**U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  FORM 10-QSB
 
  **(Mark
        One)**
 x
                **QUARTERLY
                    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                    OF 1934
                    FOR THE QUARTERLY PERIOD ENDED JUNE 30,
                    2007**
  OR
  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**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 xNo
o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in rule
        12b-2 of the Exchange Act).Yes oNo x
  As
        of
        August 13, 2007, there were 33,525,014shares of the
        registrant's common stock issued and outstanding.
 
 Transitional
        Small Business Disclosure Format. Yes o No x
  
  **TELIPHONE
        CORP.**
   **Part
                    I.**
                **Financial
                    Information**
                **Page**Item
                    1.
                Financial
                    Statements and Notes to Financial Statements
                3Balance
                    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
                    Operations2
                4Item
                    3
                Controls
                    and Procedures
                18**Part
                    II.**
                **Other
                    Information**Item
                    1.
                Legal
                    Proceedings
                19Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                19Item
                    3.
                Defaults
                    Upon Senior Securities
                19Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                20Item
                    5.
                Other
                    Information
                20Item
                    6.
                Exhibits
                20Signatures
                
                21
  2
  **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 June 30, 2007
        are
        not necessarily indicative of the results that can be expected for the year
        ending September 30, 2007.
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **CONDENSED
          CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED JUNE 30, 2007 AND 2006**
 
 
 **INDEX
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  Condensed
                    Consolidated Balance Sheet as of June 30, 2007
                F-1Condensed
                  Consolidated Statements of Operations and Comprehensive Income
                  (Loss) for
                  the Nine
                  andThree
                    Months Ended  June 30, 2007 and 2006
                F-2Condensed
                    Consolidated Statements of Cash Flows for the Nine Months Ended
                    June 30,
                    2007 and 2006
                F-3Notes
                    to Condensed Consolidated Financial Statements
                F-4
  3
 **TELIPHONE
            CORP**
 **CONDENSED
            CONSOLIDATED BALANCE
            SHEET**
 **JUNE
            30,
            2007**
 **(UNAUDITED)**
 **US$****ASSETS**Current
                      Assets:Cash
                      and cash
                      equivalents
                  
                  $
                  14,256Accounts
                      receivable,
                      net
                  
                  
                  42,695Investment
                      tax credit
                      receivable
                  
                  
                  15,396Inventory
                  
                  
                  8,069Prepaid
                      expenses and other current
                      assets
                  
                  
                  116,637Total
                      Current Assets
                  
                  
                  197,053Fixed
                      assets, net of depreciation
                  
                  
                  52,349**TOTAL
                      ASSETS**
                  
                  $
                  249,402**LIABILITIES
                      AND STOCKHOLDERS'
                      (DEFICIT)****LIABILITIES**Current
                      Liabilities:Deferred
                      revenue
                  
                  $
                  21,604Related
                      party loans and
                      advances
                  
                  
                  622,736Accounts
                      payable and accrued
                      expenses
                  
                  
                  164,475Total
                      Current Liabilities
                  
                  
                  808,815**Total
                      Liabilities**
                  
                  
                  808,815**Minority
                      interest**
                  
                  
                  97,153**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
                  
                  
                  (1,558,186
                  )Accumulated
                      other comprehensive
                      income (loss)
                  
                  
                  (30,090
                  )**Total
                      Stockholders'
                      (Deficit)**
                  
                  
                  (656,566
                  )**TOTAL
                      LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
                  
                  $
                  249,402
 
 The
          accompanying notes are an integral part of the condensed consolidated financial
          statements.
 F-1
 **FOR
            THE NINE AND THREE MONTHS ENDED JUNE
            30, 2007 AND 2006**
 **(UNAUDITED)**
 **US
                      $**
                  
                  
                  **US
                      $****NINE
                      MONTHS
                      ENDED**
                  
                  
                  **THREE
                      MONTHS
                      ENDED****JUNE
                      30,**
                  
                  
                  **JUNE
                      30,****2007**
                  
                  
                  **2006**
                  
                  
                  **2007**
                  
                  
                  **2006****OPERATING
                      REVENUES**Revenues
                  
                  $
                  474,145
                  
                  
                  $
                  290,723
                  
                  
                  $
                  183,630
                  
                  
                  $
                  95,994**COST
                      OF
                      SALES**Inventory,
                      beginning of
                      period
                  
                  
                  11,034
                  
                  
                  
                  32,468
                  
                  
                  
                  10,996
                  
                  
                  
                  20,014Purchases
                      and cost of VoIP
                      services
                  
                  
                  348,058
                  
                  
                  
                  279,470
                  
                  
                  
                  121,417
                  
                  
                  
                  85,083Inventory,
                      end of
                      period
                  
                  
                  (8,069
                  )
                  
                  
                  (15,862
                  )
                  
                  
                  (8,069
                  )
                  
                  
                  (15,862
                  )**Total
                      Cost of
                      Sales**
                  
                  
                  351,023
                  
                  
                  
                  296,076
                  
                  
                  
                  124,344
                  
                  
                  
                  89,235**GROSS
                      PROFIT (LOSS)**
                  
                  
                  123,122
                  
                  
                  
                  (5,353
                  )
                  
                  
                  59,286
                  
                  
                  
                  6,759**OPERATING
                      EXPENSES**Selling
                      and promotion
                  
                  
                  9,426
                  
                  
                  
                  24,416
                  
                  
                  
                  2,713
                  
                  
                  
                  5,601Professional
                      and consulting fees
                  
                  
                  29,574
                  
                  
                  
                  47,710
                  
                  
                  
                  5,283
                  
                  
                  
                  8,480Salaries
                      and wage levies
                  
                  
                  128,947
                  
                  
                  
                  104,664
                  
                  
                  
                  21,296
                  
                  
                  
                  46,809Other
                      general and administrative expenses
                  
                  
                  33,774
                  
                  
                  
                  39,970
                  
                  
                  
                  10,978
                  
                  
                  
                  11,432Depreciation
                  
                  
                  54,831
                  
                  
                  
                  33,602
                  
                  
                  
                  16,893
                  
                  
                  
                  12,364**Total
                      Operating Expenses**
                  
                  
                  256,552
                  
                  
                  
                  250,362
                  
                  
                  
                  57,163
                  
                  
                  
                  84,686**GAIN
                      (LOSS) BEFORE OTHER INCOME**
                  
                  
                  (133,430
                  )
                  
                  
                  (255,715
                  )
                  
                  
                  2,123
                  
                  
                  
                  (77,927
                  )**OTHER
                      INCOME (EXPENSE)**Loss
                      on disposal of assets
                  
                  
                  -
                  
                  
                  
                  (1,654
                  )
                  
                  
                  -
                  
                  
                  
                  (1,654
                  )Interest
                      expense
                  
                  
                  (42,506
                  )
                  
                  
                  (648
                  )
                  
                  
                  (18,675
                  )
                  
                  
                  (391
                  )**Total
                      Other Income (Expense)**
                  
                  
                  (42,506
                  )
                  
                  
                  (2,302
                  )
                  
                  
                  (18,675
                  )
                  
                  
                  (2,045
                  )**NET
                      LOSS BEFORE MINORITY INTEREST AND****PROVISION
                      FOR INCOME TAXES**
                  
                  
                  (175,936
                  )
                  
                  
                  (258,017
                  )
                  
                  
                  (16,552
                  )
                  
                  
                  (79,972
                  )**Minority
                      interest**
                  
                  
                  32,527
                  
                  
                  
                  -
                  
                  
                  
                  537
                  
                  
                  
                  -**NET
                      LOSS BEFORE PROVISION FOR INCOME TAXES**
                  
                  
                  (143,409
                  )
                  
                  
                  (258,017
                  )
                  
                  
                  (16,015
                  )
                  
                  
                  (79,972
                  )**Provision
                      for Income Taxes**
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -**NET
                      LOSS APPLICABLE TO COMMON SHARES**
                  
                  $
                  (143,409
                  )
                  
                  $
                  (258,017
                  )
                  
                  $
                  (16,015
                  )
                  
                  $
                  (79,972
                  )**NET
                      LOSS PER BASIC AND DILUTED
                      SHARES**
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.00
                  )**WEIGHTED
                      AVERAGE NUMBER OF
                      COMMON****SHARES
                      OUTSTANDING**
                  
                  
                  33,394,453
                  
                  
                  
                  31,089,520
                  
                  
                  
                  33,554,014
                  
                  
                  
                  31,089,520**COMPREHENSIVE
                      INCOME
                      (LOSS)**Net
                      loss
                  
                  $
                  (143,409
                  )
                  
                  $
                  (258,017
                  )
                  
                  $
                  (16,015
                  )
                  
                  $
                  (79,972
                  )Other
                      comprehensive income
                      (loss)Currency
                      translation
                      adjustments
                  
                  
                  (9,146
                  )
                  
                  
                  (36,641
                  )
                  
                  
                  (8,093
                  )
                  
                  
                  (36,394
                  )Comprehensive
                      income
                      (loss)
                  
                  $
                  (152,555
                  )
                  
                  $
                  (294,658
                  )
                  
                  $
                  (24,108
                  )
                  
                  $
                  (116,366
                  )
 The
          accompanying notes are an integral part of
          the condensed consolidated financial statements.
 
 F-2
  **TELIPHONE
            CORP.**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF
            CASH FLOWS**
 **FOR
            THE NINE MONTHS ENDED JUNE 30, 2007
            AND 2006**
 **(UNAUDITED)**
 **US$****2007**
                  
                  
                  **2006****CASH
                      FLOWS FROM OPERATING
                      ACTIVITIES**Net
                      loss
                  
                  $
                  (143,409
                  )
                  
                  $
                  (258,017
                  )**Adjustments
                      to reconcile net loss to net cash****used
                      in operating activities:**Depreciation
                  
                  
                  54,831
                  
                  
                  
                  33,602Loss
                      on dispoosal of assets
                  
                  
                  -
                  
                  
                  
                  1,654Minority
                      interest
                  
                  
                  (32,528
                  )
                  
                  
                  -**Changes
                      in assets and liabilities**(Increase)
                      decrease in accounts receivable
                  
                  
                  (15,721
                  )
                  
                  
                  37,293(Increase)
                      in investment tax credit receivable
                  
                  
                  -
                  
                  
                  
                  (689
                  )Decrease
                      in inventory
                  
                  
                  3,327
                  
                  
                  
                  16,606Decrease
                      in prepaid expenses and other current assets
                  
                  
                  15,806
                  
                  
                  
                  12,479Increase
                      in deferred revenue
                  
                  
                  12,122
                  
                  
                  
                  -Increase
                      (decrease) in accounts payable andand
                      accrued expenses
                  
                  
                  3,148
                  
                  
                  
                  (85,527
                  )Total
                      adjustments
                  
                  
                  40,985
                  
                  
                  
                  15,418**Net
                      cash (used in) operating activities**
                  
                  
                  (102,424
                  )
                  
                  
                  (242,599
                  )**CASH
                      FLOWS FROM INVESTING ACTIVITIES**Acquisitions
                      of fixed assets
                  
                  
                  (4,618
                  )
                  
                  
                  (6,394
                  )**Net
                      cash (used in) investing activities**
                  
                  
                  (4,618
                  )
                  
                  
                  (6,394
                  )**CASH
                      FLOWS FROM FINANCING ACTIVITES**(Decrease)
                      in bank overdraft
                  
                  
                  (7,554
                  )
                  
                  
                  (4,452
                  )Proceeds
                      from loan payable, net
                  
                  
                  -
                  
                  
                  
                  52,554Proceeds
                      from loan payable - related parties, net
                  
                  
                  130,967
                  
                  
                  
                  237,532**Net
                      cash provided by financing activities**
                  
                  
                  123,413
                  
                  
                  
                  285,634Effect
                      of foreign currency transalation
                  
                  
                  (2,115
                  )
                  
                  
                  (36,641
                  )**NET
                      INCREASE (DECREASE) IN****CASH
                      AND CASH EQUIVALENTS**
                  
                  
                  14,256
                  
                  
                  
                  -**CASH
                      AND CASH EQUIVALENTS -****BEGINNING
                      OF PERIOD**
                  
                  
                  -
                  
                  
                  
                  -**CASH
                      AND CASH EQUIVALENTS - END OF PERIOD**
                  
                  $
                  14,256
                  
                  
                  $
                  -**CASH
                      PAID DURING THE PERIOD FOR:**Interest
                      expense
                  
                  $
                  15,506
                  
                  
                  $
                  6,753**SUPPLEMENTAL
                      NONCASH INFORMATION:**Common
                      stock issued for liability
                      for stock to be issued
                  
                  $
                  165,000
                  
                  
                  $
                  -
 
 The
          accompanying notes are an integral part of
          the condensed consolidated financial statements.
 F-3
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS**
 **JUNE
          30, 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)**
 **JUNE
          30, 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 $143,409 and $258,017
          for the nine months ended June 30, 2007 and 2006, and has a working capital
          deficiency of $611,762 as of June 30, 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)**
 **JUNE
          30, 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)**
 **JUNE
          30, 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)**
 **JUNE
          30, 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 nine months ended June 30, 2007 and 2006, the Company
          recorded approximately ($9,146) and ($36,641) 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"), EITF
          Issue
          00-21, "Revenue Arrangements with Multiple Deliverables", and EITF Issue
          No.
          00-14, “Accounting for Certain Sales Incentives”. 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)**
 **JUNE
          30, 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
          March 31, 2007 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 April 1, 2007, the Company changed its disconnect
          policy.
          Upon cancellation of the service, no disconnection fee is charged and there
          is
          no refund issued to the customer for any portion of the unused services
          as
          before.  The customer’s service termination date becomes the next
          anniversary date of its billing cycle.
  F-9
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)**
 
 **Revenue
          Recognition(Continued)**
  This
          accounting is consistent with the rules set forth in SAB 104 Section A(4)(a)
          since there are no rights of returns or refunds that exist for the customer
          other than a standard 30-day money-back guarantee.  In the event of a
          return within the 30 day guarantee period, the hardware is refunded in
          its
          entirety.  This accounting is also consistent with FASB Statement 48
          on “Revenue Recognition When Right of Return Exists” which allows for equipment
          revenue to be recognized at the time of sale since there no longer exists
          a
          right of return after the 30 day period.
 
 **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 recognizes this revenue utilizing the guidance set forth in EITF
          Issue
          00-21, "Revenue Arrangements with Multiple Deliverables".  For the
          Wholesale channel, the activation fee is recognized as deferred revenue,
          and
          amortized over the length of the service agreement. If the service is terminated
          within the term of the service agreement, the deferred revenue is fully
          amortized.  This accounting is consistent with Question 1 of Section
          A(3)(f) of SAB 104 because the up-front fee is not in exchange for products
          delivered or services performed that represent the culmination of a separate
          earnings process, and hence the deferral of revenue is appropriate.
  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” and EITF Issue 01-9, “Accounting for
          Consideration Given by a Vendor to a Customer (Including a Reseller of
          the
          Vendor’s Products)”.
  F-10
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)**
 
 **Revenue
          Recognition(Continued)**
 
 Under
          a
          retail agreement, the cost of the equipment is recognized as deferred revenue,
          and amortized over the length of the service agreement. 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.
 
 **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 based on the recurring revenues recorded
          by the
          company and incurred in the period where the revenue is recognized and
          paid by
          the company to the retail Distributor in the following month.  These
          commissions are recorded as cost of sales as they are directly related
          to the
          revenue acquired and are not considered a sales and marketing
          expense.  These commissions are payable based on the Distributor’s
          servicing of the customer on an on-going basis.  This accounting is
          consistent with EITF Issue No. 00-14, “Accounting for Certain Sales
          Incentives.”
 
 ***Commissions
          Paid to Wholesalers***
 
 The
          Company recognizes this revenue utilizing the guidance set forth in EITF
          Issue
          01-9 “Accounting for Consideration Given by a Vendor to a Customer (Including
          a
          Reseller of the Vendor’s Products)”.  The Company is receiving
          identifiable benefits from the Wholesaler (billing and customer support)
          in
          return for the allowance.  These benefits are sufficiently separable
          from the Wholesaler’s purchase of the Company’s hardware and
          services.  The fair value of those benefits can be reasonably
          estimated and therefore the excess consideration is characterized as a
          reduction
          of revenue on the Company’s Statement of Operations.
  F-11
 
 **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)**
 
 **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 $4,846
          at
          June 30, 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.
 
 **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
          $15,396 in investment tax credits as of June 30, 2007.
  F-12
 
 **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)**
 
 **Convertible
          Instruments**
 
 The
          Company reviews the terms of convertible debt and equity securities for
          indications requiring bifurcation, and separate accounting, for the embedded
          conversion feature. Generally, embedded conversion features where the ability
          to
          physical or net-share settle the conversion option is not within the control
          of
          the Company are bifurcated and accounted for as a derivative financial
          instrument. (See Derivative Financial Instruments below). Bifurcation of
          the
          embedded derivative instrument requires allocation of the proceeds first
          to the
          fair value of the embedded derivative instrument with the residual allocated
          to
          the debt instrument. The resulting discount to the face value of the debt
          instrument is amortized through periodic charges to interest expense using
          the
          Effective Interest Method.
 
 **Derivative
          Financial Instruments**
 
 The
          Company generally does not use derivative financial instruments to hedge
          exposures to cash-flow or market risks. However, certain other financial
          instruments, such as warrants or options to acquire common stock and the
          embedded conversion features of debt and preferred instruments that are
          indexed
          to the Company’s common stock, are classified as liabilities when either (a) the
          holder possesses rights to net-cash settlement or (b) physical or net share
          settlement is not within the control of the Company. In such instances,
          net-cash
          settlement is assumed for financial accounting and reporting, even when
          the
          terms of the underlying contracts do not provide for net-cash settlement.
          Such
          financial instruments are initially recorded at fair value and subsequently
          adjusted to fair value at the close of each reporting period.
 
 **Advertising
          Costs**
 
 The
          Company expenses the costs associated with advertising as
          incurred.  Advertising expenses for the nine months ended June 30,
          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)**
 **JUNE
          30, 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:
 
 **June
                      30,**
                  
                  
                  **June
                      30,****2007**
                  
                  
                  **2006**Net
                      loss
                  
                  $
                  (143,409
                  )
                  
                  $
                  (258,017
                  )Weighted-average
                      common
                      sharesOutstanding
                      (Basic)
                  
                  
                  33,394,453
                  
                  
                  
                  31,089,520Weighted-average
                      common
                      stockEquivalentsStock
                      options
                  
                  
                  -
                  
                  
                  
                  -Warrants
                  
                  
                  -
                  
                  
                  
                  -Weighted-average
                      common
                      sharesOutstanding
                      (Diluted)
                  
                  
                  33,394,453
                  
                  
                  
                  31,089,520
  F-14
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 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)**
 **JUNE
          30, 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 nine months ended June 30, 2006 to conform
          with
          the June 30, 2007 presentation. These reclassifications had no effect on
          the net
          loss for the nine months ended June 30, 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)**
 **JUNE
          30, 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)**
 **JUNE
          30, 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 June 30, 2007 were as follows:
 
 **Estimated
                    Useful**
                ****
                ****
                ****
                ********
                ****
                **Lives
                    (Years)**Furniture
                    and fixtures
                
                
                5
                
                
                $
                1,157Computer
                    equipment
                
                
                3
                
                
                
                164,929Vehicles
                
                
                5
                
                
                
                21,836187,922Less:
                    accumulated depreciation
                
                
                
                
                
                
                135,573Property
                    and equipment, net
                
                
                
                
                
                $
                52,349
  F-18
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    3-**
                **FIXED
                    ASSETS (CONTINUED)**
 
 There
          was
          $54,831 and $33,602 charged to operations for depreciation expense for
          the nine
          months ended June 30, 2007 and 2006, respectively.
 
 The
          Company had acquired assets of a now related entity in April 2005, United
          American Corporation (UAC).  UAC was the founder of Teliphone Inc.,
          the Company’s majority-owend subsidiary.  This equipment was part of
          the initial investment made by UAC in Teliphone Inc.  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 nine months
          ended June 30, 2007 was $27,000 on this loan. Accrued interest on this
          loan as
          of June 30, 2007 is $33,000.
 
 In
          addition, there are approximately $135,756 of non-interest bearing advances
          that
          were incurred from August 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)**
 **JUNE
          30, 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
          June 30, 2007, the Company has $38,483 including accrued interest outstanding
          with an officer. The Company has recorded interest expense of approximately
          $1,040 for the nine months ended June 30, 2007. There were no amounts
          outstanding during the nine months ended June 30, 2006. As the amount is
          due on
          demand, the Company has classified the loan as a current liability.
 
 As
          of
          June 30, 2007, the Company has $102,199 including accrued interest outstanding
          with shareholders. Interest expense for the nine months ended June 30,
          2007 and
          2006 were approximately $1,065 and $1,100, respectively. As the amounts
          are due
          on demand, the Company has classified them as current liabilities.
 
 As
          of
          June 30, 2007, the Company has $8,400 including accrued interest outstanding
          with a company controlled by an officer of the Company. The Company has
          recorded
          interest expense of approximately $375 for the nine months ended June 30,
          2007.  There were no amounts outstanding during the nine months ended
          June 30, 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)**
 **JUNE
          30, 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 is
          $.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)**
 **JUNE
          30, 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)**
 **JUNE
          30, 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 June 30, 2007 has not
          used
          the $12,000 (CDN$) per month. As of June 30, 2007, the balance remaining
          in the
          prepaid expense for Intelco is $124,267 (CDN$) or $116,637
          (US$).  Teliphone Inc. is currently negotiating with Intelco as to how
          the credit position is to be treated going forward.
  F-23
  **TELIPHONE
          CORP.**
 **(FORMERLY
          OSK CAPITAL II CORPORATION)**
 **NOTES
          TO CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2007 AND 2006**
 **NOTE
                    8-**
                **STOCKHOLDERS’
                    DEFICIT**
 
 **Common
          Stock**
 
 As
          of
          June 30, 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 June 30,
          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)**
 **JUNE
          30, 2007 AND 2006**
   **NOTE
                    9-**
                **PROVISION
                    FOR INCOME TAXES
                    (CONTINUED)**
 
 At
          June
          30, 2007, deferred tax assets consist of the following:
 
 Net
                      operating
                      losses
                  
                  $
                  529,783Valuation
                      allowance
                  
                  
                  (529,783
                  )$
                  -
  At
          June
          30, 2007, the Company had a net operating loss carryforward in the approximate
          amount of $1,558,186, 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 June 30,
          2007 and
          2006 is summarized as follows:
 **2007**
                ****
                ****
                **2006**Federal
                    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., aNevadacorporation, together with our
          majority-owned subsidiary Teliphone Inc., a Canadian
          corporation.
 
 **History**
 
 Teliphone
          Corp was incorporated in the State of Nevada on March 2, 1999 under the
          name
          "OSK Capital II Corp." to serve as a vehicle to effect a merger, exchange
          of
          capital stock, asset acquisition or other business combination with a domestic
          or foreign private business. Effective April 28, 2005, the Company achieved
          its
          objectives with the reverse merger and reorganization with Teliphone Inc.,
          a
          Canadian company. On August 21, 2006, we changed our name from OSK Capital
          II
          Corp. to Teliphone Corp.
  4
  As
          a
          result of the merger and re-organization, Teliphone Inc. became our wholly
          owned
          subsidiary and we became a majority owned subsidiary of Teliphone Inc.'s
          parent
          company, United American Corporation, a Florida Corporation trading on
          the NASD
          OTCBB under the symbol UAMA.
  The
          merger and re-organization of April 28, 2005 was a business combination
          between
          Teliphone Inc. and OSK Capital II Corp. As a result, Teliphone Inc. became
          a
          wholly-owned subsidiary of OSK Capital II Corp.
  The
          Principal terms of the combination were that a recapitalization occurred
          as a
          result of the reverse merger. The shareholder's equity of OSK Capital II
          Corp.
          became that of Teliphone Inc. Original shareholders of OSK Capital II Corp.
          maintained their shareholdings of OSK Capital II Corp. and new treasury
          shares
          of OSK Capital II Corp. were issued to shareholders of Teliphone Inc
 
 On
          July
          14th, 2006 the Company entered into a Letter of Intent with 3901823 Canada
          Inc.
          ("3901823") whereby Teliphone Inc. will issue 3901823 new shares from its
          treasury such that 3901823 will become a 25% owner of our subsidiary Teliphone
          Inc. in return for additional investment in the company. As a result of
          this
          transaction, Teliphone Inc. remains a majority-owned subsidiary of the
          Company.
          The Company does not have any other subsidiaries.
  On
          October 30, 2006, United American Corporation spun off their share position
          in
          our Company through the pro rata distribution of their 25,737,956 shares
          to
          their shareholders. Although there were no contractual obligations on the
          part
          of the company or United American Corporation, this spin off was part of
          a long
          term strategy of United American Corporation.
  **History
          of Key Agreements**
  At
          the
          time of the merger and re-organization, the Company, through its subsidiary
          Teliphone Inc., was able to offer its services to customers in Canada only.
          This
          was achieved through the signing of a retail distribution agreement on
          March 1,
          2005, with BR Communications Inc. ("BR") for the purpose accessing the
          retail
          consumer portion of our target market through retail and Internet-based
          sales.
          Under the terms of this agreement, BR was granted the exclusive right to
          distribute Teliphone Inc.’s VoIP services via Internet-based sales or direct
          sales to retail establishments in the territory consisting of the Province
          of
          Quebec in Canada exclusive of Sherbrooke, Quebec for a 5 year term. The
          agreement includes a commitment by Teliphone Inc. to pay BR 25% of the
          recurring
          revenues derived from clients in the territory. BR then utilizes this 25%
          to
          distribute a portion of the recurring revenues to their base of re-sellers.
          Teliphone Inc. provides the hardware necessary for the delivery of their
          VoIP
          services directly to the re-sellers, and therefore BR does not receive
          any
          commission on the sale of, nor distribution of, the hardware. Recurring
          revenues
          from paying customers include unlimited local and long distance calling
          services. This agreement was later expanded to include the city of Ottawa
          within
          the Province of Ontario and to remove the restriction of Sherbrooke,
          Quebec.
 
 On
          April
          22, 2005, the Company, through its subsidiary Teliphone Inc., entered into
          a
          Wholesale distribution agreement with 9151-4877 Quebec Inc., also known
          as
          "Dialek Telecom". Teliphone Inc. supplies Dialek Telecom with VoIP services
          to
          Dialek's Canadian and US customers, permitting Dialek Telecom to brand
          the
          service "Dialek VoIP" instead of "Teliphone VoIP". The agreement also permits
          Dialek Telecom to invoice and support its clients directly. The term of
          the
          agreement is for one year renewable to successive one year terms upon 30
          days
          written notice.
  On
          June
          1, 2005, the Company, through its subsidiary Teliphone Inc., signed an
          Agreement
          with Northern Communication Services Inc. ("Northern") such that Northern
          would
          supply the company with Emergency 9-1-1 caller address verification and
          call
          transfer services to the necessary Municipal Emergency Services Department
          associated with the caller's location. This service is required for Teliphone
          Inc.'s customers located in North America. The term of the agreement is
          for 3
          years, renewable automatically for an additional 3 years with a termination
          clause of 90 days written notice.
  5
 
 The
          Company sought to further expand its distribution reach internationally
          and on
          August 23, 2005, we entered into a marketing and distribution agreement
          with
          Podar Enterprise ("Podar") of Mumbai, India. Podar is focused on building
          a
          distribution network to sell to consumers in Central, South, and East Asia,
          Eastern Europe, and parts of the Middle East. Under the terms of this agreement,
          Podar was granted the exclusive marketing and distribution rights for our
          products and services in India, China, Sri Lanka, United Arab Emirates,
          and
          Russia. The agreement stipulated that Podar was to receive 25% of the recurring
          revenues sold to clients in the territory. The agreement does not deal
          with any
          hardware sales, as the intent of the agreement was to have clients source
          the
          necessary hardware locally in their country. Recurring revenues from paying
          customers include long distance calling services outside of the customer’s
          geographic location. The term of this agreement is five (5) years subject
          to
          early termination with 60 days notice following any default under the
          agreement.
 
 On
          December 2, 2005, the Company, through it's subsidiary Teliphone Inc. signed
          a
          Co-Location and Bandwidth Services Agreement with Peer 1. The agreement
          stipulates that the Company houses its telecommunications and computer
          server
          hardware within the Peer 1 Montreal Data center, located at 1080 Beaver
          Hall,
          suite 1512, Montreal, Quebec, Canada. Likewise, Teliphone Inc. agrees to
          purchase Peer 1 bandwidth services and internet access across its worldwide
          network. The term of the contract was for 12 months, renewable for successive
          30
          day terms.
  The
          Company sought to expand its product offering in order to offer its broadband
          phone services to US customers as well. The Company singed an agreement
          with RNK
          Telecom Inc, a New Jersey company, in December of 2005 which permitted
          the
          company to interconnect with RNK's network of US cities. This agreement
          has a
          term of one year renewable month to month at the end of the term.
  On
          December 7, 2005, the Company entered into, in conjunction with United
          American
          Corporation, a related party, a Customer and Asset Acquisition and Software
          Licensing Agreement with Iphonia, Inc., a Quebec corporation. However,
          on July
          6th, 2006, the agreement with iPhonia Inc. was terminated by both parties.
          The
          original agreement was to set forth the rights and obligations pertaining
          to the
          transfer of Iphonia's clients and services to Teliphone Inc., the Company's
          subsidiary, along with the sale of various telecommunications and equipment.
          The
          term of the agreement was to be 24 months.
  On
          April
          6, 2006, the Company, through its subsidiary Teliphone Inc. signed a Master
          Services Agreement with Rogers Business Solutions ("Rogers"). This agreement
          permits Teliphone Inc. to purchase voice channel capacity for its Canadian
          Network. The majority of its current voice channel capacity already exists
          with
          Rogers, however, the current agreements are still between Rogers and the
          Company's former parent company, United American Corporation. It is anticipate
          that all of the capacity will transfer under the Teliphone Inc.-Rogers
          agreement
          by June 30, 2007. The term of the agreement is for 2 years, with no specific
          renewal conditions.
  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 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 paid back in December 2006.
  6
  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.
 
 **Description
          of Business**
 
 **Trends
          in Our Industry and Business**
  A
          number
          of trends in our industry and business have a significant effect on our
          results
          of operations and are important to an understanding of our financial statements.
          These trends include:
  *Broadband
          adoption.* The number of households with broadband Internet access in
          our core markets of Canada and India has grown significantly. We expect
          this
          trend to continue. We benefit from this trend because our service requires
          a
          broadband Internet connection and our potential addressable market increases
          as
          broadband adoption increases.
  *Changing
          competitive landscape.* We are facing increasing competition from
          other companies that offer multiple services such as cable television,
          voice and
          broadband Internet service. Several of these competitors are offering VoIP
          or
          other voice services as part of a bundle, in which they offer voice services
          at
          a lower price than we do to new subscribers. In addition, several of these
          competitors are working to develop new integrated offerings that we cannot
          provide and that could make their services more attractive to customers.
          We also
          compete against established alternative voice communication providers and
          independent VoIP service providers. Some of these service providers may
          choose
          to sacrifice revenue in order to gain market share and have offered their
          services at lower prices or for free. These offerings could negatively
          affect
          our ability to acquire new customers or retain our existing
          customers.
  *Consumer
          adoption of new VoIP technology.*  The development of our Teliphone
          VoIP service permits us to sell telecommunications services to consumers
          who
          have a broadband internet connection. Our technology permits customers
          to
          continue to use their traditional phone devices to make and receive calls
          at a
          lower cost than traditional phone services. One of the key challenges in
          the
          adoption of this new technology is the customer’s acceptance of potential loss
          of service when their internet connection goes down or they lose electrical
          power in their home or office. The Company has mitigated this risk for
          their
          customers by providing telephone call fail-over methods in case of loss
          of
          service. Management believes that even though this adoption risk exists,
          the
          reduction of cost for the services will negate the impact of occasional
          service
          loss much like how consumers accepted at times lower call quality in their
          worldwide adoption of mobile phones due to increased convenience.
  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. We have not as yet realized any revenue from our callona.com prototype.
  7
  **Principal
          products or services and their
          markets**
  Our
          Company has invested in the research and development of our VoIP
          telecommunications technology which permits the control, forwarding, storing
          and
          billing of phone calls made or received by our customers. Our technology
          consists of proprietary software programming and specific hardware
          configurations, however, we have no specific legal entitlement that does
          not
          permit someone else from utilizing the same base software languages and
          same
          hardware in order to produce similar telephony service offerings. We therefore
          cannot be certain that others will not gain access to our technology. In
          order
          to protect this proprietary technology, we hold non-disclosure and
          confidentiality agreements and understandings with our employees, consultants,
          re-sellers, distributors, wholesalers and technology partners. We cannot
          guarantee that our technology and trade secrets will not be stolen, challenged,
          invalidated or circumvented. If any of these were to occur, we would suffer
          from
          a decreased competitive advantage, resulting in lower profitability due
          to
          decreased sales.
  The
          Company offers the following products and services to customers utilizing
          its
          VoIP technology platform:
  Residential
                    phone service. Customers purchase a VoIP adaptor from a re-seller
                    and
                    install it in their home. This allows all of their traditional
                    phones in
                    their home to have their inbound and outbound calls redirected
                    to
                    Teliphone. As a result, the residential customer purchases their
                    choice of
                    unlimited local or long distance calling services, with pay-per-minute
                    long distance calling services.
  Business
                    phone service. Customers purchase multiple VoIP adaptors from
                    re-sellers
                    and install them in their business. Similar to Residential phone
                    service,
                    customers purchase various local and long distance calling services
                    from
                    the Company.
  For
          Residential and Business phone services, the Company, through its subsidiary
          Teliphone Inc., invoices and collects funds directly from the end-user
          customer
          and pays a commission to their re-sellers and distributors upon receipt
          of the
          funds. The customer can also purchase the VoIP adaptors and calling services
          directly with Teliphone Inc. via its website www.teliphone.us for US
          customers, www.teliphone.ca for Canadian customers and
www.teliphone.in for India customers.
  The
                    Company also sells VoIP calling services to Wholesalers who re-sell
                    these
                    services to their customers. In this case, the Company’s subsidiary
                    Teliphone Inc. provides the services to the end-user customers,
                    however
                    invoices and collects funds from the Wholesaler, who invoices
                    their
                    customers and provides technical support to their customers
                    directly.
  The
          VoIP
          adaptors are manufactured by Linksys-Cisco and purchased by the Company
          directly
          from the manufacturer and re-sold to the re-sellers and wholesalers. The
          Company’s subsidiary Teliphone Inc. is a Linksys-Cisco Internet Telephony
          Services approved supplier based on their agreement signed in October
          2005.
  **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.
  8
  Our
          relationship to the retail outlets is on of a supplier. We supply the hardware
          to the retail outlet owners, who have a re-seller agreement with our
          distributor, BR Communications Inc. We ship these products direct to the
          stores
          based on their requirements. All shipments are Cash On Delivery payment
          terms.
  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.
  **Status
            of any publicly announced new product or
            service;**
  TeliPhone
          VoIP services were officially launched to the public in the Province of
          Quebec
          in December of 2004.
  *teliPhone
            Residential VoIP service*
 The
          Company currently offers a residential VoIP phone service to customers
          in the
          provinces of Ontario and Quebec. Average revenues per customer are $30.00
          per
          month. The customer can also purchase virtual numbers from other cities
          in North
          America and Internationally, permitting the customer to provide a local
          phone
          number to their calling party who is in another area or country that normally
          would represent a long distance call. These services cost from 5$ to 30$
          per
          month depending on the country.
  *teliPhone
            Small business VoIP services*
  During
            2005Q3, The Company began to target Small and Medium sized business clients
            with
            an expanded version of its offering. Average revenues per customer in
            this
            segment are $400. The Company markets these services primarily through
            its
            telecom interconnection resellers, who have existing customer relationships
            in
            this segment.
  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 2007Q4.
  9
  *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 in fiscal year end
          2008.
  *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
          nor 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 fiscal
          year
          2008 to The Company's Retail sales channel as well. As described above,
          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.
  **Competitive
          Business Conditions**
  Today,
          VoIP technology is used in the backbone of many traditional telephone networks,
          and VoIP services are offered to residential and business users by a wide
          array
          of service providers, including established telephone service providers.
          These
          VoIP providers include traditional local and long distance phone companies,
          established cable companies, Internet service providers and alternative
          voice
          communications providers such as Teliphone.
  
 While
          all
          of these companies provide residential VoIP communications services, each
          group
          provides those services over a different type of network, resulting in
          important
          differences in the characteristics and features of the VoIP communications
          services that they offer. Traditional wireline telephone companies offering
          VoIP
          services to consumers do so using their existing broadband DSL networks.
          Similarly, cable companies offering VoIP communications services use their
          existing cable broadband networks. Because these companies own and control
          the
          broadband network over which the VoIP traffic is carried between the customer
          and public switched telephone network, they have the advantage of controlling
          a
          substantial portion of the call path and therefore being better able to
          control
          call quality. In addition, many of these providers are able to offer their
          customers additional bandwidth dedicated solely to the customer's VoIP
          service,
          further enhancing call quality and preserving the customer's existing bandwidth
          for other uses. However, these companies typically have high capital
          expenditures and operating costs in connection with their networks. In
          addition,
          depending on the structure of their VoIP networks, the VoIP services provided
          by
          some of these companies can only be used from the location at which the
          broadband line they provide is connected.
  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.
  10
  Internet
          service providers generally offer or have announced intentions to offer
          VoIP
          services principally on a PC-to-PC basis. These providers generally carry
          their
          VoIP traffic for the most part over the public Internet, with the result
          that
          VoIP services are often offered for free, but can only be used with other
          users
          of that provider's services. Many of these providers offer a premium service
          that allows customers to dial directly into a public switched telephone
          network.
          In addition, while no special adapters or gateways are required, often
          customers
          must use special handsets, headsets or embedded microphones through their
          computers, rather than traditional telephone handsets.
  **Competition**
  The
          telecommunications industry is highly competitive, rapidly evolving and
          subject
          to constant technological change and to intense marketing by different
          providers
          of functionally similar services. Since there are few, if any, substantial
          barriers to entry, except in those markets that have not been subject to
          governmental deregulation, we expect that new competitors are likely to
          enter
          our markets. Most, if not all, of our competitors are significantly larger
          and
          have substantially greater market presence and longer operating history
          as well
          as greater financial, technical, operational, marketing, personnel and
          other
          resources than we do.
  Our
          use
          of VoIP technology and our proprietary systems and products enables us
          to
          provide customers with competitive pricing for telecommunications services.
          Nonetheless, there can be no assurance that we will be able to successfully
          compete with major carriers in present and prospective markets. While there
          can
          be no assurances, we believe that by offering competitive pricing we will
          be
          able to compete in our present and prospective markets.
  We
          rely
          on specialized telecommunications and computer technology to meet the needs
          of
          our consumers. We will need to continue to select, invest in and develop
          new and
          enhanced technology to remain competitive. Our future success will also
          depend
          on our operational and financial ability to develop information technology
          solutions that keep pace with evolving industry standards and changing
          client
          demands. Our business is highly dependent on our computer and telephone
          equipment and software systems, the temporary or permanent loss of which
          could
          materially and adversely affect our business.
  The
          Company is provided its phone numbers and interconnection with the existing
          public switched telephone network in Canada by Rogers Business Solutions.
          This
          agreement was originally signed in 2004 under Teliphone's former parent
          company
          United American Corporation and has since been updated to the current agreement
          with Teliphone and Rogers Business Solutions signed on April 25th, 2006.
          In the
          US and internationally, this service is provided by RNK Telecom
          Inc.
  We
          are
          not dependent on a few major customers. Our largest Wholesale customer,
          Dialek
          Telecom, currently produces less than 10% of our monthly revenues.
  We
          do not
          currently hold any patents, trademarks, liences, franchises, concessions
          or
          royalty agreements.
  **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.
  11
  The
          Federal Communications Commission, or FCC, the U.S. Congress and various
          regulatory bodies in the states and in foreign countries have begun to
          assert
          regulatory authority over VoIP providers and are continuing to evaluate
          how VoIP
          will be regulated in the future. In addition, while some of the existing
          regulation concerning VoIP is applicable to the entire industry, many rulings
          are limited to individual companies or categories of service. As a result,
          both
          the application of existing rules to us and our competitors and the effects
          of
          future regulatory developments are uncertain.
  **Regulatory
          Classification of VoIP Services**
  On
          February 12, 2004, the FCC initiated a rulemaking proceeding concerning
          the
          provision of VoIP and other services, and applications utilizing Internet
          Protocol technology. As part of this proceeding, the FCC is considering
          whether
          VoIP services like ours should be classified as information services, or
          telecommunications services. We believe our service should be classified
          as
          information services. If the FCC decides to classify VoIP services like
          ours as
          telecommunications services, we could become subject to rules and regulations
          that apply to providers of traditional telephony services. This could require
          us
          to restructure our service offering or raise the price of our service,
          or could
          otherwise significantly harm our business.
  While
          the
          FCC has not reached a decision on the classification of VoIP services like
          ours,
          it has ruled on the classification of specific VoIP services offered by
          other
          VoIP providers. The FCC has drawn distinctions among different types of
          VoIP
          services, and has concluded that some VoIP services are telecommunications
          services while others are information services. The FCC's conclusions in
          those
          proceedings do not determine the classification of our service, but they
          likely
          will inform the FCC's decision regarding VoIP services like ours.
 
 In
          Canada, the Canadian Radio-Television Commission (CRTC) is the regulating
          body
          who has set guidelines that our subsidiary, Teliphone, must meet. These
          guidelines center around 9-1-1 calling services and other services that
          are
          normally available to subscribers of traditional telephony services. Teliphone
          has met these requirements in its product offering.
  An
          additional element of Canadian regulation is that the incumbent providers,
          Bell
          Canada (Central and Eastern Canada) and Telus (Western Canada), who in
          2004
          controlled over 98% of the Business and Residential phone lines, are not
          able to
          reduce their prices to meet the newly offered reduced price options of
          independent VoIP and Cable phone companies. This regulation permitted
          independents such as Teliphone to provide their VoIP phone service without
          fear
          of anti-competitive activity by the incumbents. The CRTC has recently ruled
          that
          they will permit the reduction of pricing by the incumbent carriers once
          a 25%
          market share has been attained by the upstart phone service providers.
          Effective
          March 2005, there is a penetration of 10% of phone services by up-start
          VoIP
          providers. Teliphone views its long term strategy outside of just residential
          phone service, through the availability of international phone numbers
          to global
          clients, thereby creating an international product offering, a strategy
          that is
          very different from the geographically limited incumbent carriers.
  **Customer
          Access to Broadband Services**
  Our
          customers must have broadband access to the Internet in order to use our
          service. In the case of the Canadian market, our principal market, the
          Canadian
          Radio-Television Telecommunications Commission (CRTC) has ordered that
          Internet
          Service Providers and Incumbent Exchange Carriers have a legal obligation
          as per
          Order 2000-789 to provide their services without interference to other
          service
          providers in conjunction with to section 27(2) of the Telecommunications
          Act.
  However,
          anti-competitive behaviour in our market can still occur. For example,
          a
          Canadian cable provider recently began offering an optional Cdn$10 per
          month
          "quality of service premium" to customers who use third-party VoIP services
          over
          its facilities. However, customers who purchase VoIP services directly
          from this
          cable provider are not required to pay this additional fee. Based on this
          example, some providers of broadband access may take measures that affect
          their
          customers' ability to use our service, such as degrading the quality of
          the data
          packets we transmit over their lines, giving those packets low priority,
          giving
          other packets higher priority than ours, blocking our packets entirely,
          or
          attempting to charge their customers more for also using our
          services.
  12
  **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.
  In
          July
          of 2005, the CRTC required us to offer enhanced emergency calling services,
          or
          E-911. The FCC followed suit with a deadline of November 28, 2005. The
          requirement meant that we had to offer enhanced emergency calling services,
          or
          E-911, to all of our customers located in areas where E-911 service is
          available
          from their traditional wireline telephone company. E-911 service allows
          emergency calls from our customers to be routed directly to an emergency
          dispatcher in a customer's registered location and gives the dispatcher
          automatic access to the customer's telephone number and registered location
          information. We complied with both these requirements through our agreement
          with
          Northern Communications Inc., which calls for Northern Communications to
          provide
          and operate a 9-1-1 dispatch center for caller address verification and
          call
          transfer to the emergency services department closest to the customer's
          location
          on behalf of the Company.
  Effective
          the filing of this prospectus, we have complied with all of these FCC
          requirements.
  **International
          Regulation**
  The
          regulation of VoIP services is evolving throughout the world. The introduction
          and proliferation of VoIP services have prompted many countries to reexamine
          their regulatory policies. Some countries do not regulate VoIP services,
          others
          have taken a light-handed approach to regulation, and still others regulate
          VoIP
          services the same as traditional telephony. In some countries, VoIP services
          are
          prohibited. Several countries have recently completed or are actively holding
          consultations on how to regulate VoIP providers and services. We primarily
          provide VoIP services internationally in Canada.
   **Canadian
          Regulation**
  **Classification
          and Regulation of VoIP Services.**
  The
          Telecommunications Act governs the regulation of providers of telecommunications
          services in Canada. We are considered a telecommunications service provider
          rather than a telecommunications common carrier. Telecommunications service
          providers are subject to less regulation than telecommunications common
          carriers, but do have to comply with various regulatory requirements depending
          on the nature of their business.
  On
          May
          12, 2005, the Canadian regulator, the CRTC, stated that VoIP services permitting
          users to make local calls over the public switched telephone networks will
          be
          regulated by the same rules that apply to traditional local telephone services.
          Because we are not a telecommunications common carrier, we will not be
          subject
          to such regulation. Under the CRTC's decision, however, we are required
          to
          register as a local VoIP reseller in order to obtain access to certain
          services
          from other telecommunications providers.
  13
 
 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
          for 911 Services.**
  On
          April
          4, 2005, the CRTC released a ruling requiring certain providers of VoIP
          services, like us, to provide interim access to emergency services at a
          level
          comparable to traditional basic 911 services by July 3, 2005 or such later
          date
          as the CRTC may approve on application by a service provider. Under the
          interim
          solution adopted by the regulator for the provision of VoIP 911 services,
          customers of local VoIP services who dial 911 will generally be routed
          to a call
          center, where agents answer the call, verbally determine the location of
          the
          caller, and transfer the call to the appropriate emergency services agency.
          VoIP
          service providers are also required to notify their customers about any
          limitations on their ability to provide 911 services in a manner to be
          determined.
  Since
          July 2005, Teliphone has complied with these regulations by partnering
          with a
          PSAP (Primary Service Access Point) which serves to verify the customer
          location
          and forward the call to the respective Municipal 9-1-1 center for assistance.
          This service therefore permits Teliphone's customers to have access to
          9-1-1
          services irrespective of their physical location, anywhere in the Continental
          US
& Canada. This service is of significance as VoIP permits customers to
          utilize their phone anywhere a high-speed internet connection exists and
          can
          therefore be located outside of their local city when requiring 9-1-1
          services.
  **Other
          Foreign Jurisdictions**
  Our
          operations in foreign countries must comply with applicable local laws
          in each
          country we serve. The communications carriers with which we associate in
          each
          country is licensed to handle international call traffic, and takes
          responsibility for all local law compliance. For that reason we do not
          believe
          that compliance with the laws of foreign jurisdictions will affect our
          operations or require us to incur any significant expense
 
 **Going
          Concern**
 
 As
          shown
          in the accompanying condensed consolidated financial statements the Company
          has
          incurred recurring losses of $143,409 and $258,017 for the nine months
          ended
          June 30, 2007 and 2006, and has a working capital deficiency of $611,762
          as of
          June 30, 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.
  14
 
 **Nine  Months
          Ended June 30, 2007 Compared to Nine Months Ended June 30,
          2006**
 
 The
          Company's condensed consolidated balance sheet as of the nine months ended
          June
          30, 2007, had assets consisting of accounts receivable in the amount of
          $42,695,
          income tax receivable (Canadian Research and Development Tax Credits) of
          $15,396, inventory of $8,069 and prepaid expenses of $116,637, fixed assets
          of
          $52,349 and $14,256 in 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 June 30, 2007 reflects an accumulated deficit of ($1,558,186)
          and a stockholders' deficit of ($656,566).
 
 The
          Company recorded sales of $474,145 for the nine months ended June 30, 2007
          as
          compared to $290,723 for the nine months ended June 30, 2006.  The
          Company recorded sales of $183,630 for the three months ended June 30,
          2007 as
          compared to $95,994 for the three months ended June 30, 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 $351,023 for the nine months ended June 30,
          2007 as
          compared to $296,076 for the nine months ended June 30, 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 $124,344 for the three months ended June 30, 2007 as
          compared
          to $89,235 for the three months ended June 30, 2006
 
 The
          Company's aggregate operating expenses were $256,552 for the nine months
          ended
          June 30, 2007 as compared to $250,362 for the nine months ended June 30,
          2006.  In particular, there was a decrease in Selling and Promotion
          expenses from $24,416 to $9,426 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 $104,664 to $128,947
          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 $47,710 to $29,574 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 decrease
          in General and Administrative Expenses from $39,970 to $33,774 due principally
          to the company’s offices being moved to a smaller, less expensive office
          space.  There was an increase in Depreciation Expenses from $33,602 to
          $54,831 attributed to the acquisition of additional computer equipment
          during
          the period.
 
 The
          Company had a net loss for the nine months ended June 30, 2007 of ($143,409)
          as
          compared to ($258,017) for the nine months ended June 30, 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 June 30, 2007 of ($16,015) compared to ($79,972) for the
          same
          period last year.
 
 **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.
  15
  **ACCOUNTING
          POLICIES SUBJECT TO ESTIMATION AND JUDGMENT**
 
 Management's
          Discussion and Analysis of Financial Condition and Results of Operations
          are
          based upon our consolidated financial statements, which have been prepared
          in
          accordance with accounting principles generally accepted in the United
          States.
          When preparing our financial statements, we make estimates and judgments
          that
          affect the reported amounts on our balance sheets and income statements,
          and our
          related disclosure about contingent assets and liabilities. We continually
          evaluate our estimates, including those related to revenue, allowance for
          doubtful accounts, reserves for income taxes, and litigation. We base our
          estimates on historical experience and on various other assumptions, which
          we
          believe to be reasonable in order to form the basis for making judgments
          about
          the carrying values of assets and liabilities that are not readily ascertained
          from other sources. Actual results may deviate from these estimates if
          alternative assumptions or condition are used.
 
 **USE
          OF ESTIMATES**
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America requires management
          to make
          estimates and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of
          the financial statements and the reported amounts of revenues and expenses
          during the reporting period. On an on-going basis, the Company evaluates
          its
          estimates, including, but not limited to, those related to investment tax
          credits, bad debts, income taxes and contingencies. The Company bases its
          estimates on historical experience and on various other assumptions that
          are
          believed to be reasonable under the circumstances, the results of which
          form the
          basis for making judgments about the carrying value of assets and liabilities
          that are not readily apparent from other sources. Actual results could
          differ
          from those estimates.
 
 **INVENTORIES**
 
 Inventories
          are stated at the lower of cost to purchase and/or manufacture the inventory
          or
          the current estimated market value of the inventory. We regularly review
          our
          inventory quantities on hand and record a provision for excess and obsolete
          inventory based primarily on our estimated forecast of product demand and/or
          our
          ability to sell the products and production requirements. Demand for the
          our
          products can fluctuate significantly. Factors which could affect demand
          for our
          products include unanticipated changes in consumer preferences, general
          market
          conditions or other factors, which may result in cancellations of advance
          orders
          or a reduction in the rate of reorders placed by customers and/or continued
          weakening of economic conditions. Additionally, our estimates of future
          product
          demand may be inaccurate, which could result in an understated or overstated
          provision required for excess and obsolete inventory. Our estimates are
          based
          upon our understanding of historical relationships which can change at
          anytime.
 
 **CURRENCY
          TRANSLATION**
 
 For
          subsidiaries outside the United States that prepare financial statements
          in
          currencies other than the U.S. dollar, the Company translates income and
          expense
          amounts at average exchange rates for the year, translates assets and
          liabilities at year-end exchange rates and equity at historical rates.
          The
          Company records these translation adjustments as accumulated other comprehensive
          income (loss). Gains and losses from foreign currency transactions are
          included
          in other income (expense) in the results of operations.
  16
 
 **RESEARCH
          AND DEVELOPMENT**
 
 The
          Company annually incurs costs on activities that relate to research and
          development of new products. Research and development costs are expensed
          as
          incurred. Certain of these costs are reduced by government grants and investment
          tax credits where applicable.
 
 **INCOME
          TAXES**
 
 The
          Company accounts for income taxes utilizing the liability method of accounting.
          Under the liability method, deferred taxes are determined based on differences
          between financial statement and tax bases of assets and liabilities at
          enacted
          tax rates in effect in years in which differences are expected to reverse.
          Valuation allowances are established, when necessary, to reduce deferred
          tax
          assets to amounts that are expected to be realized.
 
 **STOCK-BASED
          COMPENSATION**
 
 The
          Company measures compensation expense for its employee stock-based compensation
          using the intrinsic-value method. Under the intrinsic-value method of accounting
          for stock-based compensation, when the exercise price of options granted
          to
          employees and common stock issuances are less than the estimated fair value
          of
          the underlying stock on the date of grant, deferred compensation is recognized
          and is amortized to compensation expense over the applicable vesting period.
          In
          each of the periods presented, the vesting period was the period in which
          the
          options were granted. All options were expensed to compensation in the
          period
          granted rather than the exercise date.
 
 **SEGMENT
          INFORMATION**
 
 The
          Company follows the provisions of SFAS No. 131, "Disclosures about Segments
          of
          an Enterprise and Related Information". This standard requires that companies
          disclose operating segments based on the manner in which management
          disaggregates the Company in making internal operating decisions. Despite
          the
          Company's subsidiary, Teliphone, Inc. incurring sales of hardware components
          for
          the VoiP service as well as the service itself, the hardware sales are
          only
          necessary to receive the service. The Company does not consider this a
          separate
          segment of their business. In less than 5% of the cases is Teliphone, Inc.
          selling hardware without service or service without the hardware, therefore
          has
          not segregated their business.
  **Off-balance
          sheet arrangements**
  We
          have
          no off-balance sheet arrangements including arrangements that would effect
          our
          liquidity, capital resources, market risk support and credit risk support
          or
          other benefits.
  17
  **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.
  **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
  18
  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
          June
          30, 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
          June 30, 2007.
  **PART
          IIOTHER 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 June 30,
          2007.
  19
  **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 June 30, 2007.
 
 **Item
            5.  Other Information**
  There
            is
            no information with respect to which information is not otherwise called
            for by
            this form.
 **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.
  20
 
 **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.
  **Teliphone
                    Corp.**
                  **a Nevada Corporation**Date: August
                    13,
                    2007
                By:
                /s/ George
                  MetrakosName:
                  George MetrakosTitle:
                  Chief Executive
                  Officer  Date: August
                    13, 2007
                By:
                /s/ George
                  MetrakosName:
                  George MetrakosTitle:
                  Principal Accounting Officer
   21