**UNITED
                  STATES**
 **SECURITIES
                  AND EXCHANGE COMMISSION**
 **Washington,
                  DC 20549**
  **FORM
                  10-KSB**
 (MARK
                              ONE)**x**
                          **ANNUAL
                              REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF
                              1934****For
                              the fiscal year ended March 31, 2007****OR****o**
                          **TRANSITION
                              REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF
                              1934****For
                              the transition period from  ______________ to
                              ______________**
  Commission
                    file number **: 000-24595**
 **NEXTPHASE
                  WIRELESS, INC.**
 (Name
                    of
                    Small Business Issuer in its Charter)
 **Nevada**
                        **88-0343832**(State
                              or Other Jurisdiction of
                            Incorporation
                              or Organization)
                        (IRS
                            Employer
                          Identification
                            No.)
   **300
                              S. Harbor Blvd, Suite 500**
                            **Anaheim,
                              California**
                        **92805**(Address
                            of Principal Executive Offices)
                        (Zip
                            Code)
   Issuer's
                    telephone number, including area code: **(800)
                    748-5548**
 
 Securities
                    registered under Section 12(b) of
 the
                    Exchange Act:
 
 Name
                              of Each ExchangeTitle
                              of Each Class
                          on
                              Which Registered
 
 None
 
 Securities
                    registered under Section 12(g) of the Exchange Act:
 
 **Common
                    Stock, $.001 par value**
 (Title
                    of
                    Class)
 
 
 Check
                    whether the issuer is not required to file reports pursuant to
                    Section 13 or
                    15(d) of the Exchange Act. o
 
 Note
                    -
                    Checking the box above will not relieve any registrant required
                    to file reports
                    pursuant to Section 13 or 15(d) of the Exchange Act from their
                    obligations under
                    those Sections.
 
 Check
                    whether the issuer: (1) filed all reports required to be filed
                    by Section 13 or
                    15(d) of the Exchange Act during the past 12 months (or for such
                    shorter period
                    that the registrant was required to file such reports), and (2)
                    has been subject
                    to such filing requirements for the past 90 days. Yes o
                    No x
 
 Check
                    if
                    there is no disclosure of delinquent filers in response to Item
                    405 of
                    Regulation S-B contained in this form, and no disclosure will
                    be contained, to
                    the best of registrant's knowledge, in definitive proxy or information
                    statements incorporated by reference in Part III of this Form
                    10-KSB or any
                    amendment to this Form 10-KSB. o
 
 Indicate
                    by check mark whether the registrant is a shell Company (as defined
                    in Rule
                    12b-2 of the Exchange Act). Yes o
                    No x
 
 State
                    issuer's revenues for its most recent fiscal year: $1,986,426
 
 The
                    aggregate market value of the voting and non-voting common equity
                    held by
                    non-affiliates, based upon the average bid and asked price of
                    such common equity
                    as of July 12, 2007, was $4,457,454
 
 
 **ISSUERS
                    INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
                    YEARS**
 
 Check
                    whether the issuer has filed all documents and reports required
                    to be filed by
                    Section 12, 13 or 15(d) of the Exchange Act after the distribution
                    of securities
                    under a plan confirmed by a court. Yes o 
No
o
 
 **APPLICABLE
                    ONLY TO CORPORATE REGISTRANTS**
 
 The
                    number of shares outstanding of the issuer's common stock as
                    of July 12, 2007
                    was 31,838,955 shares.
 
 **DOCUMENTS
                    INCORPORATED BY REFERENCE: none**
 
 Transitional
                    Small Business Disclosure Format (check one): Yes o
                    No x
 Table
                      of Contents
  **NEXTPHASE
                    WIRELESS, INC.**
  **TABLE
                    OFCONTENTS**
  PAGEPART
                            I.Item
                            1.
                        Description
                            of Business
                        1Item
                            2.
                        Description
                            of Property
                        10Item
                            3.
                        Legal
                            Proceedings
                        10Item
                            4.
                        Submission
                            of Matters to a Vote of Security
                            Holders
                        10PART
                            II.Item
                            5.
                        Market
                            for Common Equity and Related Stockholder Matters
                            and
                            SmallBusiness
                            Issuer Purchases of Equity Securities
                        11Item
                            6.
                        Management’s
                              Discussion and Analysis or Plan of
                              Operation
                        14Item
                            7.
                        Financial
                            Statements
                        26Item
                            8.
                        Changes
                            In and Disagreements With Accountants on Accounting
                            and Financial Disclosure
                        26Item
                            8A.
                        Controls
                              and Procedures
                        26Item
                            8B.
                        Other
                            Information
                        27PART
                            III.Item
                            9.
                        Directors,
                            Executive Officers, Promoters, Control Persons
                            and Corporate Governance; Compliance with Section 16(a)
                            of the Exchange
                            Act
                        28Item
                            10.
                        Executive
                            Compensation
                        30Item
                            11.
                        Security
                            Ownership of Certain Beneficial Owners and
                            Management and Related Stockholder Matters
                        33Item
                            12.
                        Certain
                            Relationships and Related Transactions, and
                            Director Independence
                        34Item
                            13.
                        Exhibits
                            and Reports
                        34Item
                            14.
                        Principal
                            Accountant Fees and Services
                        35Signature
                          Page
                        36Financial
                          Statements
                        F-1
  Table
                  of Contents
  **PART
              I**
 
 **RISK
              FACTORS AND CAUTIONARY STATEMENTS**
 
 Forward-looking
              statements in this report are made pursuant to the “safe harbor” provisions of
              the Private Securities Litigation Reform Act of 1995. The Company wishes
              to
              advise readers that actual results may differ substantially from such
              forward-looking statements. Forward-looking statements include underlying
              assumptions and other statements that are other than historical facts.
              Forward-looking statements involve risks and uncertainties that could
              cause
              actual results to differ materially from those expressed or implied
              by the
              statements, including, but not limited to, the following: the ability
              of the
              Company to provide for its obligations, to provide working capital
              needs from
              operating revenues, to obtain additional financing needed for any future
              acquisitions, to meet competitive challenges and technological changes,
              and
              other risks detailed in the Company's periodic report filings with
              the
              Securities and Exchange Commission (“SEC”).
  
 **ITEM
              1. DESCRIPTIONOF BUSINESS**
 
 **General**
 
 **Company**
 
 NextPhase
              Wireless, Inc. (“NextPhase” “we”,“us”
              “our” or the “Company”) is an emerging national provider of broadband wireless
              Internet access and turnkey wireless networks. We specialize in delivering
              integrated Internet, voice, video, and data to our clients and customers.
              The
              Company designs, deploys and operates its own WiMAX-ready wireless
              networks and
              also provides wireless technology solutions to businesses and municipalities.
              Leveraging its full-service capabilities and infrastructure, NextPhase
              offers a
              comprehensive portfolio of broadband solutions that meet customers'
              needs today,
              and can anticipate and grow to meet their needs of tomorrow. Our initial
              goal is
              to create a nationwide broadband wireless network based on WiMAX, a
              more
              powerful relative of Wi-Fi technology. Because WiMAX infrastructure
              is much
              cheaper to build and maintain than traditional networks, WiMAX has huge
              technical advantages over other fast pipes, particularly Wi-Fi. Unlike
              Wi-Fi, it
              operates on a licensed spectrum, making the service far more reliable.
              The range
              of Wi-Fi signals is measured in hundreds of feet; WIMAX's range is
              measured in
              miles.
 
 The
              NextPhase Wireless Broadband Network is one of only a few Pre-WiMAX
              networks in
              the United States that is capable of delivering up to 300Mbps of raw
              data. Our
              network combined with that of our technology partners covers over 175
              cities in
              California and Nevada. With locations in Georgia and California, NextPhase
              is poised to begin its acquisition of Internet service providers
              (“ISPS”).  NextPhase has entered into two letters of intent to acquire
              broadband companies located in New Jersey and Florida.  These
              transactions are expected to close in the quarter ended September 30,
              2007.
  The
                Company’s objective is to build a hybrid (wired/wireless) platform in all
                48
                contiguous states, as connectivity demands continue to accelerate,
                and ‘any
                time, any place, any device’ creation, consumption and collaboration of content
                becomes more prevalent. With the onslaught of devices, such as iPods,
                smartphones, VoIP and wireless streaming media, NextPhase is positioned
                to
                handle the traffic for these devices and future growth in
                businesses.
  
 1
 Table
                  of Contents
 
 **Business
              Model**
 
 NextPhase
              is developing an integrated portfolio of innovative connectivity products
              and
              services in the following divisions:
 
 ·
                    **NEXTPHASE
                        BROADBAND** operates as an Internet Service Provider (ISP)
                        from our
                        Network Operations Centers (NOCs) in Anaheim, CA and Marietta,
                        GA,
                        providing tiered Internet connectivity services (utilizing
                        both wired and
                        wireless technologies) to business and residential subscribers.
                        We
                        significantly expanded our capability and customer base in
                        this area by
                        acquiring the assets of Synkronus, Inc. (“Synkronus”) in April 2006. Since
                        the acquisition, we operate our ISP business under the name
                        SpeedFactory,
                        Inc. (“SpeedFactory”). We are extending our wireless "footprint" by
                        negotiating the deployment of network repeaters at strategic
                        geographic
                        locations, and plan to expand further through strategic alliances
                        and
                        selective acquisitions. By broadening our range of connectivity
                        offerings
                        to include DSL and T1 circuits in addition to our wireless
                        capabilities,
                        we have been able to provide connectivity services to customers
                        outside
                        our physical "footprint" and also to develop value-added
                        redundancy and
                        failover offerings by combining multiple
                        technologies.
 
 ·
                    **NEXTPHASE
                        PROFESSIONAL SERVICES** designs, deploys, operates and supports
                        wireless connectivity solutions. We leverage our relationships
                        with
                        leading manufacturers, distributors and service partners
                        to offer a broad
                        range of turnkey solutions and individually customized services
                        to
                        customers in our target markets, such as municipalities,
                        enterprises and
                        large-scale systems integrators. Leveraging our operational
                        expertise and
                        experience from designing and building the networks that
                        support our
                        fast-growing wireless ISP business, we also design, build,
                        deploy and
                        operate large-scale NextZone(TM) and NextMetro(TM) networks
                        in conjunction
                        with, or on behalf of, clients such as property developers
                        and
                        municipalities. NextZone(TM) and NextMetro(TM) networks extend
                        the hotspot
                        concept, both in terms of scale and by including a service
                        layer that is
                        tailored to the specific needs of targeted
                        markets.
 
 ·
                    NextZone(TM)
                        networks are primarily targeted at property developers (both
                        commercial
                        and residential), stadiums, airports, small municipalities,
                        etc. and
                        provide them with the capability to provision, deliver, monitor
                        and
                        invoice end-consumers for Internet connectivity services
                        (or they can
                        contract with us to do some or all of that on their
                        behalf).
 
 ·
                    NextMetro(TM)
                        networks builds upon the NextZone(TM) offering in three key
                        ways; scale,
                        integration and multi-use:
 
 ·
                    In
                        terms of scale, NextMetro(TM) networks are targeted at major
                        municipalities and large enterprises; customers whose needs
                        are complex
                        and who are looking for comprehensive connectivity
                        solutions.
 
 ·
                    While
                        NextZone(TM) networks tend to be stand-alone solutions (the
                        networks
                        usually consisting of a sizeable backhaul connection to the
                        Internet, with
                        point-to-multipoint wireless connectivity to the end-customers,
                        aggregating and servicing the demand) that provide initial
                        connectivity or
                        extends existing connectivity, NextMetro(TM) networks often
                        require
                        extensive integration into existing network infrastructures,
                        which often
                        incorporate multiple connectivity technologies (e.g. fiber,
                        leased lines,
                        CDMA, etc.).
 
 ·
                    In
                        terms of traffic and usage, NextZone(TM) networks are primarily
                        used for
                        connectivity to and from the Internet, with some secondary
                        uses dependent
                        on the specific customer and their application requirements
                        (e.g. video
                        surveillance, remote monitoring, VoIP, etc.). The traffic
                        / usage patterns
                        for NextMetro(TM) networks are often more complex, with requirements
                        to
                        provide multiple service types with differing Quality of
                        Service (QoS)
                        expectations to different end-users. An example would be
                        a major
                        municipality requiring a combination of services that could
                        include:
                        mobile data/voice connectivity for police, public transportation
                        and EMS
                        vehicles; enterprise-level connectivity for municipal offices;
                        Virtual
                        Private Network (VPN) connectivity for employees; tiered
                        paid-access
                        broadband connectivity services for businesses, residents
                        and visitors
                        (potentially including `free' connectivity services in specific
                        geographic
                        locations for economic development
                        purposes).
  2
 Table
                  of Contents
 
 **MarketOpportunity**
 
 In
              refining our business model, we have identified multiple niche market
              opportunities that we are actively pursuing.
 
 ·
                    **NEXTPHASE
                        BROADBAND**
 
 ·
                    **SMALL
                        TO MIDSIZE BUSINESSES (SMBS) SMBs**are not served well by
                        traditional connectivity technologies. As they're often physically
                        located
                        outside the footprint of cable providers (who primarily focus
                        on
                        residential markets), their choices are often limited to
                        services provided
                        by their telephone companies such as DSL and T1 circuits.
                        The majority of
                        DSL services are asynchronous in nature, with faster download
                        speeds than
                        upload capabilities. This can result in bottlenecks for companies
                        who need
                        to transmit a lot of data. While T1s offer fast, synchronous
                        connections
                        (1.5 Mbps each way), they are relatively expensive for small
                        businesses,
                        generally have long installation lead times and are not scaleable
                        as
                        connectivity needs grow. NextPhase has developed a range
                        of flexible,
                        scalable and cost-effective solutions that target the connectivity
                        needs
                        of SMBs, letting them focus on growing their
                        businesses.
 
 ·
                    **UNDERSERVED
                        / FAST GROWING RESIDENTIAL MARKETS** The high deployment costs for
                        traditional technologies such as cable and DSL often results
                        in `cherry
                        picking' of high-density markets, leaving rural and low-density
                        markets
                        underserved. In addition to being expensive to deploy (ten
                        times more
                        costly than wireless infrastructure), it is also very time
                        consuming to
                        deploy, resulting in a `window of opportunity' for technologies
                        that can
                        be rapidly and cost-effectively deployed. By deploying wireless
                        connectivity technologies, NextPhase can `light up' marginal
                        markets
                        faster and at lower cost than any competing technology, providing
                        cost-effective connectivity services to markets that enjoy
                        little or none
                        of the pricing pressures seen in more attractive
                        markets.
 
 ·
                    **NATIONWIDE
                        DSL RESELLER OF CHOICE** As part of the 1996 Telecommunications
                        Act, pro-competitive rules governing network unbundling were
                        introduced by
                        the FCC, enabling other ISPs to access to the carriers' networks
                        at
                        discounted rates. While the DSL market is fiercely competitive
                        and very
                        price-sensitive at the lower end of the market, NextPhase
                        has identified
                        niche opportunities for differentiated services. In particular,
                        we believe
                        that there is a growing market for cost-effective; high-touch
                        (enabled
                        through automation and integration) connectivity services
                        to customers
                        alienated by impersonal Service Providers. Our market research
                        suggests
                        that this segment is not as price sensitive and is willing
                        to pay a
                        premium for offerings that include high customer service
                        / technical
                        support components. In order to serve this segment, we have
                        negotiated
                        favorable reseller agreements that allow us to offer DSL
                        and T1 services
                        nationwide, with us providing the additional service
                        layer.
 
 
 **·**
                    **NEXTPHASE
                        PROFESSIONAL SERVICES**
 
 **·**
                    **TIER
                        1 MUNICIPAL MARKETS** Many of these high profile projects are being
                        won by large scale system integrators, who often have relatively
                        little
                        in-house expertise in wireless integration and implementation,
                        and in RF
                        projects in general. We are still relatively early in the
                        life cycle for
                        projects of this nature, with few deployments of this size
                        or level of
                        complexity. From a capital perspective, the technologies
                        being deployed
                        are not yet mass market and so the associated economies of
                        scale are not
                        yet realizable. From a revenue perspective, the business
                        models are still
                        evolving and it remains uncertain whether forecasts will
                        be realized in
                        the short-term. By positioning ourselves as a trusted advisor
                        to the
                        general contractors responsible for these large-scale projects,
                        we have an
                        opportunity to leverage our experience and expertise, allowing
                        us to
                        maximize our returns while minimizing our levels of risk
                        and
                        exposure.
 
 
 ·
                    **TIER
                        2 / 3 MUNICIPAL MARKETS**While competition to build out wireless
                        capabilities in Tier 1 markets has been intense (where traditional
                        connectivity technologies are often readily available, or
                        at least
                        available in the high-margin neighborhoods), smaller cities
                        are often
                        overlooked and underserved by traditional providers who have
                        been slow or
                        reluctant to build out broadband infrastructure in these
                        markets. While
                        these markets often escape the `loss leader' predatory pricing
                        seen in the
                        Tier 1 markets, the lower density and often lower percentage
                        of
                        high-margin business customers results in more complex, multi-use
                        networks
                        (e.g. public, commercial, government and public safety traffic,
                        all
                        utilizing the same network infrastructure) being the only
                        way that the
                        projects can be made viable. NextPhase's integration capabilities
                        are key
                        differentiators in this segment, and we are partnering with
                        wireless
                        equipment manufacturers, municipalities and agencies in designing,
                        deploying, operating and supporting complex (often multi-use)
                        wireless
                        networking solutions.
 
 ·
                    **VERTICAL
                        MARKETS - TRANSPORTATION /****MOBILE****SECURITY** Homeland Security mandates and the associated funding
                        that is being made available is rapidly transforming mobile
                        security from
                        a niche market to a major market. Wireless connectivity technologies
                        are
                        being deployed as a `wrapper' to the core technologies, allowing
                        differentiating high value services to be defined and delivered.
                        Again,
                        NextPhase's integration capabilities and focus on service
                        delivery are key
                        differentiators in these markets. Through partnering with
                        premiere
                        manufacturers we enable the provision of enhanced mobile
                        security
                        solutions (i.e. extended capabilities, reduced operating
                        costs) to
                        regional and metropolitan transit
                        authorities.
 
 3
 Table
                  of Contents
 
 **Business
              Strategy**
 
 NextPhase
              operates in the rapidly evolving broadband connectivity industry, with
              our
              primary expertise and experience in the provision of broadband Internet
              services
              and wireless connectivity and integration. In order to distinguish
              ourselves
              from the competition and to emerge as an acknowledged market leader,
              we focus on
              executing a disciplined business strategy that is highlighted by a
              seasoned
              management team, elite professional services, new market-driven products
              and
              innovative customer-centric marketing programs.
 
 ·
                    With
                        the seasoned executive team we've built, we have a lot of
                        experience and
                        expertise for a young company. We plan to continue to bring
                        in
                        best-in-class professionals and executives as we
                        grow.
 
 ·
                    NextPhase
                        Professional Services will continue to be a "jewel in the
                        crown",
                        establishing and reinforcing our reputation in the marketplace,
                        serving as
                        an important revenue source, and leveraging our experience
                        and expertise
                        in designing, deploying and operating wireless networks to
                        provide turnkey
                        connectivity solutions in target markets such as municipalities,
                        public
                        safety, transport, homeland security and
                        others.
 
 ·
                    With
                        the acquisition of SpeedFactory, we are now focusing our
                        broadband
                        activities on becoming a national broadband Internet service
                        provider of
                        choice. Our research has identified an opportunity for cost-effective,
                        high-touch connectivity services to customers alienated by
                        impersonal
                        services provided by existing internet service providers.
                        SpeedFactory's
                        previous investment in automation and integration enables
                        us to rapidly
                        scale from our existing regional base in Georgia, and we
                        have negotiated
                        favorable reseller agreements with three leading telecommunication
                        companies that allow us to offer those products and services
                        on a
                        nationwide basis.
 
 ·
                    Through
                        a combination of strategic relationships and acquisitions,
                        we plan to
                        continue rolling out our portfolio of innovative connectivity
                        products and
                        services to customers in target markets across the
                        U.S.
 
 ·
                    We
                        plan to focus on growing market share and extending our "footprint"
                        through selective acquisitions and the development and deployment
                        of
                        franchise and licensing programs.
 
 **Marketing
              Strategy**
 
 We
              take a
              market-back approach to those markets identified as offering potential
              for
              sustainable growth. In order to determine the basis for differentiation
              and
              strategy, we develop a deep understanding of our target markets. This
              includes
              customers, competitors, value chains, leverage points, and the strategic
              opportunities that they represent. These opportunities are then assessed
              against
              our own capabilities and competitive advantages, with potential strategies
              evaluated in light of anticipated competitive responses and market
              developments.
 
 Building
              off the business strategy, our marketing strategy focuses on locating,
              attracting, and retaining customers. Our approach is to first establish
              and
              validate ourselves as a thought leader within our chosen segments,
              building
              relationships with all key industry participants and developing strong,
              recognizable brands in the marketplace. Once we capture `mind share',
              we will
              then utilize a combination of marketing tools to translate that into
              market
              share, with the goal of achieving market leadership.
 
 4
 Table
                  of Contents
  **Competition**
 
 NextPhase
              faces intense competition from:
 
 ·
                    Wireless
                        equipment manufacturers relative to our manufacture of wireless
                        products;
 
 ·
                    Large,
                        medium and small scale system integrators relative to our
                        wireless
                        professional services business;
 
 ·
                    Cable,
                        DSL, fiber optic lines and satellite communication providers
                        relative to
                        our broadband connectivity
                        business.
 
 Entry
              barriers in these areas are relatively low and increased competition
              is likely.
              As we seek to develop and expand our business, we expect to face a
              greater
              number of competitors, many of whom will be well-established in the
              markets in
              which we operate and those we seek to penetrate. Many of our competitors
              are
              much larger, have better name recognition and have far greater financial
              and
              other resources. We cannot provide assurances that we will be able
              to
              effectively compete against them, or any future competitors.
 
 Competition
              may lower the prices we are able to charge our customers, thereby potentially
              lowering the amount of income on future sales and sales of products
              and
              services. We cannot provide assurances that we will be able to compete
              successfully in our evolving markets.
 
 ·
                    **WIRELESS
                        PROFESSIONAL SERVICES**
 
 As
              wireless connectivity is increasingly accepted as an alternative and/or
              supplement to wireline communications, new applications are rapidly
              being
              developed and deployed, such as wireless security, and wireless technologies
              are
              increasingly being considered for existing mission-critical applications.
              Typical projects are becoming both larger and more complex. In terms
              of
              competition, the marketplace can be characterized into four groups;
 
 ·
                    Large
                        scale system integrators, such as IBM, Hewlett Packard,
                        CSC;
 
 ·
                    Medium-size
                        system integrators, such as Avaya, Alcatel and
                        Siemens;
 
 ·
                    Specialized
                        wireless engineering and integration firms, such as WPCS
                        International and
                        Business Information Group (BIG);
                        and
 
 ·
                    Smaller
                        "garage shop" cellular and tower installation
                        companies.
 
 As
              wireless installations have become more complex, a distinction is being
              drawn
              between those companies with `soup to nuts' capabilities, from design
              through
              deployment to operation and maintenance (either having the skills themselves
              or
              access to them through strategic partnerships and alliances), and those
              that do
              not. As the bar continues to be raised, smaller "garage shops" are
              being
              excluded by enterprise-level customers, and also by leading wireless
              manufacturers and large scale integrators looking for partners.
 
 5
 Table
                  of Contents
  The
              large
              scale integrators are starting to see this market as attractive, as
              projects
              approach the size and level of complexity that they are familiar with.
              Recognizing that they have skill gaps in terms of wireless design and
              deployment, these integrators are forming relationships with the specialized
              wireless engineering and integration firms to win bids and complete
              projects.
              Simultaneously, they are determining whether they need to buy or build
              their own
              wireless capabilities over the longer term. In seeking relationships
              with the
              large scale integrators and leading wireless manufacturers, those specialized
              wireless engineering and integration firms that have a regional or
              national
              presence, either by themselves or through alliances with other similar
              players,
              have a significant advantage.
 
 **·**
                    **BROADBAND
                        WIRELESS ACCESS (BWA)**
 
 By
                the
                end of 2006, the worldwide installed base for broadband connections
                had grown
                from 221  million in 2005 to 286 million connections. Forecasts
                suggest that the market will further grow to 448 million connections
                by 2010. In
                building out this market, the key challenge that every provider faces
                has been
                in cost-effectively connecting their customers to the Internet backbone.
                Various
                technologies such as cable, DSL, fiber, satellite, wireless and leased
                line,
                have been deployed to bridge this `last mile', and have met with
                varying degrees
                of success and resultant market share.
 While
                cable and DSL currently represent approximately 90% of the residential
                market,
                they are not a universal panacea. In particular, rural markets have
                proven
                uneconomic to cable and their telephone infrastructure does not always
                support
                DSL because it is a distance-sensitive technology. In addition, areas
                of many
                urban markets, for example 40% of Greater Philadelphia and many smaller
                regional
                markets have been overlooked as incumbent providers such as telephone
                companies
                and cable providers focus on the more attractive metropolitan
                markets.
 
 In
              the business market, the high-end continues to be dominated by leased
              lines,
              with DSL leading the low-end. Cable has limited coverage in this market
              because
              the underlying infrastructure is often not present.
 
 Research
              indicates that today the broadband wireless access market is fragmented,
              with
              over 3,000 companies providing solutions in niche markets across the
              U.S. The
              advent of common technology standards, which is driving down costs
              and promoting
              compatibility and interoperability, and Intel's support in seeding
              the market by
              building awareness, educating the customer base and creating demand,
              is driving
              rapid change. While it currently has relatively low market penetration,
              management believes that wireless broadband is poised to become a market
              leader
              for both fixed and mobile connectivity.
 
 In
              terms of competition, the BWA market can be divided into three
              groups:
 
 ·
                    Telcos
                        and leading ISPs looking to cost-effectively extend their
                        reach and
                        presence,
 
 ·
                    well-funded
                          national and regional Wireless Internet Service Providers
                          (WISPs) such as
                          Clearwire and Towerstream who are pursuing aggressive build-out
                          and
                          roll-up strategies in the residential and business markets,
                          respectively.
 
 ·
                    the
                        residential market and smaller WISPs providing connectivity,
                        primarily to
                        residential consumers, in single
                        locations.
 
 Increasingly,
              the smaller WISPs are being squeezed as price wars between cable and
              DSL
              operators have brought prices down to uncompetitive levels and the
              underserved
              market continues to shrink from 40% of zip codes with no high speed
              providers in
              December 1999, to 5% in December 2004. Continuing high Consumer Premises
              Equipment (CPE) costs, little opportunity to negotiate favorable bandwidth
              costs, limited marketing expertise and restricted access to funding
              alternatives
              means that the smaller WISPs are in no position to compete on
              price.
 
 6
 Table
                  of Contents
  **Suppliers**
 
 NextPhase
              selects "best-of-breed" components and equipment for our products and
              services,
              which are readily available from several vendors at relatively similar
              prices.
              Accordingly, we are not dependent on any suppliers.
 
 **Customers**
 
 NextPhase
              began developing its customer base in August 2004 when we acquired
              our
              wholly-owned subsidiary, NextPhase Technologies, Inc. With the acquisition
              of
              the SpeedFactory assets fromSynkronus,completed in April 2007, we have increased that customer base
              by over
              1,100%, from approximately 250 to 2,700 customers. We believe that
              if we lose
              one or more current or future customers, we will readily be able to
              replace them
              with new customers. We receive a substantial portion of our professional
              services customers through our relationships with large scale wireless
              equipment
              manufacturers and system integrators. If we lose any of these relationships,
              we
              may experience a slow down in volume of customers for a period of time
              until we
              develop similar relationships with other wireless equipment manufacturers
              and
              system integrators. We cannot predict our business will develop or
              that our
              customer base will continue to expand as we expect.
 
 **Research
              and Development**
 
 The
              Company focuses its research and development efforts on products, services
              and
              methodologies that enable it to build on its expertise in designing,
              deploying,
              operating and supporting connectivity solutions. The Company does not
              currently
              conduct pure, general research, but focuses upon developing specific,
              marketable
              products and services which the company has the current capability
              to
              deliver.
 
 For
              the
              fiscal year ended March 31, 2007, the Company specifically focused
              on developing
              a range of innovative connectivity solutions designed to satisfy the
              connectivity needs of municipalities and enterprises:
 
 ·
                    NextZone(TM)
                        Connectivity Solutions An innovative range of connectivity
                        products and
                        services that can be integrated with existing infrastructure
                        (copper,
                        fiber, ethernet, etc.) to provide flexible, scalable, reliable
                        and
                        cost-effective connectivity
                        solutions.
 
 ·
                    Sudden
                        Network(TM) Solutions
 
 A
              portfolio of innovative products and services that enable design, deployment
              and
              management of 'on demand' networks, enabling rapid and cost-effective
              extension
              of existing networks, either to satisfy spikes in demand or to provide
              additional functional requirements. The same technologies can also
              be rapidly
              deployed in response to unplanned events, offering timely support for
              emergency
              responders, and business continuity / disaster recovery for impacted
              communities
              and businesses.
 
 ·
                    NextNode
                        Virtual Networks(TM) Leveraging our partner's 20,000 route
                        miles of metro
                        and regional fiber, NextNode Virtual Networks(TM) combines
                        an 'on-net'
                        fiber backbone with a wireless 'last mile' to deliver flexible,
                        reliable,
                        scalable and cost-effective connectivity solutions to customers
                        nationwide.
 
 
 7
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                  of Contents
  **Intellectual
              Property**
 
 NextPhase's
              proprietary wireless products are based on readily available component
              parts,
              units and off-the-shelf software. Our technology is not patented, nor
              have we
              obtained or applied for, copyright registration for our products. The
              configuration and specifications of our products and the compilation,
              integration, bundling or embedding of component parts and software
              which
              comprises our products are protected as a trade secret.
 
 We
              believe the designs, complexity and total integration of components
              and software
              into our products and know-how best protects our trade secrets. We
              cannot assure
              that our trade secrets, know-how and confidential and proprietary information
              will provide us with meaningful protections. We require that every
              employee and
              consultant sign an agreement of non-disclosure and assignment of development
              rights.
 
 **Government
              Regulation**
 
 Our
              products and services, as well as components that we purchase from
              suppliers to
              bundle or include in our product and service offerings, are subject
              to
              telecommunications-based regulation by the United States and foreign
              laws and
              international treaties. We must conform our products to a variety of
              regulatory
              requirements and protocols established to, among other things, avoid
              interference among users of radio frequencies and to permit interconnection
              of
              equipment. The delays inherent in this regulatory approval process
              may force us
              to reschedule, postpone or cancel the installation of our products
              by our
              customers, or the commencement of our services to our customers, which
              may
              result in reductions in our sales.
 
 In
              the
              United States, we are subject to various Federal Communications Commission,
              or
              FCC, rules and regulations. Current FCC regulations permit license-exempt
              operation in certain FCC-certified bands in the radio spectrum. Operation
              in
              these frequency bands is governed by rules set forth in Part 15 of
              the FCC
              regulations. The Part 15 rules are designed to minimize the probability
              of
              interference to other users of the spectrum and, thus, accord Part
              15 systems
              license-exempt status in the frequency band. In the event that there
              is harmful
              interference caused by a Part 15 user, the FCC can require the Part
              15 user to
              curtail transmissions that create interference. In addition, if users
              of our
              products or services experience excessive interference from primary
              users,
              market acceptance of our products or services could be adversely affected,
              which
              could materially and adversely affect our business and operating results.
              The
              FCC, however, has established certain standards that create an irrefutable
              presumption of noninterference for Part 15 users and we believe that
              our
              products comply with such requirements. There can be no assurance that
              the
              occurrence of regulatory changes, including changes in the allocation
              of
              available license-exempt frequency spectrum, changes in the use of
              allocated
              frequency spectrum, or modification to the standards establishing an
              irrefutable
              presumption of non-interference for unlicensed Part 15 users, would
              not
              significantly affect our operations by rendering current products and
              services
              obsolete, restricting the applications and markets served by our products
              or
              increasing the opportunity for additional competition.
 
 Several
              changes by the FCC were approved within the last several years including
              changes
              in the availability of spectrum, as well as the granting of an interim
              waiver.
              These approved changes could create opportunities for other wireless
              networking
              products and services. There can be no assurance that new regulations
              will not
              be promulgated, that could materially and adversely affect our business
              and
              operating results. It is possible that the United States and other
              jurisdictions
              will adopt new laws and regulations affecting the pricing, characteristics
              and
              quality of broadband wireless systems and products. Increased government
              regulations could:
 
 ·
                    decrease
                        the growth of the broadband wireless
                        industry;
 
 ·
                    hinder
                        our ability to conduct business
                        internationally;
 
 ·
                    reduce
                        our revenues;
 
 ·
                    affect
                        the costs and pricing of our
                        products;
 
 ·
                    increase
                        our operating expenses; and
 
 ·
                    expose
                        us to significant liabilities.
 
 Any
              of
              these events or circumstances could seriously harm our business and
              results of
              operations.
  8
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  **Personnel**
 
 We
                have
                thirteen full-time employees, located at our corporate offices in
                Anaheim,
                California and Marietta, Georgia.
 
 **Corporate
              History**
 
 NextPhase was
              incorporated on August 28, 1995 in Nevada under the name of Professional
              Mining
              Consultants, Inc.
 
 On
              August
              3, 2004 the Company, then known as Edison Renewables, Inc., consummated
              a share
              exchange in which it issued 12,943,000 shares of common stock, or approximately
              76% of the company's outstanding common stock, to the shareholders
              of NextPhase
              Technologies, Inc. ("NTI") in exchange for all of the shares of NTI.
              As a
              result, NTI became a wholly-owned subsidiary of the Company. NTI did
              not have an
              operating business. Its assets were technology related to high-speed
              wireless
              networks, which had an ability to penetrate populated areas, and special
              antennas and equipment in the area of microwave technology.
 
 Prior
              to
              August 3, 2004 the Company had no revenues, while it incurred expenses
              in the
              development of its business. In fiscal year 2007, NextPhase generated
              approximately $365,753 in revenues and continued to incur relatively
              substantial
              expenses to develop its business.  Effective November 2006 NextPhase’s
              wireless business was combined with SpeedFactory’s
              business.  SpeedFactory revenues were $1,620,675 for the year ended
              March 31, 2007.
 
 The
              Company's corporate address is 300 S. Harbor Blvd, Anaheim, CA 92805 and
              its telephone number is (800) 748-5548. The company maintains a website
              at
              www.npwireless.com. Information contained on the website is not part
              of this
              report.
 
 **Subsidiaries**
 
 The
              company has two wholly-owned subsidiaries.
 
 ·
                    **SPEEDFACTORY,
                        INC**., a Nevada corporation, which operates the company's
                        Internet
                        Service Provider business.
 
 ·
                    **NEXTPHASE
                        TECHNOLOGIES, INC**., a California corporation, which does not
                        currently have any operations.
 **Available
              Information**
 
 The
              Company files annual and quarterly reports, proxy and information
              statements, and registration statements with the SEC. The public may
              read and
              copy any materials we file with the SEC at the SEC's Public Reference
              Room at
              450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
              information on the operation of the Public Reference Room by calling
              the SEC at
              1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
              proxy
              and information statements, and other information regarding issuers
              such as the
              company that files electronically with the SEC and state the address
              of that
              site (http://www.sec.gov).
 
 9
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 **ITEM
              2. DESCRIPTIONOF PROPERTY**
 
 The
              Company leases 1,748 square feet of Class A office space at 300 S.
              Harbor Blvd.,
              Suite 500, Anaheim, California, which serves as the corporate offices
              and
              Company headquarters. The monthly cost of this office space is $2,359
              and the
              lease expires on October 31, 2009.
 
 The
              Company also leases 2,767 square feet of additional Class A office
              space in the
              same building as its corporate offices. The monthly cost of this office
              space is
              $3,598 and the lease expires on April 30, 2009.
 
 The
              Company also leases 1,169 square feet of data center space in the same
              building
              as its corporate offices. This space serves as the Company's main data
              facility
              and houses the equipment that provides broadband Internet service to
              the
              surrounding areas. The monthly cost of this data center space is $2,630
              and the
              lease expires on November 30, 2008.
 
 The
                Company leases approximately 2,000 square feet of space in Marietta,
                Georgia,
                which serves as a corporate office. This lease calls for monthly
                payments of
                $2,350 and expires in April 2008.
 NextPhase's
              facilities are adequate for its current needs and anticipated needs
              for the next
              12 months. However, in the event we consummate any acquisitions in
              the future,
              we may need additional or alternative space.
 
 **ITEM
              3. LEGALPROCEEDINGS**
 
 The
              Company is subject to legal proceedings and claims that arise in the
              ordinary
              course of its business. Although occasional adverse decisions or settlements
              may
              occur, the Company believes that the final disposition of such matters
              will not
              have material adverse effect on its financial position, results of
              operations or
              liquidity.
 
 **ITEM
              4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY
              HOLDERS**
 
 None
 
 10
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  **PART
              II**
 
 
 **ITEM
              5. MARKETFOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
              SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES**
 
 NextPhase
              Wireless' common stock trades in the over-the-counter market and is
              quoted on
              the OTC Bulletin Board under the trading symbol NXPW. As of July 12,
              2007, we
              had 31,838,955 shares of common stock issued and outstanding.
 
 The
              following table sets forth, for the periods indicated, the high and
              low bid
              prices per share of our common stock as quoted on the OTC Bulletin
              Board. The
              quotations reflect inter-dealer quotations without retail markup, markdown,
              or
              commission, and may not represent actual transactions.
 
 *Source:
              www.quotemedia.com*
 
 **High**
                    
                    ****
                    **Low****2007
                        Fiscal Year**First
                        Quarter
                    
                    $
                    0.40
                    
                    
                    $
                    0.12Second
                        Quarter
                    
                    
                    0.18
                    
                    
                    
                    0.05Third
                        Quarter
                    
                    
                    0.17
                    
                    
                    
                    0.05Fourth
                        Quarter
                    
                    
                    0.17
                    
                    
                    
                    0.08**2006
                        Fiscal Year**First
                        Quarter
                    
                    $
                    2.50
                    
                    
                    $
                    0.93Second
                        Quarter
                    
                    
                    1.25
                    
                    
                    
                    0.25Third
                        Quarter
                    
                    
                    0.40
                    
                    
                    
                    0.22Fourth
                        Quarter
                    
                    
                    0.45
                    
                    
                    
                    0.20
  As
              of
              July 12, 2007, the last reported sale price of the Company's stock
              was $0.14 per
              share.
 
 11
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  **Dividend
              Policy**
 
 No
              dividends have been paid by the Company since its inception. We currently
              intend
              to retain any earnings for use in the business and therefore do not
              anticipate
              paying any dividends in the near future. Dividends on our common stock
              can be
              paid lawfully only out of current and retained earnings and surplus
              of the
              Company, when, and if, declared by the Board of Directors. We have
              not declared
              or paid any dividends on the common stock and there is no assurance
              dividends
              will be paid in the foreseeable future. The payment of dividends in
              the future
              rests within the discretion of the Board of Directors and will depend,
              among
              other things, upon our earnings, our capital requirements and our financial
              condition, as well as other factors, which the Board of Directors deems
              relevant.
 
 **Holders**
 
 There
              were 425 stockholders of record of the Company's common stock as of
              July 12,
              2007.
 
 **Securities
              Authorized for Issuance under Equity Compensation
              Plans**
 
 NextPhase
                adopted its 2003 Equity Participation Plan (the “2003 Plan”) on February 24,
                2003. Our shareholders approved the adoption of the 2003 Plan by
                majority
                written consent on the same day. No securities have been granted
                or issued under
                the 2003 Plan. NextPhase adopted its 2005 Employee Stock Compensation
                Plan
                (the”2005 Plan”) on October 19, 2005. This 2005 Plan has not been approved by
                the Company's stockholders. This Plan will be used to issue shares
                of common
                stock of NextPhase to the employees of NextPhase Wireless and its
                subsidiaries,
                in payment of wages, salary, bonuses or other compensation from time
                to time. No
                options, warrants or other rights exercisable or convertible into
                common stock
                or other securities of the Company, are issuable under the 2005
                Plan.
 
 The
                2003
                plan is currently administered by a Compensation Committee selected by the
                Board.
 
 NextPhase
                has reserved a total of 20,000,000 shares of common stock for issuance
                under the
                2003 Plan. As of March 31, 2007, -0- shares of common stock had been
                issued and
                20,000,000 shares remained available for issuance under this 2003
                Plan. As
                a condition to receiving shares under the 2003 Plan, the employee
                receiving the
                shares must consent in writing to accept shares in payment of wages,
                salary,
                bonus or other compensation, as the case may be, prior to the issuance
                of shares
                to that employee under the 2003 Plan.
 The
              board
              of directors of NextPhase may terminate the 2005 Plan at any time or
              make
              amendments or modifications which the board deems advisable from time
              to time,
              including among other things.
 
 ·
                    Increasing
                        the maximum number of shares which can be issued under the
                        2005 Plan,
                        and
 
 ·
                    Changing
                        the designations of class of employees who are eligible to
                        receive shares
                        under the 2005 Plan.
  12
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  **Recent
              Sales of Unregistered Securities; Use of Proceeds from Registered
              Securities**
 
 On
              April
              5, 2006, we issued 30,000 shares of our common stock valued at $9,600
              to a
              consultant for consulting services. The issuance was exempt from registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              April
              5, 2006, we issued 10,000 shares of our common stock valued at $3,400
              to a
              former employee for services rendered. The issuance was exempt from
              registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              April
              27, 2006 we issued 30,000 shares of our common stock valued at $8,400
              to a
              consultant for consulting services. The issuance was exempt from registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              June
              14, 2006 we issued 50,000 shares of our common stock valued at $7,500
              to a
              consultant for consulting services. The issuance was exempt from registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              June
              14, 2006 we issued 50,000 shares of our common stock valued at $25,000
              to an
              individual for the purchase of assets. The issuance was exempt from
              registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              August
              4, 2006, we issued 50,000 shares of our common stock valued at $4,500
              to an
              employee for an employee bonus. The issuance was exempt from registration
              under
              Section 4(2) of the Securities Act of 1933.
 
 On
              August
              21, 2006 we issued 240,000 shares of our common stock valued at $20,400
              to a
              consultant for consulting services. The issuance was exempt from registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              October 18, 2006 we issued 230,769 shares of our common stock valued
              at $24,231
              to an officer director in lieu of salary. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              October 18, 2006 we issued 230,769 shares of our common stock valued
              at $24,231
              to an officer director in lieu of salary. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              October 18, 2006 we issued 76,923 shares of our common stock valued
              at $8,077 to
              an officer director in lieu of salary. The issuance was exempt from
              registration
              under Section 4(2) of the Securities Act of 1933.
 
 On
              November 8, 2006 we issued 480,000 shares of our common stock valued
              at $40,800
              to a consultant for consulting services. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              November 8, 2006 we issued 520,939 shares of our common stock valued
              at $69,000
              to a note holder for payment of interest. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
  13
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  On
              January 4, 2007 we issued 500,000 shares of our common stock valued
              at $45,000
              to an officer director in lieu of salary. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              January 4, 2007 we issued 500,000 shares of our common stock valued
              at $45,000
              to an officer director in lieu of salary. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              January 4, 2007 we issued 1,180,000 shares of our common stock valued
              at
              $106,200 to an officer director in lieu of salary. The issuance was
              exempt from
              registration under Section 4(2) of the Securities Act of 1933.
 
 On
              February 1, 2007 we issued 383,333 shares of our common stock valued
              at $34,500
              to a note holder for payment of interest. The issuance was exempt from
              registration under Section 4(2) of the Securities Act of 1933.
  None
              of
              the sales of securities described above have been registered with the
              Securities
              and Exchange Commission because they are believed to be exempt from
              registration
              under the Securities Act of 1933 pursuant to Regulation D, Rule 506,
              promulgated
              thereunder or generally section 4(2) of the Act. Each purchaser represented
              his,
              her or its intention to acquire the securities for investment only
              and not with
              a view toward distribution. Each investor was given adequate information
              about
              us to make an informed investment decision. We did not engage in any
              general
              solicitation or advertising. The stock certificates issued in each
              case contain
              an appropriate legend identifying each as restricted stock.
 
 Since
              March 31, 2007 we have not issued any shares that were not registered
              under the
              Securities Act.
  **ITEM
              6. MANAGEMENT'SDISCUSSION AND ANALYSIS OR PLAN OF
              OPERATION**
 
 The
              Management's Discussion and Analysis is intended to help shareholders
              and other
              readers understand the dynamics of NextPhase's business and the key
              factors
              underlying its financial results. It explains trends in NextPhase's
              financial
              condition and results of operations for the year ended March 31, 2007
              compared
              with the operating results for the year ended March 31, 2006.
 
 14
 Table
                  of Contents
  **Forward
              Looking Statements**
 
 Certain
              information contained in this report may include "forward-looking statements"
              within the meaning of the Private Securities Litigation Reform Act
              of 1995, and
              is subject to the safe harbor created by that act. The safe harbor
              created by
              the Securities Litigation Reform Act will not apply to certain "forward
              looking
              statements" because we issued "penny stock" (as defined in Section
              3(a) (51) of
              the Securities Exchange Act of 1934 and Rule 3a51-1 under the Exchange
              Act)
              during the three year period preceding the date(s) on which those forward
              looking statements were first made, except to the extent otherwise
              specifically
              provided by rule, regulation or order of the Securities and Exchange
              Commission.
              We caution readers that certain important factors may affect our actual
              results
              and could cause such results to differ materially from any forward-looking
              statements which may be deemed to have been made in this Report or
              which are
              otherwise made by or on behalf of us. For this purpose, any statements
              contained
              in this report that are not statements of historical fact may be deemed
              to be
              forward-looking statements. Without limiting the generality of the
              foregoing,
              words such as "may", "will", "expect", "believe", "explore", "consider",
              "anticipate", "intend", "could", "estimate", "plan", "propose", "seem",
              "hope"
              or "continue" or the negative variations of those words or comparable
              terminology are intended to identify forward-looking statements. Factors
              that
              may affect our results include, but are not limited to, the risks and
              uncertainties associated with:
 
 ·
                    our
                        ability to raise capital necessary to sustain our anticipated
                        operations
                        and implement our proposed business
                        plan,
 
 ·
                    our
                        ability to implement our proposed business
                        plan,
 
 ·
                    the
                        ability to successfully integrate the operations of businesses
                        we have
                        acquired, or may acquire in the future, into our
                        operations,
 
 ·
                    our
                        ability to generate sufficient cash to pay our lenders and
                        other
                        creditors,
 
 ·
                    our
                        ability to obtain regulatory permits and approvals to operate
                        in the
                        high-speed wireless network
                        industry,
 
 ·
                    the
                        introduction of new broadband connectivity technologies by
                        our competitors
                        that may have advantages over our planned products and may
                        make our
                        planned products less attractive to our potential
                        customers,
 
 ·
                    our
                        ability to identify and complete acquisitions and successfully
                        integrate
                        the businesses we acquire, if any,
 
 ·
                    our
                        ability to employ and retain qualified management and
                        employees,
 
 ·
                    our
                        dependence on the efforts and abilities of our current employees
                        and
                        executive officers,
 
 ·
                    changes
                        in government regulations that are applicable to our anticipated
                        business,
 
 ·
                    changes
                        in the demand for our services,
 
 ·
                    the
                        degree and nature of our
                        competition,
 
 ·
                    our
                        lack of diversification of our business
                        plan,
 
 ·
                    the
                        general volatility of the capital markets and the establishment
                        of a
                        market for our shares, and
 
 ·
                    disruption
                        in the economic and financial conditions primarily from the
                        impact of past
                        terrorist attacks in the United States, threats of future
                        attacks, police
                        and military activities overseas and other disruptive worldwide
                        political
                        events.
  15
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  We
              are
              also subject to other risks detailed from time to time in other SEC
              filings and
              elsewhere in this report. Any one or more of these uncertainties, risks
              and
              other influences could materially affect our results of operations
              and whether
              forward-looking statements made by us ultimately prove to be accurate.
              Our
              actual results, performance and achievements could differ materially
              from those
              expressed or implied in these forward-looking statements. We undertake
              no
              obligation to publicly update or revise any forward-looking statements,
              whether
              from new information, future events or otherwise.
 
 Management
              believes that cash on hand and cash generated from operations may be
              insufficient to fund its current or planned operating needs, and the
              Company
              currently has insufficient revenue to fund its operations. The Company
              plans on
              funding working capital requirements, necessary equipment purchases,
              marketing
              costs, and all other operations for the next quarter and foreseeable
              future by
              raising capital with the sale of equity and/or debt securities.
 
 **Financial
              Statement Overview**
 
 *Nature
              of Operations*
 NextPhase
              was incorporated on August 28, 1995 in Nevada under the name of Professional
              Mining Consultants, Inc.
 
 Effective
                April 5, 2006, through its wholly-owned subsidiary SpeedFactory,
                NextPhase
                acquired the internet service and connectivity business assets previously
                operated by Synkronus under the name “SpeedFactory”. Management's plans are
                discussed further in the Going Concern portion of Note 1.
 
 Prior
                to
                the acquisition of SpeedFactory, the Company has a limited operating
                history
                with revenue-generating products and services only recently entering
                the market.
                The consolidated financial statements include the accounts of the
                Company and
                its wholly-owned subsidiaries, NTI and SpeedFactory.  NTI
                was engaged in the development of a web-based software
                product,  the  development  of  which  has  been  abandoned.  The
                costs of the development were paid by its then parent
                company.  NextPhase had no operations prior to the reverse
                acquisition.  Management’s plans are discussed further in the Going
                Concern portion of Note 1 of the consolidated financial statements.
                On January
                21, 2005 the Company changed its name from Edison Renewables, Inc.
                to NextPhase
                Wireless, Inc.
  Effective
                October 1, 2006, all revenue generating activity was combined with
                SpeedFactory.
                With the acquisition of SpeedFactory, we have enhanced our position as a
                nationwide provider of scalable, reliable and cost effective connectivity
                solutions, expanding our portfolio of products and services to include
                DSL, T1s,
                co-location and web hosting. We continue to extend our wireless “footprint” in
                Southern California, through a combination of organic growth and
                acquisitions,
                we have continued to add small to medium business subscribers, small
                office/home
                office (SOHO) subscribers, and residential subscribers in underserved
                markets to
                our network.
 16
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 **Results
              of Operations**
 
 For
              the
              year ended March 31, 2007, revenue increased to $ 1,986,426 compared
              to $643,367
              during the year ended March 31, 2006, an increase of $1,343,059 or
              approximately
              209%. The increase was due to revenues from the SpeedFactory acquisition. 
Revenues for NextPhase were $367,753 through October 31, 2006 when
              its
              operations were combined with SpeedFactory.
 
 Cost
              of
              revenue was $1,116,874 or 56.2% of sales for the year ended March 31,
              2007,
              compared to $519,404 or 80.7% during the year ended March 31, 2006. The
              increase was primarily due to the SpeedFactory acquisition, which had
              a scalable
              customer base and favorable contracts for bandwidth costs used in providing
              the
              company's portfolio of connectivity products and services.
 
 Gross
              profit increased to $869,552 for the year ended March 31, 2007, compared
              to
              $123,963 for the year ended March 31, 2006. The increase in gross profit
              of
              $745,589 or 601% was due to the SpeedFactory acquisition.  The
              Company feels that its business is now scalable and plans to add additional
              companies with similar results to the SpeedFactory acquisition.
 
 Selling,
                  general, and administrative expenses were $1,879,202 for the year ended
                  March 31, 2007, compared to $1,573,070 for the year ended March
                  31, 2006, an
                  increase of $306,132, or approximately 19.5%. The increase was
                  due to the
                  acquisition of SpeedFactory, which related expense was $532,144;
                  The NextPhase
                  expense for 2007 was $1,347,058 versus $1,573,070 in 2006 which
                  represented a
                  decrease of $226,012 or $14.4%.  The improvement was due to lower
                  legal expense of $151,970 and marketing expense of $67,940. The
                  improvement in
                  operations was due to better absorption of SG&A expenses as revenues
                  increased over the year.  As a result, selling, general and
                  administrative expenses represented 94.6% of revenue in 2007 versus
                  244.5% in
                  2006.  The Company’s expenses will continue to reduce as a
                  percentage of revenues as the Company follows its acquisition
                  strategy.
 
 Stock-based
                  compensation expense was $653,363 in the year ended March 31, 2007
                  as compared
                  with $1,395,045 in the year ended March 31, 2006.  Although the
                  reduction reflected a lower average stock price in 2006, the Company
                  has made a
                  conscious decision to restrict issuance of stock to prevent dilution
                  and pay
                  expenses wherever possible in cash.
 
 Depreciation
                  and amortization expense was $337,715 in the year ended March 31,
                  2007 versus
                  $70,248 in 2006. The increase was generally due to the depreciation
                  and
                  amortization of the assets acquired in the SpeedFactory acquisition
                  of $241,886.
                  The purchase price of SpeedFactory was allocated to the fair value
                  of assets
                  acquired as follows:
 **Amount**
                      
                      **Estimated
                          Lives**Computers
                          and related equipment
                      
                      $
                      100,000
                      
                      3
                          yearsCustomer
                          lists
                      
                      
                      980,000
                      
                      5
                          yearsTrademarks
                      
                      
                      100,000
                      
                      indefiniteSupply
                          contracts
                      
                      
                      60,000
                      
                      5
                          yearsGoodwill
                      
                      
                      260,000
                      
                      indefinite$
                      1,500,000
  17
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  The
              trademarks are deemed to have an indefinite life and, accordingly,
              are not being
              amortized, but will be subject to periodic impairment testing at future
              periods
              in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets".
              The
              customer lists and supply contracts will be amortized based on estimated
              weighted cash flows over their lives.
 The
                operating loss for the Company for the year ended March 31, 2007
                was
                $2,000,728 versus $2,914,400 for the year ended March 31,
                2006.  Legal settlement expense was $318,957 during the year ended
                March 31, 2007, as compared with legal settlement income $1,115,500
                during the
                prior year.    The associated cash operating loss was
                $1,009,650 for the year ended March 31, 2007 as compared with $1,449,107
                for
                2006.  The improvement was $439,457 or 30.3%.  SpeedFactory
                had an operating profit of $217,872. During the year ended March
                31, 2007 the
                Company settled all significant outstanding litigation and subsequent
                to year
                end, received a favorable settlement from its former chairman, which
                resulted in
                a gain in the amount of $95,141.  During the year ended March 31,
                2006, the Company settled all litigations which had been previously
                disclosed in
                the Company's reports filed with the SEC under the Securities Exchange
                Act of
                1934
 
 Interest
                expense, was $157,238 during the year ended March 31, 2007, compared
                to $65,027
                during the prior year. The increase is primarily due to debt issued
                in
                connection with the acquisition of SpeedFactory in the amount of
                $1,500,000.
 
 The
                net
                loss for the year ended March 31, 2007 was $2,476,923 versus $1,861,927
                for the year ended March 31, 2006.  The 2006 loss was greatly
                reduced by the gain on legal settlements in the amount of $1,115,500.
                Monthly
                operating cash losses are now approximately $85,000 per month as compared
                with $121,000 in 2006.  Management expects this to continue to decline
                as the Company completes its acquisition strategy, two of which are
                expected to
                close in the quarter ended September 30, 2007. The Company had a
                net loss of
                $0.10 per share during the year ended March 31, 2007 as compared
                with a net loss
                of $0.08 per share for the year ended March 31, 2006.
 **Liquidity
              and Capital Resources**
 
 As
                of
                March 31, 2007, the Company had a cash balance of $71,683 and the
                Company's
                accumulated deficit was $8,631,710. The Company had negative working
                capital of
                $1,864,981.  Total liabilities were $4,393,646, which included
                accounts payable of $1,158,673, accrued expenses of $290,015, deferred
                revenue
                of $78,000 and notes and advances payable of $2,866,958.  The
                Company’s cash operating loss for 2007 was $1,009,650 and the Company
                currently is using $75,000 cash per month in operations.
 
 During
                the year ended March 31, 2007, the Company developed a plan to integrate
                additional ISPs in a scalable roll-up strategy.  The Company will
                acquire only profitable operations, both wireless and land based,
                which are
                synergistic to the Company’s current operations. The Company has entered into
                letters of intent to acquire two companies which would greatly reduce
                the
                negative cash flow on a monthly basis. The Company expects the first
                acquisition
                to be completed in July 2007 and the second one is scheduled for
                early fall
                2007. Under its plans, management expects to generate positive operating
                cash
                flow during the fourth quarter of calendar 2007. There is no assurance
                that
                management will achieve its plan. There is further no assurance that
                the
                proceeds from operating cash flows or future financings will be sufficient
                to
                obtain profitable operations. The acquisitions will be made by a
                cash purchase
                and there is no assurance that the Company will be able to raise
                the required
                capital through equity or debt offerings.
 
 The
                accompanying consolidated financial statements were prepared on a
                going concern
                basis, which contemplates the realization of assets and the settlement
                of
                liabilities in the normal course of business. The Company has incurred
                losses
                from operations and negative cash flows from operating activities
                during the
                year ended March 31, 2007 and 2006. The Company also had a working
                capital
                deficiency as of March 31, 2007 of $1,864,981. These factors raise
                substantial
                doubt about the Company’s ability to continue as a going concern. In April 2006,
                the Company obtained long-term financing of $1,500,000 in connection
                with the
                acquisition of SpeedFactory.  During the year ended March 31, 2007,
                the Company executed short-term convertible notes for
                $451,000.  Subsequent to March 31, 2007, the Company issued additional
                short-term convertible notes totaling $200,000.  All of the short-term
                convertible notes and due in one year from the date of issuance.
                They  provide for mandatory conversion when the Company’s common stock
                reaches $0.20 or above for a period of 10 consecutive days, at which
                time the
                principal and accrued interest due under the note will convert into
                common stock
                of the Company at a rate of $0.15 per share.
  18
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  The
              Company has a convertible note payable in the amount of $2,300,000
              which is due
              in full on April 1, 2008. Upon maturity, the note and accrued interest
              are
              convertible into common stock of the Company at the lower of the fair
              market
              value of the Company's common stock at the date of conversion or $0.33
              per
              share. The minimum price at which the note and accrued interest may
              convert is
              $0.15 per share.
 
 Notes
              payable totaling $63,000, along with accrued interest and expenses
              were
              cancelled subsequent to March 31, 2007 in a settlement with the Company’s former
              chairman.
 
 NextPhase
              plans on continuing to fund working capital requirements, necessary
              equipment
              purchases, marketing costs, and other operations for the next year
              and
              foreseeable future by raising capital through the sale of equity and/or
              debt
              securities, issuing common stock in lieu of cash for services and by
              advances
              from shareholders.
 
 The
              Company expects that any sale of additional equity securities or convertible
              debt will result in additional dilution to our stockholders. The Company
              can
              give no assurance that it will be able to generate adequate funds from
              operations, that funds will be available to us from debt or equity
              financing, or
              that if available, the Company will be able to obtain such funds on
              favorable
              terms and conditions. If the Company cannot secure additional funds
              it will not
              be able to continue as a going concern. The Company currently has no
              definitive
              arrangements with respect to additional financing.
 
 By
              adjusting its operations and development to the level of capitalization,
              management believes it has sufficient capital resources to meet projected
              cash
              flow deficits through the next year. However, if thereafter, we are
              not
              successful in generating sufficient liquidity from operations or in
              raising
              sufficient capital resources, on terms acceptable to us, this could
              have a
              material adverse effect on our business, results of operations, liquidity
              and
              financial condition.
 
 The
              report of our registered public accounting firm  on our March 31, 2007
              consolidated financial statements states that our recurring losses
              raise
              substantial doubt about our ability to continue as a going concern.
 
 **Off-Balance
              SheetArrangements**
 
 We
              have
              no off-balance sheet arrangements that have or are reasonably likely
              to have a
              current or future effect on our financial condition, changes in financial
              condition, revenues or expenses, results of operation, liquidity, capital
              expenditures or capital resources that is material to investors.
 
 **Inflation**
 
 In
              the
              opinion of management, inflation has not had a material effect on the
              Company's
              financial condition or results of its operations
 
 **Critical
              Accounting Policies**
 
 Our
              consolidated financial statements are prepared in accordance with accounting
              principles generally accepted in the U.S., which requires us to make
              estimates
              and assumptions in certain circumstances that affect amounts reported.
              In
              preparing these financial statements, management has made its best
              estimates and
              judgments of certain amounts, giving due consideration to materiality.
              We
              believe that of our significant accounting policies (more fully described
              in
              notes to the consolidated financial statements), which are particularly
              important to the portrayal of our results of operations and financial
              position
              and may require the application of a higher level of judgment by our
              management,
              and as a result are subject to an inherent degree of uncertainty. While
              there
              are a number of accounting policies, methods and estimates affecting
              our
              consolidated financial statements, areas that are particularly significant
              include:
  *Revenue
              Recognition and Deferred Revenue*
 Revenues
              are recognized in the period that services are provided.  For revenue
              from product sales, the Company recognizes revenue in accordance with
              Staff
              Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” ("SAB No. 104"),
              which superseded SAB No. 101, Revenue Recognition In Financial Statements
              ("SAB
              No. 101"). SAB No. 104 requires that four basic criteria must be met
              before
              revenue can be recognized: (1) persuasive evidence of an arrangement
              exists; (2)
              delivery has occurred; (3) the selling price is fixed and determinable;
              and (4)
              collectibility is reasonably assured. Determination of criteria (3)
              and (4) are
              based on management's judgments regarding the fixed nature of the selling
              prices
              of the products delivered and the collectibility of those amounts.
              Provisions
              for discounts and rebates to customers, estimated returns and allowances,
              and
              other adjustments are provided for in the same period the related sales
              are
              recorded. The Company defers any revenue for which the product has
              not been
              delivered or for which services have not been rendered or are subject
              to refund
              until such time that the Company and the customer jointly determine
              that the
              product has been delivered or services have been rendered or no refund
              will be
              required.
 19
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 SAB
              104
              incorporates Emerging Issues Task Force(“EITF”) issued No.00-21 issued ("EITF
              No. 00-21"), “Deliverable Revenue Arrangements.” EITF No. 00-21 addresses
              accounting for arrangements that may involve the delivery or performance
              of
              multiple products, services and/or rights to use assets. The effect
              of
              implementing EITF No. 00-21 on the Company's consolidated financial
              position and
              results of operations was not significant.
 
 The
              Company considers amounts to be earned once evidence of an arrangement
              has been
              obtained, services are delivered, fees are fixed or determinable, and
              collectibility is reasonably assured.  The Company generates and
              recognizes revenue as follows:
 
 Revenue
              from operating as a wireless Internet service provider of tiered wireless
              Internet services to business and residential subscribers:  Internet
              services are billed at the beginning of each month's activity at a
              fixed rate
              for each customer.  Customers sign an annual agreement or utilize the
              service on a month-to-month basis.  Revenue not yet earned is recorded
              as deferred revenue.
  Revenue
              from the sale and configuration of wireless equipment:  NextPhase acts
              as a reseller of certain components and equipment related to its products
              and
              services.  Equipment revenue is recognized at the time of shipment FOB
              to the customer.  Configuration is billed at an hourly rate and
              recognized after completion. Costs associated with the equipment are
              expensed at
              the time of shipment.  In order to maximize the Company’s cash flows,
              revenue from the sale and configuration of wireless equipment is sometimes
              billed in advance of shipment. In such cases, these invoices are recorded
              as
              deferred revenue.
 
 Revenue
              from professional and consulting services provided by its
              staff:  These services include wireless network consulting,
              interference surveys, network management and telephone
              consulting.  Revenue is recognized after the professional or
              consulting service has been provided. In order to maximize the Company’s cash
              flows, revenue from professional services is sometimes billed in advance
              of
              project completion. In such cases, these invoices are recorded as deferred
              revenue.
 
 *Long-Lived
              Assets*
 The
              Company reviews its fixed assets and certain identifiable intangibles
              for
              impairment whenever events or changes in circumstances indicate that
              the
              carrying amount of an asset may not be recoverable. The test for impairment
              is
              required to be performed by management at least annually. Recoverability
              of
              assets to be held and used is measured by a comparison of the carrying
              amount of
              an asset to the future undiscounted operating cash flow expected to
              be generated
              by the asset. If such assets are considered to be impaired, the impairment
              to be
              recognized is measured by the amount by which the carrying amount of
              the asset
              exceeds the fair value of the asset. Long-lived assets to be disposed
              of are
              reported at the lower of carrying amount or fair value less costs to
              sell.
 
 As
              of
              March 31, 2007, The Company’s management believes there is no impairment of its
              long-lived assets.  There can be no assurance, however, that market
              conditions will not change which could result in impairment of long-lived
              assets
              in the future.
 
 20
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 *Goodwill
              and Other Intangible Assets*
 The
              Company has adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS
              No. 142 requires that goodwill and intangible assets deemed to have
              indefinite
              lives are no longer amortized but are subject to an annual impairment
              test which
              has two steps to determine whether asset impairment exists. The first
              step of
              the impairment test identifies potential impairment by comparing the
              fair value
              with the carrying amount of the reporting unit, including goodwill.
              If the
              carrying amount of the reporting unit exceeds its fair value, the second
              step of
              the impairment test shall be performed to measure the amount of the
              impairment
              loss, if any. Intangibles with indefinite useful lives are measured
              for
              impairment by the amount that the carrying value exceeds the estimated
              fair
              value of the intangible. The fair value is calculated using the income
              approach.
              Intangible assets with definite useful lives will continue to be amortized
              over
              their estimated useful lives. Any impairment is recorded at the date
              of
              determination.
  The
              changes in the carrying amount of goodwill for the year ended March
              31, 2007 are
              as follows:
 
 Balance,
                        April 1, 2006
                    
                    $
                    -Goodwill
                        acquired
                    
                    
                    260,000Balance,
                        March 31, 2007
                    
                    $
                    260,000
  The
              Company’s policy provides for annual evaluation of goodwill on the first day
              of
              the fourth fiscal quarter and whenever events and changes in circumstances
              suggest that the carrying amount may not be recoverable. Impairment
              of goodwill
              is tested at the operating segment level by comparing the segments'
              net carrying
              value, including goodwill, to the fair value of the segment. The fair
              values of
              our segments are estimated using a combination of the income or discounted
              cash
              flows approach and the market approach, which uses comparable market
              data. If
              the carrying amount of the segment exceeds its fair value, goodwill
              is
              potentially impaired and a second test would be performed to measure
              the amount
              of impairment loss, if any.
 
 *Business
              Combinations*
 In
              accordance with SFAS No. 141,  “Business Combinations,” the Company
              allocates the purchase price of acquired entities to the tangible and
              intangible
              assets acquired and, liabilities assumed, based on their estimated
              fair values.
              The Company engaged an independent third-party appraisal firm to assist
              management in determining the fair values of certain assets acquired
              and
              liabilities assumed. Such a valuation requires management to make significant
              estimates and assumptions, especially with respect to intangible
              assets.
 
 Management
              makes estimates of fair values based upon assumptions believed to be
              reasonable.
              These estimates are based on historical experience and information
              obtained from
              the management of the acquired companies. Critical estimates in valuing
              certain
              of the intangible assets include but are not limited to: future expected
              cash
              flows from revenues, customer relationships, key management and market
              position,
              assumptions about the period of time the acquired trade names will
              continue to
              be used in the Company's combined product portfolio, and discount rates
              used to
              establish fair value. These estimates are inherently uncertain and
              unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
              events and circumstances may occur which may affect the accuracyor validity
              of such
              assumptions, estimates or actual results.
 
 21
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  *Beneficial
              Conversion Feature*
 The
              convertible feature of one of the Company’s convertible notes provided for a
              rate of conversion that was below market value (see Note 5). Such feature
              is normally characterized as a “beneficial conversion feature” (“BCF”). Pursuant
              to Emerging Issues Task Force (“EITF”) Issue No. 98-5, “Accounting for
              Convertible Securities with Beneficial Conversion Features or Contingently
              Adjustable Conversion Ratio” and EITF No. 00-27, “Application of EITF Issue
              No. 98-5 to Certain Convertible Instruments”, the estimated relative fair
              value of the BCF was recorded as a discount from the face amount of
              the
              convertible note. The Company amortized the discount using the effective
              interest method through the conversion of such instrument.
 
 *Income
              Taxes*
 The
              Company utilizes the liability method of accounting for income taxes
              as set
              forth in SFAS No. 109, “Accounting for Income Taxes” (“SFAS
              No. 109”). Under the liability method, deferred taxes are determined based
              on the temporary differences between the financial statement and tax
              bases of
              assets and liabilities using enacted tax rates. A valuation allowance
              is
              recorded when it is more likely than not that some of the deferred
              tax assets
              will not be realized. The Company also determines its tax contingencies
              in
              accordance with SFAS No. 5, “Accounting for Contingencies.” The
              Company records estimated tax liabilities to the extent the contingencies
              are
              probable and can be reasonably estimated.
  *Stock-Based
              Compensation*
 As
              of
              March 31, 2007, the Company has not issued any share-based payments
              to its
              employees.
  In
              December 2004, the FASB issued SFAS No. 123 (revised 2004*),*”Share-Based
              Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) supersedes Accounting Principles
              Board (“APB”) No. 25 and amends SFAS No. 95, “Statement of Cash Flows.” SFAS No.
              123(R) requires all share-based payments to employees, including grants
              of
              employee stock options, to be recognized in the income statement based
              on their
              fair values. Pro forma disclosure is no longer an alternative. The
              provisions of
              this statement were adopted by the Company as of April 1, 2006.
 
 SFAS
              No.
              123(R) requires companies to recognize in the statement of operations
              the
              grant-date fair value of stock options and other equity-based compensation
              issued to employees. SFAS No. 123(R) also establishes accounting requirements
              for measuring, recognizing and reporting share-based compensation,
              including
              income tax considerations. The Company adopted SFAS No. 123(R) using
              the
              modified prospective application. Under the modified prospective application,
              the cost of new awards and awards modified, repurchased or cancelled
              after the
              required effective date and the portion of awards for which the requisite
              service has not been rendered (unvested awards) that are outstanding
              as of the
              required effective date are recognized as the requisite service is
              rendered on
              or after the required effective date. The compensation cost for that
              portion of
              awards is based on the grant-date fair value of those awards as calculated
              for
              either recognition or pro forma disclosures under SFAS No. 123.
 
 The
              adoption of SFAS No. 123(R)’s fair value method will have a negative impact on
              the Company’s results of operations if the Company grants share-based payments
              to its employees in the future, although it will have no impact on
              its overall
              financial position. The impact of adopting SFAS No. 123(R) cannot be
              predicted
              at this time because it will depend on levels of share-based payments
              granted in
              the future. SFAS No. 123(R) also requires the benefits of tax deductions
              in
              excess of recognized compensation cost to be reported as a financing
              cash flow,
              rather than as an operating cash flow as required under current accounting
              literature. The requirement will reduce net operating cash flows and
              increase
              net financing cash flows in periods of adoption.
  22
 Table
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  *Basic
              and Diluted Loss per Common Share*
 Basic
              loss per share is calculated by dividing net loss by the weighted average
              common
              shares outstanding during the period. Diluted net loss per share reflects
              the
              potential dilution to basic EPS that could occur upon conversion or
              exercise of
              securities, options or other such items to common shares using the
              treasury
              stock method, based upon the weighted average fair value of our common
              shares
              during the period.  During the years ended March 31, 2007 and 2006,
              the Company did not have any potentially dilutive securities and no
              common stock
              equivalents were considered in the calculation of the weighted average
              number of
              shares outstanding because they would be anti-dilutive.
 
 *Recent
              Accounting Pronouncements*
 In
              July 2006, the FASB
              issued  Interpretation No. 48, “Accounting for Uncertainty in Income
              Taxes” (“FIN No. 48”) which clarifies the accounting for uncertainty in income
              taxes recognized in the financial statements in accordance with SFAS
              No. 109, “Accounting for Income Taxes.” This pronouncement recommends a
              recognition threshold and measurement process for recording in the
              consolidated
              financial statements uncertain tax positions taken or expected to be
              taken in
              the Company’s tax return. FIN No. 48 also provides guidance on derecognition,
              classification, interest and penalties, accounting in interim periods
              and
              disclosure requirements for uncertain tax positions. The accounting
              provisions
              of FIN No. 48 will be effective for the Company beginning April 1,
              2007. The
              Company is in the process of evaluating the effect, if any, the adoption
              of FIN
              No. 48 will have on its consolidated financial statements.
 
 In
              September 2006, the FASB issued SFAS No. 157 “Fair Value
              Measurements,”  to eliminate the diversity in practice that exists due
              to the different definitions of fair value and the limited guidance
              for applying
              those definitions in accounting principals generally accepted in the
              United
              States of America that are dispersed among the many accounting pronouncements
              that require fair value measurements. SFAS No. 157 retains the exchange
              price
              notion in earlier definitions of fair value, but clarifies that the
              exchange
              price is the price in an orderly transaction between market participants
              to sell
              an asset or liability in the principal or most advantageous market
              for the asset
              or liability. Moreover, SFAS No. 157 states that the transaction is
              hypothetical at the measurement date, considered from the perspective
              of the
              market participant who holds the asset or liability. Consequently,
              fair value is
              defined as the price that would be received to sell an asset or paid
              to transfer
              a liability in an orderly transaction between market participants at
              the
              measurement date (an exit price), as opposed to the price that would
              be paid to
              acquire the asset or received to assume the liability at the measurement
              date
              (an entry price).
 
 SFAS
              No.
              157 also stipulates that, as a market-based measurement, fair value
              measurement
              should be determined based on the assumptions that market participants
              would use
              in pricing the asset or liability, and establishes a fair value hierarchy
              that
              distinguishes between (a) market participant assumptions developed
              based on
              market data obtained from sources independent of the reporting entity
              (observable inputs) and (b) the reporting entity's own assumptions
              about market
              participant assumptions developed based on the best information available
              in the
              circumstances (unobservable inputs). Finally, SFAS No. 157 expands
              disclosures
              about the use of fair value to measure assets and liabilities in interim
              and
              annual periods subsequent to initial recognition. Entities are encouraged
              to
              combine the fair value information disclosed under SFAS No. 157 with
              the fair
              value information disclosed under other accounting pronouncements,
              including
              SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” where
              practicable. The guidance in this Statement applies for derivatives
              and other
              financial instruments measured at fair value under SFAS No. 133, “Accounting for
              Derivative Instruments and Hedging Activities,” at initial recognition and in
              all subsequent periods.
 
 SFAS
              No.
              157 is effective for financial statements issued for fiscal years beginning
              after November 15, 2007, and interim periods within those fiscal years,
              although
              earlier application is encouraged. Additionally, prospective application
              of the
              provisions of SFAS No. 157 is required as of the beginning of the fiscal
              year in
              which it is initially applied, except when certain circumstances require
              retrospective application. The Company is currently evaluating the
              effect of
              adopting SFAS No. 157 on its consolidated financial statements.
 
 SFAS
              No. 159 permits all entities to choose to measure eligible items at
              fair value
              at specified election dates. A business entity will report unrealized
              gains and
              losses on items for which the fair value option has been elected in
              earnings (or
              another performance indicator if the business entity does not report
              earnings)
              at each subsequent reporting date. A not-for-profit organization will
              report
              unrealized gains and losses in its statement of activities or similar
              statement.
              The fair value option: ( *a* ) may be applied instrument by instrument,
              with a few exceptions, such as investments otherwise accounted for
              by the equity
              method; ( *b* ) is irrevocable (unless a new election date occurs); and
              (
*c* ) is applied only to entire instruments and not to portions
              of
              instruments. SFAS No. 159 is effective as of the beginning of an entity’s first
              fiscal year that begins after November 15, 2007.  Early adoption is
              permitted as of the beginning of the previous fiscal year provided
              that the
              entity makes that choice in the first 120 days of that fiscal year
              and also
              elects to apply the provisions of FASB Statement No. 157, “Fair Value
              Measurements.” The adoption of this pronouncement is not expected to have
              material effect on the Company’s consolidated financial statements
*.*
 
 *Risks
              and Uncertainties*
 The
              Company's operations are subject to new innovations in product design
              and
              function. Significant technological changes can have an adverse effect
              on the
              Company's future operating results. Design and development of new marketing
              strategies are important elements to achieve profitability in the Company's
              industries.
 
 23
 Table
                  of Contents
 
 **ITEM
              7. FINANCIALSTATEMENTS**
 
 The
              financial statements required by this item are included in this report
              after Part
              III
              Item 14, beginning after page 34.
 
 **ITEM
              8. CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE**
 
 On
                June
                15, 2007, upon recommendation of its Board of Directors, the Company
                dismissed
                its certifying accountant, RBSM LLP.  RBSM LLP’**s**
                report on the Company's consolidated financial statements for the
                two fiscal
                years ended March 31, 2006 and 2005 did not contain any adverse opinion
                or
                disclaimer of opinion; however, the audit contained an explanatory
                paragraph
                regarding the substantial doubt about the Company's ability to continue
                as a
                going concern. There were no disagreements with RBSM LLP on any matter of
                accounting principles or practices, financial statement disclosure,
                or auditing
                scope or procedure, during the two fiscal years ended March 31, 2006
                and during
                the interim periods ended December 31, 2006 , which, if not resolved
                to RBSM LLP
                satisfaction, would have caused it to make reference to the subject
                matter of
                the disagreement in connection with its report, as required by Item
                304(a)(3) of
                Regulation S-B. The Company engaged as its independent registered
                public
                accounting firm KMJ Corbin & Company LLP for the Company's fiscal year
                ending March 31, 2007. The Company has not consulted KMJ Corbin & Company
                LLP previously.
 
 **ITEM
              8A.  CONTROLSAND
              PROCEDURES**
 
 Disclosure
              controls and procedures are controls and other procedures that are
              designed to
              ensure that information required to be disclosed by us in the reports
              that we
              file or submit under the Exchange Act is recorded, processed, summarized
              and
              reported, within the time periods specified in the Securities and Exchange
              Commission's rules and forms. Disclosure controls and procedures include,
              without limitation, controls and procedures designed to ensure that
              information
              required to be disclosed by us in the reports that we file under the
              Exchange
              Act is accumulated and communicated to our management, including our
              principal
              executive and financial officers, as appropriate to allow timely decisions
              regarding required disclosure.
 
 **Evaluation
              of Disclosure Controls and Procedures**
 
 As
              of the
              end of the period covered by this Annual Report, we conducted an evaluation,
              under the supervision and with the participation of our Chief Executive
              Officer
              and Chief Financial Officer, of our disclosure controls and procedures
              (as
              defined in Rules 13a-15(e) of the Exchange. Based on their evaluation,
              our Chief
              Executive Officer and Chief Financial Officer concluded that our disclosure
              controls and procedures need improvement and were not adequate
              and  effective as of March 31, 2007 to ensure timely reporting with
              the Securities and Exchange Commission. Our management is in the process
              of
              identifying deficiencies with respect to our disclosure controls and
              procedures
              and implementing corrective measures, which includes the establishment
              of new
              internal policies related to financial reporting.
  24
 Table
                  of Contents
  **Changes
              in Internal Control over Financial Reporting**
 
 As
              required by Rule 13a-15(d), the Company's Chairman and Chief Financial
              Officer,
              also conducted an evaluation of the Company's internal controls over
              financial
              reporting to determine whether any changes occurred during the fourth
              fiscal
              quarter that have materially affected, or are reasonably likely to
              materially
              affect, the Company's internal control over financial reporting.
  During
              the preparation of the Company's consolidated financial statements
              as of and for
              the year ended March 31, 2007, the Company has concluded that the current
              system
              of disclosure controls and procedures was not effective because of
              the internal
              control weaknesses identified below. As a result of this conclusion,
              the Company
              has initiated the changes in internal control, to the extent possible
              given
              limitations in financial and manpower resources, also described below.
              It should
              be noted that any system of controls, however well designed and operated,
              can
              provide only reasonable, and not absolute, assurance that the objectives
              of the
              system will be met. In addition, the design of any control system is
              based in
              part upon certain assumptions about the likelihood of future
              events.
 
 **Lack
              of Adequate Financial and Management Resources**
 
 In
              April
              2006 NextPhase Wireless closed the acquisition of its SpeedFactory
              business by
              purchasing the assets of Synkronus.. The expansion of the Company's
              business
              through the SpeedFactory acquisition has caused a significant short-term
              increase in required information and financial analysis. NextPhase
              Wireless'
              financial and management resources were proven to be inadequate to
              address this
              increased workload in order to complete and file the Company's Annual
              Report on
              Form 10-KSB for the year ended March 31, 2007 on a timely basis. As
              a result,
              the Company has hired a new chief financial officer, redesigned work
              processes,
              reallocated responsibilities between existing employees and engaged
              additional
              contract resources to bolster its finance and accounting team and correct
              this
              material weakness. The Company feels that these measures will improve
              the
              quality of future period financial reporting and timeliness in completing
              reports.
 
 **ITEM
              8B.OTHER INFORMATION**
 
 None.
 
 25
 Table
                  of Contents
 
 **PART
              III**
  ITEM
              9. **DIRECTORS,
              EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
              SECTION 16(A)
              OF THE EXCHANGE ACT**
  Our
              executive officers and directors and their respective ages as of March
              31, 2007
              are as follows:
 
 **Current
              Executive Officers and Directors:**
  Set
              forth
              below is a brief description of the background and business experience
              of each
              of our directors and executive officers for the past five years.
  **Management**
 
 The
              following table sets forth the name, age and position of our executive
              officers,
              certain non-executive officers and directors:
 
 **Name**
                    **Age**
                    **Position
                        and Offices with the Company**Thomas
                        Hemingway
                    50
                    Chairman
                        of the BoardRobert
                        Ford
                    46
                    President,
                        Chief Executive Officer, Treasurer and Director (Principal
                        Executive
                        Officer)David
                        Noyes
                    64
                    Chief
                        Financial Officer (Principal Accounting Officer)Michael
                        Jones
                    51
                    President
                        of NextPhase International Division,
                        Director
  **Thomas
              Hemingway – Chairman and COO**, President and CEO, of Redwood Investment
              Group; previously, (2004 to 2006) the Chief Executive Officer and Chairman
              of
              Oxford Media. Mr. Hemingway has served as CEO and Chairman of Esynch
              Corporation
              (1998 to 2003), a publicly traded company, and Chairman and CEO of
              Intermark
              Corporation (1995 to 1998), a software developer and publisher in the
              entertainment markets. Prior, Mr. Hemingway was President and CEO of
              Omni
              Advanced Technologies and Intellinet Information Systems. In addition,
              Mr.
              Hemingway has been a consultant to several NASDAQ and privately held
              companies,
              including Smart House /LV, Great American Coffee Company (GACC), Redwood
              Investment Group, CBC, Pure Bioscience, and Smart OnLine. He has a
              B.A. from the
              State University of New York.
 
 **Robert
              Ford - Chief Executive Officer, President, Treasurer and a Director,** of
              NextPhase in February 2005. From November 2002 to June 2004 Mr. Ford
              was the
              Global Corporate Communications Manager at E.I. DuPont de Nemours. From
              June 2001 to November 2002 he was the Chief Information Officer of
              DuPont
              Solutions and Services. From January 2001 to November 2002 Mr. Ford
              served as
              the Chief Technology Officer of DuPont Global Services. From September
              1998 to
              November 2002 he was a Business Manager of DuPont Communications Solutions.
              Prior to that, from September 1997 to September 1998, Mr. Ford was
              the Chief
              Information Officer of DuPont External Affairs. Mr. Ford received his
              B.S. in
              Applied Science (Computing/Economics) from Wolverhampton University
              (UK) and his
              M.B.A. from Bradford University (UK).
 
 **David
              Noyes, – Chief Financial Officer** of NextPhase in April 2007. Prior he
              was Director of Monarch Capital Resources, LLC, a business-consulting
              firm.
              Previously, Mr. Noyes was a co-founder and Chief Financial Officer
              of Oxford
              Media, Inc. Prior he was Chief Financial Officer of Local.com Corp.
              (formerly
              Interchange Corporation) from January 2001 through January 2003 and
              Mergence
              Corporation from September 1999 through November 2000; Chief Executive
              Officer
              and Chief Financial Officer and Director of American Furnishings Corp.
              and
              California Mattress from 1996-1997; President, Chief Financial Officer
              and
              Director of California Software Products, Inc. in 1996; and, Director
              and Chief
              Financial Officer of Cla-Val Corporation in 1994-1995; President, Director
              and
              Chief Executive Officer of Structural Coatings, Inc. from 1990-1992;
              Executive
              Vice President, Chief Operating Officer and Chief Financial Officer
              of General
              Power Systems from 1984-1994 and Executive Vice President of Worldwide
              Operations for Scientific Drilling International from 1976 to 1984.
              He was also
              a senior Manager with Ernst and Young, and is a Certified Public Accountant
              and
              has a MBA and BS from UCLA.
 
 **Michael
              Jones****– Director** In August 2004, Michael Jones
              was elected a Director of NextPhase. In February 2006, Mr. Jones was
              elected
              President of the NextPhase International division. Since April 1, 2004,
              Mr.
              Jones has been a Director of NextPhase Technologies, Inc., which became
              our
              wholly-owned subsidiary as a result of a share exchange in August 2004.
              From
              June 2001 to August 2004, Mr. Jones was an independent consultant,
              specializing
              in the technology and communications industries and specifically on
              broadband,
              wireless data, and emerging technologies sectors. From August 1999
              to June 2001,
              Mr. Jones was the Vice President of Network Engineering and Operations
              for
              Flashcom, Inc. Prior to that, Mr. Jones was Vice President of Network
              Operations
              for IBCTV, Inc. from February 1998 to August 1999.
  26
 Table
                  of Contents
  **Audit
              Committee**
 
 We
              do not
              have an audit committee, and accordingly we do not have an audit committee
              financial expert. Currently we have three members of the Board of Directors,
              none of whom are independent. The Board of Directors plans to seek
              qualified
              candidates for election as independent board and audit committee members.
              We
              cannot anticipate when we will have independent board members' elected
              or will
              establish an audit committee.
 
 **Report
              of the Compensation Committee**
  We
              compensate our executive officers through a combination of a base salary,
              a cash
              bonus, and options to purchase shares of our common stock.  In addition, in
              the future, we may provide other perquisites to some of our executive
              officers.  We do not have a formal plan for determining the compensation of
              our executive officers. Instead, each executive officer negotiates
              their
              respective employment agreement with us.
  All
              agreements with our named executive officers that provide for payments
              to such
              named executive officers at, following or in connection with the resignation,
              retirement or other termination of such named executive officers, or
              a change in
              control of our company or a change in the responsibilities of such
              named
              executive officers following a change in control are set forth  in the
              following description of their respective employment agreements.
  **Section
              16(a) Beneficial Ownership Reporting Compliance**
 
 Section
              16 of the Exchange Act requires that reports of beneficial ownership
              of common
              shares and changes in such ownership be filed with the Securities and
              Exchange
              Commission by Section 16 "reporting persons," including directors,
              certain
              officers, holders of more than 10% of the outstanding common shares
              and certain
              trusts of which reporting persons are trustees. We are required to
              disclose in
              this Annual Report each reporting person whom we know to have failed
              to file any
              required reports under Section 16 on a timely basis during the fiscal
              year ended
              March 31, 2007. To our knowledge, during the fiscal year ended March
              31, 2007,
              our officers, directors and 10% stockholders complied with all Section
              16(a)
              filing requirements applicable to them, except that Stephen Young filed
              eight
              Forms 4 reporting 17 transactions late, Robert Ford filed three Forms
              4
              reporting three transactions late, and Viper Networks, Inc. filed one
              Form 4
              reporting one transaction late.
 
 **Code
              of Ethics**
 
 NextPhase
              has adopted a Code of Business Conduct and Ethics that applies to its
              Principal
              Executive Officer, Principal Financial Officer, Principal Accounting
              Officer, or
              persons performing similar functions, as well as the Company's other
              officers
              and managers, and the Company's directors.
 
 NextPhase's
              Code of Business Conduct and Ethics is posted on the Company's website
              at:
              http://www.npwireless.com/ethics-policy.
 
 NextPhase
              will furnish a copy of its Code of Business Conduct and Ethics without
              charge to
              any person upon request made in writing to NextPhase Wireless, Inc.,
              300 S.
              Harbor Blvd., Suite 500, Anaheim, California 92805 Attention:
              Secretary.
 
 27
 Table
                  of Contents
 
 **ITEM
              10. EXECUTIVECOMPENSATION**
  **Name
                        and**
                      **principal
                        position**
                    
                    **Year**
                    
                    **Salary**
                      **($)**
                    
                    **Bonus**
                      **($)**
                    
                    **Stock
                        Awards**
                      **($)**
                    
                    **Option**
                      **Awards**
                      **($)**
                    
                    **Non-Equity**
                      **Incentive
                        Plan**
                      **Compensation**
                      **($)**
                    
                    **Nonqualified**
                      **Deferred**
                      **Compensation**
                      **Earnings
                        ($)**
                    
                    **All
                        Other**
                      **Compensation**
                      **($)**
                    
                    **Total**
                      **($**)Tom
                        Hemingway
                      Chairman
                        and COO
                      Director
                        (1)
                    
                    2007
                      2006
                    
                    $48,461
                      n/a
                    
                    -0-
                      n/a
                    
                    $106,200
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    $154,661
                      n/aRobert
                        Ford
                      Chief
                        Executive Officer, Director (2)
                    
                    2007
                      2006
                    
                    $118,846
                      14,038
                    
                    -0-
                      -0-
                    
                    $114,231
                      240,962
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    $233,077
                      255,000Steven
                        Young
                      Former
                        Chairman of the Board    (3)
                    
                    2007
                      2006
                    
                    $55,384
                      16,535
                    
                    n/a
                      n/a
                    
                    $114,231
                      154,465
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    $169,615
                      171,000David
                        Noyes Chief Financial Officer
                    
                    2007
                      2006
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      -0-
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/a
                    
                    -0-
                      n/aJames
                        Wray Former
                      Vice
                        President, Secretary  (4)
                    
                    2007
                      2006
                    
                    -0-
                      36,715
                    
                    -0-
                      -0-
                    
                    $35,000
                      133,465
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    -0-
                      -0-
                    
                    $35,000
                      170,180
 (1)
                      Salary
                          was $180,000 annually effective February 1, 2007(2)
                      Salary
                          was $120,000 annually effective February 5, 2005 and $180,000
                          effective February 1, 2007. Stock grants were  made in lieu of
                          base compensation in the amount of $105,692 in 2006(3)
                      Base
                          salary of $120,000, with stock taken in lieu of base compensation
                          of
                          $103,465 in 2006. He left the Company December 28, 2006(4)
                      Base
                          salary of $120,000, with stock taken in lieu of base compensation
                          of
                          $103,465 in 2006. He resigned May 23,
                          2006.
  28
 Table
                    of Contents
  **Name**
                    
                    **Number
                        of**
                      **Securities**
                      **Underlying**
                      **Unexercised**
                      **Options**
                      **(#)**
                      **Exercisable**
                    
                    **Number
                        of**
                      **Securities**
                      **Underlying**
                      **Unexercised**
                      **Options**
                      **(#)**
                      **Unexercisable**
                    
                    **Equity**
                      **Incentive**
                      **Plan**
                      **Awards:**
                      **Number
                        of**
                      **Securities**
                      **Underlying**
                      **Unexercised**
                      **Unearned**
                      **Options**
                      **(#)**
                    
                    **Option**
                      **Exercise**
                      **Price**
                      **($)**
                    
                    **Option**
                      **Expiration**
                      **Date**
                    
                    **Number**
                      **of**
                      **Shares**
                      **or
                        Units**
                      **of**
                      **Stock
                        That**
                      **Have**
                      **Not**
                      **Vested**
                      **(#)**
                    
                    **Market**
                      **Value**
                      **of**
                      **Shares**
                      **or**
                      **Units**
                      **of**
                      **Stock**
                      **That**
                      **Have**
                      **Not**
                      **Vested**
                      **($)**
                    
                    **Equity**
                      **Incentive**
                      **Plan**
                      **Awards:**
                      **Number**
                      **of**
                      **Unearned**
                      **Shares,**
                      **Units
                        or**
                      **Other**
                      **Rights**
                      **That
                        Have**
                      **Not**
                      **Vested**
                      **(#)**
                    
                    **Equity**
                      **Incentive**
                      **Plan**
                      **Awards:**
                      **Market
                        or**
                      **Payout**
                      **Value
                        of**
                      **Unearned**
                      **Shares,**
                      **Units
                        or**
                      **Other**
                      **Rights**
                      **That**
                      **Have
                        Not**
                      **Vested**
                      **(#)**Tom
                        Hemingway
                      Chairman
                        and COO
                      Director
                        (1)
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0Robert
                        Ford
                      Chief
                        Executive Officer, Director (2)
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0Steven
                        Young
                      Former
                        Chairman of the Board    (3)
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0David
                        Noyes Chief Financial Officer
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0James
                        Wray Former
                      Vice
                        President, Secretary  (4)
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
                    
                    0
 
 The
              table
              below summarizes all compensation of our directors as of March 31,
              2007
 
 **DIRECTOR
              COMPENSATION**
 
 **Name**
                    
                    **Fees
                        Earned or**
                      **Paid
                        in**
                      **Cash**
                      **($)**
                    
                    **Stock
                        Awards**
                      **($)**
                    
                    **Option
                        Awards**
                      **($)**
                    
                    **Non-Equity**
                      **Incentive**
                      **Plan**
                      **Compensation**
                      **($)**
                    
                    **Non-Qualified**
                      **Deferred**
                      **Compensation**
                      **Earnings**
                      **($)**
                    
                    **All**
                      **Other**
                      **Compensation**
                      **($)**
                    
                    **Total**
                      **($)**Michael
                        Jones
                    
                    -0-
                    
                    $8,077
                    
                    -0-
                    
                    -0-
                    
                    -0-
                    
                    -0-
                    
                    $8,077Director
                    
                    -0-
                    
                    40,000
                    
                    -0-
                    
                    -0-
                    
                    -0-
                    
                    -0-
                    
                    40,000
 
  29
 Table
                  of Contents
  **Employment
              Agreements**
 
 **THOMAS
              HEMINGWAY**
 
 NextPhase
              and Thomas Hemingway are parties to an employment agreement which provides,
              among other things:
 
 ·
                    that
                        Mr. Hemingway will serve as NextPhase's Chairman and Chief
                        Operating
                        Officer,
 
 ·
                    for
                        a term of three (3) years, commencing February 1, 2007, subject
                        to earlier
                        termination by either party in accordance with the Employment
                        Agreement,
 
 ·
                    that
                        Mr. Hemingway’s salary shall be initially $180,000 per annum, increasing
                        to $250,000 on October 1, 2007, payable by the Company in
                        regular
                        installments in accordance with the Company's general payroll
                        practices.
 
 ·
                    that
                        Mr. Hemingway’s shall be eligible to receive additional stock bonuses
                        under the Company's 2005 Employee Stock Compensation
                        Plan.
 
 **ROBERT
              FORD**
 
 NextPhase
              and Robert Ford are parties to an employment agreement which provides,
              among
              other things:
 
 ·
                    that
                        Mr. Ford will serve as NextPhase's Chief Executive
                        Officer,
 
 ·
                    for
                        a term of three (3) years, commencing February 1, 2007, subject
                        to earlier
                        termination by either party in accordance with the Employment
                        Agreement,
 
 ·
                    that
                        Mr. Ford's salary shall be initially $180,000 per annum,
                        increasing to
                        $250,000 on October 1, 2007, payable by the Company in regular
                        installments in accordance with the Company's general payroll
                        practices.
 
 ·
                    that
                        Mr. Ford shall be eligible to receive additional stock bonuses
                        under the
                        Company's 2005 Employee Stock Compensation
                        Plan.
 
 
 30
 Table
                  of Contents
  **ITEM
                11. SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT AND RELATED STOCKHOLDER MATTERS**
 
 The
              following table sets forth information regarding the beneficial ownership
              of our
              shares of common stock on June 30, 2007, by: (i) each person known
              by us to be
              the beneficial owner of more than 5% of our outstanding shares of common
              stock;
              (ii) each of our current and proposed directors; (iii) each of our
              executive
              officers; and (iv) all current and proposed directors and executive
              officers as
              a group. Each person named in the table, has sole voting and investment
              power
              with respect to all shares shown as beneficially owned by such
              person.
 
 
 **Title
                        of Class**
                    
                    **Name
                        and Address of Beneficial Owner**
                    
                    **Shares
                        of Beneficial Owner**
                    
                    **Percent****Common
                        Stock**
                    
                    Tom
                        Hemingway
                      300
                        S. Harbor Blvd., Suite 500
                      Anaheim,
                        CA 92805
                      Chairman
                        and Chief Operation Officer, Director
                    
                    **2,400,000**
                    **(1)**
                    **7.54%****Common
                        Stock**
                    
                    Robert
                        Ford
                      300
                        S. Harbor Blvd., Suite 500
                      Anaheim,
                        CA 92805
                      Chief
                        Executive Officer, Director
                    
                    **3,124,615**
                    **(2)**
                    **9.81%****Common
                        Stock**
                    
                    Michael
                        Jones
                      2304
                        Ruland Ave, Suite A
                      Redondo
                        Beach, CA 90278
                      Director
                    
                    **828,277**
                    
                    **2.60%****Common
                        Stock**
                    
                    David
                        Noyes
                      300
                        S. Harbor Blvd., Suite 500
                      Anaheim,
                        CA 92805
                      Chief
                        Financial Officer
                    
                    **-**
                    
                    **-****Common
                        Stock**
                    
                    All
                        executive officers and directors as a group (4 persons)
                    
                    **6,352,892**
                    
                    **19.95%**
 
 (1)
                    Includes
                        720,000 shares held by Redwood Investment Group, LLC, owned
                        by Mr.
                        Hemingway(2)
                    Includes
                        600,000 shares held by Digits, LLC owned by Mr.
                        Ford
 
 The
              persons named above have full
              voting and investment power with respect to the shares indicated. Under
              the
              rules of the Securities and Exchange Commission, a person (or group
              of persons)
              is deemed to be a "beneficial owner" of a security if he or she, directly
              or
              indirectly, has or shares the power to vote or to direct the voting
              of such
              security, or the power to dispose of or to direct the disposition of
              such
              security. Accordingly, more than one person may be deemed to be a beneficial
              owner of the same security. A person is also deemed to be a beneficial
              owner of
              any security, which that person has the right to acquire within 60
              days, such as
              options or warrants to purchase our common stock.
  31
 Table
                  of Contents
  **ITEM
              12. CERTAINRELATIONSHIPS AND RELATED
              TRANSACTIONS**
 
 NextPhase
              and Robert Ford, and Tom Hemingway and NextPhase are parties to employment
              agreements which are described under Item 10 "Executive
              Compensation".
  The
              Company issued an aggregate of 2,100,769 shares of common stock valued
              at
              $249,231 to its chief executive officer for services totaling $114,231
              and
              $135,000 provided during the years ended March 31, 2007 and 2006,
              respectively.
 
 The
              Company issued an aggregate 1,500,769 shares of common stock valued
              at $165,231
              (based on the estimated fair value at the measurement dates) to its
              former
              chairman for services totaling $114,231 and $51,000 provided during
              the years
              ended March 31, 2007 and 2006,  respectively.
 
 The
              Company issued 2,400,000 shares of its common stock valued at $212,400
              (based on
              the estimated fair value on the measurement date) to its chairman for
              services
              provided during the year ended March 31, 2007.
 
 The
              Company issued an aggregate of 156,923 shares of common stock valued
              at $41,077
              to a director for services totaling $8,877 and $ 33,000 provided during
              the
              years ended March 31, 2007 and 2006, respectively.
 
 The
              Company issued an aggregate of 305,000 shares of common stock valued
              at $65,000
              (based on the estimated fair value on the measurement dates) to a former
              officer
              for services totaling $35,000 and $30,000 provided during  the years
              ended March 31, 2007 and 2006, respectively.
 
 A
              payment
              of $13,000 was made on a convertible note payable to the Company’s former
              chairman leaving a balance due of $17,000 at March 31, 2007..
  **ITEM
              13. EXHIBITS**
  23.1
                    
                    Consent
                      of Registered Independent Public Accounting Firm23.2
                    
                    Consent
                      of Registered Independent Certified Public Accounting Firm31.1
                    
                    Certification
                        of Chief Executive Officer pursuant to Securities Exchange
                        Act Rule
                        13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of
                        the
                        Sarbanes-Oxley Act of 200231.2
                    
                    Certification
                        of Chief Financial Officer pursuant to Securities Exchange
                        Act Rule
                        13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of
                        the
                        Sarbanes-Oxley Act of 200232.1
                    
                    Certification
                        of Chief Executive Officer and Chief Financial Officer pursuant
                        to 18
                        U.S.C. Section 1350, as adopted pursuant to Section 906 of
                        the
                        Sarbanes-Oxley Act of 2002
   32
 Table
                  of Contents
  **ITEM
              14.  PRINCIPALACCOUNTANT FEES AND
              SERVICES**
 
 Our
              principal accountants, KMJ Corbin & Company LLP billed us approximately
              $60,000 for the audit of our consolidated financial statements for the year
              ended March 31, 2007.
 
 Our  previous
              principal accountants, RBSM LLP ,
              have
              billed us approximately $90,314 for the audit of our consolidated financial
              statements for the year ended March 31, 2007 and the review of our
              financial
              statements included in our Quarterly Reports on Form 10-QSB for the
              periods
              ended June 30, September 30, and December 31, 2005.
 
 Our
              principal accountants did not bill us any fees for tax compliance,
              tax advice
              and tax planning for our fiscal years ended March 31, 2007 and
              2006.
 
 Our previous
              principal accountants, RBSM LLP, billed us $35,040 in connection with their
              review of Synkronus's consolidated financial statements for the years
              ended
              December 31, 2005 and 2004.
 
 **POLICY
              ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
              SERVICES OF
              INDEPENDENT AUDITORS**
 
 The
              Company currently does not have a designated Audit Committee, and accordingly,
              the Company's Board of Directors' policy is to pre-approve all audit
              and
              permissible non-audit services provided by the independent auditors.
              These
              services may include audit services, audit-related services, tax services
              and
              other services. Pre-approval is generally provided for up to one year
              and any
              pre-approval is detailed as to the particular service or category of
              services
              and is generally subject to a specific budget. The independent auditors
              and
              management are required to periodically report to the Company's Board
              of
              Directors regarding the extent of services provided by the independent
              auditors
              in accordance with this pre-approval, and the fees for the services
              performed to
              date. The Board of Directors may also pre-approve particular services
              on a
              case-by-case basis.
 
 
 33
 Table
                  of Contents
  **SIGNATURES**
 
 In
              accordance with Section 13 or 15(d) of the Exchange Act, the registrant
              caused
              this report to be signed on its behalf by the undersigned, thereunto
              duly
              authorized.
 
 (Registrant)
                      **NextPhase
                        Wireless, Inc.**Date:
                        July 16,
                        2007
                    By:
                    /s/Robert
                      FordRobert
                      FordOfficer
                      and Director
   In
              accordance with the Exchange Act, this report has been signed below
              by the
              following persons on behalf of the registrant and in the capacities
              and on the
              dates indicated.
 
 
 /s/
                          Robert FordRobert
                          Ford, Chief ExecutiveOfficer
                          and DirectorDate: July
                          16, 2007/s/
                          Thomas HemingwayThomas
                          Hemingway, Chairman ofthe
                          Board and DirectorDate:
                          July 16, 2007/s/
                          David P. NoyesDavid
                          P. NoyesChief
                            Financial OfficerDate:
                          July 16,  2007
   34
 Table
                of Contents
  **Consolidated
            FinancialStatements**
  INDEX
            TO CONSOLIDATED FINANCIAL STATEMENTS
 **NEXTPHASE
              WIRELESS, INC. AND SUBSIDIARIES**
 PageReport
                      of Independent Registered Public Accounting
                      Firm
                  F-1Report
                      of Independent Registered Certified Public
                      Accounting Firm
                  F-2Consolidated
                      Balance Sheet as of March 31,
                      2007
                  F-3Consolidated
                      Statements of Operations for the Years Ended
                      March 31, 2007 and 2006
                  F-4Consolidated
                      Statements of Stockholders’ Deficit for the Years
                      Ended March 31, 2007 and 2006
                  F-5Consolidated
                      Statements of Cash Flows for the Years Ended March
                      31, 2007 and 2006
                  F-6Notes
                      to Consolidated Financial
                      Statements
                  F-7
  Table
              of Contents
  **REPORT
          OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING
          FIRM**
 
 
 To
          the
          Board of Directors and the Stockholders
 NextPhase
          Wireless, Inc.
 
 We
          have
          audited the accompanying consolidated balance sheet of NextPhase Wireless,
          Inc.
          and subsidiaries (collectively the “Company”) as of March 31, 2007, and the
          related consolidated statements of operations, stockholders' deficit and
          cash
          flows for the year then ended. These consolidated financial statements
          are the
          responsibility of the Company's management. Our responsibility is to express
          an
          opinion on these consolidated financial statements based on our
          audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. The Company is not required to have, nor were we engaged to
          perform,
          an audit of its internal control over financial reporting.  Our audit
          included consideration of internal control over financial reporting as
          a basis
          for designing audit procedures that are appropriate in the circumstances,
          but
          not for the purposes of expressing an opinion on the effectiveness of the
          Company’s internal control over financial reporting. Accordingly, we express no
          such opinion. An audit also includes assessing the accounting principles
          used
          and significant estimates made by management, as well as evaluating the
          overall
          financial statement presentation. We believe that our audit provides a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the consolidated financial statements referred to above present
          fairly,
          in all material respects, the financial position of NextPhase Wireless,
          Inc. and
          subsidiaries as of March 31, 2007 and the results of their operations and
          their
          cash flows for the year then ended in conformity with accounting principles
          generally accepted in the United States of America.
 
 The
          accompanying consolidated financial statements have been prepared assuming
          the
          Company will continue as a going concern. As discussed in Note 1, the Company
          has a working capital deficiency and losses from operations which raise
          substantial doubt about its ability to continue as a going concern. Management’s
          plans as to these matters are also described in Note 1. The accompanying
          consolidated financial statements do not include any adjustments that might
          result from the outcome of this uncertainty.
 
 
 /s/
          KMJ | Corbin & Company LLP
 Irvine,
          California
 July
          13,
          2007
 
 
 F-1
 Table
              of Contents
  **REPORT
          OF INDEPENDENTREGISTERED CERTIFIED PUBLIC ACCOUNTING
          FIRM**
 
 
 To
          the
          Board of Directors
 NextPhase
          Wireless, Inc.
 
 We
          have
          audited the accompanying consolidated statements of operations, stockholders'
          deficit and cash flows for the year ended March 31, 2006 for NextPhase
          Wireless,
          Inc. and subsidiaries (collectively the “Company”). These financial statements
          are the responsibility of the Company's management. Our responsibility
          is to
          express an opinion on these financial statements based on our
          audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audit provides a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of NextPhase Wireless, Inc. and
          subsidiaries as of March 31, 2006 and the results of their operations and
          their
          cash flows for the year then ended in conformity with accounting principles
          generally accepted in the United States of America.
 
 The
          accompanying consolidated financial
          statements for the year ended March 31, 2006 have been prepared assuming
          that
          the company will continue as a going concern. As shown in the financial
          statements, the company has incurred net losses since its inception. This
          raises
          substantial doubt about the company's ability to continue as a going concern.
          Management's plans in regard to this matter are described in Note 1. The
          financial statements do not include any adjustments that might result from
          the
          outcomeof
          this uncertainty.
 
 
 /s/
          RBSM, LLP
 RBSM,LLP
 Certified
          Public Accountants
 
 New
          York,
          New York
 June
          23,
          2006
  F-2
 Table
            of Contents
  **NEXTPHASE
        WIRELESS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**




**March
                31,****2007****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            71,683Accounts
                receivable, net of allowance for doubtful accounts of
                $30,000
            
            
            116,154Other
                current assets
            
            
            39,403Total
                current assets
            
            
            227,240Property
                and equipment, net
            
            
            295,011Customer
                lists, net
            
            
            784,000Trademarks
            
            
            100,000Supply
                contracts, net
            
            
            48,000Goodwill
            
            
            260,000Deposits
            
            
            8,637Total
                assets
            
            $
            1,722,888**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Accounts
                payable
            
            $
            1,158,673Accrued
                expenses
            
            
            290,015Deferred
                revenue
            
            
            78,000Cash
                advances payable
            
            
            100,000Notes
                payable and capital leases,  current portion
            
            
            465,533Total
                current liabilities
            
            
            2,092,221Notes
                payable and capital leases, net of current portion and discount of
                $35,090
            
            
            2,301,425Total
                liabilities
            
            
            4,393,646Commitments
                and contingenciesStockholders'
                deficit:Preferred
                stock, $0.001 par value, 20,000,000 sharesauthorized;
                no shares issued and outstandingCommon
                stock, $0.001 par value, 200,000,000 shares
            
            
            -authorized;  29,948,955
                shares issued and outstanding
            
            
            29,949Additional
                paid-in capital
            
            
            5,931,003Accumulated
                deficit
            
            
            (8,631,710
            )Total
                stockholders' deficit
            
            
            (2,670,758
            )Total
                liabilities and stockholders' deficit
            
            $
            1,722,888




See
          reports of independent registered public accounting firms and accompanying
          notes to these consolidated financial statements.


F-3
 Table
          of Contents




**NEXTPHASE
        WIRELESS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF LOSSES**




**For
                  the Years Ended March 31,****2007**
              
              
              **2006**Revenues:
              
              $
              1,986,426
              
              
              $
              643,367Cost
                  of revenues:
              
              
              1,116,874
              
              
              
              519,404Gross
                  profit:
              
              
              869,552
              
              
              
              123,963Operating
                  expenses:Selling,
                  general and administrative
              
              
              1,879,202
              
              
              
              1,573,070Stock-based
                  compensation
              
              
              653,363
              
              
              
              1,395,045Depreciation
                  and amortization
              
              
              337,715
              
              
              
              70,248Total
                  operating expenses
              
              
              2,870,280
              
              
              
              3,038,363Operating
                  loss
              
              
              (2,000,728
              )
              
              
              (2,914,400
              )Other
                  income (expense):Legal
                  settlements
              
              
              (318,957
              )
              
              
              1,115,500Interest  expense
              
              
              (157,238
              )
              
              
              (65,027
              )Other
              
              
              -
              
              
              
              2,000Total
                  other income (expense)
              
              
              (476,195
              )
              
              
              1,052,473Loss
                  before income taxes
              
              
              (2,476,923
              )
              
              
              (1,861,927
              )Provision
                  for income taxes
              
              
              -
              
              
              
              -Net
                  loss
              
              $
              (2,476,923
              )
              
              $
              (1,861,927
              )Basic
                  and diluted net loss per share
              
              $
              (0.10
              )
              
              $
              (0.08
              )Weighted
                  average shares outstanding
              
              
              23,611,644
              
              
              
              21,930,310




See
          reports of independent registered public accounting firms and accompanying
          notes to these consolidated financial statements.
 F-4
 Table
            of Contents
  
 **NEXTPHASE
        WIRELESS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' DEFICIT**
  **Stock**
                
                
                
                **Additional**
                
                
                
                **Total****Common
                    Stock**
                
                **Subscriptions
                    Payable**
                
                **Cancellation**
                
                **Deferred**
                
                **Paid-in**
                
                **Accumulated**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Receivable**
                
                **Compensation**
                
                **Capital**
                
                **Deficit**
                
                **Deficit****Balance-April
                    1, 2005**
                
                19,896,724
                
                $             19,897
                
                1,120,000
                
                $           280,000
                
                $                           -
                
                $                           -
                
                $
                    3,895,241
                
                $  (4,292,860)
                
                $         (97,722)Common
                    stock sold for cash
                
                890,000
                
                890
                
                -
                
                -
                
                -
                
                -
                
                444,110
                
                -
                
                445,000Common
                    stock issued,  previously subscribed
                
                1,120,000
                
                1,120
                
                (1,120,000)
                
                (280,000)
                
                -
                
                -
                
                278,880
                
                -
                
                -Discount
                    on convertible notes payable
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                20,000
                
                -
                
                20,000Common
                    stock subscribed
                
                -
                
                -
                
                50,000
                
                25,000
                
                -
                
                -
                
                -
                
                -
                
                25,000Common
                    stock issued for services
                
                4,124,585
                
                4,124
                
                -
                
                -
                
                -
                
                (183,600)
                
                1,147,142
                
                -
                
                967,666Amortization
                    of deferred compensation
                
                -
                
                -
                
                -
                
                -
                
                -
                
                165,521
                
                -
                
                -
                
                165,521Cancellation
                    of common stock in legal settlement
                
                (2,895,000)
                
                (2,895)
                
                -
                
                -
                
                -
                
                -
                
                (720,855)
                
                -
                
                (723,750)Warrants
                    issued to consultant for services
                
                -
                
                -
                
                -
                
                -
                
                -
                
                (71,256)
                
                71,256
                
                -
                
                -Shares
                    to be cancelled in legal settlement
                
                -
                
                -
                
                -
                
                -
                
                (250,000)
                
                -
                
                -
                
                -
                
                (250,000)Net
                    loss for the year ended March 31, 2006
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                (1,861,927)
                
                (1,861,927)**Balance-March
                    31, 2006**
                
                23,136,309
                
                23,136
                
                50,000
                
                25,000
                
                (250,000)
                
                (89,335)
                
                5,135,774
                
                (6,154,787)
                
                (1,310,212)Common
                    stock issued for services
                
                5,417,488
                
                5,418
                
                -
                
                -
                
                -
                
                -
                
                520,210
                
                -
                
                525,628Common
                    stock issued in payment of accounts payable
                
                125,461
                
                126
                
                -
                
                -
                
                -
                
                -
                
                37,512
                
                -
                
                37,638Common
                    stock issued for accrued payroll
                
                1,486,230
                
                1,486
                
                -
                
                -
                
                -
                
                -
                
                279,072
                
                -
                
                280,558Common
                    stock issued for accrued interest
                
                904,272
                
                904
                
                -
                
                -
                
                -
                
                -
                
                102,596
                
                -
                
                103,500Common
                    stock issued in legal settlement
                
                40,000
                
                40
                
                -
                
                -
                
                -
                
                -
                
                19,960
                
                -
                
                20,000Stock
                    cancelled in previous settlement
                
                (1,000,000)
                
                (1,000)
                
                -
                
                -
                
                250,000
                
                -
                
                (249,000)
                
                -
                
                -Common
                    stock issued previously subscribed
                
                50,000
                
                50
                
                (50,000)
                
                (25,000)
                
                -
                
                -
                
                24,950
                
                -
                
                -Shares
                    cancelled
                
                (120,625)
                
                (121)
                
                -
                
                -
                
                -
                
                -
                
                121
                
                -
                
                -Purchase
                    of treasury stock
                
                (90,180)
                
                (90)
                
                -
                
                -
                
                -
                
                -
                
                (9,889)
                
                -
                
                (9,979)Discount
                    on note payable
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                69,697
                
                -
                
                69,697Amortization
                    of deferred compensation
                
                -
                
                -
                
                -
                
                -
                
                -
                
                89,335
                
                -
                
                -
                
                89,335Net
                    loss for the year ended March 31, 2007
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                -
                
                (2,476,923)
                
                (2,476,923)**Balance-March
                    31, 2007**
                
                29,948,955
                
                $       
                         29,949
                
                -
                
                $        
                                 -
                
                $         
                                    -
                
                $     
                                        -
                
                $
                    5,931,003
                
                $  (8,631,710)
                
                $    (2,670,758)
 ****


See
            reports of independent registered public accounting firms and accompanying
            notes to these consolidated financial statements.
 F-5
 Table
              of Contents




**NEXTPHASEWIRELESS,
        INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**




**For
                  the Years Ended March 31,****2007**
              
              
              **2006****Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (2,476,923
              )
              
              $
              (1,861,927
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities:Common
                  stock issued in legal settlement
              
              
              20,000
              
              
              
              (1,115,500
              )Gain
                  on sale of equity securities
              
              
              -
              
              
              
              (2,000
              )Issuance
                  of common stock for services
              
              
              525,628
              
              
              
              1,395,045Amortization
                  of deferred compensation
              
              
              89,335
              
              
              
              -Amortization
                  of discount on notes payable
              
              
              34,607
              
              
              
              20,000Bad
                  debt expense
              
              
              30,000
              
              
              
              8,383Depreciation
                  and amortization
              
              
              337,715
              
              
              
              70,248Changes
                  in assets and liabilities:(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              53,057
              
              
              
              (190,017
              )Other
                  current assets
              
              
              (36,775
              )
              
              
              (2,628
              )Other
                  receivables
              
              
              -
              
              
              
              200,000Deposits
              
              
              (600
              )
              
              
              -Increase
                  (decrease) in liabilities:Advances
                  payable
              
              
              -
              
              
              
              (12,206
              )Accounts
                  payable and accrued liabilities
              
              
              972,674
              
              
              
              477,301Deferred
                  revenue
              
              
              44,219
              
              
              
              29,656Net
                  cash used in operating activities
              
              
              (407,063
              )
              
              
              (983,645
              )**Cash
                  flows from investing activities:**Increase
                  in long-term lease deposits
              
              
              -
              
              
              
              (8,037
              )Purchase
                  of furniture and equipment
              
              
              (47,705
              )
              
              
              (113,265
              )Purchase
                  of treasury stock
              
              
              (9,979
              )
              
              
              -Net
                  cash used in investing activities
              
              
              (57,684
              )
              
              
              (121,302
              )**Cash
                  flows from financing activities:**Proceeds
                  from notes payable
              
              
              451,000
              
              
              
              55,000Proceeds
                  from cash advances payable
              
              
              100,000
              
              
              
              800,000Principal
                  payments on notes payable and capital leases
              
              
              (50,417
              )
              
              
              (210,154
              )Proceeds
                  from sale of common stock
              
              
              -
              
              
              
              445,000Net
                  cash provided by financing activities
              
              
              500,583
              
              
              
              1,089,846Change
                  in cash and cash equivalents
              
              
              35,836
              
              
              
              (15,101
              )Cash
                  and cash equivalents at beginning of year
              
              
              35,847
              
              
              
              50,948Cash
                  and cash equivalents at end of year
              
              $
              71,683
              
              
              $
              35,847
 
 **Supplemental
                  disclosure of cash flow information:**Cash
                  paid during the year for:Interest
              
              $
              -
              
              
              $
              -Income
                  taxes
              
              $
              -
              
              
              $
              -Non-cash
                  investing and financing transactions:Warrants
                  issued to consultants for services
              
              $
              -
              
              
              $
              71,256Cash
                  advance converted to note payable
              
              $
              800,000
              
              
              $
              -Issuance
                  of previously subscribed common stock
              
              $
              -
              
              
              $
              280,000Cancellation
                  of stock from legal settlements
              
              $
              250,000
              
              
              $
              973,750Value
                  of shares of Nathaniel Energy received in legal settlement
              
              $
              -
              
              
              $
              198,000Beneficial
                  conversion feature of notes payable
              
              $
              69,697
              
              
              $
              -Shares
                  issuable for Blazen acquisition
              
              $
              -
              
              
              $
              25,000Acquisition
                  of equipment under capital lease agreements and notes
                  payable
              
              $
              50,650
              
              
              $
              25,669Amortization
                  of deferred compensation
              
              $
              89,335
              
              
              $
              165,521Common
                  stock issued for services and legal settlement
              
              $
              -
              
              
              $
              957,666Accrual
                  of common stock issued in April 2006 for services provided in the
                  previous
                  year
              
              $
              -
              
              
              $
              271,858Common
                  stock issued for accounts payable and accrued expenses
              
              $
              318,196
              
              
              $
              -Common
                  stock issued for accrued interest
              
              $
              103,500
              
              
              $
              -Note
                  payable issued in connection with acquisition
              
              $
              1,500,000
              
              
              $
              -




See
          reports of independent registered public accounting firms and accompanying
          notes to these consolidated financial statements.
 F-6
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND
          SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
 
 *Nature
        of Operations*
 NextPhase
          Wireless, Inc. (“NextPhase” or the “Company”) was incorporated on August 28,
          1995 in Nevada under the name of Professional Mining Consultants,
          Inc.
 
 On
          August
          3, 2004, the Company consummated  a share  exchange in which
          it issued
          12,943,000  shares  of  common  stock,  or  approximately  76%
          of the Company's outstanding  common stock, to the shareholders
          of NextPhase  Technologies,  Inc.
          ("NTI")  in  exchange  for all of the shares of
          NTI.  As a result, NTI became a wholly owned subsidiary of the
          Company.  NTI was formed on September 14, 2000. For accounting
          purposes, this transaction is considered a "reverse merger,” and the historical
          financial statements of the Company reflect the operations of
          NTI.  Effective on the merger date, all financial activity became
          generated by the Company and NTI became an inactive
          subsidiary.  On January 21, 2005 the Company changed its name to
          NextPhase Wireless, Inc.
 
 Effective
          April 5, 2006, through its wholly-owned subsidiary SpeedFactory, Inc.
          (“SpeedFactory”), the Company acquired the Internet service and
          connectivity business assets previously operated by Synkronus, Inc.
          (“Synkronus”) under the name "SpeedFactory." Management's plans are discussed
          further in the Going Concern portion of Note 1.
 
 Prior
          to
          the acquisition of SpeedFactory, the Company had a limited operating
          history with revenue-generating products and services only recently entering
          the
          market.
 
 With
          the
          acquisition of SpeedFactory, the Company enhanced its position as a
          nationwide provider of scalable, reliable and cost effective connectivity
          solutions, expanding its portfolio of products and services to include
          DSL, T1s,
          co-location and web hosting. The Company continues to extend its
          wireless “footprint” in Southern California, through a combination of organic
          growth and acquisition, the Company has continued to add small to
          medium business subscribers, small office/home office (SOHO) subscribers,
          and
          residential subscribers in underserved markets to its network.
  *Basis
          of Presentation*
 The
        accompanying consolidated financial statements include the accounts of NextPhase
        and its wholly- owned subsidiaries NTI, a California corporation formed on
        September 14, 2000, and SpeedFactory, a Nevada corporation formed on March
        14,
        2006. The term "Company" refers to NextPhase, NTI, and SpeedFactory
        collectively. All significant inter-company accounts and transactions have
        been
        eliminated in consolidation.
 The
        Company conducts its operations from its office located in Anaheim, California
        and the SpeedFactory location in Marietta, Georgia.
 
 The
        consolidated financial statements presented include only the accounts of
        NTI,
        from its inception (September 14, 2000) through March 31, 2007, of NextPhase
        from August 3, 2004 through March 31, 2007, and of SpeedFactory from April
        6,
        2006 (date of acquisition) through March 31, 2007.
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 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
          1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          continued**
  *Going
        Concern and Management’s Plan*
 The
        accompanying consolidated financial statements have been prepared on a going
        concern basis, which contemplates the realization of assets and the settlement
        of liabilities in the normal course of business. The Company has incurred
        losses
        from operations and negative cash flows from operating activities during
        the
        years ended March 31, 2007 and 2006.  The Company also had a working
        capital deficiency as of March 31, 2007 of approximately $1,865,000. These
        factors, among others, raise substantial doubt about the Company’s ability to
        continue as a going concern. In April 2006, the Company obtained long-term
        financing of $1,500,000 in connection with the acquisition of SpeedFactory.
        During the year ended March 31, 2007, the Company executed short-term notes
        for
        $451,000. In April, June and July 2007, the Company issued convertible notes
        totaling $200,000, with interest at 7%, and all due in one year from the
        date of
        issuance.
 
 During
        the year ended March 31, 2007, the Company developed a plan to integrate
        additional Internet Service Providers (“ISPs”) in a scalable roll-up
        strategy.  The Company will acquire only profitable operations, both
        wireless and landline based, which are synergistic to the Company’s current
        operations in California and Georgia. The Company has entered into letters
        of
        intent to acquire two such companies which would greatly reduce the negative
        cash flow on a monthly basis. The Company expects the first acquisition to
        be
        completed in July 2007 and the second one is scheduled for early fall 2007.
        Under its plans, management expects to generate positive operating cash flow
        during the fourth calendar quarter of 2007. There is no assurance that
        management will achieve its plan. There is further no assurance that the
        proceeds from operating cash flows or future financings will be sufficient
        to
        obtain profitable operations.
 
 The
        Company anticipates its current cash reserves, plus its expected generation
        of
        cash from existing operations, will only be sufficient to fund its anticipated
        operations through the second quarter of fiscal 2008. Consequently, the Company
        will need to raise additional debt and/or equity capital in order to finance
        its
        business plan and needs for working capital. Such financing(s), if available,
        may increase the risk of the Company not being able to service its debt
        obligations, and/or cause dilution to existing equity holders.The accompanying
        consolidated financial statements do not include any adjustments to reflect
        the
        possible future effects on the recoverability and classification of assets
        and
        liabilities that might result from the outcome of this uncertainty.
 
 *Use
        of Estimates*
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, disclosure of contingent assets and liabilities at the date
        of the
        financial statements and the reported amounts of revenues and expenses during
        the reporting period. Actual results could differ from these estimates and
        could
        change in the near term. Significant estimates include the realizability
        of
        accounts receivable, recoverability of long-lived assets, and valuation of
        common stock, warrants and deferred taxes.
 
 *Fair
        Value of Financial Instruments*
 Financial
        instruments consist of cash, evidence of ownership in an entity and contracts
        that both (i) impose on one entity a contractual obligation to deliver cash
        or
        another financial instrument to a second entity, or to exchange other financial
        instruments on potentially unfavorable terms with the second entity, and
        (ii)
        conveys to that second entity a contractual right (a) to receive cash or
        another
        financial instrument from the first entity, or (b) to exchange other financial
        instruments on potentially favorable terms with the first entity. Accordingly,
        our financial instruments consist of cash and cash equivalents, accounts
        receivable, accounts payable, accrued liabilities and notes payable. The
        estimated fair values of the Company’s financial instruments approximate their
        carrying values due to their current nature.
 
 *Cash*
 The
        Company maintains its cash accounts in commercial banks. The total cash balances
        held in a commercial bank are secured by the Federal Deposit Insurance
        Corporation (“FDIC”) up to $100,000. From time to time cash balances will exceed
        such limits. At March 31, 2007, the Company did not have cash deposits in
        excess
        of FDIC insured limits.
 
 *Accounts
        Receivable*
 The
        Company performs periodic credit evaluations of its customers and does not
        typically require collateral.  From time to time, the Company may require
        new customers to pay for equipment and services in advance of performance. 
The Company maintains reserves for potential credit losses, and historically,
        such losses have been within management expectations.
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 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**
  *Concentrations
        of Credit Risk*
 Financial
        instruments and related items, which potentially subject the company to
        concentrations of credit risk, consist primarily of cash and cash equivalents
        and accounts receivable.
 
 *Accounting
        for Bad Debts and Allowances*
 Bad
        debts
        and allowances are provided based on historical experience and management's
        evaluation of outstanding accounts receivable. The management periodically
        evaluates past due or delinquency of accounts receivable in evaluating its
        allowance for doubtful accounts. Allowance for doubtful accounts at March
        31,
        2007 was $30,000.
  *Segment
        Information*
 The
        Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related Information” upon the
        first date of required adoption. SFAS No. 131 establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires selected information for those segments to be presented
        in interim financial reports issued to stockholders. SFAS No. 131 also
        establishes standards for related disclosures about products and services
        and
        geographic areas. Operating segments are identified as components of an
        enterprise about which separate discrete financial information is available
        for
        evaluation by the chief operating decision maker, or decision-making group,
        in
        making decisions regarding the allocation of resources and asset performance.
        The information disclosed herein materially represents all of the financial
        information related to the Company's principal operating segment.
 *Property
          and Equipment*
 Property
        and equipment are stated at cost. When retired or otherwise disposed, the
        related carrying value and accumulated depreciation are removed from the
        respective accounts and the net difference less any amount realized from
        disposition, is reflected in earnings. Minor additions and renewals are expensed
        in the year incurred. Major additions and renewals are capitalized and
        depreciated over their estimated useful lives ranging from 3 to 10
        years.
 
 *Reclassifications*
 Certain
        reclassifications have been
        made in prior year's consolidated financial statements to conform to
        classifications used in the current year.
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 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
          1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          continued**
 
 *Revenue
        Recognition and Deferred Revenue*
 Revenues
        are
        recognized in the period that services are provided.  For revenue from
        product sales, the Company recognizes revenue in accordance with Staff
        Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” ("SAB No. 104"),
        which superseded SAB No. 101, "Revenue Recognition In Financial Statements"
        ("SAB No. 101"). SAB No. 104 requires that four basic criteria must be met
        before revenue can be recognized: (1) persuasive evidence of an arrangement
        exists; (2) delivery has occurred; (3) the selling price is fixed and
        determinable; and (4) collectibility is reasonably assured. Determination
        of
        criteria (3) and (4) are based on management's judgments regarding the fixed
        nature of the selling prices of the products delivered and the collectibility
        of
        those amounts. Provisions for discounts and rebates to customers, estimated
        returns and allowances, and other adjustments are provided for in the same
        period the related sales are recorded. The Company defers any revenue for
        which
        the product has not been delivered or for which services have not been rendered
        or are subject to refund until such time that the Company and the customer
        jointly determine that the product has been delivered or services have been
        rendered or no refund will be required.
 
 SAB
          No.
          104 incorporates Emerging Issues Task Force (“EITF”) Issue
          No.00-21 ("EITF No. 00-21"), “Deliverable Revenue Arrangements.” EITF No.
          00-21 addresses accounting for arrangements that may involve the delivery
          or
          performance of multiple products, services and/or rights to use assets.
          The
          effect of implementing EITF No. 00-21 on the Company's consolidated financial
          position and results of operations was not significant.
 
 The
        Company considers amounts to be earned once evidence of an arrangement has
        been
        obtained, services are delivered, fees are fixed or determinable, and
        collectibility is reasonably assured.  The Company generates and
        recognizes revenue as follows:
 
 Revenue
        from operating as a wireless Internet service provider of tiered wireless
        Internet services to business and residential subscribers:  Internet
        services are billed at the beginning of each month's activity at a fixed
        rate
        for each customer.  Customers sign an annual agreement or utilize the
        service on a month-to-month basis.  Revenue not yet earned is recorded
        as deferred revenue.
 
 Revenue
        from the sale and configuration of wireless equipment:  NextPhase acts
        as a reseller of certain components and equipment related to its products
        and
        services.  Equipment revenue is recognized at the time of shipment FOB
        to the customer.  Configuration is billed at an hourly rate and
        recognized after completion. Costs associated with the equipment are expensed
        at
        the time of shipment.  In order to maximize the Company’s cash flows,
        revenue from the sale and configuration of wireless equipment is sometimes
        billed in advance of shipment. In such cases, these invoices are recorded
        as
        deferred revenue.
 
 Revenue
        from professional and consulting services provided by its
        staff:  These services include wireless network consulting,
        interference surveys, network management and telephone
        consulting.  Revenue is recognized after the professional or
        consulting service has been provided. In order to maximize the Company’s cash
        flows, revenue from professional services is sometimes billed in advance
        of
        project completion. In such cases, these invoices are recorded as deferred
        revenue.
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 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**
 
 *Long-Lived
        Assets*
 The
        Company reviews its fixed assets and certain identifiable intangibles for
        impairment whenever events or changes in circumstances indicate that the
        carrying amount of an asset may not be recoverable. The test for impairment
        is
        required to be performed by management at least annually. Recoverability
        of
        assets to be held and used is measured by a comparison of the carrying amount
        of
        an asset to the future undiscounted operating cash flow expected to be generated
        by the asset. If such assets are considered to be impaired, the impairment
        to be
        recognized is measured by the amount by which the carrying amount of the
        asset
        exceeds the fair value of the asset. Long-lived assets to be disposed of
        are
        reported at the lower of carrying amount or fair value less costs to
        sell.
 
 As
        of
        March 31, 2007, The Company’s management believes there is no impairment of its
        long-lived assets.  There can be no assurance, however, that market
        conditions will not change which could result in impairment of long-lived
        assets
        in the future.
 
 *Business
        Combinations*
 In
        accordance with SFAS No. 141,  “Business Combinations,” the Company
        allocates the purchase price of acquired entities to the tangible and intangible
        assets acquired and liabilities assumed, based on their estimated fair values.
        The Company engaged an independent third-party appraisal firm to assist
        management in determining the fair values of certain assets acquired and
        liabilities assumed. Such a valuation requires management to make significant
        estimates and assumptions, especially with respect to intangible
        assets.
 
 Management
        makes estimates of fair values based upon assumptions believed to be reasonable.
        These estimates are based on historical experience and information obtained
        from
        the management of the acquired companies. Critical estimates in valuing certain
        of the intangible assets include but are not limited to: future expected
        cash
        flows from revenues, customer relationships, key management and market position,
        assumptions about the period of time the acquired trade names will continue
        to
        be used in the Company's combined product portfolio, and discount rates used
        to
        establish fair value. These estimates are inherently uncertain and
        unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
        events and circumstances may occur which may affect the accuracy or validity
        of
        such assumptions, estimates or actual results.
 
 *Goodwill
        and Other Intangible Assets*
 The
        Company has adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS
        No. 142 requires that goodwill and intangible assets deemed to have indefinite
        lives are no longer amortized but are subject to an annual impairment test
        which
        has two steps to determine whether an asset impairment exists. The first
        step of
        the impairment test identifies potential impairment by comparing the fair
        value
        with the carrying amount of the reporting unit, including goodwill. If the
        carrying amount of the reporting unit exceeds its fair value, the second
        step of
        the impairment test shall be performed to measure the amount of the impairment
        loss, if any. Intangibles with indefinite useful lives are measured for
        impairment by the amount that the carrying value exceeds the estimated fair
        value of the intangible. The fair value is calculated using the income approach.
        Intangible assets with definite useful lives will continue to be amortized
        over
        their estimated useful lives. Any impairment is recorded at the date of
        determination.
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 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**
 
 The
          Company’s policy provides for annual evaluation of goodwill on the first day of
          the fourth fiscal quarter and whenever events and changes in circumstances
          suggest that the carrying amount may not be recoverable. Impairment of
          goodwill
          is tested at the reporting unit level by comparing the reporting unit's
          net
          carrying value, including goodwill, to the fair value of the reporting
          unit. The
          fair values of the Company’s reporting units are estimated using a
          combination of the income or discounted cash flows approach and the market
          approach, which uses comparable market data. If the carrying amount of
          the
          reporting unit exceeds its fair value, goodwill is potentially impaired
          and a
          second test would be performed to measure the amount of impairment loss,
          if
          any.
  The
          changes in the carrying amount of goodwill for the year ended March 31,
          2007 are
          as follows:
 
 Balance,
                    April 1, 2006
                
                $
                -Goodwill
                    acquired
                
                
                260,000Balance,
                    March 31, 2007
                
                $
                260,000
  *Beneficial
        Conversion Feature*
 The
        convertible feature of one of the Company’s convertible notes provided for a
        rate of conversion that was below market value (see Note 5). Such feature
        is normally characterized as a “beneficial conversion feature” (“BCF”). 
Pursuant to EITF No. 98-5, “Accounting for Convertible Securities with
        Beneficial Conversion Features or Contingently Adjustable Conversion Ratio” and
        EITF No. 00-27, “Application of EITF Issue No. 98-5 to Certain
        Convertible Instruments”, the estimated relative fair value of the BCF was
        recorded as a discount from the face amount of the convertible note. The
        Company
        amortized the discount using the effective interest method through the
        conversion of such instrument.
 
 *Income
        Taxes*
 The
        Company utilizes the liability method of accounting for income taxes as set
        forth in SFAS No. 109, “Accounting for Income Taxes” (“SFAS
        No. 109”). Under the liability method, deferred taxes are determined based
        on the temporary differences between the financial statement and tax bases
        of
        assets and liabilities using enacted tax rates. A valuation allowance is
        recorded when it is more likely than not that some of the deferred tax assets
        will not be realized. The Company also determines its tax contingencies in
        accordance with SFAS No. 5, “Accounting for Contingencies.” The
        Company records estimated tax liabilities to the extent the contingencies
        are
        probable and can be reasonably estimated.
  *Stock-Based
        Compensation*
 As
        of March 31, 2007, the
        Company has not issued any share-based payments to its employees.
 
 In
        December 2004, the FASB issued SFAS No. 123 (revised 2004*),*”Share-Based
        Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) supersedes Accounting Principles
        Board (“APB”) No. 25 and amends SFAS No. 95, “Statement of Cash Flows.” SFAS No.
        123(R) requires all share-based payments to employees, including grants of
        employee stock options, to be recognized in the income statement based on
        their
        fair values. Pro forma disclosure is no longer an alternative. The provisions
        of
        this statement were adopted by the Company as of April 1, 2006.
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 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**
 
 SFAS
        No.
        123(R) requires companies to recognize in the statement of operations the
        grant-date fair value of stock options and other equity-based compensation
        issued to employees. SFAS No. 123(R) also establishes accounting requirements
        for measuring, recognizing and reporting share-based compensation, including
        income tax considerations. The Company adopted SFAS No. 123(R) using the
        modified prospective application. Under the modified prospective application,
        the cost of new awards and awards modified, repurchased or cancelled after
        the
        required effective date and the portion of awards for which the requisite
        service has not been rendered (unvested awards) that are outstanding as of
        the
        required effective date are recognized as the requisite service is rendered
        on
        or after the required effective date. The compensation cost for that portion
        of
        awards is based on the grant-date fair value of those awards as calculated
        for
        either recognition or pro forma disclosures under SFAS No. 123.
 
 The
        adoption of SFAS No. 123(R)’s fair value method will have a negative impact on
        the Company’s results of operations if the Company grants share-based payments
        to its employees in the future, although it will have no impact on its overall
        financial position. The impact of adopting SFAS No. 123(R) cannot be predicted
        at this time because it will depend on levels of share-based payments granted
        in
        the future. SFAS No. 123(R) also requires the benefits of tax deductions
        in
        excess of recognized compensation cost to be reported as a financing cash
        flow,
        rather than as an operating cash flow as required under current accounting
        literature. The requirement will reduce net operating cash flows and increase
        net financing cash flows in periods of adoption.
 
 *Basic
        and Diluted Loss per Common Share*
 Basic
        loss per share is calculated by dividing net loss by the weighted average
        common
        shares outstanding during the period. Diluted net loss per share reflects
        the
        potential dilution to basic EPS that could occur upon conversion or exercise
        of
        securities, options or other such items to common shares using the treasury
        stock method, based upon the weighted average fair value of our common shares
        during the period.  During the years ended March 31, 2007 and 2006,
        the Company did not have any potentially dilutive securities and no common
        stock
        equivalents were considered in the calculation of the weighted average number
        of
        shares outstanding because they would be anti-dilutive.
 
 *Recent
        Accounting Pronouncements*
 In
        July
        2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes” (“FIN No. 48”) which clarifies the accounting for uncertainty in
        income taxes recognized in the financial statements in accordance with SFAS
        No. 109, “Accounting for Income Taxes.” This pronouncement recommends a
        recognition threshold and measurement process for recording in the consolidated
        financial statements uncertain tax positions taken or expected to be taken
        in
        the Company’s tax return. FIN No. 48 also provides guidance on derecognition,
        classification, interest and penalties, accounting in interim periods and
        disclosure requirements for uncertain tax positions. The accounting provisions
        of FIN No. 48 will be effective for the Company beginning April 1, 2007.
        The
        Company is in the process of evaluating the effect, if any, the adoption
        of FIN
        No. 48 will have on its consolidated financial statements.
  In
        September 2006, the FASB issued SFAS No. 157 “Fair
        Value Measurements,”  to eliminate the diversity in practice that
        exists due to the different definitions of fair value and the limited guidance
        for applying those definitions in accounting principals generally accepted
        in
        the United States of America that are dispersed among the many accounting
        pronouncements that require fair value measurements. SFAS No. 157 retains
        the
        exchange price notion in earlier definitions of fair value, but clarifies
        that
        the exchange price is the price in an orderly transaction between market
        participants to sell an asset or liability in the principal or most advantageous
        market for the asset or liability. Moreover, SFAS No. 157 states that the
        transaction is hypothetical at the measurement date, considered from the
        perspective of the market participant who holds the asset or liability.
        Consequently, fair value is defined as the price that would be received to
        sell
        an asset or paid to transfer a liability in an orderly transaction between
        market participants at the measurement date (an exit price), as opposed to
        the
        price that would be paid to acquire the asset or received to assume the
        liability at the measurement date (an entry price).
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 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**
 
 SFAS
        No.
        157 also stipulates that, as a market-based measurement, fair value measurement
        should be determined based on the assumptions that market participants would
        use
        in pricing the asset or liability, and establishes a fair value hierarchy
        that
        distinguishes between (a) market participant assumptions developed based
        on
        market data obtained from sources independent of the reporting entity
        (observable inputs) and (b) the reporting entity's own assumptions about
        market
        participant assumptions developed based on the best information available
        in the
        circumstances (unobservable inputs). Finally, SFAS No. 157 expands disclosures
        about the use of fair value to measure assets and liabilities in interim
        and
        annual periods subsequent to initial recognition. Entities are encouraged
        to
        combine the fair value information disclosed under SFAS No. 157 with the
        fair
        value information disclosed under other accounting pronouncements, including
        SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” where
        practicable. The guidance in this Statement applies for derivatives and other
        financial instruments measured at fair value under SFAS No. 133, “Accounting for
        Derivative Instruments and Hedging Activities,” at initial recognition and in
        all subsequent periods.
 
 SFAS
        No.
        157 is effective for financial statements issued for fiscal years beginning
        after November 15, 2007, and interim periods within those fiscal years, although
        earlier application is encouraged. Additionally, prospective application
        of the
        provisions of SFAS No. 157 is required as of the beginning of the fiscal
        year in
        which it is initially applied, except when certain circumstances require
        retrospective application. The Company is currently evaluating the effect
        of
        adopting SFAS No. 157 on its consolidated financial statements.
  On
          February 15, 2007, the FASB issued FASB Statement No. 159, “The Fair Value
          Option for Financial Assets and Financial Liabilities - Including an Amendment
          of FASB Statement No. 115,” SFAS No. 159 permits an entity to choose to measure
          many financial instruments and certain other items at fair value. This
          option is
          available to all entities, including not-for-profit organizations. Most
          of the
          provisions in SFAS No. 159 are elective; however, the amendment to FASB
          Statement No. 115, “Accounting for Certain Investments in Debt and Equity
          Securities,” applies to all entities with available-for-sale and trading
          securities. Some requirements apply differently to entities that do not
          report
          net income. The fair value option established by SFAS No. 159 permits all
          entities to choose to measure eligible items at fair value at specified
          election
          dates. A business entity will report unrealized gains and losses on items
          for
          which the fair value option has been elected in earnings (or another performance
          indicator if the business entity does not report earnings) at each subsequent
          reporting date. A not-for-profit organization will report unrealized gains
          and
          losses in its statement of activities or similar statement. The fair value
          option: ( *a* ) may be applied instrument by instrument, with a few
          exceptions, such as investments otherwise accounted for by the equity method;
          (
*b* ) is irrevocable (unless a new election date occurs); and (
          *c* ) is applied only to entire instruments and not to portions
          of
          instruments. SFAS No. 159 is effective as of the beginning of an entity’s first
          fiscal year that begins after November 15, 2007.  Early adoption is
          permitted as of the beginning of the previous fiscal year provided that
          the
          entity makes that choice in the first 120 days of that fiscal year and
          also
          elects to apply the provisions of FASB Statement No. 157, “Fair Value
          Measurements.” The adoption of this pronouncement is not expected to have
          material effect on the Company’s consolidated financial statements
*.*
  *Risks
        and Uncertainties*
 The
        Company's operations are subject to new innovations in product design and
        function. Significant technological changes can have an adverse effect on
        the
        Company's future operating results. Design and development of new marketing
        strategies are important elements to achieve profitability in the Company's
        industries.
  **NOTE
          2 - ACQUISITION**
 
 On
          April
          5, 2006, the Company, through its wholly-owned subsidiary SpeedFactory,
          the
          Company acquired all of the assets of Synkronus excluding cash, pursuant
          to an
          asset purchase agreement dated March 29, 2006 between SpeedFactory and
          Synkronus. The assets acquired by SpeedFactory comprise Synkronus's Internet
          service and connectivity business operated by Synkronus under the name
          "SpeedFactory."
 
 The
          Company paid $1,500,000 in cash for the assets at closing. SpeedFactory
          did not
          assume any pre-closing liabilities from Synkronus. The amount of $1,200,000
          was
          delivered to the seller on April 7, 2006 and the closing documents were
          released
          from escrow on that date. The amount of $300,000 was delivered to escrow
          on
          April 7, 2006, pending resolution of certain elements of the transaction,
          which
          were resolved in May 2007.  There were no acquisition related expenses
          incurred.  The closing was effective as of April 5,
          2006.
  F-14
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
   NOTE
          2 - ACQUISITION,
          continued
 NextPhase
        borrowed $1,500,000 to fund the purchase price from a private lender (see
        Note
        7). This borrowing was secured by substantially all the assets of the
        Company.
  The
        acquisition of Synkronus was accounted for using the purchase method in
        accordance with SFAS No. 141. The results of operations for Synkronus have
        been
        included in the consolidated Statements of Operations since the date of
        acquisition.
  In
        accordance with SFAS No. 141, the total purchase price was allocated to the
        estimated fair value of assets acquired and liabilities assumed. The fair
        value
        of the assets acquired was based on management's best estimates and independent
        third party appraisal. The Company has made an allocation of the purchase
        price
        to the Synkronus assets at estimated fair values.  The purchase price
        was allocated to the fair value of assets acquired as follows:
  **Amount**
                
                **Estimated
                    Lives**Computers
                    and related equipment
                
                $
                100,000
                
                3
                    yearsCustomer
                    lists
                
                
                980,000
                
                5
                    yearsTrademarks
                
                
                100,000
                
                indefiniteSupply
                    contracts
                
                
                60,000
                
                5
                    yearsGoodwill
                
                
                260,000
                
                indefinite$
                1,500,000
 The
        trademarks are deemed to have an indefinite life and, accordingly, are not
        being
        amortized, but will be subject to periodic impairment testing at future periods
        in accordance with SFAS No. 142. The customer lists and supply contracts
        will be
        amortized based on estimated weighted cash flows over their lives. Amortization
        expense for the year ended March 31, 2007 was $208,000.
  Acquired
          amortizable intangible assets consist of the following as of March 31,
          2007:
  **Estimated
                      Useful Life**
                  
                  **Gross
                      Carrying**
                  ****
                  ****
                  **Accumulated**
                  ****
                  ****
                  **Net
                      Carrying**
                  ********
                  ****
                  **(Years)**
                  ****
                  **Amount**
                  ****
                  ****
                  **Amortization**
                  ****
                  ****
                  **Amount**Computers
                      and equipment
                  
                  Three
                  
                  
                  100,000
                  
                  
                  
                  (33,333
                  )
                  
                  
                  66,667Customer
                      list
                  
                  Five
                  
                  
                  980,000
                  
                  
                  
                  (196,000
                  )
                  
                  
                  784,000Supply
                      agreement
                  
                  Five
                  
                  
                  60,000
                  
                  
                  
                  (12,000
                  )
                  
                  
                  48,000Total
                      other intangible assets
                  
                  
                  
                  $
                  1,140,000
                  
                  
                  $
                  (241,333
                  )
                  
                  $
                  898,667
 Amortization
          of other intangible assets was $241,333 during 2007.
  F-15
 Table
                of Contents
  **NEXTPHASE
            WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
   NOTE
            2 - ACQUISITION,
            continued
  The
          estimated amortization expense for the next five years is as
          follows:
 
 **Years
                    Ending**
                  **March
                    31,**2008
                
                $
                241,0002009
                
                
                241,0002010
                
                
                208,0002011
                
                
                208,000$
                898,000
  The
        following combined proforma historical results as if Synkronus had been acquired
        at the beginning of the period indicated are estimated below.  There
        is no proforma for fiscal 2007 due to the proximity of the acquisition date
        to
        the beginning of the Company’s fiscal year.
  **Year
                  Ended****March
                  31,****2006**Total
                  Revenues
              
              $
              2,481,846Net
                  Loss
              
              $
              (1,662,489
              )Pro
                  formaLoss
                  per share
              
              
              (0.08
              )
  NOTE
        3 - RELATED PARTY
        TRANSACTIONS


**For
        the Year Ended March 31, 2006**
 
 A
        director of the Company purchased 200,000 shares of common stock at a price
        of
        $0.50 per share for a total cost of $100,000.
  The
        Company issued 560,000 shares of common stock to an officer of the Company
        pursuant to the terms of an asset acquisition which had been completed during
        the year ended March 31, 2005.
 
 The
        Company received a loan in the amount of $25,000 from a Company
        director.  This loan was fully paid during the year ended March 31,
        2006.
  F-16
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        3 - RELATED PARTY TRANSACTIONS, continued**
  The
        Company issued 423,846 shares of common stock to
        its Chief Executive Officer in lieu of $105,962 of salary, and a total of
        400,000 shares valued at $177,000 to Digitis, Inc., a Company controlled
        by
        NextPhase’s Chief Executive Officer, as a bonus.  The Company also
        granted a bonus of 750,000 shares valued at $105,000 for services performed
        during the period ended March 31, 2006. These shares were issued in June
        2007.  The Company also issued 120,000 shares in April 2006 valued at
        $30,000 for services performed during the year ended March 31,
        2005.
  The
        Company issued 413,860 shares of common stock to its Chairman in lieu of
        $103,465 of salary, and a total of 200,000 shares of common stock valued
        at
        $50,000 as a bonus.  The Company also granted a bonus of 150,000
        shares valued at $22,500 for services performed during the period ended March
        31, 2006. These shares were issued in 2007.  The Company also agreed
        to issue 120,000 shares valued at $30,000 for services performed during the
        year
        ended March 31, 2005.
 
 The
        Company issued 333,138 shares of common stock to its Vice President – Sales and
        Marketing in lieu of $83,285 salary, and 325,000 shares of common stock valued
        at $70,000 as a bonus.  The Company also issued a total of 120,000
        shares valued at $30,000 in lieu of salary.
 
 A
        convertible note payable in the amount of $30,000 was assigned by the original
        maker of the note to the Company’s Chairman, and the Company is now indebted to
        its Chairman in the amount of $30,000 plus accrued interest (see Note
        5).
 
 **For
        the Year Ended March 31, 2007**
 
 The
        following is a summary of debt and equity transactions entered into
        with related parties, for detailed discussions of debt and equity
        transactions, see Notes 5 and 6, respectively.
 
 The
        Company issued an aggregate of 2,100,769 shares of common stock valued at
        $249,231 to its chief executive officer for services totaling $114,231 and
        $135,000 provided during the years ended March 31, 2007 and 2006,
        respectively.
 
 The
        Company issued an aggregate 1,500,769 shares of common stock valued at $165,231
        (based on the estimated fair value at the respective measurement dates) to
        its former chairman for services totaling $114,231 and $51,000 provided during
        the years ended March 31, 2007 and 2006,  respectively.
 
 The
        Company issued 2,400,000 shares of its common stock valued at $212,400 (based
        on
        the estimated fair value on the measurement date) to its chairman for services
        provided during the year ended March 31, 2007.
 The
          Company issued an aggregate of 156,923 shares of common stock valued at
          $41,077
          (based on the estimated fair value at the respective measurement dates)
          to a
          director for services totaling $8,877 and $33,000 provided during the years
          ended March 31, 2007 and 2006, respectively.
 
 The
          Company issued an aggregate of 305,000 shares of common stock valued at
          $65,000
          (based on the estimated fair value on the respective measurement dates)
          to a
          former officer for services totaling $35,000 and $30,000 provided
          during  the years ended March 31, 2007 and 2006,
          respectively.
  A
          payment
          of $13,000 was made on a convertible note payable to the Company’s former
          chairman leaving a balance due of $17,000 at March 31, 2007 (see Note
          5).
  F-17
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        4 – PROPERTY AND EQUIPMENT**
  *Communications
          Towers*
 The
        Company intends to utilize  broadcast  towers as their main
        POP's (Points of Presence)  and to deliver  Point
        to  Multipoint  broadband  connectivity  to
        the
        Company's  existing  and  potential  clients.  Depending  on
        tower  location and
        visibility,  each  tower  will  cover a
        range  from 240 to 360  degrees,  with a
        broadcast  strength  in excess of 25
        miles  delivering  an  average of 32Mbps of
        broadband  data service.  Within this coverage area, the
        Company will sell data circuits for Internet service, video and/or VoIP
        service.
 
 At
        March
        31, 2007, there were ten towers in operation.  The
        estimated   useful life of the towers is approximately ten years.
        The Company begins to depreciate the cost of each tower when the tower is
        placed
        into service.
 
 Property
        and equipment are recorded at cost.
  Property
                    and equipment at March 31, 2007:
                
                **Estimated****Useful
                    Life**
                
                **Balance**Telecommunications
                    equipment
                
                3
                    years
                
                $
                156,260Communication
                    towers
                
                10
                    years
                
                
                122,326Computer
                    equipment
                
                3
                    years
                
                
                142,304Automotive
                    equipment
                
                5
                    years
                
                
                58,067Furniture
                    and fixtures
                
                5
                    years
                
                
                23,291Leasehold
                    improvements
                
                Lease
                
                
                7,176Total
                    property and equipment
                
                
                
                $
                509,424Less:
                    accumulated depreciation
                
                
                
                
                (214,413
                )Net
                    property and equipment
                
                
                
                $
                295,011
 
 
 
 Depreciation
        expense for the years ended March 31, 2007 and 2006 was $129,715 and $70,248,
        respectively.
 
 Property
        acquired under capital leases was follows:
  ***March
                    31,***
                
                **2007**
                
                
                **2006**Furniture
                
                
                13,291
                
                
                $
                13,291Less:
                    accumulated depreciation
                
                
                (1,993
                )
                
                
                (665
                )**Net
                    Furniture Under Capital Leases**
                
                $
                11,298
                
                
                $
                12,626
  F-18
 Table
            of Contents
 **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        5 – NOTES PAYABLE AND CAPITAL LEASE**
  At
                    March 31, 2007 notes payable and capital leases consisted of
                    the
                    following:**Total**
                
                
                **Current**
                
                
                **Long-Term**Secured
                    convertible note payable, interest at 6%, due April 2008
                
                $
                2,300,000
                
                
                
                -
                
                
                $
                2,300,000Less
                    discount
                
                
                (35,090
                )
                
                
                -
                
                
                
                (35,090
                )Convertible
                    notes, interest at 7%, due between December 2007 and March
                    2008
                
                
                390,000
                
                
                
                390,000
                
                
                
                -Convertible
                    note, interest at 6%, due April 2007
                
                
                17,000
                
                
                
                17,000
                
                
                
                -Convertible
                    note, interest at 7%, due June 2007
                
                
                46,000
                
                
                
                46,000
                
                
                
                -Automobile
                    loan, interest at 5.9%, $924 monthly, due May 2011
                
                
                40,903
                
                
                
                8,963
                
                
                
                31,9402,758,813
                
                
                
                461,963
                
                
                
                2,296,850Capital
                    lease, imputed interest at 8.17%, $360 per month due April
                    2009
                
                
                8,145
                
                
                
                3,570
                
                
                
                4,575$
                2,766,958
                
                
                $
                465,533
                
                
                $
                2,301,425Advance
                    payable on demand, interest at 9%
                
                $
                100,000
                
                
                $
                100,000
                
                
                $
                -For
                    the year ended March 31,  future minimum payments are as
                    follows:2008
                
                
                $
                565,5332009
                
                
                
                2,313,3312010
                
                
                
                10,8322011
                
                
                
                10,6932012
                
                
                
                1,659$
                2,902,048
 
 The
        convertible note payable in the amount of $2,300,000 is dated March 31, 2006
        and
        is fully secured by all the assets of the Company. It was deemed effective
        at
        the date upon when the cash was received by Synkronus on behalf of the Company,
        or April 7, 2006. The note bears interest at the rate of 6% per annum, and
        is
        due in full on April 1, 2008. Upon maturity, the note and accrued interest
        are
        convertible into common stock of the Company at the lower of the fair market
        value of the Company's common stock at the date of conversion or $0.33 per
        share. The minimum price at which the note and accrued interest may convert
        is
        $0.15 per share. The Company determined the value of the embedded beneficial
        conversion feature of this note payable at the time of issuance to be $69,697,
        which is considered a discount to the note. The Company is amortizing the
        discount over the life of the note and charged $34,607 to interest expense
        during the year ended March 31, 2007.  During the year ended March 31,
        2007, the Company paid interest in the amount of $103,500 by issuance of
        904,272
        shares of common stock.
 
 During
        the year ended March 31, 2007, the Company issued 11 convertible notes totaling
        $390,000, with an interest rate of 7%, and all maturing in one year from
        the
        date of issuance. The maturity dates of the notes are between December 2007
        and
        March 2008. As a stipulation, when the Company’s common stock reaches $0.20 or
        above for a period of 10 consecutive days, the principal and accrued interest
        due under the note will convert into common stock of the Company at a rate
        of
        $0.15 per share. In accordance with the convertible notes payable agreements,
        if
        the notes were convertible as of March 31, 2007, the Company would have recorded
        a debt discount related to the beneficial conversion features of approximately
        $97,000.
  F-19
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        5 – NOTES PAYABLE AND CAPITAL LEASES, continued**
 
 The
        convertible note payable in the amount of $30,000 dated March 16, 2006 and
        was
        assigned to the former chairman. The note bears interest at the rate of 6%
        per
        annum, and was due in full on April 1, 2007. Upon maturity, the note and
        accrued
        interest were convertible into common stock of the Company at the lower of
        the
        fair market value of the Company's common stock at the date of conversion
        or
        $0.32 per share. The minimum price at which the note and accrued interest
        was to
        convert was $0.15 per share. The Company determined the value of the embedded
        conversion feature to be $0.  The Company paid $13,000 on the note,
        reducing the principal balance to $17,000 at March 31, 2007 and the balance
        was
        cancelled as part of a settlement agreement on June 28, 2007 (see Note
        11).
 
 The
        Company issued a convertible note payable in the amount of $61,000 dated
        June 9,
        2006. The note was reduced by payments to $46,000 as of March 31, 2007. The
        note
        bore interest at the rate of 6% per annum, and was due in full on June 9,
        2007.
        Upon maturity, the note and accrued interest were convertible into common
        stock
        of the Company at the lower of the fair market value of the Company's common
        stock at the date of conversion or $0.33 per share. The minimum price at
        which
        the note and accrued interest was to convert was $0.15 per share. The note
        was
        cancelled as part of a settlement agreement on June 28, 2007 (see Note
        11).
 
 The
        Company received an advance payable, due on demand in the amount of $100,000
        with interest at 9% per annum.
 
 The
        Company issued a note payable in the amount of $50,650 for an auto loan.
        This
        note is dated June 14, 2006, and is payable in 60 equal monthly installments
        of
        $924. This note bears interest at the rate of 5.9% per annum, and is guaranteed
        by the Company's former chairman.  The balance at March 31, 2007 was
        $40,903.
  The
        Company has a capital lease in the amount of $8,145 with an imputed interest
        rate of 8.17%, for furniture located the Company's corporate office. Minimum
        monthly payments are $360 maturing in April 2009.
  **NOTE
          6 – EQUITY**
 The
          Company is authorized 200,000,000 shares of common stock with $0.001 par
          value.
  *Common
          Stock*
 For
        the
        year ended March 31, 2006:
 
 The
        Company sold 890,000 shares of common stock for $445,000 cash.
 
 The
        Company issued 1,120,000 shares of common stock which were subscribed during
        the
        year ended March 31, 2005 for $280,000 cash.
 
 The
        Company charged to additional paid-in capital the amount of $20,000 representing
        the discount on convertible debt attributed to embedded beneficial conversion
        features.
  F-20
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        6 – EQUITY, continued**
 
 The
        Company agreed to issue 50,000 shares of common stock valued at $25,000 for
        an
        asset acquisition. This amount was charged to subscriptions payable at March
        31,
        2006; these shares were issued subsequent to March 31, 2006.
 
 The
        Company issued 4,124,585 shares of common stock for services valued at
        $1,151,266.  The Company charged the amount of $967,666 to operations
        during the twelve months ended March 31, 2006, and $183,600 to deferred
        compensation.
 
 The
        Company charged to operations the amount of $165,521 for the amortization
        of
        deferred compensation.
 
 The
        Company cancelled 2,895,000 shares of common stock valued at $723,750 pursuant
        to legal settlements.
 
 The
        Company also issued to consultants warrants to purchase 350,000 shares of
        common
        stock at a price of $0.30 per share. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $71,256 to additional
        paid-in capital during the twelve months ended March 31, 2006.
 
 For
        the
        year ended March 31, 2007:
 
 The
        Company issued 5,123,461 shares of common stock to officers and directors
        for
        services performed during the year ended March 31, 2007 valued at $483,939
        (based on the estimated fair value at the measurement dates).
 
 The
        Company issued 294,027 shares of common stock to consultants for services
        performed in during the year ended March 31, 2007 valued at $41,689 (based
        on
        the estimated fair value of the respective measurement dates).
 
 The
        Company issued 1,340,000 shares of common stock to officers and directors
        for
        services performed during the year ended March 31, 2006, which were included
        in
        accrued expenses at March 31, 2006, valued at $249,000 (based on the estimated
        fair value at the respective measurement dates).
 
 The
        Company issued 146,230 shares of common stock to consultants for services
        performed during the year ended March 31, 2006, which were included in accrued
        expenses at March 31, 2006, valued at $31,558 (based on the estimated fair
        value
        of the respective measurement dates).
 
 The
        Company issued an aggregate of 904,272 shares of common stock for payment
        of
        interest totaling $103,500 (based on the estimated fair value at the
        respective measurement dates).
 
 The
        Company issued 125,461 shares of common stock for payment of accounts payable
        accrued at March 31, 2006 in the amount of $37,638 (based on the estimated
        fair
        value at the measurement date).
 
 The
        Company issued 40,000 shares of common stock pursuant to a settlement agreement
        in the amount of $20,000 (based on the estimated fair value at the measurement
        date).
  F-21
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        6 – EQUITY, continued**
  The
          Company issued 50,000 shares of common stock valued at $25,000 for subscriptions
          payable (based on the estimated fair value at the measurement
          date).
 
 The
          Company cancelled 120,625 shares of common stock issued by the Company
          during
          the year ended March 31, 2005 pursuant to a stock purchase agreement. Upon
          cancellation, the Company credited additional paid-in capital with the
          par value
          of these shares, or $121.
 
 The
          Company received 1,000,000 shares of common stock, previously issued, valued
          at
          $250,000 (based on the estimated fair value at the measurement date) pursuant
          to
          terms of a legal settlement from a prior period.
 
 The
        Company purchased 90,180 shares of common stock for $9,979 which is being
        retired as treasury stock.
 
 The
        Company charged to operations the amount of $89,335 of deferred compensation
        during the year ended March 31, 2007, which includes $58,957 related to a
        warrant (see below).
 *Preferred
          Stock*
 The
        Company is authorized to issue 20,000,000 shares of preferred stock with
        $0.001
        par value per share. As of March 31, 2007 and 2006, the Company did not issue
        any preferred shares.
 
 *Warrants*
 The
        Company issued a fully vested warrant to purchase 350,000 shares of common
        stock
        at a price of $0.30 during the year ended March 31, 2006 for consulting services
        to be provided through January 19, 2007.  The Company valued these
        warrants using the Black-Scholes valuation mode, (risk free interest rate
        4.75%,
        volatility 154% and estimated life of 3 years) and charged $71,256 to deferred
        compensation upon grant.  $58,957 and $12,299 of this amount was
        amortized to operations during the year ended March 31, 2007 and 2006,
        respectively.
 
 There
          were no warrants issued, exercised or cancelled/expired during the year
          ended
          March 31, 2007.
  **NOTE
        7 – INCOME TAXES**
  At
        March
        31, 2007, the Company has available for federal and state income tax purposes
        a
        net operating loss carryforwards of approximately $8,500,000, expiring through
        the year 2025, that may be used to offset future taxable income. The Company
        has
        provided a valuation reserve against the full amount of the net operating
        loss
        benefit, since in the opinion of management based upon the earnings history
        of
        the Company; it is more likely than not that the benefits will not be realized.
        Also, due to a change in the control after the reverse acquisition of NTI
        by
        NextPhase, the Company’s past accumulated losses to be carried forward may be
        limited.
 
 Pursuant
        to Internal Revenue Code Sections 382 and 383, the use of the Company’s net
        operating loss and credit carryforwards may be limited if a cumulative change
        in
        ownership of more than 50% occurs within a three-year period.  The
        annual limitation may result in the expiration of net operating losses and
        credits before utilization.
 
 Deferred
        tax assets consist primarily of the tax effect of net operating loss
        carryforwards. The Company has provided a full valuation allowance on the
        deferred tax assets because of the uncertainty regarding
        realizability.  The valuation allowance increased approximately
        $748,000 and $578,000 during the years ended March 31, 2007 and 2006
        respectively.
  F-22
 Table
            of Contents
  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        7 – INCOME TAXES, continued**
 
 Components
        of deferred tax assets as of March 31, 2007 are as follows:
  Non-current:Net
                    operating loss carry forward
                
                $
                2,788,000Valuation
                    allowance
                
                
                (2,788,000
                )Net
                    deferred asset
                
                $
                -
 
 **NOTE
        8 - LEGAL SETTLEMENTS**
 
 During
        the years ended March 31, 2007 and 2006, the Company entered into various
        settlement agreements with regard to legal disputes. Pursuant to the
        terms of these settlement agreements, the company recorded other income
        (expense) in the aggregate amount of ($318,957) and $1,115,500, respectively,
        comprised of the following:
 
 **2006****Shares**
              
              
              **Value**Common
                  stock of the Company received for cancellation
              
              
              2,895,000
              
              
              $
              723,750Common
                  stock of the Company to be received for cancellation; recorded
                  to stock
                  cancellation receivable at March 31, 2006 and returned in
                  2007
              
              
              1,000,000
              
              
              
              250,000Shares
                  of Nathaniel Energy Corp. stock received
              
              
              3,000,000
              
              
              
              198,000Cash,
                  net
              
              
              -
              
              
              
              (56,250
              )Total
                  legal settlement income
              
              
              -
              
              
              $
              1,115,500
 
 In
        May
        2007, the Company entered into a settlement agreement with a former employee
        and
        officer in which the Company agreed to pay approximately $170,000 and agreed
        to
        issue 560,000 shares of common stock, valued at $78,400 (estimated fair value
        based on the measurement date).  The Company has accrued such amounts
        in the accompanying consolidated balance sheet (see Note 11).
 
 In
        May
        2007, the Company entered into a settlement agreement with former shareholders
        in which the Company agreed to pay approximately $24,000.  The Company
        has accrued such amount in the accompanying consolidated balance
        sheet.
 
 In
        May
        2007, the Company entered into a settlement agreement with a vendor in which
        the
        Company agreed to pay approximately $45,000.  The Company has accrued
        such amount in the accompanying consolidated balance sheet.
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 **NEXTPHASE
            WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
          9 - COMMITMENTS AND CONTINGENCIES**
 *Lease
        Commitments*
 The
        Company leases its offices in California and Georgia, including roof top
        rentals
        for towers and equipment under non-cancellable operating leases with monthly
        payments ranging of $16,138 to $16,225 and expiring through October 2009.
         Commitments for minimum rentals under non-cancelable leases at March 31,
        2007 are as follows:
  *For
                    the Years March 31,*
                
                **Operating
                    Leases**2008
                
                $
                180,0002009
                
                
                110,0002010
                
                
                19,000**Total
                    Minimum Lease Payments**
                
                $
                309,000
 
 For
        the
        years ended March 31, 2007 and 2006, rental expense was $193,003 and $143,069,
        respectively.
 
 *Capital
        Leases*
 The
        Company is a lessee for certain property and equipment under capital lease
        obligations that expire in April 2009. Terms of the leases call for monthly
        payments of $360 and an imputed interest rate of 8.17%. The assets and
        liabilities under the capital lease obligations are recorded at lease inception
        at the present value on the minimum lease payments.  The assets are
        depreciated over their estimated useful lives.  Future minimum
        payments under non-cancellable capital leases at March 31, 2007 are as
        follows:
 
 *For
                    the Years March 31,*
                
                **Capital
                    Leases**2008
                
                $
                4,3202009
                
                
                4,3202010
                
                
                360**Total
                    Minimum Lease Payments**
                
                
                9,000Less:
                    Amounts representing interest
                
                
                (855
                )Present
                    value of future lease payments
                
                $
                8,145
 
  *Employment
        and Consulting Agreements*
 The
        Company has employment agreements with the Company’s officers and certain
        employees. These employment agreements provide for salaries and benefits,
        including stock grants and extend up to three years. In addition to salary
        and
        benefit provisions, the agreements include defined commitments should the
        employer terminate the employee with or without cause. As of March 31, 2007,
        the
        employment agreements require aggregate payments of approximately $370,000,
        $500,000 and $416,667 for the years ending March 31, 2009 and 2010,
        respectively.
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 **NEXTPHASE
            WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
          9 - COMMITMENTS AND CONTINGENCIES, continued**
  *Litigation*
 The
          Company is subject to legal proceedings and claims that arise in the ordinary
          course of its business. Although occasional adverse decisions or settlements
          may
          occur, the Company believes at March 31, 2007, after considering the subsequent
          settlments discussed in Note 8, that the final disposition of such remaining
          matters will not have material adverse effect on its financial position,
          results
          of operations or liquidity.
  *Short-Swing
        Profit*
 The
        Company's former chairman realized a short-swing profit in the amount of
        $4,251
        by trading in the Company's stock. This amount was remitted by the former
        chairman to the Company in April 2006. The Company is unable to predict the
        extent of its ultimate liability with respect to any and all future securities
        matters. The costs and other effects of any future litigation, government
        investigations, legal and administrative cases and proceedings, settlements,
        judgments and investigations, claims and changes in this matter could have
        a
        material adverse effect on the Company's financial condition and operating
        results.
  *Other
        Contingent Obligations*
 During
        its normal course of business, the Company has made certain indemnities,
        commitments and guarantees under which it may be required to make payments
        in
        relation to certain transactions. These include (i) intellectual property
        indemnities to the Company’s customers and licensees in connection with the use,
        sales and/or license of Company products; (ii) indemnities to vendors and
        service providers pertaining to claims based on the negligence or willful
        misconduct of the Company; (iii) indemnities involving the accuracy of
        representations and warranties in certain contracts; (iv) indemnities to
        directors and officers of the Company to the maximum extent permitted under
        the
        laws of the State of Nevada; and (v) certain real estate leases, under
        which the Company may be required to indemnify property owners for environmental
        and other liabilities, and other claims arising from the Company’s use of the
        applicable premises. The duration of these indemnities, commitments and
        guarantees varies and, in certain cases, may be indefinite. The majority
        of
        these indemnities, commitments and guarantees do not provide for any limitation
        of the maximum potential for future payments the Company could be obligated
        to
        make. Historically, the Company has not been obligated to make significant
        payments for these obligations, and no liabilities have been recorded for
        these
        indemnities, commitments and guarantees in the accompanying consolidated
        balance
        sheet.
 
 **NOTE
        10 - MAJOR CUSTOMERS**
 
 For
        the
        year ended March 31, 2006:
 
 Revenue
        from two major customers approximated $229,163 or 36% of revenues. Total
        accounts receivable of $159,265 or 80% of total accounts receivable was due
        from
        these two customers as of March 31, 2006
 
 Purchases
        from two major suppliers approximated $222,867 or 43% of
        purchases.  Total accounts payable of $169,222 or 19% of total
        accounts payable was due to these two suppliers as of March 31,
        2006.
 
 For
        the
        year ended March 31, 2007:
  No
        individual customer accounted for more than 10% of revenue or 10% of accounts
        receivable.
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  **NEXTPHASE
          WIRELESS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        11 - SUBSEQUENT EVENTS**
 
 In
        April,
        June and July 2007, the Company issued convertible notes totaling $200,000,
        with
        interest at 7%, and all due in one year from the date of
        issuance.  When the Company’s common stock reaches $0.20 or above for
        a period of 10 consecutive days, the principal and accrued interest due under
        the note will convert into common stock of the Company at a rate of $0.15
        per
        share.
 
 In
        May
        2007, the Company issued 333,000 shares of its common stock valued a $29,700
        for
        consulting services
        rendered in the year ended March 31, 2007 and previously recorded in accrued
        liabilities.
 
 The
        Company settled a lawsuit with a former employee and officer in May 2007
        for
        $175,920, which was
        recorded in accounts payable as of March 31, 2007 and 560,000 shares of its
        common stock valued at $78,400 which were issued in June 2007 and recorded
        in
        accrued liabilities as of March 31,2007
 
 On
        June
        11, 2007, the Company entered into an agreement with United Capital Group,
        Inc.
        for consulting services.  In connection with the agreement the Company
        agreed to issue one million shares of the Company’s common stock valued at
        $130,000.
 
 On
        July
        1, 2007, the Company entered into a one year agreement with Elite Financial
        Communications Group, Inc, LLC for market relations support. In connection
        with
        the agreement the Company granted options to purchase common stock of the
        Company at prices ranging from $0.20 to $0.35 per share, the value of which
        was
        $32,000.
 
 In
        June
        2007, the Company’s and its former chairman, entered into a settlement agreement
        whereby the former chairman forgave notes payable, accrued interest advances
        and
        accrued expenses in the aggregate amount of $95,141, which was record as
        a gain
        on extinguishment.
 
 The
        Company has entered into letters of intent to purchase Interactive Network
        Services Inc. and DSL Express.  The agreements provide for the
        purchase of the fixed operating assets and customer base and are expected
        to
        close in quarter ended September 30, 2007.








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