**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB/A**









**(Mark
      One)**





x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31,
                2006**




**OR**




o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**Commission
      file number** 000-51151




**TELIPHONE
      CORP**


**(Name
      of small business issuer in its charter)**





**Nevada**
            
            **84-1491673**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer Identification
              No.)





4150
      Ste-Catherine Street West, Suite 200,


Westmount
      (Montreal),


Quebec,
      Canada, H3Z 0A1


(Address
      of principal executive offices)





**(514)
      313-6010**


(Issuer’s
      telephone number)





Copies
      of
      communications to:


JOSEPH
      I.
      EMAS


1224
      WASHINGTON AVENUE


MIAMI
      BEACH, FLORIDA 33139


TELEPHONE
      NO.: (305) 531-1174


FACSIMILE
      NO.: (305) 531-1274





**Securities
      registered under Section 12(b) of the Exchange Act:**




**None**





**Securities
      registered under Section 12(g) of the Exchange Act:**


**Common
      Stock, $0.001 par value per share**




**(Title
      of Class)**





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





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





As
      of May
      10, 2007, there were 33,525,014 shares of the registrant's common stock issued
      and outstanding.





Transitional
      Small Business Disclosure Format Yes o No o







**TELIPHONE
      CORP.**





**Page****Part
                I.**
            
            **Financial
                Information**Item
                1.
            
            Financial
                Statements and Notes to Financial Statements
            
            1Balance
                Sheets
            
            F-1Statements
                of Operations
            
            F-2Statements
                of Cash Flows
            
            F-3Notes
                to the Financial Statements
            
            F-4Item
                2.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            2Item
                3
            
            Controls
                and Procedures
            
            13**Part
                II.**
            
            **Other
                Information**Item
                1.
            
            Legal
                Proceedings
            
            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
            
            15Item
                5.
            
            Other
                Information
            
            15Item
                6.
            
            Exhibits
            
            16Signatures
            
            
            
            16







PART
      I  FINANCIAL
      INFORMATION




**Item
      1.**  **Financial
      Statements and Notes to Financial Statements**





General





The
      accompanying reviewed financial statements have been prepared in accordance
      with
      the instructions to Form 10 QSB/A. Therefore, they do not include all
      information and footnotes necessary for a complete presentation of financial
      position, results of operations, cash flows, and stockholders' equity in
      conformity with generally accepted accounting principles. Except as disclosed
      herein, there has been no material change in the information disclosed in the
      notes to the financial statements included in the Company's annual report on
      Form 10 KSB for the year ended September 30, 2006. In the opinion of management,
      all adjustments considered necessary for a fair presentation of the results
      of
      operations and financial position have been included and all such adjustments
      are of a normal recurring nature. Operating results for the six months ended
      December 31, 2006 are not necessarily indicative of the results that can be
      expected for the year ending September 30, 2007.




1




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




Condensed
                  Consolidated Balance Sheet as of December 31, 2006(Restated)
              F-1Condensed
                  Consolidated Statements of Operations and Comprehensive Income
                  (Loss) for
                  the Three Months Ended December 31, 2006(Restated)and
                  2005
              F-2Condensed
                  Consolidated Statements of Cash Flows for the Three Months Ended
                  December
                  31, 2006(Restated)and
                  2005
              F-3Notes
                  to Condensed Consolidated Financial Statements Teliphone Corp.
                  (Unaudited)(Restated)
              F-4









**TELIPHONE
                CORP.****(FORMERLY
                OSK CAPITAL II CORPORATION)****CONDENSED
                CONSOLIDATED BALANCE SHEET****DECEMBER
                31, 2006 (RESTATED)****(UNAUDITED)**




**ASSETS****US$**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              -Accounts
                  receivable, net
              
              
              21,138Investment
                  tax credit receivable
              
              
              14,075Inventory
              
              
              17,697Prepaid
                  expenses and other current assets
              
              
              115,047Total
                  Current Assets
              
              
              167,957Fixed
                  assets, net of depreciation
              
              
              79,697**TOTAL
                  ASSETS**
              
              $
              247,654**LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)****LIABILITIES**Current
                  Liabilities:Bank
                  overdraft
              
              $
              9,352Deferred
                  revenue
              
              
              10,007Related
                  party loans and advance
              
              
              564,844Accounts
                  payable and accrued expenses
              
              
              106,901Total
                  Current Liabilities
              
              
              691,104**Total
                  Liabilities**
              
              
              691,104**Minority
                  interest**
              
              
              115,677**STOCKHOLDERS'
                  (DEFICIT)**Common
                  stock, $.001 Par Value; 125,000,000 shares authorizedand
                  33,554,014 shares issued and outstanding
              
              
              33,554Additional
                  paid-in capital
              
              
              898,156Accumulated
                  deficit
              
              
              (1,468,308
              )Accumulated
                  other comprehensive income (loss)
              
              
              (22,529
              )**Total
                  Stockholders' (Deficit)**
              
              
              (559,127
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
              
              $
              247,654





F-1





**TELIPHONE
                CORP.****(FORMERLY
                OSK CAPITAL II CORPORATION)****CONDESNED
                CONSOLIDATED STATEMENTS OF OPERATIONS****AND
                COMPREHENSIVE INCOME (LOSS)****FOR
                THE THREE MONTHS ENDED DECEMBER 31, 2006 (RESTATED) AND
                2005****(UNAUDITED)**




**US
                  $****2006**
              
              **2005****(RESTATED)****OPERATING
                  REVENUES**Revenues
              
              $
              129,234
              
              $
              87,011**COST
                  OF SALES**Inventory,
                  beginning of period
              
              
              11,034
              
              
              32,468Purchases
                  and cost of VoIP services
              
              
              109,267
              
              
              121,430Inventory,
                  end of period
              
              
              (17,697
              )
              
              (51,652
              )**Total
                  Cost of Sales**
              
              
              102,604
              
              
              102,246**GROSS
                  PROFIT (LOSS)**
              
              
              26,630
              
              
              (15,235
              )**OPERATING
                  EXPENSES**Selling
                  and promotion
              
              
              961
              
              
              1,869Professional
                  and consulting fees
              
              
              9,181
              
              
              12,334Salaries
                  and wages
              
              
              38,807
              
              
              19,080Other
                  general and administrative expenses
              
              
              12,176
              
              
              4,887Depreciation
              
              
              22,105
              
              
              12,583**Total
                  Operating Expenses**
              
              
              83,230
              
              
              50,753**LOSS
                  BEFORE OTHER INCOME (EXPENSE)**
              
              
              (56,600
              )
              
              (65,988
              )**OTHER
                  INCOME (EXPENSE)**Interest
                  expense
              
              
              (10,987
              )
              
              (1,671
              )**Total
                  Other Income (Expense)**
              
              
              (10,987
              )
              
              (1,671
              )**NET
                  LOSS BEFORE MINORITY INTEREST AND****PROVISION
                  FOR INCOME TAXES**
              
              
              (67,587
              )
              
              (67,659
              )**Minority
                  interest**
              
              
              14,003
              
              
              -**NET
                  LOSS BEFORE PROVISION FOR INCOME TAXES**
              
              
              (53,584
              )
              
              (67,659
              )**Provision
                  for Income Taxes**
              
              
              -
              
              
              -**NET
                  LOSS APPLICABLE TO COMMON SHARES**
              
              $
              (53,584
              )
              $
              (67,659
              )**NET
                  LOSS PER BASIC AND DILUTED SHARES**
              
              $
              (0.00
              )
              $
              (0.00
              )**WEIGHTED
                  AVERAGE NUMBER OF COMMON****SHARES
                  OUTSTANDING**
              
              
              33,113,900
              
              
              31,089,520**COMPREHENSIVE
                  INCOME (LOSS)**Net
                  loss
              
              $
              (53,584
              )
              $
              (67,659
              )Other
                  comprehensive income (loss)Currency
                  translation adjustments
              
              
              (54
              )
              
              2,090Comprehensive
                  income (loss)
              
              $
              (53,638
              )
              $
              (65,569
              )




F-2





**TELIPHONE
                CORP.****(FORMERLY
                OSK CAPITAL II CORPORATION)****CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR
                THE THREE MONTHS ENDED DECEMBER 31, 2006 (RESTATED) AND
                2005****(UNAUDITED)**




**US$****2006**
              
              **2005****(RESTATED)****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  loss
              
              $
              (53,584
              )
              $
              (67,659
              )**Adjustments
                  to reconcile net loss to net cash****used
                  in operating activities:**Depreciation
              
              
              22,105
              
              
              12,583**Changes
                  in assets and liabilities**Decrease
                  in accounts receivable
              
              
              4,899
              
              
              4,743Decrease
                  in investment tax credit receivable
              
              
              601
              
              
              44(Increase)
                  in inventory
              
              
              (6,663
              )
              
              (19,184
              )Decrease
                  in prepaid expenses and other current assets
              
              
              10,232
              
              
              2,106Increase
                  in deferred revenue
              
              
              1,717
              
              
              -(Decrease)
                  in accounts payable andand
                  accrued expenses
              
              
              (48,127
              )
              
              (11,844
              )Total
                  adjustments
              
              
              (15,236
              )
              
              (11,552
              )**Net
                  cash (used in) operating activities**
              
              
              (68,820
              )
              
              (79,211
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisitions
                  of fixed assets
              
              
              (4,618
              )
              
              (11,314
              )**Net
                  cash (used in) investing activities**
              
              
              (4,618
              )
              
              (11,314
              )**CASH
                  FLOWS FROM FINANCING ACTIVITES**Increase
                  (decrease) in bank overdraft
              
              
              1,685
              
              
              (2,058
              )Proceeds
                  from loan payable, net
              
              
              -
              
              
              43,330Proceeds
                  from loan payable - related parties, net
              
              
              84,189
              
              
              47,163**Net
                  cash provided by financing activities**
              
              
              85,874
              
              
              88,435Effect
                  of foreign currency transalation
              
              
              (12,436
              )
              
              2,090**NET
                  INCREASE (DECREASE) IN****CASH
                  AND CASH EQUIVALENTS**
              
              
              -
              
              
              -**CASH
                  AND CASH EQUIVALENTS -****BEGINNING
                  OF PERIOD**
              
              
              -
              
              
              -**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              -
              
              $
              -**CASH
                  PAID DURING THE PERIOD FOR:**Interest
                  expense
              
              $
              1,099
              
              $
              1,671**SUPPLEMENTAL
                  NONCASH INFORMATION:**Common
                  stock issued for liability for stock to be issued
              
              $
              165,000
              
              $
              -




F-3





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION**


The
        unaudited condensed consolidated financial statements included herein have
        been
        prepared, without audit, pursuant to the rules and regulations of the Securities
        and Exchange Commission (“SEC”). The condensed consolidated financial statements
        and notes are presented as permitted on Form 10-QSB and do not contain
        information included in the Company’s annual consolidated statements and notes.
        Certain information and footnote disclosures normally included in financial
        statements prepared in accordance with accounting principles generally accepted
        in the United States of America have been condensed or omitted pursuant to
        such
        rules and regulations, although the Company believes that the disclosures
        are
        adequate to make the information presented not misleading. It is suggested
        that
        these condensed consolidated financial statements be read in conjunction
        with
        the September 30, 2006 audited financial statements and the accompanying
        notes
        thereto. While management believes the procedures followed in preparing these
        condensed consolidated financial statements are reasonable, the accuracy
        of the
        amounts are in some respects dependent upon the facts that will exist, and
        procedures that will be accomplished by the Company later in the
        year.
 
 These
        condensed consolidated unaudited financial statements reflect all adjustments,
        including normal recurring adjustments which, in the opinion of management,
        are
        necessary to present fairly the consolidated operations and cash flows for
        the
        periods presented.
 
 Teilphone
        Corp. (formerly OSK Capital II Corporation) (the “Company”) was incorporated in
        the State of Nevada on March 2, 1999 to serve as a vehicle to effect a merger,
        exchange of capital stock, asset acquisition or other business combination
        with
        a domestic or foreign private business. Effective April 28, 2005, the Company
        achieved its objectives with the reverse merger and reorganization with
        Teliphone Inc., a Canadian company.
 
 Teliphone,
        Inc. was founded by its original parent company, United American Corporation,
        a
        publicly traded Florida Corporation, in order to develop a
        Voice-over-Internet-Protocol (VoIP) network which enables users to connect
        an
        electronic device to their internet connection at the home or office which
        permits them to make telephone calls to any destination phone number anywhere
        in
        the world. VoIP is currently growing in scale significantly in North America.
        Industry experts predict the VoIP offering to be one of the fastest growing
        sectors from now until 2009. This innovative new approach to telecommunications
        has the benefit of drastically reducing the cost of making these calls as
        the
        distances are covered over the Internet instead of over dedicated lines such
        as
        traditional telephony.




F-4




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION** **(CONTINUED)**




Prior
        to
        its acquisition by the Company, Teliphone Inc. had grown primarily in the
        Province of Quebec, Canada through the sale of its product offering in retail
        stores and over the internet. For this distribution channel, the Company
        typically pays a 25% commission to the distributor who shares this with the
        re-seller.
 
 In
        addition to the retail services provided, Teliphone Inc. also sells to
        wholesalers. Wholesalers typically receive approximately a 35% commission
        on
        such sales, however, the wholesaler re-bills these services to their customers
        and provide the necessary customer support to their customers directly. This
        sector has grown this year for the Company and the Company will look to add
        further distribution channels to other sectors of the world, commencing with
        India in fiscal year 2007.
 
 On
        August
        21, 2006, OSK Capital II Corporation formerly changed its name to Teliphone
        Corp.
 
 
 **Going
        Concern**
 
 As
        shown
        in the accompanying condensed consolidated financial statements the Company
        has
        incurred recurring losses of $53,584 and $67,659 for the three months ended
        December 31, 2006 and 2005, and has a working capital deficiency of $523,147
        as
        of December 31, 2006. The Company has been searching for new distribution
        channels to wholesale their services to provide additional revenues to support
        their operations. In addition, the Company entered into a letter of intent
        with
        Intelco Communications that can save them operating costs in addition to
        providing support services; however, this has not had an impact on the current
        year operations. The Company successfully reduced approximately $400,000
        of
        related party debt as this was converted into additional shares of the Company’s
        stock in August 2006. There is no guarantee that the Company will be able
        to
        raise additional capital or generate the increase in revenues to sustain
        its
        operations, however the Company has recently submitted a registration statement
        of Form SB-2 to raise additional capital. These conditions raise substantial
        doubt about the Company’s ability to continue as a going concern for a
        reasonable period


F-5


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION** **(CONTINUED)**




**Going
        Concern** **(Continued)**
 
 Management
        believes that the Company’s capital requirements will depend on many factors.
        These factors include the increase in sales through existing channels as
        well as
        the Company’s subsidiary Teliphone Inc.’s ability to continue to expand its
        distribution points and leveraging its technology into the commercial small
        business segments. The Company’s subsidiary Teliphone Inc.’s strategic
        relationships with telecommunications interconnection companies, internet
        service providers and retail sales outlets has permitted the Company to achieve
        consistent monthly growth in acquisition of new customers. Additionally,
        the
        Company sold approximately 25% of its subsidiary Teliphone Inc. to the parent
        company of Intelco Communications which will bring further opportunity and
        working capital to the Company.
 
 The
        Company will look to further develop its existing relationship with its
        wholesaler in India in order to take advantage of the strong growth in demand
        for its VoIP products worldwide.
 
 In
        the
        near term, the Company will look to complete the registration process to
        effectiveness and completes its offering. The Company’s ability to continue as a
        going concern for a reasonable period is dependent upon management’s ability to
        raise additional interim capital and, ultimately, achieve profitable operations.
        There can be no assurance that management will be able to raise sufficient
        capital, under terms satisfactory to the Company, if at all.
 
 The
        condensed consolidated financial statements do not include any adjustments
        relating to the carrying amounts of recorded assets or the carrying amounts
        and
        classification of recorded liabilities that may be required should the Company
        be unable to continue as a going concern.


F-6





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**   **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**


**Principles
        of Consolidation**
 
 The
        condensed consolidated financial statements include the accounts of the Company
        and all of its majority owned subsidiaries. All significant intercompany
        accounts and transactions have been eliminated in consolidation. All minority
        interests have been reflected herein.
 
 **Use
        of Estimates**
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. On an on-going basis, the Company evaluates
        its
        estimates, including, but not limited to, those related to investment tax
        credits, bad debts, income taxes and contingencies. The Company bases its
        estimates on historical experience and on various other assumptions that
        are
        believed to be reasonable under the circumstances, the results of which form
        the
        basis for making judgments about the carrying value of assets and liabilities
        that are not readily apparent from other sources. Actual results could differ
        from those estimates.
 
 **Cash
        and Cash Equivalents**
 
 The
        Company considers all highly liquid debt instruments and other short-term
        investments with an initial maturity of three months or less to be cash
        equivalents.
 
 **Comprehensive
        Income**
 
 The
        Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
        Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
        comprehensive income in addition to net income from operations.
 
 Comprehensive
        income is a more inclusive financial reporting methodology that includes
        disclosure of information that historically has not been recognized in the
        calculation of net income.
 
 **Inventory**
 
 Inventory
        is valued at the lower of cost or market determined on a first-in-first-out
        basis. Inventory consisted only of finished goods.


F-7





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Fair
        Value of Financial Instruments (other than Derivative Financial
        Instruments)**
 
 The
        carrying amounts reported in the condensed consolidated balance sheet for
        cash
        and cash equivalents, accounts receivable and accounts payable approximate
        fair
        value because of the immediate or short-term maturity of these financial
        instruments. For the notes payable, the carrying amount reported is based
        upon
        the incremental borrowing rates otherwise available to the Company for similar
        borrowings. For the convertible debentures, fair values were calculated at
        net
        present value using the Company’s weighted average borrowing rate for debt
        instruments without conversion features applied to total future cash flows
        of
        the instruments.
 
 **Currency
        Translation**
  For
        subsidiaries outside the United States that prepare financial statements
        in
        currencies other than the U.S. dollar, the Company translates income and
        expense
        amounts at average exchange rates for the year, translates assets and
        liabilities at year-end exchange rates and equity at historical rates. The
        Company’s functional currency is the Canadian dollar, whiles the Company reports
        its currency in the US dollar. The Company records these translation adjustments
        as accumulated other comprehensive income (loss). Gains and losses from foreign
        currency transactions are included in other income (expense) in the results
        of
        operations. For the three months ended December 31, 2006 and 2005, the Company
        recorded approximately ($54) and $2,090 in transaction gains (losses) as
        a
        result of currency translation.
  **Research
        and Development**
 
 The
        Company annually incurs costs on activities that relate to research and
        development of new products. Research and development costs are expensed
        as
        incurred. Certain of these costs are reduced by government grants and investment
        tax credits where applicable.
 
 **Revenue
        Recognition**
 
 Operating
        revenues consists of telephony services revenue and customer equipment (which
        enables the Company's telephony services) and shipping revenue. The point
        in
        time at which revenue is recognized is determined in accordance with Staff
        Accounting Bulletin No. 104, Revenue Recognition, and Emerging Issues Task
        Force
        Consensus No. 01-9, Accounting for Consideration Given by a Vendor to a Customer
        (Including a Reseller of the Vendor's Products) ("EITF No. 01-9"). When the
        Company emerged from the development stage with the acquisition of Teliphone
        Inc. they began to recognize revenue from their VoIP Telephony services when
        the
        services were rendered and customer equipment purchased as follows:




F-8




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Revenue
        Recognition** **(Continued)**
 
 *VoIP
        Telephony Services Revenue*
 
 The
        Company realizes VoIP telephony services revenue through sales by two distinct
        channels; the Retail Channel (Customer purchases their hardware from a Retail
        Distributor and the Company invoices the customer direct) and the Wholesale
        Channel (Customer purchases their hardware from the Wholesaler and the Company
        invoices the Wholesaler for usage by the Wholesaler’s customers
        collectively).
 
 Substantially
        all of the Company's operating revenues are telephony services revenue, which
        is
        derived primarily from monthly subscription fees that customers are charged
        under the Company's service plans. The Company also derives telephony services
        revenue from per minute fees for international calls and for any calling
        minutes
        in excess of a customer's monthly plan limits.
 
 Retail
        Channel
 
 Monthly
        subscription fees are automatically charged to customers' credit cards in
        advance and are recognized over the following month when services are
        provided.
 
 Revenue
        generated from international calls and from customers exceeding allocated
        call
        minutes under limited minute plans is charged to the customer’s credit cards in
        advanced in small increments and are recognized over the following month
        when
        the services are provided.
 
 The
        Company generates revenues from shipping equipment direct to customers and
        our
        re-seller partners. This revenue is considered part of the VoIP service
        revenues.
 
 The
        Company does not charge initial activation fees associated with the service
        contracts in the Retail Channel. The Company generates revenues from disconnect
        fees associated with early termination of service contracts with Retail
        Customers. These fees are included in service revenue as they are considered
        part of the service component when the service is delivered or
        performed.
 
 Prior
        to
        September 30, 2006 the Company generally charged a disconnect fee to Retail
        customers who did not return their customer equipment to the Company upon
        disconnection of service if the disconnection occurred within the term of
        the
        service contract. On October 1, 2006, the Company changed its disconnect
        policy.
        Upon cancellation of the service, a disconnect fee is charged only if the
        customer does not return their equipment to the Company. These fees are included
        in service revenue as they are considered part of the service component when
        the
        service is delivered or performed and are recognized upon receipt of the
        fee.


F-9


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Revenue
          Recognition** **(Continued)**
 
 Wholesale
          Channel
 
 Monthly
          subscription fees are invoiced to Wholesale customers at the end of the
          month
          for the entirety of the services delivered during the month. Revenue for
          this
          period is therefore recognized at the time the Wholesaler is
          billed.
  The
          Company generates revenue from initial activation fees associated with
          wholesale
          service contracts. These fees are included in service revenue as they are
          considered part of the service component when the service is delivered
          or
          performed and are recognized upon receipt of the fee.
   There
          is
          no disconnection fee associated with a wholesale customer.
  The
          Company generates revenues from shipping equipment direct to wholesale
          customers. This revenue is considered part of the VoIP service
          revenues.
 
 *Customer
          Equipment*
 
 Retail
          Channel
 
 For
          retail sales, the equipment is sold to re-sellers at a subsidized price
          below
          that of cost and below that of the retail sales price. The customer purchases
          the equipment at the retail price from the retailer. The Company recognizes
          this
          revenue utilizing the guidance set forth in EITF 00-21, “Revenue Arrangements
          with Multiple Deliverables”.
 
 Under
          a
          retail agreement, the cost of the equipment is recognized as deferred revenue,
          and amortized over the length of the service agreement. Upon satisfying
          the
          minimum service requirements the equipment charges are refunded through
          subsequent billings netting out this charge against service charges. Upon
          refund, the deferred revenue is fully amortized.
 
 Customer
          equipment expense is recorded to direct cost of goods sold when the hardware
          is
          initially purchased from our suppliers.
 
 The
          Company also provides rebates to retail customers who purchase their customer
          equipment from retailers and satisfy minimum service period requirements.
          These
          rebates are recorded as a reduction of revenue over the minimum service
          period
          based upon the actual rebate coupons received from customers and whose
          accounts
          are in good standing.


F-10




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Revenue
        Recognition** **(Continued)**
 
 Wholesale
        Channel
 
 For
        wholesale customers, the equipment is sold to wholesalers at the Company’s cost
        price plus mark-up. There are no rebates for equipment sold to wholesale
        customers and the Company does not subsidize their equipment sales. The Company
        recognizes revenue from sales of equipment to wholesale customers as
        billed.
 
 *Commissions
        Paid to Retail Distributors*
 
 Commissions
        paid to Retail Distributors are sales and marketing expenses and are recognized
        during the period where the commissions are paid.
 
 *Commissions
        Paid to Wholesalers*
 
 Commissions
        paid to wholesalers is recognized as a cost of sales due to the Company
        receiving an identifiable benefit in exchange for the consideration, and
        the
        Company can reasonably estimate the fair value of the benefit identified.
        The
        Company receives the following identifiable benefit in exchange for the
        commissions paid:
 
 ·
            The
                Wholesaler assumes the cost of billing and collections direct with
                the
                customer ·
            The
                Wholesaler assumes the costs of customer
                support 
 This
        cost
        of sale is recognized when the service is provided to the Wholesaler. Should
        the
        consideration paid by the Company exceed the fair value of the benefit received,
        that amount would be reflected as a reduction of revenue when recognized
        in the
        Company’s statement of operation.
 
 **Accounts
        Receivable**
 
 The
        Company conducts business and extends credit based on an evaluation of the
        customers’ financial condition, generally without requiring collateral.
 
 Exposure
        to losses on receivables is expected to vary by customer due to the financial
        condition of each customer. The Company monitors exposure to credit losses
        and
        maintains allowances for anticipated losses considered necessary under the
        circumstances. The Company has an allowance for doubtful accounts of $4,431
        at
        December 31, 2006.
 
 Accounts
        receivable are generally due within 30 days and collateral is not required.
        Unbilled accounts receivable represents amounts due from customers for which
        billing statements have not been generated and sent to the
        customers.





F-11





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Income
        Taxes**
 
 The
        Company accounts for income taxes utilizing the liability method of accounting.
        Under the liability method, deferred taxes are determined based on differences
        between financial statement and tax bases of assets and liabilities at enacted
        tax rates in effect in years in which differences are expected to reverse.
        Valuation allowances are established, when necessary, to reduce deferred
        tax
        assets to amounts that are expected to be realized.
 
 **Investment
        Tax Credits**
 
 The
        Company claims investment tax credits as a result of incurring scientific
        research and experimental development expenditures. Investment tax credits
        are
        recognized when the related expenditures are incurred, and there is reasonable
        assurance of their realization. Management has made a number of estimates
        and
        assumptions in determining their expenditures eligible for the investment
        tax
        credit claim. It is possible that the allowed amount of the investment tax
        credit claim could be materially different from the recorded amount upon
        assessment by Revenue Canada and Revenue Quebec. The Company has estimated
        $14,075 in investment tax credits as of December 31, 2006.
 
 **Convertible
        Instruments**
 
 The
        Company reviews the terms of convertible debt and equity securities for
        indications requiring bifurcation, and separate accounting, for the embedded
        conversion feature. Generally, embedded conversion features where the ability
        to
        physical or net-share settle the conversion option is not within the control
        of
        the Company are bifurcated and accounted for as a derivative financial
        instrument. (See Derivative Financial Instruments below). Bifurcation of
        the
        embedded derivative instrument requires allocation of the proceeds first
        to the
        fair value of the embedded derivative instrument with the residual allocated
        to
        the debt instrument. The resulting discount to the face value of the debt
        instrument is amortized through periodic charges to interest expense using
        the
        Effective Interest Method.


F-12




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Derivative
        Financial Instruments**
 
 The
        Company generally does not use derivative financial instruments to hedge
        exposures to cash-flow or market risks. However, certain other financial
        instruments, such as warrants or options to acquire common stock and the
        embedded conversion features of debt and preferred instruments that are indexed
        to the Company’s common stock, are classified as liabilities when either (a) the
        holder possesses rights to net-cash settlement or (b) physical or net share
        settlement is not within the control of the Company. In such instances, net-cash
        settlement is assumed for financial accounting and reporting, even when the
        terms of the underlying contracts do not provide for net-cash settlement.
        Such
        financial instruments are initially recorded at fair value and subsequently
        adjusted to fair value at the close of each reporting period.
 
 **Advertising
        Costs**
 
 The
        Company expenses the costs associated with advertising as incurred. Advertising
        expenses for the three months ended December 31, 2006 and 2005 are included
        in
        general and administrative expenses in the condensed consolidated statements
        of
        operations.
 
 **Fixed
        Assets**
  Fixed
        assets are stated at cost. Depreciation is computed using the straight-line
        method over the estimated useful lives of the assets; automobiles - 3 years,
        computer equipment - 3 years, and furniture and fixtures - 5 years.
 
 When
        assets are retired or otherwise disposed of, the costs and related accumulated
        depreciation are removed from the accounts, and any resulting gain or loss
        is
        recognized in income for the period. The cost of maintenance and repairs
        is
        charged to income as incurred; significant renewals and betterments are
        capitalized. Deduction is made for retirements resulting from renewals or
        betterments.







F-13






**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Impairment
        of Long-Lived Assets**
 
 Long-lived
        assets, primarily fixed assets, are reviewed for impairment whenever events
        or
        changes in circumstances indicate that the carrying amount of the assets
        might
        not be recoverable. The Company does perform a periodic assessment of assets
        for
        impairment in the absence of such information or indicators. Conditions that
        would necessitate an impairment assessment include a significant decline
        in the
        observable market value of an asset, a significant change in the extent or
        manner in which an asset is used, or a significant adverse change that would
        indicate that the carrying amount of an asset or group of assets is not
        recoverable. For long-lived assets to be held and used, the Company recognizes
        an impairment loss only if its carrying amount is not recoverable through
        its
        undiscounted cash flows and measures the impairment loss based on the difference
        between the carrying amount and estimated fair value.
  **(Loss)
        Per Share of Common Stock**
 
 Basic
        net
        (loss) per common share is computed using the weighted average number of
        common
        shares outstanding. Diluted earnings per share (EPS) includes additional
        dilution from common stock equivalents, such as stock issuable pursuant to
        the
        exercise of stock options and warrants. Common stock equivalents were not
        included in the computation of diluted earnings per share when the Company
        reported a loss because to do so would be antidilutive for periods
        presented.
 
 The
        following is a reconciliation of the computation for basic and diluted
        EPS:




**December
                  31,**
              
              **December
                  31,****2006**
              
              **2005**Net
                  loss
              
              $
              (53,584
              )
              $
              (67,659
              )Weighted-average
                  common sharesOutstanding
                  (Basic)
              
              
              33,113,900
              
              
              31,089,520Weighted-average
                  common stockEquivalentsStock
                  options
              
              
              -
              
              
              -Warrants
              
              
              -
              
              
              -Weighted-average
                  common sharesOutstanding
                  (Diluted)
              
              
              33,113,900
              
              
              31,089,520







F-14




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**(Loss)
        Per Share of Common Stock** **(Continued)**
 
 The
        Company has not issued options or warrants to purchase stock in these periods.
        If there were options or warrants outstanding they would not be included
        in the
        computation of diluted EPS because inclusion would have been
        antidilutive.
 
 **Stock-Based
        Compensation**
 
 On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
        Payment* ”
(“SFAS
        123R”). SFAS 123R requires that compensation cost related to share-based payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans. The provisions of SFAS 123R, as amended, are effective
        for
        small business issuers beginning as of the next fiscal year after December
        15,
        2005. The Company has adopted the provisions of SFAS 123R for its fiscal
        year
        ended September 30, 2006. The adoption of this principle had no effect on
        the
        Company’s operations.
 
 On
        January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
        Payment” (“FAS 123R”) which requires recognition of stock-based compensation
        expense for all share-based payments based on fair value. Prior to January
        1,
        2006, the Company measured compensation expense for all of its share-based
        compensation using the intrinsic value method prescribed by Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees” (“APB 25”) and related interpretations. The Company has provided pro
        forma disclosure amounts in accordance with FAS No. 148, “Accounting for
        Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
        Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
        123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
        its stock-based compensation.
 
 The
        Company has elected to use the modified-prospective approach method. Under
        that
        transition method, the calculated expense in 2006 is equivalent to compensation
        expense for all awards granted prior to, but not yet vested as of January
        1,
        2006, based on the grant-date fair values estimated in accordance with the
        original provisions of FAS 123. Stock-based compensation expense for all
        awards
        granted after January 1, 2006 is based on the grant-date fair values estimated
        in accordance with the provisions of FAS 123R. The Company recognizes these
        compensation costs, net of an estimated forfeiture rate, on a pro rata basis
        over the requisite service period of each vesting tranche of each award.
        The
        Company considers voluntary termination behavior as well as trends of actual
        option forfeitures when estimating the forfeiture rate.







F-15




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


Stock-Based
        Compensation(Continued)
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
        The
        fair value of the option issued is used to measure the transaction, as this
        is
        more reliable than the fair value of the services received. The fair value
        is
        measured at the value of the Company’s common stock on the date that the
        commitment for performance by the counterparty has been reached or the
        counterparty’s performance is complete. The fair value of the equity instrument
        is charged directly to compensation expense and additional paid-in
        capital.
 
 **Segment
        Information**
 
 The
        Company follows the provisions of SFAS No. 131, “ *Disclosures
        about Segments of an Enterprise and Related Information”* .
        This
        standard requires that companies disclose operating segments based on the
        manner
        in which management disaggregates the Company in making internal operating
        decisions. Despite the Company’s subsidiary, Teliphone, Inc. incurring sales of
        hardware components for the VoiP service as well as the service itself, the
        Company treats these items as one component, therefore has not segregated
        their
        business.
 
 **Reclassifications**
 
 The
        Company has reclassified certain amounts in their condensed consolidated
        statement of operations for the three months ended December 31, 2005 to conform
        with the December 31, 2006 presentation. These reclassifications had no effect
        on the net loss for the three months ended December 31, 2005.
 
 **Recent
        Accounting Pronouncements**
 
 In
        February 2006, the FASB issued Statement of Financial Accounting Standard
        No.
        155, *“Accounting
        for Certain Hybrid Instruments”* (“SFAS
        155”). FASB 155 allows financial instruments that have embedded derivatives to
        be accounted for as a whole (eliminating the need to bifurcate the derivative
        from its host) if the holder elects to account for the whole instrument on
        a
        fair value basis. This statement is effective for all financial instruments
        acquired or issued after the beginning of an entity’s first fiscal year that
        begins after September 15, 2006. The Company has determined that SFAS 155
        will
        not have a material impact on its condensed consolidated financial
        statements.








F-16




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Recent
        Accounting Pronouncements** **(Continued)**
 
 In
        May
        2005, the FASB issued Statement of Financial Accounting Standard No. 154, *“Accounting
        Changes and Error Corrections”* (“SFAS
        154”). SFAS 154 is a replacement of APB No. 20, *“Accounting
        Changes”* ,
        and
        SFAS No. 3, *“Reporting
        Accounting Changes in Interim Financial Statements”* .
        SFAS
        154 applies to all voluntary changes in accounting principle and changes
        the
        requirements for accounting and reporting of a change in accounting principle.
        This statement establishes that, unless impracticable, retrospective application
        is the required method for reporting of a change in accounting principle
        in the
        absence of explicit transition requirements specific to the newly adopted
        accounting principle. It also requires the reporting of an error correction
        which involves adjustments to previously issued financial statements similar
        to
        those generally applicable to reporting an accounting change retrospectively.
        SFAS 154 is effective for accounting changes and corrections of errors made
        in
        fiscal years beginning after December 15, 2005. The Company has restated
        its
        consolidated financial statements for its prior year due to a correction
        of an
        error. The impact of those restatements are noted in Note 11 to these condensed
        consolidated financial statements.
 
 In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
        standard defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles, and expands disclosure about fair
        value measurements. This statement is effective for financial statements
        issued
        for fiscal years beginning after November 15, 2007. Early adoption is
        encouraged. The adoption of SFAS 157 is not expected to have a material impact
        on the financial statements.
  In
        September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
        87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize
        the over-funded or under-funded status of a defined benefit postretirement
        plan
        (other than a multiemployer plan) as an asset or liability in its statement
        of
        financial position and to recognize changes in that funded status in the
        year in
        which the changes occur through comprehensive income. SFAS 158 also
        requires the measurement of defined benefit plan assets and obligations as
        of
        the date of the employer’s fiscal year-end statement of financial position (with
        limited exceptions). Management does not expect adoption of SFAS 158 to have
        a
        material impact on the Company’s financial statements.
 
 In
        February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities - Including an amendment of FASB Statement
        No.
        115”, (“FAS 159”) which permits entities to choose to measure many financial
        instruments and certain other items at fair value at specified election dates.
        A
        business entity is required to report unrealized gains and losses on items
        for
        which the fair value option has been elected in earnings at each subsequent
        reporting date.




F-17


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**


**Recent
        Accounting Pronouncements** **(Continued)**
 
 This
        statement is expected to expand the use of fair value measurement. FAS 159
        is
        effective for financial statements issued for fiscal years beginning after
        November 15, 2007, and interim periods within those fiscal years.
 
 In
        July
        2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
        Uncertainty in Income Taxes.” This interpretation requires recognition and
        measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
        15,
        2006. Management is still evaluating what effect this will have on the Company’s
        financial statements.
 
 In
        September 2006, the United States Securities and Exchange Commission (“SEC”)
        issued SAB 108, “Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements.”
 
 This
        SAB
        provides guidance on the consideration of the effects of prior year
        misstatements in quantifying current year misstatements for the purpose of
        a
        materiality assessment. SAB 108 establishes an approach that requires
        quantification of financial statement errors based on the effects of each
        of the
        company’s financial statements and the related financial statement disclosures.
        SAB 108 permits existing public companies to record the cumulative effect
        of
        initially applying this approach in the first year ending after November
        15,
        2006 by recording the necessary correcting adjustments to the carrying values
        of
        assets and liabilities as of the beginning of that year with the offsetting
        adjustment recorded to the opening balance of retained earnings. Additionally,
        the use of the cumulative effect transition method requires detailed disclosure
        of the nature and amount of each individual error being corrected through
        the
        cumulative adjustment and how and when it arose. The Company does not anticipate
        that SAB 108 will have a material impact on its financial
        statements.




F-18




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      3-**  **FIXED
      ASSETS**




Fixed
        assets as of December 31, 2006 were as follows:
 
 Estimated
                  UsefulLives
                  (Years)Furniture
                  and fixtures
              
              
              5
              
              $
              1,146Computer
                  equipment
              
              
              3
              
              
              163,405Vehicles
              
              
              5
              
              
              21,634186,185Less:
                  accumulated depreciation
              
              
              
              
              
              106,488Property
                  and equipment, net
              
              
              
              
              $
              79,697
 
 There
        was
        $22,105 and $12,583 charged to operations for depreciation expense for the
        three
        months ended December 31, 2006 and 2005, respectively.
 
 The
        Company had acquired assets of a related entity in April 2005, United American
        Corporation that related to United American Corporation's use of the Company’s
        VoIP services. These assets, included in fixed assets amounted to $104,500.
 
 **NOTE
        4 -** **RELATED
        PARTY LOANS**
 
 On
        August
        1, 2006, the Company converted $421,080 of the $721,080 of its loans with
        United
        American Corporation, a related party through common ownership, and majority
        shareholder of the Company prior to United American Corporation’s stock dividend
        that took place effective October 30, 2006 into 1,699,323 shares of the
        Company’s common stock. In December 2006, the Company issued a resolution to
        issue the remaining 171 fractional shares related to United American
        Corporation’s spin-off of the corporation and pro-rata distribution of United
        American Corporation’s holding of the Company’s common stock to its
        shareholders. Those shares were issued prior to December 31, 2006 and
        distributed to shareholders. The $300,000 remaining on the loan has become
        interest bearing at 12% per annum on August 1, 2006, payable monthly with
        a
        maturity date of August 1, 2009. Interest on this loan for the three months
        ended December 31, 2006 was $9,000 on this loan. Accrued interest on this
        loan
        as of December 31, 2006 is $15,000.
 
 In
        addition, there are approximately $115,232 of non-interest bearing advances
        that
        were incurred in August and September 2006 from United American Corporation.
        These advances were provided for cash flow purposes for the Company to sustain
        its operations.




F-19


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**


**NOTE
        4-**  **RELATED
        PARTY LOANS** **(CONTINUED)**
  The
          Company has also been advanced various amounts from related parties whom
          are
          either officers, shareholders or entities under control by an officer or
          shareholder. These amounts bear interest at interest rates ranging between
          5%
          and 7% per annum as follows:
 
 As
          of
          December 31, 2006, the Company has $33,149 outstanding with an officer,
          with
          interest expense of $534 for the three months ended December 31, 2006,
          and
          accrued interest on that amount of $3,714 as of December 31, 2006. There
          were no
          amounts outstanding during the three months ended December 31, 2005. As
          the
          amount is due on demand, the Company has classified the loan as a current
          liability.
 
 As
          of
          December 31, 2006, the Company has $66,758 outstanding with shareholders.
          There
          is no accrued interest for these amounts, and interest expense for the
          three
          months ended December 31, 2006 and 2005 were approximately $388 and $450,
          respectively. As the amounts are due on demand, the Company has classified
          them
          as current liabilities.
 
 As
          of
          December 31, 2006, the Company has $7,294 outstanding with a company controlled
          by an officer of the Company with interest expense of $126 for the three
          months
          ended December 31, 2006, and accrued interest on that amount of $921 as
          of
          December 31, 2006. There were no amounts outstanding during the three months
          ended December 31, 2005. As the amounts are due on demand, the Company
          has
          classified them as current liabilities.
 
 As
          of
          December 31, 2006, the Company has $42,905 outstanding with a company controlled
          by an officer of the Company with interest expense of $767 for the three
          months
          ended December 31, 2006. There is $767 of interest accrued as of December
          31,
          2006. There were no amounts outstanding during the three months ended December
          31, 2005. As the amounts are due on demand, the Company has classified
          them as
          current liabilities.
 
 Teliphone,
          Inc. a majority owned subsidiary of the Company, as part of the agreement
          they
          entered into with Intelco Communications and Intelco Communication’s parent,
          3901823 Canada Inc., was extended $25,000 (CDN$), $22,368 (US$) from the
          $75,000
          (CDN$) line of credit extended to them by Intelco Communications. This
          amount
          was repaid by December 31, 2006.




F-20


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
          5-** **CONVERTIBLE
          DEBENTURES**


On
        August
        11, 2005, the Company entered into 10% Convertible Debentures (the “Debentures”)
        with various individuals. The Debentures had a maturity date of August 11,
        2008,
        and incurred interest at a rate of 10% per annum.
 
 The
        Debentures can either be paid to the holders on August 11, 2008 or converted
        at
        the holders’ option any time up to maturity at a conversion price equal to
        eighty percent (80%) of the average closing price of the common stock as
        listed
        on a Principal Market for the five (5) trading days immediately proceeding
        the
        conversion date. If the common stock is not traded on a Principal Market,
        the
        conversion price shall mean the closing bid price as furnished by the National
        Association of Securities Dealers, Inc. The holder agrees that it shall not
        convert the Debentures prior to August 12, 2005, if on a conversion date
        the
        closing price of the common stock on any of the five (5) trading days
        immediately proceeding the applicable conversion date id $.50 per share or
        less.
        The Company’s stock was not trading on a Principal Market as of August 12, 2005,
        and therefore the holders all converted their debentures at $.50 per share.
        The
        total Debentures issued by the Company was $331,760 and the Company issued
        663,520 shares of common stock in conversion of the debentures. The convertible
        debentures met the definition of hybrid instruments, as defined in SFAS 133, *Accounting
        for Derivative Instruments and Hedging Activities* (SFAS
        No. 133). The hybrid instruments are comprised of a i) a debt instrument,
        as the
        host contract and ii) an option to convert the debentures into common stock
        of
        the Company, as an embedded derivative. The embedded derivative derives its
        value based on the underlying fair value of the Company’s common stock. The
        Embedded Derivative is not clearly and closely related to the underlying
        host
        debt instrument since the economic characteristics and risk associated with
        this
        derivative are based on the common stock fair value. There was no derivative
        liability recognized due to the conversion of the debenture into shares of
        common stock at the time the debenture agreement was entered into.
 
 The
        embedded derivative did not qualify as a fair value or cash flow hedge under
        SFAS No. 133.
 
 There
        was
        no interest charged due to the debentures being converted immediately.
 
 **NOTE
        6-**  **COMMITMENTS**
 
 The
        Company’s subsidiary Teliphone Inc. has entered into a distribution agreement
        with one of its distributors in March 2006 for a period of five-years. The
        distribution agreement stipulates that the Company must pay up to 25%
        commissions on all new business generated by the distributor. This distributor
        controls the areas of Quebec and Ontario in Canada. The agreement does not
        stipulate any minimum commissions due the distributor, only that the distributor
        is paid monthly on its business generated. The Company is current with its
        commissions to the distributor.


F-21




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      6-**  **COMMITMENTS** **(CONTINUED)**




On
        August
        23, 2005, The Company’s subsidiary Teliphone, Inc. entered into a marketing and
        distribution rights with Podar Infotech Ltd. The five year renewable agreement
        grants Podar the exclusive marketing and distribution rights for the Company’s
        products and services for India, China, Sri Lanka, Russia and UAE for which
        the
        Company will receive contractually agreed payments. No payments have been
        made
        or accrued as of December 31, 2006. Company senior management and officers
        are
        in process of finalizing amendments to this agreement and anticipate the
        commencement of Podar’s distribution channel to bring revenues into the Company
        by its second fiscal quarter of 2007. Upon services being provided by the
        Company, commissions will be paid to Podar.
 
 The
        Company’s subsidiary Teliphone, Inc. had entered into a lease agreement for its
        offices, which was to expire on July 31, 2010. The Company was to pay
        approximately $50,835 per year, however, on August 1, 2006, vacated the premises
        of the office for which the rent was due. The Company on September 30, 2006
        entered into a Termination Agreement with the landlord to pay $11,522 to
        satisfy
        all obligations under this lease agreement. These amounts have all been
        paid.
 
 Currently,
        the corporate headquarters is leasing space with Intelco Communications,
        a
        minority owner of the Company’s subsidiary Teliphone, Inc. Rent for the first
        year as well as use of Intelco’s data center for Teliphone Inc.’s equipment, and
        use of Intelco’s broadband telephony network is provided to Teliphone Inc. in
        consideration for the 35 shares of the subsidiary Teliphone Inc. stock Intelco’s
        parent company 3901823 Canada, Inc. received. (See Note 7).





F-22


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      7-**  **AGREEMENT
      - INTELCO COMMUNICATIONS**




Teliphone
        Inc., a majority-owned subsidiary of the Company, 3901823 Canada Inc., the
        holding company of Intelco Communications (“3901823”), and Intelco
        Communications (“Intelco”) entered into an agreement (the “Agreement”) on July
        14, 2006. Pursuant to the terms of the Agreement, Teliphone Inc. agreed to
        issue
        35 class A voting shares of its common stock representing 25.2% of Teliphone
        Inc.’s issued shares to 3901823 in exchange for office rent, use of Intelco’s
        data center for Teliphone Inc.’s equipment, and use of Intelco’s broadband
        telephony network valued at approximating $144,000 (CDN$) for the period
        August
        1, 2006 through July 31, 2007, a line of credit of $75,000 (CDN$), of which
        $25,000 (CDN$) was already drawn upon in July 2006.
 
 Teliphone
        Inc. also agreed to make available to the customers of Intelco certain
        proprietary software for broadband telephony use. In lieu of receiving cash
        for
        the licensing of this software, Teliphone Inc. will apply $1 per customer
        per
        month at a minimum of $5,000 per month. Following a twelve month period,
        Intelco
        will receive additional shares of class A voting common stock of Teliphone
        Inc.
        for the difference in the value between $144,000 and the total payments credited
        back to Teliphone Inc. The maximum amount of additional shares that can be
        issued to Intelco after the twelve month period is an additional 8.34% of
        Teliphone Inc.’s issued and outstanding shares. In the event that the total
        payments credited back to Teliphone Inc. exceeds $144,000, Intelco will not
        be
        entitled to the issuance of any additional shares of Teliphone Inc. common
        stock.
 
 Teliphone
        Inc. recognized a prepaid expense for the fair value of the shares issued
        to
        Intelco. The value of the prepaid expense was determined based on the estimated
        cost of the services that Teliphone Inc. is to receive under the Joint Venture
        Agreement entered into for a one-year period of time. The cost was estimated
        at
        $12,000 (CDN$) per month. Teliphone Inc. up through December 31, 2006 has
        not
        used the $12,000 (CDN$) per month. As of December 31, 2006, the balance
        remaining in the prepaid expense for Intelco is $134,072 (CDN$) or $115,047
        (US$). Should Teliphone Inc. utilize more service from Intelco, the appropriate
        number of additional shares that Intelco will be issued will be provided
        under
        the agreement. In addition to the stock issuance, Teliphone Inc. is expected
        to
        have approximately $56,000 available in research and development tax credits
        that have been pledged as a guarantee under their agreement with Intelco.
        These
        are only tax credits, and not to be received in the form of a cash
        refund.
 
 The
        amounts drawn under the line of credit will be recorded as liabilities, the
        value of the utilization of the network, savings on office rent and use of
        equipment is the value of the investment equal to the number of shares issued
        by
        Teliphone Inc.
 
 Teliphone
        Inc. had until December 31, 2006 to repay this amount, and did repay the
        amount
        by December 31, 2006.




F-23




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      8-**  **STOCKHOLDERS’
      DEFICIT**




**Common
        Stock**
  As
        of
        December 31, 2006, the Company has 125,000,000 shares of common stock authorized
        with a par value of $.001.
 
 The
        Company has 33,554,014 shares issued and outstanding as of December 31,
        2006.
 
 On
        September 30, 2004, the Company had 3,216,000 shares issued and outstanding.
        On
        April 28, 2005, the Company entered into a reverse merger upon the acquisition
        of Teliphone, Inc. and issued 27,010,000 shares of common stock to the
        shareholders of Teliphone, Inc. in exchange for all of the outstanding shares
        of
        stock of Teliphone, Inc. Thus the Company had 30,426,000 shares issued and
        outstanding.
 
 On
        August
        31, 2005, the Company issued 663,520 shares of common stock in conversion
        of the
        Company’s convertible debentures in the amount of $331,760.
 
 On
        August
        22, 2006, the Company issued 1,699,323 shares of common stock to United American
        Corporation in conversion of related party debt in the amount of $421,080
        (see
        Note 4). An additional 171 fractional shares were issued in December 2006.
 
 On
        August
        22, 2006, the Company issued 105,000 shares of common stock for consulting
        services. These services have been valued at $0.25 per share, the price at
        which
        the Company’s offering will be. The value of $26,250 was reflected in the
        consolidated statement of operation for the year ended September 30,
        2006.
 
 In
        December 2006, the Company issued 660,000 shares of common stock representing
        a
        value in the amount of $165,000, for consulting services that occurred during
        the year ended September 30, 2006. The Company recognized the expense in
        the
        year ended September 30, 2006 as the services were provided in this time
        frame.
        The Company used the $0.25 price for valuation purposes.
 
 **NOTE
        9-**  **PROVISION
        FOR INCOME TAXES**
 
 Deferred
        income taxes are determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes are measured based on
        the tax rates expected to be in effect when the temporary differences are
        included in the Company’s tax return. Deferred tax assets and liabilities are
        recognized based on anticipated future tax consequences attributable to
        differences between financial statement carrying amounts of assets and
        liabilities and their respective tax bases.




F-24


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      9-**  **PROVISION
      FOR INCOME TAXES** **(CONTINUED)**





At
        December 31, 2006, deferred tax assets consist of the
        following:
 Net
                    operating losses
                
                $
                499,225Valuation
                    allowance
                
                
                (499,225
                )$
                    -
                
                
                -
 
 At
        December 31, 2006, the Company had a net operating loss carryforward in the
        approximate amount of $1,468,308, available to offset future taxable income
        through 2026. The Company established valuation allowances equal to the full
        amount of the deferred tax assets due to the uncertainty of the utilization
        of
        the operating losses in future periods.
 
 A
        reconciliation of the Company’s effective tax rate as a percentage of income
        before taxes and federal statutory rate for the periods ended September 30,
        2006
        and 2005 is summarized as follows:
 
  2006
              
              
              2005Federal
                  statutory rate
              
              
              (34.0
              )%
              
              
              (34.0
              )%State
                  income taxes, net of federal benefits
              
              
              3.3
              
              
              
              3.3Valuation
                  allowance
              
              
              30.7
              
              
              
              30.70
              %
              
              
              0
              %




F-25





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**





**NOTE
      10-**  **RESTATEMENT
      OF FINANCIAL STATEMENTS**





The
        condensed consolidated financial statements have been restated to correct
        an
        error in the treatment of a computer equipment operating lease which was
        originally treated as a capital lease. The statements have also been restated
        to
        correct an error in calculation of interest on loans payable from an officer
        of
        the company. The statements have also been restated to correct an error where
        the purchase of computer equipment was classified incorrectly as a purchase
        of
        VoIP services.
 
 The
        restatement adjusted the following line items:


Accounts
                    receivable, net previously reported
                
                $
                20,813Adjustment
                
                $
                325Accounts
                    receivable, as restated
                
                $
                21,138Fixed
                    Assets, net of depreciation previously reported
                
                $
                99,003Adjustment
                
                
                ($19,306
                )Fixed
                    Assets, net of depreciation, as restated
                
                $
                79,697Accounts
                    payable and accrued expenses, previously reported
                
                $
                108,248Adjustment
                
                $
                2,654Accounts
                    payable and accrued expenses, as restated
                
                $
                110,902Related
                    party loans and advances, previously reported
                
                $
                560,816Adjustment
                
                $
                27Related
                    party loans and advances, as restated
                
                $
                560,843Current
                    portion of obligation under capital lease, previously
                    reported
                
                $
                11,323Adjustment
                
                
                ($11,323
                )Current
                    portion of obligation under capital lease, as restated
                
                $
                0Obligations
                    under capital lease, net of current maturities, previously
                    reported
                
                $
                10,755Adjustment
                
                
                ($10,755
                )Obligations
                    under capital lease, net of current maturities, as
                    restated
                
                $
                0Minority
                    interest (Balance sheet), previously reported
                
                $
                115,570Adjustment
                
                $
                107Minority
                    interest (Balance sheet), as restated
                
                $
                115,677Accumulated
                    deficit, previously reported
                
                
                ($1,468,627
                )Adjustment
                
                $
                319Accumulated
                    deficit, as restated
                
                
                ($1,468,308
                )


F-26





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**(RESTATED)**


Purchases
                    and cost of VoIP services, previously reported
                
                $
                107,466Adjustment
                
                $
                1,801Purchases
                    and cost of VoIP services, as restated
                
                $
                109,267Depreciation,
                    previously reported
                
                $
                23,901Adjustment
                
                
                ($1,796
                )Depreciation,
                    as restated
                
                $
                22,105Interest
                    expense, previously reported)
                
                
                ($11,365Adjustment
                
                $
                378Interest
                    expense, as restated
                
                
                ($10,987
                )Minority
                    interest (St of Operations), previously reported
                
                $
                14,111Adjustment
                
                
                ($108
                )Minority
                    interest (St. of Operations), as restated
                
                $
                14,003Currency
                    translation adjustments, previously reported
                
                
                ($1,675
                )Adjustment
                
                $
                1,621Currency
                    translation adjustments, as restated
                
                
                ($54
                )





F-27


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**




Management’s
      Discussion and Analysis contains various “forward looking statements” within the
      meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
      regarding future events or the future financial performance of the Company
      that
      involve risks and uncertainties. Certain statements included in this Form
      10-QSB/A, including, without limitation, statements related to anticipated
      cash
      flow sources and uses, and words including but not limited to “anticipates”,
“believes”, “plans”, “expects”, “future” and similar statements or expressions,
      identify forward looking statements. Examples of forward-looking statements
      include, but are not limited to: (a) projections of our revenues, capital
      expenditures, growth, prospects, dividends, capital structure and other
      financial matters; (b) statements of our plans and objectives; (c) statements
      of
      our future economic performance; (d) statements of assumptions underlying other
      statements and statements about us and our business relating to the future;
      and
      (e) any statements using the words "believes," "budget," "target," "goal,"
      "anticipate," "expect," "plan," "outlook," "objective," "may," "project,"
      "intend," "estimate," or similar expressions. Any forward-looking statements
      herein are subject to certain risks and uncertainties in the Company’s business,
      including but not limited to, reliance on key customers and competition in
      its
      markets, market demand, product performance, technological developments,
      maintenance of relationships with key suppliers, difficulties of hiring or
      retaining key personnel and any changes in current accounting rules, all of
      which may be beyond the control of the Company. The Company’s actual results
      could differ materially from those anticipated in these forward-looking
      statements as a result of certain factors, including those set forth
      therein.




Management’s
      Discussion and Analysis of Results of Financial Condition and Results of
      Operations (“MD&A”) should be read in conjunction with the financial
      statements included herein. Further, this quarterly report on Form 10-QSB/A
      should be read in conjunction with the Company’s Financial Statements and Notes
      to Financial Statements included in its 2006 Annual Report on Form
      10-KSB.




The
      Company's financial statements have been prepared in accordance with United
      States generally accepted accounting principles. We urge you to read this report
      in conjunction with the risk factors described herein.




**BACKGROUND**




**Company
      Overview**




As
      used
      in this annual report, "we", "us", "our", “Teliphone”, the "Group", "Company" or
      "our company" refers to Teliphone Corp., a Nevada corporation, together with
      our
      majority-owned subsidiary Teliphone Inc., a Canadian corporation.





History




We
        were
        incorporated in Nevada under the name “OSK CAPITAL II CORP” in 1999. In April of
        2005, we effectuated a merger and re-organization with Teliphone Inc., a
        Canadian Internet Telecommunications (VoIP or “Voice-Over-Internet-Protocol”)
        Company. Teliphone Inc. is now a majority-owned subsidiary of our company
        and as
        such, our revenues are derived primarily from the sale of telecommunications
        services to retail clients.
 
 The
        following trends have lead Management to believe that an enormous window
        of
        opportunity exists to enter the Retail Telecommunications Market:
 
 ·
            Broadband
                Internet (also know as “High Speed Internet”) has become more prevalent
                worldwide and therefore the number of people looking to use Internet-based
                telecommunications services is
                increasing. ·
            In
                today’s technology-driven society, consumers are constantly looking for
                innovative ways to reduce the costs for their telecommunications
                needs
                without sacrificing ease-of-use and
                convenience ·
            The
                Internet has become the defacto standard for use by consumers to
                seek
                information, and as a result, the quantity of internet web site viewing
                has increased, producing opportunities for generating advertising
                revenues
                from the usage by consumers of a website. 
 The
        development of our Teliphone VoIP service permits us to sell telecommunications
        services to consumers who have a broadband internet connection. The service’s
        innovative calling features permit these consumers to benefit from our
        value-added services such as enhanced voice-mail and international call
        forwarding services while reducing the cost of their telecommunications services
        compared with traditional residential and mobile phone charges.
 
 The
        development of our callona.com website seeks to attract consumers on the
        internet who will look to utilize our web-based communications services,
        which
        will permit us to generate advertising and promotional revenues from other
        companies looking to advertise and promote their products to our callona.com
        users.
 
 Since
        we
        launched our Teliphone services, we incurred costs principally related to
        the
        development of our proprietary software, acquisition of telecommunications
        and
        computer hardware and the rental fees associated with having voice channels
        that
        were part of the public switched telephone network (PSTN), which permits
        our
        customers to make phone calls from their Teliphone device direct to any other
        phone number, be it a cellular-mobile phone or traditional wireline phone
        anywhere in the world. We have not yet officially launched our callona.com
        service, which has been in a prototype stage since the end of 2006. Since
        inception, we have invested approximately 1.5M$ to build our technology and
        market our products.




2




We
        initially marketed our Teliphone services at one re-seller’s retail store in
        downtown Montreal, which has now expanded to sales points across the Central
        Canadian provinces of Ontario and Quebec, along with regions in India. We
        utilize our website, www.teliphone.us to sell
        to consumers in the USA.





On
      July
      14th, 2006, we entered into a letter of intent with 3901823 Canada Inc. where
      3901823 Canada Inc. becomes a minority shareholder of our subsidiary Teliphone
      Inc. As a result of this letter of Intent, Teliphone Inc. remains a
      majority-owned subsidiary of our company at 74.8% and 3901823 Canada Inc. owns
      25.2%.





On
      October 30, 2006, United American Corporation spun-off our Company by
      distributing its entire holding of 25,737,956 shares of the common stock of
      our
      company to its shareholders on a pro rata basis. Prior to the distribution,
      United American Corporation held 76.7% of the common stock of our
      company.





Principal
      Products or Services And Their Markets





With
      the
      merger and re-organization we became a telecommunications company providing
      broadband telephone services utilizing our innovative Voice over Internet
      Protocol, or VoIP, technology platform, to offer feature-rich, low-cost
      communications services to our customers, thus providing them an experience
      similar to traditional telephone services at a reduced cost. VoIP means that
      the
      technology used to send data over the Internet (example, an e-mail or web site
      page display) is used to transmit voice as well. The technology is known as
      packet switching. Instead of establishing a dedicated connection between two
      devices (computers, telephones, etc.) and sending the message "in one piece,"
      this technology divides the message into smaller fragments, called 'packets'.
      These packets are transmitted separately over the internet and when they reach
      the final destination, they are reassembled into the original
      message.





The
      Company offers the following services to customers utilizing its VoIP technology
      platform:




·
            Local
                and International VoIP calling services for residential customers
                in the
                Province of Quebec, Canada·
            Local
                and International VoIP calling services for small businesses in the
                Province of Quebec, Canada·
            International
                VoIP calling services to residential customers in
                India





Distribution
      Methods of The Products or Services





Retail
      Sales





We
      distribute our products and services through our retail partners' stores. Our
      retail partners have existing public retail outlets where they typically sell
      telecommunications or computer related products and services such as other
      telecommunications services (cellular phones) or computer hardware and
      software.




3




The
      Company does not own or rent any retail space for the purpose of distribution,
      rather, it relies on its re-seller partners to display and promote the Company's
      products and services within their existing retail stores. Our agreement with
      BR
      Communications Inc. has permitted us to establish our retail sales
      channel.





For
      a
      retail sale to occur, our re-sellers purchase hardware from us and hold
      inventory of our hardware at their store. In some cases, we may sell the
      hardware to our re-sellers below cost in order to subsidize the customer's
      purchase of the hardware from the re-seller. Upon the sale of hardware to the
      customer, the retail partner activates the service on our website while in-store
      with the customer.





Internet
      Sales





We
      likewise distribute our products through the sale of hardware on our website,
      www.teliphone.us. The customer purchases the necessary hardware from our on-line
      catalog. Upon receipt of the hardware from us, the customer returns to the
      company's website to activate their services.





Wholesale
      Sales





We
      likewise distribute our products and services through Wholesalers. A Wholesaler
      is a business partner who purchases our products and services "unbranded",
      that
      is, with no reference to our Company on the hardware or within the service,
      and
      re-bills the services to their end-user customers. In the case of a sale to
      our
      Wholesalers, we do not sell the hardware below cost.





In
      the
      Province of Quebec, we have an agreement with 9151-4877 Quebec Inc. "Dialek"
      who
      is a wholesaler of our products and services. The nature of the agreement is
      such that Dialek purchases our products and services at volume quantities and
      re-selles them to their own end-user customers. Internationally, we have an
      agreement with Podar Infotech LLC "Podar"of India, our principal wholesale
      partner in Asia and the Middle East. Podar sells to re-sellers and end-users
      the
      Company's products and services exclusively in India, China, Russia, Sri Lanka
      and the United Arab Emirates.





Status
      of
      Any Publicly Announced New Product or Service





TeliPhone
      VoIP services were officially launched to the public in the Province of Quebec
      in December of 2004.





Teliphone
      Residential Voip Service





The
      Company currently offers a residential VoIP phone service to customers in the
      provinces of Ontario and Quebec. Average revenues per customer are $30.00 per
      month. The customer can also purchase virtual numbers from other cities in
      North
      America and internationally, permitting the customer to provide a local phone
      number to their calling party who is in another area or country that normally
      would represent a long distance call. These services cost from $5 to $30 per
      month depending on the country.





Teliphone
      Small Business Voip Services





During
      2005Q3, The Company began to target Small and Medium sized business clients
      with
      an expanded version of its offering. Average revenues per customer in this
      segment are $400. The Company markets these services primarily through its
      telecom interconnection resellers, who have existing customer relationships
      in
      this segment.





4




Teliphone
      has also developed and integrated new software permitting the replacement of
      traditional auto-attendant and office telephony systems. The Company is
      currently finalizing its beta trials and will introduce to the market through
      its interconnection re-seller base in 2007 - Q1.





CallOnA.com





We
      are
      currently testing our CallOnA.com service, which permits users to execute free
      calls to certain international destinations by initiating a call from our
      website. This service has not been fully tested as of yet and we anticipate
      launching the service in a preliminary form within the next several
      months.





Teliphone
      Mobile Voip And Single Point Of Contact Services (Mobilnation)





This
      service is an entry-level service targeting both residential and business mobile
      phone users. This end-user customer does not require broadband internet access
      or any additional equipment to utilize this service. Users pay a fixed monthly
      fee of $9.95 per month and receive a phone number where they are provided
      options to re-direct the incoming call to numerous phones, enhanced voice-mail,
      as well as the ability to add virtual numbers from other cities ($4.95 per
      month), eliminating inbound long distance charges to their calling
      parties.





Customers
      of MobilNation are provided with multiple dial-up numbers from various cities
      in
      the US & Canada. This permits the customer to make long distance calls on
      their home or cellular phone by purchasing the long distance call from the
      Company instead of their existing service provider. Our rates are typically
      up
      to 50% less than existing suppliers, thereby reducing our customer's overall
      monthly phone bill.





The
      MobilNation services are currently in the final stages of development. They
      will
      be marketed primarily over the Internet and will be introduced in 2007Q1 to
      The
      Company's Retail sales points as well.





Competitive
      Business Conditions





Today,
      VoIP technology is used in the backbone of many traditional telephone networks,
      and VoIP services are offered to residential and business users by a wide array
      of service providers, including established telephone service providers. These
      VoIP providers include traditional local and long distance phone companies,
      established cable companies, Internet service providers and alternative voice
      communications providers such as Teliphone.





While
      all
      of these companies provide residential VoIP communications services, each group
      provides those services over a different type of network, resulting in important
      differences in the characteristics and features of the VoIP communications
      services that they offer. Traditional wireline telephone companies offering
      VoIP
      services to consumers do so using their existing broadband DSL networks.
      Similarly, cable companies offering VoIP communications services use their
      existing cable broadband networks. Because these companies own and control
      the
      broadband network over which the VoIP traffic is carried between the customer
      and public switched telephone network, they have the advantage of controlling
      a
      substantial portion of the call path and therefore being better able to control
      call quality. In addition, many of these providers are able to offer their
      customers additional bandwidth dedicated solely to the customer's VoIP service,
      further enhancing call quality and preserving the customer's existing bandwidth
      for other uses. However, these companies typically have high capital
      expenditures and operating costs in connection with their networks. In addition,
      depending on the structure of their VoIP networks, the VoIP services provided
      by
      some of these companies can only be used from the location at which the
      broadband line they provide is connected.





5




Like
      traditional telephone companies and cable companies offering VoIP services,
      the
      Company also connects its VoIP traffic to the public switched telephone network
      so that their customers can make and receive calls to and from non-VoIP users.
      Unlike traditional telephone companies and cable companies, however, alternative
      voice communications providers such as Teliphone do not own or operate a private
      broadband network. Instead, the VoIP services offered by these providers use
      the
      customer's existing broadband connection to carry call traffic from the customer
      to their VoIP networks. These companies do not control the "last mile" of the
      broadband connection, and, as a result, they have less control over call quality
      than traditional telephone or cable companies do. However, these companies
      have
      the operating advantage of low capital expenditure requirements and operating
      costs.





Internet
      service providers generally offer or have announced intentions to offer VoIP
      services principally on a PC-to-PC basis. These providers generally carry their
      VoIP traffic for the most part over the public Internet, with the result that
      VoIP services are often offered for free, but can only be used with other users
      of that provider's services. Many of these providers offer a premium service
      that allows customers to dial directly into a public switched telephone network.
      In addition, while no special adapters or gateways are required, often customers
      must use special handsets, headsets or embedded microphones through their
      computers, rather than traditional telephone handsets.





Competition





The
      telecommunications industry is highly competitive, rapidly evolving and subject
      to constant technological change and to intense marketing by different providers
      of functionally similar services. Since there are few, if any, substantial
      barriers to entry, except in those markets that have not been subject to
      governmental deregulation, we expect that new competitors are likely to enter
      our markets. Most, if not all, of our competitors are significantly larger
      and
      have substantially greater market presence and longer operating history as
      well
      as greater financial, technical, operational, marketing, personnel and other
      resources than we do.





Our
      use
      of VoIP technology and our proprietary systems and products enables us to
      provide customers with competitive pricing for telecommunications services.
      Nonetheless, there can be no assurance that we will be able to successfully
      compete with major carriers in present and prospective markets. While there
      can
      be no assurances, we believe that by offering competitive pricing we will be
      able to compete in our present and prospective markets.





We
      rely
      on specialized telecommunications and computer technology to meet the needs
      of
      our consumers. We will need to continue to select, invest in and develop new
      and
      enhanced technology to remain competitive. Our future success will also depend
      on our operational and financial ability to develop information technology
      solutions that keep pace with evolving industry standards and changing client
      demands. Our business is highly dependent on our computer and telephone
      equipment and software systems, the temporary or permanent loss of which could
      materially and adversely affect our business.





The
      Company is provided its phone numbers and interconnection with the existing
      public switched telephone network in Canada by Rogers Business Solutions. This
      agreement was originally signed in 2004 under Teliphone's former parent company
      United American Corporation and has since been updated to the current agreement
      with Teliphone and Rogers Business Solutions signed on April 25th, 2006. In
      the
      US and internationally, this service is provided by RNK Telecom
      Inc.




6




We
      are
      not dependent on a few major customers. Our largest Wholesale customer, Dialek
      Telecom, currently produces less than 10% of our monthly revenues.





Existing
      and Probable Governmental Regulation





Overview
      of Regulatory Environment





Traditional
      telephone service has historically been subject to extensive federal and state
      regulation, while Internet services generally have been subject to less
      regulation. Because some elements of VoIP resemble the services provided by
      traditional telephone companies, and others resemble the services provided
      by
      Internet service providers, the VoIP industry has not fit easily within the
      existing framework of telecommunications law and until recently, has developed
      in an environment largely free from regulation.





The
      Federal Communications Commission, or FCC, the U.S. Congress and various
      regulatory bodies in the states and in foreign countries have begun to assert
      regulatory authority over VoIP providers and are continuing to evaluate how
      VoIP
      will be regulated in the future. In addition, while some of the existing
      regulation concerning VoIP is applicable to the entire industry, many rulings
      are limited to individual companies or categories of service. As a result,
      both
      the application of existing rules to us and our competitors and the effects
      of
      future regulatory developments are uncertain.





Regulatory
      Classification of VoIP Services





On
      February 12, 2004, the FCC initiated a rulemaking proceeding concerning the
      provision of VoIP and other services, and applications utilizing Internet
      Protocol technology. As part of this proceeding, the FCC is considering whether
      VoIP services like ours should be classified as information services, or
      telecommunications services. We believe our service should be classified as
      information services. If the FCC decides to classify VoIP services like ours
      as
      telecommunications services, we could become subject to rules and regulations
      that apply to providers of traditional telephony services. This could require
      us
      to restructure our service offering or raise the price of our service, or could
      otherwise significantly harm our business.





While
      the
      FCC has not reached a decision on the classification of VoIP services like
      ours,
      it has ruled on the classification of specific VoIP services offered by other
      VoIP providers. The FCC has drawn distinctions among different types of VoIP
      services, and has concluded that some VoIP services are telecommunications
      services while others are information services. The FCC's conclusions in those
      proceedings do not determine the classification of our service, but they likely
      will inform the FCC's decision regarding VoIP services like ours.





In
      Canada, the Canadian Radio-Television Commission (CRTC) is the regulating body
      who has set guidelines that our subsidiary, Teliphone, must meet. These
      guidelines center around 9-1-1 calling services and other services that are
      normally available to subscribers of traditional telephony services. Teliphone
      has met these requirements in its product offering.





An
      additional element of Canadian regulation is that the incumbent providers,
      Bell
      Canada (Central and Eastern Canada) and Telus (Western Canada), who in 2004
      controlled over 98% of the Business and Residential phone lines, are not able
      to
      reduce their prices to meet the newly offered reduced price options of
      independent VoIP and Cable phone companies. This regulation permitted
      independents such as Teliphone to provide their VoIP phone service without
      fear
      of anti-competitive activity by the incumbents. The CRTC has recently ruled
      that
      they will permit the reduction of pricing by the incumbent carriers once a
      25%
      market share has been attained by the upstart phone service providers. Effective
      March 2005, there is a penetration of 10% of phone services by up-start VoIP
      providers. Teliphone views its long term strategy outside of just residential
      phone service, through the availability of international phone numbers to global
      clients, thereby creating an international product offering, a strategy that
      is
      very different from the geographically limited incumbent carriers.




7




VoIP
      E-911 Matters





On
      June
      3, 2005, the FCC released an order and notice of proposed rulemaking concerning
      VoIP emergency services. The order set forth two primary requirements for
      providers of "interconnected VoIP services" such as ours, meaning VoIP services
      that can be used to send or receive calls to or from users on the public
      switched telephone network.





First,
      the order requires us to notify our customers of the differences between the
      emergency services available through us and those available through traditional
      telephony providers. We also must receive affirmative acknowledgment from all
      of
      our customers that they understand the nature of the emergency services
      available through our service. Second, the order requires us to provide enhanced
      emergency dialing capabilities, or E-911, to all of our customers by November
      28, 2005. Under the terms of the order, we are required to use the dedicated
      wireline E-911 network to transmit customers' 911 calls, callback number and
      customer-provided location information to the emergency authority serving the
      customer's specified location.





Effective
      as of this filing, we have complied with all of these FCC
      requirements.





International
      Regulation





The
      regulation of VoIP services is evolving throughout the world. The introduction
      and proliferation of VoIP services have prompted many countries to reexamine
      their regulatory policies. Some countries do not regulate VoIP services, others
      have taken a light-handed approach to regulation, and still others regulate
      VoIP
      services the same as traditional telephony. In some countries, VoIP services
      are
      prohibited. Several countries have recently completed or are actively holding
      consultations on how to regulate VoIP providers and services. We primarily
      provide VoIP services internationally in Canada.





Canadian
      Regulation





Classification
      and Regulation of VoIP Services.





The
      Telecommunications Act governs the regulation of providers of telecommunications
      services in Canada. We are considered a telecommunications service provider
      rather than a telecommunications common carrier.




Telecommunications
      service providers are subject to less regulation than telecommunications common
      carriers, but do have to comply with various regulatory requirements depending
      on the nature of their business.





On
      May
      12, 2005, the Canadian regulator, the CRTC, stated that VoIP services permitting
      users to make local calls over the public switched telephone networks will
      be
      regulated by the same rules that apply to traditional local telephone services.
      Because we are not a telecommunications common carrier, we will not be subject
      to such regulation. Under the CRTC's decision, however, we are required to
      register as a local VoIP reseller in order to obtain access to certain services
      from other telecommunications providers.





The
      CRTC's May 12, 2005 decision provided that VoIP providers who are registered
      as
      local VoIP resellers will be able to obtain numbers and portability from
      Canadian local exchange carriers, but will not be able to obtain numbers
      directly from the Canadian Numbering Administrator or to have direct access
      to
      the local number portability database. The CRTC's decision also identified
      other
      obligations of VoIP providers, such as contributing to a national service fund,
      complying with consumer protection, data and privacy requirements, and providing
      access for the disabled. The details of these requirements have been referred
      to
      industry groups for further study. Certain aspects of the decision are the
      subject of pending appeals by other Canadian VoIP providers. We do not know
      what
      requirements will ultimately be imposed nor the potential cost that compliance
      may entail. The CRTC found that it is technically feasible for VoIP providers
      to
      support special services for hearing-impaired customers.




8




Effective
      the filing of this prospectus, we have complied with all CRTC
      requirements.





Provision
      of 911 Services





On
      April
      4, 2005, the CRTC released a ruling requiring certain providers of VoIP
      services, like us, to provide interim access to emergency services at a level
      comparable to traditional basic 911 services by July 3, 2005 or such later
      date
      as the CRTC may approve on application by a service provider. Under the interim
      solution adopted by the regulator for the provision of VoIP 911 services,
      customers of local VoIP services who dial 911 will generally be routed to a
      call
      center, where agents answer the call, verbally determine the location of the
      caller, and transfer the call to the appropriate emergency services agency.
      VoIP
      service providers are also required to notify their customers about any
      limitations on their ability to provide 911 services in a manner to be
      determined.





Since
      July 2005, Teliphone has complied with these regulations by partnering with
      a
      PSAP (Primary Service Access Point) which serves to verify the customer location
      and forward the call to the respective Municipal 9-1-1 center for assistance.
      This service therefore permits Teliphone's customers to have access to 9-1-1
      services irrespective of their physical location, anywhere in the Continental
      US
& Canada. This service is of significance as VoIP permits customers to
      utilize their phone anywhere a high-speed internet connection exists and can
      therefore be located outside of their local city when requiring 9-1-1
      services.





Other
      Foreign Jurisdictions





Our
      operations in foreign countries must comply with applicable local laws in each
      country we serve. The communications carriers with which we associate in each
      country is licensed to handle international call traffic, and takes
      responsibility for all local law compliance. For that reason we do not believe
      that compliance with the laws of foreign jurisdictions will affect our
      operations or require us to incur any significant expense




Going
      Concern:




The
        Company has incurred recurring losses of $53,584 and $67,659 for the three
        months ended December 31, 2006 and 2005, and has a working capital deficiency
        of
        $523,147 as of December 31, 2006. The Company has been searching for new
        distribution channels to wholesale their services to provide additional revenues
        to support their operations. In addition, the Company entered into a letter
        of
        intent with Intelco Communications that can save them operating costs in
        addition to providing support services; however, this has not had an impact
        on
        the current year operations. The Company successfully reduced approximately
        $400,000 of related party debt as this was converted into additional shares
        of
        the Company’s stock in August 2006. There is no guarantee that the Company will
        be able to raise additional capital or generate the increase in revenues
        to
        sustain its operations, however the Company has recently submitted a
        registration statement of Form SB-2 to raise additional capital. Accordingly,
        ou
        r auditors have stated their opinion that there currently exists substantial
        doubt about our ability to continue as a going concern.




9


Three
      Months Ended December 31, 2006 Compared to Three Months


Ended
      December 31, 2005





The
        Company's condensed consolidated balance sheet as of the three months ended
        December 31, 2006, had assets consisting of accounts receivable in the amount
        of
        $21,138, income tax receivable (Canadian Research and Development Tax Credits)
        of $14,075, inventory of $17,697 and prepaid expenses of $115,047, fixed
        assets
        of $79,697, but no cash. The Company has expended its cash in furtherance
        of its
        business plan, including expenditure of funds to pay legal and accounting
        expenses. Consequently, the Company's condensed consolidated balance sheet
        as of
        ended December 31, 2006 reflects an accumulated deficit of ($1,468,308) and
        a
        stockholders' deficit of ($559,127).
 
 The
        Company recorded sales of $129,234 for the three months ended December 31,
        2006
        as compared to $87,011 for the three months ended December 31, 2005. The
        increase in sales is primarily due to increased sales in the small business
        segment in our domestic market.
 
 The
        Company's cost of sales were $102,604 for the three months ended December
        31,
        2006 as compared to $102,246 for the three months ended December 31, 2005,
        primarily as a consequence, in spite of an increase of sales, of a decrease
        in
        the cost of purchasing inventory. We have moved to outsourced fulfillment
        and
        provisioning of our device hardware and therefore stock inventory on an as
        needed basis in order to fulfill our re-seller demand.
 
 The
        Company's aggregate operating expenses were $83,230 for the three months
        ended
        December 31, 2006 as compared to $50,753 for the three months ended December
        31,
        2005. In particular, there was a decrease in Selling and Promotion expenses
        from
        $1,869 to $961 as the company reduced its purchasing of promotional media
        and
        sales travel as it concentrated its sales in its local market. There was
        an
        increase in Salaries and Wages from $19,080 to $38,807 as the Company began
        to
        pay its subsidiary President as an employee instead of a consultant from
        June
        2006 onwards and the Company hired an additional Research and Development
        employee in June of 2006. There was a decrease in Professional and Consulting
        fees from $12,334 to $9,181 attributed to a reduction of legal and compliance
        fees for the period. There was an increase in General and Administrative
        Expenses from $4,887 to $12,176 due to increased expenditures associated
        with
        the move of the company from its offices within the Company founder’s basement
        and its offices in downtown Montreal. There was an increase in Depreciation
        Expenses from $12,583 to $22,105 attributed to the acquisition of additional
        computer equipment during the period.
 
 The
        Company had a net loss of for the three months ended December 31, 2006 of
        ($53,638) as compared to ($65,569) for the three months ended December 31,
        2005,
        primarily as a consequence of further reduction of costs attributed to our
        telecommunications network and our operating expenses along with an increase
        in
        sales in our domestic market.


Plan
      of
      Operations and Need for Additional Financing





The
      Company's plan of operations for most of 2007 is to build a subscriber base
      of
      both residential and business customers who purchase telecommunications services
      on a monthly basis, as well as wholesale technology and telecommunications
      solutions to Tier 1 & Tier 2 telecommunications companies and international
      reseller partners.




The
      Company will require additional capital in order to pay the costs associated
      with developing its business plan. Even though we have secured adequate funding,
      no assurances can be provided that our business activities will generate
      sufficient revenues which may result in net profits for the Company. Our
      auditors have raised substantial doubt as to our ability to continue as a going
      concern. The financial statements do not include any adjustments that might
      result from the outcome of these uncertainties.


10




ACCOUNTING
      POLICIES SUBJECT TO ESTIMATION AND JUDGMENT





Management's
      Discussion and Analysis of Financial Condition and Results of Operations are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      When preparing our financial statements, we make estimates and judgments that
      affect the reported amounts on our balance sheets and income statements, and
      our
      related disclosure about contingent assets and liabilities. We continually
      evaluate our estimates, including those related to revenue, allowance for
      doubtful accounts, reserves for income taxes, and litigation. We base our
      estimates on historical experience and on various other assumptions, which
      we
      believe to be reasonable in order to form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily ascertained
      from other sources. Actual results may deviate from these estimates if
      alternative assumptions or condition are used.





USE
      OF
      ESTIMATES





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. On an on-going basis, the Company evaluates its
      estimates, including, but not limited to, those related to investment tax
      credits, bad debts, income taxes and contingencies. The Company bases its
      estimates on historical experience and on various other assumptions that are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying value of assets and liabilities
      that are not readily apparent from other sources. Actual results could differ
      from those estimates.





INVENTORIES





Inventories
      are stated at the lower of cost to purchase and/or manufacture the inventory
      or
      the current estimated market value of the inventory. We regularly review our
      inventory quantities on hand and record a provision for excess and obsolete
      inventory based primarily on our estimated forecast of product demand and/or
      our
      ability to sell the products and production requirements. Demand for the our
      products can fluctuate significantly. Factors which could affect demand for
      our
      products include unanticipated changes in consumer preferences, general market
      conditions or other factors, which may result in cancellations of advance orders
      or a reduction in the rate of reorders placed by customers and/or continued
      weakening of economic conditions. Additionally, our estimates of future product
      demand may be inaccurate, which could result in an understated or overstated
      provision required for excess and obsolete inventory. Our estimates are based
      upon our understanding of historical relationships which can change at
      anytime.





CURRENCY
      TRANSLATION





For
      subsidiaries outside the United States that prepare financial statements in
      currencies other than the U.S. dollar, the Company translates income and expense
      amounts at average exchange rates for the year, translates assets and
      liabilities at year-end exchange rates and equity at historical rates. The
      Company records these translation adjustments as accumulated other comprehensive
      income (loss). Gains and losses from foreign currency transactions are included
      in other income (expense) in the results of operations.


11




RESEARCH
      AND DEVELOPMENT





The
      Company annually incurs costs on activities that relate to research and
      development of new products. Research and development costs are expensed as
      incurred. Certain of these costs are reduced by government grants and investment
      tax credits where applicable.





INCOME
      TAXES





The
      Company accounts for income taxes utilizing the liability method of accounting.
      Under the liability method, deferred taxes are determined based on differences
      between financial statement and tax bases of assets and liabilities at enacted
      tax rates in effect in years in which differences are expected to reverse.
      Valuation allowances are established, when necessary, to reduce deferred tax
      assets to amounts that are expected to be realized.





STOCK-BASED
      COMPENSATION





The
      Company measures compensation expense for its employee stock-based compensation
      using the intrinsic-value method. Under the intrinsic-value method of accounting
      for stock-based compensation, when the exercise price of options granted to
      employees and common stock issuances are less than the estimated fair value
      of
      the underlying stock on the date of grant, deferred compensation is recognized
      and is amortized to compensation expense over the applicable vesting period.
      In
      each of the periods presented, the vesting period was the period in which the
      options were granted. All options were expensed to compensation in the period
      granted rather than the exercise date.





SEGMENT
      INFORMATION





The
      Company follows the provisions of SFAS No. 131, "Disclosures about Segments
      of
      an Enterprise and Related Information". This standard requires that companies
      disclose operating segments based on the manner in which management
      disaggregates the Company in making internal operating decisions. Despite the
      Company's subsidiary, Teliphone, Inc. incurring sales of hardware components
      for
      the VoiP service as well as the service itself, the hardware sales are only
      necessary to receive the service. The Company does not consider this a separate
      segment of their business. In less than 5% of the cases is Teliphone, Inc.
      selling hardware without service or service without the hardware, therefore
      has
      not segregated their business.




**Off-balance
      sheet arrangements**




We
      have
      no off-balance sheet arrangements including arrangements that would effect
      our
      liquidity, capital resources, market risk support and credit risk support or
      other benefits.


12




RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      November 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standard ("SFAS") No. 151 "Inventory Costs
      -
      an amendment of ARB No. 43, Chapter 4" ("SFAS 151"). This statement amends
      the
      guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
      accounting for abnormal amounts of idle facility expense, freight, handling
      costs, and wasted material (spoilage). SFAS 151 requires that those items be
      recognized as current-period charges. In addition, this Statement requires
      that
      allocation of fixed production overheads to costs of conversion be based upon
      the normal capacity of the production facilities. The provisions of SFAS 151
      are
      effective for fiscal years beginning after June 15, 2005. As such, the Company
      is required to adopt these provisions at the beginning of the fiscal year ended
      December 31, 2006. The Company has adopted SFAS 151 and believes that the impact
      on its consolidated financial statements is immaterial for the quarter ended
      June 30, 2006.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
      -
      - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153 replaces the
      exception from fair value measurement in APB Opinion No. 29 for nonmonetary
      exchanges of similar productive assets with a general exception from fair value
      measurement for exchanges of nonmonetary assets that do not have commercial
      substance. A nonmonetary exchange has commercial substance if the future cash
      flows of the entity are expected to change significantly as a result of the
      exchange. SFAS 153 is effective for fiscal years beginning after June 15, 2005.
      As such, the Company is required to adopt these provisions at the beginning
      of
      the fiscal year ended December 31, 2006. The Company has adopted SFAS 153 and
      believes that the impact on its consolidated financial statements is immaterial
      for the quarter ended June 30, 2006.





**Item
      3. Controls and Procedures**




**Evaluation
      of Disclosure Controls and Procedures**




As
        of the
        end of the period covered by this report, we carried out an evaluation, under
        the supervision and with the participation of our management, including our
        Chief Executive Officer and Chief Financial Officer, of the effectiveness
        of our
        disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
        of the Securities Exchange Act of 1934 as of the end of the period covered
        by
        this report. Based on that evaluation, our Chief Executive Officer and Chief
        Financial Officer have concluded that our disclosure controls and procedures
        as
        of December 31, 2006 were effective to ensure that information required to
        be
        disclosed by us in reports that we file or submit under the Securities Exchange
        Act of 1934 is recorded, processed, summarized and reported within the time
        periods specified in the Securities and Exchange Commission’s rules and forms.
        Management, however, has identified certain limitations in specific
        critical controls in their accounting system which are increasingly resulting
        in
        lengthier time lapses required in order for the company to accurately disclose
        its financial statements.  In particular, these lengthier time lapses occur
        for the following reasons:
  ·
            Lack
                of dedicated resources to track and keep records of supplier invoices
                on a
                daily basis  ·
            Lack
                of dedicated resources to track and keep records of daily disbursements
                against these invoices  ·
            Surplus
                accounting entries required to track intercompany expenses, post
                spin-off
                of the Company from its former parent company  ·
            Lack
                of a dedicated resource person to oversee daily record keeping 
 Management
        will look to dedicate resources to these tasks in the coming months in order
        to
        accelerate the reporting of our financial statements.  This resource
        dedication will result in the Company incurring additional costs which will
        affect the Company’s profitability going forward.  The Company's
        management anticipates that these costs will be up to $50,000 per year in
        order
        to maintain compliance with timely financial reporting
        requirements.
 
 **Changes
        in Internal Controls**
  There
        have been no changes in our internal controls over financial reporting or
        in
        other factors that could materially affect, or are reasonably likely to affect,
        our internal controls over financial reporting during the six months ended
        December 31, 2006. There have not been any significant changes in the Company’s
        critical accounting policies identified since the Company filed its Form
        10-KSB
        as of September 30, 2006.


13





PART
      II  OTHER
      INFORMATION





**Item
      1. Legal Proceedings**




There
      are
      no material currently pending legal proceedings to which the Company is a party
      and, to the Company's knowledge, no proceedings are contemplated against the
      Company.





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




For
      the
      period ended December 31, 2006, we issued the following securities on December
      6th, 2006 as restricted stock for services:





Name
            
            Address
            
            #
                of Shares of Common StockSimon
                Lamarche
            
            3196
                Broadway, Brossard, Quebec J4Z 2P6 Canada
            
            10,000Ronald
                Gold
            
            190
                Riverside Drive, New York, NY, 10024 USA
            
            50,000Strathmere
                and Associates
            
            468
                Pleasant Park Road, Ottawa Ontario K1H 5N1 Canada
            
            250,000Podar
                Infotech Ltd.
            
            Podar
                Chambers, 4th Fl, 109 S.A.Brelvi Road, Fort, Mumbai 400 001.
                India
            
            100,000Business
                Development Consultants
            
            5580
                La Jolla Blvd. #34, La Jolla, CA 92037 USA
            
            250,000




The
      offer
      and sale of the securities above were effected in reliance on the exemptions
      for
      sales of securities not involving a public offering, as set forth in Rule 506
      promulgated under the Securities Act of 1933, as amended (the "Securities Act")
      and in Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506
      of
      Regulation D.




The
      offer
      and sale of such shares of our common stock were effected in reliance on the
      exemptions for sales of securities not involving a public offering, as set
      forth
      in Rule 504 and 506 promulgated under the Securities Act and in Section 4(2)
      and
      in reliance upon Regulation S of the Securities Act, based on the following:
      (a)
      the investors confirmed to us that they were "accredited investors," as defined
      in Rule 501 of Regulation D promulgated under the Securities Act and had such
      background, education and experience in financial and business matters as to
      be
      able to evaluate the merits and risks of an investment in the securities; (b)
      there was no public offering or general solicitation with respect to the
      offering; (c) the investors were provided with certain disclosure materials
      and
      all other information requested with respect to our company; (d) the investors
      acknowledged that all securities being purchased were "restricted securities"
      for purposes of the Securities Act, and agreed to transfer such securities
      only
      in a transaction registered under the Securities Act or exempt from registration
      under the Securities Act; and (e) a legend was placed on the certificates
      representing each such security stating that it was restricted and could only
      be
      transferred if subsequent registered under the Securities Act or transferred
      in
      a transaction exempt from registration under the Securities Act.





**Item
      3. Defaults upon Senior Securities**





There
      were no defaults upon senior securities during the period ended December 31,
      2006.


14




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




There
      were no matters submitted to the vote of securities holders during the quarter
      ended December 31, 2006.




**Item
      5. Other Information**




There
      is
      no information with respect to which information is not otherwise called for
      by
      this form.


15




**Item
      6. Exhibits**





A.
      Exhibits:





31.1
            
            Certification
                pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
                Act
                of 1934, as amended.31.2
            
            Certification
                pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
                Act
                of 1934, as amended.32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.32.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.





SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) 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.




By:
                 /s/ George MetrakosName:
                George MetrakosTitle:
                Chief Executive OfficerMay
                10, 2007





By: 
                /s/ George MetrakosName:
                George MetrakosTitle:
                Principal Accounting OfficerMay
                10, 2007




16