**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**




**WASHINGTON,
      D. C. 20549**






**FORM
      10-Q**







[
      x
      ] **** Quarterly
      report under Section 13 or 15(d) of the Securities Exchange Act of
      1934


For
      the
      quarterly period ended **March
      31** ***,*** **2008**





[  
      ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of
      1934


For
      the
      transition period from ______ to ______







**000-30061**


( *Commission
      file No.)*





**ELEPHANT
      TALK COMMUNICATIONS, INC.**


*(Exact
      name of small business issuer as specified in its charter)*







**CALIFORNIA**
            
            **95-4557538***(State
                or other jurisdiction of*
            
            *(I.R.S.
                employer identification no.)**incorporation
                or organization)*


**Schiphol
      Boulevard 249**


**1118
      BH Schiphol**


**The
      Netherlands**


*(Address
      of principal executive offices)*




**31
      0 20 653 5916** ******


*(Issuer's
      telephone number, including area code)*







Check
      whether the registrant (1) has 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___.





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      Accelerated filer [  ]  Accelerated filer
      [  ]  Non-Accelerated filer
      [  ]  Smaller reporting
      company [ X ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes __  No X




As
      of May
      15, 2008 there were 238,265,927 shares of the Company’s common stock
      outstanding.









**ELEPHANT
      TALK COMMUNICATIONS, INC.**




TABLE
      OF
      CONTENTS




FORM
      10-Q




March
      31,
      2008




PART
                I - FINANCIAL INFORMATION
            3Item
                1. Consolidated Financial Statements
            3Consolidated
                Balance Sheets asof
                March 31, 2008 (Unaudited) and December 31, 2007
            3Unaudited
                Consolidated Statements of Operation for the three months period
                endedMarch
                31, 2008 and 2007
            4Unaudited
                Consolidated Statements of Cash Flows for the three months period
                endedMarch
                31, 2008 and 2007
            5Notes
                to the Consolidated Financial Statements (Unaudited)
            7Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            22Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            26Item
                4. Controls and Procedures
            26PART
                II - OTHER INFORMATION
            28Item
                1. Legal Proceedings
            28Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            28Item
                3.Defaults
                upon Senior Securities
            28Item
                4.Submission
                of Matters to a Vote of Security Holders
            28Item
                5.Other
                Information
            28Item
                6. Exhibits
            28SIGNATURES
            29







Exhibit
            31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
                15(d)-14(a)
            X-1Exhibit
            31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
                15(d)-14(a)
            X-2Exhibit
            32.1
            Certification
                of ChiefExecutive
                Officerpursuant
                to section 906 of the Sarbanes-Oxley Act of 2002
            X-3Exhibit
            32.2
            Certification
                of Chief FinancialOfficerpursuant
                to section 906 of the Sarbanes-Oxley Act of 2002
            X-4




Page
          2




**PART
      I - FINANCIAL INFORMATION**




**Item
      1. Consolidated Financial Statements**







**ELEPHANT
                TALK COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS****March
                31, 2008**
            
            **December
                31, 2007****(Unaudited)****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            2,493,316
            
            $
            4,366,312Restricted
                cash
            
            
            31,297
            
            
            23,266Accounts
                receivable, net
            
            
            6,455,256
            
            
            4,438,224Ernest
                Deposits
            
            
            486,009
            
            
            442,853Prepaid
                expenses and other current assets
            
            
            348,521
            
            
            372,331Due
                from related parties
            
            
            17,746
            
            
            18,514Total
                Current Assets
            
            
            9,832,145
            
            
            9,661,500**PROPERTY
                AND EQUIPMENT - NET**
            
            
            3,612,183
            
            
            3,484,224**INTANGIBLE
                ASSETS, NET**
            
            
            11,614,957
            
            
            11,462,504**TOTAL
                ASSETS**
            
            $
            25,059,285
            
            $
            24,608,228**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES**Overdraft
            
            $
            204,428
            
            $
            197,815Accounts
                payable and customer deposits
            
            
            6,520,352
            
            
            4,857,229Deferred
                revenue
            
            
            225,078
            
            
            93,661Accrued
                expenses and other payable
            
            
            2,999,349
            
            
            3,011,267Advances
                from third parties
            
            
            314,712
            
            
            201,191Loans
                payable
            
            
            877,480
            
            
            875,432Shares
                to be issued
            
            
            18,398,680
            
            
            18,255,065Convertible
                promissory note - related party
            
            
            6,484,063
            
            
            6,484,063Due
                to related parties
            
            
            -
            
            
            115,241Total
                Current Liabilities
            
            
            36,024,142
            
            
            34,090,964**MINORITY
                INTEREST**
            
            
            201,431
            
            
            231,575**COMMITMENT
                AND CONTINGENCIES**
            
            
            --
            
            
            --**STOCKHOLDERS'
                DEFICIT**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, 238,265,927 issued
                and
                outstanding for March 31, 2008 and December 31, 2007
            
            
            17,881,827
            
            
            17,868,448Accumulated
                Comprehensive gain
            
            
            2,547,705
            
            
            1,437,073Accumulated
                deficit
            
            
            (31,595,820
            )
            
            (29,019,832
            )Total
                Stockholders' Deficit
            
            
            (11,166,288
            )
            
            (9,714,311
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            
            $
            25,059,285
            
            $
            24,608,228The
                accompanying notes are an integral part of the unaudited consolidated
                financial statements





Page
          3





**ELEPHANT
                TALK COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENT OF OPERATIONS (UNAUDITED)****FOR
                THE THREE MONTH PERIODS ENDED MARCH 31, 2008 AND
                2007****2008**
            
            **2007**REVENUES
            
            $
            11,757,280
            
            $
            11,170,615COST
                OF REVENUE(including
                depreciation and amortization of $558,900 and $463,529 for the three
                months ended March 31, 2008 and 2007)
            
            
            11,971,411
            
            
            11,189,839GROSS
                LOSS
            
            
            (214,131
            )
            
            (19,224
            )OPERATING
                EXPENSESSelling,
                general and administrative
            
            
            1,756,999
            
            
            689,398Compensation
                to officers, directors and employees
            
            
            161,487Depreciation
                and amortization
            
            
            115,556
            
            
            513,375Total
                Operating Expenses
            
            
            2,034,042
            
            
            1,202,773LOSS
                FROM OPERATIONS
            
            
            (2,248,173
            )
            
            (1,221,997
            )OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            15,753
            
            
            2,202Interest
                expense
            
            
            (370,577
            )
            
            (176,644
            )Other
                expense
            
            
            (1,208
            )
            
            (1,228
            )Total
                Other Expense, net
            
            
            (356,032
            )
            
            (175,670
            )LOSS
                BEFORE INCOME TAXES AND MINORITY INTEREST
            
            
            (2,604,205
            )
            
            (1,397,666
            )Provision
                for income taxes
            
            
            800
            
            
            800LOSS
                BEFORE MINORITY INTEREST
            
            
            (2,605,005
            )
            
            (1,398,466
            )Minority
                interest
            
            
            (29,017
            )
            
            (2,299
            )NET
                LOSS
            
            
            (2,575,988
            )
            
            (1,396,167
            )OTHER
                COMPREHENSIVE INCOMEForeign
                currency translation gain
            
            
            1,110,632
            
            
            21,133COMPREHENSIVE
                LOSS
            
            $
            (1,465,356
            )
            $
            (1,375,034
            )Net
                loss per common share and equivalents - basic and diluted
            
            $
            (0.006
            )
            $
            (0.006
            )Weighted
                average shares outstanding during the period - basic and diluted
            
            
            238,265,927
            
            
            212,265,928The
                accompanying notes are an integral part of the unaudited consolidated
                financial statements




Page
          4







**ELEPHANT
                TALK COMMUNICATIONS, INC. AND SUBSIDIARIES**CONSOLIDATED
                STATEMENTS OF CASH FLOWS(UNAUDITED)




**For
                the three months periods ended March 31,****2008**
            
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (2,575,988
            )
            $
            (1,396,167
            )**Adjustments
                to reconcile net loss to net cash used in operating activities:**Depreciation
                and amortization
            
            
            674,456
            
            
            513,375Amortization
                of Options expense
            
            
            13,379
            
            
            --Minority
                interest
            
            
            29,017
            
            
            2,299**Changes
                in operating assets and liabilities:**Decrease
                (increase) in accounts receivable
            
            
            (1,607,125
            )
            
            (165,134
            )(Increase)
                decrease in prepaid expenses, deposits and other assets
            
            
            21,464
            
            
            (472,964
            )Increase
                (decrease) in accounts payable, proceeds form related parties and
                customer
                deposits
            
            
            1,476,917
            
            
            2,315,154Increase
                (decrease) in deferred revenue
            
            
            --
            
            
            (3,481
            )Increase
                (decrease) in accrued expenses and other payable
            
            
            141,223
            
            
            (2,721,495
            )**Net
                cash used in operating activities**
            
            
            (1,826,658
            )
            
            (1,929,366
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchase
                of property and equipment
            
            
            (224,753
            )
            
            (84,920
            )Restricted
                cash
            
            
            (6,009
            )
            
            --Earnest
                deposit on acquisitions, net
            
            
            --
            
            
            5,832,231Cash
                received from acquisition of subsidiary
            
            
            --
            
            
            406,118**Net cash provided by (used in) investing activities**
            
            
            (230,763
            )
            
            6,153,429**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Cash
                overdraft
            
            
            6,141
            
            
            6,061Advances
                received from investorProceeds
                from bank loans
            
            
            1,398
            
            
            --Proceeds
                from note payable
            
            
            --
            
            
            (2,567,291
            )Proceeds
                from sale of shares
            
            
            --
            
            
            944,500Proceeds
                from related parties
            
            
            --
            
            
            (1,344,682
            )Payments
                to related parties
            
            
            --
            
            
            (763,211
            )**Net cash provided by (used in) financing activities**
            
            
            7,538
            
            
            (3,724,623
            )**EFFECT
                OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS**
            
            
            176,887
            
            
            (89,378
            )**NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            (1,872,996
            )
            
            410,062**CASH
                AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD**
            
            
            4,366,312
            
            
            332,001**CASH
                AND CASH EQUIVALENTS, END OF THE PERIOD**
            
            $
            2,493,316
            
            $
            742,063




Page
          5




**SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:**Cash
                paid during the period for interest
            
            $
            25,467
            
            $
            48,308Cash
                paid during the period for income taxes
            
            $
            --
            
            $
            800The
                accompanying notes are an integral part of the unaudited consolidated
                financial statements





Page
          6


**ELEPHANT
      TALK COMMUNICATIONS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      1** **Organization
      and Nature of Operations**





Elephant
      Talk Communications, Inc. (herein referred to as “Elephant Talk,” “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 the 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 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 is the business of Elephant Talk Limited.





On
      January 1, 2007, the Company completed its acquisition of Elephant Talk
      Communications Holding AG, formerly known as Benoit Telecom Holding AG (herein
      referred to as “Benoit Telecom”), an international telecom operator and
      multi-media distributor servicing primarily the business-to-business segment
      of
      the telecommunications and media market. Benoit Telecom offers a broad range
      of
      products and services based on the integration of telecom, VoIP, SMS, FAX,
      Conferencing and Streaming services all integrated with a Customer Relationship
      Management and Billing application.





**NOTE
      2** **Financial
      Condition and Going Concern**





The
      Company has an accumulated deficit of $31,595,820 including a net loss of
      $2,575,988 for the three months ended March 31, 2008. The Company has
      historically relied on a combination of debt and equity financings to fund
      its
      ongoing cash requirements. Management believes that its cash balance at March
      31, 2008 and cash generated from operations will provide sufficient funds
      through May 31, 2008.





In
      the light of the need to raise additional funds in the immediate short term,
      the
      Company has been focused on capital raising activities in addition to continuing
      to control operating costs, aggressively managing working capital and attempting
      to settle certain debt by the issuance of common shares. As of the date of
      this
      filing, the Company has received $1.15 million of equity financing (see Note
      22
      - Subsequent Events). In addition to the aforementioned financing activity,
      the Company intents to raise additional debt or equity financing if possible
      in
      order to fund cash requirements generated by future operations, capital
      expenditures and potential acquisitions.





Although
      the Company has previously been able to raise capital as needed, there can
      be no
      assurance that such capital would continue to be available at all or, if
      available, that the terms of such financing would not be dilutive to existing
      stockholders or otherwise on terms favorable to us. If the Company is unable
      to
      secure additional capital as circumstances require, it may not be able to
      continue its operations.





These
      financial statements assume that the Company will continue as a going concern.
      If the Company is unable to continue as a going concern, the Company may be
      unable to realize its assets and discharge its liabilities in the normal course
      of business. The financial statements do not include any adjustments relating
      to
      the recoverability and classification of recorded asset amounts or to the
      amounts and classification of liabilities that may be necessary should the
      Company be unable to continue as a going concern.





**NOTE
      3     Significant Accounting Policies**





**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-Q. Accordingly, they do not
      include all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements and related notes as
      included in the Company's 2007 Form 10-K. These consolidated financial
      statements should be read in conjunction with the audited consolidated financial
      statements of the Company for the year ended December 31, 2007 which were filed
      on April 15, 2008 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.





Page
          7


The
      results of operations for the three months ended March 31, 2008 are not
      necessarily indicative of the results to be expected for the entire year.
      Certain 2007 amounts have been reclassified to conform to current period
      presentation. These reclassifications have no effect on previously reported
      net
      income (loss).





**Principles
      of Consolidation**





The
      accompanying consolidated financial statements for the three months ended March
      31, 2008 and December 31, 2007 included the accounts of Elephant Talk
      Communications, Inc., its wholly-owned subsidiary Elephant Talk Europe Holding
      B.V., its wholly-owned subsidiary Elephant Talk Communication Holding AG, its
      wholly-owned subsidiary Elephant Talk Communications S.L.U., its wholly-owned
      subsidiary Cardnet Clearing Services B.V., its wholly-owned subsidiary Elephant
      Talk Communication Austria GmbH, its wholly-owned subsidiary Vocalis Austria
      GmbH, its wholly-owned subsidiary Elephant Talk Communications Italy S.R.L.,
      its
      wholly-owned subsidiary ET-Stream GmbH, its wholly-owned subsidiary Elephant
      Talk Communication Carrier Services GmbH, its wholly-owned subsidiary Elephant
      Talk Communication (Europe) GmbH, its wholly-owned subsidiary Elephant Talk
      Communication Schweiz GmbH, its majority owned (51%) subsidiary Elephant Talk
      Communications Premium Rate Services Netherlands B.V., its wholly-owned
      subsidiary Elephant Talk Communications France S.A.S., its majority owned (51%)
      subsidiary Elephant Talk Communications PRS U.K. Limited, its majority owned
      (99.76275%) subsidiary Elephant Talk Communications Luxembourg SA, its
      wholly-owned subsidiary Elephant Talk Global Holding B.V., its wholly-owned
      subsidiary Elephant Talk Business Services W.L.L., its wholly-owned subsidiary
      Elephant Talk Limited, its wholly-owned subsidiary Full Mark Technology Ltd.,
      its wholly-owned subsidiary Jinfuyi Technology Limited, its majority owned
      (51%)
      subsidiary Elephant Talk Middle East & Africa (Holding) W.L.L., its majority
      owned (51%) subsidiary Elephant Talk Middle East & Africa (Holding) Jordan
      L.L.C., its majority owned (50.49%) subsidiary Elephant Talk Middle East &
Africa Bahrain W.L.L and its majority owned (50.54%) subsidiary Elephant Talk
      Middle East & Africa FZ-LLC.





**Foreign
      Currency Translation**





The
      functional currency was Euros for its wholly-owned subsidiary Elephant Talk
      Europe Holding B.V. and subsidiaries and the Hong Kong Dollar for its
      wholly-owned subsidiary Elephant Talk Limited. The financial statements of
      the
      Company were translated to USD using period-end exchange rates as to assets
      and
      liabilities and average exchange rates as to revenues and expenses. Capital
      accounts were translated at their historical exchange rates when the capital
      transaction occurred. Net gains and losses resulting from translation of foreign
      currency financial statements are included in the statements of stockholder’s
      equity as other comprehensive income (loss). Foreign currency translation gains
      and losses are included in consolidated income (loss). The accumulated
      comprehensive gain as at March 31, 2008 and December 31, 2007 were $2,547,705
      and $1,437,073, respectively. The foreign currency translation gain for the
      three months periods ended March 31, 2008 and 2007 were $1,110,632 and $21,133,
      respectively **.**





**Use
      of Estimate**





The
      preparation of the accompanying financial statements conforms with accounting
      principles generally accepted in the United States of America and requires
      management to make certain estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures 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 those estimates and assumptions.





Page
          8


**Cash
      and Cash Equivalent**





For
      purposes of the cash flow statements, the Company considers all highly liquid
      investments with original maturities of three months or less at the time of
      purchase to be cash equivalents.





**Restricted
      Cash**





Restricted
      cash represents cash deposited as bank guarantee for interconnects.





**Accounts
      Receivables, net**





The
      Company’s customer base consists of a geographically dispersed customer base.
      The Company maintains reserves for potential credit losses on accounts
      receivable. Management reviews the composition of accounts receivable and
      analyzes historical bad debts, customer concentrations, customer credit
      worthiness, current economic trends and changes in customer payment patterns
      to
      evaluate the adequacy of these reserves. Reserves are recorded primarily on
      a
      specific identification basis. As of March 31, 2008 and December 31, 2007 the
      reserve for doubtful debts was $209,363 and $146,215, respectively.





**Revenue
      Recognition, Cost of Revenue and Deferred Revenue**





The
      Company's revenue recognition policies are in compliance with Staff accounting
      bulletin (SAB) 104. The Company derives revenues from activities as a fixed-line
      telecom provider with its own carrier network and its own switching technology.
      Revenue represents amounts earned for telecommunication services provided to
      customers (net of value added tax and inter-company revenue). Cost of revenues
      includes the cost of capacity associated with the revenue recognized within
      the
      corresponding time period, payments made to content providers and depreciation
      of network infrastructure and equipment





The
      Company recognizes revenue from prepaid calling cards as the services are
      provided. Payments received before all of the relevant criteria for revenue
      recognition are satisfied are recorded as deferred revenue. Cost of revenue
      includes the cost of capacity associated with the revenue recognized within
      the
      corresponding time period.





Deferred
      revenue represents amounts received from the customers against future sales
      of
      services since the Company recognizes revenue upon performing the services.
      Deferred revenue was $225,078 and $93,661 as of March 31, 2008 and December
      31,
      2007, respectively.





**Reporting
      Segments**





Statement
      of financial accounting standards No. 131, Disclosures about segments of an
      enterprise and related information (SFAS No. 131), which superseded statement
      of
      financial accounting standards No. 14, Financial reporting for segments of
      a
      business enterprise, establishes standards for the way that public enterprises
      report information about operating segments in annual financial statements
      and
      requires reporting of selected information about operating segments in interim
      financial statements regarding products and services, geographic areas and
      major
      customers. SFAS No. 131 defines operating segments as components of an
      enterprise about which separate financial information is available that is
      evaluated regularly by the chief operating decision maker in deciding how to
      allocate resources and in assessing performances. The Company allocates its
      resources and assesses the performance of its sales activities based upon
      geographic locations of its subsidiaries.


Page
          9





**Stock-based
      Compensation**





Effective
      January 1, 2006, the Company adopted Statement No.123R, Share-Based Payment
      (SFAS 123R), which requires companies to measure and recognize compensation
      expense for all stock-based payments at fair value. SFAS 123R is being applied
      on the modified prospective basis. Prior to the adoption of SFAS 123R, the
      Company accounted for its stock-based compensation plans under the recognition
      and measurement principles of Accounting Principles Board (APB) Opinion No.25,
      Accounting for Stock Issued to Employees, and related interpretations, and
      accordingly, recognized no compensation expense related to the stock-based
      plans. Under the modified prospective approach, SFAS 123R applies to new awards
      and to awards that were outstanding on January 1, 2006 that are subsequently
      modified, repurchased or cancelled.





**Recently
      Issued Accounting Pronouncements**





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which is an amendment of Accounting Research
      Bulletin (“ARB”) No. 51.  This statement clarifies that a
      noncontrolling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements.  This statement changes the way the consolidated
      income statement is presented, thus requiring consolidated net income to be
      reported at amounts that include the amounts attributable to both parent and
      the
      noncontrolling interest.  This statement is effective for the fiscal
      years, and interim periods within those fiscal years, beginning on or after
      December 15, 2008.  Based on current conditions, the Company does not
      expect the adoption of SFAS 160 to have a significant impact on its results
      of
      operations or financial position.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
      SFAS 141 that the acquisition method of accounting (which SFAS 141 called
      the purchase method) be used for all business combinations and for an acquirer
      to be identified for each business combination. This statement defines the
      acquirer as the entity that obtains control of one or more businesses in the
      business combination and establishes the acquisition date as the date that
      the
      acquirer achieves control. This statement requires an acquirer to recognize
      the
      assets acquired, the liabilities assumed, and any noncontrolling interest in
      the
      acquiree at the acquisition date, measured at their fair values as of that
      date,
      with limited exceptions specified in the statement. This statement applies
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company does not expect the adoption of SFAS 141 to
      have a significant impact on its results of operations or financial
      position.





In
      March, 2008, the FASB issued FASB Statement No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities”. The new standard is intended to
      improve financial reporting about derivative instruments and hedging activities
      by requiring enhanced disclosures to enable investors to better understand
      their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The new standard also improves transparency about the location
      and
      amounts of derivative instruments in an entity’s financial statements; how
      derivative instruments and related hedged items are accounted for under
      Statement 133; and how derivative instruments and related hedged items affect
      its financial position, financial performance, and cash flows. FASB Statement
      No. 161 achieves these improvements by requiring disclosure of the fair values
      of derivative instruments and their gains and losses in a tabular format. It
      also provides more information about an entity’s liquidity by requiring
      disclosure of derivative features that are credit risk-related. Finally, it
      requires cross-referencing within footnotes to enable financial statement users
      to locate important. Based on current conditions, the Company does not expect
      the adoption of SFAS 161 to have a significant impact on its results of
      operations or financial position.


Page
          10





**Note
                4**
            **Acquisitions**





On
      January 1, 2007, the Company, through its wholly-owned subsidiary Elephant
      Talk
      Europe Holding B.V., completed its acquisition of Elephant Talk Communication
      Holding AG (formerly known as “Benoit Telecom Holding AG” or “Benoit Telecom”),
      a European telecom company. Benoit Telecom is an international telecom operator
      and multi-media distributor servicing primarily the business-to-business segment
      of the telecommunications and media market. Benoit Telecom offers a broad range
      of products and services based on the integration of telecom, VoIP, SMS, FAX,
      Conferencing and Streaming services all integrated with a sophisticated Customer
      Relationship Management and Billing application and using its own fixed-line
      national interconnects and partner interconnects in numerous European countries.
      The Company purchased all of the 100,000 issued and outstanding shares of Benoit
      Telecom in exchange for a) cash payment of $6,643,080 and b) 40,000,000 shares
      of the Company’s common stock valued at $3,000,000. The common shares were
      valued at the actual date of issuance of such shares. The total consideration
      for the purchase of Benoit Telecom was valued at $9,643,080.





A
      summary
      of the assets acquired and liabilities assumed for Benoit Telecom are:





Cash
                & cash equivalents
            
            $
            409,174Accounts
                receivables
            
            
            4,485,259Property
                & equipment
            
            
            2,163,157Customer
                contracts & licenses
            
            
            11,504,192Other
                assets
            
            
            1,299,647Total
                Assets acquired
            
            
            19,861,430Accounts
                payable
            
            
            1,535,504Accrued
                expenses and other payables
            
            
            3,631,658Payable
                to third parties
            
            
            4,013,056Others
            
            
            125,160Liabilities
                assumed
            
            
            9,305378Net
                assets acquired
            
            
            10,556,052Consideration
                paid
            
            
            9,643,080Negative
                goodwill
            
            $
            (912,972
            )




The
      Company has reduced the recorded value of the non-current assets acquired,
      by
      negative goodwill of $912,972. The purchase price allocation for Benoit Telecom
      acquisition is based on the fair value of assets acquired and liabilities
      assumed. Immediately after the execution of the definitive agreement, the
      Company obtained effective control over Benoit Telecom. Accordingly, the
      operating results of Benoit Telecom have been consolidated with those of the
      Company starting January 1, 2007.





In
      accordance with paragraph 44 of SFAS 142, any excess of cost over net assets
      acquired shall be allocated as a pro rata reduction of the amounts that
      otherwise would have been assigned to all of the acquired assets except
      financial assets other than investments accounted for by the equity method,
      assets to be disposed of by sale, deferred tax assets, prepaid assets relating
      to pension or other postretirement benefit plans and any other current assets.





Page
          11


The
      value
      of the shares issued by the Company in connection with this acquisition exceeded
      the fair market value of the net assets acquired. Thus, negative goodwill
      generated was allocated to reduce the cost of the non-current assets acquired.





The
      Company included the financial results of Benoit Telecom in its consolidated
      2007 financial results from the date of the purchase, January 1, 2007 through
      December 31, 2007.





On
      January 1, 2007, the Company’s subsidiary Elephant Talk Europe Holding B.V.,
      entered into a Share Purchase Agreement with 3U Telecom AG, and acquired all
      of
      the issued and outstanding shares of 3U Telecom SARL France, for a consideration
      of 180,000 Euros (approximately $241,935). The Agreement entitled the Company
      to
      a 100% share of the economic benefits of the operations of 3U Telecom SARL.
      On
      June 1, 2007, all the terms and conditions of the Agreement were completed,
      and
      the Company acquired total assets $419,365 and assumed liabilities of $177,430
      upon completion of this acquisition.





The
      following un-audited pro forma consolidated financial information for the three
      months period ended March 31, 2007 as presented below, reflects the results
      of
      operations of the Company as of January 1, 2007, and after giving effect to
      the
      purchase accounting adjustments. These pro forma results have been prepared
      for
      information purposes only and do not purport to be indicative of what operating
      results would have been had the acquisitions actually taken place on January
      1,
      2007, and may not be indicative of future operating results.


**FOR
                THE PERIOD ENDED****March
                31, 2007**REVENUES,
                net
            
            $
            11,170,615LOSS
                FROM OPERATION
            
            $
            (1,221,996)NET
                LOSS
            
            $
            (1,396,167)Loss
                per share - basic and fully diluted
            
            $
            (0.01Weighted
                average shares outstanding during the period - basic and
                diluted
            
            
            238,265,927








**Note
                5**
            **Earnest
                deposit**





Earnest
      deposits to various telecom carriers during the course of its operations amount
      to $486,009 as at March 31, 2008 compared to $442,853 as at December 31, 2007.
      The deposits are refundable at the conclusion of the business relationship
      with
      the carriers.




**Note
                6**
            **Prepaid
                expenses and other current
                assets**





Prepaid
      expenses and other current assets recorded as $348,521 as at March 31, 2008
      and
      $372,331 as at December 31, 2007. The amount consists primarily of VAT prepaid
      and receivable from various European authorities.


Page
          12




**NOTE
      7****Property
      & Equipment**





Property
      and equipment as at March 31, 2008 and December 31, 2007 consist of:





**Mar
                31, 2008**
            
            **Dec
                31, 2007**(Unaudited)Furniture
                and fixtures
            
            
            168,140
            
            
            231,219Computer,
                communication and network equipment
            
            
            6,463,839
            
            
            6,083,545Automobiles
            
            
            147,740
            
            
            137,726Construction
                in progress
            
            
            908,206
            
            
            687,9627,687,926
            
            
            7,140,452Less:
                accumulated depreciation
            
            
            (4,075,743
            )
            
            (3,656,228
            )$
            3,612,183
            
            $
            3,484,224





Depreciation
      expense for the three months ended March 31, 2008 and 2007 was $223,292 and
      $210,435 respectively. $169,513 out of $223,292 depreciation expense directly
      attributable to revenue, network costs, facility cost of hosting network for
      the first three months of 2008 was re-classed to cost of sales compared to
      $197,994 out of $210,435 for the same period in 2007.





**NOTE
      8** **Intangible
      Assets - Customer Contracts, Licenses and Interconnects**





Customer
      contracts, licenses and interconnects include the acquisitions of large customer
      contracts, telecommunication licenses and integrated multi-country, centrally
      managed switch-based national interconnects in Europe, CRM Billing System and
      software. The telecommunications services acquired and customers obtained are
      primarily in the “service number” industry (also “Premium Rate Services”),
      low-cost telephony services such as Carrier Select and Carrier Pre Select” and
      Freephone (Toll-Free) number services. These services offered and customers
      served are done through ET Europe’s fixed-line switch-based telecom network,
      including the acquired interconnections and licenses with the National
      Incumbents and Regulators in Spain, Netherlands, Italy, Switzerland, Austria,
      France and Belgium.





**Mar
                31, 2008**
            
            **Dec
                31, 2007**(Unaudited)Customer
                Contracts, Licenses & Interconnect
            
            $
            16,014,787
            
            $
            15,219,998Accumulated
                amortization Customer Contracts & Licenses
            
            
            (4,399,830
            )
            
            (3,757,496
            )Customer
                Contracts & Licenses, net
            
            $
            11,614,957
            
            $
            11,462,504




Amortization
      expense for the three months ended March 31, 2008 and 2007 totaled $451,165
      and
      $302,904 respectively. $389,387 out of $451,165 amortization expense was
      directly attributable to revenue, network costs, facility cost of hosting
      network for the first three months of 2008 was re-classed to cost of sales compared
      to
      $265,535 out of $302,904 for the same period in 2007.





**NOTE
      9****Due
      From Related Parties**





The
      Company advanced funds to entities that officers and/or shareholders have an
      ownership interest in. The funds were advanced to these entities prior to 2007.
      The balances of funds advanced as of March 31, 2008 amounted to $17,746 in
      comparison with $18,514 as of December 31, 2007.





Page
          13





**Note
                10**
            **Overdraft**





The
      Company has executed a credit facility with a bank in Hong Kong under which
      the
      Company has borrowed funds from the bank under an overdraft account. As of
      March
      31, 2008 the overdraft balance included accrued interest amounted to $204,428
      in
      comparing to $197,815 as of December 31, 2007. The interest rate and default
      payment interest rate were charged at 2% and 6% per annum above the Lender’s
      Hong Kong Dollar Prime Rate quoted by the Lender from time to time.





**Note
                11**
            **Accrued
                Expenses**





As
      at
      March 31, 2008 and December 31, 2007, the accrued expenses comprised of the
      following :





**2008**
            
            **2007**(Unaudited)Accrued
                SG&A expenses
            
            $
            919,572
            
            $
            877,901Accrued
                cost of sales and network
            
            
            438,081
            
            
            521,398Accrued
                taxes
            
            
            (49,569
            )
            
            43,941Accrued
                interest payable
            
            
            1,664,775
            
            
            1,473,811Other
            
            
            26,491
            
            
            94,216Total
                accrued expenses
            
            $
            2,999,349
            
            $
            3,011,267




**Note
                12**
            **Payable
                To Third Parties**





As
      at
      March 31, 2008 and December 31, 2007 the Company had $314,712 and $201,191
      respectively as payable to third parties in relation to advances received at
      various times for its working capital requirements. The advances received were
      non-interest bearing, unsecured and due on demand.





**NOTE
      13** **Loans
      Payable**





Loans
      payable at March 31, 2008 and December 31, 2007 are summarized as follows:


Mar
                31, 2008
              (Unaudited)
            
            
            Dec
                31, 2007Installment
                loan payable due December 24, 2006, secured by personal guarantees
                of two
                shareholders, a former director, and a third party
            
            $
            319,227
            
            
            $
                318,481Installment
                loan payable, bank, monthly principal and interest payments of $2,881
                including interest at bank's prime rate plus 1.5% per annum, 8.75%
                at
                December 31, 2007, due December 24, 2011, secured by personal guarantees
                of three shareholders and a former director
            
            
            190,743
            
            
            190,299Installment
                loan payable, bank, monthly principal and interest payments of $1,740
                including interest at bank's prime rate plus 1.5% per annum, 8.75%
                at
                December 31, 2007, due June 28, 2009, secured by personal guarantees
                of
                three shareholders and a former director
            
            
            84,810
            
            
            84,612Term
                loan payable, bank, monthly payments of interest at bank's prime
                rate,
                7.0% at March 31, 2008
            
            
            282,700
            
            
            282,040Total
            
            $
            877,480
            
            
            $
                875,432





Page
          14


A
      subsidiary of the Company has executed a credit facility with a bank in Hong
      Kong since June 29, 2004 under which the subsidiary has borrowed funds from
      the
      bank under three installment loans and a term loan arrangement. The subsidiary
      of the Company is in default of making loan payments on all the loans and has
      recorded a accrued interest amounting to $338,278 as of March 31, 2008. As
      a
      result of the default, the entire loan balance outstanding at March 31, 2008
      is
      immediately due and payable to the bank. Furthermore, the subsidiary of the
      Company is obligated to pay a default interest rate at the rate of 4.25% per
      annum in addition to the prescribed interest rate of the installment loans
      and
      term loan. However, Management believes the bank will take no further action
      as
      there are no parent company guarantees or collateral and the loans are
      personally guaranteed by previous management. The Company has recorded $2,782
      and $25,285 in
      interest expense and default interest expense, respectively, on loans payable
      as
      of March 31, 2008 and $14,044 and $6,737 in interest expense as of March 31,
      2007.





**NOTE
      14** **Convertible
      Promissory Note**





On
      December 15, 2005, the Company executed a Convertible Promissory Note (the
      “Note”) in the principal amount of $3.5 million to Rising Water Capital (“RWC”),
      an investor and an entity controlled by the Chief Executive Officer, funds
      to be
      drawn in stages. The Note is convertible during the term, in whole or in part,
      into shares of common stock at the conversion price of three and one-half cents
      ($0.035) of principal amount per share of common stock. The Note did not have
      any beneficial conversion factor attached to it since the conversion rate was
      equal to the market price of the common stock of $0.035, on the closing of
      agreement. The Note is convertible to the extent that the Company has sufficient
      authorized common stock. In that regard, there are currently 5,586,580 shares
      out of the Company’s 250,000,000 authorized common shares available for issuance
      upon conversion. The Note has a term of thirty (30) months during which time
      interest at the rate of 10% per annum will accrue from the date advances are
      drawn by the Company. The Note is secured by shares owned or to be owned by
      (an
      agent of) the Company in its subsidiaries. The Note would have to be paid in
      full at the end of the thirty month term with a balloon payment of principal
      and
      accrued interest or converted into common stock. RWC has not converted the
      principal drawn by the Company as of March 31, 2008 in exchange for the common
      shares of the Company. As of December 31, 2007, the entire principal of $3.5
      million had been received. The Company recorded accrued interest of $822,798
      and
      $735,298 at ended March 31, 2008 and December 31, 2007 respectively. The
      interest expense for the three months period ended March 31, 2008 and 2007
      was
      $87,500 and $87,500, respectively. We are currently in discussions with RWC
      as
      to their possible conversion of the entire principal amount of the
      Note.




On
      May
      26, 2006, the Company executed a second Convertible Promissory Note (the
“2 nd Note”)
      in the principal sum of $3,000,000 with Rising Water Capital, an entity
      controlled by the Chief Executive Officer. The 2 nd Note has
      a term of thirty (30) months, during which time interest on the Principal Amount
      will accrue from the date of this 2 nd Note at
      an annual interest rate of 10%. The 2 nd Note
      will be paid in full at the end of the thirty month term with a balloon payment
      of principal and interest accrued. The 2 nd Note
      shall be convertible during the term, in whole or in part, into common shares
      at
      the conversion price of seven cents ($0.07) per share provided, however, that
      this 2 nd Note
      shall not be convertible during the term when the Company has insufficient
      authorized common shares to issue to the 2 nd Note
      holder when a demand for conversion is made. The Note did not have any
      beneficial conversion factor attached to it since the conversion rate was equal
      to the market price of the common stock of $0.07 on the closing of agreement.
      The 2 nd Note is
      secured by shares owned or to be owned by (an agent of) the Company in its
      subsidiaries. The Company has received the principal balance $2,984,063. Accrued
      interest recorded was $491,922 and $417,321 as of March 31, 2008 and December
      31, 2007 respectively. The interest expense for three months period ended March
      31, 2008 and 2007 was $74,602 and $64,436, respectively. We are currently in
      discussions with RWC as to their possible conversion of the entire principal
      amount of the 2 nd Note.




On
      March
      26, 2008, the Company received a letter of Rising Water Capital A.G. regarding
      the above mentioned Promissory Notes, notifying that they agreed to waive any
      and all defaults or continuing defaults for a period of time commencing on
      the
      date of the letter and continuing for 3 months hereafter.


Page
          15





**NOTE
      15** **Stockholders’
      Equity**





**(A)
      Common Stock**





The
      Company is presently authorized to issue 250,000,000 shares of no par value
      Common Stock. The Company currently has 238,265,927 Shares of Common Stock
      issued and outstanding as of March 31, 2008. The shares issued and outstanding
      as per the stock transfer agent’s records are 244,413,420. 6,147,493 shares were
      cancelled by the company prior to 2006, however, these shares were not returned
      to the stock transfer agent and never cancelled on records. These shares have
      been blocked for trading by the Stock Transfer Agent.





**Shares
      to be Issued**





Pursuant
      to a Stock Purchase Agreement dated June 30, 2005, the Company sold to an
      accredited investor Rising Water Capital (RWC) (an entity controlled by the
      Chief Executive Officer) 195,947,395 shares of restricted common stock for
      a
      total cash consideration of $7,837,896.  As of December 31, 2006, the
      Company has issued to RWC 100,000,000 of its restricted common shares valued
      at
      $4,000,000. The common shares were valued at $0.04 cents per share pursuant
      to
      the terms of the agreement. As a result, per that same date the Company still
      had to issue 95,947,395 common shares, valued at $3,837,896 to RWC. The Company
      has recorded such shares to be issued as a liability in the accompanying
      financials as of December 31, 2006.




On
      October 30, 2006, the Company agreed to issue to RWC an additional
      258,546,313 shares of common stock as price adjustment for failed acquisitions
      by the Company leading to lower market value than anticipated. The result of
      the
      price adjustment was to bring the ownership of RWC in the Company, as of October
      30, 2006, to 72.5% of total of shares of common stock (excluding the hereunder
      mentioned promissory notes).




Pursuant
      to a Stock Purchase Agreement, on December 28, 2006, the Company agreed to
      sell
      109,480,000 restricted common shares to five accredited investors for a total
      consideration of $4,105,500. The shares were valued at 50% discount over the
      last five days average market price on the date of execution of the agreement.
      On December 31, 2006 the Company had received a cash consideration of $944,500
      from one investor relating to 25,186,667 shares. In 2007 the Company received
      the remaining cash consideration from the other four investors of $3,161,000
      and
      interest for late payment amounting to $65,813. The aggregate number of shares
      to be issued to those four investors is 84,293,333 bringing the total number
      of
      shares to be issued to the five accredited investors to the agreed 109,480,000
      number of shares.




On
      June
      28, 2007, the Board approved to issue over a three years periods as of January
      1, 2007 a total of 72,036,800 shares of common stock to its officers and
      directors of which 51,761,600 shares of common stock valued at $4,399,736 was
      recognized at June 28, 2007 as compensation for employment commitments for
      a
      term of three years as of January 1, 2007. The remaining 20,275,200 valued
      at
      $1,723,392 will be amortized over a period of three years as of January 2007.
      Therefore, for compensation for services for the 3 months ended March 31, 2008
      1,689,600 shares of stock valued at $143,616 was expected. In 2007 a total
      of
      6,758,400 shares of stock, valued at $574,464 were awarded to Management. Since
      January 1, 2007 management has been awarded a total of 8,448,000 shares valued
      at $718,080. The shares were valued at the closing market price of eight and
      one-half cents ($0.085) on June 28, 2007, the date of grant. The Company has
      recorded such shares to be issued as a liability in the accompanying financial
      statements as of March 31, 2008. Subsequent to the grant of such shares, the
      Board of Directors and the above-referenced officers and directors determined
      that it is unlikely that the shares of common stock will be issued in the form
      and within the timeframe originally agreed upon, if at all. The Board of
      Directors and management of the Company are currently in discussions regarding
      modifications to the original compensation plan and expect to finalize a revised
      plan in 2008.




On
      August
      22, 2007, the Board approved the sale of approximately 91 million restricted
      common shares to 5 accredited investors for a total consideration of
      approximately $5.2million.




Page
          16


The
      shares were valued at a 30% discount over the closing price of August 22, 2007,
      resulting in an issuance price of $0.0595, before consultancy fee of 5%. The
      Company has received a total cash consideration of $5,414,128 in 2007 and paid
      fees for raising financing of $142,470. The Company has recorded 90,998,790
      shares to be issued as a liability in the accompanying financial statements
      as
      of March 31, 2008.




Per
      March
      31, 2008 the total number of shares to be issued amounted to 615,182,098
      (excluding Promissory Notes) valued at $18,398,680.




**Computation
                of Full Dilution - March 31, 2008**
            **Number
                of shares to be issued**Shared
                O/S at March 31, 2008 (issued)
            238,265,927Add'l
                shares to be issued - RWC - sale of shares
            95,947,395Add'l
                shares to be issued to bring the ownership to 72.5%
            258,546,313Shares
                sold to five investors - $4,105,500 @$0.0375 per share
            109,480,000Shares
                sold to 5 accredited investors $ 5,271,658 @ $ 0.0595
            90,998,790Signing
                Bonus Officers
            51,761,600Management
                Compensation until 03.31.2008
            8,448,000Add'l
                shares to be issued - RWC - $3.5 MM CPNote
            100,000,000RWC
                - $3 MM CPNote @ conv. price of $0.07 per share
            38,005,87103.31.
                2008 Total number of shares issued and to be issued
            991,453,806





In
      addition, on May 13, 2008, we received subscriptions in the aggregate amount
      of
      $1.15 million dollars for the sale of our Units, consisting of common stock
      and
      Warrants. As of today, we are unable to issue the shares of common stock
      underlying the Units due to our lack of authorized shares of common
      stock.





**(B)
      Class B Preferred Stock**





The
      Company’s Articles of Incorporation (Articles”) authorize the issuance of
      50,000,000 shares of no par value Class B Preferred Stock. No shares of
      Preferred Stock are currently issued and outstanding. Under the Company’s
      Articles, the Board of Directors has the power, without further action by the
      holders of the Common Stock, to designate the relative rights and preferences
      of
      the preferred stock, and issue the preferred stock in such one or more series
      as
      designated by the Board of Directors. The designation of rights and preferences
      could include preferences as to liquidation, redemption and conversion rights,
      voting rights, dividends or other preferences, any of which may be dilutive
      of
      the interest of the holders of the Common Stock or the Preferred Stock of any
      other series. The issuance of Preferred Stock may have the effect of delaying
      or
      preventing a change in control of the Company without further shareholder action
      and may adversely affect the rights and powers, including voting rights, of
      the
      holders of Common Stock. In certain circumstances, the issuance of preferred
      stock could depress the market price of the Common Stock.





During
      the quarter ended March 31, 2008, the Company did not issue any shares of
      Preferred Stock or warrants.





**NOTE
      16** **Basic
      and Diluted Net Loss Per Share**





Net
      loss per share is calculated in accordance with the Statement of financial
      accounting standards No.128 (SFAS No.128), “Earnings per share”. Basic net loss
      per share is based upon the weighted average number of common shares
      outstanding. Dilution is computed by applying the treasury stock method. Under
      this method, options and warrants are assumed to be exercised at the beginning
      of the period (or at the time of issuance, if later), and as if funds obtained
      thereby were used to purchase common stock at the average market price during
      the period. 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.





Page
          17


**NOTE
      17** **Employee
      Benefit Plan and Non-Qualified Stock Option and Compensation Plan**





**The
      2000 Employee Benefit Plan**





Under
      this Plan, out of an available 4,000,000 shares of common stock and 4,000,000
      of
      stock options, 3,700,000 shares of common stock have been issued to date.
      Therefore 300,000 shares of common stock and 4,000,000 stock options remain
      available for grant at March 31, 2008.





**2006
      Non-Qualified Stock and Option Compensation Plan**




The
      Board
      of Directors approved on September 26, 2007 a proposal to issue under the 2006
      Non-Qualified Stock and Option Plan non-qualified stock options to staff
      and key consultants. In total there were 7,483,333 options granted .
      As at March 31, 2008, there are 7,120,833 options outstanding.





The
      options were granted with an exercise price of $0.09, the share closing price
      as
      of September 26, 2007. The options will vest on December 31, 2009 or so much
      earlier as there will be a change of control of the Company. The options are
      exercisable though December 31, 2011.





The
      fair market value of the options of $460,280 was calculated using the
      Black-Sholes options model. The assumptions used for the Black Scholes
      calculation are: volatility of 102%, term of 4 years and a risk free Rate of
      4.5%.





**2008
      Long-Term Incentive Plan**





The
      2008 Long Term Incentive Plan was adopted on January 15, 2008, and approved
      by
      our stockholders on the same date at our annual meeting. This incentive plan
      authorizes awards of up to 5,000,000 share of common stock, in the form of incentive
      and non-qualified stock options, stock appreciation rights, performance units,
      restricted stock awards and performance bonuses .
      The amount of common stock underlying the awards to be granted will remain
      the
      same after a planned 25 to one reverse stock-split. As of March 31, 2008 there
      have been no awards granted under this Plan.





Common
      stock purchase options and warrants consisted of the following as of March
      31,
      2008:





#
                shares
            
            Exercise
                Price
            
            Aggregate
                Intrinsic Value**Options:**Outstanding
                as of December 31, 2007
            
            7,120,833
            
            0.09
            
            -Granted
            
            
            -
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -
            
            
            -Expired
            
            
            -
            
            
            -
            
            
            -Outstanding
                as of March 31, 2008
            
            
            7,120,833
            
            
            0.09
            
            $
            -





Following
      is a summary of the status of options outstanding at March 31,
      2008:





**Range
                of Exercise Price**
            
            **Total**
              **Options
                Outstanding**
            
            **Weighted
                Average Remaining Life**
              **(Years)**
            
            **Weighted
                Average Exercise Price**
            
            **Options
                Exercisable**
            
            **Weighted
                Average Exercise Price**$0.09
            
            7,120,833
            
            3.75
                years
            
            $0.09
            
            -
            
            -





Page
          18


**NOTE
      18** **Commitments**





As
      of March 31, 2008 commitments of the Company relating to leases, co-location
      and
      office rents,





December
                31, 2008
            
            $
            2,697,699December
                31, 2009
            
            
            1,764,049December
                31, 2010
            
            
            1,713,252December
                31, 2011
            
            
            1,629,059December
                31, 2012
            
            
            1,580,000**Total**
            
            $
            9,384,059





**Note
      19********Minority
      interest in subsidiary**





The
      Company had minority interest in several of its subsidiaries. The balance of
      the
      minority interest as of March 31, 2008 and December 31, 2007 was as
      follows:





**Minority
                Interest Balance at****Subsidiary**
            **Minority
                Interest %**
            **March
                31, 2008**
            **December
                31, 2007**ETC
                PRS UK
            49%
            $
                10,807
            $
                10,807ETC
                PRS Netherlands
            49%
            144,344
            144,344ET
                ME&A Holding WLL
            49%
            10,984
            39,254ET
                Bahrain WLL
            1%
            83
            1,955ET
                ME&A FZ LLC
            49.46%
            35,214
            35,214Total
            
            $
                201,431
            $
                231,575





**NOTE
      20** **Litigation**





**a)
      Beijing Chinawind**


The
      judgment of the Beijing Haiding Civil Court was recently received. On October
      the 18 th the
      verdict was given in the two cases:




·
            Beijing
                China Wind Internet Information Technology Ltd. (CW) as Plaintiff
                against
                Guangdong Elephant Talk Network Information Ltd.( GDET), Agent of
                the
                Company, as Defendant.





The
      Equity Transfer Agreement signed by CW and GDET on January 4, 2006 is confirmed
      to be effective. All requests from CW are rejected.





·
            Guangdong
                Elephant Talk Network Information Ltd. (GDET), Agent of the Company,
                as
                Plaintiff against Beijing China Wind Internet Information technology
                Ltd.
                (CW) Defendant.





The
      Court
      confirmed the opinion of GDET that the resolutions of the shareholders meeting
      of China Wind held on January 27, 2007 are invalid, as the meeting was not
      conducted in a proper way.





An
      appeal
      has not been made in either case.





**(b)
      Rescission of the Purchase Agreement of May 24, 2004 of New Times Navigation
      Limited.**





As
      reported in the 10 KSB filing of April 1, 2005, regarding the fiscal year 2004,
      the Company and other parties to the Purchase Agreement mutually agreed to
      terminate such agreement. The Company returned the received shares of New Times
      Navigation Limited to the concerned shareholders and received back 2,252,500
      common shares out of the 5,100,000 issued by the Company for the purchase.
      In
      addition the Company issued 37 unsecured convertible promissory notes for a
      total amount of US$3,600,000. At the request of the Company 21 were returned
      with a total value of US$2,040,000.





Page
          19


The
      Company is presently a Plaintiff seeking relief from the High Court of the
      Hong
      Kong Special Administrative Region against the holders of the not returned
      shares to return a total of 2,847,500 common shares (valued at $381,565) and
      to
      have them returning the remaining 16 unsecured convertible promissory notes
      representing a total amount of US$1,560,000.





**NOTE
      21** **Segment
      Information**





**Three
      months ended March 31, 2008**





**EUROPE****Netherlands**
            
            **Spain**
            
            **Switzerland**
            
            **Others**
            
            **Total**
            
            **Far
                East HK/PRC**
            
            **Middle
                East**
            
            **USA**
            
            **TOTAL**Reuenue
                from unaffiliated customers
            
            $
            8,715,094
            
            $
            694,283
            
            $
            2,219,107
            
            $
            125,120
            
            $
            11,753,603
            
            $
            3,677
            
            $
            -
            
            $
            -
            
            $
            11,757,280Operating
                income (loss)
            
            $
            (745,052
            )
            $
            146,250
            
            $
            (462,067
            )
            $
            (212,681
            )
            $
            (1,273,549
            )
            $
            (241,067
            )
            $
            (61,691
            )
            $
            (672,666
            )
            $
            (2,248,973
            )Net
                Income (Loss)
            
            $
            (730,508
            )
            $
            146,250
            
            $
            (462,067
            )
            $
            (212,681
            )
            $
            (1,259,005
            )
            $
            (420,525
            )
            $
            (61,691
            )
            $
            (834,767
            )
            $
            (2,575,988
            )Identifiable
                assets
            
            $
            8,551,301
            
            $
            1,952,685
            
            $
            12,428,849
            
            $
            1,308,209
            
            $
            24,241,044
            
            $
            203,994
            
            $
            608,359
            
            $
            5,888
            
            $
            25,059,285Depreciation
                and amortization
            
            $
            (161,504
            )
            $
            (58,811
            )
            $
            (437,735
            )
            $
            (6,708
            )
            $
            (664,758
            )
            $
            (9,698
            )
            $
            -
            
            $
            -
            
            $
            (674,456
            )Capital
                expenditure
            
            $
            -
            
            $
            -
            
            $
            197,319
            
            $
            -
            
            $
            197,319
            
            $
            27,434
            
            $
            -
            
            $
            -
            
            $
            224,753








**Three
      months ended March 31, 2007**





**EUROPE****Netherlands**
            
            **Spain**
            
            **Switzerland**
            
            **Others**
            
            **Total**
            
            **Far
                East HK/PRC**
            
            **Middle
                East**
            
            **USA**
            
            **TOTAL**Reuenue
                from unaffiliated customers
            
            $
            7,812,884
            
            $
            1,036,329
            
            $
            2,220,274
            
            $
            73,049
            
            $
            11,142,536
            
            $
            28,079
            
            $
            -
            
            $
            -
            
            $
            11,170,615Operating
                income (loss)
            
            $
            (246,027
            )
            $
            164,130
            
            $
            (542,228
            )
            $
            (104,423
            )
            $
            (728,547
            )
            $
            (240,689
            )
            $
            -
            
            $
            (252,761
            )
            $
            (1,221,997
            )Net
                Income (Loss)
            
            $
            (245,053
            )
            $
            164,130
            
            $
            (542,288
            )
            $
            (104,423
            )
            $
            (727,573
            )
            $
            (270,625
            )
            $
            -
            
            $
            (397,969
            )
            $
            (1,396,167
            )Identifiable
                assets
            
            $
            8,606,570
            
            $
            1,615,195
            
            $
            9,019,744
            
            $
            863,744
            
            $
            20,105,254
            
            $
            348,420
            
            $
            -
            
            $
            126,671
            
            $
            20,580,345Depreciation
                and amortization
            
            $
            (37,774
            )
            $
            (27,688
            )
            $
            (436,535
            )
            $
            -
            
            $
            (501,997
            )
            $
            (11,278
            )
            $
            -
            
            $
            (100
            )
            $
            (513,375
            )Capital
                expenditure
            
            $
            -
            
            $
            -
            
            $
            84,920
            
            $
            -
            
            $
            84,920
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            84,920


Page
            20





**Note
      22********Subsequent
      events**





Through
      an intermediate Placement Agent our
      management has secured additional funding for the Company. On
      May
      13, 2008, the Company received subscriptions for its units totaling $ 1,150,000
      from two investors. The Company has not yet issued the units for which the
      subscription was made.


Page
          21


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





*Forward-Looking
      Statements*




Any
      forward looking statements made herein are based on current expectations of
      the
      Company, involve a number of risks and uncertainties and should not be
      considered as guarantees of future performance. The factors that could cause
      actual results to differ materially include: interruptions or cancellation
      of
      existing contracts, inability to integrate acquisitions, impact of competitive
      products and pricing, product demand and market acceptance risks, the presence
      of competitors with greater financial resources than the Company, product
      development and commercialization risks, and changing economic conditions in
      developing countries and an inability to arrange additional debt or equity
      financing. More information about factors that potentially could affect the
      Company's financial results is included in the Company's filings with the
      Securities and Exchange Commission, including its Annual Report on Form 10-K
      for
      the year ended December 31, 2007.




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our financial statements and
      notes
      thereto and the other financial information included elsewhere in this
      document.





**Overview**





Elephant
      Talk Communications Inc. (“ETCI”), until recently was engaged in the long
      distance telephone business in China and the Special Administrative Region
      Hong
      Kong.





In
      2006
      the Company adopted the strategy to position itself as an international telecom
      operator and enabler to the multi-media industry by facilitating to the
      distribution of all forms of content and telecommunications services to various
      global customers. Through intelligent design and organizational structure the
      Company pursues this strategy by building a worldwide network based on both
      clear and IP bandwidth that is managed centrally by its proprietary
      IN-CRM-Billing platform.





In
      January 2007, through the acquisition of various assets in Europe, the Company
      established a foothold in the European Telecommunications Market, particularly
      in the market of Service Numbers like Toll Free and Premium Rate Services and
      to
      a smaller extent Carrier (Pre) Select Services. Furthermore, through the human
      and IT resources thereby acquired, the company obtained expertise of telecom
      and
      multi-media systems, telecom regulations and European markets.





The
      Company currently operates a switch-based telecom network with national licenses
      and direct fixed line interconnects with the Incumbents/National Telecom
      Operators in eight (8) European countries, one (1) in the Middle East (Bahrain),
      licenses in Hong Kong and the U.S.A. and partnerships with telecom operators
      in
      Scandinavia, Poland, Germany, Greece and Hong Kong. Codec and media streaming
      servers are currently located in six centers geographically spread around the
      world. Together with the centrally operated and managed IN-CRM-Billing platform,
      the Company thus offers geographical, premium rate, toll free, personal, nomadic
      and VoIP numbers. Services are primarily provided to the business market and
      include traditional telecom services, VOIP, media streaming and distribution
      including the necessary billing and collection. Through its European and Chinese
      development centers, ETCI develops in-house telecom and media related systems
      and software.





In
      the
      third quarter of 2007 the Company finalized testing and commissioned
      additional national interconnects in the United Kingdom (British Telecom) and
      Bahrain (Batelco), further enlarging the Company’s footprint in fixed line
      infrastructure. In the Caribbean and the Middle East, the Company installed
      its
      first Wifi test sites, aimed at creating own broadband mobile access networks
      in
      emerging markets with relatively poor (or relatively expensive)
      infrastructures.





Page
          22


In
      Europe, a step was made towards building a mobile enabled infrastructure on
      top
      of the Company’s fixed line infrastructure by committing capital expenditure and
      implementation resources towards becoming a Mobile Virtual Network Enabler
      (MVNE).





At
      the
      same time the Company is pursuing the above described business opportunities,
      attention is paid by its Management to improve the internal structuring of
      the
      organization and to realize a fully integrated organization. This will have
      to
      be achieved not only on a corporate level but also in the financial, technical
      and operational departments of the Company in order to implement new services,
      connectivity in new countries and extra capacity.





**Comparison
      of the three months period ended March 31, 2008 and 2007**





**Result
      of Operations**





Our
      results of operations for the three months ended March 31, 2008 consisted of
      the
      operations of Elephant Talk Communications, Inc., its wholly-owned subsidiary
      Elephant Talk Limited and its subsidiaries, its wholly-owned subsidiary Elephant
      Talk Europe Holding BV and its subsidiaries, and its wholly-owned subsidiary
      Elephant Talk Global Holding BV and its subsidiaries.





The
      results of operations for the three months ended March 31, 2007 consisted the
      operations of Elephant Talk Communications, Inc., its wholly-owned subsidiary
      Elephant Talk Limited and its subsidiaries, and its wholly-owned subsidiary
      Elephant Talk Europe Holding BV and its subsidiaries





**Revenues
      and Cost of Revenues:**





**Revenues** recorded
      by the Company were $11,757,280 and $11,170,615 for the three months ended
      March
      31, 2008 and 2007, respectively. Revenues for the three months ended March
      31,
      2008 consisted of telecommunications services such as premium rate, carrier
      select, carrier pre-select, freephone (toll free), voice and data transmission
      like IDD and pre-paid calling cards services provided to a wide range of
      customers. The revenue from IDD and pre-paid calling card services continue
      to
      decline for the three months mainly due to significant pricing pressure and
      reduction in demand on its products. The long-distance and calling card revenue
      decreases were impacted by continued weakness in the telecommunications industry
      and ongoing economic and competitive pressures from other telecommunications
      services providers in Hong Kong and around the world. During the same period
      in
      2007, the main contribution of the Company’s revenues primary came from its
      premium rate services.




**Cost
      of revenue** was
      $11,971,411 and $11,122,554 for the three months period ended March 31, 2008
      and
      2007, respectively. Cost of revenue included depreciation of assets and
      amortization of intangibles that are directly attributable to generating
      revenues, network costs, facility cost of hosting network and equipment and
      cost
      in providing resale arrangements with long distance service providers, cost
      of
      leasing transmission facilities, international gateway switches for voice,
      data
      transmission services. Depreciation and amortization expenses re-classed to
      cost
      of revenue amounted to $558,900 and $395,244 for the period ended March 31,
      2008
      and 2007 respectively. The increase is a result of the larger assets base in
      the
      first quarter of 2008. Gross margin for the three months period ended March
      31,
      2008 was negative 0.018% of the revenues compared to 0.43% of the revenues
      for
      the same period in 2007. The decline on gross margin was mainly caused by the
      increase in the re-classification of depreciation and amortization
      expenses.





**Operating
      expenses** :
      Selling, general and administrative (SG&A) expenses and compensation to
      officers, directors and employees expense were $1,757,799 and $161,487
      respectively for the three months period ended March 31, 2008 compared to
      $1,152,926 and $0 for the same period in 2007. SG&A expenses increased by
      $604,873 or 52.5% in 2008 compared to 2007 was the result of:


1.
            translation
                effect due to the increase of the Euro versus the US
                Dollar.


2.
            the
                hiring of extra personnel to anticipate future
                growth.


3.
            the
                extra cost for management
                compensation.




Page
          23


**Other
      Income and Expenses:** Interest
      Income was $15,753 and $2,202 for the three months ended March 31, 2008 and
      2007
      respectively. Interest expense was $370,577 and $176,644 for the three months
      ended March 31, 2008 and 2007 respectively. The interest expense increase was
      due to continuous increase of the default payments and interest charges on
      promissory notes.




**Minority
      Interest:** The
      Company’s majority owned subsidiaries Elephant Talk Communications PRS U.K.
      Limited, Elephant Talk Communications Premium Rate Services Netherlands B.V.,
      Elephant Talk Communications Luxembourg SA, Elephant Talk Middle East &
Africa (Holding) W.L.L., Elephant Talk Middle East & Africa (Holding) Jordan
      L.L.C., Elephant Talk Middle East & Africa Bahrain W.L.L., Elephant Talk
      Middle East & Africa FZ-LLC incurred loss of $29,017 attributed to minority
      shareholders’ interest in the three months ended March 31, 2008. During the same
      period in 2007, the Company’s incurred losses of $2,299 attributed to minority
      shareholders’ interest.




**Comprehensive
      Income (Loss):** The
      Company records foreign currency translation gains and losses as comprehensive
      income or loss. The Company recorded a gain of $1,110,632 and $21,133 for the
      three months ended March 31, 2008 and 2007 respectively. The increase is
      contributed to the translation gain due to the sharp increase of exchange value
      from Euro to USD.




**Liquidity
      and Capital Resources:** The
      Company’s principle capital requirements during the year of 2008 are to fund the
      internal operations and acquire profitable growth-oriented telecommunications
      and related business in Europe, Asia and North America. The Company has raised
      the funds by selling shares of its common stock to selected investors and
      bringing in business partners whose contributions include cash. In view of
      low
      borrowing interest rates, the Company continues to actively pursue additional
      credit facilities with accredited investors and financial institutions in
      Europe, Middle East and USA as a means to obtain new funding.




As
      shown
      in the accompanying financial statements, the Company incurred a net loss of
      $2,575,988 for the three months ended March 31, 2008 as compared to a net loss
      of $1,397,666 for the same period in 2007. Additionally, the Company current
      liabilities exceeded its current assets by $23,225,680 as of March 31, 2008.





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 March 31, 2008 towards (i) obtaining additional
      equity financing (ii) controlling of salaries and general and administrative
      expenses (iii) management of accounts payable (iv) settlement of debt by
      issuance of common shares and (v) strategically acquire profitable companies
      that bring synergies to the Company’s products and services.





The
      Company has historically relied on a combination of debt and equity financings
      to fund its ongoing cash requirements. Management believes that its cash balance
      at March 31, 2008 and cash generated form operations will provide sufficient
      funds through May 31, 2008.





In
      the light of the need to raise additional funds in the immediate short term,
      the
      Company has been focused on capital raising activities in addition to continuing
      to control operating costs, aggressively managing working capital and attempting
      to settle certain debt by the issuance of common shares. As of the date of
      this
      filing, the Company has received $1.15 million of equity financing in order
      to fund cash requirements generated by future operations, capital expenditures
      and potential acquisitions.





Although
      the Company has previously been able to raise capital as needed, there can
      be no
      assurance that such capital would continue to be available at all or, if
      available, that the terms of such financing would not be dilutive to existing
      stockholders or otherwise on terms favorable to us.





If
      the Company is unable to secure additional capital as circumstances require,
      it
      may not be able to continue its operations.





Page
          24


Currently
      the Company has 250,000,000 shares of common stock authorized and 238,265,927
      shares of common stock outstanding. Accordingly our lack of available common
      stock limits our ability to engage in equity financing. However, on January
      14,
      2008, our shareholders approved a 25-1 reverse stock split. Upon our filing
      of
      our amended articles of incorporation to enact this reverse stock split, we
      will
      have sufficient authorized but unissued shares of common stock for additional
      financing, provided such financing is available on terms acceptable to the
      Company.




**Operating
      Activities:** Net cash
      used in operating activities for the three months ended March 31, 2008 was
      $1,826,659. The increase is primarily due to the increase in loss of
      $1,179,821in 2008, increase in accounts receivable of $1,607,125, offset by
      a
      decrease in prepaid expenses of $21,464, increase in accounts payable and
      customer deposits of $1,476,917, and increase in accrued expenses and other
      payable of $55,640.




**Investment
      Activities:** Net cash
      used in investment activities for the three months ended March 31, 2008 was
      $230,763. Cash used to purchase plant and equipment was $224,753 and restricted
      cash deposit for inter-connect was $6,009.




**Financing
      Activities:** Net cash
      received by financing activities for the three months ended March 31, 2008
      was
      $7,538. $6,141 came from cash overdraft and $1,398 from bank loan.





As
      a result of the above activities, the Company recorded a cash and cash
      equivalent balance of $2,493,315 as of March 31, 2008, a net decrease in cash
      and cash equivalent of $1,872,997 for the three months ended March 31, 2008.
      The
      ability of the Company to continue as a going concern is still dependent on
      its
      success in obtaining additional financing.




**Application
      of Critical Accounting Policies and Estimates**





Revenue
      Recognition, Cost of Revenue and Deferred Revenue:





The
      Company's revenue recognition policies are in compliance with Staff accounting
      bulletin (SAB) 104. The Company derives revenues from activities as a fixed-line
      provider with its own carrier network and its own switching technology and
      from
      transport, internet and VPN solutions. The Company also derives revenues from
      sale of minutes of calling time via sale of its prepaid calling cards. Costs
      of
      revenues of the services supplied to attain the sales comprise the total
      acquisition and production costs and cost of sales for the products and services
      sold during the reporting period. Cost of revenues includes the cost of capacity
      associated with the revenue recognized within the corresponding time period.
      Revenue is deferred upon activation of the calling cards and is recognized
      as
      the prepaid calling card balances are reduced based upon minute usage,
      imposition of administrative fees, or no further obligations exist with respect
      to a calling card. Deferred revenues represent amounts received from its
      customers for the unused minutes of the prepaid calling cards sold to its
      customers since the Company recognizes revenues only on the usage of the
      minutes.





Stock-based
      Compensation:





The
      Company follows the prescribed accounting and reporting standards for all
      stock-based compensation plans, including employee stock options, restricted
      stock, employee stock purchase plans and stock appreciation rights in accordance
      with SFAS No. 148 “Accounting for Stock-Based Compensation.” SFAS No. 148
      provides alternative methods of transition for a voluntary change to the fair
      value based method of accounting for stock-based employee compensation. In
      addition, this Statement requires prominent disclosures in both annual and
      interim financial statements about the method of accounting for stock-based
      employee compensation and the effect of the method used, on reported
      results.





Issuance
      of Shares for Services:





Page
          25


The
      Company accounts for the issuance of equity instruments to acquire goods and
      services based on the fair value of the goods and services or the fair value
      of
      the equity instrument at the time of issuance, whichever is more reliably
      measurable.





**Impact
      of Accounting Pronouncements**





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which is an amendment of Accounting Research
      Bulletin (“ARB”) No. 51.  This statement clarifies that a
      noncontrolling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements.  This statement changes the way the consolidated
      income statement is presented, thus requiring consolidated net income to be
      reported at amounts that include the amounts attributable to both parent and
      the
      noncontrolling interest.  This statement is effective for the fiscal
      years, and interim periods within those fiscal years, beginning on or after
      December 15, 2008.  Based on current conditions, the Company does not
      expect the adoption of SFAS 160 to have a significant impact on its results
      of
      operations or financial position.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
      SFAS 141 that the acquisition method of accounting (which SFAS 141 called
      the purchase method) be used for all business combinations and for an acquirer
      to be identified for each business combination. This statement defines the
      acquirer as the entity that obtains control of one or more businesses in the
      business combination and establishes the acquisition date as the date that
      the
      acquirer achieves control. This statement requires an acquirer to recognize
      the
      assets acquired, the liabilities assumed, and any noncontrolling interest in
      the
      acquiree at the acquisition date, measured at their fair values as of that
      date,
      with limited exceptions specified in the statement. This statement applies
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company does not expect the adoption of SFAS 141 to
      have a significant impact on its results of operations or financial
      position.





In
      March, 2008, the FASB issued FASB Statement No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities”. The new standard is intended to
      improve financial reporting about derivative instruments and hedging activities
      by requiring enhanced disclosures to enable investors to better understand
      their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The new standard also improves transparency about the location
      and
      amounts of derivative instruments in an entity’s financial statements; how
      derivative instruments and related hedged items are accounted for under
      Statement 133; and how derivative instruments and related hedged items affect
      its financial position, financial performance, and cash flows. FASB Statement
      No. 161 achieves these improvements by requiring disclosure of the fair values
      of derivative instruments and their gains and losses in a tabular format. It
      also provides more information about an entity’s liquidity by requiring
      disclosure of derivative features that are credit risk-related. Finally, it
      requires cross-referencing within footnotes to enable financial statement users
      to locate important. Based on current conditions, the Company does not expect
      the adoption of SFAS 161 to have a significant impact on its results of
      operations or financial position.





**Item
      3. Quantitative and Qualitative Disclosure About Market
      Risks**





Not
      applicable. ****





**Item
      4T. Controls and Procedures**





*Evaluation
      of Disclosure Controls and Procedures*





As
      of the
      end of the period covered by this Quarterly Report, the Company’s management,
      with the participation of the Company’s Chief Executive Officer and Chief
      Financial Officer (“the Certifying Officers”), conducted evaluations of the
      Company’s disclosure controls and procedures. As defined under Sections 13a -
      15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as amended (the
      “Exchange Act”), the term “disclosure controls and procedures” means controls
      and other procedures of an issuer that are designed to ensure that information
      required to be disclosed by the issuer in the reports that it files or submits
      under the Exchange Act is recorded, processed, summarized and reported, within
      the time periods specified in the 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 an issuer in
      the
      reports that it files or submits under the Exchange Act is accumulated and
      communicated to the issuer’s management, included the Certifying Officers, to
      allow timely decisions regarding required disclosures. Based on this evaluation,
      our management feels our controls and procedures are
      not
      effective as of the end of the period covered by this report. Our management
      was
      unable to evaluate our controls and procedures based upon the framework in
      Internal Control—Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO) due to the fact that the Company
      does not have the personnel resources nor technological infrastructure in place
      to perform this evaluation. Management has identified this lack of personnel
      and
      technological resources as a material weakness in the Company’s internal control
      over financial reporting. While management believes the financial reports
      included in this Quarterly Report fairly represent the financial condition
      of the Company, due to the Company’s inability to evaluate its internal controls
      over financial reporting based on the framework developed by COSO, there is
      no
      guarantee that the financial reports accurately represent our financial
      condition.




Page
          26


The
      Company has begun to take appropriate steps to remediate the material weakness
      described above. The Company has hired a Sarbanes-Oxley consultant and intends
      to purchase software designed to strengthen internal controls over financial
      reporting. The Company expects to initiate these remediation efforts in the
      second half of 2008. The effectiveness of our internal controls following our
      remediation efforts will not be known until we test those controls in connection
      with management’s tests of internal control over financial reporting that will
      be performed after the close of our third fiscal quarter of 2008, ending
      September 30.




This
      Report does not include an attestation report of the Company’s registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this Report.





*Changes
      in Internal Control over Financial Reporting*





Further,
      there were no changes in the Company’s internal control over financial reporting
      during the Company’s first fiscal quarter that materially affected, or are
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.




Page
          27


**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings**





**a)
      Beijing Chinawind**


As
      disclosed in prior filings, the judgment of the Beijing Haiding Civil Court
      was
      recently received. On October 18, 2007  the
      verdict was given in the two cases:




·
            Beijing
                China Wind Internet Information Technology Ltd. (CW) as Plaintiff
                against
                Guangdong Elephant Talk Network Information Ltd.( GDET), Agent of
                the
                Company, as Defendant.





The
      Equity Transfer Agreement signed by CW and GDET on January 4, 2006 is confirmed
      to be effective. All requests from CW are rejected.





·
            Guangdong
                Elephant Talk Network Information Ltd. (GDET), Agent of the Company,
                as
                Plaintiff against Beijing China Wind Internet Information technology
                Ltd.
                (CW) Defendant.





The
      Court
      confirmed the opinion of GDET that the resolutions of the shareholders meeting
      of China Wind held on January 27, 2007 are invalid, as the meeting was not
      conducted in a proper way.





An
      appeal
      has not been made in either case.





**(b)
      Rescission of the Purchase Agreement of May 24, 2004 of New Times Navigation
      Limited.**





As
      reported in the 10 KSB filing of April 1, 2005, regarding the fiscal year 2004,
      the Company and other parties to the Purchase Agreement mutually agreed to
      terminate such agreement. The Company returned the received shares of New Times
      Navigation Limited to the concerned shareholders and received back 2,252,500
      common shares out of the 5,100,000 issued by the Company for the purchase.
      In
      addition the Company issued 37 unsecured convertible promissory notes for a
      total amount of US$3,600,000. At the request of the Company 21 were returned
      with a total value of US$2,040,000.





The
      Company is presently as Plaintiff seeking relieve from the High Court of the
      Hong Kong Special Administrative Region against the holders of the not returned
      shares to return a total of 2,847,500 common shares (valued at $381,565) and
      to
      have them returning the remaining 16 unsecured convertible promissory notes
      representing a total amount of US$1,560,000.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





None.




**Item
      3. Defaults upon Senior Securities.**





None.




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





Reference
      is made to the Registrant’s Annual Report on Form 10-K for the year ended
      December 31, 2007, which discusses certain matters submitted to a vote of
      security holders on January 15, 2008. The information contained therein is
      incorporated by reference into this Quarterly Report.





**Item
      5. Other Information**





Page
          28


On
      January 3, 2008, with effective date January 2, 2008 Elephant Talk Global
      Holding B.V.( ET Global) signed  a joint venture agreement with United
      Telecommunication Services NV (UTS), the incumbent telecom operator in the
      Dutch
      Antilles organized and existing under the laws of Curacao, Netherland
      Antilles.  This cooperation enables  ET
      Global
      and UTS to design, install, and operate WIFI networks throughout the Dutch
      and
      French Caribbean, as well as the Islands of St. Kitts and Nevis. As a
      consequence ET Global incorporated on March 19, 2008, Elephant Talk
      Caribbean BV( ET Caribbean), organized and existing under the laws of the
      Netherlands. ET Caribbean participates for 51% in the share capital of the
      on
      April 9, 2008 established company ET-UTS NV in Curacao, Netherlands Antilles.
      The other 49% of the shares is issued to United Telecoms N.V.. Our joint venture
      partner ET-UTS NV will head the JV activities.





On
      February 4, 2008 the Company through its 100% subsidiary, Elephant Talk Global
      Holding BV, incorporated a 100% subsidiary in the People’s Republic of China.
      The name of the new subsidiary is “Elephant Talk Guangzhou Information
      Technology Ltd.( ET Guangzhou). ET Guangzhou is a special vehicle for the in
      house development of software for all kind of activities in the Company. The
      Network Operations and Control at ET Guangzhou will be a part of the Company’s
      world wide operation support. It is the Company’s intention to have ET Guangzhou
      start its operation on April 1, 2008.





On
      March
      26, 2008, the Company received a letter from Rising Water Capital A.G. regarding
      a Promissory Note of May 26, 2006 (see note 13 of the consolidated financial
      statements) in which they agreed to waive any and all defaults or continuing
      defaults 5(a)(6) for a period of time commencing on the date of the letter
      and
      continuing for 3 months hereafter.








**Item
      6. Exhibits**





(a)
            Exhibits


31.1
              Certificationof
                  the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)on
                  page X-1.


31.2
            Certification
                of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)on
                page X-2.


32.1
            Certification
                pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002on
                page X-3.


32.2
            Certification
                pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 on page
                X-4.


__________________________




Page
          29


**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




ELEPHANT
                TALK COMMUNICATIONS, INC.May
                15, 2008
            By:/s/
                Steven van der
                VeldenSteven
                van der VeldenPresident
                and Chief Executive Officer(Principal
                Executive Officer)May
                15, 2008
            By:/s/
                Willem
                AckermansWillem
                AckermansChief
                Financial Officer(Principal
                Financial and Accounting Officer)








**Index
      to Exhibits**




Number
              Exhibit
              Page31.1
              Certification
                  of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
              X-131.2
              Certification
                  of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
              X-232.1
              Certification
                  pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906of
                  the Sarbanes-Oxley Act of 2002
              X-332.2
              Certification
                  pursuant to 18 U.S.C. §1350 as adopted pursuant to Section
                  906of
                  the Sarbanes-Oxley Act of 2002
              X-4