United
States


Securities
and Exchange Commission


Washington,
D.C. 20549





FORM
10-Q





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


SECURITIES
EXCHANGE ACT OF 1934





For the
quarterly period ended March 31, 2009





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


SECURITIES
EXCHANGE ACT OF 1934





For the
transition period from ______________ to ________________





Commission
File Number: 0-24857





Teleconnect
Inc.





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





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





Oude Vest
4


4811 HT
Breda


The
Netherlands





(Address
of principal executive offices)





Registrant’s
telephone number, including area code:  011-31- (0)6
30048023





____________________________________________________________


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





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





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





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





Large
      accelerated filer  ̈
              Accelerated
      filer   ̈Non-accelerated
      filer   ̈
              Smaller
      reporting company x





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS





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





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the last practicable date: 495,361,707 shares at October 2,
2009.









TELECONNECT
INC.





INDEX





PART 
       I.  FINANCIAL INFORMATIONItem   
       1.  Financial Statements:Condensed Consolidated Balance Sheets as of March31, 2009 and 2008(unaudited) and September 30, 2008 and
    2007
                            4Condensed Consolidated Statements of Operations forthe three and six months ended March 31, 2009, 2008 and2007(Unaudited)
                            6Condensed Consolidated Statements of Cash Flows forthe three and six months ended March 31, 2009, 2008 and2007(Unaudited)
                            7Notes to Condensed Consolidated Financial Statements
      (Unaudited)
                            9Item     2. 
      Management's Discussion and Analysis of Financial Condition
      andResults of Operations
                            12Item     3.
       Quantitative and Qualitative Disclosure About Market
      Risk
                            17Item     4. 
      Controls and Procedures
                            17PART  II.
      OTHER INFORMATIONItem     1. 
      Legal Proceedings
                            18Item     1A.
      Risk Factors
                            18Item     2. 
      Unregistered Sales of Equity Securities and Use of
Proceeds
                            18Item     3. 
      Defaults Upon Senior Securities
                            18Item     4. 
      Submission of Matters to a Vote of Security Holders
                            18Item     5. 
      Other Information
                            18Item     6. 
      Exhibits
                            18Signatures
                            19




2




PART
I FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS




3




TELECONNECT, INC.


CONDENSED
CONSOLIDATED BALANCE SHEET





PAGE 1 of
2





March 31,
                
                
                March 31,
                
                
                September 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2008
                
                
                2007(Unaudited)
                
                
                (Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                18,116
                
                
                $
                158,218
                
                
                $
                48,342
                
                
                $
                441,121Accounts
      receivable
                
                
                20,353
                
                
                
                271,935
                
                
                
                70,189
                
                
                
                8,010Due
      from related parties
                
                
                482,582
                
                
                
                564,724
                
                
                
                468,146
                
                
                
                381,439Inventory
      (work in process)
                
                
                1,472,538
                
                
                
                1,181,430
                
                
                
                1,535,630
                
                
                
                373,186Prepaid
      taxes
                
                
                25,092
                
                
                
                85,870
                
                
                
                44,663
                
                
                
                94,201Prepaid
      expenses
                
                
                21,765
                
                
                
                81,688
                
                
                
                14,313
                
                
                
                118,622Asset
      of discontinued operations
                
                
                521,044
                
                
                
                783,136
                
                
                
                546,393
                
                
                
                822,029Total
      current assets
                
                
                2,561,490
                
                
                
                3,127,001
                
                
                
                2,727,676
                
                
                
                2,238,608PROPERTY
      AND EQUIPMENT, NET
                
                
                71,826
                
                
                
                197,228
                
                
                
                90,461
                
                
                
                159,860OTHER
      ASSETS:Investment
      in Giga Matrix Holdings B.V.
                
                
                -
                
                
                
                93,400
                
                
                
                44,626
                
                
                
                142,173Goodwill
                
                
                413,775
                
                
                
                491,630
                
                
                
                444,712
                
                
                
                440,856Long-term
      notes receivable (net of allowance for bad debts of $551,777 and $549,074
      at March 31, 2009 and September 30, 2008, respectively)
                
                
                53,232
                
                
                
                650,119
                
                
                
                57,212
                
                
                
                571,414Assets
      of discontinued operations
                
                
                676,209
                
                
                
                834,847
                
                
                
                841,171
                
                
                
                744,671Total
      assets
                
                $
                3,776,532
                
                
                $
                5,394,225
                
                
                $
                4,205,858
                
                
                $
                4,297,582





See
accompanying Notes to Condensed Consolidated Financial Statements.




4




TELECONNECT, INC.


CONDENSED
CONSOLIDATED BALANCE SHEET





PAGE 2 of
2





March 31,
                
                
                March 31,
                
                
                September 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2008
                
                
                2007(Unaudited)
                
                
                (Unaudited)LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable - trade
                
                $
                113,056
                
                
                $
                284,619
                
                
                $
                207,397
                
                
                $
                134,740Accrued
      liabilities
                
                
                87,140
                
                
                
                97,036
                
                
                
                139,467
                
                
                
                37,887Taxes
      payable
                
                
                80,000
                
                
                
                -
                
                
                
                80,000
                
                
                
                -Notes
      payable
                
                
                159,696
                
                
                
                189,744
                
                
                
                171,636
                
                
                
                170,148Loans
      from related parties
                
                
                1,664,899
                
                
                
                3,123,354
                
                
                
                3,313,728
                
                
                
                998,202Current
      portion of capital lease obligations
                
                
                12,219
                
                
                
                34,906
                
                
                
                38,825
                
                
                
                48,742Liabilities
      of discontinued operations
                
                
                3,614,309
                
                
                
                4,305,701
                
                
                
                4,063,929
                
                
                
                3,336,921Total
      current liabilities
                
                
                5,731,319
                
                
                
                8,035,360
                
                
                
                8,014,982
                
                
                
                4,726,640Capital
      lease obligations, less current portion
                
                
                -
                
                
                
                35,595
                
                
                
                -
                
                
                
                38,491STOCKHOLDERS'
      DEFICIT:Preferred
      stock; par value of $0.001, 5,000,000 shares authorized, no shares
      outstanding
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock; par value of $0.001, 500,000,000 shares authorized,
      499,361,707  shares outstanding as of March 31, 2009 and
      332,243,707 shares outstanding as of March 31, 2008 and September 30, 2008
      and 2007
                
                
                499,362
                
                
                
                332,244
                
                
                
                332,244
                
                
                
                332,244Additional
      paid-in capital
                
                
                30,944,054
                
                
                
                28,999,901
                
                
                
                28,999,901
                
                
                
                28,999,901Accumulated
      deficit
                
                
                (31,236,080
                )
                
                
                (28,645,955
                )
                
                
                (30,573,787
                )
                
                
                (27,063,048
                )Accumulated
      other comprehensive loss
                
                
                (2,162,123
                )
                
                
                (3,362,920
                )
                
                
                (2,567,482
                )
                
                
                (2,736,646
                )Total
      stockholders' deficit
                
                
                (1,954,787
                )
                
                
                (2,676,730
                )
                
                
                (3,809,124
                )
                
                
                (467,549
                )Total
      liabilities and stockholders' deficit
                
                $
                3,776,532
                
                
                $
                5,394,225
                
                
                $
                4,205,858
                
                
                $
                4,297,582





See
accompanying Notes to Condensed Consolidated Financial Statements.




5




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





For the three months ended March 31,
                    
                    
                    For the six months ended March 31,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    2007SALES
                    
                    $
                    95,061
                    
                    
                    $
                    35,004
                    
                    
                    $
                    -
                    
                    
                    $
                    150,335
                    
                    
                    $
                    50,644
                    
                    
                    $
                    -COST
      OF GOODS SOLD
                    
                    
                    107,417
                    
                    
                    
                    125,976
                    
                    
                    
                    -
                    
                    
                    
                    163,683
                    
                    
                    
                    293,832
                    
                    
                    
                    -GROSS
      LOSS
                    
                    
                    (12,356
                    )
                    
                    
                    (90,972
                    )
                    
                    
                    -
                    
                    
                    
                    (13,348
                    )
                    
                    
                    (243,188
                    )
                    
                    
                    -OPERATING
      EXPENSES:Selling,
      general and administrative expenses
                    
                    
                    351,115
                    
                    
                    
                    120,560
                    
                    
                    
                    828,199
                    
                    
                    
                    587,840
                    
                    
                    
                    449,355
                    
                    
                    
                    1,217,242Depreciation
                    
                    
                    7,717
                    
                    
                    
                    11,766
                    
                    
                    
                    -
                    
                    
                    
                    15,629
                    
                    
                    
                    21,718
                    
                    
                    
                    -Total
      operating expenses
                    
                    
                    358,832
                    
                    
                    
                    132,326
                    
                    
                    
                    828,199
                    
                    
                    
                    603,469
                    
                    
                    
                    471,073
                    
                    
                    
                    1,217,242LOSS
      FROM CONTINUING OPERATIONS
                    
                    
                    (371,188
                    )
                    
                    
                    (223,298
                    )
                    
                    
                    (828,199
                    )
                    
                    
                    (616,817
                    )
                    
                    
                    (714,261
                    )
                    
                    
                    (1,217,242
                    )OTHER
      INCOME (EXPENSES):Other
      income (expense)
                    
                    
                    (37,117
                    )
                    
                    
                    (57,414
                    )
                    
                    
                    57,172
                    
                    
                    
                    (29,608
                    )
                    
                    
                    (48,728
                    )
                    
                    
                    57,172Interest
      expense - related parties
                    
                    
                    (19,293
                    )
                    
                    
                    (22,514
                    )
                    
                    
                    (31,395
                    )
                    
                    
                    (53,357
                    )
                    
                    
                    (56,168
                    )
                    
                    
                    (56,760
                    )LOSS
      FROM CONTINUING OPERTIONS BEFORE INCOME TAXES AND DISCONTINUED
      OPERATIONS
                    
                    
                    (427,598
                    )
                    
                    
                    (303,226
                    )
                    
                    
                    (802,422
                    )
                    
                    
                    (699,782
                    )
                    
                    
                    (819,157
                    )
                    
                    
                    (1,216,830
                    )NET
      INCOME (LOSS) FROM DISCONTINUED OPERATIONS
                    
                    
                    114,737
                    
                    
                    
                    (405,954
                    )
                    
                    
                    1,129,050
                    
                    
                    
                    37,489
                    
                    
                    
                    (763,750
                    )
                    
                    
                    857,829NET
      (LOSS) INCOME
                    
                    $
                    (312,861
                    )
                    
                    $
                    (709,180
                    )
                    
                    $
                    326,628
                    
                    
                    $
                    (662,293
                    )
                    
                    $
                    (1,582,907
                    )
                    
                    $
                    (359,001
                    )BASIC
      AND DILUTED (LOSS) INCOME PER SHARE:From
      continuing operations
                    
                    
                    (0.00
                    )
                    
                    
                    (0.00
                    )
                    
                    
                    (0.00
                    )
                    
                    
                    (0.00
                    )
                    
                    
                    (0.00
                    )
                    
                    
                    (0.01
                    )From
      discontiued operations
                    
                    
                    0.00
                    
                    
                    
                    (0.00
                    )
                    
                    
                    0.01
                    
                    
                    
                    0.00
                    
                    
                    
                    (0.00
                    )
                    
                    
                    0.00Total
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.00
                    
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )AVERAGE
      COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
                    
                    
                    378,708,851
                    
                    
                    
                    332,243,707
                    
                    
                    
                    179,486,022
                    
                    
                    
                    355,199,476
                    
                    
                    
                    332,243,707
                    
                    
                    
                    186,018,406THE
      COMPONENTS OF COMPREHENSIVE LOSS:Net
      (loss) income
                    
                    $
                    (312,861
                    )
                    
                    $
                    (709,180
                    )
                    
                    $
                    326,628
                    
                    
                    $
                    (662,293
                    )
                    
                    $
                    (1,582,907
                    )
                    
                    $
                    (359,001
                    )Foreign
      currency translation adjustment
                    
                    
                    501,492
                    
                    
                    
                    (837,576
                    )
                    
                    
                    (471,382
                    )
                    
                    
                    614,180
                    
                    
                    
                    (948,900
                    )
                    
                    
                    (549,279
                    )Tax
      effect on currency translation
                    
                    
                    (170,507
                    )
                    
                    
                    284,776
                    
                    
                    
                    160,270
                    
                    
                    
                    (208,821
                    )
                    
                    
                    322,626
                    
                    
                    
                    186,755COMPREHENSIVE
      INCOME (LOSS)
                    
                    $
                    18,124
                    
                    
                    $
                    (1,261,980
                    )
                    
                    $
                    15,516
                    
                    
                    $
                    (256,934
                    )
                    
                    $
                    (2,209,181
                    )
                    
                    $
                    (721,525
                    )





See
accompanying Notes to Condensed Consolidated Financial Statements.




6




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


FOR THE
SIX MONTHS ENDED MARCH 31,





Page 1 of
2





2009
                
                
                2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (662,293
                )
                
                $
                (1,582,907
                )
                
                $
                (359,001
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                
                
                15,629
                
                
                
                21,718
                
                
                
                -Loss
      on equity investments
                
                
                44,626
                
                
                
                48,773
                
                
                
                -Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                532,600Change
      in operating assets and liabilitiesAccounts
      receivable
                
                
                44,953
                
                
                
                (263,002
                )
                
                
                (13,318
                )Accrued
      interest income
                
                
                -
                
                
                
                (15,018
                )
                
                
                -Inventory
                
                
                (43,736
                )
                
                
                (765,253
                )
                
                
                -Prepaid
      expenses
                
                
                (8,448
                )
                
                
                50,599
                
                
                
                15,453Prepaid
      taxes
                
                
                16,464
                
                
                
                19,183
                
                
                
                -Accounts
      payable
                
                
                (79,913
                )
                
                
                134,357
                
                
                
                119,891Accrued
      liabilities
                
                
                22,024
                
                
                
                54,784
                
                
                
                (33,259
                )Operating
      cash flows from discontinued operations
                
                
                (179,570
                )
                
                
                717,958
                
                
                
                (1,883,906
                )Net
      cash used in operating activities
                
                
                (830,264
                )
                
                
                (1,578,808
                )
                
                
                (1,621,540
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Advances
      to equity investment
                
                
                (47,003
                )
                
                
                (139,343
                )
                
                
                -Issuance
      of notes receivables
                
                
                -
                
                
                
                -
                
                
                
                (506,084
                )Purchase
      of property and equipment
                
                
                (3,287
                )
                
                
                (40,670
                )
                
                
                (24,000
                )Investing
      activities of discontinued operations
                
                
                106,445
                
                
                
                (4,390
                )
                
                
                (73,532
                )Net
      cash provided by (used in) investing activities
                
                
                56,155
                
                
                
                (184,403
                )
                
                
                (603,616
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Loan
      proceeds from related parties
                
                
                628,316
                
                
                
                2,010,159
                
                
                
                1,202,778Deposits
      received
                
                
                -
                
                
                
                -
                
                
                
                2,197,470Loan
      proceeds from bank
                
                
                -
                
                
                
                -
                
                
                
                7,896Payments
      on capital leases
                
                
                (23,905
                )
                
                
                (26,781
                )
                
                
                -Net
      cash provided by financing activities
                
                
                604,411
                
                
                
                1,983,378
                
                
                
                3,408,144EFFECT
      OF EXCHANGE RATE
                
                
                139,472
                
                
                
                (503,070
                )
                
                
                (362,524
                )NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (30,226
                )
                
                
                (282,903
                )
                
                
                820,464CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                48,342
                
                
                
                441,121
                
                
                
                3,460CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                
                $
                18,116
                
                
                $
                158,218
                
                
                $
                823,924





See
accompanying Notes to Condensed Consolidated Financial Statements.




7




TELECONNECT,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


FOR THE
SIX MONTHS ENDED MARCH 31,





Page 2 of
2





2009
                
                
                2008
                
                
                2007SUPPLEMENTAL
      DISCLOSURE OF NONCASH TRANSACTIONS:Common
      stock issued for conversion of debt and accrued interest
                
                $
                2,111,271
                
                
                $
                -
                
                
                $
                289,014Common
      stock issued for services received
                
                $
                -
                
                
                $
                -
                
                
                $
                532,600





See
accompanying Notes to Condensed Consolidated Financial Statements.




8




TELECONNECT,
INC.





NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





March
31, 2009





1.
BASIS OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements of
Teleconnect Inc. (the “Company”) have been prepared in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”) for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission.  Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.  Operating results for the
three month period and six month period ended March 31, 2009 and 2008,
respectively, are not necessarily indicative of the results that may be expected
for the full year.





The
condensed consolidated financial statements include the accounts of Teleconnect,
Inc. and its subsidiaries ITS Europe, Teleconnect Comunicaciones, Teleconnect
Telecom, PhotoWizz BV (“MediaWizz”), and Recarganet.  All significant
inter-company balances and transactions have been eliminated.





The
balance sheets at September 30, 2008 and 2007 have been derived from the audited
financial statements at that date but do not include all of the information and
footnotes required by GAAP for complete financial statements.





For
further information, refer to the consolidated financial statements and notes
thereto included in the Company’s annual reports on Form 10-K for the years
ended September 30, 2008 and 2007.




2.
RECENTLY ISSUED ACCOUNTING STANDARDS




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





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





In
May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” SFAS
No. 165 is intended to establish general standards of accounting for and
disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. SFAS No. 165
requires disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date, and is effective for interim and annual
periods ending after June 15, 2009. The Company does not expect this
standard will have a material impact on its consolidated financial
statements.





3.
DISCONTINUED OPERATIONS





In March
2009, the Company entered into an agreement to sell ITS Europe, Teleconnect
Spain, Teleconnect Telecom and Recarganet to certain employees and officers of
Teleconnect Spain with the Company retaining 10% of Teleconnect SA. Going
forward the Company will account for its remaining 10% interest
in  Teleconnect SA by the cost method.





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




9




Three months ended
                    
                    
                    Six months endedMarch 31,
                    
                    
                    March 31,
                    
                    
                    March 31,
                    
                    
                    March 31,
                    
                    
                    March 31,
                    
                    
                    March 31,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    2007Sales
                    
                    $
                    979,188
                    
                    
                    $
                    910,233
                    
                    
                    $
                    985,177
                    
                    
                    $
                    1,839,108
                    
                    
                    $
                    1,670,350
                    
                    
                    $
                    1,959,400Cost
      of sales
                    
                    
                    742,304
                    
                    
                    
                    661,099
                    
                    
                    
                    640,237
                    
                    
                    
                    1,389,698
                    
                    
                    
                    1,330,187
                    
                    
                    
                    1,306,155Gross
      profit
                    
                    
                    236,884
                    
                    
                    
                    249,134
                    
                    
                    
                    344,940
                    
                    
                    
                    449,410
                    
                    
                    
                    340,163
                    
                    
                    
                    653,245Selling,
      general and administrative expenses
                    
                    
                    429,715
                    
                    
                    
                    554,163
                    
                    
                    
                    367,705
                    
                    
                    
                    752,960
                    
                    
                    
                    1,047,136
                    
                    
                    
                    879,904Depreciation
                    
                    
                    9,126
                    
                    
                    
                    33,748
                    
                    
                    
                    50,185
                    
                    
                    
                    34,854
                    
                    
                    
                    66,434
                    
                    
                    
                    117,406Operating
      loss
                    
                    
                    (201,957
                    )
                    
                    
                    (338,777
                    )
                    
                    
                    (72,950
                    )
                    
                    
                    (338,404
                    )
                    
                    
                    (773,407
                    )
                    
                    
                    (344,065
                    )Other
      income (expense)
                    
                    
                    316,694
                    
                    
                    
                    (67,177
                    )
                    
                    
                    1,202,000
                    
                    
                    
                    375,893
                    
                    
                    
                    9,657
                    
                    
                    
                    1,201,894Income
      (loss)  from discontinued operations
                    
                    $
                    114,737
                    
                    
                    $
                    (405,954
                    )
                    
                    $
                    1,129,050
                    
                    
                    $
                    37,489
                    
                    
                    $
                    (763,750
                    )
                    
                    $
                    857,829




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




March
      31,
                    
                    
                    March
      31,
                    
                    
                    September
      30,
                    
                    
                    September
      30,2009
                    
                    
                    2008
                    
                    
                    2008
                    
                    
                    2007Cash
                    
                    $
                    7,480
                    
                    
                    $
                    126,808
                    
                    
                    $
                    22,372
                    
                    
                    $
                    104,148Accounts
      receivable - trade, net of allowance for doubtful accounts of $667,629,
      $703,742, $678,167 and $605,718  at March 31, 2009 and 2008 and
      September 30, 2008 and 2007, respectively
                    
                    
                    313,716
                    
                    
                    
                    566,976
                    
                    
                    
                    384,709
                    
                    
                    
                    641,295Accounts
      receivable - other
                    
                    
                    116,672
                    
                    
                    
                    40,229
                    
                    
                    
                    122,860
                    
                    
                    
                    24,486Inventory
                    
                    
                    17,451
                    
                    
                    
                    39,521
                    
                    
                    
                    13,332
                    
                    
                    
                    50,893Prepaid
      taxes
                    
                    
                    62,952
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Prepaid
      expenses
                    
                    
                    2,773
                    
                    
                    
                    9,602
                    
                    
                    
                    3,120
                    
                    
                    
                    1,207Current
      assets of discontinued operations
                    
                    
                    521,044
                    
                    
                    
                    783,136
                    
                    
                    
                    546,393
                    
                    
                    
                    822,029Property
      and equipment, net
                    
                    
                    409,608
                    
                    
                    
                    219,505
                    
                    
                    
                    478,214
                    
                    
                    
                    237,884Vendor
      deposits
                    
                    
                    266,601
                    
                    
                    
                    615,342
                    
                    
                    
                    362,957
                    
                    
                    
                    506,787Other
      assets of discontinued operations
                    
                    
                    676,209
                    
                    
                    
                    834,847
                    
                    
                    
                    841,171
                    
                    
                    
                    744,671Accounts
      payable
                    
                    
                    917,376
                    
                    
                    
                    1,343,296
                    
                    
                    
                    1,231,822
                    
                    
                    
                    943,736Accrued
      liabilities
                    
                    
                    238,970
                    
                    
                    
                    219,293
                    
                    
                    
                    253,952
                    
                    
                    
                    178,729Taxes
      payable
                    
                    
                    310,852
                    
                    
                    
                    286,428
                    
                    
                    
                    342,439
                    
                    
                    
                    258,557Deferred
      income
                    
                    
                    2,147,111
                    
                    
                    
                    2,456,684
                    
                    
                    
                    2,235,716
                    
                    
                    
                    1,955,899Liabilities
      of discontinued operations
                    
                    
                    3,614,309
                    
                    
                    
                    4,305,701
                    
                    
                    
                    4,063,929
                    
                    
                    
                    3,336,921Net
      liabilities of discontinued operations
                    
                    $
                    2,417,057
                    
                    
                    $
                    2,687,718
                    
                    
                    $
                    2,676,365
                    
                    
                    $
                    1,770,221





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





4.
LOANS FROM RELATED PARTIES





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





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





During
the six months ended March 31, 2009 and 2008 the Company obtained approximately
$628,000 and $2,010,000, respectively, in additional short term loans from
shareholders, net of currency translation adjustments. These loans bear interest
between 4% and 8% annually, are unsecured and due upon demand.




10




5.
INCOME TAXES





The
Company has not recorded any income tax benefit for the three and six months
ended March 31, 2009, 2008 and 2007. The Company has recorded an income tax
valuation allowance equal to the benefit of any income tax carryforward because
of the uncertain nature of realization.





6.
EARNINGS (LOSS) PER SHARE





Basic
earnings per share amounts are computed based on the weighted average number of
shares outstanding on that date during the applicable periods. Stock options for
1,000,000, 4,000,000 and 4,315,000 shares that were outstanding at March 31,
2009, 2008 and 2007, respectively, have not been included in diluted earnings
per share as their inclusion would have been anti-dilutive.





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





2009
                  
                  
                  2008
                  
                  
                  2007Basic
      and diluted (loss) income per share computationNumerator:Net
      loss from continuing operations
                  
                  $
                  (427,598
                  )
                  
                  $
                  (303,226
                  )
                  
                  $
                  (802,422
                  )Net
      income (loss) from discontinued operations
                  
                  $
                  114,737
                  
                  
                  $
                  (405,954
                  )
                  
                  $
                  1,129,050Net
      (loss) income
                  
                  $
                  (312,861
                  )
                  
                  $
                  (709,180
                  )
                  
                  $
                  326,628Denominator:Weighted
      average common shares Outstanding
                  
                  
                  378,708,851
                  
                  
                  
                  332,243,707
                  
                  
                  
                  190,896,383Basic
      and diluted (loss) income per share:From
      continuing operations
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )From
      discontinued operations
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  0.01Total
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )





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





2009
                  
                  
                  2008
                  
                  
                  2007Basic
      and diluted loss per share computationNumerator:Net
      loss from continuing operations
                  
                  $
                  (699,782
                  )
                  
                  $
                  (819,157
                  )
                  
                  $
                  (1,216,830
                  )Net
      income (loss) from discontinued operations
                  
                  $
                  37,489
                  
                  
                  $
                  (763,750
                  )
                  
                  $
                  857,829Net
      loss
                  
                  $
                  (662,293
                  )
                  
                  $
                  (1,582,907
                  )
                  
                  $
                  (359,001
                  )Denominator:Weighted
      average common shares outstanding
                  
                  
                  355,199,476
                  
                  
                  
                  332,243,707
                  
                  
                  
                  186,018,406Basic
      and diluted loss per share:From
      continuing operations
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.01
                  )From
      discontinued operations
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )Total
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )




7. GOING CONCERN





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





The
ability of the Company to continue as a going concern is dependent upon the
Company’s ability to attain a satisfactory level of profitability and obtain
suitable and adequate financing. There can be no assurance that management's
plan will be successful.




11


ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR RESULTS OF OPERATION
 
 Caution
Regarding Forward-Looking Statements
 
 The
following information may contain certain forward-looking statements that are
not historical facts. These statements represent our expectations or beliefs,
including but not limited to, statements concerning future acquisitions, future
operating results, statements concerning industry performance, capital
expenditures, financings, as well as assumptions related to the foregoing.
Forward-looking statements may be identified by the use of forward-looking
terminology such as “may,” “shall,” “will,” “could,” “expect,” “estimate,”
“anticipate,” “predict,” “should,” “continue” or similar terms, variations of
those terms or the negative of those terms. Forward-looking statements are based
on current expectations and involve various risks and uncertainties that could
cause actual results and outcomes for future periods to differ materially from
any forward-looking statement or view expressed herein. Our financial
performance and the forward-looking statements contained in this report are
further qualified by other risks including those set forth from time to time in
documents filed by us with the SEC.
 
 INTRODUCTION
 
 We derive
our revenues from continuing operations primarily from the sale of multimedia
kiosks and hardware components to retail chains. These kiosks and components can
be applied to different functions such as recharging prepaid telephone cards.
Our revenues and operating results in the near future will depend upon the
continued use of the services provided by the multimedia kiosks and components
supplied by Mediawizz. The rate of adoption is influenced significantly over the
longer term by government laws and mandates, performance and pricing of our
products/services, relationships with the public and other factors.
 
 Our
revenues from discontinued operations are primarily from the sale of our
long-distance telecommunication services. Our revenues and operating results
have depended upon the continued adoption and use of our products and services
by consumers and small businesses. This use is influenced significantly over the
longer term by government laws and mandates, performance and pricing of our
products/services, relationships with the public and other factors.
 
 Our
future revenues will greatly depend on targeted acquisition of companies with
high potential business.  Today, our existing revenues generated by
Mediawizz may be impacted by other factors including the length of our sales
cycle, the timing of sales orders, budget cycles of our customers, competition,
the timing and introduction of new versions of our products, the loss of, or
difficulties affecting, key personnel and distributors, changes in market
dynamics or the timing of product development or market introductions. These
factors have impacted our historical results to a greater extent than has
seasonality. Combinations of these factors have historically influenced our
growth rate and profitability significantly in one period compared to another,
and is expected to continue to influence future periods, which may compromise
our ability to make accurate forecasts.
 
 Cost of
sales consists primarily of the costs associated with carriers which supply the
telecom services for the Company to resell. We rely on third parties to offer
the majority of the services we have in our portfolio. Accordingly, a
significant portion of our cost of sales consists of payments to these carriers.
Cost of sales also consists of customer support costs, training and professional
services expenses, and parts.
 
 Our gross
profit has been and will continue to be affected by a variety of factors,
including competition, the mix and average selling prices of products,
maintenance and services, new versions of products, the cost of equipment,
component shortages, and the mix of distribution channels through which our
products are sold. Our gross profit will be adversely affected by price declines
if we are unable to reduce costs on existing products or to introduce new
versions of products with higher margins.
 
 Selling,
general and administrative expenses consist primarily of salaries and related
expenses for executive, finance, accounting, legal and human resources
personnel, professional fees and corporate expenses. We expect general and
administrative expenses to decrease in absolute dollars as we employ fewer
personnel and incur fewer costs related to the growth of our business and our
operation as a public company. We include stock-based compensation, when
applicable, in general and administrative expenses.
  12
 
 BALANCE SHEET COMPARISON AT
MARCH 31, 2009 AND SEPTEMBER 30, 2008
 
 Assets: Total assets
at March 31, 2009 decreased 10.2% to $3,776,532 compared to $4,205,858 at
September 30, 2008.  This decrease is due primarily to a reduction of
the assets from discontinued operations.
 
 Liabilities: Current
liabilities at March 31, 2009 decreased 28.5% to $5,731,319 compared to
$8,014,982 at September 30, 2008.  This increase is due primarily to
the conversion of loans owed to a shareholder in exchange for common
stock.
 
 COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2009 AND 2008 (CONTINUING OPERATIONS)
 
 We
incurred a $312,861 net loss ($427,598 from continuing operations) for the three
months ended March 31, 2009 as compared to a net loss of $709,180 ($303,226 from
continuing operations) during the comparable period in 2008. A comparison of
revenues and expenses for the two periods is as follows:
 
 REVENUES
 
 Sales for
the three months ended March 31, 2009, increased to $95,061 from $35,004 for the
quarter ended March 31, 2008. This increase in sales is attributed to the sales
of calling credit which consists of prepaid phone usage generated through the
kiosks that are currently in trial placements in Dutch retail
businesses.
 
 COST OF
SALES
 
 Cost of
sales decreased to $107,417 during the three months ended March 31, 2009 from
$125,976 during the same period in 2008. The decrease in cost of sales partially
reflects efficiencies gained in our assembly process and operations of kiosks
but is predominately due to the increase in sales of calling credit which has a
much lower associated cost of sales than the assembly of the kiosk
hardware.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses increased by 191.2 % to $ 351,115 during the
three months ended March 31, 2009 as compared to $120,560 for the comparable
period in 2008.   This increase in selling, general and
administrative expenses is primarily due to the additional cost of outside
professional services related to the Company’s accounting and taxes for the
years 2007, 2008 and 2009.
 
 COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2009 AND 2008 (DISCONTINUED
OPERATIONS)
 
 Discontinued
operations had net income of $114,737 for the three months ended March 31, 2009
as compared to a net loss of $405,954 during the comparable period in
2008.  Without the effects of other income, discontinued operations
incurred a $201,957 operating loss for the three months ended March 31, 2009 as
compared to a operating loss of $338,777 during the comparable period in
2008.  It is expected that the discontinued operations will be sold
during 2009.
 
 A
comparison of revenues and expenses for the two periods is as
follows:
 
 REVENUES
 
 Sales for
the three months ended March 31, 2009, increased 7.6% to $979,188 from $910,233
for the quarter ended March 31, 2008. The increase in sales is due to aggressive
end user pricing due to our ability to temporarily lower prices of our goods and
services to the levels of our competitors.  The increase is also
attributed to the Gotel, Wholesale and Speedline services, which are prepaid
services not requiring a card, thus costing less to provide to distributors than
the prepaid calling cards.  These additional sales resulted from an
increase in total minutes of end-user usage which increased to nearly 19.5
million minutes for the three months ended March 31, 2009 up from 18.4 million
minutes for the quarter ended March 31, 2008.
 
 COST OF
SALES
 
 Cost of
sales increased by 12.3% to $742,304 during the three months ended March 31,
2009 from $661,099 during the same period in 2008. The main reason for this
increase was sales increased 7.6% but the Company was unable to negotiate
proportionately better pricing with its carriers leading to more expensive cost
of calls and lower gross profit.  The net effect of this increased
cost of sales combined with a lower increase of sales lead to a poorer gross
profit than that of one year earlier for the same quarter.
  13
  SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses decreased by 22.5 % to $ 429,715 during the
three months ended March 31, 2009 as compared to $ 554,163 for the comparable
period in 2008.   This decrease in selling, general and
administrative expenses is primarily due to the lower general and administrative
expenses associated with a reduction of staff and a reduction of cost associated
to external consultants.
 
 OTHER
INCOME (EXPENSE)
 
 Other
income for the three months ended March 31, 2009 was $316,694 as compared to
other expenses of $67,177 for the same period in 2008.  Other Income
included gains from debt forgiveness income of approximately $260,000 during the
period ended March 31, 2009 which did not occur in the same period in
2008.
 
 COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2009 AND 2008
(CONTINUING  OPERATIONS)
 
 We
incurred a $662,293 net loss ($699,782 from continuing operation) for the six
months ended March 31, 2009 as compared to a net loss of $1,582,907 ($819,157
from continuing operations) during the comparable period in 2008. A comparison
of revenues and expenses for the two periods is as follows:
 
 REVENUES
 
 Sales for
the six months ended March 31, 2009, increased to $150,335 from $50,644 for the
six months ended March 31, 2008. This increase in sales is attributed to the
sales of calling credit which consists of prepaid calling time paid for through
the kiosks that are currently in trial placements in Dutch retail
businesses.
 
 COST OF
SALES
 
 Cost of
sales decreased to $163,683 during the six months ended March 31, 2009 from
$293,832 during the same period in 2008. The decrease in cost of sales reflects
efficiencies gained in our assembly process and operations of
kiosks.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses increased by 30.8 % to $ 587,840 during the
six months ended March 31, 2009 as compared to $449,355 for the comparable
period in 2008.   This increase in selling, general and
administrative expenses is primarily due to the additional cost of outside
professional services for the Company’s accounting and taxes for the years 2007,
2008 and 2009.
 
 COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2009 AND 2008 (DISCONTINUED OPERATIONS)
 
 Discontinued
operations had net income of $37,489 for the six months ended March 31, 2009 as
compared to incurring a net loss of $763,750 during the comparable period in
2008.  Without the effects of other income, discontinued operations
incurred a $338,404 operating loss for the six months ended March 31, 2009 as
compared to an operating loss of $773,407 during the comparable period in
2008.  It is expected that the discontinued operations will be sold
during 2009.
 
 A
comparison of revenues and expenses for the two periods is as
follows:
 
 REVENUES
 
 Sales for
the six months ended March 31, 2009, increased nearly 10.1% to $1,839,108 from
$1,670,350 for the six months ended March 31, 2008. The increase in sales is due
to our ability to lower prices of our goods and services due to less competitive
end user pricing. As such, the number of minutes sent over our network increased
to approximately 37.9 million during the six months ended March 31, 2009 as
compared to nearly 36.9 million minutes for the quarter ended March 31,
2008.
 
 COST OF
SALES
 
 Cost of
sales increased less than 1% to $1,389,698 during the six months ended March 31,
2009 from $1,330,187 during the same period in 2008. The main reason for the
small increase compared to that of sales is the fact that the Gotel, Wholesale
and Speedline services, which are prepaid services not requiring a card, thus
costing less to provide to distributors than the prepaid calling
cards.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses decreased by 28.1 % to $ 752,960 during the
six months ended March 31, 2009 as compared to $1,047,136 for the comparable
period in 2008.   This decrease in selling, general and
administrative expenses is primarily due to a small reduction of staff and a
reduction of costs associated with external consultants.
  14
 
 OTHER
INCOME (EXPENSE)
 
 Other
income for the six months ended March 31, 2009 was $375,893 as compared to
$9,657 for the same period in 2008.  Other Income includes gains from
debt forgiveness income of approximately $260,000 for the six months ended March
31, 2009 as compared to none for the same period in 2008.
 
 BALANCE SHEET COMPARISON AT
MARCH 31, 2008 and SEPTEMBER 30, 2007
 
 Assets: Total assets
for the period ended March 31, 2008 increased 25.5% to $5,394,225 compared to
$4,297,582 for the period ended September 30, 2007.  This increase is
due primarily to the additional work-in progress inventory from
Mediwizz.
 
 Liabilities: Current
liabilities at March 31, 2008 increased 70.0% to $8,035,360 compared to
$4,726,640 at September 30, 2007.  This increase is due primarily to
additional loans from related parties.
 
 COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2008 AND 2007 (CONTINUING OPERATIONS)
 
 We
incurred a $709,180 net loss ($303,226 from continuing operations) for the three
months ended March 31, 2008 as compared to a net gain of $326,628 (loss of
$802,422 from continuing operations) during the comparable period in 2007. A
comparison of revenues and expenses for the two periods is as
follows:
 
 REVENUES
 
 Sales for
the three months ended March 31, 2008 amounted to $35,004. This is attributed to
the fact that Mediawizz began operations in the third quarter of
2007.
 
 COST OF
SALES
 
 Cost of
sales amounted to $125,976 during the three months ended March 31, 2008. The
cost of sales reflects the Company’s initial entry into the market and is
expected to decline as efficiencies are obtained.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses decrease by 85.4 % to $ 120,560 during the
three months ended March 31, 2008 as compared to $828,199 for the comparable
period in 2007.   This decrease in selling, general and
administrative expenses is due primarily to approximately $450,000 in
stock-based compensation for consulting fees for financial consulting and
$200,000 in legal and accounting fees paid in three months ended March 31, 2007
that were not incurred in the three months ended March 31, 2008.
 
 COMPARISON OF THE THREE
MONTHS ENDED MARCH 31, 2008 AND 2007 (DISCONTINUED
OPERATIONS)
 
 Discontinued
operations had net loss of $405,954 for the three months ended March 31, 2008 as
compared to incurring net income of $1,129,050 during the comparable period in
2007.  Without the effects of other income, discontinued operations
incurred a $338,777 operating loss for the three months ended March 31, 2008 as
compared to an operating loss of $72,950 during the comparable period in
2007.
 
 A
comparison of revenues and expenses for the two periods is as
follows:
 
 REVENUES
 
 Sales for
the three months ended March 31, 2008, decreased nearly 7.6% to $910,233 from
$985,177 for the quarter ended March 31, 2007. The decrease in sales is due to
the increased competitiveness of the market and our inability to lower prices of
our goods and services due to less competitive end user pricing. While the
number of minutes sent over our network increased to approximately 18.4 million
during for the three months ended March 31, 2008 as compared to nearly 16.0
million minutes for the quarter ended March 31, 2007, the average price per
minute dropped to $0.049 for the three months ended March 31, 2008 as compared
to $0.062 in the same period in 2007.
 
 COST OF
SALES
 
 Cost of
sales increased less than 3.3% to $661,099 during the three months ended March
31, 2008 from $640,237 during the same period in 2007. The main reason for the
increase was the inability to renegotiate better carrier pricing during this
period.
  15
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses increased by 50.7 % to $554,163 during the
three months ended March 31, 2008 as compared to $367,705 for the comparable
period in 2007.   This increase in selling, general and
administrative expenses is primarily due to the higher general and
administrative expenses associated to the cancellation of certain labor
contracts.
 
 OTHER
INCOME (EXPENSE)
 
 Other
expense for the three months ended March 31, 2008 was $67,177 as compared to
other income of $1,202,000 for the same period in 2007.  Other Income
in 2007 included gains from debt forgiveness income of $1,202,000 for the three
month period ended March 31, 2007 which did not occur in the same period in
2008.
 
 COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2008 AND 2007
(CONTINUING  OPERATIONS)
 
 We
incurred a $1,582,907 net loss ($819,157 from continuing operations) for the six
months ended March 31, 2008 as compared to a net loss of $359,001 ($1,216,830
from continuing operations) during the comparable period in 2007. A comparison
of revenues and expenses for the two periods is as follows:
 
 REVENUES
 
 Sales for
the six months ended March 31, 2008 amounted to $50,644 and none for the six
months ended March 31, 2007. This is attributed to the fact that Mediawizz began
operations in the third quarter of 2007.
 
 COST OF
SALES
 
 Cost of
sales amounted to $293,832 during the six months ended March 31, 2008 compared
to none during the same period in 2007. The cost of sales reflects the Company’s
initial entry into the market and is expected to decline as efficiencies are
obtained.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses decreased by 63.1% to $ 449,355 during the
six months ended March 31, 2008 as compared to $1,217,242 for the comparable
period in 2007.   This decrease in selling, general and
administrative expenses is primarily due to decrease in legal and accounting
services of approximately $200,000 and stock-based compensation of $532,600
during this period of 2007 as compared to 2008 when these services were not
used.
 
 COMPARISON OF THE SIX MONTHS
ENDED MARCH 31, 2008 AND 2007 (DISCONTINUED OPERATIONS)
 
 We
incurred a $763,750 loss from discontinued operations for the six months ended
March 31, 2008 as compared to net income of $857,829 during the comparable
period in 2007.  A comparison of revenues and expenses for the two
periods is as follows:
 
 REVENUES
 
 Sales for
the six months ended March 31, 2008, decreased nearly 14.7% to $1,670,350 from
$1,959,400 for the six months March 31, 2007. The decrease in sales is due to
the increased competitiveness of the market and our inability to lower prices of
our goods and services due to less competitive end user pricing. As such, the
number of minutes sent over our network dropped to approximately 36.9 million
during for the six months ended March 31, 2008 as compared to nearly 38.7
million minutes for the six months ended March 31, 2007.
 
 COST OF
SALES
 
 Cost of
sales increased less than 2% to $1,330,187 during the six months ended March 31,
2008 from $1,306,155 during the same period in 2007. The main reason for the
increase was the inability to renegotiate better carrier pricing during this
period.
 
 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
 
 Selling,
general and administrative expenses increased by 19.1% to $1,047,136 during the
six months ended March 31, 2008 as compared to $879,904 for the comparable
period in 2007.   This increase in selling, general and
administrative expenses is primarily due to the higher general and
administrative expenses associated to the cancellation of certain labor
contracts.
  16
  OTHER
INCOME (EXPENSE)
 
 Other
income for the six months ended March 31, 2008 was $9,657 as compared to other
income of $1,201,894 for the same period in 2007.  Other Income in
2007 included gains from debt forgiveness income of $1,202,000 for the six month
period ended March 31, 2007.
 
 LIQUIDITY AND CAPITAL
RESOURCES
 
 At March
31, 2009 and 2008, Teleconnect Inc. had negative working capital of
approximately $3,170,000 and $4,908,000, respectively, compared to negative
working capital of $5,287,000 and $2,488,000 at September 30, 2008 and 2007,
respectively.
 
 The
ability of the Company to satisfy its obligations will depend in part upon its
ability to raise funds, increase borrowings, and upon its ability to reach a
profitable level of operations of which there can be no assurances.
 
 The
Company's capital resources have been provided primarily by capital
contributions from stockholders, stockholder loans, the exchange of outstanding
debt into Common Stock of the Company, and services rendered in exchange for
Common Stock.
 
 The
Company intends to look for additional funding to pay debts and for working
capital. However, there is no assurance that such capital will be raised, and
the Company may seek bank financing and other sources of financing to complete
the payment of additional debt.
 
 DISCONTINUED
OPERATIONS
 
 In March
2009, the Company entered into an agreement to sell ITS Europe, Teleconnect
Spain, Teleconnect Telecom and Recarganet to certain employees and officers of
Teleconnect Spain with the Company retaining 10% of Teleconnect Spain subject to
shareholder approval.  The Company has accounted for the transaction
under SFAS 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, and the results of
operations of these subsidiaries were reported as “discontinued operations” and
assets and liabilities have been separated on the balance sheet.
 
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not
applicable.
 
 ITEM
4. CONTROLS AND PROCEDURES
 
 The
Company's Chief Executive Officer and Chief Financial Officer/Principal
Accounting Officer (collectively, the Certifying Officers) are responsible for
establishing and maintaining disclosure controls and procedures for the Company.
Such officers have concluded (based upon their evaluation of these controls and
procedures as of a date within 90 days of the filing of this report) that the
Company's disclosure controls and procedures are not effective to ensure that
information required to be disclosed by the Company in this report is
accumulated and communicated to the Company's management, including its
principal executive officers as appropriate, to allow timely decisions regarding
required disclosure.
 
 The
Certifying Officers also have indicated that there were no significant changes
in the Company's internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation.
 
 Management
is currently designing new internal controls and procedures to address our
material weaknesses which will be implemented in the coming
year.
  17
  PART
II
 
 OTHER
INFORMATION
 
 ITEM
1. LEGAL PROCEEDINGS
 
 In the
normal course of its operations, the Company has been named in legal actions
seeking monetary damages. While the outcome of these matters cannot be estimated
with certainty, management does not expect, based upon consultation with legal
counsel, that they will have a material effect on the Company's business or
financial condition or results of operations.
 
 ITEM
1A. RISK FACTORS
 
 Not applicable
 
 ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 None
 
 ITEM
3. DEFAULTS UPON SENIOR SECURITIES
 
 None
 
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None
 
 ITEM
5. OTHER INFORMATION
 
 None
 
 ITEM
6. EXHIBITS
 
 31.1
Certification of Dirk Benschop, Chief Executive Officer and
President
 
 31.2
Certification of Alfonso de Borbón, Executive Vice President and Chief
Accounting and Financial Officer
 
 32.1
Certification of Dirk Benschop and Alfonso de Borbon
  18
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 October
2, 2009
 
 TELECONNECT
INC.
 
 By:
                          /s/
      Dirk Benschop
                          
                          By:
                          /s/
      Alfonso de BorbonDirk
      Benschop, Director,
                            Chief
      Executive Officer,
                            President
      and Treasurer
                          
                          
                          Alfonso
      de Borbon,
                            Director,
      Chief Accounting
                            and
      Financial Officer,
                            Executive
      Vice President and
                            Chief
      Operating
Officer
  19
  INDEX
TO EXHIBITS
    No.
                      Description31.1
                      Certification
      of Dirk Benschop31.2
                      Certification
      of Alfonso de Borbon32.1
                      Certification
      of Dirk Benschop and Alfonso de
Borbon
  20