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

**Washington,D. C. 20549**

**FORM 10-QSB**

**(Mark One)**

**x****  QuarterlyReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**For the quarterly period ended March 31, 2007**

**o****   TransitionReport 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**

**O2 SECURE WIRELESS, INC.**

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

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

 

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

**Norcross,GA  30071**

(Address of Principal Executive Offices)

**(678) 942-0684**

(Issuer’s telephonenumber)

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

**Norcross,Georgia 30092**

(Former Address ofPrincipal Executive Offices)

Checkwhether the issuer  (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during thepast 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements forthe past 90 days.  Yes o; No x

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

Yes o No x

APPLICABLEONLY TO CORPORATE ISSUERS

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,the Registrant had outstanding 26,176,552 shares of its Common Stock, no parvalue.

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

 

----

**O2Secure Wireless, Inc. and Subsidiary**

**FORM 10-QSB REPORTINDEX**
|                                                                                                               | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| PART  I. FINANCIAL INFORMATION                                                                                |       |       |       |
| Item  1. Financial Statements (Unaudited)                                                                     |       |       |       |
| Consolidated  Balance Sheet as of March 31, 2007                                                         |       |       |       |
| Consolidated Statements of Operations for the Three  and Six Months  Ended March 31, 2007 and 2006       |       |       |       |
| Consolidated Statements of Cash Flows for the Six  Months Ended  March 31, 2007 and 2006                 |       |       |       |
| Notes to Unaudited Consolidated Financial Statements  for the Three and  Six Months Ended March 31, 2007 |       |       |       |
| 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**

**March 31, 2007**

**(unaudited)**
| ASSETS                                                                                          |   |       |    |
|-------------------------------------------------------------------------------------------------|--------|------------|---------|
| CURRENT ASSETS:                                                                                 |   |       |    |
| Cash and cash  equivalents                                                                      |   | $          | 44,781  |   |
| Trade accounts  receivable                                                                      |   | 8,093      |    |
| Other current  assets                                                                           |   | 2,313      |    |
| TOTAL CURRENT  ASSETS                                                                           |   | 55,187     |    |
| EQUIPMENT, net  of accumulated depreciation                                                     |   | 553,939    |    |
| OTHER  NON-CURRENT ASSETS                                                                       |   | 17,935     |    |
|                                                                                            |   | $          | 627,061 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                       |   |       |    |
| CURRENT  LIABILITIES:                                                                           |   |       |    |
| Unsecured loan  payable                                                                         |   | $          | 13,873  |   |
| Note payable -  related party                                                                   |   | 30,000     |    |
| Accounts payable                                                                                |   | 18,264     |    |
| Accrued  liabilities                                                                            |   | 7,451      |    |
| Deferred revenue                                                                                |   | 22,554     |    |
| TOTAL CURRENT  LIABILITIES                                                                      |   | 92,142     |    |
| 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)                                                                          |   | (2,367,233 | )       |
| Total Stockholders’  Equity                                                                |   | 534,919    |    |
|                                                                                            |   | $          | 627,061 |   |

 

SEE ACCOMPANYINGNOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3

----

**O2 SECURE WIRELESS, INC. AND SUBSIDIARY**

----

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(unaudited)**
| ** **                                            | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **March 31,**               | ** ** | **March 31,**             | ** ** |
| ** **                                            | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| REVENUES:                                             |       |                             |       |                           |       |   |   |   |   |
| Network service  revenues                             |       | $                                | 73,842     |                           | $          | 21,833 |   | $ | 137,766 |   | $ | 35,886 |   |
| Network  component sales                              |       | 3,597                            |       | 27,458                         |       | 40,033 |   | 33,572 |   |
| Other                                                 |       | —                           |       | 110                            |       | 1,073 |   | 652 |   |
| Total revenues                                        |       | 77,439                           |       | 49,401                         |       | 178,872 |   | 70,110 |   |
| COSTS AND EXPENSES:                                   |       |                             |       |                           |       |   |   |   |   |
| Cost of network  service revenues                     |       | 15,944                           |       | 18,535                         |       | 27,748 |   | 30,180 |   |
| Cost of network  component sales                      |       | 1,977                            |       | 15,701                         |       | 31,936 |   | 20,329 |   |
| Selling general  and administrative:                  |       |                             |       |                           |       |   |   |   |   |
| Compensation                                          |       | 106,053                          |       | 103,684                        |       | 207,936 |   | 210,073 |   |
| Professional  fees                                    |       | 61,685                           |       | 57,997                         |       | 112,208 |   | 120,639 |   |
| Communications                                        |       | 30,592                           |       | 21,543                         |       | 60,375 |   | 34,884 |   |
| Travel &  entertainment                           |       | 2,682                            |       | 9,079                          |       | 5,052 |   | 21,570 |   |
| Other                                                 |       | 41,782                           |       | 41,010                         |       | 80,690 |   | 65,159 |   |
| Depreciation  expense                                 |       | 33,585                           |       | 22,838                         |       | 64,223 |   | 45,081 |   |
| Total cost and  expenses                              |       | 294,300                          |       | 290,387                        |       | 590,168 |   | 547,915 |   |
| OTHER INCOME  (EXPENSE):                              |       |                             |       |                           |       |   |   |   |   |
| Interest income                                       |       | 723                              |       | 1,617                          |       | 2,729 |   | 4,003 |   |
| NET (LOSS)                                            |       | $                                | (216,138   | )                              | $          | (239,369 | ) | $ | (408,567 | ) | $ | (473,802 | ) |
| BASIC AND  DILUTED NET (LOSS)  PER COMMON SHARE       |       | $                                | (0.01      | )                              | $          | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
| WEIGHTED AVERAGE NUMBER OF  COMMON SHARES OUTSTANDING |       | 26,176,552                       |       | 23,928,908                     |       | 26,170,508 |   | 23,720,549 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4

----

**O2 SECURE WIRELESS, INC. AND SUBSIDIARY**

----

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(unaudited)**
| ** **                                                 | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                 | ** ** | **March 31,**             | ** ** |
| ** **                                                 | ** ** | **2007**                       | ** ** | **2006** | ** ** |
| OPERATING ACTIVITIES:                                      |       |                           |       |   |   |
| Net (loss) from  operations                                |       | $                              | (408,567   | ) | $ | (473,802 | ) |
| Adjustments to  reconcile net (loss) to net cash (used by) |       |                           |       |   |   |
| operating  activities:                                     |       |                           |       |   |   |
| Expense paid by  investor                                  |       | —                         |       | 11,177 |   |
| Depreciation  expense                                      |       | 64,223                         |       | 45,081 |   |
| Change in:                                                 |       |                           |       |   |   |
| Accounts  receivable                                       |       | (6,504                         | )          | 3,215 |   |
| Other current  assets                                      |       | (503                           | )          | 1,103 |   |
| Other  non-current assets                                  |       | (13,136                        | )          | 116 |   |
| Accounts payable                                           |       | (11,125                        | )          | 6,913 |   |
| Accrued expenses                                           |       | 11,196                         |       | 6 |   |
| Deferred revenue                                           |       | 13,947                         |       | 1,793 |   |
| NET CASH (USED) BY  OPERATING ACTIVITIES                   |       | (350,469                       | )          | (404,398 | ) |
|                                                       |       |                           |       |   |   |
| INVESTING ACTIVITIES:                                      |       |                           |       |   |   |
| Purchase of  equipment and capitalized installation costs  |       | (127,101                       | )          | (183,575 | ) |
|                                                       |       |                           |       |   |   |
| NET CASH (USED)  BY INVESTING ACTIVITIES                   |       | (127,101                       | )          | (183,575 | ) |
|                                                       |       |                           |       |   |   |
| FINANCING ACTIVITIES:                                      |       |                           |       |   |   |
| Proceeds from  sale of common stock                        |       | —                         |       | 352,241 |   |
| Cash paid for  common stock offering costs                 |       | —                         |       | (13,890 | ) |
| NET CASH PROVIDED BY  FINANCING ACTIVITIES                 |       | —                         |       | 338,351 |   |
| NET CHANGE IN CASH AND  CASH EQUIVALENTS                   |       | (477,570                       | )          | (249,622 | ) |
| CASH AND CASH  EQUIVALENTS, beginning of period            |       | 522,351                        |       | 415,079 |   |
| CASH AND CASH EQUIVALENTS, end of period                   |       | $                              | 44,781     |   | $ | 165,457 |   |

 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5

----

**O2 SECURE WIRELESS, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

----

**THREE AND SIX MONTHS ENDED MARCH 31, 2007**

**(unaudited)**

# NOTE1 — BASIS OF FINANCIAL STATEMENT PRESENTATION

*Interim Financial Information.* The accompanying unaudited consolidated financial statements of O2Secure Wireless, Inc. (the “Company”) have been prepared in accordance withprinciples generally accepted in the United States of America for interimfinancial information and applicable rules of Regulation S-X. Accordingly, theydo not include all of the information and notes required by generally acceptedaccounting principles for complete financial statements. In the opinion ofmanagement, all adjustments considered necessary for a fair presentation havebeen included. The interim financial statements and notes should be read inconjunction with the financial statements and notes thereto included in theCompany’s Form 10-KSB for the year ended September 30, 2006. Operating resultsfor the three and six months ended March 31, 2007 are not necessarilyindicative of the results that may be expected for the fiscal year endingSeptember 30, 2007.

*Principles of Consolidation.*The accompanying consolidated financialstatements include the accounts of O2 Secure Wireless, Inc. and itswholly-owned subsidiary, Epiphony Voice Solutions, LLC. All materialintercompany accounts and transactions have been eliminated in consolidation.

##### *Going Concern*. The accompanying consolidated financial statements have beenpresented on the basis that the Company is a going concern, which contemplatesthe realization of assets and the satisfaction of liabilities in the normalcourse of business.  It has sustainedoperating losses since inception, and has been dependent upon privateplacements of stock to provide sufficient working capital in order to financeits development activities. A Securities Purchase Agreement with a soleinvestor, who represents our sole source of private stock placements to date,expired on September 30, 2006 without extension. Our ability to continue inexistence is dependent upon developing additional sources of capital and/orachieving profitable operations. Management’s plan is to raise capital throughadditional private 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 six months ended March 31, 2007, we capitalized$67,132 of equipment and labor costs for new wireless network installations.Hardware component equipment held for network installations or sale decreased$691 for the three months ended March 31, 2007 and increased $56,276 during thesix months ended March 31, 2007.

NOTE 3 — COMMITMENTS

*Operating Lease.*On November 28, 2006, we executed afive-year, non-cancelable lease for office space commencing January 1, 2007.Monthly minimum lease payments during the first year will be $3,750, withannual escalations over the lease term to $4,387 per month. The lease has afive year option to

6

----

renew. In addition tomonthly lease payments, we will be subject to a pro rata share of the lessor’sincreases in property taxes and insurance in future years above the level paidby the lessor during calendar year 2006. We paid a deposit of $11,250 uponexecution of the lease, and an additional $6,000 on February 1, 2007.  $9,750 of this deposit will be creditedagainst rent payments at various points during the lease term so long as we arein compliance with the lease agreement. During the three and six months ended March 31, 2007, rent expense of$11,008 was incurred in connection with this lease.

*Employment Agreements.*Effective February 24, 2007, we entered a newemployment agreement with our  ChiefExecutive Officer (“CEO”). The new employment agreement, which is for a termexpiring on February 24, 2012, provides for the payment of a fixed salary tothe CEO of $80,000 for the year ending December 31, 2007, with annual increasesof at least $5,000 and an annual bonus in an amount to be determined by ourBoard of Directors.  As additionalcompensation, the agreement grants the CEO options to purchase 600,000 shares of our common stock at anundetermined price, should our Board of Directors adopt, and our shareholdersapprove, a qualified incentive stock option plan in the future. At this time,no such plan has been adopted. The agreement also provides for othercompensation and benefits, as more fully reported on Form 8-K filed on March 1,2007.

Effective February 24, 2007,we entered a new employment agreement with our Chief Technology Officer (“CTO”).The new employment agreement, which is for a term expiring on February 24,2012, provides for the payment of a fixed salary to the CTO of $80,000 for theyear ending 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 FLOW INFORMATION

As disclosed in Note 4,during the six months ended March 31, 2007, we issued 100,000 common stock witha stated value of $30,000, in settlement of a $20,000 loan and $10,000 accruedliability owed to an investor.

NOTE 6 — SUBSEQUENT EVENTS

On April 9, 2007, wereceived a $37,000 loan from the father of the CTO for working capitalpurposes. Principal and 8% simple interest are due December 31, 2007. Ifeither of two officers, the CEO or CTO, is terminated for any reason, theunderlying unsecured promissory note will be immediately due and payable. The noteholder may elect to convert the note into unregistered common shares of theCompany. In the event the note is converted, the initial conversion price indetermining shares to be issued is $0.35, which may be subject to certainadjustments as defined in the promissory note. We have evaluated the conversion feature related to this note and havedetermined no benefit related to the conversion feature.

On April 24, 2007, an outstanding warrant to purchase one millioncommon shares expired without exercise by the warrant holder.

7

----

We are currentlypursuing a private placement offering for shares of our common stock. However,there is no guarantee this private placement will be successful or completed ina timely enough manner to prevent a significant disruption of our operations.If we are successful pursing this private placement offering, it will requireus to file, on Form SB-2, a registration statement for which we will incurlegal, accounting and filing costs.

Wehave recently begun cash-conserving measures, including partial or fullnon-payment of officer salaries, termination of a non-essential employee, andchanging the compensation of our Marketing Director from salary tofull-commission basis. In the event we experience delays in raising additionalcapital, we will likely reduce or possibly curtail further installations asnecessary in order to maintain adequate cash funds, and eventually ceaseoperations entirely.  However, these cash conservation measures will notassure continued operations.

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

***Disclosure Regarding Forward Looking Statements***

This Quarterly Report onForm 10-QSB includes forward looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended (“Forward Looking Statements”). Allstatements other than statements of historical fact included in this report areForward Looking Statements. In the normal course of its business, the Company,in an effort to help keep its shareholders and the public informed about theCompany’s operations, may from time-to-time issue certain statements, either inwriting or orally, which contain or may contain Forward-Looking Statements.Although the Company believes that the expectations reflected in such ForwardLooking Statements are reasonable, it can give no assurance that suchexpectations will prove to have been correct. Generally, these statementsrelate to business plans or strategies, projected or anticipated benefits orother consequences of such plans or strategies, past and possible future, ofacquisitions and projected or anticipated benefits from acquisitions made by orto be made by the Company, or projections involving anticipated revenues,earnings, levels of capital expenditures or other aspects of operating results.All phases of the Company operations are subject to a number of uncertainties,risks and other influences, many of which are outside the control of theCompany and any one of which, or a combination of which, could materiallyaffect the results of the Company’s proposed operations and whether ForwardLooking Statements made by the Company ultimately prove to be accurate. Suchimportant factors (“Important Factors”) and other factors could cause actualresults to differ materially from the Company’s expectations are disclosed inthis report. All prior and subsequent written and oral Forward LookingStatements attributable to the Company or persons acting on its behalf areexpressly qualified in their entirety by the Important Factors described belowthat 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***

Ourprimary business involves the installation of wireless Internet systems inmultifamily properties and educational institutions, from which a majority ofour revenues are derived.  We also sell network components, such aswireless cards and access points, to unrelated parties, which constitute thebalance of our revenues.  This quarter is the first quarter in which a newservice line has been launched, the REACTOR, which we are currently marketing.

Ouroriginal plan of operation involved installing a wireless Internet system in amulti-residential property at our cost, and then generating revenue from thesale of subscriptions to residents of the property-the “subscriber model.”However, through January 2007 we have completed the installation of

8

----

fourproperties under which we are compensated by the owner of the property insteadof through subscriptions directly from residents in the property.  Underthis “amenity model,” the property owner pays us a flat rate for the total number of units in the property, whoprovides the service as a complimentary benefit to all residents. Through thisarrangement we can generate cash flows more quickly by eliminating the time lagto market our services to tenants and students and achieve 100 percentsaturation.  Also, marketing costs toobtain and maintain individual subscribers will be unnecessary, and we will beable to maintain a consistent revenue stream that is not affected by tenantturnover.  Our first project under this model required a ramp up ofrevenues during the first year of the agreement which did not enable us toachieve full revenue potential until near the end of that period. Theremaining projects we deployed under the amenity model did not require arevenue ramp up period, and we began receiving the full flat-rate revenues forthose projects immediately upon the networks becoming operational.

Asof March 31, 2007, under the original subscriber model, we serviced sevenproperties, and had 455 full subscribers at $29.95 per month and 46 childaccounts at $5.00, for a bulk total of 501 accounts representing revenues ofapproximately $14,000 per month. As of March 31, 2007, under the amenity model,we serviced four properties and were receiving flat-rate revenues approximating$16,000 per month. At March 31, 2007, we had commitments to deploy networks atfour more multi-residential properties in Atlanta, Georgia representing 786apartment units.  One of these networkswas completed in April 2007 and began generating limited revenues under thesubscriber model.  We believe theremaining three networks, consisting of two subscriber models and one amenitymodel, will be operational during the 3rd quarter of fiscal year 2007. However, weestimate only 30% of tenants will ultimately participate in the subscribermodel networks, and it is likely to require a year or more to reach that levelof subscriber base.

Duringfiscal year 2006, we began marketing our services to educational institutionsthat desire to provide wireless Internet access to their studentpopulations.  Because the Internetservice would be offered as part of the institution’s educational experience,our revenues would not be dependent on obtaining subscribers for our service. Instead, the service would be open to all students, and we would becompensated on a per student basis by the educational institution itself. Wecompleted our first such deployment in Atlanta, Georgia during the 4th quarter of fiscal year 2006, and a seconddeployment in Chattanooga, Tennessee in January 2007.

Typically,our network projects initially result in negative cash flows. This is becausewe usually bear the full costs of installation, including materials and labor.In addition, seven of our eleven operational projects to date are under thesubscriber model. Under this model, installing a network (and incurring theassociated installation costs) only allows us the opportunity to begin tomarket our services to individual tenant subscribers before we can realize anyrevenues. Our experience indicates that it takes more than one year before thesubscriber base can reach a level at which the network has a positive cashflow. Furthermore, after a network is operational we begin to incur costs toservice and maintain the network regardless how many subscribers we have forthat network.

Thepoint at which a project begins to realize positive cash flow depends uponseveral key factors, including how well we control installation costs, whetherrevenues are based on the subscriber or the amenity model, whether we canobtain any funding from the owner for installation costs, and the complexityand location (i.e. outside of Atlanta) of the network, which affects the coststo service the network after it is operational.

Duringthe 4th quarter of fiscal year 2006, we further improved upon our amenity modelby securing a project in which we are not only receiving our full revenues uponthe activation of the network, but we received a deposit from the customer. Bycontrolling our costs, this deposit substantially covered our installationcosts. Thus, this project was cash flow positive within three months ofactivation. In addition, 

9

----

inJanuary 2007 we completed another installation under the amenity model in whichthe property owner paid for our installation costs, enabling this project to becash positive from inception. While we will continue to seek such projects, itis not reasonable to expect that we will secure all future projects undersimilar terms.

Alongthese lines, we have developed the infrastructure to provide additionalInternet services, such as our REACTOR product under which we have begunoffering “anywhere” access to the Internet.  The product connects to theInternet utilizing the nationwide EVDO network deployed by cellular carriers toconnect to the Internet.  We elected to diversify into anywhere accessafter we determined that a market existed for the service, and that we couldeconomically provide the service using our existing technical personnel andnetwork systems.  We have begun marketingREACTOR to transportation companies, such as limousine services and truckingcompanies.  We currently have one paidsubscriber who is evaluating the performance of one REACTOR unit for possiblefurther purchases.

Wealso generate revenue from the resale of wireless cards that we purchase on awholesale basis for the wireless networks we install. Most of our businessreselling wireless cards is from resellers, via our online web store or onEbay.  We do not consider the business of reselling of wireless cards tobe a core business and, accordingly, we do not plan to invest any additionalresources to expand that line of business.

Wehave also explored the feasibility of installing our wireless Internet systemsto serve the growing municipal market, and plan to install a test system in thenear future in a portion of Dekalb County, Georgia for the city of Decatur incooperation with PowerNet global, a national Internet service provider. We planto compete on the basis of superior technology, price and customer service. Inparticular, we plan to offer our Internet service at a lower price than ourcompetitors, which are primarily DSL or cable Internet services.  Our planis also to utilize the best available technology at any given time, so as to continueto offer reliable, high quality, wireless Internet access that provides eachend user with maximum mobility, very high speed, and security.

Otherpotential sources of revenue may include business-to-business applications ofbroadband technology, and implementation of wider area Internet coverage astechnology evolves. The company also plans to move toward total convergence atsome point in the future, providing voice and video in addition to dataservices.

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.  Under this new architecture, we are now offering substantiallyhigher bandwidth at a similar price to what we currently pay for existing,smaller amounts of bandwidth. Since speed and latency are two of theprimary competitive advantages that an Internet provider can have with regardsto its service offering, we are pleased with the results of these discussions.

***Results of Operations***

*Three Months Ended March 31, 2007 and 2006*

During the three months ended March 31, 2007 and 2006, wegenerated $77,439 and $49,401 of revenues, respectively, and incurred netlosses of ($216,138) and ($239,369), respectively.  During the three months ended March 31, 2007,we were receiving revenues from eleven operational networks versus six duringthe prior period.  We also beganreceiving revenues from a subscriber to our REACTOR product, as described inour Plan of Operation above.

10

----

Significant expenses and transactions during the three monthsended March 31, 2007 and 2006 were as follows:

·                  Compensation expense includes allsalaries, wages and commissions not capitalized as a part of networkinstallation costs.

·                 Professional fees represent expensesnecessary for outside accounting, audit, legal and transfer agent fees.

·                  Capitalized material and labor costs fornetwork installations were $67,132 and $96,403 during the three months endedMarch 31, 2007 and 2006, respectively. During the three months ended March 31,2007 we had three installation projects in process in Atlanta, Georgia, and onein Chattanooga, Tennessee, two of which were completed and began generatingrevenues during the period.   During thesame period in 2006, we had two installation projects in process in Atlanta,Georgia, and Tampa, Florida.

·                  Depreciation and communications expensesincreased due to the additional networks which have been completed and placedinto service.

*Six Months Ended March 31, 2007 and**2006*

During the six months ended March 31, 2007 and 2006, wegenerated $178,872 and $70,110 of revenues, respectively, and incurred netlosses of ($408,567) and ($473,802), respectively.  During the six months ended March 31, 2007,we were receiving revenues from eleven operational networks versus nine duringthe prior period.  We also beganreceiving revenues from a subscriber to our REACTOR product, as described inour Plan of Operation above.

Significant expenses and transactions during the six monthsended March 31, 2007 and 2006 were as follows:

·                  Compensation expense includes allsalaries, wages and commissions not capitalized as a part of networkinstallation costs.

·                 Professional fees represent expensesnecessary for outside accounting, audit, legal and transfer agent fees.

·                  Depreciation and communications expensesincreased due to the additional networks which have been completed and placedinto service.

Capitalized material and labor costs for networkinstallations were $67,132 and $129,417 during the six months ended March 31,2007 and 2006, respectively. During the six months ended March 31, 2007 we hadthree installation projects in process in Atlanta, Georgia, and one inChattanooga, Tennessee, two of which were completed and began generating revenuesduring the period.  During the sameperiod in 2006, we had two installation projects in process in Atlanta,Georgia, 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 two Regulation Sofferings.  Our most recent agreement to sell shares of 

11

----

commonstock to the foreign investor expired, unrenewed, in the 4th quarter of fiscal year 2006, and we currentlydo not have any agreement to obtain additional capital from any source.

AtMarch 31, 2007, we had a net working capital deficit of $37,000.  Ourworking capital is currently insufficient for us to continue implementing ourbusiness plan and our commitment to breakeven as outlined in our most recentRegulation S offering.   The present level of gross profit on networkservice fees and component sales are insufficient to enable us to cover ourrecurring operating expenses unless such levels are dramatically increased.

Webelieve our current working capital is sufficient to both sustain our currentoperations and planned growth only through June 2007.  We are currentlyusing capital at an average monthly rate of $69,000 for operating expenses onan accrual basis, although the actual monthly cash outlay varies.  Inaddition, normally we must incur additional capital expenditures with eachsystem that we install.  This rate will accelerate significantly over thefollowing twelve months if we reach agreements to install systems in the numberof properties that we have projected in our business plan, unless we aresuccessful in negotiating for more property owners to fund our installationcosts.

Weproject additional working capital needs of $1 million, exclusive of fundscurrently on hand, to fund our planned operations for the following twelvemonth period. To date, we have relied substantially upon investment proceeds tosatisfy our working capital requirements. We must secure immediate additionalcapital from debt or equity sources in order to continue operations, and thereis no assurance we will be successful. In April 2007, we secured an additionalloan from the father an officer for $37,000 to meet immediate working capitalneeds. Our current cash position as of May 15, 2007 is approximately $34,000.

Whilewe have been actively pursuing other sources of capital, we currently have noimmediate funding transactions in progress.  We are currently pursuing a private placement offering for shares of ourcommon stock.  However, there is noguarantee this private placement will be successful or completed in a timelyenough manner to prevent a significant disruption of our operations.  If we are successful in pursing this privateplacement offering, it will require us to file, on Form SB-2, a registrationstatement for which we will incur legal, accounting and filing costs.

Wehave recently begun cash-conserving measures, including partial or fullnon-payment of officer salaries, termination of a non-essential employee, andchanging the compensation of our Marketing Director from salary tofull-commission basis. In the event we experience delays in raising additionalcapital, we will likely reduce or possibly curtail further installations asnecessary in order to maintain adequate cash funds, and eventually ceaseoperations entirely.  However, these cash conservation measures will notassure continued operations.

***Off-Balance Sheet Arrangements***

The Company does not have any off-balance sheetarrangements that are reasonably likely to have a current or future effect onour financial condition, changes in financial condition, revenues or expenses,results of operations, liquidity, capital expenditures or capital resourcesthat are material to investors.

**Item3.  Controls and Procedures.**

The Company believes that its disclosure controls andprocedures are effective for gathering, analyzing and disclosing theinformation it is required to disclose in its reports filed under theSecurities 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.

12

----

Disclosure controls and procedures are controls andother procedures that are designed to ensure that information required to bedisclosed in the Company’s reports filed or submitted under the Exchange Actare recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms.Disclosure controls and procedures include, without limitation, controls andprocedures designed to ensure that information required to be disclosed in theCompany’s reports filed under the Exchange Act is accumulated and communicatedto management, including the our company’s chief executive officer and chieffinancial officer, as appropriate, to allow timely decisions regarding requireddisclosure.

**PARTII.  OTHER INFORMATION.**

**Item1.  Legal Proceedings.**

None.

**Item 2.  Changes in Securities.**

None

**Item3.  Defaults upon Senior Securities.**

None

**Item 4.  Submission of Matters to a Vote of SecurityHolders.**

None.

**Item5.  Other Information.**

None.

**Item6.  Exhibits and Reports on Form 8-K.**

(a)    Furnishthe 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.

13

----

**SIGNATURES**

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.
|                    |   | O2 SECURE WIRELESS, INC. |
|--------------------|--------|--------------------------|
|               |   |                     |
| Date: May 15, 2007 |   | /s/ T. Scott Conley      |
|               |   | By:                      |   | T. Scott Conley, Chief Executive Officer |

 

14

----