenses and conserving
cash while exploring possible sales of equity and/or debt financing to improve
the Company’s working capital position. 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.





9







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





Caution
Regarding Forward-Looking Statements





The
following information may contain certain forward-looking statements that are
not historical facts. These statements represent our expectations or beliefs,
including but not limited to, statements concerning future acquisitions, future
operating results, statements concerning industry performance, capital
expenditures, financings, as well as assumptions related to the foregoing.
Forward-looking statements may be identified by the use of forward-looking
terminology such as “may,” “shall,” “will,” “could,” “expect,” “estimate,”
“anticipate,” “predict,” “should,” “continue” or similar terms, variations of
those terms or the negative of those terms. Forward-looking statements are based
on current expectations and involve various risks and uncertainties that could
cause actual results and outcomes for future periods to differ materially from
any forward-looking statement or view expressed herein. Our financial
performance and the forward-looking statements contained in this report are
further qualified by other risks including those set forth from time to time in
documents filed by us with the SEC.





INTRODUCTION





At the
time of this filing, we derive our revenues from continuing operations primarily
from the sale of multimedia kiosks and hardware components to retail chains.
These kiosks and components can be applied to different functions such as
recharging prepaid telephone cards. Our revenues and operating results in the
near future will depend upon the continued adoption and use of the services
provided by the multimedia kiosks and components supplied by Mediawizz. The rate
of adoption is influenced significantly over the longer term by government laws
and mandates, performance and pricing of our products/services, relationships
with the public and other factors.





Our
revenues from discontinued operations are primarily from the sale of our
long-distance telecommunication services. On November 25, 2009 we completed the
sale of the discontinued operations.





Today,
our existing revenues generated by Mediawizz may be impacted by other factors
including the length of our sales cycle, the timing of sales orders, budget
cycles of our customers, competition, the timing and introduction of new
versions of our products, the loss of, or difficulties affecting, key personnel
and distributors, changes in market dynamics or the timing of product
development or market introductions. These factors have impacted our historical
results to a greater extent than has seasonality. Combinations of these factors
have historically influenced our growth rate and profitability significantly in
one period compared to another, and is expected to continue to influence future
periods, which may compromise our ability to make accurate
forecasts.





Cost of
sales included in discontinued operations consists primarily of the costs
associated with carriers which supply the telecom services for the Company to
resell. We relied on third parties to offer the majority of the services we had
in our portfolio. Accordingly, a significant portion of our cost of sales
consists of payments to these carriers. Cost of sales included in continuing
operations consists of customer support costs, training and professional
services expenses, and parts for the terminals; which consist of small display
screens, metallic housings, PC’s, switches, small cameras similar to webcams,
electronic components, cables, power supplies and software licenses amongst
other items.





Our gross
profit has been and will continue to be affected by a variety of factors,
including competition, the mix and average selling prices of products,
maintenance and services, new versions of products, the cost of equipment,
component shortages, and the mix of distribution channels through which our
products are sold. Our gross profit will be adversely affected by price declines
if we are unable to reduce costs on existing products or to introduce new
versions of products with higher margins.





Selling,
general and administrative expenses consist primarily of salaries and related
expenses for executive, finance, accounting, legal and human resources
personnel, professional fees and corporate expenses. We expect general and
administrative expenses to stabilize in the short term in absolute dollars as we
will employ fewer hours to maintain the Company’s current status with its SEC
filings than to bring the Company current in 2009. Major efforts today are
focused on preparing the Company to be compliant with Sarbanes-Oxley Section
404.





On May 3,
2010 the Company signed a letter of intent to acquire 100% of Hollandsche
Exploitatie Maatschappij BV (HEM) in The Netherlands. The purchase price
contemplated by the letter of intent is 12% of the outstanding common stock of
the Company, post emission.   Both parties agreed to pursue a
Company shareholder’s meeting by the end of June, 2010 to approve a final
purchase agreement.  HEM, established in 2007, developed an age
validation system, “Ageviewers”, which utilizes the Companies products in its
processes.








10







BALANCE SHEET COMPARISON AT
MARCH 31, 2010 AND SEPTEMBER 30, 2009







Assets: Total assets
at March 31, 2010 decreased $1,709,539 or 45.4% to $2,055,793 compared to
$3,765,332 at September 30, 2009.  This decrease is due to the sale of
discontinued operations which accounts for approximately $1,261,000 of this
difference as well as to the collection of accounts receivable during the
period; a reduction of inventory at Mediawizz due to recording a provision for
slow moving products and recognition of loss from equity investment of
approximately $104,000.





Liabilities: Current
liabilities at March 31, 2010 decreased by $4,190,753 or 58.5% to $2,974,233
compared to $7,164,986 at September 30, 2009.  This decrease is due
primarily to the elimination of approximately $4,377,000 of liabilities
associated with the discontinued operations.





COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2010 AND 2009
(CONTINUING  OPERATIONS)





We
incurred a net loss of $335,712­­­­­­­­­­­­
­­­­­­for
the three months ended March 31, 2010 as compared to a net loss of $312,861
($427,598 from continuing operations) during the comparable period in 2009. A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the three months ended March 31, 2010, decreased by 99.9%, or $94,950, to $111
from $95,061 for the quarter ended March 31, 2009. The decrease in sales is
attributed to the fact that the Company did not ship any kiosks during the
quarter as a customer of a current 150 kiosk order requested a delay in shipping
additional units. Company management also was focusing energy on marketing the
kiosks to a 550 store association of liquor stores in The Netherlands for use in
age verification.  The Company also discontinued sales of calling
credit through the kiosks early in the quarter to focus energies on the age
verification market for the kiosks.  Revenues during 2009 were
primarily derived from the sales of kiosks and the sales of calling credit
through kiosks that Mediawizz custom built and installed in supermarkets for a
Netherlands customer.





COST OF
SALES





Cost of
sales decreased 87.2% or $93,644 to $13,773 during the three months ended March
31, 2010 from $107,417 during the same period in 2009. The decrease in cost of
sales is directly related to the decrease in sales, however there were some
excess capacity costs associated with the discontinued sales of calling credit
during the period.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 36.2 % to $224,049 during the
three months ended March 31, 2010 as compared to $351,115 for the comparable
period in 2009.  This decrease in selling, general and administrative
expenses is primarily due to the reduction of additional outside professional
services related to the Company’s delinquent regulatory filings in
2009.





COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2010 AND 2009 (DISCONTINUED
OPERATIONS)





The
discontinued operations were sold on November 25, 2009 and had no activity
during the three month ended March 31, 2010.





COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2010 AND 2009
(CONTINUING  OPERATIONS)





We
incurred net income of $2,529,858 ($644,635 loss from continuing operations
offset by income of $3,174,493 from discontinued operations) for the six months
ended March 31, 2010 as compared to a net loss of $662,293 ($699,782 from
continuing operations) during the comparable period in 2009. A comparison of
revenues and expenses for the two periods is as follows:





REVENUES





Sales for
the six months ended March 31, 2010, increased by 56.0%, or $84,175, to $234,510
from $150,335 for the comparable period in 2009. The increase in sales is
attributed to the fact that 2009 revenues primarily were derived from the sales
of kiosks and calling credit through kiosks that Mediawizz custom built and
installed in supermarkets for a Netherlands customer.  Where the sales
of calling credit in these supermarkets formerly was organized through both
service desks and kiosks, in 2009, the sales at these service desks were
discontinued thus generating more traffic and increasing sales through the
kiosks. While sales of the calling credit had been increasing during the first
quarter it was determined in the current quarter that the margins from those
sales were unacceptable and sales of calling credit was discontinued. Also,
Mediawizz delivered a new lot from a previously agreed 150 terminal-order,
during the first quarter, but due to customer request, further deliveries were
deferred until later in the year.   Company management also was
focusing energy on marketing the kiosks to a 550 store association of liquor
stores in The Netherlands for use in age verification which slowed production of
the kiosks during the second quarter.




11





COST OF
SALES





Cost of
sales increased 12,4% or $20,223 to $183,906 during the six months ended March
31, 2010 from $163,683 for the comparable period in 2009. The increase in cost
of sales is associated to the increase in sales (56.0%), however, the fact that
the cost of sales increased less than the sales is partly due to efficiencies
gained in our assembly process and operations of kiosks. In addition, the main
factor influencing this comparison is the increase in sales of calling credit
which has a much lower associated cost of sales than the assembly of the kiosk
hardware.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 1.0 % to $581,749 during the
six months ended March 31, 2010 as compared to $587,840 for the comparable
period in 2009.  This decrease in selling, general and administrative
expenses is primarily due to the reduction of additional outside professional
services related to the Company’s delinquent regulatory filings in
2009.





COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2010 AND 2009 (DISCONTINUED OPERATIONS)





We
incurred $3,174,493 of net income from discontinued operations for the six
months ended March 31, 2010 as compared to a net income of $37,489 during the
comparable period in 2009. The discontinued operations were sold on November 25,
2009 resulting in a gain of approximately $3,200,000.  Revenues, Cost
of Sales and Selling, General and Administrative expenses decreased from the
prior comparable period due to the fact the entities were sold during the first
two months of the current fiscal year.





LIQUIDITY AND CAPITAL
RESOURCES





At March
31, 2010 and September 30, 2009, Teleconnect Inc. had negative working capital
of approximately $1,400,000 and $4,556,000, respectively.  The
improvement is primarily due to the effect of the sale of the discontinued
operations which provided a gain on the sale of approximately
$3,200,000.





The
ability of the Company to satisfy its obligations and to continue as a going
concern will depend in part upon its ability to raise funds through the sale of
additional shares of its Common Stock, increasing borrowing, and in part upon
its ability to reach a profitable level of operations. The Company’s financial
statements do not reflect adjustments that might result from its inability to
continue as a going concern and these adjustments could be material





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





The
Company intends to look for additional funding to pay debts and for 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 debt.





DISCONTINUED
OPERATIONS





In March
2009, the Company entered into an agreement to sell ITS Europe, Teleconnect
Spain, Teleconnect Telecom and Recarganet to certain employees and officers of
Teleconnect Spain with the Company retaining 10% of Teleconnect
Spain.  The results of operations of these subsidiaries were reported
as “discontinued operations” and assets and liabilities have been separated on
the balance sheet. Going forward the Company will account for the 10% of
Teleconnect Spain by the cost method. The sale of ITS Europe to certain
employees and officers of Teleconnect Spain was completed on May 14,
2009.  Teleconnect Spain, Teleconnect Telecom and Recarganet were
officially sold on November 25, 2009.








ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





On
November 12, 2009, at a meeting of the shareholders of Teleconnect Inc, the
shareholders present, representing 94.69% of the outstanding shares of common
stock of the Company, agreed to sell the Spanish subsidiaries of the Company.
 The stock purchase agreements were formalized on November 25, 2009 before
a public Spanish notary upon approval by the Company’s
shareholders.  By disposing of the Spanish subsidiaries and
maintaining a 10% stake in Teleconnect Comunicaciones Spain, Teleconnect Inc is
relieved of its obligation to fund these companies while Teleconnect Inc. could
possibly benefit from future dividends, if so declared by Teleconnect
Comunicaciones Spain.





The
shareholders also approved a reverse split of the Company’s Common Stock in the
ratio of 1-for-100 at the November 12, 2009 shareholders’ meeting.




12







ITEM 4. 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 not 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.





Management
is currently designing new internal controls and procedures to address our
material weaknesses which will be implemented in this fiscal year.







13






PART II





OTHER
INFORMATION





ITEM 1. LEGAL PROCEEDINGS





In the
normal course of its operations, the Company has been 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.





ITEM
1A. RISK FACTORS





N/A





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





None





ITEM 3. DEFAULTS UPON SENIOR
SECURITIES





None





ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





At the
shareholders meeting held on November 12, 2009 in Breda, The Netherlands, the
stockholders present approved the sale of 100 % of the Company’s interest in
Recarganet, and Teleconnect Telecom in addition to approximately 90% of its
interest in Teleconnect Comunicaciones SA.  The stock purchase
agreements for the sale of Recarganet, Teleconnect Telecom and Teleconnect
Comunicaciones were formalized before a public Spanish notary on November 25,
2009.  The gain from the sale of these subsidiaries is
$3,200,137.





At this
same shareholders meeting of November 12, 2009, the stockholders of the Company
voted in favor of a 1-for-100 reverse stock split of its common
stock.  This reverse stock split has been reflected retroactively for
all periods presented in these financial statements.





ITEM
5. OTHER INFORMATION





None





ITEM 6.
EXHIBITS





Exhibit
3.1  Amendment to Articles of Incorporation is incorporated herein by
reference to Exhibit 3.1 to the Company’s Form 8-K dated November 12,
2009.





Exhibit
10  Agreement(s) to sell subsidiaries are hereby incorporated by
reference to the Exhibits to the definitive proxy statement of the Company dated
October 29, 2010.





31.1
Certification of Dirk L. Benschop, sole Director, Chief  Executive
Office, President, Treasurer, Chief Financial Officer and principal accounting
officer





32.1
Certification of Dirk L. Benschop, sole Director, Chief  Executive
Office, President, Treasurer, Chief Financial Officer and principal accounting
officer





14









SIGNATURES





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








TELECONNECT
INC.




May 12,
2010




By:
              /s/ Dirk
      L. BenschopDirk
      L. BenschopSole
      Director, Chief  Executive Office, President, Treasurer, Chief
      Financial Officer and principal accounting
  officer







15


INDEX TO EXHIBITS





Exhibit





No.
            Description31.1
            Certification
      of Dirk Benschop32.1
            Certification
      of Dirk Benschop




16