United
States


Securities
and Exchange Commission


Washington,
D.C. 20549





FORM
10-Q/A


(Amendment
No.1)





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


SECURITIES
EXCHANGE ACT OF 1934





For the
quarterly period ended June 30, 2009





 ̈ 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- (0)6
30048023








(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  ̈   No x





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  ̈   No x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.





Large
      accelerated filer  ̈
            Accelerated
      filer    ̈Non-accelerated
      filer    ̈
            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  ̈   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  ̈ No  ̈





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the last practicable date: 495,361,707 shares at October 13,
2009.









EXPLANATORY
NOTE




This
amendment to our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, originally filed on October 14, 2009 (the “Original Filing”), is
being filed by Teleconnect,  Inc. (the “Company”) to amend the
certifications in exhibit 31.1 and 31.2.




In the
Company’s previously filed 10-Q, some language in the certifications attached as
exhibit 31.1 and 31.2 did not conform to the language in Item 601(31)(i) of
Regulation S-K .




This
Amendment No. 1 to Form 10-Q/A amends exhibits 31.1 and 31.2 only. It does not,
and does not purport to, amend, update or restate the information in the
Original Filing or reflect any events that have occurred after the Original
Filing was made.







TELECONNECT
INC.





INDEX





PART  I.
      FINANCIAL INFORMATIONItem  
      1. Financial Statements:
              
              3Condensed
      Consolidated Balance Sheets as of June 30, 2009 and 2008(unaudited) and
      September 30, 2008 and 2007
              
              4Condensed
      Consolidated Statements of Operations for the three and nine months ended
      June 30, 2009, 2008 and 2007(Unaudited)
              
              6Condensed
      Consolidated Statements of Cash Flows for the three and nine months ended
      June 30, 2009, 2008 and 2007(Unaudited)
              
              7Notes
      to Condensed Consolidated Financial Statements (Unaudited)
              
              9Item  
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
              
              13Item 
       3. Quantitative and Qualitative Disclosure About Market
      Risk
              
              18Item  
      4. Controls and Procedures
              
              18PART  II.
      OTHER INFORMATIONItem  
      1. Legal Proceedings
              
              19Item 
      1A. Risk Factors
              
              19Item  
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              
              19Item  
      3. Defaults Upon Senior Securities
              
              19Item  
      4. Submission of Matters to a Vote of Security Holders
              
              19Item  
      5. Other Information
              
              19Item  
      6. Exhibits
              
              19Signatures
              
              20




2




PART
I FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS


3




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEET





PAGE 1 of
2





June 30,
                  
                  
                  June 30,
                  
                  
                  September
                    30,
                  
                  
                  September
                    30,2009
                  
                  
                  2008
                  
                  
                  2008
                  
                  
                  2007(Unaudited)
                  
                  
                  (Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                  
                  $
                  39,841
                  
                  
                  $
                  41,795
                  
                  
                  $
                  48,342
                  
                  
                  $
                  441,121Accounts
      receivable
                  
                  
                  18,759
                  
                  
                  
                  223,671
                  
                  
                  
                  70,189
                  
                  
                  
                  8,010Due
      from related parties
                  
                  
                  512,534
                  
                  
                  
                  555,902
                  
                  
                  
                  468,146
                  
                  
                  
                  381,439Inventory
      (work in process)
                  
                  
                  1,560,134
                  
                  
                  
                  1,412,618
                  
                  
                  
                  1,535,630
                  
                  
                  
                  373,186Prepaid
      taxes
                  
                  
                  17,494
                  
                  
                  
                  146,572
                  
                  
                  
                  44,663
                  
                  
                  
                  94,201Prepaid
      expenses
                  
                  
                  7,594
                  
                  
                  
                  76,121
                  
                  
                  
                  14,313
                  
                  
                  
                  118,622Asset
      of discontinued operations
                  
                  
                  640,865
                  
                  
                  
                  897,507
                  
                  
                  
                  546,393
                  
                  
                  
                  822,029Total
      current assets
                  
                  
                  2,797,221
                  
                  
                  
                  3,354,186
                  
                  
                  
                  2,727,676
                  
                  
                  
                  2,238,608PROPERTY
      AND EQUIPMENT, NET
                  
                  
                  69,185
                  
                  
                  
                  184,778
                  
                  
                  
                  90,461
                  
                  
                  
                  159,860OTHER
      ASSETS:Investment
      in Giga Matrix Holdings B.V.
                  
                  
                  -
                  
                  
                  
                  69,013
                  
                  
                  
                  44,626
                  
                  
                  
                  142,173Goodwill
                  
                  
                  439,457
                  
                  
                  
                  490,137
                  
                  
                  
                  444,712
                  
                  
                  
                  440,856Long-term
      notes receivable (net of allowance for bad debts of $591,932 and $549,074
      at June 30, 2009 and September 30, 2008, respectively)
                  
                  
                  56,536
                  
                  
                  
                  655,756
                  
                  
                  
                  57,212
                  
                  
                  
                  571,414Assets
      of discontinued operations
                  
                  
                  660,064
                  
                  
                  
                  794,485
                  
                  
                  
                  841,171
                  
                  
                  
                  744,671Total
      assets
                  
                  $
                  4,022,463
                  
                  
                  $
                  5,548,355
                  
                  
                  $
                  4,205,858
                  
                  
                  $
                  4,297,582





See
accompanying Notes to Condensed Consolidated Financial
Statements.


4




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEET





PAGE 2 of
2





June 30,
                  
                  
                  June 30,
                  
                  
                  September 30,
                  
                  
                  September 30,2009
                  
                  
                  2008
                  
                  
                  2008
                  
                  
                  2007(Unaudited)
                  
                  
                  (Unaudited)LIABILITIES
      AND STOCKHOLDERS’ DEFICITCURRENT
      LIABILITIES:Accounts
      payable – trade
                  
                  $
                  186,979
                  
                  
                  $
                  476,400
                  
                  
                  $
                  207,397
                  
                  
                  $
                  134,740Accrued
      liabilities
                  
                  
                  108,114
                  
                  
                  
                  105,241
                  
                  
                  
                  139,467
                  
                  
                  
                  37,887Taxes
      payable
                  
                  
                  80,000
                  
                  
                  
                  -
                  
                  
                  
                  80,000
                  
                  
                  
                  -Notes
      payable
                  
                  
                  169,608
                  
                  
                  
                  190,464
                  
                  
                  
                  171,636
                  
                  
                  
                  170,148Loans
      from related parties
                  
                  
                  2,016,211
                  
                  
                  
                  3,383,437
                  
                  
                  
                  3,313,728
                  
                  
                  
                  998,202Current
      portion of capital lease obligations
                  
                  
                  -
                  
                  
                  
                  56,640
                  
                  
                  
                  38,825
                  
                  
                  
                  48,742Liabilities
      of discontinued operations
                  
                  
                  3,876,877
                  
                  
                  
                  4,759,379
                  
                  
                  
                  4,063,929
                  
                  
                  
                  3,336,921Total
      current liabilities
                  
                  
                  6,437,789
                  
                  
                  
                  8,971,561
                  
                  
                  
                  8,014,982
                  
                  
                  
                  4,726,640Capital
      lease obligations, less current portion
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  38,491Long-term
      liabilities of discontinued operations
                  
                  
                  141,340
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -STOCKHOLDERS’
      DEFICITPreferred
      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, 495,361,707
      shares issued and outstanding as of June 30, 2009 and 332,243,707 shares
      issued and outstanding as of June 30, 2008 and September 30, 2008 and
      2007
                  
                  
                  495,362
                  
                  
                  
                  332,244
                  
                  
                  
                  332,244
                  
                  
                  
                  332,244Additional
      paid-in capital
                  
                  
                  30,948,054
                  
                  
                  
                  28,999,901
                  
                  
                  
                  28,999,901
                  
                  
                  
                  28,999,901Accumulated
      deficit
                  
                  
                  (31,740,498
                  )
                  
                  
                  (29,368,663
                  )
                  
                  
                  (30,573,787
                  )
                  
                  
                  (27,063,048
                  )Accumulated
      other comprehensive loss
                  
                  
                  (2,259,584
                  )
                  
                  
                  (3,386,688
                  )
                  
                  
                  (2,567,482
                  )
                  
                  
                  (2,736,646
                  )Total
      stockholders' deficit
                  
                  
                  (2,556,666
                  )
                  
                  
                  (3,423,206
                  )
                  
                  
                  (3,809,124
                  )
                  
                  
                  (467,549
                  )Total
      liabilities and stockholders' deficit
                  
                  $
                  4,022,463
                  
                  
                  $
                  5,548,355
                  
                  
                  $
                  4,205,858
                  
                  
                  $
                  4,297,582





See
accompanying Notes to Condensed Consolidated Financial
Statements.


5




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





For the three months ended June 30,
                  
                  
                  For the nine months ended June 30,2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007SALES
                  
                  $
                  92,354
                  
                  
                  $
                  52,927
                  
                  
                  $
                  17,015
                  
                  
                  $
                  242,689
                  
                  
                  $
                  103,571
                  
                  
                  $
                  17,015COST
      OF GOODS SOLD
                  
                  
                  93,539
                  
                  
                  
                  134,589
                  
                  
                  
                  8,231
                  
                  
                  
                  257,222
                  
                  
                  
                  428,421
                  
                  
                  
                  8,231GROSS
      LOSS
                  
                  
                  (1,185
                  )
                  
                  
                  (81,662
                  )
                  
                  
                  8,784
                  
                  
                  
                  (14,533
                  )
                  
                  
                  (324,850
                  )
                  
                  
                  8,784OPERATING
      EXPENSES:Selling,
      general and administrative expenses
                  
                  
                  309,850
                  
                  
                  
                  167,542
                  
                  
                  
                  826,954
                  
                  
                  
                  897,690
                  
                  
                  
                  616,897
                  
                  
                  
                  2,044,196Depreciation
                  
                  
                  8,065
                  
                  
                  
                  11,356
                  
                  
                  
                  4,092
                  
                  
                  
                  23,694
                  
                  
                  
                  33,074
                  
                  
                  
                  4,092Total
      operating expenses
                  
                  
                  317,915
                  
                  
                  
                  178,898
                  
                  
                  
                  831,046
                  
                  
                  
                  921,384
                  
                  
                  
                  649,971
                  
                  
                  
                  2,048,288LOSS
      FROM CONTINUING OPERATIONS
                  
                  
                  (319,100
                  )
                  
                  
                  (260,560
                  )
                  
                  
                  (822,262
                  )
                  
                  
                  (935,917
                  )
                  
                  
                  (974,821
                  )
                  
                  
                  (2,039,504
                  )OTHER
      INCOME (EXPENSES):Other
      income (expense)
                  
                  
                  7,509
                  
                  
                  
                  (95,532
                  )
                  
                  
                  -
                  
                  
                  
                  (22,099
                  )
                  
                  
                  (144,260
                  )
                  
                  
                  57,172Interest
      expense - related parties
                  
                  
                  (11,545
                  )
                  
                  
                  (31,395
                  )
                  
                  
                  (31,836
                  )
                  
                  
                  (64,902
                  )
                  
                  
                  (87,563
                  )
                  
                  
                  (88,596
                  )LOSS
      FROM CONTINUING OPERTIONS BEFORE INCOME TAXES AND DISCONTINUED
      OPERATIONS
                  
                  
                  (323,136
                  )
                  
                  
                  (387,487
                  )
                  
                  
                  (854,098
                  )
                  
                  
                  (1,022,918
                  )
                  
                  
                  (1,206,644
                  )
                  
                  
                  (2,070,928
                  )NET
      (LOSS) INCOME FROM DISCONTINUED OPERATIONS
                  
                  
                  (181,282
                  )
                  
                  
                  (335,221
                  )
                  
                  
                  (491,105
                  )
                  
                  
                  (143,793
                  )
                  
                  
                  (1,098,971
                  )
                  
                  
                  366,724NET
      LOSS
                  
                  $
                  (504,418
                  )
                  
                  $
                  (722,708
                  )
                  
                  $
                  (1,345,203
                  )
                  
                  $
                  (1,166,711
                  )
                  
                  $
                  (2,305,615
                  )
                  
                  $
                  (1,704,204
                  )BASIC
      AND DILUTED (LOSS) INCOME PER SHARE:From
      continuing operations
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.01
                  )From
      discontiued operations
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  (0.00
                  )
                  
                  
                  0.00Total
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )AVERAGE
      COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
                  
                  
                  495,449,141
                  
                  
                  
                  332,243,707
                  
                  
                  
                  215,657,251
                  
                  
                  
                  401,934,873
                  
                  
                  
                  332,243,707
                  
                  
                  
                  195,898,020THE
      COMPONENTS OF COMPREHENSIVE (LOSS) INCOME:Net
      loss
                  
                  $
                  (504,418
                  )
                  
                  $
                  (722,708
                  )
                  
                  $
                  (1,345,203
                  )
                  
                  $
                  (1,166,711
                  )
                  
                  $
                  (2,305,615
                  )
                  
                  $
                  (1,704,204
                  )Foreign
      currency translation adjustment
                  
                  
                  (147,668
                  )
                  
                  
                  (29,995
                  )
                  
                  
                  150,997
                  
                  
                  
                  466,512
                  
                  
                  
                  (984,912
                  )
                  
                  
                  (398,282
                  )Tax
      effect on currency translation
                  
                  
                  50,207
                  
                  
                  
                  10,198
                  
                  
                  
                  (51,339
                  )
                  
                  
                  (158,614
                  )
                  
                  
                  334,870
                  
                  
                  
                  135,416COMPREHENSIVE
      LOSS
                  
                  $
                  (601,879
                  )
                  
                  $
                  (742,505
                  )
                  
                  $
                  (1,245,545
                  )
                  
                  $
                  (858,813
                  )
                  
                  $
                  (2,955,657
                  )
                  
                  $
                  (1,967,070
                  )





See
accompanying Notes to Condensed Consolidated Financial
Statements.


6




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


FOR
THE NINE MONTHS ENDED JUNE 30,





Page
1 of 2





2009
                
                
                2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (1,166,711
                )
                
                $
                (2,305,615
                )
                
                $
                (1,704,204
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                
                
                23,694
                
                
                
                33,074
                
                
                
                4,092Loss
      on equity investments
                
                
                44,626
                
                
                
                73,160
                
                
                
                -Debt
      forgiveness income
                
                
                -
                
                
                
                -
                
                
                
                (57,000
                )Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                1,132,600Change
      in operating assets and liabilitiesAccounts
      receivable
                
                
                50,600
                
                
                
                (214,765
                )
                
                
                (32,362
                )Accrued
      interest
                
                
                -
                
                
                
                (22,527
                )
                
                
                -Inventory
                
                
                (42,649
                )
                
                
                (997,710
                )
                
                
                (6,725
                )Prepaid
      expenses
                
                
                6,550
                
                
                
                55,763
                
                
                
                16,453Prepaid
      taxes
                
                
                26,641
                
                
                
                (41,839
                )
                
                
                -Accounts
      payable
                
                
                (17,967
                )
                
                
                326,596
                
                
                
                59,666Accrued
      liabilities
                
                
                34,944
                
                
                
                63,118
                
                
                
                172,019Deposits
      held
                
                
                -
                
                
                
                -
                
                
                
                2,198,325Operating
      cash flows from discontinued operations
                
                
                (239,961
                )
                
                
                1,065,815
                
                
                
                (2,025,618
                )Net
      cash used in operating activities
                
                
                (1,280,233
                )
                
                
                (1,964,930
                )
                
                
                (242,754
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Advances
      to equity investment
                
                
                (49,920
                )
                
                
                (131,818
                )
                
                
                -Issuance
      of notes receivables
                
                
                -
                
                
                
                -
                
                
                
                (513,190
                )Purchase
      of property and equipment
                
                
                (3,487
                )
                
                
                (40,120
                )
                
                
                (201,220
                )Investing
      activities of discontinued operations
                
                
                171,168
                
                
                
                33,440
                
                
                
                (62,532
                )Net
      cash provided by (used in) investing activities
                
                
                117,761
                
                
                
                (138,498
                )
                
                
                (776,942
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Loan
      proceeds from related parties
                
                
                788,260
                
                
                
                2,273,636
                
                
                
                1,039,290Payments
      on capital leases
                
                
                (38,366
                )
                
                
                (40,346
                )
                
                
                -Financing
      activities of discontinued operations
                
                
                141,340
                
                
                
                -
                
                
                
                -Net
      cash provided by financing activities
                
                
                891,234
                
                
                
                2,233,290
                
                
                
                1,039,290EFFECT
      OF EXCHANGE RATE
                
                
                262,737
                
                
                
                (529,188
                )
                
                
                79,274NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (8,501
                )
                
                
                (399,326
                )
                
                
                98,868CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                48,342
                
                
                
                441,121
                
                
                
                3,460CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                
                $
                39,841
                
                
                $
                41,795
                
                
                $
                102,328





See
accompanying Notes to Condensed Consolidated Financial
Statements.


7




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)


FOR THE
NINE MONTHS ENDED JUNE 30,





Page 2 of
2





2009
                
                
                2008
                
                
                2007SUPPLEMENTAL
      DISCLOSURE OF NONCASH TRANSACTIONS:Common
      stock issued for conversion of debt and accrued interest
                
                $
                2,111,271
                
                
                $
                -
                
                
                $
                1,796,000





See
accompanying Notes to Condensed Consolidated Financial Statements.




8




TELECONNECT,
INC.





NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





JUNE
30, 2009





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 month period and nine month period ended June 30, 2009 and 2008,
respectively, 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 subsidiaries ITS Europe, Teleconnect Comunicaciones, Teleconnect
Telecom, PhotoWizz BV (“MediaWizz”), and Recarganet.  All significant
inter-company balances and transactions have been eliminated.





The
balance sheets at September 30, 2008 and 2007 have been derived from the audited
financial statements at that date but do 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 reports on Form 10-K for the years
ended September 30, 2008 and 2007.





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 June 30, 2009 through
October 13, 2009.




2.
RECENTLY ISSUED ACCOUNTING STANDARDS




In
June 2009, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles — a replacement of SFAS No. 162,” which identifies
sources of accounting principles and the framework for selecting the principles
used in preparation of financial statements. SFAS No. 168 is effective for
interim and annual periods ending after September 15, 2009. The Company
does not believe the adoption of SFAS 168 will have a material impact on its
consolidated financial statements.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)”). SFAS 167 requires a qualitative approach to identifying a controlling
financial interest in a variable interest entity (VIE), and requires ongoing
assessment of whether an entity is a VIE and whether an interest in a VIE makes
the holder the primary beneficiary of the VIE. SFAS No. 167 is effective for
fiscal years beginning after November 15, 2009. The Company does not believe the
adoption of SFAS 167 will have a material impact on its consolidated financial
statements.





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. Going
forward the Company will account for its remaining 10% interest in Teleconnect
Spain by the cost method.





Summarized
financial information (which consists principally of Teleconnect SA) included in
discontinued operations is as follows :


9




Three months ended
                        
                        
                        Nine months endedJune 30,
                        
                        
                        June 30,
                        
                        
                        June 30,
                        
                        
                        June 30,
                        
                        
                        June 30,
                        
                        
                        June 30,2009
                        
                        
                        2008
                        
                        
                        2007
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        2007Sales
                        
                        $
                        932,976
                        
                        
                        $
                        1,030,974
                        
                        
                        $
                        961,500
                        
                        
                        $
                        2,772,084
                        
                        
                        $
                        2,701,324
                        
                        
                        $
                        2,920,900Cost
      of sales
                        
                        
                        791,768
                        
                        
                        
                        831,648
                        
                        
                        
                        880,283
                        
                        
                        
                        2,181,466
                        
                        
                        
                        2,161,835
                        
                        
                        
                        2,186,438Gross
      profit
                        
                        
                        141,208
                        
                        
                        
                        199,326
                        
                        
                        
                        81,217
                        
                        
                        
                        590,618
                        
                        
                        
                        539,489
                        
                        
                        
                        734,462Selling,
      general and administrative expenses
                        
                        
                        332,772
                        
                        
                        
                        458,433
                        
                        
                        
                        558,073
                        
                        
                        
                        1,085,732
                        
                        
                        
                        1,505,569
                        
                        
                        
                        1,437,977Depreciation
                        
                        
                        13,198
                        
                        
                        
                        31,670
                        
                        
                        
                        59,542
                        
                        
                        
                        48,052
                        
                        
                        
                        98,104
                        
                        
                        
                        176,948Operating
      loss
                        
                        
                        (204,762
                        )
                        
                        
                        (290,777
                        )
                        
                        
                        (536,398
                        )
                        
                        
                        (543,166
                        )
                        
                        
                        (1,064,184
                        )
                        
                        
                        (880,463
                        )Other
      income (expense)
                        
                        
                        23,480
                        
                        
                        
                        (44,444
                        )
                        
                        
                        45,293
                        
                        
                        
                        399,373
                        
                        
                        
                        (34,787
                        )
                        
                        
                        1,247,187(Loss)
      Income from discontinued operations
                        
                        $
                        (181,282
                        )
                        
                        $
                        (335,221
                        )
                        
                        $
                        (491,105
                        )
                        
                        $
                        (143,793
                        )
                        
                        $
                        (1,098,971
                        )
                        
                        $
                        366,724





The net
liabilities of discontinued operations (which consists principally of
Teleconnect SA), which are included in the condensed consolidated balance sheets
as assets and liabilities of discontinued operations, consist of the following
at:





June 30,
                    
                    
                    June 30,
                    
                    
                    September
                      30,
                    
                    
                    September
                      30,2009
                    
                    
                    2008
                    
                    
                    2008
                    
                    
                    2007Cash
                    
                    $
                    56,291
                    
                    
                    $
                    30,381
                    
                    
                    $
                    22,372
                    
                    
                    $
                    104,148Accounts
      receivable - trade, net of allowance for doubtful accounts of $680,152,
      $683,778, $678,167 and $605,718  at June 30, 2009 and 2008 and
      September 30, 2008 and 2007, respectively
                    
                    
                    348,744
                    
                    
                    
                    815,715
                    
                    
                    
                    384,709
                    
                    
                    
                    641,295Accounts
      receivable - other
                    
                    
                    120,607
                    
                    
                    
                    29,521
                    
                    
                    
                    122,860
                    
                    
                    
                    24,486Inventory
                    
                    
                    20,127
                    
                    
                    
                    20,757
                    
                    
                    
                    13,332
                    
                    
                    
                    50,893Prepaid
      taxes
                    
                    
                    94,620
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Prepaid
      expenses
                    
                    
                    476
                    
                    
                    
                    1,133
                    
                    
                    
                    3,120
                    
                    
                    
                    1,207Current
      assets of discontinued operations
                    
                    
                    640,865
                    
                    
                    
                    897,507
                    
                    
                    
                    546,393
                    
                    
                    
                    822,029Property
      and equipement, net
                    
                    
                    426,384
                    
                    
                    
                    219,126
                    
                    
                    
                    478,214
                    
                    
                    
                    237,884Vendor
      deposits
                    
                    
                    233,680
                    
                    
                    
                    575,359
                    
                    
                    
                    362,957
                    
                    
                    
                    506,787Other
      assets of discontinued operations
                    
                    
                    660,064
                    
                    
                    
                    794,485
                    
                    
                    
                    841,171
                    
                    
                    
                    744,671Accounts
      payable
                    
                    
                    1,011,225
                    
                    
                    
                    1,569,671
                    
                    
                    
                    1,231,822
                    
                    
                    
                    943,736Accrued
      liabilities
                    
                    
                    233,461
                    
                    
                    
                    254,420
                    
                    
                    
                    253,952
                    
                    
                    
                    178,729Taxes
      payable
                    
                    
                    321,684
                    
                    
                    
                    354,217
                    
                    
                    
                    342,439
                    
                    
                    
                    258,557Deferred
      income
                    
                    
                    2,310,507
                    
                    
                    
                    2,581,071
                    
                    
                    
                    2,235,716
                    
                    
                    
                    1,955,899Liabilities
      of discontinued operations
                    
                    
                    3,876,877
                    
                    
                    
                    4,759,379
                    
                    
                    
                    4,063,929
                    
                    
                    
                    3,336,921Long-term
      liabilities of discontinued operations
                    
                    
                    141,340
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      liabilities of discontinued operations
                    
                    $
                    2,717,288
                    
                    
                    $
                    3,067,387
                    
                    
                    $
                    2,676,365
                    
                    
                    $
                    1,770,221





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





4.
LOANS FROM RELATED PARTIES





On March
6, 2009 the Company converted $1,766,271 of debt and accrued interest from
related parties into 29,118,000 shares of the Company’s common
stock.





On March
6, 2009 the Company converted $345,000 of debt from certain investors in to
138,000,000 shares of the Company’s common stock.


10




On April
1, 2009, 4,000,000 shares of the Company’s common stock were returned to the
Company by Teleconnect Spain employees and retired.





During
the nine months ended June 30, 2009 and 2008 the Company obtained approximately
$788,000 and $2,274,000, 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 benefit for the three and nine months
ended June 30, 2009, 2008 and 2007. The Company has recorded an income tax
valuation allowance equal to the benefit of any income tax carryforward because
of the uncertain nature of realization.





6.
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 and 4,315,000 shares that were outstanding at June 30, 2008 and 2007,
respectively, have not been included in diluted earnings per share as their
inclusion would have been anti-dilutive. No stock options were outstanding at
June 30, 2009.





The
following reconciles the components of the (loss) income per share computation
for the three months ended June 30:





2009
                
                
                2008
                
                
                2007Basic
      and diluted loss per share computationNumerator:Net
      loss from continuing operations
                
                $
                (323,136
                )
                
                $
                (387,487
                )
                
                $
                (854,098
                )Net
      loss from discontinued operations
                
                $
                (181,282
                )
                
                $
                (335,221
                )
                
                $
                (491,105
                )Net
      loss
                
                $
                (504,418
                )
                
                $
                (722,708
                )
                
                $
                (1,345,203
                )Denominator:Weighted
      average common shares
                
                
                495,449,141
                
                
                
                332,243,707
                
                
                
                215,657,251OutstandingBasic
      and diluted loss per share:From
      continuing operations
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.00
                )From
      discontinued operations
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.00
                )Total
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.01
                )





The
following reconciles the components of the loss per share computation for the
nine months ended June 30:





2009
                
                
                2008
                
                
                2007Basic
      and diluted loss per share computationNumerator:Net
      loss from continuing operations
                
                $
                (1,022,918
                )
                
                $
                (1,206,644
                )
                
                $
                (2,070,928
                )Net
      (loss) income from discontinued operations
                
                $
                (143,793
                )
                
                $
                (1,098,971
                )
                
                $
                366,724Net
      loss
                
                $
                (1,166,711
                )
                
                $
                (2,305,615
                )
                
                $
                (1,704,204
                )Denominator:Weighted
      average common shares outstanding
                
                
                401,934,873
                
                
                
                332,243,707
                
                
                
                195,898,020Basic
      and diluted loss per share:From
      continuing operations
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.01
                )From
      discontinued operations
                
                $
                (0.00
                )
                
                $
                (0.00
                )
                
                $
                (0.00
                )Total
                
                $
                (0.00
                )
                
                $
                (0.01
                )
                
                $
                (0.01
                )




11




7 . 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.




12




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





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





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 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. Our revenues and operating results
have depended upon the continued adoption and use of our products and services
by consumers and small businesses. This use 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
future revenues will greatly depend on targeted acquisition of companies with
high potential business.  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 consists primarily of the costs associated with carriers which supply the
telecom services for the Company to resell. We rely on third parties to offer
the majority of the services we have in our portfolio. Accordingly, a
significant portion of our cost of sales consists of payments to these carriers.
Cost of sales also consists of customer support costs, training and professional
services expenses, and parts.





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 decrease in absolute dollars as we employ fewer
personnel and incur fewer costs related to the growth of our business and our
operation as a public company. We include stock-based compensation, when
applicable, in general and administrative expenses.


13




BALANCE SHEET COMPARISON AT
JUNE 30, 2009 AND SEPTEMBER 30, 2008





Assets: Total assets
at June 30, 2009 decreased 4.4% to $4,022,463 compared to $4,205,858 at
September 30, 2008.  This decrease is due primarily to a reduction of
the assets from discontinued operations.





Liabilities: Current
liabilities at June 30, 2009 decreased 19.7% to $6,437,789 compared to
$8,014,982 at September 30, 2008.  This increase is due primarily to
the conversion of loans owed to a shareholder in exchange for common
stock.





COMPARISON OF THE THREE
MONTHS ENDED JUNE 30, 2009 AND 2008 (CONTINUING OPERATIONS)





We
incurred a $504,418 net loss ($323,136 from continuing operations) for the three
months ended June 30, 2009 as compared to a net loss of $722,708 ($387,487 from
continuing operations) during the comparable period in 2008. A comparison of
revenues and expenses for the two periods is as follows:





REVENUES





Sales for
the three months ended June 30, 2009, increased 74.5% to $92,354 from $52,927
for the quarter ended June 30, 2008. This increase in sales is attributed to the
sales of calling credit which consists of prepaid phone usage generated through
the kiosks that are currently in trial placements in certain Dutch retail
businesses.





COST OF
SALES





Cost of
sales decreased 30.5% to $93,539 during the three months ended June 30, 2009
from $134,589 during the same period in 2008. The decrease in cost of sales
partially reflects efficiencies gained in our assembly process and operations of
kiosks but is predominately due to 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 increased by 84.9 % to $ 309,850 during the
three months ended June 30, 2009 as compared to $167,542 for the comparable
period in 2008.   This increase in selling, general and
administrative expenses is primarily due to the additional cost of outside
professional services related to the Company’s accounting and taxes for the
years 2007, 2008 and 2009.





COMPARISON OF THE THREE
MONTHS ENDED JUNE 30, 2009 AND 2008 (DISCONTINUED
OPERATIONS)





Discontinued
operations had net loss of $181,282 for the three months ended June 30, 2009 as
compared to a net loss of $335,221 during the comparable period in
2008.  Without the effects of other income, discontinued operations
incurred a $204,762 operating loss for the three months ended June 30, 2009 as
compared to a operating loss of $290,777 during the comparable period in
2008.  It is expected that the discontinued operations will be sold
during fiscal year 2010.





A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the three months ended June 30, 2009, decreased 9.5% to $932,976 from $1,030,974
for the quarter ended June 30, 2008. The decrease in sales is due to more
aggressive end user pricing due to necessity to temporarily lower prices in
order to maintain market share.  This is evidenced by the fact that
even though the revenues decreased, we experienced an increase in total minutes
of end-user usage to nearly 19.9 million minutes for the three months ended June
30, 2009 up from 19.5 million minutes for the quarter ended June 30,
2008.





COST OF
SALES





Cost of
sales decreased by 4.8% to $791,768 during the three months ended June 30, 2009
from $831,648 during the same period in 2008. The main reason that this
percentage decrease in cost of sales is less than the percentage decrease in
sales of 9.5% is that the Company was unable to negotiate proportionately better
pricing with its carriers leading to more expensive cost of calls and lower
gross profit which fell 29.2% to $141,208 during the three months ended June 30,
2009 from $199,326 during the same period in 2008. Included in this decrease of
gross profit is the offset effect of the Gotel, Wholesale and Speedline
services, which are prepaid services not requiring a card, thus costing less to
provide to distributors than the prepaid calling cards and as such helping to
reduce the cost of sales.


14




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 27.4 % to $ 332,772 during the
three months ended June 30, 2009 as compared to $ 458,433 for the comparable
period in 2008.   This decrease in selling, general and
administrative expenses is primarily due to the lower general and administrative
expenses associated with a reduction of staff and a reduction of cost associated
to external consultants.





OTHER
INCOME (EXPENSE)





Other
income for the three months ended June 30, 2009 was $23,480 as compared to other
expenses of $44,444 for the same period in 2008.  The calculation of
Other Income included gains from debt forgiveness income of approximately
$40,500 during the period ended June 30, 2009 which did not occur in the same
period in 2008.





COMPARISON OF THE NINE
MONTHS ENDED JUNE 30, 2009 AND 2008
(CONTINUING  OPERATIONS)





We
incurred a $1,166,711 net loss ($1,022,918 from continuing operation) for the
nine months ended June 30, 2009 as compared to a net loss of $2,305,615
($1,206,644 from continuing operations) during the comparable period in 2008. A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the nine months ended June 30, 2009, increased 134.3% to $242,689 from $103,571
for the nine months ended June 30, 2008. This increase in sales is attributed to
the sales of calling credit which consists of prepaid calling time paid for
through the kiosks that are currently in trial placements in Dutch retail
businesses.





COST OF
SALES





Cost of
sales decreased nearly 40% to $257,222 during the nine months ended June 30,
2009 from $428,421 during the same period in 2008. The decrease in cost of sales
reflects efficiencies gained in our assembly process and operations of
kiosks.  The lower relative cost of sales compared to revenues,
partially reflects efficiencies gained in our assembly process and operations of
kiosks but is predominately due to 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 increased by 45.5 % to $ 897,690 during the
nine months ended June 30, 2009 as compared to $616,897 for the comparable
period in 2008.   This increase in selling, general and
administrative expenses is primarily due to the additional cost of outside
professional services for the Company’s accounting and taxes for the years 2007,
2008 and 2009.





COMPARISON OF THE NINE
MONTHS ENDED JUNE 30, 2009 AND 2008 (DISCONTINUED
OPERATIONS)





Discontinued
operations had net loss of $143,793 for the nine months ended June 30, 2009 as
compared to incurring a net loss of $1,098,971 during the comparable period in
2008.  Without the effects of other income, discontinued operations
incurred a $543,166 operating loss for the nine months ended June 30, 2009 as
compared to an operating loss of $1,064,184 during the comparable period in
2008.  It is expected that the discontinued operations will be sold
during fiscal year 2010.





A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the nine months ended June 30, 2009, increased 2.6% to $2,772,084 from
$2,701,324 for the nine months ended June 30, 2008. The increase in sales is due
to our ability to lower prices of our goods and services due to less competitive
end user pricing. As such, the number of minutes sent over our network increased
nearly 2.5% to approximately 57.9 million during the nine months ended June 30,
2009 as compared to nearly 56.5 million minutes for the nine months ended June
30, 2008.





COST OF
SALES





Cost of
sales increased less than 1% to $2,181,466 during the nine months ended June 30,
2009 from $2,161,835 during the same period in 2008. The main reason for the
small increase compared to that of sales is the fact that the Gotel, Wholesale
and Speedline services, which are prepaid services not requiring a card, thus
costing less to provide to distributors than the prepaid calling
cards.


15




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 27.9 % to $ 1,085,732 during
the nine months ended June 30, 2009 as compared to $1,505,569 for the comparable
period in 2008.   This decrease in selling, general and
administrative expenses is primarily due to a small reduction of staff and a
reduction of costs associated with external consultants.





OTHER
INCOME (EXPENSE)





Other
income for the nine months ended June 30, 2009 was $399,373 as compared to other
expense of $34,787 for the same period in 2008.  Other Income includes
gains from debt forgiveness income of approximately $281,000 for the nine months
ended June 30, 2009 as compared to none for the same period in
2008.





BALANCE SHEET COMPARISON AT
JUNE 30, 2008 and SEPTEMBER 30, 2007





Assets: Total assets
at June 30, 2008 increased 29.1% to $5,548,355 compared to $4,297,582 at
September 30, 2007.  This increase is due primarily to the additional
work-in progress inventory from Mediwizz.





Liabilities: Current
liabilities at June 30, 2008 increased 89.8% to $8,971,561 compared to
$4,726,640 at September 30, 2007.  This increase is due primarily to
additional loans from related parties.





COMPARISON OF THE THREE
MONTHS ENDED JUNE 30, 2008 AND 2007 (CONTINUING OPERATIONS)





We
incurred a $722,708 net loss ($387,487 from continuing operations) for the three
months ended June 30, 2008 as compared to a net loss of $1,345,203 ($854,098
from continuing operations) during the comparable period in 2007. A comparison
of revenues and expenses for the two periods is as follows:





REVENUES





Sales for
the three months ended June 30, 2008 amounted to $52,927 compared to sales of
$17,015 for the same three month period ended June 30, 2007. This is attributed
to the fact that Mediawizz began operations in the third quarter of fiscal
2007.





COST OF
SALES





Cost of
sales amounted to $134,589 during the three months ended June 30, 2008 compared
to $8,231 for the same period in 2007. The cost of sales reflects the Company’s
initial entry into the market and is expected to decline as efficiencies are
obtained.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decrease by 80.0 % to $ 167,542 during the
three months ended June 30, 2008 as compared to $826,954 for the comparable
period in 2007.   This decrease in selling, general and
administrative expenses is due primarily to approximately $600,000 in
stock-based compensation for consulting fees for assistance in identifying and
purchasing  new subsidiaries and equity investments and location of
new funding sources during three months ended June 30, 2007 that were not
incurred in the three months ended June 30, 2008.





COMPARISON OF THE THREE
MONTHS ENDED JUNE 30, 2008 AND 2007 (DISCONTINUED
OPERATIONS)





Discontinued
operations had net loss of $335,221 for the three months ended June 30, 2008 as
compared to a net loss of $491,105 during the comparable period in
2007.  Without the effects of other income, discontinued operations
incurred a $290,777 operating loss for the three months ended June 30, 2008 as
compared to an operating loss of $536,398 during the comparable period in
2007.





A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the three months ended June 30, 2008, increased nearly 7.2% to $1,030,974 from
$961,500 for the quarter ended June 30, 2007. The increase in sales is due to
the increased competitiveness of the market and our ability to lower prices of
our goods and services due to more competitive end user pricing. While the
number of minutes sent over our network increased to approximately 19.5 million
during for the three months ended June 30, 2008 as compared to nearly 16.9
million minutes for the quarter ended June 30, 2007, the average price per
minute dropped to $0.053 for the three months ended June 30, 2008 as compared to
$0.057 in the same period in 2007.


16




COST OF
SALES





Cost of
sales decreased 5.5% to $831,648 during the three months ended June 30, 2008
from $880,283 during the same period in 2007. The main reason for the increase
was the ability to renegotiate better carrier pricing during this period such
that even though sales increased our cost of sales
decreased.  Further, during the three months ended June 30, 2007, the
Company experienced higher than normal costs of new products and services which
was not the case in 2008.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 17.9 % to $458,433 during the
three months ended June 30, 2008 as compared to $558,073 for the comparable
period in 2007.   This decrease in selling, general and
administrative expenses is primarily due to the lower labor costs associated
with a reduction of staff which took place during the preceding quarter ended
March 31, 2008. These additional labor costs were present during the same three
month period of the prior year.





OTHER
INCOME (EXPENSE)





Other
expense for the three months ended June 30, 2008 was $44,444 as compared to
other income of $45,293 for the same period in 2007.  Other Income in
2007 included gains from debt forgiveness income for the three month period
ended June 30, 2007 which did not occur in the same period in 2008.





COMPARISON OF THE NINE
MONTHS ENDED JUNE 30,  2008 AND 2007
(CONTINUING  OPERATIONS)





We
incurred a $2,305,615 net loss ($1,206,644 from continuing operations) for the
nine months ended June 30, 2008 as compared to a net loss of $1,704,204
($2,070,928 from continuing operations) during the comparable period in 2007. A
comparison of revenues and expenses for the two periods is as
follows:





REVENUES





Sales for
the nine months ended June 30, 2008 amounted to $103,571 and $17,015 for the
nine months ended June 30, 2007. This is attributed to the fact that Mediawizz
began operations in the third quarter of fiscal 2007.





COST OF
SALES





Cost of
sales amounted to $428,421 during the nine months ended June 30, 2008 compared
to 8,231 during the same period in 2007. This is attributed to the acquisition
of Mediawizz in the third quarter of 2007.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses decreased by 69.8% to $ 616,897 during the
nine months ended June 30, 2008 as compared to $2,044,196 for the comparable
period in 2007.   This decrease in selling, general and
administrative expenses is primarily due to decrease in legal and accounting
services of approximately $200,000 and stock-based compensation of $1,132,600
for assistance in identifying and purchasing new subsidiaries and equity
investments and location of new funding sources as compared to
2007.





COMPARISON OF THE NINE
MONTHS ENDED JUNE 30, 2008 AND 2007 (DISCONTINUED
OPERATIONS)





We
incurred a $1,098,971 loss from discontinued operations for the nine months
ended June 30, 2008 as compared to net income of $366,724 during the comparable
period in 2007.  A comparison of revenues and expenses for the two
periods is as follows:





REVENUES





Sales for
the nine months ended June 30, 2008, decreased nearly 7.5% to $2,701,324 from
$2,920,900 for the nine months June 30, 2007. The decrease in sales is due to
more aggressive end user pricing due to necessity to temporarily lower prices in
order to maintain market share.  This is evidenced by the fact that
even though the revenues decreased, we experienced an increase in total minutes
of end-user usage to nearly 56.5 million minutes for the nine months ended June
30, 2008 up from 54.2 million minutes for the nine months ended June 30,
2007.


17





COST OF
SALES





Cost of
sales decreased 1.1% to $2,161,835 during the nine months ended June 30, 2008
from $2,186,438 during the same period in 2007. The main reason for the decrease
was the ability to renegotiate better carrier pricing during this
period.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses increased by 4.7% to $1,505,569 during the
nine months ended June 30, 2008 as compared to $1,437,977 for the comparable
period in 2007.   This increase in selling, general and
administrative expenses is primarily due to the higher general and
administrative expenses associated to the cancellation of certain labor
contracts.





OTHER
INCOME (EXPENSE)





Other
expense for the nine months ended June 30, 2008 was $34,787 as compared to other
income of $1,247,187 for the same period in 2007.  Other Income in
2007 included gains from debt forgiveness income of $1,202,000 for the nine
month period ended June 30, 2007.





LIQUIDITY AND CAPITAL
RESOURCES





At June
30, 2009 and 2008, Teleconnect Inc. had negative working capital of
approximately $3,640,000 and $5,617,000, respectively, compared to negative
working capital of $5,287,000 and $2,488,000 at September 30, 2008 and 2007,
respectively.





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





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 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 subject to
shareholder approval.  The Company has accounted for the transaction
under SFAS 144, Accounting for
the Impairment or Disposal of Long-Lived Assets , and the results of
operations of these subsidiaries were reported as “discontinued operations” and
assets and liabilities have been separated on the balance sheet.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
applicable.





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 the coming
year.


18




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





Not
applicable





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





None





ITEM
5. OTHER INFORMATION





None





ITEM
6. EXHIBITS





31.1
Certification of Dirk Benschop, Chief Executive Officer and
President





31.2
Certification of Alfonso de Borbón, Executive Vice President and Chief
Accounting and Financial Officer





32.1
Certification of Dirk Benschop and Alfonso de Borbon


19




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.





October
26, 2009





TELECONNECT
INC.





By:
            /s/ Dirk Benschop
            
            By:
            /s/ Alfonso de BorbonDirk
      Benschop, Director,
            
            
            Alfonso
      de Borbon,Chief
      Executive Officer,
            
            
            Director,
      Chief AccountingPresident
      and Treasurer
            
            
            and
      Financial Officer,Executive
      Vice President andChief
      Operating Officer




20




INDEX
TO EXHIBITS




ExhibitNo.
                    Description31.1
                    Certification
      of Dirk Benschop31.2
                    Certification
      of Alfonso de Borbon32.1
                    Certification
      of Dirk Benschop and Alfonso de
Borbon




21