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
      1934For
      the fiscal year ended March 31, 2008ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      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 ofIncorporation
      or Organization)
            (IRS
      EmployerIdentification
      No.)






300
      S. Harbor Blvd, Suite 500Anaheim,
      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: $1,890, 040


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 8 2008, was $ $933,410.








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 07, 2008
was 5,461,181 shares.





DOCUMENTS
INCORPORATED BY REFERENCE: none





Transitional
Small Business Disclosure Format (check one): Yes o No x
















NEXTPHASE
WIRELESS, INC.




TABLE OF CONTENTS




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 Small Business
      Issuer Purchases of Equity Securities
            11Item
      6.
            Management’s
      Discussion and Analysis or Plan of Operation
            12Item
      7.
            Financial
      Statements (included after Part III Item 14, beginning on page
      29)
            20Item
      8.
            Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure
            20Item
      8A.
            Controls
      and Procedures
            20Item
      8B.
            Other
      Information
            21PART
      III.Item
      9.
            Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act
            22Item
      10.
            Executive
      Compensation
            24Item
      11.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            27Item
      12.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            27Item
      13.
            Exhibits
      and Reports
            28Item
      14.
            Principal
      Accountant Fees and Services
            28Financial
      Statements
            F1
      – F5Signature
      PageExhibit
      Index










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. DESCRIPTION OF BUSINESS





General





NextPhase
Wireless, Inc. (“NextPhase” “we”,” us” “our” or the “Company”) The following is intended as a
summary of certain matters relating to NextPhase Wireless, Inc. (the “Company”)
and is qualified in its entirety by the more detailed information appearing
elsewhere in this document, including all Exhibits hereto, which are hereby
incorporated by this reference.  In this document, “NextPhase”, “we”,
“us” and “our” refer to the Company and its subsidiaries.





Since
mid-2005, we have been executing a business plan to position NextPhase as a
nationwide developer of WiMAX-ready networks and a provider of advanced wired
and wireless broadband connectivity solutions to businesses, public school
systems, municipalities and other government agencies.  With a mission
to build a device-agnostic, WiMAX-ready, wireless broadband connectivity/content
delivery platform serving all 48 contiguous U.S. states, using licensed WiMAX
and LMDS spectrum bands.




In
addition, we recently secured licensed LMDS (Local Multipoint Distribution
Service) spectrum on a 10 year lease agreement.  With this spectrum,
we can more cost-effectively provide high-capacity connections and deliver our
NextPhaseSM
CONNECT family of high quality wireless broadband solutions that meet the
demands of mobile and wireline voice, data, VoIP and video
applications.




Also,
we successfully received a nationwide license to provide WiMAX wireless services
in the newly released 3.65 GHz band (3650-3700 MHz), which was granted by the
FCC in January 2008.  Initial testing and deployment of the
NextPhaseSM
MAX.CONNECT WiMAX services is on schedule, and will commence roll-out in key
Southern California markets by early 3rd quarter 2008.




We
are actively engaged in designing, deploying and operating our own proprietary,
nationwide WiMAX-ready wireless network, and offering next-generation broadband
connectivity products and services to customers located primarily in secondary
(non-metropolitan) U.S. markets.




NextPhase
is executing a series of complementary business strategies to build and support
a nationwide broadband wireless network based on WiMAX, a more powerful relative
of Wi-Fi technology.  Currently, we provide wireless coverage in
California with offices in California and New Jersey.  NextPhase’s
expanding wireless broadband network is currently one of only a few WiMAX-ready
networks in the United States that is capable of delivering up to 1.0 Gbps of
raw data.




We
are extending our national wireless "footprint" by negotiating the deployment of
network repeaters at strategic geographic locations throughout the country, as
well as through strategic alliances and highly targeted
acquisitions.  By broadening our range of connectivity offerings to
include DSL, T1, ATM, Frame Relay and Satellite circuits in addition to our
wireless capabilities, we are also able to provide a full range of connectivity
services to customers outside our physical "footprint" and are empowered to
develop value-added redundancy and failover offerings by combining multiple
best-of-breed technologies and bundling advanced service offerings.








Business
Model





Unlike
others within the wireless broadband industry who are executing a ‘build it and
they will come’ business model, our growth strategy provides for the acquisition
of profitable local and regional ISPs in secondary (non-metropolitan) markets
that have already established customer bases comprised of business users, public
school systems, government agencies and municipalities.  Our
post-acquisition integration process then provides for the overlay of physical
wireline network footprints with WiMAX-ready wireless networks, and the
migration of the existing customer base to wireless circuits.  As a
result, we are able to provide our acquired customers with a wider range of
premium broadband connectivity solutions at more favorable pricing than
prevailing wireline offerings, while achieving significantly improved
margins.




We
have chosen to pursue acquisitions in specific geographical regions that meet
certain criteria.  We have a well-defined M&A process which
rapidly qualifies potential target companies against a series of selection
criteria: strong historical revenue generation, profit growth potential and
established wireline or wireless networks.




Demand
for bandwidth has grown at an compound annual growth rate of 100% from 1996 to
2006, and this trend, being driven in particular by the rapid growth of video
content delivery via the Internet, is forecast to continue over the next several
years (source: Nemertes Research).  The study goes on to suggest that
while "core fiber and switching/routing resources will scale nicely to support
virtually any conceivable user demand, Internet access infrastructure,
specifically in North America, will likely cease to be adequate for supporting
demand within the next three to five years."




Much
of this growth was possible without significant investment in additional
infrastructure because of the huge amounts of surplus capacity left over from
the ‘dot com’ boom (e.g. dark fiber, etc.).  As this excess capacity
has now effectively been consumed, there is an imminent need for significant
investment in backhaul capabilities, if carriers are to deliver on the promise
of 3G and WiMAX technologies (Source: ABI Research).  Global CAPEX for
backhaul is forecast to increase from $14 billion in 2007 to $23 billion in
2012, with OPEX expected to rise from $1 billion to $6 billion during the same
period.





By
acquiring licensed LMDS spectrum, we are well positioned to provide backhaul
capabilities to Telco’s and other service providers.




Microwave
backhaul has significant advantages in both cost (traditional technologies
typically cost 10-12X more to enable the same level of service) and time to
deploy.




The
cellular service providers (i.e. AT&T, Verizon, Sprint, etc.) have seen
similar dramatic growth, as their customers demand ‘any time, any place’ voice
and data services:





·
            an
      18X increase in minutes of use from 63 billion in 1997 to 1.1 trillion in
      2004;





·
            an
      almost 4X increase in the number of wireless customers from 55 million in
      1997 to over 180 million in 2004;
and





·
            a
      40 times increase in wireless data revenues from under $100 million in
      1997 to over $4 billion in 2004.





This
massive growth has strained their networks, and while they continue to add
additional cell towers (currently, there are approximately 450,000 cell towers
across the US), they are now looking to expand capacity in other
ways.  The most cost-effective method of increasing capacity, and why
NextPhase is aggressively targeting this market segment, is by upgrading the
backhaul capabilities.  Many of the existing cell towers use copper
telephone lines for backhaul, and so other technologies need to be considered.
Fiber satisfies the requirements in terms of additional capacity, but it is very
costly and time-consuming to deploy.  All of the major cellular
service providers have significant spectrum holdings, but it is more
cost-effective to use that spectrum to deliver services to their customers, and
use LMDS microwave spectrum from service providers such as NextPhase for their
backhaul needs.




By
exploiting our full-service capabilities, leveraging our relationships with
best-of-breed equipment suppliers and solution providers,  and
promoting acquired and organic expansion of our national network’s footprint, we
believe we are able to offer broadband connectivity services that are both
competitive with, and complementary to, existing wireline and wireless
networks.  Our customers have access to the same rich content,
applications and services as those offered by wireline broadband service
providers, while also enjoying the freedom and flexibility of ‘any time, any
place, any device’ access and connectivity.  Moreover, with the advent
of network-ready mobile devices, such as iPods, smart phones, VoIP and wireless
streaming media, we believe we will be ideally positioned to handle the
impending broadband traffic for these devices and support the anticipated future
growth in broadband demand.








Market
Opportunity





By
exploring why we believe wireless spectrum (and in particular, licensed wireless
spectrum) is so valuable, and why we believe that wireless connectivity is
entering a period of rapid growth and increased market share, it is necessary to
first understand some of the underlying trends.  From 2000 to 2006,
aggregate bandwidth demand grew by 100% per year (Source: Nemertes Research), as
the world became more interconnected.  Consumers and businesses alike
are increasingly communicating, collaborating and transacting online, and
consuming ever-increasing amounts of bandwidth to do so.  Whether at
work or at play, we’re creating, consuming and sharing content (text, images,
music, video) in ever-increasing amounts.  In order to put this 100%
compound annual growth rate (CAGR) into perspective, let’s take a look at a
single company, Youtube.  In 2006, Youtube (which only started up in
February 2005) was responsible for 27 Petabytes (1 Petabyte = 1 quadrillion
bytes = 1000 terabytes) of demand.  That is approximately the same
amount of bandwidth that the whole Internet used in 2000.




The
only reason that a single company was able to generate so much traffic in a very
short period of time, and without impacting the overall level of service for all
Internet users was that they were able to take advantage of the huge amount of
surplus capacity left over from the dot-com boom and subsequent
bust.  During that period (1998-2001), several hundred billion dollars
were spent on installing network capacity to meet not only current demand, but
optimistic expectations of future demand.  The exponential growth in
demand for full motion video and other high throughput applications has consumed
much of that excess capacity.  Research indicates that significant
investment is now required, particularly in backhaul, if services providers are
to continue to deliver higher-capacity circuits and the increased mobility
promised by 3G and WiMAX technologies.  In a recent study, ABI
Research forecasted that global CAPEX for backhaul will increase from $14
billion in 2007 to $23 billion in 2012, with OPEX also expected to rise from $1
billion to $6 billion during the same period.




Different
spectrum bands exhibit different properties that make them more or less suited
for different end-uses.  Lower frequencies, such as the recently
auctioned 700MHz has superior propagation characteristics, meaning that it will
go through buildings and trees, and cover longer distances, which means that you
need less infrastructure (which means lower CAPEX costs) to service a given
population.  The downside to the lower frequencies is that it has a
lower payload, or data capacity.  As you move up through the bands
(many of which have already been allocated for other purposes, you start to lose
distance and non-line of sight (NLOS) properties, but the payload / data
capacity goes up.




Prior
to the deployment of fiber during the dotcom boom, telecom companies regularly
used licensed spectrum (6GHz and 11GHz) to backhaul phone services across the
US.  Given the exponential growth in bandwidth consumption, the
reduction in excess fiber capacity, and the mismatch between where that fiber is
and where the demand is (“any time, any place” mobility means demand comes from
locations that weren’t built out in 1998 - 2001), telecom companies and other
service providers are increasingly utilizing licensed spectrum.  In
upgrading our backhaul to licensed spectrum in 2006 and 2007, we learned that
that 11GHz links were unavailable in several key areas and that 18 Ghz links
were also increasingly in demand.  Extrapolating this trend
nationally, we determined that we needed to secure our own licensed spectrum,
which we announced in December 2007.





While
we position ourselves as a “nationwide developer of WiMAX-ready networks and
provider of advanced wireless broadband solutions”, we pride ourselves on being
‘technology agnostic’, understanding the relative pros and cons of each
connectivity technology, and how they can be combined to truly deliver
cost-effective solutions.  In addition to the faster deployment and
reduced deployment costs already discussed, wireless technologies have
significant advantages over traditional wireline technologies in terms of
scalability and flexibility.





·
            Scalability
      – In looking at traditional wireline options (e.g. dial-up, DSL, cable,
      T1, DS-3, Fiber), we see a series of disparate technologies, each of which
      enable delivery of a subset of services with common characteristics (e.g.
      asynchronous / synchronous, best effort / SLA, provision-ability
      (distance, capacity, etc.)).  Often, as your needs grow, you
      outgrow your wireline technology, and there are significant switching
      costs, and migration challenges.  With wireless technologies, we
      have the ability to remotely configure the service level, via the
      connection itself.  Without switching out the Customer Premises
      Equipment (CPE), we can remotely increase a circuit from 1Mbps up to
      30Mbps, or any level in between.





·
            Flexibility
      – In addition to the flexibility to increase the size of the circuit ‘on
      the fly’, we can also shape the circuit (in terms of how the bandwidth is
      split between download and upload), to meet the changing needs of the
      customer.  In comparison, if a wireline T1 customer (1.5Mbps
      up/1.5 Mbps down) wanted to double their bandwidth, they would have to
      provision a second T1 connection, and then they would have to be bonded
      together (using additional equipment, and at additional cost) for the two
      circuits to behave as if they were a
    single  circuit








Business
Strategy





NextPhase
has adopted a business-back approach to those markets identified as offering
potential for sustainable growth.  In order to determine the basis for
differentiation and business 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.




Our
underpinning marketing strategy is centered on locating, attracting and
retaining customers.  Our approach involves establishing and
validating our Company’s senior executives as thought leaders within the
wireless broadband industry – with special emphasis on mainstream adoption of
WiMAX; building relationships with key industry participants; and developing
strong, recognizable brands in the marketplace.  We see the ISP
industry in transition, with the traditional ‘pipe’ business rapidly being
commoditized, and the opportunity being to focus on the applications that the
pipe carries (e.g. Voice over IP (VoIP), Software as a Service (SAAS), Virtual
Private Networks (VPNs), etc.), the reliability and security of the service
(e.g. redundancy, proactive monitoring & alerting, remote backups, disaster
recovery, business continuity, etc.) and the seamless integration with other
platforms and services.  While commodity ‘pipe’ customers can, and
will, switch providers on cost alone, customers who are looking for improved
levels of service and increased functionality tend not to switch.




Having
acquired new customers (either through acquisition or organic growth), our focus
is to deepen our relationship with them, learning more about their unmet needs,
and presenting them with products and services that meet those needs and make
their lives easier.  Our intent is that over time, we become our
customers’ “trusted advisor”, as we listen to their needs, satisfy those needs,
and deepen our relationship in the process.  This will reduce customer
churn, and significantly increase Average Revenue Per User (ARPU).




From
a customer perspective, NextPhase is intent on initially optimizing revenue
growth through focused marketing initiatives targeting:





·
            Small- to Mid-Size Businesses
      (SMBs).  SMBs are not well served by traditional
      connectivity technologies.  As they are often physically located
      outside the footprint of cable providers, who generally focus on
      residential markets, their choices are often limited to services provided
      by their telephone service provider, 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 scalable as connectivity and bandwidth needs
      grow.  NextPhase has developed a range of flexible, scalable and
      cost-effective solutions that address the specialized needs of SMBs, thus
      freeing them to focus on growing their
  businesses.





·
            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.  Nonetheless, 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 wireless 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 – Public
      Security.  There are very few wireless applications more
      critical than those related to emergency first response and public
      safety.  Through funding initiatives sponsored by the U.S.
      Department of Homeland Security, many law enforcement/first responder
      agencies throughout the country are choosing to deploy new wireless 4.9
      GHz networks for providing improved security, throughput and reliability
      for wireless transmission of voice, video and data from IP surveillance
      cameras, mobile and fixed radio communications systems and the Internet,
      to and from Mobile Command and Communications Vehicles.  The new
      4.9 GHZ spectrum was specifically designated by the FCC for public safety,
      emergency management and homeland security applications.  In
      July 2007, NextPhase was contracted by a major law enforcement agency in
      Southern California to deploy and support its 4.9 GHz wireless broadband
      network.  NextPhase is not referencing this deployment as a
      model for similar 4.9 GHz network deployments by other law enforcement
      agencies across the country.





As WiMAX is now
becoming commercially available, we believe that manufacturers will have an
interest in equipping a broad array of handheld communications and consumer
electronic devices with mobile WiMAX chipsets, including notebook computers,
ultra mobile PCs, PDAs, games consoles, MP3 players,and other work and
entertainment devices.  As these products are introduced, we intend to
explore offering new premium services designed to take advantage of the
capabilities of these devices.




Our
marketing efforts include reliance on a full range of integrated marketing
campaigns and sales activities, including advertising, direct marketing, public
relations and events to support our direct sales teams, authorized
representatives and resellers.  We believe we have a strong local
presence in each of the markets we currently serve, which enhances our ability
to design marketing campaigns tailored to the preferences of the local business
community.





Marketing
Strategy





Early
Q2’08, the company announced the introduction of its new family of services,
NextPhaseSM
CONNECT, to better serve businesses, school districts and local agencies across
the United States.




Designed
to support business-class communications, NextPhaseSM
CONNECT relies on a unique combination of licensed wireless spectrum (WiMAX and
LMDS), guaranteed service levels, secure transport and key technology
partnerships to deliver a robust solution for B2B
environments.




Enabling
customers to choose the best available solution for their
communications needs has remained a fundamental objective for NextPhase
since our inception.  Our team has put together a very reliable,
flexible and secure suite of integrated broadband services, maximizing
our assets, minimizing our customers’ costs, and
providing best-in-class guaranteed service levels at very competitive
prices.  In reference to how these services will make a difference for
customers, we are convinced that NextPhaseSM
CONNECT has the potential to become the new market standard for next
generation services in the telecommunications market; fast, reliable, secure and
affordable.




This
suite allows customers flexible bandwidth allocation (on-demand) up to 1Gb,
Quality of Service (QoS) /guaranteed Service Level Agreements (SLAs), no
interferences or latency effects, enhanced
security/encryption, pro-active network monitoring and management, and
high end-to-end throughput, with the ability to blend wireless/WiMAX/LMDS, fiber
and satellite seamlessly with our customers’ LAN/WAN/MAN networks.  In
addition to enhanced broadband connectivity, NextPhaseSM
CONNECT includes value added business-class services such as four differentiated
options of Voice Over IP (VoIP) and a fully-integrated and easy to
implement VoIP plug-in for Customer Relationships Management (CRM)
systems.





Below
a more detailed view of NextPhaseSM
CONNECT, service by service:





·
            NET.CONNECTSM


o
            1
      to 3 Mb wireless IP service, faster than DSL and priced below traditional
      T-1 service.





·
            GDN.CONNECTSM


o
            6mbps
      “Guardian” link, very unique Internet connectivity delivered on redundant
      circuits.





·
            MAX.CONNECTSM


o
            1
      to 15 Mb true WiMAX wireless IP
connectivity.









·
            WAN.CONNECTSM


o
            10
      to 100 Mb wireless Ethernet connectivity and IP
  services.





·
            GIG.CONNECTSM


o
            High
      capacity wireless Ethernet services from 100 Mb to a full
    Gb.





·
            MET.CONNECTSM


o
            Metropolitan
      Ethernet using the best available technologies (fiber, wireless,
      satellite).  From 1Mb to
1Gb.





·
            VoIP.CONNECTSM


o
            Business-class
      Voice Over IP services, in four different
  editions:


§
            Standard


§
            Enterprise


§
            Premium


§
            Call
      Center





·
            CRM.CONNECTSM


o
            Our
      VoIP. CONNECTSM
      plug-in for Customer Relationship Management
  systems.





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 thatwe 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.




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.









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 from Synkronus, 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.





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.





Personnel





We
have seventeen 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).





ITEM 2. DESCRIPTION OF PROPERTY





The
Company leases 2,032 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
$3,149.60 . The lease expires on October 31, 2009.  The company also
leases roof space for $1,500. per month.





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.The lease expires on November 30, 2013..




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 2009.




The
Company sub-leases approximately 1,700 square feet of space in Blackwood, New
Jersey, which serves as a corporate office.  This sub-lease calls for
monthly payments of $2,450 and expires in August 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. LEGAL PROCEEDINGS





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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.













PART
II





ITEM 5. MARKET FOR 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 NPHS..  As of July 8,
2008, we had 5,461,181 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
              
              
              Low2009 Fiscal
      YearFirst
      Quarter
              
              $
              1.15
              
              
              $
              0.162008 Fiscal
      YearFirst
      Quarter
              
              $
              2.80
              
              
              $
              1.80Second
      Quarter
              
              
              6.20
              
              
              
              2.80Third
      Quarter
              
              
              4.60
              
              
              
              1.80Fourth
      Quarter
              
              
              2.50
              
              
              
              1.012007 Fiscal
      YearFirst
      Quarter
              
              $
              8.00
              
              
              $
              2.40Second
      Quarter
              
              
              3.60
              
              
              
              1.00Third
      Quarter
              
              
              3.40
              
              
              
              1.00Fourth
      Quarter
              
              
              3.40
              
              
              
              1.60


As
of July 08, 2008, the last reported sale price of the Company's stock was $0.25
per share.




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 417 stockholders of record of the Company's common stock as of July 8,
2008.





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 were granted
or issued under the 2003 Plan.




NextPhase
adopted its 2005 Employee Stock Compensation Plan (the “2005 Plan”) on October
19, 2005.  The 2005 Plan was later amended on February 4, 2008 to
expand those persons eligible to participate.  The 2005 Plan is used
to issue shares of common stock of NextPhase to Participants, 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.  This 2005 Plan has not been approved by the Company's
stockholders.  Nonetheless such approval is not required for purposes
of adopting a plan.









The
2005 plan is currently administered by a Compensation Committee selected by
the Board.




NextPhase
reserved a total of 20,000,000 shares of common stock for issuance under the
2005 Plan.  As of March 31, 2008, 11,664,661 shares of common stock
had been issued and 8,335,339 shares remained available for issuance under this
2005 Plan.  As of July 8, 2008, 7,017,959 shares remained available
for issuance under this 2005 Plan.  As a condition to receiving shares
under the 2005 Plan, the person 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 2005
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.





Recent Sales of Unregistered
Securities; Use of Proceeds from Registered Securities





On
January 29, 2008, we issued 100,000 shares to a consultant.  These
shares were valued at $204,000. Stock-based compensation ended December 31,
2007.  The issuance was exempt from registration under Section 4(2) of
the Securities Act of 1933.




On
March 17, 2008, we issued 50,000 shares to an investment banking
firm.  These shares were valued at $97,500.  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.





ITEM 6. MANAGEMENT'S DISCUSSION 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, 2008
compared with the operating results for the year ended March 31,
2007.





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.







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.


NextPhase
Wireless, Inc. (“NextPhase” or the
“Company”) was incorporated in Nevada on August 28, 1995 under the name of
Professional Mining Consultants, Inc.





On
August 3, 2004, NextPhase consummated a share exchange in which it issued
12,943,000 shares of common stock, or approximately 76% of its 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
NextPhase.  NTI was formed on September 14, 2000.  For accounting
purposes, this transaction is considered a "reverse merger,” and the historical
financial statements of NextPhase reflect the operations of
NTI.  Effective on the merger date, all financial activity became
generated by NextPhase 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”), NextPhase acquired the Internet service and connectivity
business assets previously operated by Synkronus, Inc. (“Synkronus”) under the
name "SpeedFactory."  Effective July 23, 2007 SpeedFactory acquired the
Internet service and connectivity business assets previously operated by
Interactive Network Systems, Inc.  (“INS”).  Management's
plans are discussed further in the Going Concern portion of Note 1.




Prior
to the acquisition of SpeedFactory, NextPhase had a limited operating history
with revenue-generating products and services only recently entering the
market.





With
the acquisition of SpeedFactory, NextPhase 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. NextPhase continues to extend its wireless
“footprint” in Southern California, through a combination of organic growth and
acquisition, NextPhase has continued to add small to medium business
subscribers, small office/home office (SOHO) subscribers, and residential
subscribers in underserved markets to its network.





Results of
Operations





For
the year ended March 31, 2008, revenue decreased to $ 1,890,040
compared to $1,986,426 during the year ended March 31, 2007, a decrease of $
$96,386 or approximately 4.9%.  The decrease was due to a reduction of
revenue for SpeedFactory of $372,791, and partially offset by INS revenue of
$286,405.




Cost
of revenue was $1,018,732 o 53.9 % of sales for the year ended March 31, 2008,
compared to $1,116,874 or 56.2% during the year ended March 31, 2007. The
decrease was primarily due to lower revenues and increase
efficiencies.




Gross
profit increased to $871,308 for the year ended March 31, 2008, compared to
$869,552 for the year ended March 31, 2007.  The increase in gross
profit of $1,756 or _.2 % was due to _greater efficiencies despite lower
revenues. 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 $2,650,653 for the year ended March
31, 2008, compared to $1,879,200 for the year expenses as revenues increased
over the year.  As a result, selling, general and administrative
expenses represented 140.2 % of revenue in 2008 versus 94.6% in
2007.  The Company’s expenses will reduce as a percentage of revenues
as the Company follows its new business strategy.




Stock-based
compensation expense was $7,071,519 in the year ended March 31, 2008 as compared
with $653,363 in the year ended March 31, 2007.  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 $371,089 in the year ended March 31, 2008 versus
$337,715 in 2007.  The increase was generally due to the depreciation
and amortization of the assets acquired in the INS acquisition of
$49,333..  The purchase price of SpeedFactory was allocated to the
fair value of assets acquired as follows:




Amount
            
            Estimated
      LivesComputers
      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 "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, 2008 was
$9,221,952 versus $2,000,727 for the year ended March 31,
2007.  Legal settlementincomewas $151,805 during the year ended
March 31, 2008, as compared with legal settlement expense of $318,957 during the
prior year.  The associated cash operating loss was $1,024,712 for the
year ended March 31, 2008 as compared with $407,063 for 2007.  During
the year ended March 31, 2008, the Company settled all significant outstanding
litigation.  During the year ended March 31, 2007, the Company settled
all significant outstanding litigation which had been previously disclosed in
the Company's reports filed with the SEC under the Securities Exchange Act of
1934 and subsequent to year end, received a favorable settlement from its former
chairman, which resulted in a gain in the amount of $95,141.




Interest
expense, was $271,151 during the year ended March 31, 2008, compared to $157,238
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, 2008 was $9,342,019  versus
$2,476,922 for the year ended March 31, 2007.   Monthly
operating cash losses are now approximately $50,000 per month as compared
with $85,000 in 2007.  Management expects this to continue to decline
as the Company completes its current consolidation policy.  The
Company had a net loss of $5.69 per share during the year ended March 31, 2008
as compared with a net loss of $2.10 per share for the year ended March 31,
2007.




Liquidity and Capital
Resources





As
of March 31, 2008, the Company had a cash balance of $592. and the Company's has
experienced net losses of $17,973,729 since inception..  The Company
had negative working capital deficit of
$5,580,521.  These factors raise substantial doubt about
the Company’s ability to continue as a going concern. Without realization of
additional capital, it would be unlikely for the Company to continue as a going
concern. These consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets amounts, or
amounts and classification of liabilities that might result from this
uncertainty.




As
of March 31, 2008, the Company had executed short –term notes for $1,453,299
(all of which are past due as of July 10, 2008) In addition, the Company
received a $275,000 advance from its secured note holder in July 2007 to assist
in the acquisition of INS which was finalized on July 23, 2007. the Company has
a convertible note payable in the amount of $2,300,000 which is became due in
full on April 7, 2008. In April 2008 the Company issued a note for $150,000 and
in May issued notes for $75,000 (see Note 7) with interest at 7%, due between
ninety days from the date of issuance.




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 3rd
quarter of 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. In June 2008, the Company consolidated its
management activities in Anaheim CA., reduced expenses, and redirected its
efforts as described below.








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, 2008
consolidated financial statements states that our recurring losses raise
substantial doubt about our ability to continue as a going concern.





Off-Balance Sheet
Arrangements





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


The
Company recognized revenues 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 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
services and products delivered and the collectability 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
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 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.




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.




Guarantees
and Product Warranties


FASB
Interpretation No. 45, “ Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others” ( “FIN
45”), requires that upon issuance of a guarantee, the guarantor must disclose
and recognize a liability for the fair value of the obligation it assumes under
that guarantee.




The
company’s guarantees issued subject to the recognition and disclosure
requirements of FIN 45 as of March 31, 2008 and 2007 were not material. The
company has service level agreements that can result in a liability to its
customers. Using the company’s historical costs as a basis, a reserve of $0 was
accrued.




Research
and Development


The
company accounts for research and development costs in accordance with the
Financial Accounting Standards Board’s Statement of Financial Accounting
Standards No. 2 (“SFAS 2”), “ Accounting for Research and Development Costs.”
Under SFAS 2, all research and development costs must be charged to expense as
incurred, Accordingly, internal research and development costs are expensed as
incurred. Third-party and developments costs are expense when the contracted
work has been performed or as milestone results have been achieved. Company
–sponsored research and development costs related to both present and future
products are expensed in the period incurred, Total expenditures on research and
product development for the year ended March 31, 2008 and 2007 was
$0.






Business
Combinations


In
accordance with SFAS No. 141, “ business combinations”, we allocate the purchase
price of acquired entities to the tangible and intangible assets acquired,
liabilities assumed, based on their estimated fair values. The Company normally
engages a 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 experiences and information obtained from the
management of the acquired companies. Critical estimates in valuing certain of
the intangible assets include but not limited to: future expected cash flows,
customer relationships and key management and market position, as well as
assumptions about the period of time the acquired will continue to be used in
the company’s combined product portfolio, and
discount rates used to establish fair value.  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.




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, 2008, 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.









Goodwill and
Other Intangible Assets


The
Company has adopted Statement of Financial Accounting
Standards (“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, 2008 are
as follows:




Balance, April 1,
      2007
            
            $
            260,000Goodwill
      acquired
            
            
            80,000Balance,
      March 31, 2008
            
            $
            340,000




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
accuracy or validity of such assumptions, estimates or actual
results.




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




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.




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.  The following is a summary of
outstanding securities which have been excluded from the calculation of diluted
net loss per share because the effect would have been anti-dilutive for the
years endedMarch
31, 2008 and 2007:




2008
            
            
            2007Common
      stock warrants and options
            
            
            17,500
            
            
            
            20,500Convertible
      debt
            
            
            478,485
            
            
            
            348,485495,985
            
            
            
            368,985






Recent
Accounting Pronouncements


On April 1, 2007,
FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”
(“FIN No. 48”) became effective.  NIN No. 48 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 effect on
the Company adopting FIN No. 48 has not been
determined.









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.






ITEM 7. FINANCIAL
STATEMENTS




The
financial statements required by this item are included in this report after
Part III Item 14, beginning on page 30.




ITEM 8. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




On
June 13, 2008, the Company and KJM Corbin and Company, the Company's independent
accountants for the Company's most recent fiscal year, agreed to cease their
client-auditor relationship.  In connection with its audit for fiscal year
2007, and during the interim period preceding such mutually-agreed cessation,
there were no disagreements between the Company and KJM Corbin and Company on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of KJM Corbin and Company, would have caused them to make
reference thereto in their report on the financial statements, as required by
Item 304(a)(3) of Regulation S-B.  The Company engaged as its
certifying accountant Hansen Barnett & Maxwell as its outside auditor.
 During the year ended March 31, 2008, Company did not consult HBM with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company’s Consolidated Financial Statements, or any other
matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of
Regulation S-K.









ITEM 8A. CONTROLS AND
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, 2008 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.




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, 2008,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.Itshould 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.




Our management believes that these
internalcontrol
deficiencies resultin amaterial weakness.  This
material weakness had not been fully remedied  byMarch 31, 2008. Nevertheless, based
upon a number of factors, including ourplanfor remediation(as  described  above)
andother
proceduresdesigned toassistus in ensuring thereliability of our financial
statements,
ourManagementbelieves that the
consolidatedfinancial statementsincluded in theAnnual ReportonForm 10-KSB fairlystates, inall material respects,
ourfinancialcondition,results of operations
andcash flows forthe periodspresented inconformity withgenerally accepted accounting
principlesin
theUnited States of
America.




ITEM 8B. OTHER
INFORMATION




None.















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, 2008
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.




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 CompanyThomas
      Hemingway(1)
            51
            Chairman
      of the Board, Chief Operating Officer, Secretary, and Interim Chief
      Executive Officer and Chief Financial OfficerRobert
      Ford(2)
            47
            President,
      Chief Executive Officer, Treasurer and Director (Principal Executive
      Officer)Michael
      Jones
            52
            President
      of NextPhase International Division, DirectorNicholas
      J. Yocca
            50
            Outside
      Director


___________________________


(1)
            Thomas
      Hemingway became interim Chief Executive Officer and Chief Financial
      Officer of the Registrant Effective June 13, 2008.(2)
            Robert
      Ford took a 90-day personal leave of absence on June 13, 2008 for personal
      reasons.(3)
            David
      Noyes’resignation was reported as effective June 10,
  2008.




Thomas Hemingway – Chairman, Chief
Operating Officer, Secretary and Interim Chief
Executive Officer and Chief Financial Officer,  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,  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).




Michael Jones –
Director,  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.




Nicholas J. Yocca –
Director,Founding/Managing
Partner of The Yocca Law Firm LLP from since 2000; Director of Oxford Media
Group since 2006; formerly with Stradling Yocca Carlson and Rauth,
P.C.









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, 2008.  To our knowledge, during the fiscal
year ended March 31, 2008, our officers, directors and 10% stockholders complied
with all Section 16(a) filing requirements applicable to them.




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
a person 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.










Non-Equity
              
              
              Non-QualifiedIncentive
              
              
              Deferred
              
              
              AllFee
      Paid
              
              
              Stock
              
              
              Other
              
              
              Option
              
              
              Plan
              
              
              Compensation
              
              
              Otherin
      Cash
              
              
              Awards
              
              
              Awards
              
              
              Awards
              
              
              Compensation
              
              
              Earnings
              
              
              Compensation
              
              
              TotalName
      and Position
              Year
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $Thomas
      Hemingway   (1)
              2008
              
              $
              135,000
              
              
              $
              1,950,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              2,085,000Chairman,
      Chief Executive Officer and Chief
              2007
              
              
              48,461
              
              
              
              106,200
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              154,661Financial
      OfficerRobert
      Ford  (2)
              2008
              
              $
              135,000
              
              
              
              1,950,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              
              2,085,000Former
      President Chief Executive Officer
              2007
              
              
              118,846
              
              
              
              114,231
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              233,077David
      Noyes (3)
              2008
              
              $
              84,331
              
              
              $
              812,500
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              896,831Former
      Chief Financial Officer
              2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
  (1)  Salary
      was $180,000 annually effective February 1, 2007 and increased to $250,000
      on December 1, 2007.Mr.
      Hemingway received 600,000 shares of common stock on November 5, 2007
      subject to lock-up provisions.Mr.
      Hemingway became Ceo and CFO effective June 13, 2008(2)  Salary
      was $120,000 annually effective February 5, 2005,to
      $180,000 effective February 1, 2007 and $250,000 on December 1,
      2007.Mr.
      Ford received 600,000 shares of common stock on November 5, 2007 subject
      to lock-up provisions.Mr.
      Ford took a leave of absence on June 13, 2008(3)  Salary
      was $180,000 annually effective November 5, 2007 and increased to
      $250,000on
      December 1, 2007.  Mr. Noyes received 250,000 shares on November
      5, 2007 subject to lock-up provisions.Mr.
      Noyes resigned on March 18,
2008.




ITEM 10. EXECUTIVECOMPENSATION




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
              (#)TomHemingway
              Chairman
      CEO, CFO and
              Director
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Robert
      Ford
              Former
      Chief Executive Officer, Director
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0David
      Noyes  Former Chief Financial Officer
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0


______________________________________











The
table below summarizes all compensation of our directors as of March 31,
2008




DIRECTOR
COMPENSATION


Non-Equity
              
              
              Non-QualifiedIncentive
              
              
              Deferred
              
              
              AllFee
      Paid
              
              
              Stock
              
              
              Other
              
              
              Option
              
              
              Plan
              
              
              Compensation
              
              
              Otherin
      Cash
              
              
              Awards
              
              
              Awards
              
              
              Awards
              
              
              Compensation
              
              
              Earnings
              
              
              Compensation
              
              
              TotalName
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $Michael
      Jones
              
              $
              -
              
              
              $
              81,250
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              81,250Nick
      Yocca
              
              $
              -
              
              
              $
              10,800
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              10,800


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 five (5) years, commencing November 5, 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 November 1, 2007, payable by the Company in regular
      installments in accordance with the Company's general payroll
      practices.




·




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 five (5) years, commencing November 5, 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 November 1, 2007, payable by the Company in regular
      installments in accordance with the Company's general payroll
      practices.






·
            Mr.
      Ford took a 90-day  leave of absence on June 13, 2008 for
      personal reasons.  In resolutions approving the medical leave,
      Mr. Ford and the Company agreed that this would be unpaid leave, but that
      Mr. Ford would nonetheless maintain coverage under the Company’s group
      policy.









DAVID
NOYES




NextPhase
and David Noyes are parties to an employment agreement which provides, among
other things:




·
            that
      Mr. Noyes will serve as NextPhase's Chief Financial Officer for a term of
      three (3) years, commencing November 5, 2007, subject to earlier
      termination by either party in accordance with the Employment
      Agreement,






·
            Mr.
      Noyes annual salary was $250,000.






ITEM 11. SECURITY OWNERSHIP 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 July 8, 2008, 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
              PercentCommon
      Stock
              Tom
      Hemingway
              (1)
              720,000
              
              13.18%300
      S. Harbor Blvd., Suite 500Anaheim,
      CA 92805Chairman
      and Chief Operation Officer, DirectorCommon
      Stock
              Robert
      Ford
              (2)
              735,039
              
              13.46%300
      S. Harbor Blvd., Suite 500Anaheim,
      CA 92805Chief
      Executive Officer, DirectorCommon
      Stock
              David
      Noyes
              
              237,500
              
              4.35%300
      S. Harbor Blvd., Suite 500Anaheim,
      CA 92805Former
      Chief Financial OfficerCommon
      Stock
              Michael
      Jones
              
              25,000
              
              0.46%2304
      Ruland Ave, Suite ARedondo
      Beach, CA 90278DirectorCommon
      Stock
              Nick
      Yocca, Director
              
              10,000
              
              0.18%300
      S. Harbor Blvd., Suite 500Anaheim,
      CA 92805Former
      DirectorAll
      executive officers and directors as a group (4 persons)
              1,727,539
              
              31.63%(1)
      Includes 30,000 shares held by Redwood Investment Group, LLC, owned by Mr.
      Hemingway(2)
      Includes  36,000 shares held by 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.





ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS




NextPhase
and Robert Ford, Tom Hemingway, and David Noyes are parties to employment
agreements with NextPhase which are described under Item 10 "Executive
Compensation"




In
November 2007, the Company executed employment agreements with Messrs. Ford,
Hemingway and Noyes.  In connection with the agreements, the Company
granted 600,000, 600,000 and 250,000 shares to Messrs. Ford, Hemingway and Noyes
respectively.  These issuances were valued at $4,712,500 and the
shares are subject to lock-up provisions.  Also, in connection with
the agreements, the Company granted options to purchase 600,000, 600,000 and
250,000 shares of the Company’s common stock at $3.25 per share to Messrs. Ford,
Hemingway and Noyes respectively.  The options were fully vested on March
31, 2008 and are exercisable for a three-year period.  These options were
valued at $3,270,268.




The
Company issued an aggregate of 156,923 shares of common stock valued at $41,077
to a director for services totaling $8,877 provided during the years ended March
31, 2007.




In
November 2007, the Company issued 25,000 shares to Michael Jones, Director,
valued at $81,250.




ITEM 13.
EXHIBITS




Please
see Exhibit Index located behind the signature page.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




Our
principal accountants, Hansen Barnett & Maxwell billed us $ -0- $ for
the audit of our consolidated financial statements for the year ended March 31,
2008.




Our previous
principal accountants, KMJ Corbin LLP, have billed us approximately $ 60,500 for
the audit of our consolidated financial statements for the year ended March 31,
2007 and $45,600 for their quarterly reviews of our consolidated financial
statements for the year ended March 31, 2008.




Our
principal accountants did not bill us any fees for tax compliance, tax advice
and tax planning for our fiscal years ended March 31, 2008 and
2007.




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.









NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 
 INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
  
  PageReport of Independent Registered Public Accounting
      Firm
              F-2Consolidated Balance Sheets as of March 31, 2008 and
      2007
              F-3Consolidated Statements of Operations for the Years Ended March 31,
      2008 and 2007
              F-4Consolidated Statements of Stockholders’ Deficit for the Years
      Ended March 31, 2007 and 2008
              F-5Consolidated Statements of Cash Flows for the Years Ended March 31,
      2008 and 2007
              F-6Notes to Consolidated Financial Statements
              F-7
   F-1
  HANSEN,BARNETT& MAXWELL,
      P.C.
                A
      Professional Corporation
                CERTIFIED
      PUBLIC ACCOUNTANTS
                5
      Triad Center, Suite 750
                Salt
      Lake City, UT 84180-1128
                Phone:
      (801) 532-2200
                Fax:
      (801) 532-7944
                www.hbmcpas.com
              
              Registered
      with the Public Company
                Accounting Oversight
      Board
   REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and the Stockholders
 NextPhase
Wireless, Inc.
 
 We have
audited the accompanying consolidated balance sheets of NextPhase Wireless, Inc.
and subsidiaries (the “Company”) as of March 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years 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
audits.
 
 We
conducted our audits 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits 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 purpose 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
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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, 2008 and 2007 and the results of their operations
and their cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1, the Company
suffered losses from operations and used cash in operating activities during the
years ended March 31, 2008 and 2007. At March 31, 2008, the Company had a
working capital deficit and a stockholders’ deficit. These matters raise
substantial doubt about the Company’s ability to continue as a going concern for
a reasonable period of time. Management’s plans concerning these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
   HANSEN, BARNETT
      & MAXWELL, P.C.
   Salt Lake
City, Utah
 July 12,
2008
  F-2
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
  March
      31,2008
                  
                  
                  2007ASSETSCurrent
      assets:Cash
                  
                  $
                  592
                  
                  
                  $
                  71,683Accounts
      receivable, net of allowance for doubtful accounts of$4,000 and
      $30,000, respectively
                  
                  
                  38,601
                  
                  
                  
                  116,154Prepaid
      expenses
                  
                  
                  39,703
                  
                  
                  
                  39,403Total
      current assets
                  
                  
                  78,896
                  
                  
                  
                  227,240Property
      and equipment, net
                  
                  
                  330,166
                  
                  
                  
                  295,011Deposits
                  
                  
                  8,636
                  
                  
                  
                  8,637Intangible
      assets, net of accumulated amortization of $432,000 and$208,000,
      respectively
                  
                  
                  828,000
                  
                  
                  
                  932,000Goodwill
                  
                  
                  340,000
                  
                  
                  
                  260,000Total
      Assets
                  
                  $
                  1,585,698
                  
                  
                  $
                  1,722,888LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                  
                  $
                  1,241,019
                  
                  
                  
                  1,158,673Accrued
      expenses
                  
                  
                  225,175
                  
                  
                  
                  290,015Deferred
      revenue
                  
                  
                  101,500
                  
                  
                  
                  78,000Cash
      advance payable
                  
                  
                  375,000
                  
                  
                  
                  100,000Due
      to officer shareholders
                  
                  
                  326,852
                  
                  
                  
                  -Notes
      payable - current portion
                  
                  
                  3,762,323
                  
                  
                  
                  465,533Total
      current liabilities
                  
                  
                  6,031,869
                  
                  
                  
                  2,092,221Long-term
      notes payable, net of current portion
                  
                  
                  23,766
                  
                  
                  
                  2,301,425Stockholders'
      deficit:Preferred
      stock, $0.001 par value, 20,000,000 sharesauthorized;
      no shares issued and outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $0.001 par value, 10,000,000 sharesauthorized;  4,123,181
      and 1,497,945 shares issued and outstanding
                  
                  
                  4,123
                  
                  
                  
                  1,497Additional
      paid-in capital
                  
                  
                  13,872,121
                  
                  
                  
                  5,959,455Accumulated
      deficit
                  
                  
                  (18,346,181
                  )
                  
                  
                  (8,631,710
                  )Total
      stockholders' deficit
                  
                  
                  (4,469,937
                  )
                  
                  
                  (2,670,758
                  )Total
      Liabilities and Stockholders' Deficit
                  
                  $
                  1,585,698
                  
                  
                  $
                  1,722,888
   F-3
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 March
      31,2008
                  
                  
                  2007Revenue
                  
                  $
                  1,890,040
                  
                  
                  $
                  1,986,425Cost
      of revenue
                  
                  
                  1,018,732
                  
                  
                  
                  1,116,874Gross
      Profit
                  
                  
                  871,308
                  
                  
                  
                  869,551Operating
      expenses:Selling,
      general and administrative expenses
                  
                  
                  2,650,653
                  
                  
                  
                  1,879,200Stock
      based compensation
                  
                  
                  7,443,971
                  
                  
                  
                  653,363Depreciation
      and amortization
                  
                  
                  371,089
                  
                  
                  
                  337,715Total
      operating expenses
                  
                  
                  10,465,713
                  
                  
                  
                  2,870,278Operating
      loss
                  
                  
                  (9,594,405
                  )
                  
                  
                  (2,000,727
                  )Other
      income (expense)Legal
      settlements
                  
                  
                  151,085
                  
                  
                  
                  (318,957
                  )Interest  expense
                  
                  
                  (271,151
                  )
                  
                  
                  (157,238
                  )Total
      other income (expense)
                  
                  
                  (120,066
                  )
                  
                  
                  (476,195
                  )Net
      Loss
                  
                  $
                  (9,714,471
                  )
                  
                  $
                  (2,476,922
                  )Basic
      and diluted net loss per share
                  
                  $
                  (5.92
                  )
                  
                  $
                  (2.10
                  )Weighted
      average shares outstanding
                  
                  
                  1,640,758
                  
                  
                  
                  1,180,582
   F-4
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
 FOR
THE YEARS ENDED MARCH 31, 2007 AND 2008
 Additional
                  
                  
                  
                  
                  
                  TotalCommon
      Stock
                  
                  
                  Deferred
                  
                  
                  Paid-in
                  
                  
                  Accumulated
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Compensation
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  DeficitBalance-March
      31, 2006
                  
                  
                  1,157,312
                  
                  
                  $
                  1,157
                  
                  
                  $
                  (89,335
                  )
                  
                  $
                  5,157,753
                  
                  
                  $
                  (6,154,788
                  )
                  
                  $
                  (1,085,213
                  )Common
      stock issued for services
                  
                  
                  270,874
                  
                  
                  
                  271
                  
                  
                  
                  -
                  
                  
                  
                  525,357
                  
                  
                  
                  -
                  
                  
                  
                  525,628Common
      stock issued in payment of accounts payable
                  
                  
                  6,273
                  
                  
                  
                  6
                  
                  
                  
                  -
                  
                  
                  
                  37,632
                  
                  
                  
                  -
                  
                  
                  
                  37,638Common
      stock issued for accrued payroll
                  
                  
                  74,312
                  
                  
                  
                  74
                  
                  
                  
                  -
                  
                  
                  
                  280,484
                  
                  
                  
                  -
                  
                  
                  
                  280,558Common
      stock issued for accrued interest
                  
                  
                  45,214
                  
                  
                  
                  45
                  
                  
                  
                  -
                  
                  
                  
                  103,455
                  
                  
                  
                  -
                  
                  
                  
                  103,500Common
      stock issued in legal settlement
                  
                  
                  2,000
                  
                  
                  
                  2
                  
                  
                  
                  -
                  
                  
                  
                  19,998
                  
                  
                  
                  -
                  
                  
                  
                  20,000Stock
      cancelled in previous settlement
                  
                  
                  (50,000
                  )
                  
                  
                  (50
                  )
                  
                  
                  -
                  
                  
                  
                  (249,950
                  )
                  
                  
                  -
                  
                  
                  
                  (250,000
                  )Common
      stock issued for equipment purchased inprior years
                  
                  
                  2,500
                  
                  
                  
                  3
                  
                  
                  
                  -
                  
                  
                  
                  24,997
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
      cancelled
                  
                  
                  (6,031
                  )
                  
                  
                  (6
                  )
                  
                  
                  -
                  
                  
                  
                  6
                  
                  
                  
                  -
                  
                  
                  
                  -Purchase
      of treasury stock
                  
                  
                  (4,509
                  )
                  
                  
                  (5
                  )
                  
                  
                  -
                  
                  
                  
                  (9,974
                  )
                  
                  
                  -
                  
                  
                  
                  (9,979
                  )Discount
      on note payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  69,697
                  
                  
                  
                  -
                  
                  
                  
                  69,697Reversal
      of deferred compensation related to theadoption of SFAS 123( R
      )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  89,335
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  89,335Net
      loss for the year ended March 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,476,922
                  )
                  
                  
                  (2,476,922
                  )Balance-March
      31, 2007
                  
                  
                  1,497,945
                  
                  
                  
                  1,497
                  
                  
                  
                  -
                  
                  
                  
                  5,959,455
                  
                  
                  
                  (8,631,710
                  )
                  
                  
                  (2,670,758
                  )Common
      stock issued for services
                  
                  
                  2,482,610
                  
                  
                  
                  2,483
                  
                  
                  
                  -
                  
                  
                  
                  7,446,033
                  
                  
                  
                  -
                  
                  
                  
                  7,448,516Common
      stock issued in payment of accounts payable
                  
                  
                  98,602
                  
                  
                  
                  99
                  
                  
                  
                  -
                  
                  
                  
                  270,306
                  
                  
                  
                  -
                  
                  
                  
                  270,405Common
      stock issued for accrued interest
                  
                  
                  44,024
                  
                  
                  
                  44
                  
                  
                  
                  -
                  
                  
                  
                  121,175
                  
                  
                  
                  -
                  
                  
                  
                  121,219Issuance
      of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  75,152
                  
                  
                  
                  -
                  
                  
                  
                  75,152Net
      loss for the year ended March 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (9,714,471
                  )
                  
                  
                  (9,714,471
                  )Balance-March
      31, 2008
                  
                  
                  4,123,181
                  
                  
                  $
                  4,123
                  
                  
                  $
                  -
                  
                  
                  $
                  13,872,121
                  
                  
                  $
                  (18,346,181
                  )
                  
                  $
                  (4,469,937
                  )
   F-5
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 March
      31,2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (9,714,471
                  )
                  
                  $
                  (2,476,922
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Gain
      on settlement of liabilities, net
                  
                  
                  (98,997
                  )
                  
                  
                  20,000Issuance
      of common stock for consulting services
                  
                  
                  7,441,850
                  
                  
                  
                  527,228Issuance
      of warrants and options for consulting services
                  
                  
                  81,818
                  
                  
                  
                  -Amortization
      of discount on notes payable
                  
                  
                  35,360
                  
                  
                  
                  34,607Amortization
      of deferred compensation
                  
                  
                  -
                  
                  
                  
                  89,335Bad
      debt expense
                  
                  
                  20,000
                  
                  
                  
                  30,000Depreciation
      and amortization
                  
                  
                  371,089
                  
                  
                  
                  337,715Changes
      in assets and liabilities: (Increase) decrease in assets:Accounts
      receivable
                  
                  
                  260,035
                  
                  
                  
                  53,057Other
      current assets
                  
                  
                  (300
                  )
                  
                  
                  (37,375
                  )Increase
      (decrease) in liabilities:Accounts
      payable and accrued liabilities
                  
                  
                  438,422
                  
                  
                  
                  971,073Advances
      payableDue
      to officers-shareholders
                  
                  
                  326,852
                  
                  
                  
                  -Deferred
      revenue
                  
                  
                  (186,370
                  )
                  
                  
                  44,219Net
      cash used in operating activities
                  
                  
                  (1,024,712
                  )
                  
                  
                  (407,063
                  )Cash
      flows from investing activities:Purchase
      of furniture and equipment
                  
                  
                  (32,244
                  )
                  
                  
                  (47,705
                  )Purchase
      of Interactive Network Services, Inc.
                  
                  
                  (342,612
                  )
                  
                  
                  -Purchase
      of company stock
                  
                  
                  -
                  
                  
                  
                  (9,979
                  )Net
      cash used in investing activities
                  
                  
                  (374,856
                  )
                  
                  
                  (57,684
                  )Cash
      flows from financing activities:Proceeds
      from notes payable
                  
                  
                  1,063,299
                  
                  
                  
                  451,000Proceeds
      from cash advances payable
                  
                  
                  275,000
                  
                  
                  
                  100,000Principal
      payments on notes payable and capital leases
                  
                  
                  (9,822
                  )
                  
                  
                  (50,417
                  )Net
      cash provided by financing activities
                  
                  
                  1,328,477
                  
                  
                  
                  500,583Change
      in cash
                  
                  
                  (71,091
                  )
                  
                  
                  35,836Cash
      at beginning of period
                  
                  
                  71,683
                  
                  
                  
                  35,847Cash  end
      of period
                  
                  $
                  592
                  
                  
                  $
                  71,683Supplemental
      disclosure of cash flow information:Non-cash
      investing and financing transactions:Cash
      advance converted to note payable
                  
                  $
                  -
                  
                  
                  $
                  800,000Cancellation
      of stock from legal settlements
                  
                  $
                  -
                  
                  
                  $
                  250,000Beneficial
      conversion feature of notes payable
                  
                  $
                  -
                  
                  
                  $
                  69,697Acquisition
      of equipment under capital lease agreements and notes
    payable
                  
                  $
                  -
                  
                  
                  $
                  50,650Amortization
      of deferred compensation
                  
                  $
                  -
                  
                  
                  $
                  89,335Common
      stock issued for services and legal settlement
                  
                  $
                  -
                  
                  
                  $
                  545,628Common
      stock issued for accounts payable and accrued expenses
                  
                  $
                  391,554
                  
                  
                  $
                  -Common
      stock issued for prepaid consulting services
                  
                  $
                  372,452
                  
                  
                  $
                  -Acquisition
      of SpeedFactory by payment directly by lender
                  
                  $
                  -
                  
                  
                  $
                  1,500,000
    F-6
 
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Nature of
Operations – NextPhase Wireless, Inc. and its subsidiaries (“NextPhase”
or the “Company”) provides internet and connectivity services to
customers located primarily in California, Georgia and New Jersey. Since
mid-2005, Management has been executing a business plan to position NextPhase as
a nationwide developer of WiMAX-ready networks and a provider of advanced wired
and wireless broadband connectivity solutions to businesses, public school
systems, municipalities and other government agencies.  The Company
seeks to build a device-agnostic, WiMAX-ready, wireless broadband
connectivity/content delivery platform serving all 48 contiguous U.S. states,
using licensed WiMAX and Local Multipoint Distribution Service (“LMDS”) spectrum
bands.
 
 The
Company recently secured licensed LMDS spectrum on a 10 year lease agreement.
With this spectrum, the Company believes that it can more cost-effectively
provide high-capacity connections. The Company also received a nationwide
license to provide WiMAX wireless services in the newly released 3.65 Gigahertz
band, which was granted by the Federal Communications Commission in January
2008. The Company is working towards deployment of these services. In addition,
the Company plans to design its own proprietary, nationwide WiMAX-ready wireless
network, and to offer next-generation broadband connectivity products and
services to customers located primarily in secondary (non-metropolitan) U.S.
markets.
 
 Basis of
Presentation – The consolidated financial statements include the accounts
and operations NextPhase for all periods presented and the accounts and
operations of its subsidiaries from the dates of their acquisition or
formation.  All significant inter-company accounts and transactions
have been eliminated in consolidation.
  Business
Condition – The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the United
States of America, which contemplate the continuation of the Company as a going
concern. While the Company now has an established source of revenue, it has
experienced losses of $9,714,471 and $2,476,922 during the years ended
March 31, 2008 and 2007, respectively. In addition, the Company used $1,024,712
and $407,063 of cash in its operating activities during the years ended March
31, 2008 and 2007, respectively. At March 31, 2008, the Company has a
working capital deficit of $5,952,973 and a stockholders’ deficit of $4,469,937.
These matters raise substantial doubt about the Company's ability to continue as
a going concern for a reasonable period of time. Without realization of
additional capital, it would be unlikely for the Company to continue as a going
concern. These consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or
amounts and classification of liabilities that might result should the Company
not be able to continue as a going concern.
 
 During
the year ended March 31, 2008, the Company executed short-term notes payable for
$1,062,299. In addition, the Company received a $275,000 advance from a secured
note holder in July 2007 to assist in the acquisition of INS in July 2007. In
April 2008, the Company issued a promissory note for $150,000 and in May
2008, it issued notes totaling $75,000 that are due ninety days from the dates
of issuance.
 
 Management
anticipates that the Company’s current cash balance plus cash expected to be
generation from existing operations will not be sufficient to fund its
anticipated operations for more than a very short period of time. Consequently,
the Company will need to raise additional debt and/or equity capital in order to
finance its business plans and needs for working capital. Such financings, if
available, may increase the risk of the Company not being able to service its
debt obligations, or cause dilution to existing equity holders. In June
2008, the Company consolidated its management activities in Anaheim, California,
reduced expenses, and redirected its efforts. There is no assurance that the
Company will be able to obtain adequate financing or that it will be available
on terms acceptable to the Company.
 
 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 assessment of impairment of intangible assets.
  F-7
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Fair Value of
Financial Instruments – Based on their short-term maturities, the
carrying amounts of cash advance payable, due to shareholders and notes payable
approximate their fair values.
 
 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 an allowance for doubtful accounts
based on historical experience and management's evaluation of outstanding
accounts receivable. Management periodically evaluates past due or delinquent
accounts receivable in evaluating its allowance for doubtful
accounts.
 
 Property and
Equipment – Property and equipment are stated at cost. When sold,
retired, traded-in 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
operations. Minor additions and renewals are expensed in the year incurred.
Major additions and renewals are capitalized and depreciated over their
estimated useful lives between 3 years to 10 years.
 
 Long-Lived
Assets – Long-lived assets are reviewed for impairment annually or when
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. The Company evaluates, at each balance sheet date,
whether events or circumstances have occurred which indicate possible
impairment. The Company uses an estimate of future undiscounted net cash flows
from the related asset or group of assets over their remaining life in measuring
whether the assets are recoverable. If projections indicate that the carrying
value of the long-lived asset will not be recovered, the carrying value of the
long-lived asset is reduced by the estimated excess of the carrying value over
the projected discounted cash flows. Through March 31, 2008, the Company
assessed the long-lived assets for impairment and determined that no impairment
was necessary.
 
 Revenue
Recognition and Deferred Revenue – The Company recognizes revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the selling
price is fixed and determinable and collectibility is reasonably assured.
Revenue not yet earned or refundable is recorded as deferred
revenue.
 
 Revenue
from operating as a wireless Internet service provider of tiered wireless
Internet services to business and residential subscribers is billed at the
beginning of each month at a fixed rate for each customer.  Customers
sign an annual agreement or utilize the service on a month-to-month basis.
Revenue is recognized monthly as the services are provided. Revenue from the
sale and configuration of wireless equipment is recognized at the time of
shipment to the customer. Configuration services are billed at an hourly rate
and recognized after completion. Costs associated with the equipment are
expensed at the time of shipment. Revenue from professional and consulting
services include wireless network consulting, interference surveys, network
management and telephone consulting.  Revenue is recognized after the
professional or consulting service has been provided.
 
 Income
Taxes – Deferred income taxes are determined based on differences between
the financial statement and tax bases of assets and liabilities and for
operating loss carryforwards, 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.
 
 Basic and Diluted
Loss per Share – Basic loss per share is calculated by dividing net loss
by the weighted average number of common shares outstanding during the period.
Diluted net loss per share reflects the potential additional dilution that could
occur upon conversion debt or exercise of warrants unless their effect is
anti-dilutive. The following is a summary of shares of common stock issuable
upon exercise of warrants or upon conversion of debt that were excluded from the
calculation of diluted loss per share for the years ended March 31, 2008 and
2007:
  Possible
      dillutive shares related to:
                    
                    2008
                    
                    
                    2007Common
      stock warrants and options
                    
                    
                    20,500
                    
                    
                    
                    17,500Convertible
      debt
                    
                    
                    348,485
                    
                    
                    
                    478,485368,985
                    
                    
                    
                    495,985
  F-8
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Recent Accounting
Pronouncements – In September 2006, the Financial Accounting Standards
Board (the “FASB”) issued SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. For the Company, SFAS No. 157 will be effective on April 1,
2008. In February 2008, the FASB issued FASB Staff Position No. 157-2 which
extended the effective date for certain nonfinancial assets and nonfinancial
liabilities for the Company to April 1, 2009. The Company does not expect that
the adoption of SFAS No. 157 will have a material impact on the consolidated
financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements. SFAS No. 141(R) requires
an acquirer to measure the identifiable assets acquired, the liabilities assumed
and any non-controlling interest in the acquiree at their fair values on the
acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a
subsidiary should be reported as equity in the consolidated financial
statements, consolidated net income shall be adjusted to include the net income
attributed to the non-controlling interest and consolidated comprehensive income
shall be adjusted to include the comprehensive income attributed to the
non-controlling interest. The calculation of earnings per share will continue to
be based on income amounts attributable to the parent. SFAS No. 141(R) and SFAS
No. 160 are effective for financial statements issued for fiscal years beginning
after December 15, 2008. Early adoption is prohibited. The Company has not yet
determined the effect on the consolidated financial statements, if any, upon
adoption of SFAS No. 141(R) or SFAS No. 160.
 
 NOTE 2 - ACQUISITIONS
 
 SpeedFactory–On April 5,
2006, the Company acquired the SpeedFactory Internet service and
connectivity business of Synkronus. The SpeedFactory
operations are included from April 5, 2006.The acquisition was accounted
for using the purchase method of accounting. The Company paid $1,500,000 in
cash for the assets. NextPhase borrowed $1,500,000 from a private lender in
order to finance the acquisition.The purchase
price was allocated to assets acquired based on their estimated fair values. The
fair value of the assets acquired was based on management's best estimates and
an independent third party appraisal. The purchase price was allocated to
the fair value of assets acquired as follows:
  Amount
                    
                    Estimated
      LivesComputers
      and related equipment
                    
                    $
                    100,000
                    
                    3
      yearsCustomer
      lists
                    
                    
                    980,000
                    
                    5
      yearsSupply
      contracts
                    
                    
                    60,000
                    
                    5
      yearsTrademarks
                    
                    
                    100,000
                    
                    indefiniteGoodwill
                    
                    
                    260,000
                    
                    indefinite$
                    1,500,000
 The
trademarks and goodwill are deemed to have an indefinite life and, accordingly,
are not being amortized, but are subject to periodic impairment testing. The
customer lists and supply contracts will be amortized over an estimated
weighted-average life of five years and over five years for the customer
lists and over five years for the supply contracts.
 
 Interactive
Network Services–On July 23,
2007, the Company acquired the Internet service and connectivity
business of Interactive Network Services (“INS”) for $342,612 paid in
cash.  The acquisition of INS was accounted for using the purchase
method of accounting. The INS operations are included from July 23,
2007. The fair value of the net assets acquired was based on management's
best estimates and the purchase price was allocated to net assets acquired as
follows:
  F-9
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Amount
                
                Estimated
      LivesAccounts
      receivable
                
                $
                202,482
                
                1
      YearComputers
      and related equipment
                
                
                150,000
                
                3
      yearsCustomer
      lists
                
                
                120,000
                
                5
      yearsGoodwill
                
                
                80,000
                
                indefiniteDeferred
      revenue
                
                
                (209,870
                )
                1
      Year$
                342,612
 The
customer lists will be amortized over an estimated life of five years. Goodwill
will not be amortized and will be assessed for impairment.
  The
following unaudited pro forma results of operations reflect the pro forma as if
the acquisitions had occurred at the beginning of each period
presented. The unaudited pro forma results of operations are presented
for additional analysis purposes and are not intended to represent what the
results of operations would have been if the operations had been combined during
the periods presented, and are not necessarily indicative of the Company's
future results of operations.
  For
      the Years EndedMarch
      31,2008
                  
                  
                  2007Revenue
                  
                  $
                  1,983,825
                  
                  
                  $
                  2,379,962Net
      loss
                  
                  $
                  (9,379,143
                  )
                  
                  $
                  (2,526,233
                  )Basic
      and diluted loss per share
                  
                  $
                  (4.60
                  )
                  
                  $
                  (2.06
                  )
 NOTE
3 – PROPERTY AND EQUIPMENT
 
 Property
and equipment with useful lives consisted of the following at March 31, 2008 and
2007:
 Estimated
                  
                  March
      31,Useful
      Lives
                  
                  2008
                  
                  
                  2007Telecommunications
      equipment
                  3
      years
                  
                  $
                  156,260
                  
                  
                  $
                  156,260Communication
      towers
                  10
      years
                  
                  
                  145,985
                  
                  
                  
                  122,326Computer
      equipment
                  3
      years
                  
                  
                  304,531
                  
                  
                  
                  142,304Automotive
      equipment
                  5
      years
                  
                  
                  48,067
                  
                  
                  
                  58,067Furniture
      and fixtures
                  5
      years
                  
                  
                  29,649
                  
                  
                  
                  23,291Leasehold
      improvements
                  5
      years
                  
                  
                  7,176
                  
                  
                  
                  7,176Total
      property and equipment
                  
                  
                  
                  691,668
                  
                  
                  
                  509,424Less:
      Accumulated depreciation
                  
                  
                  
                  (361,502
                  )
                  
                  
                  (214,413
                  )Net
      property and equipment
                  
                  
                  $
                  330,166
                  
                  
                  $
                  295,011
 Depreciation
expense was $146,974 and $129,716 for the years ended March 31, 2008, and 2007,
respectively.
 
 NOTE
4 – GOODWILL AND INTANGIBLE ASSETS
 
 Changes
in goodwill during the years ended March 31, 2007 and 2008 were as
follows:
 
 F-10
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For
      the Years EndedMarch
      31,2008
                      
                      
                      2007Balance,
      beginning of year
                      
                      $
                      260,000
                      
                      
                      $
                      -Goodwill
      acquired
                      
                      
                      80,000
                      
                      
                      
                      260,000Balance,
      End of Year
                      
                      $
                      340,000
                      
                      
                      $
                      260,000
 Intangible
assets consisted of the following:
  March
      31,2008
                      
                      
                      2007Gross
                      
                      
                      
                      
                      
                      Net
                      
                      
                      Gross
                      
                      
                      
                      
                      
                      NetCarrying
                      
                      
                      Accumulated
                      
                      
                      Carrying
                      
                      
                      Carrying
                      
                      
                      Accumulated
                      
                      
                      CarryingAmount
                      
                      
                      Amortization
                      
                      
                      Amount
                      
                      
                      Amount
                      
                      
                      Amortization
                      
                      
                      AmountAmortized
      intangible assetsCustomer
      lists
                      
                      $
                      1,100,000
                      
                      
                      $
                      408,000
                      
                      
                      $
                      692,000
                      
                      
                      $
                      980,000
                      
                      
                      $
                      196,000
                      
                      
                      $
                      784,000Supply
      contracts
                      
                      
                      60,000
                      
                      
                      
                      24,000
                      
                      
                      
                      36,000
                      
                      
                      
                      60,000
                      
                      
                      
                      12,000
                      
                      
                      
                      48,000$
                      1,160,000
                      
                      
                      $
                      432,000
                      
                      
                      
                      728,000
                      
                      
                      $
                      1,040,000
                      
                      
                      $
                      208,000
                      
                      
                      
                      832,000Unamortized
      intangible assetsTrademarks
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      100,000
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      100,000Total
      Intangible Assets
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      828,000
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      932,000
  Intangible
assets amortization expense was $224,000 and $208,000 for the years ended March
31, 2008 and 2007, respectively. Estimated future annual amortization expense is
as follows for the years ending March 31:
  2009
                      
                      $
                      232,0002010
                      
                      
                      232,0002011
                      
                      
                      232,0002012
                      
                      
                      12,0002013
                      
                      
                      20,000
 NOTE
4 - RELATED PARTY TRANSACTIONS
  For
the year ended March 31, 2007
 
 The
Company made principal payments in the amount of $9,100 on a note payable to a
former officer of the Company.  Principal in the amount of $0 remained
outstanding under this note at June 30, 2006.
  The
Company's ex-chairman personally guaranteed payment on a note from the Company
to a lender in the amount of $50,650 with regard to the acquisition of a Company
vehicle.
  The
Company has a line of credit with Bank of America of $25,000. The Company's
ex-Chairman had co-signed on this line of credit. At March 31, 2008 the company
had an outstanding balance on the credit card of $25,928.
  The
Company issued 230,769 shares of common stock with a fair value of $24,231 to
its President and Chief Executive Officer in lieu of cash salary.
  The
Company issued 1,050,038 shares of common stock valued at $249,321 to its chief
executive officer for services totaling $114,231 and $135,000 in the years ended
March 31, 2007 and 2006, respectively.
  The
Company issued 75,038 shares of common stock valued at $165,231 to its former
chairman for services performed
totaling $114,231 and $51,000 in the years ended March 31, 2007 and
2006.
  F-11
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  The
Company issued 120,000 shares of its common stock valued at $212,400 to its
chairman for services in the year ended March 31, 2007.
 
 The
Company issued 7,846 shares of common stock valued at $41,077 to a director for
services totaling $8,877and $ 33,000
in the years ended March 31, 2007 and 2006, respectively.
  The
Company issued 15,250 shares of common stock valued at $65,000 to a former
officer for services totaling $35,000
and $ 30,000 in 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.
  For
the year ended March 31, 2008
 
 In June
2007, the Company and its former chairman entered into a settlement agreement
whereby the former chairman forgave notes payable and accrued expenses in the
aggregate amount of $96,291, which was recorded in gain on settlement of
liabilities-net in the accompanying consolidated statements of
operations.
 
 In
November 2007, the Company executed employment agreements with Messrs. Ford,
Hemingway and Noyes.  In connection with the agreements, the Company
granted 600,000, 600,000 and 250,000 shares to Messrs. Ford, Hemingway and Noyes
respectively.  These issuances were valued at $4,712,500 and the
shares are subject to lock-up provisions.  Also, in connection with
the agreements, The Company had granted options to purchase 600,000, 600,000 and
250,000 shares of the Company’s common stock to Messrs. Ford, Hemingway and
Noyes respectively. The options were never issued and Messrs. Ford, Hemingway
and Noyes agreed to cancel any rights to the options.
 
 In
November 2007, the Company issued 25,000 shares to Michael Jones, Director,
valued at $81,250.
 
 From time
to time the officer shareholders have advanced funds to the Company and deferred
salaries. As of March 31, 2008, $326,352 was due to officer-shareholders.
 
 NOTE
5 – NOTES PAYABLE AND CAPITAL LEASES
  At
      March 31, 2008 notes payable consisted of the following:
                    
                    2008
                    
                    
                    2007Secured
      convertible note payable, interest at 6%,net
      of unamortized discount of $0 and $35,090, respectively
                    
                    $
                    2,300,000
                    
                    
                    
                    2,264,910Convertible
      notes, interest at 6%
                    
                    
                    -
                    
                    
                    
                    17,000Convertible
      notes, interest at 7%
                    
                    
                    1,440,000
                    
                    
                    
                    436,000Convertible
      notes, interest at 10%
                    
                    
                    13,300
                    
                    
                    
                    -Automobile
      loan,interest at 5.9%, due $924 monthly
                    
                    
                    32,789
                    
                    
                    
                    40,903Capital
      lease, imputed interest at 8.17%, $360 per month due April
      2009
                    
                    
                    -
                    
                    
                    
                    8,145Total
      Notes Payable
                    
                    
                    3,786,089
                    
                    
                    
                    2,766,958Advance
      payable on demand, interest at 9%
                    
                    $
                    375,000
                    
                    
                    $
                    100,000
    2009
                    
                    $
                    3,762,3232010
                    
                    
                    9,3002011
                    
                    
                    9,9002012
                    
                    
                    4,566$
                    3,786,089
  F-12
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  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 $.33 per share.
The minimum price at which the note and accrued interest may convert is $.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 amortized the discount over the
life of the note and charged $35,360 and $34,337 to interest expense for the
years ended March 31, 2007 and 2006, respectively.  On July 18, 2007,
the Company issued 32,271 shares of its common stock for payment of accrued
interest at June 30, 2007 in the amount of $78,908 and on December 18, 2007
issued 11,753 shares for accrued interest of $42,311. During the years ended
March 31, 2008 and 2007, the company paid interest in the amount of $121,219 and
$103,500 by issuance of 44,024 and 45,214 shares of common stock
respectively.
 
 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 $4.00 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 the company's
option, at a rate of $3.00 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
feature of approximately $121,800.
 
 In June
2007, the Company and its former chairman, entered into a settlement agreement
whereby the former chairman forgave notes payable in the amount of
$63,000 and accrued expenses in the aggregate amount of $33,291, which was
recorded as a gain on settlement of liabilities (see Note 3).
  During
the three months ended June 30, 2007, the Company issued 2 convertible notes
totaling $150,000, with an interest rate of 7%, and all maturing in one year
from the date of issuance with a stipulation when the Company’s common stock
reaches $6.00 or above for a period of 10 consecutive days, the principal and
accrued interest due under the note will convert at the Company’s
option into common stock of the Company at a rate of $3.00 per
share.  If the notes were convertible at March 31,, 2007, the
Company would have recorded a debt discount of $13,000.  If the stock does
not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended September 30, 2007, the Company issued 13 convertible
notes totaling $395,000, with an interest rate of 7%, and all maturing in one
year from the date of issuance with a stipulation when the Company’s common
stock reaches $6.00 or above for a period of 10 consecutive days, the principal
and accrued interest due under the note will convert, at the Company’s option,
into common stock of the Company at a rate of $3.00 per
share.  If the notes were convertible at March 31, 2008, the
Company would have recorded a debt discount of $119,000.  If the stock does
not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended December 31, 2007, the Company issued 5 convertible notes
totaling $120,000, with an interest rate of 7%, maturing in one year from the
date of issuance with a stipulation when the Company’s common stock reaches
$6.00 or above for a period of 10 consecutive days, the principal and accrued
interest due under the note will convert, at the Company’s option, into common
stock of the Company at a rate of $3.00 per share.  If the notes
were converted at March 31, 2008, the Company would have recorded a debt
discount of $29,747.  If the stock does not reach $6.00 or above for ten
consecutive days, the notes are not convertible.
 
 During
the three months ended March 31, 2008, the Company issued an $80,000 convertible
note payable for $50,000 and the retirement of a $30,000 account
payable.  The note, with interest at 7% is due on April 4, 2008 and is
convertible at $2 per share at the holder’s option.
 
 The
Company also issued 3 additional convertible notes with interest at 7% due
between ninety and 180 days in the amount of $215,000 and convertible into stock
of the Company at prices between $2 and $3 per share .The Company issued a $
13,229 convertible note payable with interest at 10% for legal services which is
convertible at the holder’s option at $2 per share.  On February 29,
2008 he Company issued a note for $60,000 with interest at 7% and due in 90
days
  F-13
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 On July
13, 2007, the Company issued a convertible promissory note for $85,920 for
accrued liabilities of the same amount.  The note was due in one year
with interest at 7% and is convertible at $3.00 per share into the Company’s
common stock at the holder’s option.  This note and accrued interest
was converted into 28,868 shares of the Company’s common stock on August 22,
2007.
 
 On July
13, 2007, the Company issued a convertible promissory note for $75,000 for
payment of accounts payable of $142,229.  The note was due in one
year with interest at 7% and was convertible at $3.00 per share into the
Company’s common stock at the holder’s option.  This note and accrued
interest was converted into 25,233 shares of the Company’s common stock
effective August 31, 2007.
 
 NOTE
6 – EQUITY
 
 Reverse Stock
Split – On November 5, 2007, the Company effected a one for twenty
reverse stock split. As a result of the reverse stock split, each 20 shares of
issued and outstanding common stock as of close of trading on November 2, 2007
were automatically converted into one share of split-adjusted common
stock.  No fractional shares of common stock were issued in connection
with the reverse split. The accompanying consolidated financial statements have
given effect to the reverse split effective at the beginning of the periods
reported herein.
 
 For
the year ended March 31, 2007
 
 The
Company issued 155,173 shares of common stock to officer and directors for
services performed in the year ended March 31, 2007 valued at
$503,939.
 
 The
Company issued 14,701 shares of common stock to consultants for services
performed in the year ended March 31, 2007 valued at $41,689.
 
 The
Company issued 65,000 shares of common stock to officer and directors for
services performed in the year ended March 31, 2006 valued at
$236,000.
 
 The
Company issued 93,115 shares of common stock to consultants for services
performed in the year ended March 31, 2006 valued at $44,558.
 
 The
Company issued 45,214 shares of common stock for payment of interest totaling
$103,500.
 
 The
Company issued 6,273 shares of common stock for payment of accounts payable
accrued at March 31, 2006 in the amount of $37,512.
 
 The
Company issued 2,000 shares of common stock pursuant to a legal settlement in
the amount of $20,000.
 
 The
Company issued 2,500 shares of common stock valued at $25,000 for subscriptions
payable.
 
 The
Company cancelled 6,031 shares of common stock received by the Company during
the year ended March 31, 2005 pursuant to a stock purchase agreement. Upon
cancellation, the Company credited additional-paid-capital with the par value of
these shares, or $121.
 
 The
Company received 50,000 shares of common valued for $250,000 stock for
cancellation pursuant to terms of a legal settlement for a prior
period.
 
 The
Company purchased 4,509 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.
 
 The
Company recorded a discount related to the beneficial conversion feature of a
note payable in the amount of $69,697 and charged this amount to
additional-paid-in capital during the year ended March 31, 2007.
  F-14
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 The  Company  issued  17,546  shares  of
common  stock  valued  at  $82,457  to consultants
and employees for services
 
 For
the year ended March 31, 2008
 
 In May
2007, the Company issued 16,500 shares for payment of a consulting
agreement in the amount of $29,700 which was recorded as an accrued liability at
March 31, 2007; 28,000 shares for a settlement of a lawsuit in the amount of
$72,800 and recorded as an accrued liability at March 31, 2007 and 50,000 shares
valued at $130,000 for consulting services and charged to stock-based
compensation in the year ended March 31, 2008.
 
 On July
1, 2007, the Company entered into a one year agreement for market relations
support. In connection with the agreement the Company granted options to
purchase 10,000 shares of common stock of the Company at prices ranging from
$4.00 to $7.00 per share, the value of which was $32,000 and charged to
stock-based compensation in the year ended March 31, 2008.
 
 On July
13, 2007, the Company issued a convertible promissory note for $85,920 for
accrued liabilities of the same amount.  The note was due in one year
with interest at 7% and was convertible at $3.00 per share into the Company’s
common stock at the holder’s option.  This note and accrued interest
was converted into 28,868 shares of the Company’s common stock on August 22,
2007.
 
 On July
13, 2007, the Company issued a convertible promissory note for $75,000 for
payment of accounts payable of $142,229.  The note was due in one
year with interest at 7% and was convertible at $3.00 per share into the
Company’s common stock at the holder’s option.  This note and accrued
interest was converted into 25,233 shares of the Company’s common stock
effective August 31, 2007 (see Note 4).
 
 On July
18, 2007, the Company issued 32,271 shares of its common stock for payment of
accrued interest at June 30, 2007 in the amount of $78,908 (see Note
5).
 
 On July
23, 2007, the Company entered into a consulting agreement for business
advisory services for a one year period for the issuance of 50,000 shares of
common stock valued at $170,000.
 
 On August
23, 2007, the Company entered into a consulting agreement for business advisory
services for a one year period for the issuance of 27,500 shares of common stock
valued at $121,000 and which was charged to stock-based compensation in
the year ended March 31, 2008
 
 On
September 6, 2007   the Company entered into a consulting
agreement for investor relationship services whereby the Company agreed to issue
5,250 shares of common stock valued at $26,250 of which $4,200 was charged to
stock based compensation.  The stock was issued on November 6,
2007.  The stock was cancelled and the charge reversed in December
2007.  In addition, as part of the agreement, the Company agreed to
issue a warrant to purchase 10,500 shares of common stock at $8.00 per share,
which was valued at $52,485 and charged to stock-based compensation in
the year ended March 31, 2008 as the warrant was immediately vested and
exercisable upon issuance.
 
 On
October 23, 2007, the Company entered into a consulting agreement for financial
and business planning for $40,000 which was paid in 17,778 shares of the
Company’s common stock on December 18, 2007.  $18,000 was charged to
stock-based compensation charged to stock-based compensation in the year
ended March 31, 2008 and $22,000 was recorded as a prepaid consulting fee at
March 31, 2008.
 
 On
November 5, 2007 the Company executed employment agreements with Messrs. Ford,
Hemingway and Noyes.  In connection with the agreements, the Company
granted 600,000, 600,000 and 250,000 shares to Messrs. Ford, Hemingway and Noyes
respectively.  These issuances were valued at $4,550,000 and charged
to stock-based compensation in the charged to stock-based compensation in
the year ended March 31, 2008.  The shares are subject to lock-up
provisions.  Also, in connection with the agreements, the employment
agreements provided for options to purchase 600,000, 600,000 and 250,000 shares
of the Company’s common stock to Messrs. Ford, Hemingway and Noyes respectively.
The options are exercisable for a five-year period. These options were
previously valued at a perceived exercised price of $3.25 per and$3,270,268 and
charged to stock-based compensation in the three months and nine months ended
December 31, 2007.  The options were never granted and all parties
agreed to rescind the options and the charge was reversed in the three months
ended March 31, 2008.
  F-15
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 On
November 5, 2007, we issued 25,000 shares to Michael Jones, Director, valued at
$81,250 which was charged to stock-based compensation in the year ended March
31, 2008.
 
 On
November 5, 2007 we issued 100,000 shares in total to five employees and
one consultant. These shares were valued at $325,000 and charged to stock-based
compensation in year ended March 31, 2008
 
 On
November 5, 2007, the Company entered into a consulting agreement for business
advisory services for a one-year period for the issuance of 350,000 shares of
common stock valued at $1,137,500 and charged to stock-based compensation in
the year ended March 31, 2008.
 
 On
November 9, 2007, the Company entered into a consulting agreement for marketing
services for $12,000 which was paid in the 5,333 shares of Company’s common
stock based on December 18, 2007.  $8,600 was charged to stock-based
compensation charged to stock-based compensation in the year ended March
31, 2008 and $3,400 was recorded as a prepaid consulting fee at March 31,
2008.
 
 On
December 18, 2007 the Company issued 17,000 shares to a consultant for business
advisory services.  These shares were valued at $38,250 and were charged to stock-based
compensation in the year ended March 31, 2008.
 
 On
December 18, 2007, the Company issued 11,753 shares of its common stock for
payment of accrued interest at September 30, 2007 in the amount of $42,241 (see
Note 4).
 
 In
January through March 31, 2008 the Company issued 390,000 of stock for
consulting and legal services valued at $674,350, of which $320,643 was charged
to stock-based compensation in the year ended March 31, 2008 and $291,307
was recorded as a consulting fee at March 31, 2008.
 
 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, 2008 and 2007, the Company did not issue
any preferred shares.
 
 NOTE
7 – INCOME TAXES
 
 Financial
Accounting Standard No. 109 requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statement or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between
financial statements and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Temporary differences between taxable income reported for financial reporting
purposes and income tax purposes are insignificant.
 
 At March
31, 2008, the Company has available for federal income tax purposes a net
operating loss carryforward of approximately $17,900,000, expiring in 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.
 
 Components of deferred tax assets as of
March 31, 2008are as follows:
  F-16
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Non-current:
                    
                    $
                    6,100,000Net
      operating loss carry forward
                    
                    
                    10,054,469Valuation
      allowance
                    
                    
                    (16,154,469
                    )Net
      deferred asset
                    
                    $
                    -
 NOTE
8 - COMMITMENTS AND CONTINGENCIES
 
 Lease
Commitments – The Company leases its offices in California and Georgia,
including roof top rentals for towers and equipment under non-cancelable
operating leases. Commitments for minimum rentals under non-cancelable leases at
March 31, 2008 are as follows:
 For
      the Years ended March31,
                    
                    Operating
      Leases2009
                    
                    $
                    75,3352010
                    
                    
                    28,416Total
      Minimum Lease Payments
                    
                    $
                    103,751
 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.  The employment agreements with three officer-shareholders
provided for a term of three years beginning November 5, 2007 at a base salary
of $250,000, with minimum annual increases of 5 percent.  The future
minimum payments under these contracts are as follows:
  For
      the years ended March 31,
                    
                    Compensation2009
                    
                    $
                    551,2502010
                    
                    
                    578,8132011
                    
                    
                    607,753Total
      Minimun Compensation
                    
                    $
                    1,737,816
 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 that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity.
 
 NOTE
9 - SUBSEQUENT EVENTS
 
 Subsequent
to March 31, 2008, the Company issued 1,150,000 shares of common stock valued
$809,230 in common stock as follows:
  Date
                    
                    #
      of Shares
                    
                    
                    Value
                    
                    PurposeApril
      4, 2008
                    
                    
                    50,000
                    
                    
                    $
                    51,230
                    
                    Note
      payable and interestApril
      11, 2008
                    
                    
                    325,000
                    
                    
                    
                    320,000
                    
                    Consulting
      servicesMay
      13, 2008
                    
                    
                    300,000
                    
                    
                    
                    162,000
                    
                    Consulting
      servicesMay
      22, 2008
                    
                    
                    240,000
                    
                    
                    
                    168,000
                    
                    Consulting
      servicesJune
      6, 2008
                    
                    
                    200,000
                    
                    
                    
                    74,000
                    
                    Consulting
      servicesJune
      13, 2008
                    
                    
                    200,000
                    
                    
                    
                    34,000
                    
                    Legal
      services
 On April
10, 2008 the Company received $150,000 and issued a $150,000 convertible note,
at $ 1.50 per share, and due in one year with interest at 7% and on May 22, 2008
the Company received $75,000 and issued a $75,000 convertible note, at $3.00 per
share, for cash and due in one year with interest at 7%.
  F-17








EX
23.1




REPORT
OF INDEPENDENT REGISTERED CERTIFIED 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, 2008, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the years ended March 31, 2008 and 2007.  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 the Company as of
March 31, 2008 and the results of their operations and their cash flows for the
years ended March 31, 2008 and 2007, in conformity with accounting principles
generally accepted in the United States of America.




The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  The Company has
suffered significant losses from operations. This factor raises substantial
doubt about the Company’s ability to continue as a going concern.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.








/s/
Hansen Barnett & Maxwell


Irvine,
California


July
13, 2008

















NEXTPHASE
WIRELESS, INC.


CONSOLIDATED
BALANCE SHEET

















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 __, 2008
            By:
            /s/ Thomas
      HemingwayThomas
      HemingwayInterim
      Chief Executive Officer,
              Chief
      Financial Officer, Chief Operating Officer and Chairman of the
      Board













EXHIBIT
INDEX




Exhibit
      No.
            
            Description2.1(1)
            
            Amended
      and Restated Bylaws2.2(2)
            
            Restated
      Articles of Incorporation.2.3(2)
            
            Certificate
      of Change as filed with the Nevada Secretary of State on October 24,
      200710.1(3)
            
            Asset
      Purchase Agreement by and between InterActive-III Acquisition Co., Inc.
      and InterActive Network Systems, Inc. dated July 22,
  2007.10.2(4)
            
            Employment
      Agreement of Robert Ford dated November 5, 2007.10.3(4)
            
            Employment
      Agreement of Thomas Hemingway dated November 5, 2007.10.4(4)
            
            Employment
      Agreement of David Noyes dated November 5, 2007.10.5(5)
            
            Long
      Term Licensing Agreement (Nextlink Wireless)10.6(6)*
            
            2005
      Employee Stock Compensation Plan as amended10.7
            
            Amendment
      to 2005 Employee Stock Compensation Plan as adopted February 4,
      2008.10.8
            
            Promissory
      Note in the Original Principal Amount of $2,300,000 issued to Richard
      Strain on March 31, 200614(7)
            
            Code
      of Business Conduct and Ethics for Officers Managers and
      Directors.31
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.32
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes Oxley Act of
2002.


_____________________


(1)
Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K
filed on March 18, 2005, and is incorporated by reference herein.


(2)
Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K
filed on November 14, 2007, and are incorporated by reference
herein.


(3)
Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K
filed on July 27, 2007, and is incorporated by reference herein.


(4)
Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K
filed on November 8, 2007, and are incorporated by reference
herein.


(5)
Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K
filed December 13, 2007, and is incorporated by reference herein.


(6)
Filed with the Securities and Exchange Commission in the Exhibits to Form S-8
filed on December 7, 2005, and is incorporated by reference
herein  *This plan constitutes a Management Compensation Plan or
Arrangement.


(7)
Filed with the Securities and Exchange Commission in the Exhibits to Form 10-KSB
filed July 29, 2005, and is incorporated by reference herein.