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

**Washington, D. C. 20549**

----

**FORM 10-QSB**

| **(Mark One)**                                                                                                                                                                                                                                                                        |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **x**                                                                                                                                                                                                                                                                                 | ** ** | **Quarterly Report Pursuant to Section 13 or 15(d)  of the Securities Exchange Act of 1934** |
| ** **                                                                                                                                                                                                                                                                            | ** ** | ** ** |
| **For the  quarterly period ended June 30, 2007**                                                                                                                                                                                                                                     |
| ** **                                                                                                                                                                                                                                                                            |
| **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 001-32882**

----

**O2SECURE WIRELESS, INC.**

(Exact name of small business issuer asspecified in its charter)

| **Georgia**                                                       | ** ** | **45-0526044**                     |
|-------------------------------------------------------------------|------------|------------------------------------|
| (State or other  jurisdiction of incorporation or   organization) |       | (IRS Employer  Identification No.) |

 

**4898South Old Peachtree Road, Suite 150**

**Norcross,GA  30071**

(Address of Principal Executive Offices)

**(678) 942-0684**

(Issuer’s telephone number)

**3300Holcomb Bridge Rd., Suite 226**

**Norcross,Georgia 30092**

(Former Address of Principal ExecutiveOffices)

Check whether theissuer  (1) filed all reports required tobe 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 suchreports), and (2) has been subject to such filing requirements for the past 90days.  Yes x;  No o

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

APPLICABLE ONLY TO CORPORATEISSUERS

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date: as of May 15, 2007, theRegistrant had outstanding 26,176,552 shares of its Common Stock, no par value.

Transitional SmallBusiness Disclosure Format (check one): Yes o;  No x

 

----

**O2 SecureWireless, Inc. and Subsidiary**

### **FORM 10-QSB REPORT INDEX**

| PART I. FINANCIAL  INFORMATION                                                                     |   |                                                                                               |
|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                                                                               |   |                                                                                               |
| Item 1. Financial  Statements (Unaudited)                                                          |   |                                                                                               |
|                                                                                               |   |                                                                                               |
|                                                                                               |   | Consolidated Balance  Sheet as of June 30, 2007                                                    |   |   |
|                                                                                               |   |                                                                                               |   |   |
|                                                                                               |   | Consolidated  Statements of Operations for the Three and Nine Months Ended June 30, 2007  and 2006 |   |   |
|                                                                                               |   |                                                                                               |   |   |
|                                                                                               |   | Consolidated  Statements of Cash Flows for the Nine Months Ended June 30, 2007 and 2006            |   |   |
|                                                                                               |   |                                                                                               |   |   |
|                                                                                               |   | Notes to Unaudited Consolidated Financial Statements                                               |   |   |
|                                                                                               |   |                                                                                               |   |   |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operation |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item 3.Controls and Procedures                                                                     |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| PART  II. OTHER INFORMATION                                                                        |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item  1. Legal Proceedings                                                                         |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item  2. Changes in Securities                                                                     |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item 3. Defaults on Senior Securities                                                              |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item 4. Submission of Matters to a Vote of Security  Holders                                       |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item  5. Other Information                                                                         |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Item 6. Exhibits and Reports on Form 8-K                                                           |   |                                                                                               |
|                                                                                               |   |                                                                                               |
| Signatures                                                                                         |   |                                                                                               |

 

2

----

#### **PART I.  FINANCIAL INFORMATION**

**Item1.  Financial Statements**

O2 SECURE WIRELESS, INC.AND SUBSIDIARY

 

CONSOLIDATEDBALANCE SHEET

June 30, 2007

(unaudited)

 
| ASSETS                                                                                          |   |       |    |
|-------------------------------------------------------------------------------------------------|--------|------------|---------|
| CURRENT ASSETS:                                                                                 |   |       |    |
| Cash and cash  equivalents                                                                      |   | $          | 35,508  |   |
| Trade accounts  receivable                                                                      |   | 1,875      |    |
| Other current  assets                                                                           |   | 12,250     |    |
| TOTAL CURRENT  ASSETS                                                                           |   | 49,633     |    |
|                                                                                            |   |       |    |
| EQUIPMENT, net of  accumulated depreciation                                                     |   | 491,502    |    |
|                                                                                            |   |       |    |
| OTHER NON-CURRENT  ASSETS                                                                       |   | 15,000     |    |
|                                                                                            |   |       |    |
|                                                                                            |   | $          | 556,135 |   |
|                                                                                            |   |       |    |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                      |   |       |    |
|                                                                                            |   |       |    |
| CURRENT LIABILITIES:                                                                            |   |       |    |
| Unsecured loan  payable                                                                         |   | $          | 13,873  |   |
| Note payable -  related party                                                                   |   | 64,800     |    |
| Accounts payable                                                                                |   | 30,695     |    |
| Accrued  liabilities                                                                            |   | 61,998     |    |
| Deferred revenue                                                                                |   | 16,028     |    |
| TOTAL CURRENT  LIABILITIES                                                                      |   | 187,394    |    |
|                                                                                            |   |       |    |
| COMMITMENTS AND  CONTINGENCIES                                                                  |   |       |    |
|                                                                                            |   |       |    |
| STOCKHOLDERS' EQUITY                                                                            |   |       |    |
| Preferred stock,  no par value, 10,000,000 shares authorized, -0- shares issued and outstanding |   | —     |    |
| Common stock, no  par value, 50,000,000 shares authorized, 26,176,552 issued and outstanding    |   | 2,823,352  |    |
| Other capital                                                                                   |   | 78,800     |    |
| Accumulated (deficit)                                                                           |   | (2,533,411 | )       |
| Total  Stockholders' Equity                                                                     |   | 368,741    |    |
|                                                                                            |   |       |    |
|                                                                                            |   | $          | 556,135 |   |

 

SEE ACCOMPANYINGNOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3

----

O2 SECUREWIRELESS, INC. AND SUBSIDIARY

 

CONSOLIDATEDSTATEMENTS OF OPERATIONS

(unaudited)
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                            | ** ** | **June 30,**                | ** ** | **June 30,**               | ** ** |
| ** **                                            | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| REVENUES:                                             |       |                             |       |                            |       |   |   |   |   |
| Network service revenues                              |       | $                                | 86,215     |                            | $          | 30,429 |   | $ | 223,981 |   | $ | 66,316 |   |
| Network component sales                               |       | 24,668                           |       | 36,089                          |       | 64,779 |   | 69,661 |   |
| Other                                                 |       | 1,573                            |       | —                          |       | 2,646 |   | 645 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| Total revenues                                        |       | 112,456                          |       | 66,518                          |       | 291,406 |   | 136,622 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| COSTS AND  EXPENSES:                                  |       |                             |       |                            |       |   |   |   |   |
| Cost of network service revenues                      |       | 22,048                           |       | 22,680                          |       | 49,796 |   | 52,860 |   |
| Cost of network component sales                       |       | 51,903                           |       | 13,415                          |       | 83,880 |   | 33,744 |   |
| Selling general and administrative:                   |       |                             |       |                            |       |   |   |   |   |
| Compensation                                          |       | 72,256                           |       | 99,849                          |       | 276,858 |   | 307,822 |   |
| Professional fees                                     |       | 15,674                           |       | 24,040                          |       | 131,216 |   | 146,779 |   |
| Communications                                        |       | 45,662                           |       | 19,657                          |       | 106,037 |   | 54,541 |   |
| Travel & entertainment                            |       | 3,658                            |       | 4,264                           |       | 8,710 |   | 25,834 |   |
| Other                                                 |       | 32,946                           |       | 34,556                          |       | 113,636 |   | 99,869 |   |
| Depreciation expense                                  |       | 34,840                           |       | 33,617                          |       | 99,063 |   | 78,697 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| Total cost and expenses                               |       | 278,987                          |       | 252,078                         |       | 869,196 |   | 800,146 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| OTHER INCOME  (EXPENSE):                              |       |                             |       |                            |       |   |   |   |   |
| Interest income                                       |       | 315                              |       | 287                             |       | 3,045 |   | 4,291 |   |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| NET (LOSS)                                            |       | $                                | (166,216   | )                               | $          | (185,273 | ) | $ | (574,745 | ) | $ | (659,233 | ) |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| BASIC AND  DILUTED NET (LOSS) PER COMMON SHARE        |       | $                                | (0.01      | )                               | $          | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) |
|                                                  |       |                             |       |                            |       |   |   |   |   |
| WEIGHTED AVERAGE NUMBER  OF COMMON SHARES OUTSTANDING |       | 26,176,552                       |       | 23,928,908                      |       | 26,172,523 |   | 23,790,002 |   |

 

SEE ACCOMPANYINGNOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4

----

O2 SECURE WIRELESS, INC.AND SUBSIDIARY

 

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(unaudited)

 
| ** **                                                                       | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                       | ** ** | **30-Jun**                      | ** ** |
| ** **                                                                       | ** ** | **2007**                        | ** ** | **2006** | ** ** |
| OPERATING  ACTIVITIES:                                                           |       |                            |       |   |   |
| Net (loss) from operations                                                       |       | $                               | (574,745   | ) | $ | (659,232 | ) |
| Adjustments to reconcile net (loss) to net cash  (used by) operating activities: |       |                            |       |   |   |
| Expense paid by investor                                                         |       |                            |       | 11,177 |   |
| Depreciation expense                                                             |       | 99,063                          |       | 78,697 |   |
| Change in:                                                                       |       |                            |       |   |   |
| Accounts receivable                                                              |       | (286                            | )          | (2,436 | ) |
| Employee Advances                                                                |       | (10,000                         | )          |   |   |
| Other current assets                                                             |       | (440                            | )          | 2,382 |   |
| Other non-current assets                                                         |       | (10,201                         | )          |   |   |
| Deposits                                                                         |       |                            |       | 116 |   |
| Accounts payable                                                                 |       | 1,305                           |       | 1,766 |   |
| Accrued expenses                                                                 |       | 65,743                          |       | 35,063 |   |
| Deferred revenue                                                                 |       | 7,422                           |       | 8,086 |   |
|                                                                             |       |                            |       |   |   |
| NET CASH (USED) BY OPERATING ACTIVITIES                                          |       | (422,139                        | )          | (524,381 | ) |
|                                                                             |       |                            |       |   |   |
| INVESTING  ACTIVITIES:                                                           |       |                            |       |   |   |
| Purchase of equipment and capitalized installation  costs                        |       | (99,504                         | )          | (211,956 | ) |
|                                                                             |       |                            |       |   |   |
| NET CASH (USED) BY INVESTING ACTIVITIES                                          |       | (99,504                         | )          | (211,956 | ) |
|                                                                             |       |                            |       |   |   |
| FINANCING ACTIVITIES:                                                            |       |                            |       |   |   |
| Proceeds from sale of common stock                                               |       | —                          |       | 352,241 |   |
| Proceeds from notes payable                                                      |       | 34,800                          |       |   |   |
| Cash paid for common stock offering costs                                        |       | —                          |       | (13,890 | ) |
|                                                                             |       |                            |       |   |   |
| NET CASH  PROVIDED BY FINANCING ACTIVITIES                                       |       | 34,800                          |       | 338,351 |   |
|                                                                             |       |                            |       |   |   |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                                         |       | (486,843                        | )          | (397,986 | ) |
|                                                                             |       |                            |       |   |   |
| CASH AND CASH  EQUIVALENTS, beginning of period                                  |       | 522,351                         |       | 415,079 |   |
|                                                                             |       |                            |       |   |   |
| CASH AND CASH  EQUIVALENTS, end of period                                        |       | $                               | 35,508     |   | $ | 17,093 |   |

 

SEE ACCOMPANYINGNOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

5

----

O2 SECURE WIRELESS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED JUNE 30, 2007

(unaudited)

# **NOTE 1 –BASIS OF FINANCIAL STATEMENT PRESENTATION**

*Interim Financial Information:* The accompanying unaudited consolidatedfinancial statements of O2 Secure Wireless, Inc. (the “Company,” we, our or us)have been prepared in accordance with principles generally accepted in theUnited States of America for interim financial information and applicable rulesof Regulation S-X. Accordingly, they do not include all of the information andnotes required by generally accepted accounting principles for completefinancial statements. In the opinion of management, all adjustments considerednecessary for a fair presentation have been included. The interim financialstatements and notes should be read in conjunction with the financialstatements and notes thereto included in the Company’s Form 10-KSB for the yearended September 30, 2006. Operating results for the three and nine months endedJune 30, 2007 are not necessarily indicative of the results that may beexpected for the fiscal year ending September 30, 2007.

*Principles of Consolidation:*The accompanying consolidated financialstatements include the accounts of O2 Secure Wireless, Inc. and its whollyowned subsidiary, Epiphony Voice Solutions, LLC. All material inter-Companyaccounts and transactions have been eliminated in consolidation.

##### *Going Concern:*****The accompanying consolidated financial statements have been presentedon the basis that the Company is a going concern, which contemplates therealization of assets and the satisfaction of liabilities in the normal courseof business.  It has sustained operatinglosses since inception, and has been dependent upon private placements of stockto provide sufficient working capital in order to finance its developmentactivities. A Securities Purchase Agreement with a sole investor, whorepresents our sole source of private stock placements to date, expired onSeptember 30, 2006 without extension. Our ability to continue in existence isdependent upon developing additional sources of capital and/or achievingprofitable operations. Management’s plan is to raise capital through additionalprivate offerings, while actively seeking additional wireless networkinstallation agreements and generating profitable revenue-producingconnectivity subscriptions with network end-users, in addition to profitablesales of certain products for which it is an authorized distributor. Our needfor additional working capital infusion to sustain present operations raisessubstantial doubt about our ability to continue as a going concern. Theaccompanying consolidated financial statements do not include any adjustmentsthat might result from the outcome of these uncertainties.

**NOTE 2 – EQUIPMENT**

During the three and nine months ended June 30, 2007,we capitalized $22,308 and $89,965 of equipment and labor costs for newwireless network installations. Hardware component equipment held for networkinstallations or sale decreased $50,391for the three months ended June 30, 2007and increased $5,805 during the nine months ended June 30, 2007.

**NOTE 3 – COMMITMENTS**

*Operating Lease:*On November 28, 2006, we executed a five-year, non-cancelablelease for office space commencing January 1, 2007. Monthly minimum leasepayments during the first year will be $3,750, with annual escalations over thelease term to $4,387 per month. The lease has a five-year option to 

6

----

renew. In addition to monthly lease payments, we willbe subject to a pro rata share of the lessor’s increases in property taxes andinsurance in future years above the level paid by the lessor during calendaryear 2006. We paid a deposit of $11,250 upon execution of the lease, and anadditional $6,000 on February 1, 2007. $9,750 of this deposit will be credited against rent payments at variouspoints during the lease term so long as we are in compliance with the leaseagreement.  During the three and ninemonths ended June 30, 2007, rent expense of $11,250 and $32,600 was incurred inconnection with this lease.

Effective February 24, 2007, we entered a newemployment agreement with our Chief Executive Officer (“CEO”). The newemployment agreement, which is for a term expiring on February 24, 2012,provides for the payment of a fixed salary to the CEO of $80,000 for the yearending December 31, 2007, with annual increases of at least $5,000 and anannual bonus in an amount to be determined by our Board of Directors. Asadditional compensation, the agreement grants the CEO options to purchase600,000 shares of our common stock at an undetermined price, should our Boardof Directors adopt, and our shareholders approve, a qualified incentive stockoption plan in the future. At this time, no such plan has been adopted. The agreementalso provides for other compensation and benefits, as more fully reported onForm 8-K filed on March 1, 2007.

Effective February 24, 2007, we entered a newemployment agreement with our Chief Information Officer (“CIO”). The newemployment agreement, which is for a term expiring on February 24, 2012,provides for the payment of a fixed salary to the CIO of $80,000 for the yearending December 31, 2007, with annual increases of at least $2,000. Theagreement also provides for other compensation and benefits, as more fullyreported on Form 8-K filed on March 1, 2007.

**NOTE 4 – STOCKHOLDERS’ EQUITY**

In October 2006, we repaid an investor a $20,000loan and $10,000 the investor had paid to a service provider on our behalf bythe issuance of 100,000 shares of restricted common stock at $0.30 per share.

On December 20, 2006, an outstanding warrant topurchase one million common shares expired without exercise by the warrantholder.

**NOTE 5 – SUPPLEMENTAL CASH FLOWINFORMATION**

As disclosed in Note 4, during the nine months endedJune 30, 2007, we issued 100,000 common stock shares with a stated value of$30,000. This was for a settlement of a $20,000 loan and $10,000 of accruedliability owed to an investor.

**NOTE 6 – SUBSEQUENT EVENTS**

July 15, 2007 the Company receivedthe resignation of T. Scott Conley, a Founder ofthe Company, who served since the Company’s inception as its Chief ExecutiveOfficer, President, and Chairman of the Board.  He resigned his positions as Chairman, President and CEO on July 15th, 2007 in order to pursue otherinterests, as his goals for the Company were completed to hissatisfaction.  Before his resignation, henominated Craig C. Sellars, the Company’s then-Chief Technology Officer andDirector of Operations to succeed him. The Company’s Board of Directors accepted Mr. Conley’s resignation withthanks and appreciation for his dedication and foresight, and unanimouslyapproved Mr. Sellars as the Company’s Chairman of the Board, President andChief Executive Officer.

7

----

Weare currently pursuing a private placement offering for shares of our commonstock and a line of credit. However, there is no guarantee this privateplacement or line of credit will be successful or completed in a timely manner.

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

ThisQuarterly Report on Form 10-QSB includes forward looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended (“Forward LookingStatements”). All statements other than statements of historical fact includedin this report are Forward Looking Statements. In the normal course of itsbusiness, the Company, in an effort to help keep its shareholders and thepublic informed about the Company’s operations, may from time-to-time issuecertain statements, either in writing or orally, which contain or may containForward-Looking Statements. Although the Company believes that the expectationsreflected in such Forward Looking Statements are reasonable, it can give noassurance that such expectations will prove to have been correct. Generally,these statements relate to business plans or strategies, projected oranticipated benefits or other consequences of such plans or strategies, pastand possible future, of acquisitions and projected or anticipated benefits fromacquisitions made by or to be made by the Company, or projections involvinganticipated revenues, earnings, levels of capital expenditures or other aspectsof operating results. All phases of the Company operations are subject to anumber of uncertainties, risks and other influences, many of which are outsidethe control of the Company and any one of which, or a combination of which,could materially affect the results of the Company’s proposed operations andwhether Forward Looking Statements made by the Company ultimately prove to beaccurate. Such important factors (“Important Factors”) and other factors couldcause actual results to differ materially from the Company’s expectations aredisclosed in this report. All prior and subsequent written and oral ForwardLooking Statements attributable to the Company or persons acting on its behalfare expressly qualified in their entirety by the Important Factors describedbelow that could cause actual results to differ materially from the Company’sexpectations as set forth in any Forward Looking Statement made by or on behalfof the Company.

***Plan of Operation***

Ourbusiness, from which a majority of our revenues is derived, consists primarilyof wireless internet systems installation and consulting in high-densitycommunities such as multi-family properties, student housing and educationalinstitutions.  The remainder of our revenue is comprised of the sale ofintegrated wireless equipment, both fixed and mobile, and the resale tounrelated parties of network components such as wireless radio cards and accesspoints.

Ourinitial plan of operation, initiated at our inception, involved substantialupfront capital investment by the Company, installing wireless internet systemsinto high-density residential properties at our cost.  Our goal was to then generate revenue fromthe sale of monthly subscriptions to this Internet service to residents of theproperty.   We have internally dubbedthis the “original subscription model.”

Throughour analysis of the return-on-investment on the “original subscription model,”we were able to determine that the up-front cost required to initiate thismodel would require substantial capital investment into the Company to sustaingrowth.  As we deployed each property, wewere able to continually reduce the per-unit cost of installation, as well asthe equipment cost deployed per-property. However, the “original subscription model” still required a largeinvestment by the Company to complete current and future installations.

8

----

InJanuary 2006, we began to pursue wireless internet systems sales based on an “amenitymodel,” where the Company is compensated by the owner of the property at a flatrate, on a per-unit basis rather than through the sale of subscriptionsdirectly to the residents of the community. After six months, we had deployed a large, 916-unit property under this “amenitymodel”, to the satisfaction of the community, its residents, and the Company.

ThroughJune 2007 we have completed the installation of five properties under this “amenitymodel,” and have three additional communities under this model that have beenpartially completed (with expected completion by August 31, 2007).

Underthe “amenity model,” the residential community pays the Company a flat rate forthe total number of units on the property, and provides the service as acomplimentary benefit to all its residents. This allows the Company’s costs forbandwidth and support to be offset on a continual and predictable basis foreach property, and it provides the Company with more stable cash flow.  Marketing costs are greatly reduced underthis model, as the Company is no longer required to sell subscriptions toindividual residents to cover its costs and maintain a profit.  The “amenity model” allows us to maintain aconsistent revenue stream that is not affected by resident turnover.

Dueto the positive reception received by prospective customers and the substantialease of deployment from this flat-rate model, we anticipate that all futuredeployments will follow the “amenity model.” Several projects that would have required the “original subscriptionmodel” have been cancelled until they can be re-worked to fit under the “amenitymodel.” Existing properties that have individual subscribers are intended to bemaintained by the Company through their contracts, as each property under the “originalsubscription model” still provides a positive cash flow on a per-propertybasis.

Underthe “amenity model” the Company now also seeks a minimum of 70% commitment bythe property owner, up-front, in order for a deployment contract to be signedand implemented by the Company.  Thiscould be in the form of a one-time payment, such as a deposit, or as a part ofan overall financing plan where the property owner would pay off the balance ofthe deposit over the first year of the contract.  Existing contracts were amended and contractsstill in negotiation had this component added.

Asof June 30, 2007 we continue to maintain and support nine properties under the “originalsubscription model.”  These nineproperties provide approximately $21,000 per month in subscription revenue tothe Company.  We do not intend to add new“original subscription model” properties to our portfolio under our currentoperations plan.

Asof June 30, 2007, we have deployed and maintain five properties under the “amenity”model” and have partially deployed three additional properties under thismodel. Current monthly revenues for “amenity model” properties are $20,874, andwill increase to $26,139 by the end of August 2007 if the remaining three propertieshave been fully deployed.

Ourcurrent deployment footprint consists of properties in Georgia, Florida, NorthCarolina, Tennessee and Texas.

Inour last quarterly report we disclosed that with one recent exception, all ofour network projects initially resulted in negative cash flows.  Because the Company would bear the full costsof installation, including materials and labor, this was the generally acceptedmeans of doing business. Our financial models over the past several months haveprovided us with the rationale to abandon this type of deployment strategy andinstead to focus on the “amenity model.” We now consider it unacceptable to limit our return-on-investmentrequiring more than one year to provide a cash-flow positive arrangement on ourdeployments.

9

----

Initialprojects under the “amenity model” resulted in a gradual increase, over oneyear, of their per-unit price. Later projects (and current projects goingforward) do not provide such a “ramp-up” of the per-unit price; communities paythe same flat rate throughout the contracts.

Recentexperience has demonstrated that communities are willing to pay the Companyeither a deposit for installation, or to pay the installation costsup-front.  This allows the Company to becash flow positive on any property either upon inception, or after only a fewmonths.  This model has been helpful tothe Company, as our growth is continually requiring an increase in revenues,rather than capital infusion, to continue operations.

Thepoint at which a project begins to realize positive cash flow depends uponseveral key factors, including how well installation costs are controlled,whether we can obtain from the property owner a deposit or full payment forinstallation costs, and the complexity and location of the network.  All of these factors determine the costs ofthe service and network during installation and after it is operational.

Infiscal year 2006, we began implementing, with Incumbent Local Exchange Carriers(ILECs) and Common Local Exchange Carriers (CLECs), a more cost-effective meansof delivering large amounts of synchronous bandwidth to our customerproperties.  Using this fiber-optic architecture, we are now able toprovide to our deployments higher bandwidth, at a comparable price to what wecurrently pay for existing, lower speed bandwidth.  Speed and latency aretwo of the primary competitive advantages that an Internet provider can havewith regards to its service offering, and the Company is pleased with theresults of these efforts.  “Amenity model”customers, with their consistent cash flows, help to sustain and enlarge this fiberoptic network.

Wecontinue to compete by focusing on trying to provide superior service throughtechnology, price and customer service. In particular, we plan to offer ourInternet service at a more competitive price than our competitors, which are primarilyDSL or cable Internet services.  Our plan is also to utilize the bestavailable technology at any given time, so as to continue to offer reliable,high quality, wireless Internet access that provides each end user with maximummobility, very high speed, and reasonable security.

Otherpotential and actual sources of revenue for the Company includebusiness-to-business applications of broadband technology, and implementationof wider area Internet coverage as technology evolves. The Company also plansto move toward total service convergence at some point in the future, providingvoice and video services in addition to data services, although no partner hasbeen selected to provide these services.

TheCompany has also entered into so called “White-Label” branding agreements, withlarge wireless carriers that provide cellular service, to leverage existingnationwide wireless networks to provide additional Internet services.  Our REACTOR product line, under which we havebegun offering “Anywhere Wireless” access to the Internet via “mobile hotspots,”is an example of a product and service utilizing these arrangements. TheREACTOR product (and its subsequent Air-Card component) connects to theInternet utilizing the nationwide EV-DO network deployed by these wirelesscarrier partners.

Ourdiversification plan for Wireless Internet Services depends not only on theCompany’s ability to continue to deploy Wi-Fi networks to high-densitycommunities, but also on the Company’s ability to use and resell the data servicesoffered by large, nationwide wireless carriers under wholesale or White-Labelarrangements, where the services are branded under our Company name and serviceoffering.  Without the “White-Label”agreements in place, the Company would be required to construct and deploy avery large wireless network at our own expense to offer some of theseservices.  By utilizing theinfrastructure of existing, large, nationwide wireless carriers the Company hasthe ability to compete in markets and 

10

----

withproducts that are often unavailable to other companies in our competitorswithout substantial capital investment.

Wecurrently generate additional revenue from the resale of wireless cards that wepurchase on a wholesale basis for the wireless networks we install. Most of ourbusiness reselling wireless cards is to resellers, via our online web store,online marketplaces, or direct to the customer.  We do not consider thebusiness of reselling of wireless cards to be a core business and, accordingly,we do not plan to invest additional resources to expand that line of businessbeyond our current level of commitment.

***Results of Operations***

***Three Months Ended June 30th, 2007 and 2006***

Duringthe three months ended June 30th, 2007, and 2006, we generated $112,456 and$66,518 of revenues respectively, and incurred net losses of ($166,095), and($185,273), respectively.  During the three months ended June 30, 2007, wewere receiving revenues from thirteen operational networks versus eleven duringthe same period in 2006.  The increase inoverall expenses reflects our increased operational and administrative costs tosupport the significant increase in business activity between periods.

Significantexpenses during the three months ended June 30, 2007 were as follows:

Compensation expenseincludes all salaries, wages and commissions not capitalized as a part ofnetwork installation costs.

Professionalfees and expenses necessary for outside accounting, audit, legal andtransfer agent fees, a majority of which relate to regulatory compliance.

Capitalized materialand labor costs for network installations were $22,308 and $24,353 during thethree months ended June 30, 2007 and 2006, respectively. During the threemonths ended June 30, 2007 we had two installation projects in progress.  During the same period in 2006, we had twoinstallation projects in progress in Tampa, Florida and Atlanta, Georgia

***Nine Months Ended June 30, 2007 and 2006***

Duringthe nine months ended June 30, 2007 and 2006, we generated $291,406 and$136,622 of revenues, respectively, and incurred net losses of ($574,745) and($659,233), respectively.  During the nine months ended June 30, 2007, wewere receiving revenues from thirteen operational networks versus eight duringthe same period in 2006. We also began receiving revenues from a subscriber toour REACTOR product, as described in our Plan of Operation above.

Significantexpenses and transactions during the nine months ended June 30, 2007 and 2006were as follows:

Compensationexpense includes all salaries, wages and commissions not capitalized as a partof network installation costs.

Professionalfees represent expenses necessary for outside accounting, audit, legal andtransfer agent fees.

11

----

Depreciationand communications expenses increased due to the additional networks that havebeen completed and placed into service.

Capitalizedmaterial and labor costs for network installations were $89,965 and $153,770during the nine months ended June 30, 2007 and 2006, respectively. During thenine months ended June 30, 2007, the Company had two installation projects inprocess, one in Atlanta, Georgia, and one in Austin, Texas.  During thesame period in 2006, we had started and completed four installations inAtlanta, GA and Tampa, Florida.

***Liquidity and Capital Resources***

Todate, we have financed our operations almost entirely from the proceeds fromthe sale of common stock to a foreign investor under Regulation S.  Ourmost recent agreement to sell shares of common stock to the foreign investorexpired in the 4th quarter of fiscal year 2006, and we currently do nothave any agreements, new or existing, to obtain additional capital.  However, we are currently evaluating means ofsecuring additional financing to fund a more aggressive growth strategy.

OnMay 1, 2007, we determined that the Company’s level of working capital wasinsufficient for us to fully implement our business plan and our commitment tobreak even as outlined in our most recent Regulation S offering. Similarly, our prospects for achieving cash flow break-even, beforedepleting all of our cash reserves were limited — if not impossible- at ourthen-current expense level.  At the time,our principal business plan involved the installation of wireless Internetsystems at our expense, including the cost of all parts and labor associatedwith those systems.  The then-presentlevel of gross profit on network service fees and component sales were provinginsufficient to enable us to cover our recurring operating expenses until suchexpenses were dramatically decreased.

Ourinventory base was large, as our original intention was to continue to deployour properties in a manner more consistent with the original operatingplan.  This required the Company tomaintain a large amount of inventory, purchased in bulk at wholesale prices, toimplement these installations with no investment from the customer.

Weconsidered this inventory, most of which being not immediately necessary, as anonessential illiquid asset, and sought to free up the capital invested in theinventory to continue business operation. After categorizing the inventory necessary for current implementationsand determining the balance of inventory of no immediate use to the Company, webegan inventory liquidation. This allowed the Company to generate additionalcomponent sales revenues needed for immediate cash flow.  This liquidation process occurred at a lossin gross profit in some instances, as sales were less than related inventorycosts.  However, it did produce somepositive cash flows.  Inventory is acomponent of fixed assets in the accompanying consolidated balance sheet

Cashflows were also analyzed for existing deployments. Properties considered werethose that were fully deployed and operational, under contract but not yetdeployed, and properties with contracts still under negotiation.  It became evident that our deployedproperties generate more revenue per month than recurring costs associated withthat property.  Hence, no changes weremade to existing deployed properties as their revenues are offsetting theiroriginal installation costs.

Monthlycommitments to our vendors for bandwidth, office expenses and operations werere-evaluated to determine possible consolidation or more efficient use of theseservices.  Total monthly expenses werereduced, and continue to be evaluated.

12

----

Ouraverage monthly operating expenses are currently $44,100 on an accrual basis,although the actual monthly cash outlay is much less as a result of the partialor full deferral of management salaries and other cost saving initiatives. We are, on average, receiving $37,485 in top-line revenues on a per-monthbasis.

Tosatisfy our future working capital needs for faster growth than is availablewith existing revenues, we are in discussions with financial institutions tosecure working lines of credit or to otherwise provide additionalcapital.  We are pursuing these types of arrangements for the sole purposeof funding a more aggressive growth strategy than is sustainable with currentrevenues and income growth. There is no assurance we will be successful inobtaining this type of financing. To date, we have relied substantially uponinvestment proceeds to satisfy our working capital requirements.  In theevent we experience delays in raising additional paid-in capital, we plan tocontinue operations as described above, and grow at a respectable rate usingour existing resources.  Based on thisdiscussion, the Company is optimistic about its future growth potential with orwithout additional paid-in capital.

Inaddition, the Company is currently researching similar companies in thewireless internet industry for closer cooperation, joint ventures andpartnership opportunities as they become available.  Our continuing strategy, since inception, isto endeavor to use the best engineering and technology that is available todeliver the best service possible to our customers and end-users.  This includes the resources available throughother companies within our market, both current and future vendors, andcompanies with similar goals and expertise. We continue to look forward in a positive light to the opportunities andmarkets as they are presented to us.

***Going Concern***

TheCompany’s financial statements have been presented on the basis that it is agoing concern, which contemplates the realization of assets and thesatisfaction of liabilities in the normal course of business. As shown in theaccompanying financial statements, the Company incurred net operating lossesthrough the nine months ended June 30, 2007 of ($574,745). These factors createan uncertainty about the Company’s ability to continue as a going concern. The recent past efforts by Company’s management to raise additionaloperating capital were successful, and recent efforts have improved recurringrevenues and decreased overall expenses.  However, the ability of theCompany to continue as a going concern is dependent on their continued successin sustaining existing operations as well as raising additional capital.

***Off-Balance Sheet Arrangements***

TheCompany does not have any off-balance sheet arrangements that are reasonablylikely to have a current or future effect on our financial condition, changesin financial condition, revenues or expenses, results of operations, liquidity,capital expenditures or capital resources that are material to investors.

**Item 3.  Controls andProcedures.**

TheCompany believes that its disclosure controls and procedures are effective forgathering, analyzing and disclosing the information it is required to disclosein its reports filed under the Securities Exchange Act of 1934.  TheCompany is in the process of improving its internal controls and procedures toaccommodate an increased level of business activity in the future and to complywith the upcoming requirements is Accounting Standards #5.

Disclosurecontrols and procedures are controls and other procedures that are designed toensure that information required to be disclosed in the Company’s reports filedor submitted under the Exchange Act 

13

----

arerecorded, processed, summarized and reported within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed in the Company’sreports filed under the Exchange Act is accumulated and communicated tomanagement, including to our Company’s Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.

***Disclosure RegardingForward Looking Statements***

**PART II.  OTHERINFORMATION.**

**Item 1.  LegalProceedings.**

None.

**Item 2.  Changes inSecurities.**

None

**Item 3.  Defaults uponSenior Securities.**

None

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

None.

**Item 5.  OtherInformation.**

None.

**Item 6.  Exhibits andReports on Form 8-K.**

(a)      Furnish the exhibits required by Item 601 of Regulation S-B.
| Exhibit   Number | ** ** | **Description and  Incorporation by Reference**                                                                                                                        |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                                                   |
| 31.1             |       | Rule 13a-14(a)/15d-14(a)  Certification by the Chief Executive Officer                                                                                            |
|             |       |                                                                                                                                                                   |
| 31.2             |       | Rule 13a-14(a)/15d-14(a)  Certification by the Chief Financial Officer                                                                                            |
|             |       |                                                                                                                                                                   |
| 32.1             |       | Certification  by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|             |       |                                                                                                                                                                   |
| 32.2             |       | Certification  by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b)   Reports on Form 8-K.

None.

14

----

**SIGNATURES**

In accordance with the requirementsof the Exchange Act, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|                       |   | O2 SECURE  WIRELESS, INC.                      |
|-----------------------|--------|------------------------------------------------|
|                  |   |                                           |
| Date: August 13, 2007 |   | /s/ Craig  C. Sellars                          |   |
|                  |   |                                           |
|                  |   | By: Craig  C. Sellars, Chief Executive Officer |

 

15

----