U. S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES AND EXCHANGE ACT OF 1934

               For the quarterly period ended: September 30, 2004

           [ ] QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
                      SECURITIES AND EXCHANGE ACT OF 1934

        For the transition period from ______________ to _______________


                        Commission File Number: 000-30061




                       ELEPHANT TALK COMMUNICATIONS, INC.
        (Exact name of small business issuer as specified in its charter)


                                   California
         (State or other jurisdiction of incorporation or organization)

                                   95-4557538
                        (IRS Employer Identification No.)

          438 East Katella Avenue, Suite 217, Orange, California 92867
                    (Address of principal executive offices)

                                 (714) 288-1570
                           (Issuer's telephone number)

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 [ X ] No [ ].

As of November 10,  2004,  Elephant  Talk  Communications,  Inc. had  54,353,025
shares of Common Stock Outstanding.

Transitional Small Business Disclosure Format (check one):

                                Yes [ ] No [ X ]










                                       1
<PAGE>
               ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                              Report on Form 10-QSB
                                For quarter ended
                               September 30, 2004
                                                                          Page
PART 1  FINANCIAL INFORMATION                                             ----

Item 1. Financial Statements

        Consolidated Balance Sheets at September 30, 2004 (Unaudited)     3

        Consolidated Statements of Operations for the Three Months and
        Nine Months ended September 30, 2004 and 2003 (Unaudited)         4

        Consolidated Statements of Cash Flows for the Nine Months
        ended September 30, 2004 and 2003 (Unaudited)                     5 - 6

        Notes to the Consolidated Financial Statements (Unaudited)        7

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                              13

Item 3. Controls and Procedures                                          20


PART II OTHER INFORMATION

Item 1. Legal Proceedings                                                21

Item 2. Changes in Securities                                            21

Item 3. Defaults upon Senior Securities                                  21

Item 4. Submission of Matters to Vote of Security Holders                21

Item 5. Other Information                                                21

Item 6. Exhibits and Reports on Form 8-K                                 21

Signatures                                                               22














                                       2
<PAGE>
PART 1          FINANCIAL INFORMATION
Item 1.         Financial Statements

                       ELEPHANT TALK COMMUNICATIONS, INC.
                           CONSOLIDATED BALANCE SHEETS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)
                                     ASSETS
CURRENT ASSETS
 Cash and cash equivalents                                       $      12,793
 Accounts receivable, net                                              122,513
 Prepaid expenses and other current assets                              70,961
                                                                 -------------
   Total Current Assets                                                206,267
                                                                 -------------
PROPERTY AND EQUIPMENT - NET                                           142,065

OTHER ASSETS
 Investment in New Times Navigation Limited                          4,263,976
 Earnest deposit                                                       480,000
   -----------
     Total Other Assets                                              4,743,976
                                                                    ----------

                                                                 -------------
TOTAL ASSETS                                                     $   5,092,308
                                                                 =============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
 Overdraft                                                       $     147,704
 Accounts payable and customer deposit                                 239,569
 Deferred revenue                                                      123,669
 Accrued expenses and other payable                                     26,785
 Due to related parties                                                276,146
                                                                 -------------
   Total Current Liabilities                                           813,873
                                                                 -------------
LONG-TERM LIABILITIES
 Note payable                                                          861,838
 Convetible notes payable                                            3,600,000
                                                                 -------------
   Total Long-Term Liabilities                                       4,461,838
                                                                 -------------

                                                                 -------------
TOTAL LIABILITIES                                                    5,275,711
                                                                 -------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
 Preferred stock Class B, no par value, 5,000,000
  shares authorized, none issued and outstanding                             -
 Common stock, no par value, 250,000,000 shares authorized,
  53,449,716 issued and outstanding                                  9,902,222
 Accumulated comprehensive loss, net                                    (6,778)
 Accumulated deficit                                               (10,078,847)
                                                                 -------------
   Total Stockholders' Deficiency                                     (183,403)
                                                                 -------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                   $   5,092,308
                                                                 =============
                   The accompanying notes are an integral part
                  of these consolidated financial statements.
                                       3
<PAGE>
                       ELEPHANT TALK COMMUNICATIONS, INC.
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                   (UNAUDITED)
<TABLE>
<S>                                            <C>             <C>             <C>            <C>
                                              Three Months ended September 30, Nine Months ended September 30,
                                                     2004           2003            2004            2003
                                               --------------- --------------  -------------- --------------
REVENUES, NET                                  $      143,677  $     168,747   $     495,657  $     693,207

COST OF REVENUE                                        69,765        160,718         344,751        623,205
                                               --------------  -------------   -------------  -------------
GROSS PROFIT                                           73,912          8,029         150,906         70,002
                                               --------------  -------------   -------------  -------------
OPERATING EXPENSES
  Selling, general and administrative                 150,110        192,737       1,555,040        956,809
  Depreciation and amortization                        18,916         63,349          62,160        189,891
                                               --------------  -------------   -------------  -------------
         Total Operating Expenses                     169,026        256,086       1,617,200      1,146,700
                                               --------------  -------------   -------------  -------------
LOSS FROM OPERATIONS                                  (95,114)      (248,057)     (1,466,294)    (1,076,698)

OTHER INCOME (EXPENSE)
  Interest expense                                     (8,262)        (5,193)        (30,536)       (26,561)
  Equity in loss of unconsolidated affiliate           (9,924)       (18,623)        (19,424)       (51,622)
  Loss on settlement with Hartcourt                         -              -               -       (270,613)
  Gain on settlement of vendor payables                     -              -         227,655              -
  Other                                                     -              -               -            389
                                               --------------  -------------   -------------  -------------
         Total Other Income (Expense)                 (18,186)       (23,816)        177,695       (348,407)
                                               --------------  -------------   -------------  -------------
LOSS BEFORE INCOME TAXES                             (113,300)      (271,873)     (1,288,599)    (1,425,105)
                                               --------------  -------------   -------------  -------------
  Income taxes                                              -              -             800            800
                                               --------------  -------------   -------------  -------------
NET LOSS                                       $     (113,300) $    (271,873)  $  (1,289,399) $  (1,425,905)
                                               --------------  -------------   -------------  -------------
OTHER COMPREHENSIVE INCOME (LOSS)
  Foreign currency translation gain (loss)             (2,286)            -           (6,778)             -
                                               -------------- -------------    -------------  -------------
                                                       (2,286)            -           (6,778)             -
                                               -------------- -------------    -------------  -------------
COMPREHENSIVE LOSS                             $     (115,586)$    (271,873)   $  (1,296,177) $  (1,425,905)
                                               ============== =============    =============  =============
Net loss per common share and equivalents -    $        (0.00)$       (0.01)   $       (0.03) $       (0.06)
basic and diluted
                                               ============== =============    =============  =============
Weighted average shares outstanding during
the period - basic and diluted                     50,027,718    24,767,249       49,594,230     24,357,874
                                               ============== =============    =============  =============
</TABLE>




                   The accompanying notes are an integral part
                  of these consolidated financial statements.
                                       4
<PAGE>
                       ELEPHANT TALK COMMUNICATIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<S>                                                         <C>          <C>
                                                               Nine Months Ended
                                                            September 30,September 30,
                                                                2004         2003
                                                            ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                   $(1,289,399) $(1,425,905)
 Adjustments to reconcile net loss to net
   cash used in operating activities:
 Depreciation and amortization                                   66,903      189,891
 Issuance of stock for compensation and services                985,856      168,200
 Provision for uncollectible amounts                            400,000            -
 Write-off of due from related party                                  -      560,000
 Loss on settlement with Hartcourt                                    -      270,613
 Loss in unconsolidated affiliate                                19,424       49,573
 Decrease in accounts receivable                                 33,679      204,002
 Decrease in prepaid expenses, deposits and other assets         37,951      100,478
 Increase (Decrease) in cash overdraft                         (401,501)     376,074
 Decrease in accounts payable and accrued expenses             (467,009)    (473,545)
 Increase (Decrease) in deferred revenue                        (37,870)      66,845
                                                            -----------  -----------
   Net cash used in operating activities                       (651,966)      86,226
                                                            -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                              (5,203)      (7,349)
 Purchase of investments                                              -      (10,835)
 Proceeds from sale of investment in unconsolidated affiliate   100,953            -
                                                            -----------  -----------
   Net cash provided by (used in) investing activities           95,750      (18,184)
                                                            -----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from (Payments to) related parties, net               259,210      (34,930)
 Proceeds from sale of shares                                   349,970            -
 Payments of notes payable                                      (29,188)           -
 Payments on capital leases                                     (14,018)      (30,434)
                                                            -----------  ------------
  Net cash provided by (used in) financing activities           565,974       (65,364)
                                                            -----------  ------------
EFFECT OF EXCHANGE RATES ON CASH                                 (5,247)            -
                                                            -----------  ------------
NET INCREASE IN CASH                                              4,511         2,678

CASH, BEGINNING OF THE YEAR                                       8,282         5,533
                                                            -----------  ------------
CASH, END OF THE YEAR                                       $    12,793  $      8,211
                                                            ===========  ============
</TABLE>




                   The accompanying notes are an integral part
                  of these consolidated financial statements.
                                       5
<PAGE>
                       ELEPHANT TALK COMMUNICATIONS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                  (continued)
<TABLE>
<S>                                                         <C>          <C>
                                                               Nine Months Ended
                                                            September 30,September 30,
                                                                2004         2003
                                                            ------------ ------------
NON-CASH INVESTING AND FINANCING INFORMATION:
---------------------------------------------
During 2004, the Company issued 4,000,000  restricted  common shares,  valued at
$480,000 as an escrow  deposit  for the  acquisition  of 60% equity  interest in

General Systems Technology Limited.

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------
Cash paid during the year for interest                      $    30,536  $     26,561

Cash paid during the year for income taxes                  $       800  $        800
</TABLE>

































                   The accompanying notes are an integral part
                  of these consolidated financial statements.
                                       6
<PAGE>
               ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2004

NOTE 1:  Organization and Nature of Operations
         -------------------------------------
     Elephant Talk  Communications,  Inc. (herein referred to as "ElephantTalk",
     "ETCI" or "Company" formerly known as Staruni Corporation), incorporated on
     February  5,  1962  under  the laws of the  state of  California  as Altius
     Corporation, was involved in manufacturing of freeway signs. In March 1997,
     Altius  acquired  Starnet  Universe  Internet,  Inc., a web  developer  and
     Internet   Service   Provider   (ISP)  and  changed  its  name  to  Staruni
     Corporation.  On January 4, 2002, Staruni  Corporation merged with Elephant
     Talk Limited,  a limited  company  incorporated  in Hong Kong,  and filed a
     Certificate  of  Amendment  of  Articles  of  Incorporation  to  amend  the
     corporate name to Elephant Talk  Communications,  Inc. This name change was
     done in conjunction with the merger and to emphasize that the Company's new
     focus will be the business of Elephant Talk Limited.

     On January 4, 2002, the Company  exchanged 90% of its common stock for 100%
     of the common stock of Elephant Talk Limited by issuing  31,164,210  shares
     of common stock to the shareholders of Elephant Talk Limited. Elephant Talk
     Limited is a limited  liability  company  incorporated  in Hong Kong (ETHK)
     engaged in long distance telephone business. Per the agreement, the Company
     sold its  Internet  Service  Provider  (ISP)  business to a related  party,
     Vision  Aerospace,  Inc.  (Vision) for 1,000,000 shares of Vision valued at
     $10,835.  Vision is owned by the former CEO and  President  of the Company.
     The  value of the  shares  was  recorded  at the book  value of the  assets
     exchanged  to acquire  the shares of Vision.  Pursuant  to the terms of the
     share exchange  agreement,  control of the combined companies passed to the
     former  shareholders of Elephant Talk Limited.  This type of share exchange
     has been treated as a capital  transaction  accompanied by recapitalization
     of Elephant Talk Limited in substance,  rather than a business combination,
     and is deemed a "reverse merger" for accounting purposes,  since the former
     owners of Elephant  Talk  Limited  controlled  majority of the total common
     shares  outstanding  immediately  following  the  merger.  Recapitalization
     accounting resulted in consolidated financial statements being issued under
     the name of Elephant  Talk  Communications,  Inc.,  but were  considered  a
     continuation of Elephant Talk Limited.  No pro forma  financial  statements
     are being  presented  as ETCI has no assets  other  than the  shares of the
     related third party discussed above.

NOTE 2:  Basis of Presentation
         ---------------------
     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance with generally  accepted  accounting  principles for
     interim  financial  information  and with the  instructions to Form 10-QSB.
     Accordingly,  they do not  include  all of the  information  and  footnotes
     required by generally accepted accounting principles for complete financial
     statements and related notes included in the Company's 2003 Form 10-KSB.







                                       7
<PAGE>
     The audited  consolidated  financial statements of the Company for the year
     ended  December  31, 2003 were filed on April 15, 2004 with the  Securities
     and  Exchange  Commission  and are  hereby  referenced.  In the  opinion of
     management,  the accompanying  unaudited  consolidated financial statements
     contain all adjustments  (which include only normal recurring  adjustments)
     considered necessary for fair presentation has been included.

     The  results  of  operations  for the three  months and nine  months  ended
     September  30, 2004,  are not  necessarily  indicative of the results to be
     expected for the entire year.  Certain 2003 amounts have been  reclassified
     to conform to current period presentation.  These reclassifications have no
     effect on previously reported net income (loss).

NOTE 3:  Principles of Consolidation
         ---------------------------
     The accompanying consolidated financial statements for the three months and
     nine months ended September 30, 2004 included the accounts of Elephant Talk
     Communications,  Inc.,  its 100%  wholly  owned  subsidiary  Elephant  Talk
     Limited and its 30% equity investment in New Times Navigations Limited. The
     consolidated  financial statements for the same period in 2003 included the
     accounts of  Elephant  Talk  Communications,  Inc.,  its 100% wholly  owned
     subsidiary  Elephant Talk Limited and its 35.42% equity  investment in ETNS
     Singapore Pte, Ltd. All significant inter-company accounts and transactions
     have been  eliminated  in  consolidation.  The merger  with  Elephant  Talk
     Limited  has been  accounted  for as a  purchase  and  treated as a reverse
     acquisition since the former  shareholders of Elephant Talk Limited control
     the  majority  of the  outstanding  shares of common  stock of the  Company
     immediately following the acquisition on January 4, 2002.

NOTE 4:  Use of Estimates
         ----------------
     In preparing  financial  statements in conformity  with generally  accepted
     accounting  principles,  management  is  required  to  make  estimates  and
     assumptions  that affect the reported amounts of assets and liabilities and
     the  disclosure of  contingent  assets and  liabilities  at the date of the
     financial  statements and revenues and expenses during the reported period.
     Actual results could differ from those estimates.

NOTE 5:  Supplemental Disclosure of Cash Flows
         -------------------------------------
     The Company prepares its statements of cash flows using the indirect method
     as defined  under the Financial  Accounting  Standard No. 95. The cash flow
     statements  do not include the following  non-cash  investing and financing
     activities:

     During the nine  months  ended  September  30,  2004,  the  Company  issued
     2,306,945 common shares valued at $331,500 as compensation to directors for
     salaries and fees for attending Board meetings.  The Company issued 644,005
     common shares valued at $154,561 to certain  directors and related  parties
     as  settlement of their debts to the Company,  and 4,883,424  common shares
     valued at $1,016,462 to consultants for providing  consulting  services and
     vendors for  settlement  of their debts.  In addition,  the Company  issued
     5,100,000  common  shares  valued at  $683,400 as partial  payment  towards
     purchase  of 30% equity  interest  in New Times  Navigations  Limited,  and



                                       8
<PAGE>
     further issued 4,000,000 common shares valued at $480,000 as ernest deposit
     towards its purchase of 60% equity interest in General  Systems  Technology
     Limited, known as WestSMS.

NOTE 6:  Recent Pronouncements
         ---------------------
     On May 15 2003,  the FASB  issued  FASB  Statement  No. 150  ("SFAS  150"),
     Accounting for Certain Financial  Instruments with  Characteristics of both
     Liabilities  and  Equity.  SFAS 150  changes  the  accounting  for  certain
     financial instruments that, under previous guidance, could be classified as
     equity or  "mezzanine"  equity,  by now requiring  those  instruments to be
     classified  as  liabilities  (or  assets  in  some  circumstances)  in  the
     statement  of financial  position.  Further,  SFAS 150 requires  disclosure
     regarding the terms of those instruments and settlement alternatives.  SFAS
     150  affects  an  entity's  classification  of the  following  freestanding
     instruments: a) Mandatorily redeemable instruments b) Financial instruments
     to repurchase an entity's own equity  instruments c) Financial  instruments
     embodying  obligations  that the issuer  must or could  choose to settle by
     issuing a variable number of its shares or other equity  instruments  based
     solely on (i) a fixed monetary  amount known at inception or (ii) something
     other than changes in its own equity instruments d) SFAS 150 does not apply
     to features embedded in a financial  instrument that is not a derivative in
     its  entirety.  The  guidance in SFAS 150 is  generally  effective  for all
     financial  instruments  entered into or modified after May 31, 2003, and is
     otherwise  effective at the beginning of the first interim period beginning
     after  September 15, 2003. For private  companies,  mandatorily  redeemable
     financial  instruments  are subject to the  provisions  of SFAS 150 for the
     fiscal period  beginning  after December 15, 2003. The adoption of SFAS No.
     150 did not have a material impact on the Company's  financial  position or
     results of operations or cash flows.

     In December 2003, the Financial  Accounting Standards Board (FASB) issued a
     revised   Interpretation  No.  46,   "Consolidation  of  Variable  Interest
     Entities"   (FIN  46R).  FIN  46R  addresses   consolidation   by  business
     enterprises of variable  interest  entities and  significantly  changes the
     consolidation  application of consolidation  policies to variable  interest
     entities and, thus improves  comparability  between  enterprises engaged in
     similar  activities when those  activities are conducted  through  variable
     interest  entities.  The  Company  does  not  hold  any  variable  interest
     entities.

NOTE 7:  Sale of Equity Interest in ETNS Singapore Pte, Ltd.
         ---------------------------------------------------
     On February 18, 2004, the Company's wholly owned  subsidiary  Elephant Talk
     Limited  completed  the sale of all of its 35.42%  equity  interest in ETNS
     Singapore Pte, Ltd. for a cash  consideration of $100,953.  The Company did
     not record any gain or loss from the sale of its equity  investment  during
     the nine months ended September 30, 2004.

NOTE 8:  Investment in New Times Navigation Limited
         ------------------------------------------
     On May 24, 2004,  the Company  completed  its purchase of 30% of all of the
     issued  and  outstanding  shares  of common  stock of New Times  Navigation
     Limited ("New Times") for a total  consideration  valued at $4,283,400 from
     four shareholders of Renren Holdings  Limited,  parent company of New Times


                                       9
<PAGE>
     ("Shareholders").  The  purchase  consideration  was payable at the closing
     date of May 24,  2004  to the  Shareholders  as  follows:  $683,400  of the
     purchase  consideration  consisted of 5,100,000  restricted  common  shares
     valued at the five days average  closing  price on the date of closing,  at
     $0.134 per common share, and $3,600,000 of the purchase consideration to be
     settled by issuance of unsecured Convertible  Promissory Notes ("Promissory
     Notes") bearing 2.5% interest due in full on March 28, 2005. The redemption
     of the Promissory  Notes is conditional upon the Company raising money from
     the public on or before March 28, 2005.  Failing  which,  the  Shareholders
     shall have the right to convert the Promissory  Notes into Company's common
     shares at the agreed conversion price of $0.50 per common share.

     The  Company's  30% interest in New Times is accounted for using the equity
     method of  accounting  and is stated at cost plus  equity in  undistributed
     earnings  (loss) since  acquisition.  The  Company's  share of the loss was
     $19,424 from May 24, 2004 (date of acquisition) through September 30, 2004.

     A summary of unaudited  financial  statements  of New Times as of September
     30, 2004 is as follows:

                                                               September 30,
                                                               -------------
                                                                    2004
                                                                    ----
Current assets                                                 $       76,923
Non-current assets                                                    860,417
                                                               --------------
Total Assets                                                          937,340

Current liabilities                                                         0
Non-current liabilities                                             1,304,615
Stockholder's deficit                                                (367,275)
                                                               ==============
  Total Liabilities and Stockholders' Deficit                  $      937,340

Statement of Operations - From the date of acquisition
  May 24, 2004 through September 30, 2004:

Revenues                                                       $            0
                                                               --------------
Operating expenses                                                     64,745
                                                               --------------
Net Loss                                                       $      (64,745)
                                                               ==============
Company's share of loss at 30%                                 $      (19,424)
                                                               ==============
Investment in New Times - at cost, at the date of acquisition  $    4,283,400

Share of loss in investment as of September 30, 2004                  (19,424)

Investment in New Times                                        $    4,263,977
                                                               ==============





                                       10
<PAGE>
NOTE 9:  Related Party Transactions
         --------------------------
     The Company has advanced  funds  amounting to $381,969 to entities that the
     Company's  officers and/or  shareholders have an ownership interest in. The
     Company  has  provided  a reserve  for  uncollectible  funds  amounting  to
     $300,000 for such funds advanced as of September 30, 2004.

     The Company has a standby line of credit for  $128,205  with a bank in Hong
     Kong which expires on January 16, 2005 and is personally guaranteed by four
     of the  Company's  shareholders.  The Company  utilizes the standby line of
     credit for security purposes and short-term working capital requirements of
     the  Company  and its  affiliates.  The  Company's  affiliate  had signed a
     promissory  note of $408,975,  fully  guaranteed by the Company,  requiring
     monthly installments of $12,535 and due on December 24, 2006. The affiliate
     is in  arrears  in  making  monthly  payments,  and in case of  default  of
     payments on the  promissory  note,  the Company will have the obligation to
     pay the promissory  note in full. The Company has provided a full allowance
     for the unpaid balance on the promissory note in the accompanying financial
     statements at September 30, 2004.

NOTE 10: Stockholders' Equity
         --------------------
     Stock Split: As a condition  precedent to the merger,  Staruni  Corporation
     authorized a reverse stock split of their common  shares  pursuant to which
     for every ten (10) shares of the issued and outstanding  common shares were
     exchanged  for one (1) common  share.  On January  22,  2002,  the  Company
     effected  a one (1) for ten (10)  reverse  stock  split of its  outstanding
     common stock. This reduced the number of shares outstanding from 34,626,899
     shares to 3,464,000 shares after having 1,311 partial shares redeemed.  The
     basic and diluted  net loss per share per these  financial  statements  has
     been restated to retroactively effect the reverse stock split.

     Issuance of common stock:  During the nine months ended September 30, 2004,
     the  Company  issued   2,306,945   common  shares  valued  at  $331,500  as
     compensation  to  directors  for  salaries  and  fees for  attending  Board
     meetings.  The common shares were valued at the closing market price of the
     common shares on the first day of each month starting  January 1, 2004. The
     Company  issued  644,005  common  shares  valued  at  $154,561  to  certain
     directors and related  parties as settlement of their debts to the Company,
     and 4,883,424 common shares valued at $1,016,462 to consultants and vendors
     for settlement of their debts. The common shares were valued at the 10 days
     average market closing price from the date of issuance.

     During the nine  months  ended  September  30,  2004,  the  Company  issued
     2,543,207  restricted (under Rule 144 one year  restriction)  common shares
     under  stock  sale  agreements  to  accredited  investors  under a  private
     placement  for  a  total  consideration  of  $349,970.   The Company issued
     5,100,000  restricted  common  shares  valued  at   $683,400  as considera-
     Tion   towards  the   purchase   of  30%  equity   interest  in  New  Times
     Navigation Limited (See Note 8). In addition,  the Company issued 4,000,000
     restricted  common shares  valued at $480,000  based on the 10 days average
     market closing price from the date of issuance,  as earnest deposit towards
     its purchase of 60% equity ownership interest in General Systems Technology
     Limited, known as WestSMS,  a mobile value-added service provider in China.
     As of today, the acquisition of WestSMS has not been completed.


                                       11
<PAGE>
     Pursuant  to the  terms  of  the  Spin-Off  Agreement  with  The  Hartcourt
     Companies,  Inc.  ("Hartcourt"),  on September 25, 2002, the Company issued
     5,000,000 restricted common shares to Hartcourt valued at $320,000 based on
     the market  value on the date of issue.  On January  4, 2003,  the  Company
     received from  Hartcourt  17,895,579 of its common shares held by Hartcourt
     pursuant to the finalization of the terms of the Spin-Off  Agreement.  Upon
     consummation  of the  transaction on January 4, 2003, the Company  recorded
     its  17,895,579  common  shares as shares  authorized  but unissued  shares
     valued at $1,288,482.  As a part of the  settlement,  the Company settled a
     note receivable  including  accrued interest  thereon,  of $1,387,500 and a
     note payable of $349,000.  The Company also  returned  1,000,000  shares of
     common stock of  Hartcourt it was holding,  valued at $60,0000 to Hartcourt
     and  assumed  a loan of  $140,595  from a third  party.  As a result of the
     completion  of the spin-off  agreement  with  Hartcourt  that  completed on
     January  4,  2003,  the  Company  recorded  a loss of  $270,613  as loss on
     settlement.  On March 30, 2004,  the Company  cancelled  17,895,579  of its
     common  shares  valued  at  $1,288,482  that  was  received  as part of the
     settlement with Hartcourt.

NOTE 11: Basic and Diluted Net Loss Per Share
         ------------------------------------
     Basic and diluted  net loss per share for the three  months and nine months
     ended  September 30, 2004 and 2003 were determined by dividing net loss for
     the periods by the weighted  average  number of basic and diluted shares of
     common stock outstanding. Weighted average number of shares used to compute
     basic and  diluted  loss per share is the same since the effect of dilutive
     securities is anti-dilutive.

NOTE 12: Employee Benefit Plan
         ---------------------
     The Company  adopted an employee  benefit plan "The 2000  Employee  Benefit
     Plan" (the "Plan") on May 30, 2000.  Under the Plan,  the Company may issue
     shares or grant  options to acquire  the  Company's  common  stock,  no par
     value,  from time to time to employees of the Company or its  subsidiaries.
     In addition,  at the  discretion of the Board of  Directors,  shares may be
     granted  under this Plan to other  individuals,  including  consultants  or
     advisors, who contribute to the success of the Company or its subsidiaries,
     provided  that bona fide  services  shall be  rendered by  consultants  and
     advisors and such  services  must not be in  conjunction  with the offer or
     sale of securities in a capital raising transaction. No stock may be issued
     or options granted under the Plan to consultants, advisors or other persons
     who directly or  indirectly  promote or maintain a market for the Company's
     securities.  The Plan is  intended to aid the  Company in  maintaining  and
     developing a management team,  attracting  qualified officers and employees
     capable of assuring the future success of the Company,  and rewarding those
     individuals who have contributed to the success of the Company. The Plan is
     administrated  under the  direction of the Board of  Directors.  A total of
     4,000,000  (four million)  common shares and 4,000,000 (four million) stock
     options to acquire common shares may be subject to, or issued  pursuant to,
     benefits  granted  under the Plan.  At any time any stock option is granted
     under the terms of this Plan,  the Company  will  reserve for  issuance the
     number of shares of Stock  subject to such option  until it is exercised or
     expired.  The Plan  Administrator  shall  determine  from  time to time the
     terms,  conditions and price of the options  granted.  Options shall not be
     construed to be stock and cannot be exercised  after the  expiration of its
     term.

                                       12
<PAGE>
     On January 17, 2001, the Company granted and issued 1,700,000 common shares
     at a price of $0.005  per share for a total  consideration  of  $8,500.  On
     August 24,2004,  the Company  reserved  2,000,000 common shares to grant to
     certain  officers  and  directors  for  their services.   Under  the  Plan,
     2,300,000  shares of common stock remain  available  for grant at September
     30, 2004.

NOTE 13: Going Concern
         -------------
     The accompanying financial statements have been prepared in conformity with
     generally accepted accounting principle,  which contemplate continuation of
     the Company as a going concern.  The Company has an accumulated  deficit of
     $10,078,847  including a net loss of  $1,289,399  for the nine months ended
     September 30, 2004. In view of the matters described below,  recoverability
     of a major portion of the recorded asset amounts shown in the  accompanying
     balance sheet is dependent upon continued operations of the Company,  which
     in turn is  dependent  upon  the  Company's  ability  to  raise  additional
     capital, obtain financing and to succeed in its future operations.

     The  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 be necessary should the Company be
     unable to continue as a going concern.

     Management  has  taken the  following  steps to revise  its  operating  and
     financial  requirements,  which it believes are  sufficient  to provide the
     Company  with the ability to continue as a going  concern.  Management  has
     devoted  considerable  efforts  during the period ended  September 30, 2004
     towards (i) obtaining  additional  equity  financing  (ii)  controlling  of
     salaries  and general  and  administrative  expenses  (iii)  management  of
     accounts  payable and (iv) settlement of vendors debt by issuance of common
     shares.

NOTE 14: Subsequent Events
         -----------------
     On October 1, 2004,  the Company issued  407,143  restricted  common shares
     valued at  $28,500 to its  officers  and  directors  for  compensation  for
     October 2004.

     On October 26, 2004, the Company cancelled 741,757 previously issued common
     shares and reissued 694,444 common shares to a  vendor  in final settlement
     of its debt.

     On October 29, 2004,  the Company issued 543,479  restricted common  shares
     under a stock  sale  agreement  to  an accredited investor  under a private
     placement for a total consideration of $50,000.

PART 1

ITEM 2   Management Discussion and Analysis or Plan of Operation

     Elephant Talk Communications, Inc. (ETCI) is a facility based international
     long distance  carrier  offering highly reliable and  competitively  priced
     services  on  the  wholesale  market.  The  Company  provides  services  to
     first-tier local and international  telecommunications  carriers,  enabling
     those carriers and other service  providers to offer voice and fax services
     to their end-customers.  The operations include international long distance
     on both sides of the Pacific,  serving over 20 foreign countries through an

                                       13
<PAGE>
     advanced and flexible network.  The Company has been expanding its foothold
     in Asia with more  profitable  routes and the  development  of  value-added
     services, such as PC-to-Phone service, voice over Internet protocol (VoIP),
     Broadband  Internet  and Short  messaging  service  (SMS).  The  Company is
     actively pursuing new sales channels for the higher-margin  prepaid calling
     card  market,  expanding  from the U.S. to several  countries in South East
     Asia.

     Pursuant to an agreement and plan of  reorganization,  effective August 27,
     2001, and through the subsequent  acquisition  that completed on January 4,
     2002, Staruni Corporation,  a California corporation acquired Elephant Talk
     Limited,  a limited  company  incorporated in Hong Kong. This type of share
     exchange  has  been  treated  as  a  capital  transaction   accompanied  by
     recapitalization  of  Elephant  Talk  Limited in  substance,  rather than a
     business combination,  and is deemed a "reverse acquisition" for accounting
     purposes  since the  former  owners of  Elephant  Talk  Limited  controlled
     majority of the total common shares outstanding  immediately  following the
     acquisition.  The acquisition  caused no change in any of the shares of the
     Company's  common stock  outstanding on the acquisition  date, and no other
     securities were converted as a result of the acquisition.

     Elephant Talk Limited was  established in Hong Kong in 1994.  Elephant Talk
     Limited owned switching  facilities in China,  Hong Kong,  United States of
     America,  Taiwan  and  Singapore,  which now are owned by the  Company as a
     result  of  the  merger.   ETCI  utilizes  both  IP  and  circuit  switched
     technologies  over a  common  platform,  and  provides  international  long
     distance services in wholesale market principally to carriers;  prepaid and
     post paid phone cards; and other value added services

     Elephant  Talk  Limited's  customers  include some of the largest first and
     second tier telecommunications carriers in the U.S. and several carriers in
     South East Asia,  including two of the four fixed network operators in Hong
     Kong. Since its  establishment,  Elephant Talk Limited expanded its network
     by  installing  more  switches and hubs  internationally.  Because of this,
     Elephant  Talk  Limited has secured  termination  options  outside  Asia by
     entering  into  international   operating   agreements  with  foreign-based
     telecommunications carriers,  including AT&T Corporation,  Global Crossing,
     Frontier Telecom Ltd. and MCI WorldCom Inc.

     Capitalizing on a unique position to gain market share in Asia, the Company
     has leveraged  Elephant Talk  Limited's  early entrant  status by forging a
     stronger  position in the People's  Republic of China ("PRC") by forging an
     increasing  number of strategic  relationships.  In 1996, only one-third of
     Elephant  Talk  Limited's  traffic  terminated  in  the  PRC.  The  traffic
     increased to  approximately  70% in 1998,  and to over 80% in 1999-2000 and
     declined ever since then. In keeping with the extremely  difficult economic
     and market  conditions  for  telecommunications  industry in Hong Kong, the
     Company  reported  disappointing  second  quarter  operating  results.  The
     management  discussions  contained  herein refer to only the  operations of
     Elephant Talk Communications, Inc. and its subsidiaries.

     On May 18, 2004, the Company entered into a definitive agreement to acquire
     a majority equity interest in General Systems technology Limited,  known as
     WestSMS,  a leading  mobile  value-added  service  provider  in China.  The
     Company will use this  acquisition as the  cornerstone in its transition to


                                       14
<PAGE>
     higher margin  telecommunications  services in China.  The  acquisition  is
     expected to close by November 30, 2004 after  completion  of due  diligence
     and obtaining the necessary regulatory approvals.

     On May 24, 2004,  the Company  completed  its purchase of 30% of all of the
     issued  and  outstanding  shares  of common  stock of New Times  Navigation
     Limited ("New Times") from four  shareholders of Renren  Holdings  Limited,
     parent  company of New Times  ("Shareholders"),  for a total  consideration
     valued at $4,283,400. The purchase consideration was payable at the closing
     date of May 24,  2004  to the  Shareholders  as  follows:  $683,400  of the
     purchase  consideration  consisted of 5,100,000  restricted  common  shares
     valued  at the  five-day  average  closing  price of  common  shares at the
     closing date, at $0.134 per common  share,  and  $3,600,000 of the purchase
     consideration to be settled by issuance of unsecured Convertible Promissory
     Notes  ("Promissory  Notes").  The  redemption of the  Promissory  Notes is
     conditional  upon the  Company  raising  money from the public on or before
     March 28, 2005.  Failing which,  the  Shareholders  shall have the right to
     convert the  Promissory  Notes into  Company's  common shares at the agreed
     conversion price of $0.50 per common share.

     New  Times is a  subsidiary  of  RenRen  Holdings  Limited,  the  principal
     activities of RenRen  Holdings  consist of  investments,  media,  property,
     financial services and  entertainment.  New Times was formed to oversee the
     project  of  Renren  TV  (RTV)  from  the  initial  stage   throughout  its
     development.  RTV  is  the  gateway  to  broadcast  24-hours  high  quality
     world-class  TV programs  through the broadband  Internet.  RTV provides 30
     channels aiming to capture Sports News,  Music,  Movies,  entertainment and
     documentaries confined to the Asian market areas such as Japan,  Singapore,
     Korea,  Mainland China and Taiwan to suit the taste of oriental  customers.
     RTV is the first Internet  protocol  television that exists in Hong Kong to
     provide broadband users better-than-VCD quality video through the broadband
     network  at a minimum  cost.  Broadband  TV is a new form of  entertainment
     providing  interactive media content through broadband Internet.  Providing
     media through  Internet is cost effective and highly efficient while giving
     customers  other  choice  on TV  programs.  Broadband  TV is  still  in its
     maturity  stage and the  current  lack of  regulations  in this  sector may
     hamper  our  operations  in this  market.  Nevertheless,  we  believe  such
     limitations  will  ease in the  future  and  allow  more  room for  product
     development.

     Results of  Operations:  The results of  operations  of the Company for the
     three  months and nine months  ended  September  30, 2004  consisted of the
     operations of ETCI, its wholly owned  subsidiary  Elephant Talk Limited and
     its 30% equity investment in New Times Navigation Limited from May 24, 2004
     (date of  acquisition).  The results of operations for the three months and
     nine months ended  September 30, 2003  consisted of the operations of ETCI,
     its wholly owned  subsidiary  Elephant  Talk  Limited,  and a 35.42% equity
     investment in ETNS Singapore  Pte, Ltd. The Company  reported net losses of
     $113,300  and  $1,289,399  during the three  months and nine  months  ended
     September  30, 2004 compared to net losses of $271,873 and  $1,425,905  for
     the same periods in 2003.

     Revenues and Cost of revenues:  The Company  reported  revenues of $143,677
     and $495,657  during the three months and nine months ended  September  30,
     2004  compared  to  $168,747  and  $693,207  for the same  periods in 2003.


                                       15
<PAGE>
     Revenues  consisted of  telecommunications  services such as voice and data
     transmission like IDD, pre-paid calling cards, eTalk and facsimile services
     provided to a wide range of  customers  including  major  telecommunication
     companies to retail  customers in the US,  Europe,  China,  Indonesia,  New
     Zealand  and Hong Kong.  The major  component  in the  decline of  revenues
     during the  current  year comes from price  competition  for long  distance
     business  voice  services  and a loss of a  number  of key  customers.  The
     Company's   international  business  continues  to  experience  significant
     pricing  pressure on its  products.  The sales decline was also a result of
     SARS in Hong Kong in 2003 when new  customers  acquisition  campaigns  were
     postponed.   The  wholesale   market   continued  to  be  extremely   price
     competitive,  and this, in addition to  bankruptcies  in some customers and
     industry players, a reduction in circuits connected to customers related to
     their    internal    network    consolidation,     contributed    to    the
     quarter-over-quarter  decrease.  Wholesale  revenues  during 2004 were also
     impacted by continuous  proactive revenue  initiatives,  which were made to
     improve the quality of the wholesale  revenue stream as the Company shifted
     its focus from revenue growth to cash generation.

     Part of the  Company's  revenue  reduction is  attributable  to a strategic
     decision on the Company's part to de-emphasize certain services with longer
     settlement  terms  (such as certain  wholesale  customers  and most  retail
     post-paid  customers).  Partially  offsetting the items contributing to the
     decrease  in total  revenue was the  introduction  of eTalk - a PC to phone
     service offered in China through  pre-paid call  arrangements,  which saw a
     slight  revenue  increase  in  the  quarter  and  is  expected  to be  more
     significant in future quarters from the introduction of chat-line services.

     Cost of revenue  was  $69,765 and  $344,751  for the three  months and nine
     months ended  September  30, 2004 compared to $160,718 and $623,205 for the
     same  periods in 2003.  Cost of revenues  included  the costs in  providing
     resale  arrangements with long distance service providers,  cost of leasing
     transmission  facilities,  international  gateway switches for voice,  data
     transmission  and facsimile  services and discounts  offered on eTalk cards
     sold.  Gross  margins for the three months and nine months ended  September
     30,  2004 was  51.4%  and  30.4%  compared  to 4.7% and  10.1% for the same
     periods in 2003.  The  increase in gross  margin for the nine months  ended
     September  30,  2004  was  due to the  change  in the  revenue  mix for the
     services  provided  to the  customers  as well as the direct  result of the
     pricing  pressure in the telecom markets  without  adequate volume offsets.
     The unexpired  fixed  facility  contracts  had adversely  impacted our cost
     since we accounted for facility  lines not used through our  re-focus,  the
     impact would be on a short-term basis as most of such contracts  expired in
     2003.  Although our mix improved towards a preferred blend of pre-paid mode
     versus post-paid mode, our international  business  continues to experience
     significant pricing pressure on its products.  Both the local voice revenue
     and  long-distance   revenue  decreases  were  significantly   impacted  by
     continued weakness in the telecommunications  industry and ongoing economic
     and competitive pressures from other telecommunications  services providers
     in Hong Kong and the world.

     Selling,  general and administrative  expenses (S,G&A): S,G&A expenses were
     $150,110  and  $1,555,040  for the  three  months  and  nine  months  ended
     September  30, 2004  compared to $192,737 and $956,809 for the same periods
     in 2003.  S,G&A expenses as a percentage of revenues  increased  during the


                                       16
<PAGE>
     three months and nine months ended  September 30, 2004 compared to the same
     periods in 2003,  primarily due to the Company's  revenue base reduction by
     28.5%,  and Company paying  $588,440 in fees to  consultants  and financial
     advisors  for  identifying  potential  targets  for  acquisitions  in VoIP,
     broadband and SMS business.  The Company also provided for an allowance for
     uncollectible  debt from an affiliate  for $285,283  during the nine months
     ended  September  30,  2004 as the  Company  had  guaranteed  payments on a
     promissory note signed by the affiliate.  Furthermore,  the Company reduced
     its payroll  and other  expenses  through  right-sizing  the  organization.
     Depreciation  expense was $62,160 for the nine months ended  September  30,
     2004 compared to $189,891 for the same period in 2003.

     Other Income and Expenses:  The Company  settled its debts with vendors and
     recorded a gain of $227,655  during the nine  months  ended  September  30,
     2004.  No such  settlements  were made during the same period in 2003.  The
     Company  recorded a loss of $19,424 on its equity  investment  in New Times
     from May 24, 2004 (date of  acquisition) to September 30, 2004. The Company
     sold its equity  investment in ETNS Singapore Pte, Ltd. in January 2004 and
     did not earn any gain or loss during the nine months  ended  September  30,
     2004. The Company  recorded a loss of $51,622 on its equity  investment for
     the nine months ended September 30, 2003. Due to the completion of spin-off
     with  Hartcourt on January 4, 2003,  the Company  cancelled its  promissory
     note and recorded a loss of $270,613 as part of the final  settlement  upon
     separation.  Interest  expense for the nine months ended September 30, 2004
     was $30,536 compared to $26,561 for the same period in 2003.

     Liquidity  and Capital  Resources:  The Company  believes  that current and
     anticipated  future cash  requirements  for the next three months cannot be
     met with the cash on hand and from revenue  from current  customers to fund
     the internal  operations.  The Company  plans to raise  necessary  funds by
     selling its own common shares to selected accredited investors and bringing
     in business  partners  whose  contributions  include  necessary  cash.  The
     issuance of additional common stock will result in dilution of our existing
     shareholders.  There can be no assurance  that  additional  funding will be
     available  on  favorable  terms,  if at all.  No  assurance  can be  given,
     however,  that the  Company  will have  access to the  capital  markets  in
     future,  or that financing will be available on acceptable terms to satisfy
     the  Company's   cash   requirements   needed  to  implement  its  business
     strategies. The Company's inability to access the capital markets or obtain
     acceptable financing could have a material adverse affect on its results of
     operations  and  financial  condition,  and  could  severely  threaten  the
     Company's ability as a going concern.

     The  Company's  forecast of the period of time through  which its financial
     resources will be adequate to support its  operations is a  forward-looking
     statement that involves risks and  uncertainties,  and actual results could
     vary as a result of a number of factors.

     Operating activities: Net cash used in operating activities during the nine
     month period amounted to $651,966  primarily due to the decrease in prepaid
     expenses and carrier deposits of $37,951,  decrease in accounts  receivable
     of  $33,679,  decrease  in cash  overdraft  of  $401,501,  and  decrease in
     accounts  payable,  accrued  expenses  and  deferred  revenues of $504,879.
     Additionally, the Company's current liabilities exceeded its current assets
     by  $607,606  at  September  30,  2004.  These  factors  and the  Company's


                                       17
<PAGE>
     inability to meet its debt  obligations  from current  operations,  and the
     need to raise  additional  funds to  accomplish  its  objectives,  create a
     substantial  doubt  about the  Company's  ability  to  continue  as a going
     concern.

     Investing activities.  Net cash provided by investing activities during the
     nine months ended September 30, 2004 was $95,750  primarily due to the sale
     of Company's equity interest in ETNS Singapore Pte, Ltd.

     Financing activities.  Net cash provided by financing activities during the
     nine months  ended  September  30,  2004 was  $565,974.  The  Company  sold
     2,543,207  restricted  common shares to accredited  investors for $349,970,
     received $259,210 from related parties and made payments of $29,188 towards
     notes payable and $14,018 in payments on capital leases.

     As a result of the above activities, the Company experienced a net increase
     in cash of $4,511 for the nine months ended September 30, 2004. The ability
     of the  Company to continue as a going  concern is still  dependent  on its
     success in obtaining additional financing from the institutional  investors
     or by selling its common shares and fulfilling its plan of restructuring as
     outlined above.

     Critical accounting policies and estimates:
     ------------------------------------------
     Our  discussion  and  analysis  of  financial   condition  and  results  of
     operations are based on our consolidated  financial statements,  which have
     been prepared in accordance with accounting  principles  generally accepted
     in the  United  States.  The  preparation  of  these  financial  statements
     requires  us to make  estimates  and  judgments  that  affect the  reported
     amounts of assets and liabilities  and the disclosure of contingent  assets
     and liabilities at the date of the consolidated  financial statements,  and
     the reported amounts of revenue and expenses during the period reported. By
     their  nature,  these  estimates  and  judgments are subject to an inherent
     degree of  uncertainty.  We based our estimates and judgments on historical
     experience,  market  trends,  and  other  factors  that we  believed  to be
     reasonable under the circumstances. The results of these estimates form the
     basis for judgments about the carrying value of assets and liabilities that
     are not readily apparent from other sources. Actual results may differ from
     these  estimates  under  different  assumptions  or  conditions.   We  have
     discussed the  development,  selection,  and disclosure of these  estimates
     with the Audit  Committee of our Board of Directors.  We believe there have
     been no material changes to our critical  accounting policies and estimates
     during the three months and nine months ended  September  30, 2004 compared
     to those  discussed  in our  Annual  Report on Form 10-K for the year ended
     December 31, 2003.

     We believe the  following  critical  accounting  policies  reflect our more
     significant  judgments  and  estimates  used  in  the  preparation  of  our
     financial statements.

     Revenue recognition.
     Our revenue  recognition  policy is  significant  because  revenue is a key
     component  of our results of  operations  and because  revenue  recognition
     determines  the  timing  of  certain  expenses,  such  as  commissions  and
     royalties.  We derive  our  revenue  primarily  from  sales of our  various


                                       18
<PAGE>
     services and products. As described below, significant management judgments
     and estimates must be made and used in connection  with revenue  recognized
     in any accounting  period.  If our management makes different  judgments or
     uses different estimates, material differences may result in the amount and
     timing of our revenue for any period. We recognize revenue from the sale of
     our services and products when:

         o      we have persuasive  evidence that an arrangement exists. For all
                sales,  we  use  a  binding   purchase  order  and  sales  order
                confirmation  as  evidence  of  an  arrangement.  Sales  through
                certain of our  distributors are evidenced by a master agreement
                governing  the  relationship,  together  with  binding  purchase
                orders on a transaction-by-transaction basis;

         o      the  services  are  completed  and product is  delivered  to the
                customer  under the terms of the  arrangement  and title passes.
                Passage  of  title  generally   occurs  when  the  services  are
                performed or when product is delivered to a common carrier,  but
                in some cases occurs when the customer receives the product;

         o      the  revenue  is  fixed  and  determinable.  At the  time of the
                transaction,  we  assess  whether  the fee  associated  with our
                revenue  transactions  is fixed  and  determinable  based on the
                payment terms associated with the transaction.

         o       collection of the resulting  receivable is reasonably  assured.
                 We assess  collection  based on a number of factors,  including
                 past   transaction   history   with   the   customer   and  the
                 credit-worthiness of the customer. We do not request collateral
                 from our customers. If we determine that collection of a fee is
                 not  reasonably  assured,  then we defer the fee and  recognize
                 revenue  at the time  collection  becomes  reasonably  assured,
                 which generally is upon receipt of cash.

     Sales return and other allowances.  In preparing our consolidated financial
     statements,  our management estimates potential product returns and records
     a provision for those  returns in the period in which related  revenues are
     recorded.  Our management  analyzes  historical sales returns,  analysis of
     credit memo data,  current economic trends,  and changes in customer demand
     and  acceptance of our products when  evaluating  the adequacy of the sales
     returns and other allowances estimate.

     Our  arrangements  generally  do not give  customers  the  right to  return
     products  or to cancel  firm  orders  for  services.  However,  we do offer
     customers the right to return products that do not function properly within
     a limited time after  delivery,  and we sometimes  accept returns for stock
     balancing  and  negotiate  accommodations  to  customers,  including  price
     discounts, credits and returns.

     Allowance for doubtful accounts.
     Our management  estimates the  uncollectability  of our accounts receivable
     for losses that may result from the  inability of our customers and related
     party  affiliates,  (herein  referred to as  "Customers")  to make required
     payments. Management specifically analyzes accounts receivable and analyzes
     historical bad debts, Customer concentrations,  Customer credit-worthiness,


                                       19
<PAGE>
     current  economic  trends  and  changes  in  Customer  payment  terms  when
     evaluating  the adequacy of the  allowance  for doubtful  accounts.  If our
     customers'  financial  condition  deteriorates  such that it impairs  their
     ability to make payments to us, additional allowances may be required.

     Recent accounting pronouncements.
     In September  2004, the EITF Issue No. 04-08,  "The Effect of  Contingently
     Convertible  Debt on Diluted Earnings per Share." ("EITF 04-08") was issued
     stating that  contingently  convertible  debt should be included in diluted
     earnings  per share  computations  regardless  of whether the market  price
     trigger has been met. This Issue is effective for reporting  periods ending
     after  December 15, 2004. As a result of adopting EITF 04-08,  we will need
     to include the dilution  effect of our outstanding  contingent  convertible
     debt in our diluted earnings per share  calculations  regardless of whether
     the market price  trigger has been met going  forward.  In  addition,  this
     change will be applied  retroactively to all prior periods. The retroactive
     application  of EITF 04-08 may result in dilution of earnings per share for
     the quarter ended  September 30, 2004 and may have no impact to the diluted
     earnings per share for all other prior periods.

     In September  2004, the EITF delayed the effective date for the recognition
     and measurement  guidance previously  discussed under EITF Issue No. 03-01,
     "The Meaning of  Other-Than-Temporary  Impairment  and Its  Application  to
     Certain  Investments" ("EITF 03-01") as included in paragraphs 10-20 of the
     proposed  statement.  The  proposed  statement  will clarify the meaning of
     other-than-temporary  impairment and its application to investments in debt
     and equity securities,  in particular  investments within the scope of FASB
     Statement No. 115,  "Accounting for Certain  Investments in Debt and Equity
     Securities,"  and investments  accounted for under the cost method.  We are
     currently evaluating the effect of this proposed statement on our financial
     position  and results of  operations.  If the proposed  EITF 03-01  becomes
     effective  and is  adopted,  we may have to  record  additional  impairment
     charges for certain of our investments in marketable debt securities.

PART 1

ITEM 3   Controls and Procedures

     Evaluation of disclosure  controls and  procedures:  The Company  maintains
     controls and procedures designed to ensure that information  required to be
     disclosed  in  this  report  is  recorded,   processed,   accumulated   and
     communicated to our management,  including our chief executive  officer and
     our chief  financial  officer,  to allow  timely  decisions  regarding  the
     required  disclosure.  Within the 90 days prior to the filing  date of this
     report,  our  management,  with the  participation  of our chief  executive
     officer  and chief  financial  officer,  carried out an  evaluation  of the
     effectiveness of the design and operation of these disclosure  controls and
     procedures.  Our  chief  executive  officer  and  chief  financial  officer
     concluded, as of fifteen days prior to the filing date of this report, that
     these disclosure controls and procedures are effective.

     Changes  in  internal  controls:  Subsequent  to  the  date  of  the  above
     evaluation,  the  Company  made  no  significant  changes  in its  internal
     controls  or  in  other  factors  that  could  significantly  affect  these
     controls, nor did it take any corrective action, as the evaluation revealed
     no significant deficiencies or material weaknesses.

                                       20
<PAGE>
               ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES
                          OTHER INFORMATION (UNAUDITED)
                               SEPTEMBER 30, 2004

PART II

ITEM 1   Legal Proceedings

     None

ITEM 2   Changes in Securities

     During the nine  months  ended  September  30,  2004,  the  Company  issued
     2,306,945 common shares valued at $331,500 as compensation to directors for
     salaries and fees for attending Board meetings.  The Company issued 644,005
     common shares valued at $154,561 to certain  directors and related  parties
     as  settlement of their debts to the Company,  and 4,883,424  common shares
     valued at $1,016,462 to consultants for providing  consulting  services and
     vendors  for  settlement  of their  debts.  The  Company  issued  2,543,207
     restricted  (under Rule 144 one year  restriction)  common  shares  under a
     stock sale agreement to accredited  investors under a private placement for
     cash consideration of $349,970.  The Company issued 5,100,000 common shares
     valued  at  $683,400  as  partial  consideration  towards  purchase  of 30%
     investment  interest in New Times Navigations  Limited.  The Company issued
     4,000,000  restricted common shares valued at $480,000,  as earnest deposit
     towards its purchase of 60% equity  ownership  interest in General  Systems
     Technology Limited, known as WestSMS, a mobile value-added service provider
     in China.  Furthermore,  the Company  cancelled  17,895,579  common  shares
     valued at  $1,288,482  that was  received  as part of its  settlement  with
     Hartcourt.

ITEM 3   Defaults Upon Senior Securities

     Not applicable

ITEM 4   Submission of Matters to Vote of Securities Holders

     None

ITEM 5   Other Information

     None

ITEM 6   Exhibits and Reports on Form 8-K

      a) Exhibits

         Exhibit 31.1   Certification of C.E.O. Pursuant to Section 302 of the
                        the Sarbanes-Oxley Act of 2002.

         Exhibit 31.2   Certification of Principal Accounting Officer Pursuant
                        to Section 302 of the Sarbanes-Oxley Act of 2002.

         Exhibit 32     Certification Pursuant to 18 U.S.C. Section 1350, as
                        Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002

                                       21
<PAGE>

      b) Reports on Form 8-K

         o  On September 2, 2004,  acquisition  of New Times Navigation Limited,
            Film No. 04844014.  Incorporated by reference.







               ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES
                          OTHER INFORMATION (UNAUDITED)
                               SEPTEMBER 30, 2004


                                    SIGNATURE

In accordance  with the  requirements  of the Exchange Act, the  registrant  has
caused  this  report  signed on its behalf by the  undersigned,  thereunto  duly
authorized.



                               Elephant Talk Communications, Inc.

Date:  November 12, 2004       By: /s/ Russelle Choi
                               --------------------------------
                               Russelle Choi
                               President & Chief Executive Officer


























                                    22