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


**Washington,
      D.C. 20549**









**FORM
      10-QSB**










**(Mark
      One)**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31,
                2007**




**OR**




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




**Commission
      file number** 000-51151





**TELIPHONE
      CORP**


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





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





4150
      Ste-Catherine Street West, Suite 200,


Westmount
      (Montreal),


Quebec,
      Canada, H3Z 0A1


(Address
      of principal executive offices)





**(514)
      313-6010**


(Issuer’s
      telephone number)





Copies
      of
      communications to:


JOSEPH
      I.
      EMAS


1224
      WASHINGTON AVENUE


MIAMI
      BEACH, FLORIDA 33139


TELEPHONE
      NO.: (305) 531-1174


FACSIMILE
      NO.: (305) 531-1274





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




**None**





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


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




**(Title
      of Class)**





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





Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act).


Yes o No 
      x




As
      of May
      14, 2007, there were 33,525,014 shares
      of
      the registrant's common stock issued and outstanding.





Transitional
      Small Business Disclosure Format Yes o No 
      x








**TELIPHONE
      CORP.**


Page**Part
                  I. Financial Information**Item
                  1.
              Financial
                  Statements and Notes to Financial Statements
              1Balance
                  Sheets
              F-1Statements
                  of Operations
              F-2Statements
                  of Cash Flows
              F-3Notes
                  to the Financial Statements
              F-4Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              2Item
                  3
              Controls
                  and Procedures
              14**Part
                  II. Other Information**Item
                  1.
              Legal
                  Proceedings
              15Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              15Item
                  3.
              Defaults
                  Upon Senior Securities
              15Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              15Item
                  5.
              Other
                  Information
              15Item
                  6.
              Exhibits
              16Signatures
              16





PART
      I   FINANCIAL
      INFORMATION





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





General





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




1




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




Condensed
                  Consolidated Balance Sheet as of March 31, 2007
              F-1Condensed
                  Consolidated Statements of Operations and Comprehensive Income
                  (Loss) for
                  the Three and Nine Months Ended March 31, 2007 and 2005
              F-2Condensed
                  Consolidated Statements of Cash Flows for the Three and Nine Months
                  Ended
                  March 31, 2007 and 2005
              F-3Notes
                  to Condensed Consolidated Financial Statements Teliphone
                  Corp. (Unaudited)
              F-4







**TELIPHONE
                CORP****CONDENSED
                CONSOLIDATED BALANCE SHEET****MARCH
                31, 2007****(UNAUDITED)****US$****ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            -Accounts
                receivable, net
            
            
            3,726Investment
                tax credit receivable
            
            
            14,207Inventory
            
            
            10,996Prepaid
                expenses and other current assets
            
            
            111,967Total
                Current Assets
            
            
            140,896Fixed
                assets, net of depreciation
            
            
            64,373**TOTAL
                ASSETS**
            
            $
            205,269**LIABILITIES
                AND STOCKHOLDERS' (DEFICIT)****LIABILITIES**Current
                Liabilities:Bank
                overdraft
            
            $
            17,160Deferred
                revenue
            
            
            23,127Related
                party loans and advances
            
            
            566,765Accounts
                payable and accrued expenses
            
            
            132,986Total
                Current Liabilities
            
            
            740,038**Total
                Liabilities**
            
            
            740,038**Minority
                interest**
            
            
            97,689**STOCKHOLDERS'
                (DEFICIT)**Common
                stock, $.001 Par Value; 125,000,000 shares authorizedand
                33,554,014 shares issued and outstanding
            
            
            33,554Additional
                paid-in capital
            
            
            898,156Accumulated
                deficit
            
            
            (1,542,171
            )Accumulated
                other comprehensive income (loss)
            
            
            (21,997
            )**Total
                Stockholders' (Deficit)**
            
            
            (632,458
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
            
            $
            205,269




F-1





**TELIPHONE
                CORP.****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS****AND
                COMPREHENSIVE INCOME (LOSS)****FOR
                THE SIX AND THREE MONTHS ENDED MARCH 31, 2007 AND
                2006****(UNAUDITED)****US
                $**
            
            **US
                $****SIX
                MONTHS ENDED**
            
            **THREE
                MONTHS ENDED****MARCH
                31,**
            
            **MARCH
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006****OPERATING
                REVENUES**Revenues
            
            $
            290,515
            
            $
            194,729
            
            $
            161,281
            
            $
            107,718**COST
                OF SALES**Inventory,
                beginning of period
            
            
            11,034
            
            
            32,468
            
            
            17,697
            
            
            51,652Purchases
                and cost of VoIP services
            
            
            226,641
            
            
            194,385
            
            
            117,376
            
            
            76,088Inventory,
                end of period
            
            
            (10,996
            )
            
            (20,014
            )
            
            (10,996
            )
            
            (20,014
            )**Total
                Cost of Sales**
            
            
            226,679
            
            
            206,839
            
            
            124,077
            
            
            107,726**GROSS
                PROFIT (LOSS)**
            
            
            63,836
            
            
            (12,110
            )
            
            37,204
            
            
            (8
            )**OPERATING
                EXPENSES**Selling
                and promotion
            
            
            6,714
            
            
            18,814
            
            
            5,753
            
            
            16,945Professional
                and consulting fees
            
            
            24,291
            
            
            39,231
            
            
            15,110
            
            
            26,897Salaries
                and wage levies
            
            
            107,651
            
            
            57,855
            
            
            68,844
            
            
            38,775Other
                general and administrative expenses
            
            
            22,795
            
            
            22,044
            
            
            10,618
            
            
            17,157Depreciation
            
            
            37,939
            
            
            21,238
            
            
            15,833
            
            
            8,655**Total
                Operating Expenses**
            
            
            199,390
            
            
            159,182
            
            
            116,158
            
            
            108,429**LOSS
                BEFORE OTHER INCOME (EXPENSE)**
            
            
            (135,554
            )
            
            (171,292
            )
            
            (78,954
            )
            
            (108,437
            )**OTHER
                INCOME (EXPENSE)**Interest
                expense
            
            
            (23,831
            )
            
            (6,753
            )
            
            (12,844
            )
            
            (5,082
            )**Total
                Other Income (Expense)**
            
            
            (23,831
            )
            
            (6,753
            )
            
            (12,844
            )
            
            (5,082
            )**NET
                  LOSS BEFORE MINORITY INTEREST**
              **AND
                PROVISION FOR INCOME TAXES**
            
            
            (159,385
            )
            
            (178,045
            )
            
            (91,798
            )
            
            (113,519
            )**Minority
                interest**
            
            
            31,991
            
            
            -
            
            
            17,988
            
            
            -**NET
                LOSS BEFORE PROVISION FOR INCOME TAXES**
            
            
            (127,394
            )
            
            (178,045
            )
            
            (73,810
            )
            
            (113,519
            )**Provision
                for Income Taxes**
            
            
            -
            
            
            -
            
            
            -
            
            
            -**NET
                LOSS APPLICABLE TO COMMON SHARES**
            
            $
            (127,394
            )
            $
            (178,045
            )
            $
            (73,810
            )
            $
            (113,519
            )**NET
                LOSS PER BASIC AND DILUTED SHARES**
            
            $
            (0.00
            )
            $
            (0.01
            )
            $
            (0.00
            )
            $
            (0.00
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON****SHARES
                OUTSTANDING**
            
            
            33,314,673
            
            
            31,089,520
            
            
            33,554,014
            
            
            31,089,520**COMPREHENSIVE
                INCOME (LOSS)**Net
                loss
            
            $
            (127,394
            )
            $
            (178,045
            )
            $
            (73,810
            )
            $
            (113,519
            )Other
                comprehensive income (loss)Currency
                translation adjustments
            
            
            (1,053
            )
            
            (247
            )
            
            532
            
            
            (2,337
            )Comprehensive
                income (loss)
            
            $
            (128,447
            )
            $
            (178,292
            )
            $
            (73,278
            )
            $
            (115,856
            )




F-2





**TELIPHONE
                CORP.****CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR
                THE SIX MONTHS ENDED MARCH 31, 2007 AND 2006****(UNAUDITED)****US$****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (127,394
            )
            $
            (178,045
            )**Adjustments
                to reconcile net loss to net cash****used
                in operating activities:**Depreciation
            
            
            37,939
            
            
            21,238Minority
                interest
            
            
            (31,991
            )
            
            -**Changes
                in assets and liabilities**Decrease
                in accounts receivable
            
            
            21,152
            
            
            18,569Decrease
                in investment tax credit receivable
            
            
            -
            
            
            73(Increase)
                decrease in inventory
            
            
            (281
            )
            
            12,454Decrease
                in prepaid expenses and other current assets
            
            
            9,303
            
            
            3,176Increase
                in deferred revenue
            
            
            15,093
            
            
            -(Decrease)
                in accounts payable andand
                accrued expenses
            
            
            (18,858
            )
            
            (46,266
            )Total
                adjustments
            
            
            32,357
            
            
            9,244**Net
                cash (used in) operating activities**
            
            
            (95,037
            )
            
            (168,801
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisitions
                of fixed assets
            
            
            (4,618
            )
            
            (11,008
            )**Net
                cash (used in) investing activities**
            
            
            (4,618
            )
            
            (11,008
            )**CASH
                FLOWS FROM FINANCING ACTIVITES**Increase
                in bank overdraft
            
            
            9,733
            
            
            3,225Proceeds
                from loan payable, net
            
            
            -
            
            
            43,403Proceeds
                from loan payable - related parties, net
            
            
            90,408
            
            
            133,428**Net
                cash provided by financing activities**
            
            
            100,141
            
            
            180,056Effect
                of foreign currency transalation
            
            
            (486
            )
            
            (247
            )**NET
                INCREASE (DECREASE) IN****CASH
                AND CASH EQUIVALENTS**
            
            
            -
            
            
            -**CASH
                AND CASH EQUIVALENTS -****BEGINNING
                OF PERIOD**
            
            
            -
            
            
            -**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            -
            
            $
            -**CASH
                PAID DURING THE PERIOD FOR:**Interest
                expense
            
            $
            7,291
            
            $
            6,753**SUPPLEMENTAL
                NONCASH INFORMATION:**Common
                stock issued for liability for stock to be issued
            
            $
            165,000
            
            $
            -


F-3





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





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





The
      unaudited condensed consolidated financial statements included herein have
      been
      prepared, without audit, pursuant to the rules and regulations of the Securities
      and Exchange Commission (“SEC”). The condensed consolidated financial statements
      and notes are presented as permitted on Form 10-QSB and do not contain
      information included in the Company’s annual consolidated statements and notes.
      Certain information and footnote disclosures normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been condensed or omitted pursuant to
      such
      rules and regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading. It is suggested
      that
      these condensed consolidated financial statements be read in conjunction with
      the September 30, 2006 audited financial statements and the accompanying notes
      thereto. While management believes the procedures followed in preparing these
      condensed consolidated financial statements are reasonable, the accuracy of
      the
      amounts are in some respects dependent upon the facts that will exist, and
      procedures that will be accomplished by the Company later in the
      year.




These
      condensed consolidated unaudited financial statements reflect all adjustments,
      including normal recurring adjustments which, in the opinion of management,
      are
      necessary to present fairly the consolidated operations and cash flows for
      the
      periods presented.




Teilphone
      Corp. (formerly OSK Capital II Corporation) (the “Company”) was incorporated in
      the State of Nevada on March 2, 1999 to serve as a vehicle to effect a merger,
      exchange of capital stock, asset acquisition or other business combination
      with
      a domestic or foreign private business. Effective April 28, 2005, the Company
      achieved its objectives with the reverse merger and reorganization with
      Teliphone Inc., a Canadian company.




Teliphone,
      Inc. was founded by its original parent company, United American Corporation,
      a
      publicly traded Florida Corporation, in order to develop a
      Voice-over-Internet-Protocol (VoIP) network which enables users to connect
      an
      electronic device to their internet connection at the home or office which
      permits them to make telephone calls to any destination phone number anywhere
      in
      the world. VoIP is currently growing in scale significantly in North America.
      Industry experts predict the VoIP offering to be one of the fastest growing
      sectors from now until 2009. This innovative new approach to telecommunications
      has the benefit of drastically reducing the cost of making these calls as the
      distances are covered over the Internet instead of over dedicated lines such
      as
      traditional telephony.




F-4




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





Prior
      to
      its acquisition by the Company, Teliphone Inc. had grown primarily in the
      Province of Quebec, Canada through the sale of its product offering in retail
      stores and over the internet. For this distribution channel, the Company
      typically pays a 25% commission to the distributor who shares this with the
      re-seller.





In
      addition to the retail services provided, Teliphone Inc. also sells to
      wholesalers. Wholesalers typically receive approximately a 35% commission on
      such sales, however, the wholesaler re-bills these services to their customers
      and provide the necessary customer support to their customers directly. This
      sector has grown this year for the Company and the Company will look to add
      further distribution channels to other sectors of the world, commencing with
      India in fiscal year 2007.





On
      August
      21, 2006, OSK Capital II Corporation formerly changed its name to Teliphone
      Corp.





**Going
      Concern**





As
      shown
      in the accompanying condensed consolidated financial statements the Company
      has
      incurred recurring losses of $127,394 and $178,045 for the six months ended
      March 31, 2007 and 2006, and has a working capital deficiency of $599,142 as
      of
      March 31, 2007. The Company has been searching for new distribution channels
      to
      wholesale their services to provide additional revenues to support their
      operations. In addition, the Company entered into a letter of intent with
      Intelco Communications that can save them operating costs in addition to
      providing support services; however, this has not had an impact on the current
      year operations. The Company successfully reduced approximately $400,000 of
      related party debt as this was converted into additional shares of the Company’s
      stock in August 2006. There is no guarantee that the Company will be able to
      raise additional capital or generate the increase in revenues to sustain its
      operations, however the Company has recently submitted a registration statement
      of Form SB-2 to raise additional capital. These conditions raise substantial
      doubt about the Company’s ability to continue as a going concern for a
      reasonable period.




F-5





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Going
      Concern (Continued)**





Management
      believes that the Company’s capital requirements will depend on many factors.
      These factors include the increase in sales through existing channels as well
      as
      the Company’s subsidiary Teliphone Inc.’s ability to continue to expand its
      distribution points and leveraging its technology into the commercial small
      business segments. The Company’s subsidiary Teliphone Inc.’s strategic
      relationships with telecommunications interconnection companies, internet
      service providers and retail sales outlets has permitted the Company to achieve
      consistent monthly growth in acquisition of new customers. Additionally, the
      Company sold approximately 25% of its subsidiary Teliphone Inc. to the parent
      company of Intelco Communications which will bring further opportunity and
      working capital to the Company.





The
      Company will look to further develop its existing relationship with its
      wholesaler in India in order to take advantage of the strong growth in demand
      for its VoIP products worldwide.





In
      the
      near term, the Company will look to complete the registration process to
      effectiveness and completes its offering. The Company’s ability to continue as a
      going concern for a reasonable period is dependent upon management’s ability to
      raise additional interim capital and, ultimately, achieve profitable operations.
      There can be no assurance that management will be able to raise sufficient
      capital, under terms satisfactory to the Company, if at all.





The
      condensed consolidated financial statements do not include any adjustments
      relating to the carrying amounts of recorded assets or the carrying amounts
      and
      classification of recorded liabilities that may be required should the Company
      be unable to continue as a going concern.




F-6




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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




**Principles
      of Consolidation**





The
      condensed consolidated financial statements include the accounts of the Company
      and all of its majority owned subsidiaries. All significant intercompany
      accounts and transactions have been eliminated in consolidation. All minority
      interests have been reflected herein.





Use
      of
      Estimates





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




Cash
      and Cash Equivalents




The
      Company considers all highly liquid debt instruments and other short-term
      investments with an initial maturity of three months or less to be cash
      equivalents.




**Comprehensive
      Income**





The
      Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
      Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
      comprehensive income in addition to net income from operations.




Comprehensive
      income is a more inclusive financial reporting methodology that includes
      disclosure of information that historically has not been recognized in the
      calculation of net income.




Inventory





Inventory
      is valued at the lower of cost or market determined on a first-in-first-out
      basis. Inventory consisted only of finished goods.




F-7





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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




**Fair
      Value of Financial Instruments (other than Derivative Financial
      Instruments)**





The
      carrying amounts reported in the condensed consolidated balance sheet for cash
      and cash equivalents, accounts receivable and accounts payable approximate
      fair
      value because of the immediate or short-term maturity of these financial
      instruments. For the notes payable, the carrying amount reported is based upon
      the incremental borrowing rates otherwise available to the Company for similar
      borrowings. For the convertible debentures, fair values were calculated at
      net
      present value using the Company’s weighted average borrowing rate for debt
      instruments without conversion features applied to total future cash flows
      of
      the instruments.




Currency
      Translation




For
      subsidiaries outside the United States that prepare financial statements in
      currencies other than the U.S. dollar, the Company translates income and expense
      amounts at average exchange rates for the year, translates assets and
      liabilities at year-end exchange rates and equity at historical rates. The
      Company’s functional currency is the Canadian dollar, whiles the Company reports
      its currency in the US dollar. The Company records these translation adjustments
      as accumulated other comprehensive income (loss). Gains and losses from foreign
      currency transactions are included in other income (expense) in the results
      of
      operations. For the six months ended March 31, 2007 and 2006, the Company
      recorded approximately ($1,053) and ($247) in transaction gains (losses) as
      a
      result of currency translation.




Research
      and Development




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





**Revenue
      Recognition**





Operating
      revenues consists of telephony services revenue and customer equipment (which
      enables the Company's telephony services) and shipping revenue. The point in
      time at which revenue is recognized is determined in accordance with Staff
      Accounting Bulletin No. 104, Revenue Recognition, and Emerging Issues Task
      Force
      Consensus No. 01-9, Accounting for Consideration Given by a Vendor to a Customer
      (Including a Reseller of the Vendor's Products) ("EITF No. 01-9"). When the
      Company emerged from the development stage with the acquisition of Teliphone
      Inc. they began to recognize revenue from their VoIP Telephony services when
      the
      services were rendered and customer equipment purchased as follows:




F-8


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




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


Revenue
        Recognition
        (Continued)
  VoIP
          Telephony Services Revenue
  The
          Company realizes VoIP telephony services revenue through sales by two distinct
          channels; the Retail Channel (Customer purchases their hardware from a
          Retail
          Distributor and the Company invoices the customer direct) and the Wholesale
          Channel (Customer purchases their hardware from the Wholesaler and the
          Company
          invoices the Wholesaler for usage by the Wholesaler’s customers
          collectively).




Substantially
      all of the Company's operating revenues are telephony services revenue, which
      is
      derived primarily from monthly subscription fees that customers are charged
      under the Company's service plans. The Company also derives telephony services
      revenue from per minute fees for international calls and for any calling minutes
      in excess of a customer's monthly plan limits.




*Retail
      Channel*





Monthly
      subscription fees are automatically charged to customers' credit cards in
      advance and are recognized over the following month when services are
      provided.





Revenue
      generated from international calls and from customers exceeding allocated call
      minutes under limited minute plans is charged to the customer’s credit cards in
      advanced in small increments and are recognized over the following month when
      the services are provided.





The
      Company generates revenues from shipping equipment direct to customers and
      our
      re-seller partners. This revenue is considered part of the VoIP service
      revenues.





The
      Company does not charge initial activation fees associated with the service
      contracts in the Retail Channel. The Company generates revenues from disconnect
      fees associated with early termination of service contracts with Retail
      Customers. These fees are included in service revenue as they are considered
      part of the service component when the service is delivered or
      performed.





Prior
      to
      September 30, 2006 the Company generally charged a disconnect fee to Retail
      customers who did not return their customer equipment to the Company upon
      disconnection of service if the disconnection occurred within the term of the
      service contract. On October 1, 2006, the Company changed its disconnect policy.
      Upon cancellation of the service, a disconnect fee is charged only if the
      customer does not return their equipment to the Company. These fees are included
      in service revenue as they are considered part of the service component when
      the
      service is delivered or performed and are recognized upon receipt of the
      fee.




F-9





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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




**Revenue
      Recognition (Continued)**




*Wholesale
      Channel*





Monthly
      subscription fees are invoiced to Wholesale customers at the end of the month
      for the entirety of the services delivered during the month. Revenue for this
      period is therefore recognized at the time the Wholesaler is
      billed.




The
      Company generates revenue from initial activation fees associated with wholesale
      service contracts. These fees are included in service revenue as they are
      considered part of the service component when the service is delivered or
      performed and are recognized upon receipt of the fee.




There
      is
      no disconnection fee associated with a wholesale customer.




The
      Company generates revenues from shipping equipment direct to wholesale
      customers. This revenue is considered part of the VoIP service
      revenues.




Customer
      Equipment




*Retail
      Channel*





For
      retail sales, the equipment is sold to re-sellers at a subsidized price below
      that of cost and below that of the retail sales price. The customer purchases
      the equipment at the retail price from the retailer. The Company recognizes
      this
      revenue utilizing the guidance set forth in EITF 00-21, “Revenue Arrangements
      with Multiple Deliverables”.





Under
      a
      retail agreement, the cost of the equipment is recognized as deferred revenue,
      and amortized over the length of the service agreement. Upon satisfying the
      minimum service requirements the equipment charges are refunded through
      subsequent billings netting out this charge against service charges. Upon
      refund, the deferred revenue is fully amortized.





Customer
      equipment expense is recorded to direct cost of goods sold when the hardware
      is
      initially purchased from our suppliers.





The
      Company also provides rebates to retail customers who purchase their customer
      equipment from retailers and satisfy minimum service period requirements. These
      rebates are recorded as a reduction of revenue over the minimum service period
      based upon the actual rebate coupons received from customers and whose accounts
      are in good standing.




F-10





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Revenue
      Recognition (Continued)**




*Wholesale
      Channel*





For
      wholesale customers, the equipment is sold to wholesalers at the Company’s cost
      price plus mark-up. There are no rebates for equipment sold to wholesale
      customers and the Company does not subsidize their equipment sales. The Company
      recognizes revenue from sales of equipment to wholesale customers as
      billed.




Commissions
      Paid to Retail Distributors





Commissions
      paid to Retail Distributors are sales and marketing expenses and are recognized
      during the period where the commissions are paid.




Commissions
      Paid to Wholesalers





Commissions
      paid to wholesalers is recognized as a cost of sales due to the Company
      receiving an identifiable benefit in exchange for the consideration, and the
      Company can reasonably estimate the fair value of the benefit identified. The
      Company receives the following identifiable benefit in exchange for the
      commissions paid:





·  The
      Wholesaler assumes the cost of billing and collections direct with the
      customer




·  The
      Wholesaler assumes the costs of customer support





This
      cost
      of sale is recognized when the service is provided to the Wholesaler. Should
      the
      consideration paid by the Company exceed the fair value of the benefit received,
      that amount would be reflected as a reduction of revenue when recognized in
      the
      Company’s statement of operation.





**Accounts
      Receivable**





The
      Company conducts business and extends credit based on an evaluation of the
      customers’ financial condition, generally without requiring collateral.




Exposure
      to losses on receivables is expected to vary by customer due to the financial
      condition of each customer. The Company monitors exposure to credit losses
      and
      maintains allowances for anticipated losses considered necessary under the
      circumstances. The Company has an allowance for doubtful accounts of $4,472
      at
      March 31, 2007.




Accounts
      receivable are generally due within 30 days and collateral is not required.
      Unbilled accounts receivable represents amounts due from customers for which
      billing statements have not been generated and sent to the
      customers.




F-11




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Income
      Taxes**





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




**Investment
      Tax Credits**





The
      Company claims investment tax credits as a result of incurring scientific
      research and experimental development expenditures. Investment tax credits
      are
      recognized when the related expenditures are incurred, and there is reasonable
      assurance of their realization. Management has made a number of estimates and
      assumptions in determining their expenditures eligible for the investment tax
      credit claim. It is possible that the allowed amount of the investment tax
      credit claim could be materially different from the recorded amount upon
      assessment by Revenue Canada and Revenue Quebec. The Company has estimated
      $14,207 in investment tax credits as of March 31, 2007.




**Convertible
      Instruments**




The
      Company reviews the terms of convertible debt and equity securities for
      indications requiring bifurcation, and separate accounting, for the embedded
      conversion feature. Generally, embedded conversion features where the ability
      to
      physical or net-share settle the conversion option is not within the control
      of
      the Company are bifurcated and accounted for as a derivative financial
      instrument. (See Derivative Financial Instruments below). Bifurcation of the
      embedded derivative instrument requires allocation of the proceeds first to
      the
      fair value of the embedded derivative instrument with the residual allocated
      to
      the debt instrument. The resulting discount to the face value of the debt
      instrument is amortized through periodic charges to interest expense using
      the
      Effective Interest Method.




F-12


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Derivative
      Financial Instruments**




The
      Company generally does not use derivative financial instruments to hedge
      exposures to cash-flow or market risks. However, certain other financial
      instruments, such as warrants or options to acquire common stock and the
      embedded conversion features of debt and preferred instruments that are indexed
      to the Company’s common stock, are classified as liabilities when either (a) the
      holder possesses rights to net-cash settlement or (b) physical or net share
      settlement is not within the control of the Company. In such instances, net-cash
      settlement is assumed for financial accounting and reporting, even when the
      terms of the underlying contracts do not provide for net-cash settlement. Such
      financial instruments are initially recorded at fair value and subsequently
      adjusted to fair value at the close of each reporting period.





**Advertising
      Costs**





The
      Company expenses the costs associated with advertising as incurred. Advertising
      expenses for the six months ended March 31, 2007 and 2006 are included in
      general and administrative expenses in the condensed consolidated statements
      of
      operations.





**Fixed
      Assets**




Fixed
      assets are stated at cost. Depreciation is computed using the straight-line
      method over the estimated useful lives of the assets; automobiles - 3 years,
      computer equipment - 3 years, and furniture and fixtures - 5 years.





When
      assets are retired or otherwise disposed of, the costs and related accumulated
      depreciation are removed from the accounts, and any resulting gain or loss
      is
      recognized in income for the period. The cost of maintenance and repairs is
      charged to income as incurred; significant renewals and betterments are
      capitalized. Deduction is made for retirements resulting from renewals or
      betterments.




F-13


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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




**Impairment
      of Long-Lived Assets**





Long-lived
      assets, primarily fixed assets, are reviewed for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of the assets might
      not be recoverable. The Company does perform a periodic assessment of assets
      for
      impairment in the absence of such information or indicators. Conditions that
      would necessitate an impairment assessment include a significant decline in
      the
      observable market value of an asset, a significant change in the extent or
      manner in which an asset is used, or a significant adverse change that would
      indicate that the carrying amount of an asset or group of assets is not
      recoverable. For long-lived assets to be held and used, the Company recognizes
      an impairment loss only if its carrying amount is not recoverable through its
      undiscounted cash flows and measures the impairment loss based on the difference
      between the carrying amount and estimated fair value.




**(Loss)
      Per Share of Common Stock**





Basic
      net
      (loss) per common share is computed using the weighted average number of common
      shares outstanding. Diluted earnings per share (EPS) includes additional
      dilution from common stock equivalents, such as stock issuable pursuant to
      the
      exercise of stock options and warrants. Common stock equivalents were not
      included in the computation of diluted earnings per share when the Company
      reported a loss because to do so would be antidilutive for periods
      presented.





The
      following is a reconciliation of the computation for basic and diluted
      EPS:




**March
                  31,**
              
              **March
                  31,****2007**
              
              **2006**Net
                  loss
              
              $
              (127,394
              )
              $
              (178,045
              )Weighted-average
                  common sharesOutstanding
                  (Basic)
              
              
              33,314,673
              
              
              31,089,520Weighted-average
                  common stockEquivalentsStock
                  options
              
              
              -
              
              
              -Warrants
              
              
              -
              
              
              -Weighted-average
                  common sharesOutstanding
                  (Diluted)
              
              
              33,314,673
              
              
              31,089,520  F-14


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**(Loss)
      Per Share of Common Stock (Continued)**





The
      Company has not issued options or warrants to purchase stock in these periods.
      If there were options or warrants outstanding they would not be included in
      the
      computation of diluted EPS because inclusion would have been
      antidilutive.




**Stock-Based
      Compensation**




On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based
      Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to
      share-based payment transactions be recognized in the financial statements.
      Share-based payment transactions within the scope of SFAS 123R include stock
      options, restricted stock plans, performance-based awards, stock appreciation
      rights, and employee share purchase plans. The provisions of SFAS 123R, as
      amended, are effective for small business issuers beginning as of the next
      fiscal year after December 15, 2005. The Company has adopted the provisions
      of
      SFAS 123R for its fiscal year ended September 30, 2006. The adoption of this
      principle had no effect on the Company’s operations.




On
      January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
      Payment” (“FAS 123R”) which requires recognition of stock-based compensation
      expense for all share-based payments based on fair value. Prior to January
      1,
      2006, the Company measured compensation expense for all of its share-based
      compensation using the intrinsic value method prescribed by Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”) and related interpretations. The Company has provided pro
      forma disclosure amounts in accordance with FAS No. 148, “Accounting for
      Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
      Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
      123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
      its stock-based compensation.





The
      Company has elected to use the modified-prospective approach method. Under
      that
      transition method, the calculated expense in 2006 is equivalent to compensation
      expense for all awards granted prior to, but not yet vested as of January 1,
      2006, based on the grant-date fair values estimated in accordance with the
      original provisions of FAS 123. Stock-based compensation expense for all awards
      granted after January 1, 2006 is based on the grant-date fair values estimated
      in accordance with the provisions of FAS 123R. The Company recognizes these
      compensation costs, net of an estimated forfeiture rate, on a pro rata basis
      over the requisite service period of each vesting tranche of each award. The
      Company considers voluntary termination behavior as well as trends of actual
      option forfeitures when estimating the forfeiture rate.




F-15


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Stock-Based
      Compensation** **(Continued)**





The
      Company measures compensation expense for its non-employee stock-based
      compensation under the Financial Accounting Standards Board (FASB) Emerging
      Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* ”.
      The
      fair value of the option issued is used to measure the transaction, as this
      is
      more reliable than the fair value of the services received. The fair value
      is
      measured at the value of the Company’s common stock on the date that the
      commitment for performance by the counterparty has been reached or the
      counterparty’s performance is complete. The fair value of the equity instrument
      is charged directly to compensation expense and additional paid-in
      capital.





**Segment
      Information**





The
      Company follows the provisions of SFAS No. 131, “ *Disclosures
      about Segments of an Enterprise and Related Information”* .
      This
      standard requires that companies disclose operating segments based on the manner
      in which management disaggregates the Company in making internal operating
      decisions. Despite the Company’s subsidiary, Teliphone, Inc. incurring sales of
      hardware components for the VoiP service as well as the service itself, the
      Company treats these items as one component, therefore has not segregated their
      business.





**Reclassifications**




The
      Company has reclassified certain amounts in their condensed consolidated
      statement of operations for the six months ended March 31, 2006 to conform
      with
      the March 31, 2007 presentation. These reclassifications had no effect on the
      net loss for the six months ended March 31, 2006.





**Recent
      Accounting Pronouncements**





In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155, “Accounting for Certain Hybrid Instruments” (“SFAS 155”). FASB 155 allows
      financial instruments that have embedded derivatives to be accounted for as
      a
      whole (eliminating the need to bifurcate the derivative from its host) if the
      holder elects to account for the whole instrument on a fair value basis. This
      statement is effective for all financial instruments acquired or issued after
      the beginning of an entity’s first fiscal year that begins after September 15,
      2006. The Company has determined that SFAS 155 will not have a material impact
      on its condensed consolidated financial statements.


F-16


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Recent
      Accounting Pronouncements** **(Continued)**




In
      May
      2005, the FASB issued Statement of Financial Accounting Standard No. 154,
“Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 is a
      replacement of APB No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting
      Accounting Changes in Interim Financial Statements”. SFAS 154 applies to all
      voluntary changes in accounting principle and changes the requirements for
      accounting and reporting of a change in accounting principle. This statement
      establishes that, unless impracticable, retrospective application is the
      required method for reporting of a change in accounting principle in the absence
      of explicit transition requirements specific to the newly adopted accounting
      principle. It also requires the reporting of an error correction which involves
      adjustments to previously issued financial statements similar to those generally
      applicable to reporting an accounting change retrospectively. SFAS 154 is
      effective for accounting changes and corrections of errors made in fiscal years
      beginning after December 15, 2005. The Company has restated its consolidated
      financial statements for its prior year due to a correction of an error. The
      impact of those restatements are noted in Note 11 to these condensed
      consolidated financial statements.




In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosure about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Early adoption is
      encouraged. The adoption of SFAS 157 is not expected to have a material impact
      on the financial statements.




In
      September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize
      the over-funded or under-funded status of a defined benefit postretirement
      plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income. SFAS 158 also
      requires the measurement of defined benefit plan assets and obligations as
      of
      the date of the employer’s fiscal year-end statement of financial position (with
      limited exceptions). Management does not expect adoption of SFAS 158 to have
      a
      material impact on the Company’s financial statements.





In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.
      115”, (“FAS 159”) which permits entities to choose to measure many financial
      instruments and certain other items at fair value at specified election dates.
      A
      business entity is required to report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. This statement is expected to expand the use of fair value
      measurement. FAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years.




F-17





**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Recent
      Accounting Pronouncements** **(Continued)**





In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes.” This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
      15,
      2006. Management is still evaluating what effect this will have on the Company’s
      financial statements.





In
      September 2006, the United States Securities and Exchange Commission (“SEC”)
      issued SAB 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements.”





This
      SAB
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purpose of
      a
      materiality assessment. SAB 108 establishes an approach that requires
      quantification of financial statement errors based on the effects of each of
      the
      company’s financial statements and the related financial statement disclosures.
      SAB 108 permits existing public companies to record the cumulative effect of
      initially applying this approach in the first year ending after November 15,
      2006 by recording the necessary correcting adjustments to the carrying values
      of
      assets and liabilities as of the beginning of that year with the offsetting
      adjustment recorded to the opening balance of retained earnings. Additionally,
      the use of the cumulative effect transition method requires detailed disclosure
      of the nature and amount of each individual error being corrected through the
      cumulative adjustment and how and when it arose. The Company does not anticipate
      that SAB 108 will have a material impact on its financial
      statements.





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





Fixed
      assets as of March 31, 2007 were as follows:





Estimated
                UsefulLives
                (Years)Furniture
                and fixtures
            
            
            5
            
            $
            1,157Computer
                equipment
            
            
            3
            
            
            164,929Vehicles
            
            
            5
            
            
            21,836187,922Less:
                accumulated depreciation
            
            
            
            
            
            123,549Property
                and equipment, net
            
            
            
            
            $
            64,373




F-18




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




**NOTE
      3-**  **FIXED
      ASSETS** **(CONTINUED)**




There
      was
      $37,939 and $21,238 charged to operations for depreciation expense for the
      six
      months ended March 31, 2007 and 2006, respectively.





The
      Company had acquired assets of a related entity in April 2005, United American
      Corporation that related to United American Corporation's use of the Company’s
      VoIP services. These assets, included in fixed assets amounted to $104,500.





**NOTE
      4-**  **RELATED
      PARTY LOANS**





On
      August
      1, 2006, the Company converted $421,080 of the $721,080 of its loans with United
      American Corporation, a related party through common ownership, and majority
      shareholder of the Company prior to United American Corporation’s stock dividend
      that took place effective October 30, 2006 into 1,699,323 shares of the
      Company’s common stock. In December 2006, the Company issued a resolution to
      issue the remaining 171 fractional shares related to United American
      Corporation’s spin-off of the corporation and pro-rata distribution of United
      American Corporation’s holding of the Company’s common stock to its
      shareholders. Those shares were issued prior to December 31, 2006 and
      distributed to shareholders. The $300,000 remaining on the loan has become
      interest bearing at 12% per annum on August 1, 2006, payable monthly with a
      maturity date of August 1, 2009. Interest on this loan for the six months ended
      March 31, 2007 was $18,000 on this loan. Accrued interest on this loan as of
      March 31, 2007 is $24,000.




In
      addition, there are approximately $129,975 of non-interest bearing advances
      that
      were incurred in August and September 2006 from United American Corporation.
      These advances were provided for cash flow purposes for the Company to sustain
      its operations.




F-19


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




**NOTE
      4-**  **RELATED
      PARTY LOANS** **(CONTINUED)**




The
      Company has also been advanced various amounts from related parties whom are
      either officers, shareholders or entities under control by an officer or
      shareholder. These amounts bear interest at interest rates ranging between
      5%
      and 7% per annum as follows:




As
      of
      March 31, 2007, the Company has $37,709 including accrued interest outstanding
      with an officer. The Company has recorded interest expense of approximately
      $1,040 for the six months ended March 31, 2007. There were no amounts
      outstanding during the three months ended March 31, 2006. As the amount is
      due
      on demand, the Company has classified the loan as a current
      liability.




As
      of
      March 31, 2007, the Company has $48,791 including accrued interest outstanding
      with shareholders. Interest expense for the six months ended March 31, 2007
      and
      2006 were approximately $800 and $900, respectively. As the amounts are due
      on
      demand, the Company has classified them as current liabilities.




As
      of
      March 31, 2007, the Company has $7,618 including accrued interest outstanding
      with a company controlled by an officer of the Company. The Company has recorded
      interest expense of approximately $250 for the six months ended March 31, 2007.
      There were no amounts outstanding during the six months ended March 31, 2006.
      As
      the amounts are due on demand, the Company has classified them as current
      liabilities.




As
      of
      March 31, 2007, the Company has $43,305 outstanding with a company controlled
      by
      an officer of the Company with interest expense of $1,540 for the six months
      ended March 31, 2007. There is $1,540 of interest accrued as of March 31, 2007.
      There were no amounts outstanding during the six months ended March 31, 2006.
      As
      the amounts are due on demand, the Company has classified them as current
      liabilities.




F-20




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





On
      August
      11, 2005, the Company entered into 10% Convertible Debentures (the “Debentures”)
      with various individuals. The Debentures had a maturity date of August 11,
      2008,
      and incurred interest at a rate of 10% per annum.




The
      Debentures can either be paid to the holders on August 11, 2008 or converted
      at
      the holders’ option any time up to maturity at a conversion price equal to
      eighty percent (80%) of the average closing price of the common stock as listed
      on a Principal Market for the five (5) trading days immediately proceeding
      the
      conversion date. If the common stock is not traded on a Principal Market, the
      conversion price shall mean the closing bid price as furnished by the National
      Association of Securities Dealers, Inc. The holder agrees that it shall not
      convert the Debentures prior to August 12, 2005, if on a conversion date the
      closing price of the common stock on any of the five (5) trading days
      immediately proceeding the applicable conversion date id $.50 per share or
      less.
      The Company’s stock was not trading on a Principal Market as of August 12, 2005,
      and therefore the holders all converted their debentures at $.50 per share.
      The
      total Debentures issued by the Company was $331,760 and the Company issued
      663,520 shares of common stock in conversion of the debentures. The convertible
      debentures met the definition of hybrid instruments, as defined in SFAS 133, *Accounting
      for Derivative Instruments and Hedging Activities* (SFAS
      No. 133). The hybrid instruments are comprised of a i) a debt instrument, as
      the
      host contract and ii) an option to convert the debentures into common stock
      of
      the Company, as an embedded derivative. The embedded derivative derives its
      value based on the underlying fair value of the Company’s common stock. The
      Embedded Derivative is not clearly and closely related to the underlying host
      debt instrument since the economic characteristics and risk associated with
      this
      derivative are based on the common stock fair value. There was no derivative
      liability recognized due to the conversion of the debenture into shares of
      common stock at the time the debenture agreement was entered into.





The
      embedded derivative did not qualify as a fair value or cash flow hedge under
      SFAS No. 133.





There
      was
      no interest charged due to the debentures being converted immediately.





**NOTE
      6-**  **COMMITMENTS**





The
      Company’s subsidiary Teliphone Inc. has entered into a distribution agreement
      with one of its distributors in March 2006 for a period of five-years. The
      distribution agreement stipulates that the Company must pay up to 25%
      commissions on all new business generated by the distributor. This distributor
      controls the areas of Quebec and Ontario in Canada. The agreement does not
      stipulate any minimum commissions due the distributor, only that the distributor
      is paid monthly on its business generated. The Company is current with its
      commissions to the distributor.





F-21


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




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




On
      August
      23, 2005, The Company’s subsidiary Teliphone, Inc. entered into a marketing and
      distribution rights with Podar Infotech Ltd. The five year renewable agreement
      grants Podar the exclusive marketing and distribution rights for the Company’s
      products and services for India, China, Sri Lanka, Russia and UAE for which
      the
      Company will receive contractually agreed payments. No payments have been made
      or accrued as of March 31, 2007. Podar’s distribution channel has begun to bring
      revenues into the Company which are listed as VoIP service revenues. As a
      result, commissions are being paid to Podar at rates of 25%.





The
      Company’s subsidiary Teliphone, Inc. had entered into a lease agreement for its
      offices, which was to expire on July 31, 2010. The Company was to pay
      approximately $50,835 per year, however, on August 1, 2006, vacated the premises
      of the office for which the rent was due. The Company on September 30, 2006
      entered into a Termination Agreement with the landlord to pay $11,522 to satisfy
      all obligations under this lease agreement. These amounts have all been
      paid.





Currently,
      the corporate headquarters is leasing space with Intelco Communications, a
      minority owner of the Company’s subsidiary Teliphone, Inc. Rent for the first
      year as well as use of Intelco’s data center for Teliphone Inc.’s equipment, and
      use of Intelco’s broadband telephony network is provided to Teliphone Inc. in
      consideration for the 35 shares of the subsidiary Teliphone Inc. stock Intelco’s
      parent company 3901823 Canada, Inc. received. (See Note 7).





F-22




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




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





Teliphone
      Inc., a majority-owned subsidiary of the Company, 3901823 Canada Inc., the
      holding company of Intelco Communications (“3901823”), and Intelco
      Communications (“Intelco”) entered into an agreement (the “Agreement”) on July
      14, 2006. Pursuant to the terms of the Agreement, Teliphone Inc. agreed to
      issue
      35 class A voting shares of its common stock representing 25.2% of Teliphone
      Inc.’s issued shares to 3901823 in exchange for office rent, use of Intelco’s
      data center for Teliphone Inc.’s equipment, and use of Intelco’s broadband
      telephony network valued at approximating $144,000 (CDN$) for the period August
      1, 2006 through July 31, 2007, a line of credit of $75,000 (CDN$), of which
      $25,000 (CDN$) was already drawn upon in July 2006 and repaid in December
      2006.





Teliphone
      Inc. also agreed to make available to the customers of Intelco certain
      proprietary software for broadband telephony use. In lieu of receiving cash
      for
      the licensing of this software, Teliphone Inc. will apply $1 per customer per
      month at a minimum of $5,000 per month. Following a twelve month period, Intelco
      will receive additional shares of class A voting common stock of Teliphone
      Inc.
      for the difference in the value between $144,000 and the total payments credited
      back to Teliphone Inc. The maximum amount of additional shares that can be
      issued to Intelco after the twelve month period is an additional 8.34% of
      Teliphone Inc.’s issued and outstanding shares. In the event that the total
      payments credited back to Teliphone Inc. exceeds $144,000, Intelco will not
      be
      entitled to the issuance of any additional shares of Teliphone Inc. common
      stock.





Teliphone
      Inc. recognized a prepaid expense for the fair value of the shares issued to
      Intelco. The value of the prepaid expense was determined based on the estimated
      cost of the services that Teliphone Inc. is to receive under the Joint Venture
      Agreement entered into for a one-year period of time. The cost was estimated
      at
      $12,000 (CDN$) per month. Teliphone Inc. up through March 31, 2007 has not
      used
      the $12,000 (CDN$) per month. As of March 31, 2007, the balance remaining in
      the
      prepaid expense for Intelco is $129,277 (CDN$) or $111,967 (US$). Should
      Teliphone Inc. utilize more service from Intelco, the appropriate number of
      additional shares that Intelco will be issued will be provided under the
      agreement.





F-23


**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**





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





**Common
      Stock**




As
      of
      March 31, 2007, the Company has 125,000,000 shares of common stock authorized
      with a par value of $.001.




The
      Company has 33,554,014 shares issued and outstanding as of March 31,
      2007.




On
      September 30, 2004, the Company had 3,216,000 shares issued and outstanding.
      On
      April 28, 2005, the Company entered into a reverse merger upon the acquisition
      of Teliphone, Inc. and issued 27,010,000 shares of common stock to the
      shareholders of Teliphone, Inc. in exchange for all of the outstanding shares
      of
      stock of Teliphone, Inc. Thus the Company had 30,426,000 shares issued and
      outstanding.




On
      August
      31, 2005, the Company issued 663,520 shares of common stock in conversion of
      the
      Company’s convertible debentures in the amount of $331,760.




On
      August
      22, 2006, the Company issued 1,699,323 shares of common stock to United American
      Corporation in conversion of related party debt in the amount of $421,080 (see
      Note 4). An additional 171 fractional shares were issued in December 2006.




On
      August
      22, 2006, the Company issued 105,000 shares of common stock for consulting
      services. These services have been valued at $0.25 per share, the price at
      which
      the Company’s offering will be. The value of $26,250 was reflected in the
      consolidated statement of operation for the year ended September 30,
      2006.




In
      December 2006, the Company issued 660,000 shares of common stock representing
      a
      value in the amount of $165,000, for consulting services that occurred during
      the year ended September 30, 2006. The Company recognized the expense in the
      year ended September 30, 2006 as the services were provided in this time frame.
      The Company used the $0.25 price for valuation purposes.




**NOTE
      9-**  **PROVISION
      FOR INCOME TAXES**





Deferred
      income taxes are determined using the liability method for the temporary
      differences between the financial reporting basis and income tax basis of the
      Company’s assets and liabilities. Deferred income taxes are measured based on
      the tax rates expected to be in effect when the temporary differences are
      included in the Company’s tax return. Deferred tax assets and liabilities are
      recognized based on anticipated future tax consequences attributable to
      differences between financial statement carrying amounts of assets and
      liabilities and their respective tax bases.




F-24




**TELIPHONE
      CORP.**


**(FORMERLY
      OSK CAPITAL II CORPORATION)**


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


**MARCH
      31, 2007 AND 2006**




NOTE
      9-  PROVISION
      FOR INCOME TAXES (CONTINUED)




At
        March
        31, 2007, deferred tax assets consist of the following:


Net
                  operating losses
              
              $
              524,338Valuation
                  allowance
              
              
              (524,338
              )$
              -




At
      March
      31, 2007, the Company had a net operating loss carryforward in the approximate
      amount of $1,542,171, available to offset future taxable income through 2027.
      The Company established valuation allowances equal to the full amount of the
      deferred tax assets due to the uncertainty of the utilization of the operating
      losses in future periods.





A
      reconciliation of the Company’s effective tax rate as a percentage of income
      before taxes and federal statutory rate for the periods ended March 31, 2007
      and
      2006 is summarized as follows:





2007
            
            2006Federal
                statutory rate
            
            
            (34.0
            )%
            
            (34.0
            )%State
                income taxes, net of federal benefits
            
            
            3.3
            
            
            3.3Valuation
                allowance
            
            
            30.7
            
            
            30.70
            %
            
            0
            %




F-25




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




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




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




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




**BACKGROUND**




**Company
      Overview**




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





History





We
      were
      incorporated in Nevada under the name “OSK CAPITAL II CORP” in 1999. In April of
      2005, we effectuated a merger and re-organization with Teliphone Inc., a
      Canadian Internet Telecommunications (VoIP or “Voice-Over-Internet-Protocol”)
      Company. Teliphone Inc. is now a majority-owned subsidiary of our company and
      as
      such, our revenues are derived primarily from the sale of telecommunications
      services to retail clients.





The
      following trends have lead Management to believe that an enormous window of
      opportunity exists to enter the Retail Telecommunications Market:





·
            Broadband
                Internet (also know as “High Speed Internet”) has become more prevalent
                worldwide and therefore the number of people looking to use Internet-based
                telecommunications services is
                increasing.






2




·
            In
                today’s technology-driven society, consumers are constantly looking for
                innovative ways to reduce the costs for their telecommunications
                needs
                without sacrificing ease-of-use and
                convenience


·
            The
                Internet has become the defacto standard for use by consumers to
                seek
                information, and as a result, the quantity of internet web site viewing
                has increased, producing opportunities for generating advertising
                revenues
                from the usage by consumers of a
                website.





The
      development of our Teliphone VoIP service permits us to sell telecommunications
      services to consumers who have a broadband internet connection. The service’s
      innovative calling features permit these consumers to benefit from our
      value-added services such as enhanced voice-mail and international call
      forwarding services while reducing the cost of their telecommunications services
      compared with traditional residential and mobile phone charges.





The
      development of our callona.com website seeks to attract consumers on the
      internet who will look to utilize our web-based communications services, which
      will permit us to generate advertising and promotional revenues from other
      companies looking to advertise and promote their products to our callona.com
      users.





Since
      we
      launched our Teliphone services, we incurred costs principally related to the
      development of our proprietary software, acquisition of telecommunications
      and
      computer hardware and the rental fees associated with having voice channels
      that
      were part of the public switched telephone network (PSTN), which permits our
      customers to make phone calls from their Teliphone device direct to any other
      phone number, be it a cellular-mobile phone or traditional wireline phone
      anywhere in the world. We have not yet officially launched our callona.com
      service, which has been in a prototype stage since the end of 2006. Since
      inception, we have invested approximately 1.5M$ to build our technology and
      market our products.





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





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





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





Principal
      Products or Services And Their Markets





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




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





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




3







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


·
            International
                VoIP calling services to residential customers in
                India





Distribution
      Methods of The Products or Services





Retail
      Sales





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





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





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





Internet
      Sales





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





Wholesale
      Sales





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





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





Status
      of
      Any Publicly Announced New Product or Service





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





Teliphone
      Residential Voip Service




4




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





Teliphone
      Small Business Voip Services





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


in
      this
      segment.





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





CallOnA.com





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





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





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





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





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





Competitive
      Business Conditions





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




5




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





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





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





Competition





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





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




6




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





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





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





Existing
      and Probable Governmental Regulation





Overview
      of Regulatory Environment





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





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





Regulatory
      Classification of VoIP Services





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





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




7




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





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





VoIP
      E-911 Matters





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





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





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





International
      Regulation





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





Canadian
      Regulation





Classification
      and Regulation of VoIP Services.





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




8




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




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





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





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





Provision
      of 911 Services





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





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





Other
      Foreign Jurisdictions





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




9




Going
      Concern:




The
      Company has incurred recurring losses of $127,394 and $178,045 for the six
      months ended March 31, 2007 and 2006, and has a working capital deficiency
      of
      $599,142 as of March 31, 2007. The Company has been searching for new
      distribution channels to wholesale their services to provide additional revenues
      to support their operations. In addition, the Company entered into a letter
      of
      intent with Intelco Communications that can save them operating costs in
      addition to providing support services; however, this has not had an impact
      on
      the current year operations. The Company successfully reduced approximately
      $400,000 of related party debt as this was converted into additional shares
      of
      the Company’s stock in August 2006. There is no guarantee that the Company will
      be able to raise additional capital or generate the increase in revenues to
      sustain its operations, however the Company has recently submitted a
      registration statement of Form SB-2 to raise additional capital. Accordingly,
      ou r
      auditors have stated their opinion that there currently exists substantial
      doubt
      about our ability to continue as a going concern.




Six
      Months Ended March 31, 2007 Compared to Six Months Ended March 31,
      2006





The
      Company's condensed consolidated balance sheet as of the three months ended
      March 31, 2007, had assets consisting of accounts receivable in the amount
      of
      $3,726, income tax receivable (Canadian Research and Development Tax Credits)
      of
      $14,207, inventory of $10,996 and prepaid expenses of $111,967, fixed assets
      of
      $64,373, but no cash. The Company has expended its cash in furtherance of its
      business plan, including expenditure of funds to pay legal and accounting
      expenses. Consequently, the Company's condensed consolidated balance sheet
      as of
      the period ended March 31, 2007 reflects an accumulated deficit of ($1,542,171)
      and a stockholders' deficit of ($632,458).





The
      Company recorded sales of $290,515 for the six months ended March 31, 2007
      as
      compared to $194,729 for the six months ended March 31, 2006. The Company
      recorded sales of $161,281 for the three months ended March 31, 2007 as compared
      to $107,718 for the three months ended March 31, 2006. The increase in sales
      is
      primarily due to increased sales in the small business segment in our domestic
      market.





The
      Company's cost of sales were $226,679 for the six months ended March 31, 2007
      as
      compared to $194,729 for the six months ended March 31, 2006, primarily as
      a
      consequence of increased sales, as well as a decrease in the cost of purchasing
      inventory. We have moved to outsourced fulfillment and provisioning of our
      device hardware and therefore stock inventory on an as needed basis in order
      to
      fulfill our re-seller demand. For the same reasons, the Company's cost of sales
      were $124,077 for the three months ended March 31, 2007 as compared to $107,726
      for the three months ended March 31, 2006





The
      Company's aggregate operating expenses were $199,390 for the six months ended
      March 31, 2007 as compared to $169,182 for the six months ended March 31, 2006.
      In particular, there was a decrease in Selling and Promotion expenses from
      $18,814 to $6,714 as the company reduced its purchasing of promotional media
      and
      sales travel as it concentrated its sales in its local market. There was an
      increase in Salaries and Wages from $57,855 to $107,651 as the Company began
      to
      pay its subsidiary President as an employee instead of a consultant from June
      2006 onwards and the Company hired an additional Research and Development
      employee in June of 2006. There was a decrease in Professional and Consulting
      fees from $39,131 to $24,291 attributed to a reduction of legal and compliance
      fees for the period as well as the reduction of requirements for paying
      consultants to do the technical work on our equipment that our employees can
      now
      perform themselves. There was an increase in General and Administrative Expenses
      from $22,044 to $22,795 due to increased expenditures associated with the move
      of the company from its offices within the Company founder’s basement and its
      offices in downtown Montreal. There was an increase in Depreciation Expenses
      from $21,238 to $37,939 attributed to the acquisition of additional computer
      equipment during the period.





The
      Company had a net loss for the six months ended March 31, 2007 of ($127,394)
      as
      compared to ($178,045) for the six months ended March 31, 2006, primarily as
      a
      consequence of further reduction of costs attributed to our telecommunications
      network and our operating expenses along with an increase in sales in our
      domestic market. The Company had a net loss for the three month period ending
      March 31, 2007 of ($73,810) compared to ($113,519) for the same period last
      year.




10




Plan
      of
      Operations and Need for Additional Financing





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





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




ACCOUNTING
      POLICIES SUBJECT TO ESTIMATION AND JUDGMENT





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





USE
      OF
      ESTIMATES





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




11




INVENTORIES





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





CURRENCY
      TRANSLATION





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





RESEARCH
      AND DEVELOPMENT





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





INCOME
      TAXES





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





STOCK-BASED
      COMPENSATION





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




12




SEGMENT
      INFORMATION





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




**Off-balance
      sheet arrangements**




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




RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      November 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standard ("SFAS") No. 151 "Inventory Costs
      -
      an amendment of ARB No. 43, Chapter 4" ("SFAS 151"). This statement amends
      the
      guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
      accounting for abnormal amounts of idle facility expense, freight, handling
      costs, and wasted material (spoilage). SFAS 151 requires that those items be
      recognized as current-period charges. In addition, this Statement requires
      that
      allocation of fixed production overheads to costs of conversion be based upon
      the normal capacity of the production facilities. The provisions of SFAS 151
      are
      effective for fiscal years beginning after June 15, 2005. As such, the Company
      is required to adopt these provisions at the beginning of the fiscal year ended
      March 31, 2007. The Company has adopted SFAS 151 and believes that the impact
      on
      its consolidated financial statements is immaterial for the quarter ended June
      30, 2006.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
      -
      - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153 replaces the
      exception from fair value measurement in APB Opinion No. 29 for nonmonetary
      exchanges of similar productive assets with a general exception from fair value
      measurement for exchanges of nonmonetary assets that do not have commercial
      substance. A nonmonetary exchange has commercial substance if the future cash
      flows of the entity are expected to change significantly as a result of the
      exchange. SFAS 153 is effective for fiscal years beginning after June 15, 2005.
      As such, the Company is required to adopt these provisions at the beginning
      of
      the fiscal year ended March 31, 2007. The Company has adopted SFAS 153 and
      believes that the impact on its consolidated financial statements is immaterial
      for the quarter ended June 30, 2006.





13




**Item
      3. Controls and Procedures**




**Evaluation
      of Disclosure Controls and Procedures**




As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision and with the participation of our management, including our
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      our
      disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
      of the Securities Exchange Act of 1934 as of the end of the period covered
      by
      this report. Based on that evaluation, our Chief Executive Officer and Chief
      Financial Officer have concluded that our disclosure controls and procedures
      as
      of March 31, 2007 were effective to ensure that information required to be
      disclosed by us in reports that we file or submit under the Securities Exchange
      Act of 1934 is recorded, processed, summarized and reported within the time
      periods specified in the Securities and Exchange Commission’s rules and forms.
      Management, however, has identified certain limitations in specific
      critical controls in their accounting system which are increasingly resulting
      in
      lengthier time lapses required in order for the company to accurately disclose
      its financial statements.  In particular, these lengthier time lapses occur
      for the following reasons:




·
            Lack
                of dedicated resources to track and keep records of supplier invoices
                on a
                daily basis


·
            Lack
                of dedicated resources to track and keep records of daily disbursements
                against these invoices


·
            Surplus
                accounting entries required to track intercompany expenses, post
                spin-off
                of the Company from its former parent company


·
            Lack
                of a dedicated resource person to oversee daily record keeping




Management
      will look to dedicate resources to these tasks in the coming months in order
      to
      accelerate the reporting of our financial statements.  This resource
      dedication will result in the Company incurring additional costs which will
      affect the Company’s profitability going forward.  The Company's
      management anticipates that these costs will be up to $50,000 per year in order
      to maintain compliance with timely financial reporting
      requirements.




**Changes
      in Internal Controls**




There
      have been no changes in our internal controls over financial reporting or in
      other factors that could materially affect, or are reasonably likely to affect,
      our internal controls over financial reporting during the nine months ended
      March 31, 2007. There have not been any significant changes in the Company’s
      critical accounting policies identified since the Company filed its Form 10-QSB
      as of March 31, 2007.




14




PART
      II  OTHER
      INFORMATION




**Item
      1. Legal Proceedings**




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




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




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




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





**Item
      3. Defaults upon Senior Securities**





There
      were no defaults upon senior securities during the period ended March 31,
      2007.





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




There
      were no matters submitted to the vote of securities holders during the quarter
      ended March 31, 2007.





**Item
      5. Other Information**




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




15




**Item
      6. Exhibits**




A.
      Exhibits:




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




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934 the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




By:
                /s/ George MetrakosName:
                George MetrakosTitle:
                Chief Executive Officer





May
      14,
      2007




By:
                /s/ George MetrakosName:
                George MetrakosTitle:
                Principal Accounting Officer




May
      14,
      2007





16