UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q (Mark One) xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013  OR   ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  Commission file number: 000-28793  TELIPHONE CORP. (Exact name of Registrant as specified in its charter)  Nevada30-0651002(State or jurisdiction of
Incorporation or organization)(IRS Employer
ID Number)  300-1550 Alberni, Vancouver, British Columbia V6G 1A5 (Address of principal executive offices) (Zip Code)  Registrant’s telephone number, including area code: 604-990-2000  Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes oNo  Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  Large accelerated fileroAccelerated fileroNon-accelerated filero(Do not check if a smaller reporting company)Smaller reporting companyx  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes xNo  APPLICABLE ONLY TO CORPORATE ISSUERS  State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date. As of May 30, 2013, there were 124,660,745shares of the issuer's $.001 par value common stock issued and outstanding.         TABLE OF CONTENTS  PagePART I - FINANCIAL INFORMATIONItem 1.Financial Statements.1Item 2.Management Discussion and Analysis of Financial Condition and Results of Operations29Item 4.Control and Procedures42PART II – OTHER INFORMATION42Item 1.Legal Proceedings42Item 1A.Risk Factors43Item 2.Unregistered Sales of Equity Securities and Use of Proceeds43Item 3.Defaults its Upon Senior Securities43Item 4.(Removed and Reserved)43Item 5.Other Information43Item 6.Exhibits43Signatures44                            TELIPHONE CORP.   CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2013 (UNAUDITED) AND SEPTEMBER 30, 2012   ASSETS  US $ MARCH 31 SEPTEMBER 30, 2013                                     2012 (UNAUDITED) Current Assets: Cash $70,271 $22,821 Accounts receivable, net 6,830,784 892,549 Accounts receivable - related party - 58,180 Inventory 118,655 16,257 Investments 20,021 20,444 Prepaid expenses and other current assets 1,998,271 51,234  Total Current Assets 9,038,002 1,061,485  Fixed assets, net of depreciation 11,229,097 2,924,075 Prepaid expenses, net of current portion 1,573,268 - Customer lists, net 4,333,328 1,505,657 Goodwill 14,359,228 2,585,040  TOTAL ASSETS $40,532,923 $8,076,257  LIABILITIES AND STOCKHOLDERS' EQUITY  LIABILITIES Current Liabilities: Deferred revenue $1,335,839 $906 Current portion of related party convertible debentures 61,985 61,026 Current portion of non related party notes 3,046,105 305,520 Current portion of related party loans 349,511 112,880 Current portion of obligations under capital lease 215,983 3,922 Liability for stock to be issued 19,868 19,868 Accounts payable and accrued expenses 6,710,639 2,544,229 Other accrued liabilities 166,491 - Liabilities for payroll 2,238,136 348,359  Total Current Liabilities 14,144,557 3,396,710  Long Term Liabilities: Obligations under capital lease, net of current portion 247,626 - Non related party, net of current 3,407,424 - Related party loans, net of current - 70,828  17,799,607 3,467,538   STOCKHOLDERS' EQUITY Common stock, $.001 Par Value; 125,000,000 shares authorized and 124,660,745 and 61,360,745 shares issued and outstanding, respectively 124,660 63,160 Additional paid-in capital 26,048,082 7,554,082 Accumulated deficit (3,545,678) (3,006,956) Accumulated other comprehensive income (loss) 106,252 (1,567)  Total Stockholders' Equity 22,733,316 4,608,719  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,532,923 $8,076,257   The accompanying notes are an integral part of the condensed consolidated financial statements     TELIPHONE CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED MARCH 31, 2013 and 2012 (UNAUDITED)   US$ US$ SIX MONTHS ENDED THREE MONTHS ENDED  MARCH 31, MARCH 31,  2013 2012 2013 2012  OPERATING REVENUES Revenues $12,732,614 $7,366,093 $9,844,761 $6,140,917  COST OF REVENUES Inventory, beginning of period 16,257 18,690 47,178 12,849 Purchases and cost of VoIP services 7,395,096 5,785,061 5,681,644 4,993,947 Inventory, end of period (118,655) (13,097) (118,655) (13,097) Total Cost of Revenues 7,292,698 5,790,654 5,610,167 4,993,699  GROSS PROFIT 5,439,916 1,575,439 4,234,594 1,147,218  OPERATING EXPENSES Selling and promotion 92,124 - 58,889 - Wages, professional and consulting fees 3,076,128 622,641 2,453,883 388,948 Other general and administrative expenses 1,359,209 213,129 972,606 133,189 Depreciation and amortization 1,420,707 643,728 903,807 444,521 Total Operating Expenses 5,948,168 1,479,498 4,389,185 966,658  NET INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE) (508,252) 95,941 (154,591) 180,560  OTHER INCOME (EXPENSE) Interest expense (30,470) (9,095) (21,039) (5,211) Total Other Income (Expense) (30,470) (9,095) (21,039) (5,211)  NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (538,722) 86,846 (175,630) 175,349 Provision for Income Taxes - - - -  NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $(538,722) $86,846 $(175,630) $175,349   NET INCOME (LOSS) PER BASIC AND DILUTED SHARES $(0.01) $0.00 $(0.00) $0.00  WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 101,085,745 51,613,204 124,660,745 61,538,767   COMPREHENSIVE INCOME (LOSS) Net income (loss) $(538,722) $86,846 $(175,630) $175,349 Other comprehensive income (loss) Currency translation adjustments 106,252 32,801 113,403 (1,288) Comprehensive income (loss) $(432,470) $119,647 $(62,227) $174,061   The accompanying notes are an integral part of the condensed consolidated financial statements      TELIPHONE CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)  US$ SIX MONTHS ENDED MARCH 31, 2013 2012  CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $(538,722) $86,846  Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization 1,420,707 643,728 Accounts payable restructuring gain (84,853) - Land revaluation gain (141,041) -  Changes in assets and liabilities (Increase) in accounts receivable (3,013,191) (2,399,186) (Increase) decrease in inventory and other assets (9,379) 5,593 (Increase) decrease in prepaid expenses and other current assets 778,673 (74,557) Increase (decrease) in deferred revenues (6,851) 116 Increase (decrease) in accounts payable and accrued expenses 2,525,309 2,145,434 Total adjustments 1,469,374 321,128  Net cash provided by (used in) operating activities 930,652 407,974  CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of cash on purchase of subsidiary 944,452 - Acquisitions of capital assets (1,341,151) (282,461)  Net cash provided by (used in) investing activities (396,699) (282,461)  CASH FLOWS FROM FINANCING ACTIVITES Repayments of amounts under capital lease (88,683) (13,083) Advancement (repayment) of notes payable - non-related parties (546,936) 2,910 (Repayment) proceeds from loan payable - related parties, net 211,933 (173,097)  Net cash (used in) financing activities (423,686) (183,270)  Effect of foreign currencies (62,818) 32,803  NET INCREASE (DECREASE) IN CASH 47,449 (24,954)  CASH - BEGINNING OF PERIOD 22,821 37,481  CASH - END OF PERIOD $70,270 $12,527  CASH PAID DURING THE PERIOD FOR: Interest expense $30,470 $9,095   SUPPLEMENTAL NONCASH INFORMATION:  Warrants issued for conversion of notes payable $5,000,000 $- Accounts payable forgiven for goodwill on NYTEX $992,958 $-    Common stock issued for acquision of NYTEX $- $5,000,000 Common stock issued for liability to issue common stock $- $450,000  Acquisition of Quebec, Titan and Cloud Phone: Accounts receivable $2,932,872 $- Prepaid expenses and other assets 4,504,846 - Property, plant and equipment 7,965,798 - Customer lists 3,136,878 - Goodwill 12,767,334 - Accounts payable (9,726,800) - Notes payable (6,603,712) - Long term liabilities (619,928) - Common stock issued for acquisition (15,301,740) -  Cash acquired in acquisition $944,452 $-  Acquisition of Nytex : Customer lists $- $500,000 Other receivables - 2,000,000 Depreciable assets - 2,500,000  Common stock issued in acquisition $- $5,000,000   The accompanying notes are an integral part of the condensed consolidated financial statements   TELIPHONE CORP. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)  NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION  The unaudited consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in Teliphone Corp.’s annual 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 consolidated financial statements be read in conjunction with the September 30, 2012 audited financial statements and the accompanying notes thereto.  While management believes the procedures followed in preparing these 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 completed by Teliphone Corp. later in the year.  These unaudited consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.  Teliphone Corp. (the “Company”, formerly “OSK Capital II Corp” until it changed its name on August 21, 2006) 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. 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.  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.  In addition to the retail services provided, Teliphone Inc. also sold to wholesalers who re-billed these services to their customers and provided the necessary support to their customers directly.  Teliphone Inc. provided its telecommunications services provided over its own network, and also resold traditional telecommunications services provided over the network of major telecommunications providers across Canada through a direct sales channel.  On April 1, 2011, the Company consolidated its operations into that of the parent company.  On May 31, 2011, the Company sold its entire ownership holdings in its subsidiary, Teliphone Inc. and continued operating the same business as before the disposition.    The Company acquired the New York Telecom Exchange Inc. (NYTEX), a telecommunications commodity exchange on December 31, 2011 for 20,000,000 common shares at a value of $0.25 per share. The acquisition was undertaken to allow the Company to provide a fully-integrated series of options which includes wholesale traffic. While NYTEX has been in operation since January 2009, expansion of NYTEX will require the Company to seek additional financing externally or through supplier agreements.  NYTEX is a telecommunications commodity exchange established in October 2008 and officially launched in June 2009. It focuses on facilitating the exchange of international call termination. International call termination occurs when a caller initiates a call in one country and it terminates in another. NYTEX provides services much like other commodity exchanges whereby it provides a platform for buyers and sellers to come together to purchase and sell international termination. Unlike traditional telecommunications exchanges where buyers and sellers are matched one to one on a circuit to circuit, in the NYTEX concept sellers sell their termination into a market and buyers buy from that market. NYTEX also offers a one to one trading facility for clients who request it. NYTEX manages all aspects of the transactions including technical clearing, financial clearing and quality control of the termination bought and sold on the exchange.   NYTEX developed all technical and conceptual aspects in house which includes a unique anti-False Answer Supervision (“FAS”) system which reduces the number of false calls by up to 90%. NYTEX has technical data centers in Montreal and London which manage all calls. Following the acquisition of the operations and network of Navigata Communications 2009 Inc. (“Navigata”) (described below) NYTEX has been able to take advantage of Navigata’s existing wholesale relationships.  On December 11, 2012, Teliphone Corp. completed the acquisition of the core assets and network of Navigata Communications 2009 Inc. (“Navigata”). The acquisition was effected pursuant to a two-step process involving a Purchase Agreement (the “Asset Purchase Agreement”), dated as of November 30, 2012, among 9191-4200 Quebec Inc., a corporation incorporated under the laws of the Province of Quebec, Canada ("Quebec"), Navigata and certain affiliates of Quebec; and a Share Exchange Agreement, dated as of December 11, 2012, by and between the Company and Fiducie Residence JAAM, a family trust registered in the Province of Quebec, Canada ("JAAM").  On November 30, 2012, pursuant to the Asset Purchase Agreement, Quebec acquired from Navigata selected assets and liabilities related to the business of providing telecommunications services, including voice, data and internet services, to service providers and end users, using its national MPLS-enabled data backbone, microwave backhaul network in British Columbia, and carrier points of interconnection in Vancouver, Toronto, Seattle, LA, and New York (the "Asset Purchase"). As consideration for the Asset Purchase, Quebec paid an aggregate consideration of CD$6,440,000, along with the assumption of certain limited current liabilities of the Seller, as follows: (i) CD$500,000 paid in cash by wire transfer at closing of the Asset Purchase; (ii) $940,000 to be paid in cash by certified check, wire transfer or other immediately available funds on December 14, 2012; and (iii) a total of CD$5,000,000 to be paid in cash in five separate, equal installments of CD$1,000,000 each due on December 15 of each of 2013, 2014, 2015, 2016 and 2017 (the "Deferred Consideration"). Interest will accrue on the Deferred Consideration at a rate of 6.5% per annum. In addition, under a Temporary Service Agreement, an additional CD$386,629 was agreed to be added to the purchase price for employees and Cascade Directors’ services, bringing the total purchase price to CD$6,826,630.  On December 28, 2012, JAAM assumed the $5,000,000 debt from the Company in exchange for 11,416,667 warrants for common shares of the Company.  On December 11, 2012, the Company completed the acquisition from JAMM of 100% of the outstanding stock of Quebec (the "Stock Acquisition"). The Stock Acquisition was effected pursuant to a Share Exchange Agreement in which the Company acquired all of Quebec’s   outstanding shares in exchange for tendering 61,500,000 shares of the Company, valued at US$13,530,000, to JAMM. Quebec was subsequently re-named Teliphone Navigata-Westel Communication Inc.  The warrants are based on a vesting schedule of 5 tranches with each tranche exercisable for 3 years from the date of vesting as follows:  Vesting Date Number Purchase Price Expiry of of Warrant of Warrants per share (USD) Warrant  1) December 15, 2013 5,000,000 $0.20 December 15, 2016 2) December 15, 2014 2,500,000 $0.40 December 15, 2017 3) December 15, 2015 1,666,667 $0.60 December 15, 2018 4) December 15, 2016 1,250,000 $0.80 December 15, 2019 5) December 15, 2017 1,000,000 $1.00 December 15, 2020   On December 28, 2012 the Company entered into an agreement with the former owners of NYTEX under which the former owners unconditionally assumed all responsibility and liability for $992,958 of liabilities relating to invoices from three suppliers that were previously shown as accounts payable on the books of the Company.  No consideration is payable by the Company in this transaction. As a result of this transaction, the Company decreased the value of goodwill purchased in the transaction one year earlier.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Titan Communications Inc (“Titan”.)  The acquisition was effected through a two stage process. Firstly, pursuant to a share purchase agreement (the “TSPA”) effective February 8, 2013, Fiducie Familiale M.A.A. ("MAA"), a related party to the Company, acquired all of Titan’s outstanding shares in exchange for total consideration of $1,673,310 The consideration is payable in accordance with the following schedule: i) $344,505  paid at closing; ii) $34,450 paid 30 days from closing; iii) $34,450 paid 60 days from closing; and iv) the balance ($1,259,905) to be paid in 36 equal monthly payments ($34,997 each) beginning 90 days from closing. Additional consideration equal to 10% of the aggregate revenue generated by Titan above $1,640,435 in the first 12 months beginning 30 days from closing and 10% of the aggregate revenue generated by Cloud Phone Inc (“Cloud-Phone”) above $531,522 in the first 12 months beginning 30 days from closing, may also be payable if the revenue thresholds are surpassed. Secondly, also on February 8, 2013, the Company acquired from MAA all share capital, assets and liabilities of Titan in return for assuming all liabilities due to the former shareholders of Titan under the TSPA plus the payment of $1.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Cloud-Phone. The acquisition was effected through a two stage process. Firstly, pursuant to a share purchase agreement (the “CSPA”) effective February 8, 2013, MAA acquired all of Cloud-Phone’s outstanding shares in exchange for the assumption of certain liabilities of Cloud- Phone totaling $98,430. The consideration is payable in accordance with the following schedule: i) $20,473 payable at closing; ii) the balance ($77,957) to be paid in 20 equal monthly payments ($3,898 each) beginning 30 days after closing. Secondly, also on February 8, 2013, the Company acquired from MAA all share capital, assets and liabilities of Cloud-Phone in return for assuming all liabilities due under the CSPA plus the payment of $1.  Going Concern As shown in the accompanying consolidated financial statements, the Company has incurred a net loss of $538,722 for the six months ended March 31, 2013, has a working capital deficit of $5,106,555 at March 31, 2013 and an accumulated deficit of $3,545,678 at March   31, 2013. The Company has and continues to streamline their business, and has expanded their services throughout Canada generating positive gross margins. With the acquisition of NYTEX and the core operations and network of Navigata Communications 2009 Inc. the Company added significant annualized revenues including wholesale international long distance termination to its service offerings. The positive gross margin generated by the Company was largely offset by an increase in depreciation due to investment in equipment, customer lists, an increase in consulting fees for platform upgrades as well as product development and implementation of its IPTV service. As the acquisition of Navigata was completed on December 11, 2012, only 110 days of related revenues and expenditures are reflected in the Condensed Consolidated Statements of Operations for the six months ended March 31, 2013. Annualized revenues from Navigata at the time of acquisition were approximately $33 million. The annualized net loss of Navigata was approximately $5M for its last fiscal year.  Teliphone Inc. had accumulated trade payables that exceeded their trade receivables up to May 2011.  The Company consolidated the operations such that the Company and not its former subsidiary, Teliphone Inc. is now operating the business as of April 1, 2011.  On May 9, 2011, Teliphone Inc. filed for creditor protection under provisions of the Canadian Bankruptcy and Insolvency Act.  On May 31, 2011, the Company sold its entire holdings of Teliphone Inc.  On May 1, 2009, the Company entered into a customer assignment contract with 9191-4200 Quebec Inc. where it began to service the customers of Orion Communications Inc., an Ontario, Canada Company.  This transaction is further detailed in Note 10.  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 its ability to leverage its technology into the commercial small business segments.  On December 11, 2012 the Company completed an acquisition of the core operations and network of Navigata Communications 2009 Inc. pursuant to an asset purchase agreement executed on November 30, 2012 through an acquisition company, 9191-4200 Quebec Inc. The assets acquired relate to the business of providing telecommunications services, including voice, data and internet services, to service providers and end users, using its national MPLS-enabled data backbone, microwave backhaul network in British Columbia, and carrier points of interconnection in Vancouver, Toronto, Seattle, Los Angeles, and New York.  On February 8, 2013 the Company additionally completed the acquisitions of Titan and Cloud-Phone which further increased its customer base and provided the Company with improved strategic product offerings. While the acquisition increased the Company's sales and net equity, it will require a significant effort related to restructuring including negotiation with creditors and rationalization of resources. The Company’s balance sheet includes a full provision for un-validated liabilities assumed through the Titan and Cloud-Phone acquisitions. It is management’s opinion that a yet to be determined portion of assumed liabilities will be eliminated during the validation process.  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.  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.      NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation  The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.  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 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.  Prepaid Expenses  The Company pays for some property related services in advance and recognizes these expenses as prepaid at the balance sheet date. Prepaid expenses are carried at fair value which is deemed to be the gross value of the pre-payment due to the short-term maturity of these payments. The Company does have certain prepaid expenses that extend beyond one-year and those are classified as non-current assets.  Comprehensive Income  The Company adopted ASC 220-10, “Reporting Comprehensive Income,” (formerly SFAS No. 130). ASC 220-10 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.    Fair Value of Financial Instruments  The carrying amounts reported in the condensed consolidated balance sheets 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. The Company accounts for its investment in a nonconsolidated company in accordance with the provisions of ASC 820.  Currency Translation For accounts in currencies other than the U.S. dollar, the Company translates income and expense amounts at average exchange rates for the month, translates assets and liabilities at period-end exchange rates and equity at historical rates. The Company’s functional currency is the Canadian dollar, while 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.    Revenue Recognition  Operating revenues for the Company are generated directly within the Company and not in its former subsidiary, Teliphone Inc. since the Company consolidated its operations and sold the inoperative Teliphone Inc. on May 31, 2011.  Operating revenues consist of telecommunications services (voice, video, data and long distance), customer equipment (which enables the Company's telephony services), consulting services and shipping revenue. Generally revenue recognition is the same for Teliphone Corp., the NYTEX wholesale platform and the operations acquired from Navigata Communications 2009 Inc. except where indicated below. The point in time at which revenue is recognized is determined in accordance with Revenue Recognition under ASC 605-50, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) ("ASC 605-50"), and ASC 605-25, "Revenue Arrangements with Multiple Deliverables" (“ASC 605-25”). When the Company emerged from the development stage with the acquisition of Teliphone Inc. in 2005, they began to recognize revenue from their Telephony services when they are earned, specifically when all the following conditions are met: · Services are provided or products are delivered to customers · There is clear evidence that an arrangement exists · Amounts are fixed or can be determined · The Company’s ability to collect is reasonably assured.  In particular, the Company recognizes:  For Teliphone Corp. and the acquired operations of Navigata Communications 2009 Inc, Titan and Cloud-Phone:  · Monthly fees for local, long distance and wireless voice services, as well as data services when we provide the services o “Services over the Company’s network” means that a significant portion of the voice or data passes over the Company’s own data network which it controls and o   “Services resold from Major Provider’s networks” means that the Company re-sells the services purchased from a Major Provider to its customer, and hence does not control the voice or data flow (represents majority of the Company’s revenues) · Consulting fees which the Company earns when it sells hourly consulting services. o Consulting services are typically computer software development related, along with any administrative services that occur in the management of those resources (such as project management, accounting, administrative support, etc) · Other fees, such as network access fees, license fees, hosting fees, maintenance fees and standby fees, over the term of the contract · Subscriber revenues when customers receive the service · Revenues from the sale of equipment when the equipment is delivered and accepted by customers     For NYTEX and other wholesale traffic:  · Revenue from minutes sold on the exchange at the time of purchase which includes the price of the minutes and a per minute transaction fee which can vary from transaction to transaction. · Consulting fees which the Company earns when it sells hourly consulting services o Consulting services are typically for network operators which require advice on management of their international call termination · Revenues from the sale of equipment when the equipment is delivered and accepted by customers  Revenues exclude sales taxes and other taxes we collect from our customers.  Multiple-Element Arrangements  The Company enters into arrangements that may include the sale of a number of products and services, notably in sales of voice services over our own network.  In all such cases, we separately account for each product or service according to the methods previously described when the following three conditions are met:  · The product or service has value to our customer on a stand-alone basis · here is objective and reliable evidence of the fair value of any undelivered product or service · If the sale includes a general right of return relating to a delivered product or service, the delivery or performance of any undelivered product or service is probable and substantially in our control. · If there is objective and reliable evidence of fair value for all products and services in a sale, the total price to the customer is allocated to each product and service based on its relative fair value. Otherwise, we first allocate a portion of the total price to any undelivered products and services based on their fair value and the remainder to the products and services that have been delivered. ·   If the conditions to account separately for each product or service are not met, we recognize revenue pro rata over the term of the customer agreement.  Resellers  The Company may enter into arrangements with resellers who provide services to our customers. When we act as the principal in these arrangements, we recognize revenue based on the amounts billed to our customers. Otherwise, we recognize as revenue the net amount that we retain.  Sales Returns  The Company accrues an estimated amount for sales returns, based on our past experience, when revenue is recognized.   Deferred Revenues  The Company records payments we receive in advance, including upfront non-refundable payments, as deferred revenues until we provide the service or deliver the product to customers. Deferred revenues also include amounts billed under multiple-element sales contracts where the conditions to account separately for each product or service sold have not been met.  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 $1,161,670 at March 31, 2013.  This includes a specific provision against a debt owed by one of the Company’s largest customers for the amount of $645,406.  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. Wholesale traffic generally operates on a 15 net 15 basis. Traffic that is purchased during the first 15 days of the month is due on the last day of the month and traffic purchased from the 16th to the end of the month is due on the 15th of the following month. Wholesale traffic may require pre-payment if credit has not been established or exceeds established credit limits. Also in the case of wholesale traffic, the Company may negotiate other terms with clients as appropriate and may require pre-payment of traffic if no credit can be established or if a client desires to exceed its established credit limit.  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.    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.   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 six months ended March 31, 2013 and 2012 are included 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, furniture and fixtures – 5 years and Telecoms and other long lived infrastructure 10 to 20 years dependent on the asset type.  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. 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. The Company last conducted an impairment test for the year ending September 30, 2012. This test did not take into consideration assets acquired in the Quebec transaction on December 11, 2012. The Company is currently having an independent valuation performed on those assets and will perform another impairment test upon the results of that independent valuation.  Earnings (Loss) Per Share of Common Stock  Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding.  Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants.  Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented.  The following is a reconciliation of the computation for basic and diluted EPS:  March 31, 2013March 31, 2012Net income (loss)$ (538,722)$   86,846Weighted-average common stock Outstanding (Basic)101,085,74551,613,204Weighted-average common stock Equivalents:Warrants5,000,000-Outstanding (Diluted)106,085,74551,613,204  The Company issued the following warrants on December 28, 2012. The warrants are based on a vesting schedule of 5 tranches with each tranche exercisable for 3 years of the date of vesting as follows:  Tranche Vesting Date Number Purchase Price Expiry of Warrant of Warrant of Warrants per share(USD)  1 December 15, 2013 5,000,000 $0.20 December 15, 2016 2 December 15, 2014 2,500,000 $0.40 December 15, 2017 3 December 15, 2015 1,666,667 $0.60 December 15, 2018 4 December 15, 2016 1,250,000 $0.80 December 15, 2019 5 December 15, 2017 1,000,000 $1.00 December 15, 2020   The warrants are not included in the computation of diluted EPS when the Company reports a loss as their inclusion would be antidilutive.  Stock-Based Compensation    The Company follows the provisions of ASC 718-10 “Share Based Payments”  and uses 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. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values. 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 behaviour as well as trends of actual option forfeitures when estimating the forfeiture rate.  The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “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 ASC 280-10, “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. Up to December 31, 2011, the Company had not segregated the business despite the Company incurring sales of hardware components for the VoIP service as well as the service itself. The Company treated these items as one component.  With the acquisition of NYTEX, beginning January 1, 2012, the Company began segregating the business between the activities of Teliphone and NYTEX. With the acquisition of the operations and network of Navigata Communications 2009 Inc., the Company instead began segregating revenues by voice/data/network operations and wholesale traffic (which includes all operations formerly segregated by NYTEX).  The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company’s chief operating decision-maker is considered to be the Company’s chief executive officer (“CEO”). The CEO reviews financial information presented on an entity level basis accompanied by disaggregated information about revenues by product type and certain information about geographic regions where appropriate for purposes of making operating decisions and assessing financial performance. The entity level financial information is identical to the information presented in the accompanying condensed consolidated statements of operations.  The Company has two primary operating areas; under the trade names “Teliphone” and “Teliphone Navigata-Westel” which provide voice, video and data services to residential and commercial clients across Canada, and under the trade names NYTEX (New York Telecom Exchange Inc.) and Navigata Wholesale which facilitates the exchange of domestic and international voice termination to domestic and international wholesale clients. The Company has determined that as of the balance sheet date, it is appropriate to present segmentation information by each of these primary operations and they are noted as “Voice/Data” and “Wholesale” respectively. Specific geographical segmentation is not relevant for either operation.    TELIPHONE CORP. SEGREGATED FINANCIAL SUMMARY SIX MONTHS ENDED MARCH 31, 2013  Wholesale Voice/Data Total Segmented Operating Revenues $5,316,588 $7,416,026 $12,732,614  Total Cost of Revenues 3,166,060 4,126,638 7,292,698  Gross Profit 2,150,528 3,289,388 5,439,916  Total Operating Expenses Net of Depreciation and Amortization 1,854,146 2,673,315 4,527,461  Depreciation and Amortization 692,267 728,440 1,420,707  Other Expenses 12,376 18,094 30,470  Net (Loss)  Applicable to Common Shares $(408,261) $(130,461) $(538,722)  Segmented Fixed and Intangible Assets  Wholesale Voice/Data Total  NYTEX Trading Platform $1,343,667 $- $1,343,667  Client Lists 2,134,998 2,198,330 4,333,328  Goodwill 6,839,098 7,520,130 14,359,228  Furniture and Fixtures 446,947 653,491 1,100,438  Vehicles - 11,062 11,062  Buildings & Towers 258,377 377,779 636,156  Telecoms Network 1,070,166 2,614,635 3,684,801  Switching Equipment 645,197 943,355 1,588,552  Radio Equipment 738,408 1,079,641 1,818,049  Site Improvements 111,437 162,934 274,370  Computer HW & SW 313,552 458,451 772,002    Total Assets $13,901,847 $16,019,808 $29,921,653   TELIPHONE CORP. SEGREGATED FINANCIAL SUMMARY SIX MONTHS ENDED MARCH 31, 2012  Wholesale Voice/Data Total  Segmented Operating Revenues $5,042,126 $2,323,967 $7,366,093  Total Cost of Revenues 4,208,555 1,582,099 5,790,654  Gross Profit 833,571 741,868 1,575,439  Total Operating Expenses Net of Depreciation and Amortization 214,207 630,658 844,865  Depreciation and Amortization - 643,728 643,728  Net Income (Loss) Applicable to Common Shares $619,364 ($532,518) $86,846   Segmented Fixed Assets  NYTEX Trading Platform $- $2,108,333 $2,108,333 Client Lists 1,235,037 475,000 1,710,037 Goodwill 585,040 2,000,000 2,585,040 Furniture and Fixtures 1,450,293 - 1,450,293  Total Assets $3,270,370 $4,583,333 $7,853,703    Customer Lists  The Company has acquired customer lists in five separate transactions. The customer lists will be amortized over a period of five years utilizing the straight-line method. Amortization expense related to the customer lists was $311,306 and $179,380 for the six months ended March 31, 2013 and 2012, respectively. Management has determined that no further impairment is necessary as of March 31, 2013.   Uncertainty in Income Taxes  The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2009, and they evaluate their tax positions on an annual basis, and has determined that as of March 31, 2013, no additional accrual for income taxes other than the federal and state provisions and related interest and estimated penalty accruals is not considered necessary.    The Company has performed a review of its material tax positions. During the periods ended March 31, 2013 and 2012, the Company did not recognize any amounts for interest and penalties with respect to any unrecognized tax benefits.  Goodwill Goodwill and Other Intangible Assets—Under ASC No. 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the provisions of ASC No. 360, “Property, Plant and Equipment” (“ASC 360”). Goodwill impairment is tested at least annually (October 1 for the Company) or when factors indicate potential impairment using a two-step process that begins with an estimation of the fair value of each reporting unit. Step 1 is a screen for potential impairment pursuant to which the estimated fair value of each reporting unit is compared to its carrying value. The Company estimates the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and margins multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a Step 2 test is required. On December 30, 2011 the Company acquired the assets of NYTEX through the issue of 20,000,000 shares ($0.25 per share) on December 30, 2011.   The value of $5,000,000 was allocated as follows: $2,300,000 for the trading platform, $200,000 for computer equipment, $500,000 for the customer lists, with the remaining balance of $2,000,000 allocated to goodwill. In 2011 the Company acquired $585,040 in goodwill from the Orion acquisition. Goodwill acquired in connection with the Quebec acquisition is $12,049,765 in the books and records of the Company.  Goodwill acquired in connection with the Titan and Cloud-Phone acquisitions is $717,381 in the books and records of the Company.  On December 28, 2012 the Company entered in to an agreement with the former owners of NYTEX under which the former owners unconditionally assumed all responsibility and liability for $992,958 of liabilities relating to invoices from three suppliers that were previously shown as accounts payable on the books of the Company. As a result of this transaction, the Company decreased the goodwill purchased in the transaction one year earlier. Upon performing an evaluation at September 30, 2012, Management determined that none of the goodwill has been impaired. The Company will perform another evaluation upon the completion of an independent valuation of the assets acquired in the Quebec transaction.  Discontinued Operations    The Company has accounted for the sale of its entire holdings in its subsidiary Teliphone Inc. in accordance with ASC 360-10-45, Property, Plant, and Equipment – Overall – Glossary-Component of an Entity, (formerly FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets).    In the prior year financial statement comparatives, the Company disclosed the elements of the disposed subsidiary as discontinued operations.  This reclassification had no effect on earnings per share of the prior period as it was for presentation purposes only.   Recent Accounting Pronouncements  In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. FASB ASU 2011-04 amends and clarifies the measurement and disclosure requirements of FASB ASC 820 resulting in common requirements for measuring fair value and for disclosing information about fair value measurements, clarification of how to apply existing fair value measurement and disclosure requirements, and changes to certain principles and requirements for measuring fair value and disclosing information about fair value measurements. The new requirements are effective for fiscal years beginning after December 15, 2011. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.  In June 2011, FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which amends the disclosure and presentation requirements of Comprehensive Income. Specifically, FASB ASU No. 2011-05 requires that all nonowner changes in stockholders’ equity be presented either in 1) a single continuous statement of comprehensive income or 2) two separate but consecutive statements, in which the first statement presents total net income and its components, and the second statement presents total other comprehensive income and its components. These new presentation requirements, as currently set forth, are effective for the Company beginning October 1, 2012, with early adoption permitted. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.  In September 2011, FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amended goodwill impairment guidance to provide an option for entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. After assessing the totality of events and circumstances, if an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performance of the two-step impairment test is no longer required. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. Adoption of this guidance is not expected to have any impact on the Company’s results of operations, cash flows or financial position.  In July 2012, the FASB issued ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, on testing for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting   after September 15, 2012. The Company’s adoption of this accounting guidance does not have a material impact on the consolidated financial statements and related disclosures. There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.   NOTE 3- FIXED ASSETS  Fixed assets as of March 31, 2013 (unaudited) and September 30, 2012 were as follows:  Estimated Useful(unaudited)Life (Years)March 31,September 30,20132012Buildings & Towers-647,327-Furniture and fixtures587,321689Trading platform52,302,0002,300,000Telecoms Networks153,872,279-Switching equipment151,696,422-Radio Equipment171,862,381-Site Improvements15289,405-Vehicles512,445-Computer equipment32,872,1741,902,27613,641,7544,202,965Less: accumulated depreciation2,412,6571,278,890Fixed assets, net$11,229,097$2,924,075   There was $1,109,827 and $464,348 charged to operations for depreciation expense for continuing operations for the six months ended March 31, 2013 and 2012, respectively. In addition, based on an evaluation of the Company’s fixed assets, Management has determined that there is no impairment on any of these long-lived assets as of March 31, 2013  NOTE 4- CUSTOMER LISTS  Customer lists as of March 31, 2013 (unaudited) and September 30, 2012 were as follows:  Estimated Useful(unaudited)Lives (Years)March 31,September 30,20132012Customer lists5$ 5,180,674$ 2,043,7965,180,6742,043,796Less: accumulated amortization847,346538,139Customer lists, net$4,333,328$1,505,657  There was $310,880 and $179,380 charged to operations for amortization expense of customer lists for continuing operations for the six months ended March 31, 2013 and 2012, respectively. Based on an evaluation of the customers, Management has determined that there is no further impairment as of March 31, 2013.  NOTE 5- RELATED PARTY LOANS  Current Related Party Debt  On April 1, 2011, the Company assumed debt of a shareholder previously held within its former majority-owned subsidiary, Teliphone Inc. of $70,828.  The loan matures on December 31, 2013 with interest only payable monthly at an annual rate of 12%.  The Company reserves the right to pay the principal in its entirety at any time without penalty. The total amount is outstanding as of March 31, 2013. Additionally, the Company has accrued $36,122 in interest on this payable.  The Company has also received a total of $136,587 from a former Director of the Company and a Company owned and controlled by the same Director as of March 31, 2013.  The advances are considered short term in nature, accrue interest at 10% per annum, and are due on demand. As of March 31, 2013, the Company has accrued $10,046 in interest on these advances.  During the period to March 31, 2013 the Company also received a loan from a related party in the amount of $95,928. This loan is interest free but repayable on demand.  NOTE 6- CONVERTIBLE DEBENTURES  On February 6, 2009, the Company entered into a 12% Convertible Debenture (the “A Debenture”) with an individual. The A Debenture had an original maturity date of February 6, 2010, and incurred interest at a rate of 12% per annum.  On February 6, 2010, the A Debenture was renewed for an additional 12 months at 12%. As of February 6, 2011 the debenture holder agreed to continue on a month to month basis with monthly interest payments continuing at the 12% rate.  Per the original terms of the A Debenture the A Debenture could either be paid to the holder on the anniversary or converted at the Company's option any time after the first anniversary at a conversion price equal to $0.25 per share of the common stock.  On February 1, 2013, the debenture was converted to a 2 year note at 12% per annum payable monthly with maturity on January 31, 2015, payable at any time by the Company without penalty.  On February 17, 2009, the Company entered into a 12% Convertible Debenture (the “B Debenture”) with an individual. The B Debenture had an original maturity date of February 17, 2010, and incurred interest at a rate of 12% per annum.  On February 17, 2010, the B Debenture was renewed for an additional 12 months at 12% and was further renewed to mature on February 28, 2014.  The total amount of the A and B Debentures was $60,180, plus accrued interest of $1,805 or $61,985.  The convertible debentures met the definition of hybrid instruments, as defined in ASC 815-10, Accounting for Derivative Instruments and Hedging Activities (ASC 815-10). 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.  The embedded derivative did not qualify as a fair value or cash flow hedge under ASC 815-10.  NOTE 7- COMMITMENTS/LITIGATION/INVESTMENT  The Company assumed the lease from its former subsidiary Teliphone Inc. for its Toronto, Canada offices, which was set to expire on August 31, 2014. In December 2012 the Company negotiated early termination of this lease and no further obligations remain.  Following the Quebec acquisition, the Company assumed a number of ongoing leases for the rental of properties used either as office space or for the provision of services to customers. These commitments are over variable terms from three to thirty years. Commitments under these leases over time are as follows:  Year to: Amount of Commitment  September 30, 2013: $900,618 September 30, 2014: $1,433,045 September 30, 2015: $1,225,546 September 30, 2016: $617,373 September 30, 2017: $181,361 September 30, 2018 & Onwards: $154,634  Total Commitments $4,512,578  The Company assumed the various capital lease agreements from its former subsidiary Teliphone Inc. for computer equipment with Dell Financial Services Canada Limited, both operating and capital leases.  The Company’s operating leases expired during the year ended September 30, 2011. All new leases the Company has entered into have been capital leases. (See Note 11).  Teliphone Business Solutions Corp.  In September 2011 the Company began negotiations with Dezmocom Inc. of Montreal to establish Teliphone Business Solutions Corp (“TBS”), a joint venture between the Company and Dezmocom dedicated to the marketing of the Company's products and services and the establishment of new sales channels. Dezmocom had an established track record of developing and overseeing marketing channels such as resellers and agents as well as internal expertise in sales of products the same or similar to those of the Company. Under an initial agreement executed on April 15, 2012 with the Company, Dezmocom would share profits from the joint venture equally. The Company has been working with Dezmocom on this project and has advanced $20,444 to TBS which has been matched by Dezmocom. This amount is reflected in investments at March 31, 2013. The Company subsequently reduced its stake in TBS to 20% to more accurately reflect the Company's level of involvement in TBS. However the Company continues to accrue the same direct financial benefits through sales of goods and services to TBS.  Orion Acquisition    On April 29, 2009, 9191-4200 Quebec Inc. (“9191”) entered into a purchase agreement with 3 individuals residing in the Province of Ontario, Canada for all of the issued and outstanding shares of Orion Communications Inc. (“Orion”).  On April 30, 2009, Orion, under management of 9191, executed a services agreement with the Company’s subsidiary, Teliphone Inc. to provide telecommunications services to the customers of Orion.  On January 18, 2010, 9191 filed a Statement of Claim in Superior Court of Justice in the Province of Ontario, Canada for rescission due to overpayment and damages totalling CDN$1,000,000 claiming misrepresentation of financial statements made by the former owners.  On February 18, 2010, the former owners of Orion filed their defence and counterclaim against 9191, naming the Company, its former subsidiary Teliphone Inc., George Metrakos, a current Director of the Company and the Company’s President and CEO at the time, and other individuals as third party claimants for a total of CDN$4,000,000.  The former owners of Orion claim that the Company, its former subsidiary and Director are third party claimants due to its agreements with 9191 to provide services to the clients of Orion.  The former owners of Orion are also pursuing the Company’s former subsidiary, Teliphone Inc., for $150,000 for the early termination of the employment agreement.  On March 10, 2010, the Bank of Montreal (“BMO”), a Canadian financial institution and creditor of Orion filed a claim against the Company’s former subsidiary Teliphone Inc. requesting payment of Orion’s outstanding debt of CDN$778,607.  BMO stood as a secured creditor of Orion based on its issuance of a credit line to Orion in 2007.  BMO claimed that as a secured creditor holding a general security agreement, it had rights to the receivables of Orion and claims that these receivables are being collected by Teliphone Inc.  On March 30, 2011, the Company acquired the client lists from BMO and settled with BMO for a total of $375,000 payable over 24 months as follows:  $25,000 due at commencement, monthly payments of $11,458, plus a final payment of $75,000 in the 24th month (See Note 12 for further discussion).  On November 15, 2011, BMO did not accept the monthly payment claiming that additional legal fees were owed to BMO by Teliphone.  On January 23, 2013 the Company reached an all-party agreement to settle all outstanding issues and obligations. The agreement requires a total payment of $305,520.69 for principal, interest and all costs payable over 10 months with an initial payment of $50,000, 9 monthly payments of $25,000 and a final payment of $30,520.69 on October 31, 2013. The Company has classified the entire amount ($175,679) as a current liability at March 31, 2013, and has made all required payments.   NOTE 8- STOCKHOLDERS’ EQUITY (DEFICIT)  Common Stock  As of March 31, 2013, the Company has 250,000,000 authorized shares of common stock with a par value of $.001 and 124,660,745 shares issued and outstanding.  On May 4, 2011, The Company issued 3,804,088 shares for the acquisition of the rights to service the former clients of Orion Communications Inc. after its dispute settlement with Orion’s secured creditors.  On March 31, 2010 the Company agreed to issue 489,871 shares as part of an interest payment to shareholders in order to solidify personal guarantees in conjunction with an   extension of the Company’s operating line of credit facility with its bank.  These shares have not yet been issued and the Company has an outstanding liability of $19,800 as of March 31, 2013.  During fiscal 2012, the Company also issued 1,800,000 shares of stock for its September 1, 2011 acquisition of $450,000 of equipment from Orion Communications, Inc.  On December 30, 2011 the Company issued 20,000,000 shares ($0.25 per share) for the acquisition of the New York Telecom Exchange Inc. The value of $5,000,000 was allocated as follows: $2,300,000 for the trading platform, $200,000 for computer equipment, $500,000 for the customer lists, and the remaining balance of $2,000,000 allocated to goodwill. This is a related party transaction as the Company’s President and CEO and 10% Beneficial Owner were majority owners of all the issued and outstanding stock of The New York Telecom Exchange, Inc.  During fiscal 2012, the Company also issued 1,800,000 shares of stock for its September 1, 2011 acquisition of $450,000 of equipment from Orion Communications, Inc.  On December 11, 2012, the Company issued 61,500,000 shares ($0.22 per share) for the acquisition of the core operations, assets and network of Navigata Communications 2009 Inc. The value of this transaction was $13,530,000.  On December 28, 2012, JAAM assumed the $5,000,000 debt for the acquisition of Navigata from the Company in exchange for 11,416,667 warrants for common shares of the Company. The warrants are based on a vesting schedule of 5 tranches with each tranche exercisable for 3 years from the date of vesting as follows:  Vesting Date Number Purchase Price Expiry of of Warrant of Warrants per share (USD) Warrant  1) December 15, 2013 5,000,000 $0.20 December 15, 2016 2) December 15, 2014 2,500,000 $0.40 December 15, 2017 3) December 15, 2015 1,666,667 $0.60 December 15, 2018 4) December 15, 2016 1,250,000 $0.80 December 15, 2019 5) December 15, 2017 1,000,000 $1.00 December 15, 2020  These are the only warrants outstanding as of March 31, 2013 and there are no options outstanding at March 31, 2013.   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.  At March 31, 2013 the Company had no deferred tax assets.  At March 31, 2013, the Company had a net operating loss in the amount of $538,722 for the six month period and a cumulative net loss of $3,545,678, which was generated within multiple provinces of Canada, but primarily Ontario and British Columbia.   A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended March 31, 2013 and 2012 is summarized as follows:  20132012Federal statutory rate(34.0)%(34.0)%State income taxes, net of federal benefits3.33.3Valuation allowance30.730.70%0%20132012Canadian Federal statutory rate3.5%3.5%Canadian Provincial income taxes, net of federal benefits12.012.0Valuation allowance0.00.015.5%15.5%   NOTE 10- SERVICING CONTRACT FOR THE CUSTOMERS OF ORION COMMUNICATIONS INC.  On May 7, 2009, the Company’s then subsidiary Teliphone Inc. entered into an assignment agreement with 9191-4200 Quebec Inc. (“9191”) in order to have the customer contracts of Orion Communications Inc., assigned to the Company for its management.  No consideration was paid, however, the Company and 9191 agreed to share 50% each of the gross benefits received from the customer base.  On February 23, 2010, the Company’s agreement of assignment with 9191 was cancelled due to a default of the assignor.  As a result of the default, immediate payment for all amounts owed by 9191 was requested but 9191 did not comply.  The delivery of services to Orion clients was suspended, and the clients were permitted to request delivery of service directly from the Company.  Due to the cancellation of the contract, the Company took a write-down (fully impaired).  As a result of the lawsuits against the Company’s former subsidiary resulting from the transaction (See Note 7), on March 31, 2011, the Company negotiated and entered into an asset purchase agreement with Orion and 9191 to acquire the customers from Orion valued at $1,479,265. As consideration for these customers, the Company issued 3,804,088 shares at a value of $0.25 per share for a total of $951,022, paid $375,000 to the Bank of Montreal (“BMO”) in the form of a note payable (see Note 12) and applied the $153,243 in advances paid in prior years.    NOTE 11- OBLIGATIONS UNDER CAPITAL LEASE  On April 1, 2011, the Company assumed the capital leases of its former subsidiary Teliphone Inc and on December 11, 2012 the Company assumed 5 finance leases for telecom networking equipment, following its acquisition of the Navigata core business.  At March 31, 2013, minimum future annual lease obligations are as follows:   Year Ending March 31, 2014 $234,568    March 31, 2015 $251,483 March 31, 2016 $6,127 ______ 492,178  Less: Amounts representing interest (28,569)  Total Capital Payable 463,609  Less: Current portion (215,983)  Long-term portion $ 247,626   NOTE 12- NOTE PAYABLE – BMO  On March 30, 2011, the Company entered into a non-interest bearing note payable (“Note”) to the Bank of Montreal (“BMO”) for a total of $375,000 as part of its dispute resolution regarding the management of the clients of Orion Communications Inc. The Note was payable over 24 months as follows:  $25,000 due at commencement, monthly payments of $11,458, plus a final payment of $75,000 in the 24th month.  On November 15, 2011, BMO did not accept the monthly payment claiming that additional legal fees were owed to BMO by Teliphone.  On January 23, 2013 the Company reached an all-party agreement to settle all outstanding issues and obligations. The agreement requires a payment of $305,520.69 for principal, interest and all costs payable over 10 months, with an initial payment of $50,000, 9 monthly payments of $25,000 and a final payment of $30,520.69 on October 31, 2013. The Company has classified the entire amount ($175,679) as a current liability at March 31, 2013 and has made all required payments.   NOTE 13- NOTES PAYABLE  Navigata Asset Purchase  On December 11, 2012, the Company completed the acquisition of the core assets and network of Navigata Communications 2009 Inc. (“Navigata.”) The acquisition was effected through a two-step process involving a purchase agreement, dated as of November 30, 2012, among 9191-4200 Quebec Inc., a corporation incorporated under the laws of the Province of Quebec, Canada ("Quebec"), Navigata and certain affiliates of Quebec (the "Asset Purchase Agreement"); and a Share Exchange Agreement, dated as of December 11, 2012, by and between the Company and Fiducie Residence JAAM, a family trust registered in the Province of Quebec, Canada ("JAAM").  On November 30, 2012, pursuant to the Asset Purchase Agreement, Quebec acquired from Navigata selected assets and liabilities related to the business of providing telecommunications services, including voice, data and internet services, to service providers and end users, using its national MPLS-enabled data backbone, microwave backhaul network in British Columbia, and carrier points of interconnection in Vancouver, Toronto, Seattle, LA, and New York (the "Asset Purchase"). As consideration for the Asset Purchase, Quebec paid an aggregate consideration of CD$6,440,000, along with the assumption of certain limited current liabilities of Navigata, as follows: (i) CD$500,000 paid in cash by wire transfer at closing of the Asset Purchase; (ii) $940,000 to be paid in cash by certified check, wire transfer or other immediately available funds on December 14, 2012; and (iii) a   total of CD$5,000,000 to be paid in cash in five separate, equal installments of CD$1,000,000 each due on December 15 of each of 2013, 2014, 2015, 2016 and 2017 (the "Deferred Consideration"). Interest will accrue on the Deferred Consideration at a rate of 6.5% per annum. In addition, under a Temporary Service Agreement, an additional CD$386,629 was agreed to be added to the purchase price for employees and Cascade Directors’ services, bringing the total purchase price to CD$6,826,630.  On December 28, 2012, JAAM assumed the $5,000,000 debt from the Company in exchange for 11,416,667 warrants for common shares of the Company.  At March 31, 2013 the total amount owing under this note is $30,051 and is shown as a current liability. The Company made $1,224,335 in payments from December 11, 2012 to March 31, 2013. In addition, the company recorded a current liability of $30,234 in respect of monies owed under the Transition Services Agreement associated with this asset purchase.  Titan and Cloud-Phone Share Purchases  See also Acquisitions, Note 14, describing debt incurred, acquired and outstanding related to the Quebec, Titan and Cloud Phone acquisitions.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Titan Communications Inc.  The acquisition was effected through a two stage process. Firstly, pursuant to a share purchase agreement (the “TSPA”) effective February 8, 2013, Fiducie Familiale M.A.A. acquired all of Titan’s outstanding shares in exchange for total consideration of $1,673,310 The consideration is payable in accordance with the following schedule: i) $344,505  paid at closing; ii) $34,450 paid 30 days from closing; iii) $34,450 paid 60 days from closing; and iv) the balance ($1,259,905) to be paid in 36 equal monthly payments ($34,997 each) beginning 90 days from closing. Additional consideration equal to, 10% of the aggregate revenue generated by Titan above $1,640,435 in the first 12 months beginning 30 days from closing and 10% of the aggregate revenue generated by Cloud-Phone above $531,522 in the first 12 months beginning 30 days from closing, may also be payable if the revenue thresholds are surpassed. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Titan in return for assuming all liabilities due to the former shareholders of Titan under the TSPA plus the payment of $1.  At March 31, 2013 the total amount owing under this note was $1,294,355. The Company made $378,955 in payments from February 8, 2013 to March 31, 2013.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Cloud-Phone. The acquisition was effected pursuant through a two stage process. Firstly, pursuant to a share purchase agreement (the “CSPA”) effective February 8, 2013, MAA acquired all of Cloud-Phone’s outstanding shares in exchange for the assumption of certain liabilities of Cloud-Phone totaling $98,430. The consideration is payable in accordance with the following schedule: i) $20,473 payable at closing; ii) the balance ($77,957) to be paid in 20 equal monthly payments ($3,898 each) beginning 30 days after closing. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Cloud-Phone in return for assuming all liabilities due under the CSPA plus the payment of $1.  At March 31, 2013 the total amount owing under this note was $77,957. The Company made $20,473 in payments from February 8, 2013 to March 31, 2013.  At March 31, 2013, the future annual payments on the balances owing on the Titan and Cloud-Phone acquisitions are:     Year Ending March 31, 2014 $463,652 March 31, 2015 $447,388 March 31, 2016 $416,678 March 31, 2017 $44,594 ______ Total Capital Payable 1,372,312  Less: Current portion (463,652)  Long-term portion $ 908,660   Additionally, the Company also acquired three current notes payable through the Titan acquisition secured against the Titan 2012 SR&ED claim. At March 31, 2013 the total of these notes was $300,560 including $29,877 in accrued interest.  Vendor Notes  At March 31, 2013 the Company has $4,544,695 of notes payable outstanding with key telecommunication service suppliers. These notes were created during the period to March 31, 2013 through the renegotiation of outstanding vendor liabilities that were acquired with the Navigata asset acquisition in December 2012.  At March 31, 2013, the future annual payments on the balances owing on the vendor notes are:   Year Ending March 31, 2014 $2,045,930 March 31, 2015 $1,578,919 March 31, 2016 $879,852 March 31, 2017 $4,817 March 31, 2018 $4,817 Beyond 5 years $30,360 ______ Total Payable 4,544,695  Less: Current portion (2,045,930)  Long-term portion $ 2,498,765    NOTE 15- ACQUISITIONS  Quebec The Company acquired the assets of Quebec as noted below.  Based on the fair values at the effective date of acquisition the purchase price in US$ was allocated as follows:  Net Assets PurchasedProperty, plant and equipment$7,758,629Customer lists2,152,578Cash943,726Prepaid expenses and other current assets4,334,079Accounts receivable2,347,975Accounts payable and other current liabilities(9,171,061)Long-term payables(598,459)Notes payable under Asset Purchase Agreement (Nov 30, 2012) (1)(6,287,232)Goodwill12,049,765Purchase Price$13,530,000  (1) On December 28, 2012, JAAM assumed the $5,000,000 debt from the Company in exchange for 11,416,667 warrants for common shares of the Company. The warrants are based on a vesting schedule of 5 tranches with each tranche exercisable for 3 years from the date of vesting.  The goodwill will not be amortized but will be tested annually for impairment. Goodwill in connection with this acquisition is stated at $12,049,765 in the books and records of the Company.  The following table shows pro-forma results for the years ended September 30, 2012 and 2011 as if the acquisition had occurred on October 1, 2010. These unaudited pro forma results of operations are based on the historical financial statements and related notes of each of the purchased Company and Teliphone Corp.   For the years ended September 30, 2012  2011 Revenues                                                          $32,356,660          $34,083,238 Net income (loss)                                              $(3,924,142)            $4,090,416   Titan and Cloud-Phone  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Titan Communications Inc. The acquisition was effected through a two stage process. Firstly, pursuant to a share purchase agreement (the “TSPA”) effective February 8, 2013, Fiducie Familiale M.A.A. ("MAA"),  acquired all of Titan’s outstanding shares in exchange for total consideration of $1,673,310 The consideration is payable in accordance with the following schedule: i) $344,505  paid at closing; ii) $34,450 paid 30 days from closing; iii) $34,450 paid 60 days from closing; and iv) the balance ($1,259,905) to be paid in 36 equal monthly payments ($34,997 each) beginning 90 days from closing. Additional consideration equal to, 10% of the aggregate revenue generated by Titan above $1,640,435 in the first 12 months beginning 30 days from closing and 10% of the aggregate revenue generated by Cloud-Phone above $531,522 in the first 12 months beginning 30 days from closing, may also be payable if the revenue thresholds are surpassed. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Titan in return for assuming all liabilities due to the former shareholders of Titan under the TSPA plus the payment of $1.  At March 31, 2013 the total amount owing under this note was $1,294,355. The Company made $378,955 in payments from February 8, 2013 to March 31, 2013    On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Cloud-Phone. The acquisition was effected through a two stage process. Firstly, pursuant to a share purchase agreement (the “CSPA”) effective February 8, 2013, Fiducie Familiale M.A.A. ("MAA") acquired all of Cloud-Phone’s outstanding shares in exchange for the assumption of certain liabilities of Cloud-Phone totaling $98,430. The consideration is payable in accordance with the following schedule: i) $20,473 payable at closing; ii) the balance ($77,957) to be paid in 20 equal monthly payments ($3,898 each) beginning 30 days after closing. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Cloud-Phone in return for assuming all liabilities due under the CSPA plus the payment of $1.  At March 31, 2013 the total amount owing under this note was $77,957. The Company made $20,473 in  payments from February 8, 2013 to March 31, 2013.  The combined net assets purchased in both transactions on February 8, 2013 were:  Net Assets PurchasedProperty, plant and equipment$207,170Customer lists984,300Cash3,700Current assets750,388Current liabilities(865,825)Long-term Liabilities(25,374)Goodwill717,381Purchase Price$1,771,740   The goodwill will not be amortized but will be tested annually for impairment. Goodwill in connection with these acquisitions is recorded at $717,569 in the books and records of the Company  The following table shows pro-forma results for the years ended September 30, 2012 and 2011 as if both acquisitions had occurred on October 1, 2010. These unaudited pro forma results of operations are based on the historical financial statements and related notes of each of the purchased Company and Teliphone Corp.   For the years ended September 30, 2012   2011 Revenues $34,561,308 $35,748,971 Net income (loss) $(3,968,468) $3,904,975  ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  This Quarterly Report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Quarterly Report on Form 10-Q.  Additionally, statements concerning future matters are forward-looking statements.    Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements.  We caution the reader that numerous important factors, including those factors discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012, which are incorporated herein by reference, could affect our actual results and could cause our actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company.  Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q.  We file reports with the Securities and Exchange Commission (the “SEC” or “Commission”).  You can read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  In addition, the SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.  We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.  As used in this Quarterly Report, the terms “we,” “us,” “our,” and “Teliphone” mean Teliphone Corp. and our subsidiaries unless otherwise indicated.  GENERAL OVERVIEW  OVERVIEW  We are a telecommunications company engaged in the business of providing broadband telephone services utilizing our innovative Voice over Internet Protocol, or VoIP, technology platform.  We were incorporated in the State of Nevada on March 2, 1999 under the name "OSK Capital II Corp." 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, we achieved our objective with the reverse merger and reorganization with Teliphone Inc., a Canadian company. On August 21, 2006, we changed our name from OSK Capital II Corp. to Teliphone Corp.  As a result of the merger and re-organization, Teliphone Inc. became our wholly owned subsidiary and we became a majority owned subsidiary of Teliphone Inc.'s parent company, United American Corporation, a Florida Corporation trading on the OTC Bulletin Board under the trading symbol UAMA.  Effective August 1, 2006, we entered into a transaction with 3901823 Canada Inc. ("3901823") and issued to 3901823 shares of Teliphone Inc. common stock, which was equal to a 25% ownership interest, in exchange for access to 3901823’s operating company Intelco Communications Inc. (“Intelco”) global distribution channels, cost reduction through usage of Intelco’s network and data center, along with a credit facility of $75,000.  On September 30, 2008, Teliphone Inc. issued additional stock to us representing the conversion into equity of cash advances made between August 1, 2006 to September 30, 2008.  As a result, we increased own ownership interest in the outstanding capital stock of Teliphone Inc. to 87.1% as of September 30, 2010.  We do not have any other subsidiary entities.  On February 15, 2008, we entered into a letter of intent to acquire certain assets and liabilities of the business operating as "Dialek Telecom" and complemented the offering of voice services over our own network with the resale of voice and data services over the networks of major providers. The Company entered into a definitive agreement with 9191-4200 Quebec Inc., owners of Dialek Telecom, on June 30, 2008 and the transaction was deemed to have an effective date as of February 15, 2008.  As a result of this transaction, we acquired an additional 2,000 customers for telecommunications services in Canada, along with other assets valued at CDN$86,000, liabilities valued at CDN$227,000 and access to an operating line of credit of CDN$150,000 at an annualized interest rate of 18%.    In June 2008, we commenced trading of our common stock on the OTC Bulletin Board and our common stock is currently quoted on the OTC pink sheets (OTCQB) electronic quotation system under the trading symbol TLPH.  On May 7, 2009, we entered into a customer assignment agreement with the owners of Orion Communications Inc.  (“Orion”).  As a result of this transaction, we acquired an additional 580 business customers for telecommunications services in Canada, along with other assets valued at CDN$376,781 and liabilities valued at CDN$418,762.  We and the owner of Orion, 9191-4200 Quebec Inc., agreed to a gross benefit sharing arrangement of 50%-50% for any potential future benefits derived from the customer base.  After a brief dispute with the secured creditors of Orion, on March 31, 2011, the Company acquired the client contracts in an acquisition valued at $1,479,265.  The Company paid $951,022 in common stock of the Company with the issuance of 3,804,088 shares (in May 2011) (valued at $0.25 per share) and $528,243 in cash.  On April 1, 2011, we consolidated our operations to include those of our majority-owned subsidiary Teliphone Inc.  On May 31, 2011, we sold our entire holdings of our 87.1% ownership of Teliphone Inc. to YEURB INVESTMENTS COMPANY LIMITED, a Commonwealth of the Bahamas Corporation.  The impact on our balance sheet due to the disposition of our subsidiary was as follows: We reduced our Assets by a total of $115,114, we reduced our Liabilities by $2,304,774 and we increased our Shareholder equity by $2,189,630.  For the nine months ended June 30, 2011, the transaction had the following impact on our statement of operations: We reduced our Gross Profit by $524,369, and we reduced our Expenses including Operations, Interest and Amortization by a total of $968,984. In total, the Company experienced a gain on disposal of its subsidiary of $948,266. In total, the Company experienced a gain on disposition of $2,462,895.  On December 31, 2011 we entered into an agreement with the New York Telecom Exchange Inc. (NYTEX) to purchase all the company's assets, liabilities, intellectual property, client list and operations for 20 million common shares of Teliphone Corp. at a value of $0.25 per share for a total transaction of $5,000,000. NYTEX is a telecommunications commodity exchange for the purchase and sale of international voice termination. NYTEX provides technical and financial clearing of transactions as well as value added services such as quality of service, anti-false answer supervision, market information and customer support. In 2011 NYTEX had transacted some 200 million minutes (100 million minutes bought and 100 million minutes sold) for a value of approximately $30 million ($15 million bought and $15 million sold).  On December 11, 2012, Teliphone Corp. (the "Company") completed the acquisition of the core assets and network (the "Navigata Acquired Businesses") of Navigata Communications 2009 Inc. (the "Seller"). The acquisition was effected pursuant to a two-step process involving a Purchase Agreement, dated as of November 30, 2012, among 9191-4200 Quebec Inc., a corporation incorporated under the laws of the Province of Quebec, Canada ("Quebec"), the Seller and certain affiliates of Quebec (the "Asset Purchase Agreement"); and a Share Exchange Agreement, dated as of December 11, 2012, by and between the Company and Fiducie Residence JAAM, a family trust registered in the Province of Quebec, Canada ("JAAM").  On November 30, 2012, pursuant to the Asset Purchase Agreement, Quebec acquired from Seller selected assets and liabilities related to the business of providing telecommunications services, including voice, data and internet services, to service providers and end users, using its national MPLS-enabled data backbone, microwave backhaul network in British Columbia, and carrier points of interconnection in Vancouver, Toronto, Seattle, LA, and New York (the "Asset Purchase"). As consideration for the Asset Purchase, Quebec paid an aggregate consideration of US$6,440,000, along with the assumption of certain limited current liabilities of the Seller, as follows: (i) US$500,000 paid in cash by wire transfer at closing of the Asset Purchase; (ii) $940,000 to be paid in cash by certified check, wire transfer or other immediately available funds on December 14, 2012; and (iii) a total of US$5,000,000 to be paid in cash in five separate, equal installments of US$1,000,000 each due on December 15 of each of 2013, 2014, 2015, 2016 and 2017 (the "Deferred Consideration"). Interest will accrue on the Deferred Consideration at a rate of 6.5% per annum.  On December 11, 2012, the Company completed the acquisition from JAMM of 100% of the outstanding stock of Quebec (the "Stock Acquisition"). The Stock Acquisition was effected pursuant to a Share Exchange Agreement in which the Company acquired all of Quebec’s outstanding shares in exchange for tendering 61,500,000 shares of the Company, valued at US$13,530,000, to JAMM. Quebec was subsequently re-named Teliphone Navigata-Westel Communication Inc.    On December 28, 2012, JAAM assumed the $5,000,000 debt from the Company in exchange for 11,416,667 warrants for common shares of the Company. The warrants are based on a vesting schedule of 5 tranches with each tranche exercisable for 3 years of the date of vesting as follows:  Tranche Vesting Date Number Purchase Price Expiry of Warrant of Warrant of Warrants per share(USD)  1 December 15, 2013 5,000,000 $0.20 December 15, 2016 2 December 15, 2014 2,500,000 $0.40 December 15, 2017 3 December 15, 2015 1,666,667 $0.60 December 15, 2018 4 December 15, 2016 1,250,000 $0.80 December 15, 2019 5 December 15, 2017 1,000,000 $1.00 December 15, 2020  On December 11, 2012, the Company completed the acquisition from JAMM of 100% of the outstanding stock of Quebec (the "Stock Acquisition"). The Stock Acquisition was effected pursuant to a Share Exchange Agreement in which the Company acquired all of Quebec’s outstanding shares in exchange for tendering 61,500,000 shares of the Company, valued at US$13,530,000, to JAMM. Quebec was subsequently re-named Teliphone Navigata-Westel.  On  December 28, 2012 the Company entered in to an agreement with The New York Telecom Exchange Inc., a New York Company (“NYTEX”) under which NYTEX unconditionally assumed all responsibility and liability for $992,958 of liabilities relating to invoices from three suppliers that are currently shown as ”Accounts Payable” on the books of the Company. No consideration is payable by the Company in this transaction. As a result of this transaction, the Company decreased the goodwill purchased in the transaction with NYTEX one year earlier.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Titan Communications Inc. The acquisition was effected through a two stage process. Firstly, pursuant to a Share Purchase Agreement (the “SPA”) effective February 8, 2013, Fiducie Familiale M.A.A. ("MAA"), a related party to the Company, acquired all of Titans outstanding shares in exchange for a total consideration of $1,673,310 The consideration is payable in accordance with the following schedule: i) $344,505  paid at closing; ii) $34,450 paid 30 days from closing; iii) $34,450 paid 60 days from closing; and iv) the balance ($1,259,905) to be paid in 36 equal monthly payments ($34,997 each) beginning 90 days from closing. Additional consideration equal to, 10% of the aggregate revenue generated by Titan above $1,640,435 in the first 12 months beginning 30 days from closing and 10% of the aggregate revenue generated by Cloud-Phone Inc above $531,522 in the first 12 months beginning 30 days from closing, may also be payable if the revenue thresholds are surpassed. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Titan in return for assuming all liabilities due to the former shareholders of Titan under the SPA plus the payment of $1.  On February 8, 2013 the Company completed the acquisition of 100% of the outstanding stock of Cloud-Phone Inc. The acquisition was effected pursuant through a two stage process. Firstly, pursuant to a Share Purchase Agreement (the “SPA”) effective February 8, 2013, Fiducie Familiale M.A.A. ("MAA"), a related party to the Company acquired all of Cloud-Phones outstanding shares in exchange for the assumption of certain liabilities of Cloud Phone totaling $98,430. The consideration is payable in accordance with the following schedule: i) $20,473 payable at closing; ii) the balance ($77,957) to be paid in 20 equal monthly payments ($3,898 each) beginning 30 days after closing. Secondly, also on February 8, 2013 the Company acquired from MAA all share capital, assets and liabilities of Cloud-Phone in return for assuming all liabilities due under the SPA plus the payment of $1.   Description of Business  Principal products or services and their markets  Teliphone Corp - Voice and Data Operations   We are a telecommunications company engaged in the business of providing broadband telephone services primarily utilizing Voice over Internet Protocol, (“VoIP”) technology platform as well as re-selling traditional voice and data   services of Tier-1 telecommunications providers to our customers.  We offer communications services to our customers with many features at favourable prices, thus providing them what we believe is an experience similar to traditional telephone services at a reduced cost.  Our main geographic focus is within the target market of Canada although with the recent acquisition of Navigata Communications 2009 Inc. the Company now has some limited operations in the United States.  We have invested in the research and development of our VoIP telecommunications technology, which permits the control, forwarding, storing and billing of phone calls made or received by our customers. Our technology consists of proprietary software programming and specific hardware configurations; however, we have no specific legal entitlement that would prohibit a third party from utilizing the same base software languages and same hardware in order to produce similar telephony service offerings, which could adversely impact our business.  Base software languages are the language building blocks used by programmers to translate the desired logic sequences into a message that the computer can understand and execute.  An example of a logic sequence is “if the user dials “011” before the number, the software should then treat this as an international call and invoice the client accordingly”.  The combination and use of these building blocks is known as “software code”, and hence this combination, created by our programmers, along with “off-the-shelf” computer and telecommunications hardware (i.e. equipment that is readily available by computer, networking and telecommunications companies) is collectively referred to as “our technology and trade secrets”.  Examples of “off-the-shelf” hardware utilized include the desktop phones and handsets, computer servers used to store such things as account information and voice mail, and telecommunications hardware that permit the routing of telephone voice calls between various points across the internet and the world’s Public Switched Telephone Network (PSTN), the global wired and wireless connections between every land and mobile phone.  We offer the following products and services to customers utilizing VoIP and traditional technology platforms:  Residential voice, data and television service. Customers purchase various equipment based on the services they require to be delivered.  The offering of services occurs over a combination of telecommunications platforms.  For example, the data connection provided is rented by us from a Tier-1 provider who has network access in the geographical area of the customer.  We then offer Voice and Television services utilizing our technology over this data connection.  The customer sees one invoice for all communications services delivered to their location, and see one provider for these services.  Residential voice, data and television service accounts for approximately 10% of the revenue we generated during the three months ended March, 2013.  Business voice and data services. Similar to the residential product and service offering, business customers generally purchase larger volume and more robust, commercial grade equipment that when coupled with our multiple services offering, complete the needs of our Business Customers who likewise receive one invoice from us for all of their monthly services consumption.  Business voice and data service accounts for approximately 55% of the revenue we generated during the three months ended March 31, 2013.  Collocation Services. Collocation provides business clients with a secure, climate-controlled environment with direct network access to house mission-critical servers or interconnect to carrier access points. These facilities are shared by a number of clients which benefit from economies of scale where only a small portion of a collocation facility is required.  Carrier Services. Carrier services consist of a suite of products which support domestic and international voice traffic. This includes provision of local and international phone numbers (DIDs), toll-free origination, North American Termination, International Termination, Pre-paid and Post-paid calling cards and rebilling solutions for voice resellers.  Commodity Exchange. With the acquisition of the New York Telecom Exchange (NYTEX), Teliphone offers web based commodity exchange for international traffic termination. Buyers and sellers can trade international termination minutes online anonymously. NYTEX acts as a financial and technical clearinghouse. With the acquisition of the operations of Navigata Communications 2009 Inc. the Company has access to increased markets and capacity to service the wholesale voice market and will now include US and domestic termination.     With the acquisition of Navigata Communications 2009 Inc., the Company has expanded both the nature and scope of its offerings to include more paid technical services, microwave communications, wholesale data services and tower/site collocation.   New York Telecom Exchange  NYTEX is a telecommunications commodity exchange that focuses on facilitating the exchange of international call termination. International call termination occurs when a caller initiates a call in one country and it terminates in another. NYTEX provides services much like other commodity exchanges whereby it provides a platform for buyers and sellers to come together to purchase and sell international termination. Unlike traditional telecommunications exchanges where buyers and sellers are matched one to one on a circuit to circuit, in the NYTEX concept sellers sell their termination into a market and buyer buy from that market. NYTEX also offers a one to one trading facility for clients who request it. NYTEX manages all aspects of the transactions including technical clearing, financial clearing and quality control of the termination bought and sold on the exchange.   NYTEX developed all technical and conceptual aspects in house. NYTEX has technical data centers in Montreal, London and Brussels which manage all calls.  All calls utilize Voice over IP (VoIP) technology via the public Internet.  NYTEX focuses on the trade and exchange of high value markets, typically with termination rates over $0.05 per minute. The majority of these markets are in countries with developing or emerging economies such as in Africa, Central and South America. NYTEX utilizes the services of authorized brokers who facilitate trading and help to develop its client base. Brokers are paid a proportion of the fees they generate or on a fixed salary basis.  As NYTEX is a commodity exchange, its revenues are dependent on the efforts of its brokers, international demand for long distance termination, Management`s ability to negotiate supplier terms and the availability of alternate supply. As such the revenues for NYTEX can be cyclical and previous performance is not necessarily an indicator of future revenue. Management is moving to mitigate revenue cycles and by identifying and increasing the number of NYTEX authorized brokers and increasing its efforts to secure a broader base of low cost supply.   Distribution methods of the products or services  Teliphone Voice and Data Products:  Internet Sales.We distribute our products through the sale of hardware on our website, www.teliphone.ca. The customer purchases the necessary hardware from our on-line catalogue. Upon receipt of the hardware from us, the customer returns to our website to activate their services.  Wholesale Sales.We distribute our products and services through wholesalers. A wholesaler is a business partner who purchases our products and services “unbranded” or on a private label basis 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.  The agreements between our wholesalers and our customers are similar to those that we have with our retail customers. The wholesalers provide monthly calling services to their customers and invoice them on a monthly basis on their usage. Our form of general conditions for use of our telecommunications products and services is the agreement that we hold with our wholesalers. While product and professional liability cannot be entirely eliminated, the conditions set forth in terms and conditions of sale serve to forewarn wholesalers that should a stoppage of service occur, we cannot be held liable.  On January 1, 2013, the Company acquired a comprehensive product and professional liability insurance policy.  Direct Sales.We distribute our products and services directly to customers via our own sales force.  We currently employ 8 people in this capacity, providing sales solutions directly to larger business clients throughout Canada.  Retail Sales.We developed a network of over 40 retail points of sale via retail reseller relationships until 2009.  We abandoned this sales channel by 2010 as it did not provide the sales that we were anticipating relative to the   cost of commissions and overhead required to support the sales.  The Company does not have any retail points of sale nor do they sell their products and services in any retail establishments at this time.  New York Telecom Exchange Wholesale Traffic.Wholesale traffic is transacted business to business whereby sellers of voice termination, sell capacity to carriers which need to terminate voice calls in a particular market.  These are typically high level transactions between individuals whose sole function is to buy or sell on behalf of their business. Companies often undertake both buying and selling of voice termination.  Sales are therefore generated primarily as a result of established relationships between the parties. Teliphone  relies heavily on personnel with such relationships supplemented by presence at major wholesale traffic trade shows such as the International Telecoms Week. Wholesale traffic accounted for approximately 42% of the revenue we generated for the six months ended March 31, 2013.  Status of New Products or Services  teliPhone Residential IP-Television services.We have launched an Internet-based television service for residential clients that includes traditional cable television and network media, as well as a full suite of pay-per-view listings.  The service is currently being offered to selected customers in the Province of Quebec, Canada and we have completed the necessary upgrades to our network in order to accommodate these new services.  We are utilizing our existing distribution channels to provide these services to the residential market.  Teliphone Business Solutions Corp.  In April 2012 the Company signed an agreement with Dezmocom Inc. for the creation of Teliphone Business Solutions Corp. ("TBS"), a 50/50 joint venture. TBS is responsible for expanding the market for the Company's products and services through direct sales as well as the creation of new sales channels including agents and resellers. TBS operates in cooperation with Telephones’ direct sales people. Subsequently the Company reduced its stake in TBS to 20% to more accurately reflect the Company's level of involvement in TBS. However the Company continues to accrue the same direct financial benefits through sales of goods and services to TBS.   Results of Operations  –  Teliphone generates revenues from the sale of telecommunications services to our customers, along with the hardware required for our customers to utilize these services. Our cost of sales includes all of the necessary purchases required for us to deliver these services. This includes the use of broadband internet access required for our servers to be in communication with our customers’ VoIP devices at the customer’s location, our rental of voice channels connected to the Public-Switched-Telephone-Network; that is the traditional phone network which currently links all phone numbers worldwide as well as the cost to purchase the telecommunications services from Major Carriers that we re-sell to our customers.  The New York Telecom Exchange generates revenues from buyers of international traffic termination cleared through its platform which includes transaction fees. Our cost of sales include all necessary purchases required for us to deliver this service. This includes the use of broadband internet access required to receive and send call traffic, Voice over IP devices at our data centers required to receive and send traffic and the cost of international call termination provided by sellers on the platform.  Three Months Ended March  31, 2013 compared with Three Months Ended March  31, 2012.  For the three month period ended March 31, 2013, we recorded sales of $9,844,761 as compared to $6,140,917 for the same period in 2012.  The increase represents the revenue recorded from the acquired operations of Navigata Communications 2009 Inc. and pro-rated operations of the acquired operations of Titan Communications Inc. and Cloud-Phone Inc.  Our cost of sales was $5,610,167 for the three month period ended March 31, 2013, as compared to 4,993,699.  Our cost of sales also includes our commissions paid to our re-sellers as we are distributing a portion of recurring revenues to the re-seller after the sale has been consummated. Our cost of sales also includes any variable costs of service   delivery that we may have, including our per-minute costs for terminating our customers’ calls on another carrier’s network. The increase represents the revenue recorded from the acquired operations of Navigata Communications 2009 Inc. and pro-rated operations of the acquired operations of Titan Communications Inc. and Cloud-Phone Inc.  Our aggregate operating expenses for the three month period ended March 31, 2013, were $4,389,185 compared to $966,658 for the prior year. The Company incurred a number of one-time charges related to the acquisition of the operations of Navigata Communications 2009 Inc. Titan Communications Inc and Cloud-Phone Inc. particularly related to legal costs and costs of integration. Other general and administrative expenses were $972,606 compared with $133,189 in the prior year.  Wages, professional and consulting fees were $2,453,883 during that period as opposed to $388,948 for the same period last year, the increase due to acquisition of Navigata, Titan and Cloud-Phone employees, the hiring of additional technical support, customer support and legal fees. The Company increased its depreciation expenses to $903,807 for the three month period from $444,521. The significant increase in depreciation is due to upgrades in the Company's network as well as the acquisition of NYTEX and Navigata assets.  The Company commenced its depreciation of its computer equipment acquired during the consolidation of April 1, 2011, has commenced to depreciate its acquired Orion Communications client lists effective April 1, 2011 and has commenced to depreciate equipment purchased during the period as well as the NYTEX platform and customer lists and the newly acquired assets of the Navigata core business.  As a result, we had net loss of $175,630 for the three month period ended March 31, 2013 as compared to a net income of $175,349 for the same period in the prior year.   The decrease in operating income is primarily due to the one-time payments and adjustments from due to acquisitions, an increase in depreciation due to equipment upgrading, the acquisition of NYTEX and Navigata assets and purchase of professional services for product development.  Earnings before interest, taxes, depreciation, and amortization was $749,216 during the three month period compared with $625,081 in the same period in the prior year.  Segregated revenues and costs for the wholesale (NYTEX and part of the recently acquired Navigata business) and Voice/Data (TeliPhone and the balance of the Navigata business) are shown in the table below. While revenue segregation is fairly straightforward, both Voice/Data and Wholesale share common infrastructure including network costs, administration, customer service and overhead.  Costs for these components have been allocated according to reasonable loading estimates between the two segments. All direct costs of revenues are allocated to the respective segment.   TELIPHONE CORP.SEGREGATED FINANCIAL SUMMARYTHREE MONTHS ENDED MARCH 31, 2013WholesaleVoice/DataTotalSegmented Operating Revenues$4,350,250$5,494,511$9,844,761Total Cost of Revenues2,397,5133,212,6545,610,167Gross Profit1,952,7382,281,8564,234,594Total Operating Expenses Net of Depreciation and Amortization1,558,4021,926,9763,485,378Depreciation and Amortization439,685464,122903,807Other Expenses9,22011,81921,039Net (Loss)  Applicable to Common Shares$(54,570)$(121,061)$(175,630)   The comparative from the prior year for the segregated financial summary for the three months ended March 31 2012, is the same as the table shown for the six months ended March 31, 2012 shown below.  This is because the company only commenced segmented operations at January 1, 2012.   Six Months Ended March  31, 2013 compared with Six Months Ended March  31, 2012.  For the six month period ended March 31, 2013, we recorded sales of $12,732,614 as compared to $7,366,093 for the same period in 2012.  The increase represents the revenue recorded from the acquired operations of Navigata Communications 2009 Inc. and pro-rated operations of the acquired operations of Titan Communications Inc. and Cloud-Phone Inc.  Our cost of sales was $7,292,698 for the six month period ended March 31, 2013, as compared to $5,790,654.  Our cost of sales also includes our commissions paid to our re-sellers as we are distributing a portion of recurring revenues to the re-seller after the sale has been consummated. Our cost of sales also includes any variable costs of service delivery that we may have, including our per-minute costs for terminating our customers’ calls on another carrier’s network. The increase represents the revenue recorded from the acquired operations of Navigata Communications 2009 Inc. and pro-rated operations of the acquired operations of Titan Communications Inc. and Cloud-Phone Inc.  Our aggregate operating expenses for the six month period ended March 31, 2013, were $5,948,168 compared to $1,479,498 for the prior year. The Company incurred a number of one-time charges related to the acquisition of the operations of Navigata Communications 2009 Inc. Titan Communications Inc and Cloud-Phone Inc. particularly related to legal costs and costs of integration. Other general and administrative expenses were $1,359,209 compared with $213,129 in the prior year.  This increase was due to the significant increase in operating expenses related to acquisition of Navigata Communications 2009 Inc. Wages, professional and consulting fees were $3,076,128 during that period as opposed to $622,641 for the same period last year, the increase due to acquisition of Navigata, Titan and Cloud-Phone employees, the hiring of additional technical support, customer support and legal fees. The Company increased its depreciation expenses to $1,420,707 for the six month period from $643,728. The significant increase in depreciation is due to upgrades in the Company's network as well as the acquisition of NYTEX and Navigata assets.  The Company commenced its depreciation of its computer equipment acquired during the consolidation of April 1, 2011, has commenced to depreciate its acquired Orion Communications client lists effective April 1, 2011 and has commenced to depreciate equipment purchased during the period as well as the NYTEX platform and customer lists and the newly acquired assets of the Navigata core business.  As a result, we had net loss of $538,722 for the six month period ended March 31, 2013 as compared to a net income of $86,846 for the same period in the prior year.   The decrease in operating income is primarily due to the one-time payments and adjustments from due to acquisitions, an increase in depreciation due to equipment upgrading, the acquisition of NYTEX and Navigata assets and purchase of professional services for product development.  Earnings before interest, taxes, depreciation, and amortization was $912,455 during the six month period compared with $739,669 in the same period in the prior year.  Segregated revenues and costs for the wholesale (NYTEX and part of the recently acquired Navigata business) and Voice/Data (TeliPhone and the balance of the Navigata business) are shown in the table below. While revenue segregation is fairly straightforward, both Voice/Data and Wholesale share common infrastructure including network costs, administration, customer service and overhead.  Costs for these components have been allocated according to reasonable loading estimates between the two segments. All direct costs of revenues are allocated to the respective segment.      TELIPHONE CORP. SEGREGATED FINANCIAL SUMMARY SIX MONTHS ENDED MARCH 31, 2013  Wholesale Voice/Data Total Segmented Operating Revenues $5,316,588 $7,416,026 $12,732,614  Total Cost of Revenues 3,166,060 4,126,638 7,292,698  Gross Profit 2,150,528 3,289,388 5,439,916  Total Operating Expenses Net of Depreciation and Amortization 1,854,146 2,673,315 4,527,461  Depreciation and Amortization 692,267 728,440 1,420,707  Other Expenses 12,376 18,094 30,470  Net (Loss)  Applicable to Common Shares $(408,261) $(130,461) $(538,722)  Segmented Fixed and Intangible Assets  Wholesale Voice/Data Total  NYTEX Trading Platform $1,343,667 $- $1,343,667  Client Lists 2,134,998 2,198,330 4,333,328  Goodwill 6,839,098 7,520,130 14,359,228  Furniture and Fixtures 446,947 653,491 1,100,438  Vehicles - 11,062 11,062  Buildings & Towers 258,377 377,779 636,156  Telecoms Network 1,070,166 2,614,635 3,684,801  Switching Equipment 645,197 943,355 1,588,552  Radio Equipment 738,408 1,079,641 1,818,049  Site Improvements 111,437 162,934 274,370  Computer HW & SW 313,552 458,451 772,002 Total Assets $13,901,847 $16,019,808 $29,921,653     TELIPHONE CORP. SEGREGATED FINANCIAL SUMMARY SIX MONTHS ENDED MARCH 31, 2012  Wholesale Voice/Data Total  Segmented Operating Revenues $5,042,126 $2,323,967 $7,366,093  Total Cost of Revenues 4,208,555 1,582,099 5,790,654  Gross Profit 833,571 741,868 1,575,439  Total Operating Expenses Net of Depreciation and Amortization 214,207 630,658 844,865  Depreciation and Amortization - 643,728 643,728  Net Income (Loss) Applicable to Common Shares $619,364 ($532,518) $86,846   Segmented Fixed Assets  NYTEX Trading Platform $- $2,108,333 $2,108,333 Client Lists 1,235,037 475,000 1,710,037 Goodwill 585,040 2,000,000 2,585,040 Furniture and Fixtures 1,450,293 - 1,450,293  Total Assets $3,270,370 $4,583,333 $7,853,703      Liquidity and Capital Resources  At March 31, 2013:  On our condensed consolidated balance sheet as of March 31, 2013, we had assets consisting of accounts receivable in the amount of $6,830,784, inventory of $118,655, prepaid expenses of $3,571,539, investments of $20,021 and cash of $70,271. We also show fixed assets, net of depreciation of $11,229,097.  We likewise show Net Customer List asset value of $4,333,328 representing the acquisition of the client contracts from Orion Communications Inc., the New York Telecom Exchange Inc., Navigata Communications 2009 Inc. Titan Communications Inc., Cloud-Phone Inc. and $14,359,228 representing the goodwill from our acquisition of the clients of Dialek Telecom in 2008, the client contracts of Orion in 2011, the New York Telecom Exchange Inc. and operations of Navigata Communications 2009 Inc.  Our balance sheet reflects an accumulated deficit of $3,545,678 and total stockholder’s equity of $22,733,316.  We had net cash generated by operating activities of $930,652 during the six month period ended March 31, 2013 compared to net cash provided by operating activities of $407,974 in the prior year.  We had net cash used in investing activities of $396,699 for the six month period ended March 31, 2013, as compared to $282,461 use of cash in the prior period in 2012.    For the six month period ended March 31, 2013, we had net cash used in financing activities of $423,686 versus $183,270 used in the same period in 2012.  In pursuing our business strategy, we will require additional cash for growing our operating and investing activities.  We will continue to borrow money through our operating line of credit at our subsidiary’s bank when such cash for growth purposes is required.  In order to increase this operating line, we rely on collateral guarantees from shareholders and related parties.  We continue to search for ways to reduce costs and increase revenues of our VoIP and telecommunications resell services.  We anticipate raising funds in order to increase our base of customers through the acquisition of telecommunications resellers.  No financing agreements to date exist for the Company, but Management believes that growth the acquisition of clients will continue to support the growth of the Company in lieu of intense marketing expenditures.  Likewise, we continues to pursue and carry out our business plan, which includes marketing programs aimed at the promotion of our services, hiring additional staff to distribute and find additional distribution channels, enhance the current services we provide.  Other than current requirements from our suppliers, and the maintenance of our current level of operating expenses, we do not have any commitments for capital expenditures or other known or reasonably likely cash requirements.  We have reclassified a $70,828 of related party loans as a current liability in this quarter due to the requirement of repayment at December 31, 2013. Including this item, we have total current related party obligations of $349,511.   The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty that may arise due to this working capital deficit. We have been searching for new distribution channels to wholesale their services to provide additional revenues to support their operations.  There is no guarantee that we will be able to raise additional capital or generate the increase in revenues to sustain our operations. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive, the consequences would be a material adverse effect on our business, operating results, financial condition and prospects.  These conditions raise substantial doubt about our ability to continue as a going concern for a reasonable period.  Off Balance Sheet Arrangements  We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.  Going Concern  Due to the lack of significant cash flow and the large working capital deficiency, these factors continue to raise doubt about the Company’s ability to continue as a going concern.  There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to us, if at all.  Critical Accounting Policies  Our significant accounting policies are summarized in note 2 to our consolidated financial statements. While the selection and application of any accounting policy may involve some level of subjective judgments and estimates, we believe the following accounting policies are the most critical to our financial statements, potentially involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing conditions:   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.  Prepaid Expenses  The Company pays for some property related services in advance and recognizes these expenses as prepaid at the balance sheet date. Prepaid expenses are carried at fair value which is deemed to be the gross value of the pre-payment due to the short-term maturity of these payments. The Company does have certain prepaid expenses that extend beyond one-year and those are classified as non-current assets.  Comprehensive Income  The Company adopted ASC 220-10, “Reporting Comprehensive Income,” (formerly SFAS No. 130). ASC 220-10 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.  Currency Translation  For accounts 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, while 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.   Revenue Recognition  Operating revenues consist of telecommunications services (voice, data and long distance), customer equipment (which enables the Company's telephony services), consulting services and shipping revenue. The point in time at which revenue is recognized is determined in accordance with Revenue Recognition under ASC 605-50, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) ("ASC 605-50"), and ASC 605-25, "Revenue Arrangements with Multiple Deliverables" (“ASC 605-25”). When the Company emerged from the development stage with the acquisition of Teliphone Inc. in 2005, they began to recognize revenue from their Telephony services when they are earned, specifically when all the following conditions are met:  ·Services are provided or products are delivered to customers·There is clear evidence that an arrangement exists·Amounts are fixed or can be determined·The Company’s ability to collect is reasonably assured.  In particular, the Company recognizes:    Teliphone / Teliphone Navigata-Westel  ·Monthly fees for local, long distance and wireless voice services, as well as data services when we provide the serviceso“Services over the Company’s network” means that a significant portion of the voice or data passes over the Company’s own data network which it controls ando“Services resold from Major Provider’s networks” means that the Company re-sells the services purchased from a Major Provider to its customer, and hence does not control the voice or data flow (represents majority of the Company’s revenues)·Consulting fees which the Company earns when it sells hourly consulting services.oConsulting services are typically computer software development related, along with any administrative services that occur in the management of those resources (such as project management, accounting, administrative support, etc)·Other fees, such as network access fees, license fees, hosting fees, maintenance fees and standby fees, over the term of the contract·Subscriber revenues when customers receive the service·Revenues from the sale of equipment when the equipment is delivered and accepted by customers  Revenues exclude sales taxes and other taxes we collect from our customers.  Multiple-Element Arrangements  We enter into arrangements that may include the sale of a number of products and services, notably in sales of voice services over our own network.  In all such cases, we separately account for each product or service according to the methods previously described when the following three conditions are met:  ·The product or service has value to our customer on a stand-alone basis·There is objective and reliable evidence of the fair value of any undelivered product or service·If the sale includes a general right of return relating to a delivered product or service, the delivery or performance of any undelivered product or service is probable and substantially in our control.·If there is objective and reliable evidence of fair value for all products and services in a sale, the total price to the customer is allocated to each product and service based on its relative fair value. Otherwise, we first allocate a portion of the total price to any undelivered products and services based on their fair value and the remainder to the products and services that have been delivered.·If the conditions to account separately for each product or service are not met, we recognize revenue pro rata over the term of the customer agreement.     New York Telecom Exchange Inc. (NYTEX) and Navigata Wholesale Telecommunications  · Revenue from minutes sold on the exchange at the time of purchase which includes the price of the minutes and a per minute transaction fee which can vary from transaction to transaction. · Consulting fees which the Company earns when it sells hourly consulting services o Consulting services are typically for network operators which require advice on management of their international call termination · Revenues from the sale of equipment when the equipment is delivered and accepted by customers     Resellers  We may enter into arrangements with resellers who provide services to our customers. When we act as the principal in these arrangements, we recognize revenue based on the amounts billed to our customers. Otherwise, we recognize as revenue the net amount that we retain.  Sales Returns  We accrue an estimated amount for sales returns, based on our past experience, when revenue is recognized.  Deferred Revenues  We record payments we receive in advance, including upfront non-refundable payments, as deferred revenues until we provide the service or deliver the product to customers. Deferred revenues also include amounts billed under multiple-element sales contracts where the conditions to account separately for each product or service sold have not been met.  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 $1,183,571 at March 31, 2013.  This includes a specific provision against a debt owed by one of the Company’s largest customers for the amount of $645,406.  Accounts receivable for Teliphone Corp. 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. Wholesale traffic generally operates on a 15 net 15 basis. Traffic that is purchased during the first 15 days of the month is due on the last day of the month and traffic purchased from the 16th to the end of the month is due on the 15th of the following month. Wholesale traffic may require pre-payment if credit has not been established or exceeds established credit limits. Also in the case of wholesale traffic, the Company may negotiate other terms with clients as appropriate and may require pre-payment of traffic if no credit can be established or if a client desires to exceed its established credit limit   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.    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.  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.  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, furniture and fixtures – 5 years and Telecoms and other long lived infrastructure 10 to 20 years dependent on the asset type.  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.  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.  Earnings (Loss) Per Share of Common Stock  Basic net income (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.   Stock-Based Compensation  In 2006, the Company adopted the provisions of ASC 718-10 “Share Based Payments” for its year ended December 31, 2008. The adoption of this principle had no effect on the Company’s operations.  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. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values. 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.  The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “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 ASC 280-10, “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. Up to December 31 2011 had not segregated the business despite the Company incurring sales of hardware components for the VoIP service as well as the service itself. The Company treated these items as one component.  With the acquisition of NYTEX, beginning January 1, 2012, the Company began segregating the business between the activities of Teliphone and NYTEX. With the acquisition of the operations and network of Navigata Communications 2009 Inc., the Company began segregating revenues by voice/data/network operations and wholesale traffic (which includes all operations formerly segregated by NYTEX).  Uncertainty in Income Taxes  The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2009, and they evaluate their tax positions on an annual basis.  The Company has performed a review of its material tax positions and did not recognize any amounts for interest and penalties with respect to any unrecognized tax benefits.   ITEM 4. CONTROL AND PROCEDURES.  Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.  Based on this evaluation as of March 31, 2013, the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, including this Quarterly Report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  Our conclusion is based primarily on our inadvertent failure to file management's assessment of internal controls over financial reporting in connection with the filing of our Annual Report on Form 10-K for the period ending September 30, 2012, which failure stems, we believe, primarily from the fact that we have limited personnel on our accounting and financial staff.  We are in the process of considering changes in our disclosure controls and procedures in order to address the aforementioned failure to timely file the notification. We believe that improvements will occur following the acquisition and amalgamation of Navigata Communications 2009 Inc due to more internal resources being available for delivery of effective disclosures, controls and procedures.   The expanded entity now has a dedicated staff position to each of Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Senior Vice President Corporate Affairs rather than combined responsibilities.  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 period ended March 31, 2013.  PART II - OTHER INFORMATION  ITEM 1 - LEGAL PROCEEDINGS   Former Owners of Orion Communications Inc.  During the three months ended March 31, 2013, there have been no material developments in the legal proceedings discussed in our annual report filed on form 10-K for the year ended September 30, 2012.  Bank of Montreal, related to Former Owners of Orion Communications Inc.  On March 30, 2011, BMO dropped its lawsuit against the Company’s subsidiary due to a negotiated settlement which permitted the transfer of full and unencumbered rights to the servicing contracts of the clients of Orion.  As a result of the Company entered into a non-interest bearing Note Payable to BMO for a total of $375,000. The Note calls for an initial payment of $25,000 followed by 24 equal payments due on the 15th of the month of $11,458, and a final payment of $75,000 due on April 15, 2013.   To date, the Company has met all of its payment obligations on this note payable.  On November 15, 2011, BMO did not accept the monthly payment claiming that additional legal fees were owed to BMO by Teliphone and no payments have been made since that date. These fees were not listed in the original agreement and the Company and BMO.  On January 23, 2013 the Company reached an all-party agreement to settle all outstanding issues and obligations. The agreement now calls for a payment of $305,520.69 which covers principle, interest and all costs to be paid over 10 months. An initial payment of $50,000 and the agreement calls for 9 monthly payments of $25,000 and a final payment of $30,520.69 on October 31, 2013. The Company has classified the entire amount as a current liability on September 30, 2012, and has successfully made all required payments through May 2013.   ITEM 1A - RISK FACTORS  Not Applicable.  ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None.  ITEM 3 - DEFAULTS UPON SENIOR SECURITIES  There have been no material defaults.  ITEM 4 – MINE SAFETY DISCLOSURES  None.  ITEM 5 - OTHER INFORMATION    None.  ITEM 6 - EXHIBITS  31.1Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.31.2Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.32.1Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.32.2Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.   SIGNATURES  Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, British Columbia, Canada.  Dated: May 30, 2013    TELIPHONE CORP.       /s/ Benoit Laliberte  Benoit Laliberte Chief Executive Officer and President   TELIPHONE CORP.       /s/ Benoit Laliberte  Benoit Laliberte Principal Financial Officer   TELIPHONE CORP.       /s/ Benoit Laliberte  Benoit Laliberte Principal Accounting Officer