U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 2006


       [ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                          Commission File No.


                            Y-TEL INTERNATIONAL, INC.
                 (Name of Small Business Issuer in its Charter)


             DELAWARE                                        13-4151225
-------------------------------                     ----------------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation of organization)                            Identification Number)


                      806 O'Neal Lane Baton Rouge, LA 70816
                     (Address of principal executive office)

                                 (225) 273-1100
                           (Issuer's telephone number)

                           1100 NW 163 Drive, Suite B2
                                 Miami, FL 33169
                                (former address)


Check  whether  the issuer has (1) filed all  reports  required by Section 12 or
5(d) of the Exchange Act during the past 12 months, and (2) been subject to such
filing requirements for the past ninety (90) days. Yes (x ) No ( )


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

As  of  October  31,  2006,  there  were  18,799,791   shares  of  Common  Stock
outstanding.

Transitional small business format (check one)    Yes (  )          No (X)


<PAGE>




                                            Y-TEL INTERNATIONAL, INC.
                                                   FORM 10-QSB
                                                TABLE OF CONTENTS
PART I        FINANCIAL INFORMATION                                  Page

Item 1        Financial Statements                                    F-1 - F-11
Item 2        Management's Discussion and Analysis or
               Plan of Operation                                        2
Item 3        Controls and Procedures                                   6

PART II       OTHER INFORMATION

Item 1        Legal Proceedings                                         7
Item 2        Unregistered Sales of Equity Securities and
               Use of Proceeds                                          7
Item 3        Defaults upon Senior Securities                           7
Item 4        Submission of Matters to a Vote of Security Holders       7
Item 5        Other Information                                         7
Item 6        Exhibits                                                  7

SIGNATURES                                                              8



<PAGE>



<PAGE>
<TABLE>
<CAPTION>

                   Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)
<S>                                                                                             <C>

September 30, 2006

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

ASSETS

Current assets:
        Cash                                                                                               $ 3,037
        Accounts receivable, net                                                                             5,452
        Prepaid expenses                                                                                    19,221
                                                                                                -------------------
             Total current assets                                                                           27,710

Property and equipment, net                                                                                132,368
                                                                                                -------------------
                                                                                                         $ 160,078
                                                                                                ===================
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
        Accounts payable                                                                                 $ 994,549
        Accrued expenses                                                                                   300,244
                                                                                                -------------------
             Total current liabilities                                                                   1,294,793
                                                                                                -------------------
Commitments and contingencies

Stockholders' deficit:
        Preferred stock, $0.0001 par value, 5,000,000  shares authorized;
        no shares  issued and outstanding                                                                        -
        Common stock, $0.0001 par value, 50,000,000 shares authorized;
        18,799,791 shares issued and outstanding                                                             1,880
        Additional paid-in capital                                                                       8,700,748
        Accumulated deficit                                                                             (9,837,343)
                                                                                                -------------------
        Total stockholders' deficit                                                                     (1,134,715)
                                                                                                -------------------
                                                                                                         $ 160,078
                                                                                                ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                      F-1

<PAGE>
<TABLE>
<CAPTION>

                   Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<S>                                              <C>                  <C>                    <C>                  <C>

  --------------------------------------------------------------------------------------------------------------------------
  --------------------------------------------------------------------------------------------------------------------------
                                                 For The Three Months Ended September 30     For The Nine Months Ended September 30
                                                       2006                 2005                   2006                 2005
                                                 -----------------    -----------------      -----------------    -----------------
  Net sales                                            $ -            $ 249,738               $ 91,211            $ 737,503

  Cost of sales                                          -              100,579                 85,574              203,632
                                                 -----------------    -----------------      -----------------    -----------------
  Gross profit                                           -              149,159                  5,637              533,871
                                                 -----------------    -----------------      -----------------    -----------------
  Operating expenses:
  Satellite, bandwidth and other
   telecommunications expenses                           -               39,803                 24,851               92,535
  Contract labor                                     1,500               20,149                  8,289              136,354
  Salaries and related expenses                     44,787              163,685                134,664              380,187
  Noncash compensation                                   -              363,769                263,411            2,774,558
  Impairment                                                                                         -              531,665
  Other general and administrative expenses         38,988              250,367                243,981              883,827
                                                 -----------------    -----------------     ----------------     ----------------
          Total operating expenses                  85,275              837,773               675,196            4,799,126
                                                 -----------------    -----------------     -----------------    -----------------
  Net loss                                       $ (85,275)          $ (688,614)           $ (669,559)        $ (4,265,255)
                                                 =================    =================     =================    =================

  Basic and diluted loss per common share                -              $ (0.04)              $ (0.04)             $ (0.26)
                                                 =================    =================     =================    ================

  Weighted average number of common
   shares outstanding                           18,799,791           16,574,586            17,956,717           16,147,123
                                                 =================    =================     =================    =================


</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                      F-2

<PAGE>
<TABLE>
<CAPTION>

                    YTEL INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

              For the Nine Months Ended September 30, 2006 and 2005
<S>                                                                                  <C>               <C>

----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------

                                                                                           2006             2005
                                                                                     ----------------- ---------------
Cash flows from operating activities:
     Net loss                                                                              $ (669,559)   $ (4,265,255)
     Adjustments to reconcile net loss to net cash used in
       operating activities:
        Depreciation and amortization                                                          24,989          61,338
        Bad debt expense                                                                            -          55,000
        Estimated fair value of common stock issued for services                              231,600         316,932
        Loss on sale of intangible asset                                                            -         222,000
        Amortization of prepaid services and intangible assets                                 17,186       1,117,180
        Impairment loss on prepaid services                                                         -         150,000
        Impairment loss on property and equipment                                                   -         159,665
        Estimated fair value of options granted for consulting services                             -       1,226,250
        Estimated fair value of warrants issued for services                                   14,625         117,000
        Changes in operating assets and liabilities:
            Accounts receivable                                                                 4,385          36,880
            Prepaid expenses                                                                    7,386           7,447
            Due from stockholders                                                                   -           1,963
            Other assets                                                                            -          27,100
            Accounts payable and accrued expenses                                             247,299          30,763
                                                                                     ----------------- ---------------
     Net cash used in operating activities                                                   (122,089)       (735,737)
                                                                                     ----------------- ---------------
Cash flows from investing activities:
     Purchase of intangible assets                                                                  -         (25,000)
     Purchases of fixed assets                                                                      -         (90,834)
     Collection of note receivable                                                             48,000               -
                                                                                     ----------------- ---------------
     Net cash provided by (used in) investing activities                                       48,000        (115,834)
                                                                                     ----------------- ---------------
Cash flows from financing activities:
     Issuance of common stock for cash                                                         20,655         803,719
     Proceeds from note payable to related party                                               50,000               -
     Payments on note payable to related party                                                      -         (17,500)
     Proceeds from the exercise of warrants                                                         -           2,100
     Proceeds from the issuance of convertible debt                                                 -          70,000
                                                                                     ----------------- ---------------
     Net cash provided by financing activities                                                 70,655         858,319
                                                                                     ----------------- ---------------
Decrease/Increase in cash                                                                      (3,434)          6,748

Cash at beginning of period                                                                     6,471          19,833
                                                                                     ----------------- ---------------
Cash at end of period                                                                         $ 3,037        $ 26,581
                                                                                     ================= ===============
Supplemental  disclosure of cash flow  information - Cash paid during the period
     for:
        Interest                                                                                  $ -             $ -
                                                                                     ================= ===============
        Income taxes                                                                              $ -             $ -
                                                                                     ================= ===============

Supplement schedule of noncash investing and financing activities:
     Forgiveness of amounts due to related parties                                                $ -       $ 227,000
                                                                                     ================= ===============
     Issuance of common stock for prepaid services                                                $ -       $ 126,250
                                                                                     ================= ===============
     Write off of intangible related to termination of intangible asset agreement                 $ -       $ 404,696
                                                                                     ================= ===============
     Receivable in connection with the termination of intangible asset agreement                  $ -        $ 55,000
                                                                                     ================= ===============

</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                      F-3
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                           September 30, 2006 and 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Description and Nature of Operations

The management of Y-Tel  International,  Inc. (the "Company")  without audit has
prepared the condensed  consolidated  financial  statements included herein. The
accompanying  unaudited condensed  consolidated  financial  statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America for interim financial information.  Certain information
and note disclosures normally included in the consolidated  financial statements
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America have been omitted.  In the opinion of the management of
the Company,  all adjustments  considered necessary for fair presentation of the
condensed  consolidated  financial  statements  have been included and were of a
normal recurring nature, and the accompanying  condensed  consolidated financial
statements  present fairly the consolidated  financial  position as of September
30,  2006,  and the results of  operations  for the three and nine months  ended
September 30, 2006 and 2005.

It is suggested these unaudited condensed  consolidated  financial statements be
read in conjunction with the audited financial  statements and notes thereto for
the year ended  December 31, 2005,  included in the  Company's  Annual Report on
Form 10-KSB  filed with the  Securities  and  Exchange  Commission.  The interim
results are not necessarily indicative of the results for a full year.

Nature of Business

The  accompanying   condensed  consolidated  financial  statements  include  the
activities  of  Y-Tel  International,   Inc.  ("Y-Tel")  and  its  wholly  owned
subsidiaries,  Y-Tel International,  L.L.C. ("Y-Tel LLC"), Y-Tel International -
Panama,  S.A.  ("Y-Tel  Panama") and  International  Telekom  ("International"),
formerly  Intel  Communications,   L.L.C.,   collectively  referred  to  as  the
"Company".

Y-Tel was formerly  known as  Consolidated  Pictures Corp.  ("CPC"),  a Delaware
corporation.  Y-Tel LLC was  organized in the state of Florida on August 8, 2003
("Inception").  Y-Tel  Panama  was  incorporated  in the  Republic  of Panama on
September 1, 2003.  International  was organized in the state of Florida on June
16, 2003, and acquired by Y-Tel on October 26, 2003.

The Company is a wholesale and retail provider of telecommunication,  Voice over
Internet Protocol (VoIP), and Wi-Fi services and devices.


Going Concern

The accompanying  condensed consolidated financial statements have been prepared
assuming that the Company will  continue as a going concern which  contemplates,
among other things, the realization of assets and satisfaction of liabilities in
the ordinary course of business.  The Company has incurred  operating losses and
had negative cash flows from  operations  through  September 30, 2006, and has a
lack of operational history which, among other factors,  raise substantial doubt
about its ability to continue as a going concern.

Management  recognizes the Company must generate additional  resources to enable
it to continue  operations.  The Company will  continue to seek working  capital
through  the public  markets.  The  successful  outcome of future  fund  raising
activities cannot be determined at this time, and there is no assurance that, if
achieved,  the  Company  will have  sufficient  funds to  execute  its  intended
business plan or generate positive operating results.

Principles of Consolidation

The  accompanying   condensed  consolidated  financial  statements  include  the
accounts of Y-Tel  International,  Inc. and its wholly owned  subsidiaries.  All
significant  inter-company  transactions  and balances  have been  eliminated in
consolidation.


                                      F-4

<PAGE>



                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)


Concentration of Credit Risk and Foreign Operations

The Company offers its services predominantly to international customers located
outside  the United  States  and  extends  credit  based on an  evaluation  of a
customer's financial condition, generally without collateral. Exposure to losses
on accounts  receivable is principally  dependent on each  customer's  financial
condition.  The Company  monitors its exposure for credit  losses and  maintains
allowances for anticipated losses, if required.  Although the Company expects to
collect amounts due, actual collections may differ from the estimated amounts.

Long-Lived Assets

The Company's management assesses the recoverability of its long-lived assets by
determining  whether the depreciation and amortization of long-lived assets over
their remaining lives can be recovered  through  projected  undiscounted  future
cash flows. The amount of long-lived asset impairment, if any, is measured based
on fair  value and is charged to  operations  in the period in which  long-lived
asset  impairment  is  determined  by  management.  At September  30, 2006,  the
Company's  management  believes there is no impairment of its long-lived assets.
There can be no assurance,  however,  that market  conditions will not change or
demand for the Company's products and services will continue, which could result
in additional impairment of long-lived assets in the future.

Customer Concentrations

One customer accounted for 94% of the total net sales for the three months ended
September 30, 2005. There were no sales for the three months ended September 30,
2006. One customer accounted for 10% and 93% of the total net sales for the nine
months ended September 30, 2006 and 2005, respectively.

Revenue and Expense Recognition

The Company  recognizes  revenue in accordance  with Staff  Accounting  Bulletin
("SAB") No. 101,  "Revenue  Recognition in Financial  Statements," as revised by
SAB No. 104. As such, the Company recognizes revenue when persuasive evidence of
an  arrangement  exists,  services  have been  performed,  the price is fixed or
readily  determinable and collectibility is probable.  Sales are recorded net of
sales discounts.  The Company's revenue is currently  generated from the sale of
traffic (minutes) to other telecom companies,  whereby the revenue is recognized
when invoiced to the customer,  which  approximates the time the phone calls are
placed.

Stock-Based Compensation

At September 30, 2006, the Company had one stock-based  compensation plan. Prior
to January 1, 2006,  the Company  accounted for this plan under the  recognition
and measurement  provisions of Accounting  Principles  Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees,  and related  interpretations,  as
permitted  by  SFAS  No.  123,  Accounting  for  Stock  Based  Compensation.  No
stock-based  employee  compensation  cost was  recognized  in the  statements of
operations for the nine months ended September 30, 2006 and 2005, as all options
granted under the plan were fully vested prior to January 1, 2005.

Effective  January 1,  2006,  the  Company  adopted  the fair value  recognition
provisions   of   SFAS   No.   123(R),   Share   Based   Payment,    using   the
modified-prospective   transition   method.   Under  this   transition   method,
compensation  cost required to be recognized in the periods ended  subsequent to
January 1, 2006 will include: (a) compensation cost for all share-based payments
granted  subsequent  to  December  31, 2005 based on the  grant-date  fair value
estimated in accordance with the provisions of SFAS No. 123(R).

The Company calculates stock-based  compensation by estimating the fair value of
each  option  using  the  Black-Scholes  option  pricing  model.  The  Company's
determination  of fair value of share-based  payment awards are made as of their
respective dates of grant using that option pricing model and is affected by the
Company's  stock price as well as  assumptions  regarding a number of subjective
variables.  These  variables  include,  but are  not  limited  to the  Company's
expected  stock  price  volatility  over the term of the  awards  and actual and
projected  employee stock option exercise  behavior.  The  Black-Scholes  option
pricing model was developed  for use in estimating  the value of traded  options
that have no vesting or hedging restrictions and are fully transferable. Because
the  Company's  employee  stock  options have certain  characteristics  that are
significantly  different from traded options,  the existing valuation models may
not  provide an  accurate  measure of the fair value of the  Company's  employee
stock  options.  Although the fair value of employee stock options is determined
in accordance with SFAS No. 123(R) using an option-pricing model, that value may
not be indicative of the fair value observed in a willing  buyer/willing  seller
market  transaction.  The calculated  compensation  cost will be recognized on a
straight-line basis over the vesting period of the option.

                                      F-5

<PAGE>





                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

The Company has issued  stock  options to  employees  and  directors  whose only
condition  for vesting are continued  employment  or service  during the related
vesting  period.  Option  awards  are  granted  with an  exercise  price  deemed
appropriate by the board of directors. Prior to the adoption of SFAS No. 123(R),
the Company presented all tax benefits of deductions resulting from the exercise
of stock  options  as  operating  cash  flows in the  statement  of cash  flows.
Statement  123(R)  requires  the cash  flows  resulting  from  the tax  benefits
resulting from tax deductions in excess of the compensation  cost recognized for
those options  (excess tax benefit) to be classified as financing cash flows. As
there  were no stock  options  exercised  during  the nine  month  period  ended
September 30, 2006, there was no excess tax benefit to the Company.

For the three and nine months  ended  September  30,  2006,  the Company did not
recognize compensation cost as a result of the adoption of SFAS No. 123(R).

The following  table  illustrates  the effect on net loss and net loss per share
for the nine months ended  September  30, 2005 as if the Company had applied the
fair  value  recognition  provisions  of SFAS 123 to options  granted  under the
Company's  stock option plans.  For purposes of this pro forma  disclosure,  the
fair value of the options is estimated  using the Black  Scholes  option-pricing
model and  amortized  on a  straight-line  basis to  expense  over the  options'
vesting period:

                                      F-6
<PAGE>


<TABLE>
<CAPTION>
<S>                                                          <C>                  <C>



                                                                     Nine Months  Three Months
                                                                       Ended        Ended
                                                                   September 30,  September 30,
                                                                        2005         2005
                                                             -------------------  ---------------

Net loss - as reported                                        $     (4,265,255)   $(6,881,614)
Add:  Share-based employee compensation
 expense included in net loss, net
 of related tax effects - as reported                                       --             --
Deduct:  Share-based employee compensation
 expense determined under fair value method,
 net of related tax effects - pro forma                                     --             --
                                                             -------------------  ---------------

Net loss - pro forma                                          $     (4,265,255)   $(688,614)
                                                             ===================  ===============

Basic and diluted loss available to common
   stockholders per common share - as reported                $          (0.26)   $(0.04)
                                                             ===================  ===============

Basic and diluted loss available to common
   stockholders per common share - pro forma                  $          (0.26)   $(0.04)
                                                             ===================  ===============
</TABLE>



                                      F-7

<PAGE>



                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

Share Option Plans

The Company has in effect one  share-based  plan under which  non-qualified  and
incentive stock options have been granted to employees,  non-employees and board
members.  The Board of Directors determines  eligibility,  vesting schedules and
exercise  prices for options  granted  under the plans.  The Company  issues new
shares to satisfy stock option exercises under our share-based plan.

The number of options  under the 2001 Plan  available for grant at September 30,
2006 was 1,000,000.

The fair value of each  share-based  award is  estimated on the grant date using
the Black Scholes  option-pricing  model. Expected volatilities are based on the
historical volatility of the Company's stock price. The expected term of options
granted  subsequent to the adoption of SFAS 123R is derived using the simplified
method as defined in the SEC's Staff Accounting Bulletin 107,  Implementation of
FASB  123R  and is  derived  from  historical  data on  employee  exercises  and
post-vesting  employment  termination  behavior.  The risk-free rate for periods
within the contractual life of the option is based on the U.S. Treasury interest
rates in effect at the time of grant.  There were no options  granted during the
three and nine months ended September 30, 2006 and 2005.

A summary of option activity under the stock option plans and changes during the
nine months ended September 30, 2006 are presented below:

<TABLE>
<CAPTION>
<S>                                                           <C>               <C>     <C>         <C>        <C>

                                                                                   September 30, 2006
                                                              ---------------------------------------------------------------
                                                                                      Weighted-Average
                                                                               --------------------------------
                                                                                             Remaining        Aggregate
                                                                               Exercise      Contractual      Intrinsic
                                                              Shares           Price         Term (Years)     Value
                                                              ---------------------------------------------------------------
                  Outstanding at December 31, 2005                   2,500,000  $       0.55
                  Granted                                                    -             -
                  Cancelled/forfeited                                        -             -
                  Exercised                                                  -
                                                              --------------------------------
                  Outstanding at September 30, 2006                  2,500,000  $       0.55        1.0        $          -
                                                              ===============================================================
                  Options exercisable at September 30, 2006          2,500,000  $       0.55        1.0        $          -
                                                              ===============================================================
</TABLE>


Issuance of Stock for Non-Cash Consideration

All issuances of the Company's common stock for non-cash consideration have been
assigned a dollar amount  equaling  either the market value of the shares issued
or the value of consideration  received whichever is more readily  determinable.
The  majority  of the  non-cash  consideration  received  pertains  to  services
rendered by  consultants  and others and has been valued at the market  value of
the shares  issued.  In certain  issuances,  the Company may  discount the value
assigned to the stock issued for illiquidity and restrictions on resale.

The Company's accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services  follows the  provisions  of Emerging
Issues Task Force ("EITF") 96-18,  "Accounting for Equity  Instruments  That are
Issued to Other Than  Employees for Acquiring,  or in Conjunction  with Selling,
Goods  or  Services"  and  EITF  00-18,   "Accounting  Recognition  for  Certain
Transactions  Involving Equity Instruments Granted to Other Than Employees." The
measurement  date  for the  fair  value  of the  equity  instruments  issued  is
determined at the earlier of (i) the date at which a commitment for  performance
by the  consultant or vendor is reached or (ii) the date at which the consultant
or vendor's performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting  agreement.  In accordance to EITF 00-18, an asset acquired in
exchange for the issuance of fully  vested,  nonforfeitable  equity  instruments
should not be presented or  classified  as an offset to equity on the  grantor's
balance sheet once the equity instrument is granted for accounting purposes.

 Loss Per Share

Basic  earnings  per share  ("BEPS") is computed by dividing  loss  available to
common  stockholders by the weighted average number of outstanding common shares
during the period of  computation.  Diluted  earnings per share  ("DEPS")  gives
effect to all dilutive  potential common shares outstanding during the period of
computation.  The  computation of DEPS does not assume  conversion,  exercise or
contingent  exercise of securities  that would have an  anti-dilutive  effect on
earnings. As of September 30, 2006 and 2005, the Company had no potentially

                                      F-8
<PAGE>





                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

dilutive securities that would affect loss per share.

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 2006:



Equipment                                             $     169,681
                                                        ------------
                                                            169,681

Less accumulated depreciation                             (  37,313)
                                                        ------------
Fixed assets, net                                       $   132,368
                                                        ============



NOTE 3 - EQUITY

Common Stock

During the three months ended March 31, 2006 the Company issued 92,600 shares of
restricted common stock for cash totaling $20,655.

On December 1, 2005 the Company  entered into a stock  purchase  agreement  with
Marcatus & Partners  regarding the purchase of 2,625,000  shares of common stock
for $1,200,000.  The stock certificates have been issued and are currently being
held in escrow until receipt of funds. As the shares are in escrow,  the Company
has not recorded the shares as issued and  outstanding at September 30, 2006. As
of October 16,  2006,  the Company  terminated  the  respective  agreement  with
Mercatus  and  Partners as a result of breach of  contract  and  misleading  the
Company as to their ability to fund the agreement.  The stock  certificates have
been returned to the escrow agent for cancellation.

Stock for Services

During the three months ended March 31, 2006, the Company issued 1,200 shares of
restricted common stock to a consultant for services  rendered.  The shares were
valued at $600 (based on the fair value of the common  stock at the  measurement
date) and  recorded as noncash  compensation  expense  during the quarter  ended
March 31, 2006.

During the year ended  December 31, 2005,  the Company  issued  62,500 shares of
restricted   common  stock  to  various   consultants  in  connection  with  the
performance  of  consulting  services to be performed  through  March 2006.  The
62,500  shares were  valued at  $126,250  (based on the fair value of the common
stock at the  respective  measurement  dates) and recorded the shares as prepaid
services.  Such amount was  amortized  to expense  over the lives of the related
agreements,  of which  $17,186 was expensed  during the three months ended March
31, 2006.  The amount has been fully amortized.

During the three months ended June 30, 2006, the Company issued 1,650,000 shares
of restricted common stock to two of its board members for services provided and
to fulfill  obligations made by previous  management.  The shares were valued at
$231,000 (based on the fair value of the common stock at the  measurement  date)
and expensed during the quarter ended June 30, 2006.  The amount has been fully
amortized.

Warrants

During  the year  ended  December  31,  2005,  the  Company  issued a warrant to
purchase 50,000 shares of restricted  common stock to a consultant in connection
with the  performance  of consulting  services to be performed  through  January
2006.  The  warrant was valued at $175,500  (based on the Black  Scholes  option
pricing  model),  has an exercise price of $4.00,  vests monthly through January
2006 and expires in January 2008. Such amount is being expensed over the life of
the related  agreement,  of which $14,625 was expensed  during the quarter ended
March 31, 2006.

                                      F-9
<PAGE>



                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 4 - RELATED PARTY TRANSACTIONS

In May 2006,  an officer  advanced  the  Company  $50,000  for  working  capital
purposes.  The advance bears interest at 9.75% and is due on demand. The Company
has  included  the balance of the advance  and the related  accrued  interest of
approximately   $800  in  accrued   expenses  in  the   accompanying   condensed
consolidated balance sheet.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Indemnities and Guarantees

The Company has made certain  indemnities and guarantees,  under which it may be
required to make payments to a guaranteed or indemnified  party,  in relation to
certain transactions. The Company indemnifies its directors, officers, employees
and  agents to the  maximum  extent  permitted  under the laws of the  States of
Florida and Delaware.  In connection  with its facility  lease,  the Company has
indemnified  its  lessors  for  certain  claims  arising  from  the  use  of the
facilities.  In  connection  with  certain  of  its  stock  purchase  and  other
agreements,  the Company has  indemnified  lenders,  sellers,  and various other
parties for certain claims arising from the Company's breach of representations,
warranties and other provisions contained in the agreements. The duration of the
guarantees  and  indemnities  do not provide for any  limitation  of the maximum
potential future payments the Company could be obligated to make.  Historically,
the Company has not been  obligated to make any  payments for these  obligations
and no liabilities  have been recorded for these  indemnities  and guarantees in
the accompanying condensed consolidated balance sheet.

Litigation

From time to time,  the Company may be involved in various  claims,  lawsuits or
disputes  arising in the normal  operations of its business.  The Company is not
currently  involved in any such matters which  management  believes could have a
material  adverse  effect on the Company's  consolidated  financial  position or
consolidated results of operations.

However, the Company is currently involved in settling the following claims:

o        Y-Tel has  agreed  to a  settlement  offer of  $15,000  related  to the
         Company's  failure to complete an acquisition.  Such amount is included
         in accrued expenses in the accompanying  condensed consolidated balance
         sheet.

o        Y-Tel is currently in negotiations  with the former CEO regarding final
         settlement  of unpaid  wages  and  claims.  The  Company  has  included
         approximately $50,000 in accrued expenses in the accompanying condensed
         consolidated balance sheet related to these claims.

o        Y-Tel  is  currently  in  negotiations   with  previous  legal  counsel
         regarding  unpaid  fees  totaling  $35,500.  Such amount is included in
         accounts payable in the  accompanying  condensed  consolidated  balance
         sheet.

o        Y-Tel is currently in negotiations with NAP of America regarding unpaid
         lease  expenses  totaling  $5,778.  Such amount is included in accounts
         payable in the accompanying condensed consolidated balance sheet.

Employment Agreements

During 2004, the Company entered into  employment  agreements with two officers.
Effective  November 28, 2005, the Company  terminated  the employment  agreement
with the CEO, pursuant to the termination  provisions  within the contract.  The
remaining  employment  with the CFO is through  September  2006 and continues in
effect from year to year thereafter unless otherwise terminated, pursuant to the
terms of such  contract.  Future annual minimum  payments under this  employment
agreement approximate $144,000,  with potential annual increases, as defined. In
connection with these employment agreements,  the Company issued options in 2004
to purchase an aggregate of 1,000,000 shares of common stock.


NOTE 6 - SUBSEQUENT EVENTS

On October 17, 2006, the Company agreed to acquire Sunrise  Television  Network,
Inc.,  ("STN")  from  Sunrise  Broadband  Group,  Inc.,  by  merging  STN with a
wholly-owned  subsidiary of the Company  called Sunrise  Acquisitions,  Inc. The
transaction  included  Sunrise  Broadband  of  Colorado,  Inc.,  ("SB  of C",  a
wholly-owned  subsidiary of STN) holder of a cable network license.  The Company
will account for the acquisition as an asset purchase.


                                      F-10

<PAGE>




                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                               September 30, 2006

NOTE 6 - SUBSEQUENT EVENTS (continued) The Company agreed to issue two series of
preferred  stock to Sunrise  shareholders,  one for  preferred  shareholders  of
Sunrise,  Series A (2,550,000  shares)  convertible  to a minimum of  12,600,001
shares and a maximum of  31,500,003  shares of common stock under  certain terms
and one for common shareholders of Sunrise (1,800,000  shares),  Series B, which
is  convertible  to a minimum of  12,000,000  shares and a maximum of 30,000,000
shares  of  common  stock and  which  will be  restricted  and held in trust for
Sunrise common shareholders subject to a registration  statement registering the
underlying common conversion shares.


The dividend (in trust) to Sunrise  common  shareholders  will be based upon the
Sunrise  shareholders  of record on October 30, 2006.  After  registration,  the
Series B Preferred  shares will be converted to common  shares of the Company in
four equal quarterly  distributions,  to shareholders of Sunrise Broadband as of
October 30, 2006.

The closing of the  transaction is subject to delivery of audits for STN and its
subsidiary SB of C, by December 31, 2006, which may take up to 60 days.

As of October 23, 2006,  as agreed upon in the STN  transaction,  the  Company's
Chairman,  acting  CEO/CFO  John T.  Conroy has stepped  down from his  previous
position to accept his newly  appointed  position as Executive Vice President of
Strategic  Development  and  remains a  Director.  Calvin  D.  Smiley,  Sr.  was
appointed  the  Company's  Chairman,  CEO and  President,  Daniel  M.  Smith was
appointed  Executive  Vice  President,  CFO and Director,  while Steve  Lipman's
resignation as a director was accepted by the board.

The board also agreed to issue Series C Preferred  shares  authorized and issued
in the  amount  of  650,000  shares  in  satisfaction  of for one of its  former
officers for services accrued as acting  CEO/Chairman,  and CFO for the Company.
In addition the board of  directors  accepted  the  cancellation  of $200,000 in
unpaid  wages and benefits  payable to the CFO.  Such amount is reflected in the
accrued expenses on the accompanying condensed consolidated balance sheet.

On October 17, 2006 the Company  retained OTC Financial  Network,  a division of
National  Financial  Communications   Corporation  (NFC),  for  a  comprehensive
investor relations  campaign.  This one year agreement includes a $5,000 monthly
retainer  fee ($60k  annually)  and on the  signing of the  agreement  1,000,000
warrants at an exercise price of $0.20 per share, on the one year anniversary of
this agreement an additional 1,000,000 warrants with an exercise price of market
price plus 10% and on the second year  anniversary  1,000,000  warrants  with an
exercise  price of market price plus 10%.  All warrants  offered are for a three
year period commencing from the termination date of this agreement.

On October 13,  2006,  the Company  cancelled  its  previously  announced  SICAV
Securities Purchase Agreement with Mercatus and Partners, LP, ("Mercatus") dated
December 6, 2005. The  cancellation of the agreement was due to  non-performance
by Mercatus.

On  October  27,  2006,  a  consultant  agreed  to  convert  $118,230  of unpaid
consulting fees into 5,911,500 shares of restricted common stock.  Additionally,
the  consultant  was granted  the option to  purchase up to 200,000  warrants at
$0.04 per share over the next twelve month period.

On October 27, 2006, an employee agreed to convert unpaid loans totaling $50,000
into 2,500,000 shares of restricted common stock. Additionally, the employee was
granted the option to purchase up to 200,000 warrants at $.04 per share.

                                      F-11


<PAGE>



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------------------------------------------------------------------------------
The following  discussion  of our financial  condition and results of operations
should be read in  connection  with our financial  statements  and notes thereto
appearing elsewhere herein.

Forward-looking  Information:  This  Quarterly  Report on Form  10-QSB  contains
forward-looking  statements  relating  to our goals,  beliefs,  plans or current
expectations  and other  statements that are not historical  facts. For example,
when we use words such as "project," "believe,"  "anticipate," "plan," "expect,"
"estimate,"  "intend,"  "should," "would," "could" or "may," or other words that
convey  uncertainty of future events or outcome,  we are making  forward-looking
statements.   We  refer  you  to  the  caption  entitled   "Trends,   Risks  and
Uncertainties"  below for important  factors that could cause actual  results to
differ  materially from those indicated by our  forward-looking  statements made
herein and presented elsewhere by management.  Such  forward-looking  statements
represent management's current expectations and are inherently uncertain.  We do
not undertake any obligation to update forward-looking statements made by us.

GENERAL

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial  statements and reported  amounts of revenues and expenses  during
the reporting period. Actual results may differ from those estimates.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management believes all customer  receivables are fully collectible at September
30, 2006 and therefore,  an allowance for bad debts has not been recorded in the
financial  statements.   As  the  Company  expands,   management  will  continue
monitoring  financial  indicators  and cash flow patterns and will  establish an
allowance should the need arise.

REVENUE RECOGNITION

The Company  recognizes  revenue in accordance  with Staff  Accounting  Bulletin
("SAB") No. 101, Revenue Recognition in Financial Statements," as revised by SAB
No. 104. As such, the Company recognizes revenue when persuasive  evidence of an
arrangement exists, services have been performed,  the price is fixed or readily
determinable  and  collectibility  is probable.  Sales are recorded net of sales
discounts. The Company's revenue is generated primarily from the sale of traffic
(minutes) to other telecom companies. Revenue is recognized when invoiced to the
customer, which approximates the time the phone calls are placed.

STOCK-BASED COMPENSATION

On January 1, 2006, we adopted SFAS No. 123 (revised 2004), Share-Based Payment,
("SFAS  123(R)") which requires the  measurement and recognition of compensation
expense for all  share-based  payment awards made to our employees and directors
based on  estimated  fair  values.  We adopted  SFAS 123(R)  using the  modified
prospective transaction method, which requires the application of the accounting
standard  as of  January  1, 2006,  the first day of our  fiscal  year 2006.  In
accordance  with the  modified  prospective  transition  method,  our  financial
statements  for prior  periods  have not been  restated to  reflect,  and do not
include,  the impact of SFAS 123(R).  The value of the portion of any award that
is  ultimately  expected  to vest  will be  recognized  as an  expense  over the
requisite service periods in our statement of operations.  Prior to the adoption
of SFAS 123(R),  we accounted for stock-based  awards to employees and directors
using the intrinsic  value method in accordance with APB No. 25 as allowed under
SFAS No. 123, ("SFAS 123"). As stock-based  compensation  expense  recognized in
the statement of operations for each quarter  subsequent to December 31, 2005 is
based on awards  ultimately  expected to vest,  it will be reduced for estimated
forfeitures.  SFAS 123(R)  requires  forfeitures  to be estimated at the time of
grant and revised,  if necessary,  in subsequent  periods if actual  forfeitures
differ from those  estimated.  For the nine months ended September 30, 2006, the
Company did not recognize any  compensation  expense as a result of the adoption
on SFAS 123(R).

ISSUANCE OF STOCK FOR NON-CASH CONSIDERATION

All issuances of the Company's common stock for non-cash consideration have been
assigned a dollar amount  equaling  either the market value of the shares issued
or the value of consideration  received whichever is more readily  determinable.
The  majority  of the  non-cash  consideration  received  pertains  to  services
rendered by  consultants  and others and has been valued at the market  value of
the shares  issued.  In certain  issuances,  the Company may  discount the value
assigned to the stock issued for illiquidity and restrictions on resale.

                                        2


<PAGE>




The Company's accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services  follows the  provisions  of Emerging
Issues Task Force ("EITF) 96-18,  "Accounting  for Equity  Instruments  That are
Issued to Other than  Employees for Acquiring,  or in  Conjunction  with Selling
Goods  or  Services"  and  EITF  00-18,   "Accounting  Recognition  for  Certain
Transactions  Involving Equity Instruments Granted to Other Than Employees." The
measurement  date  for the  fair  value  of the  equity  instruments  issued  is
determined at the earlier of (i) the date at which a commitment for  performance
by the  consultant or vendor is reached or (ii) the date at which the consultant
or vendor's performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting  agreement.  In accordance to EITF 00-18, an asset acquired in
exchange for the issuance of fully vested,  non-forfeitable  equity  instruments
should not be presented or  classified  as an offset to equity on the  grantor's
balance sheet once the equity instrument is granted for accounting purposes.

RESULTS OF  OPERATIONS - NINE MONTHS AND THREE MONTHS ENDED  SEPTEMBER  30, 2006
COMPARED TO SEPTEMBER 30, 2005

SUMMARY

The Company completed the relocation of its telecommunications HUB from Miami to
Dallas in December  2005.  Administration  and all  corporate  functions  of the
Company are currently being performed in Baton Rouge,  Louisiana. As a result of
the delay in funding from Mercatus and  Partners,  the Company has curtailed its
operations  during  the  first  eight  months of 2006 in order to  conserve  its
limited cash. The Company requires  additional  funding to implement its current
business plan of developing its VOIP infrastructure, products and services.

NET SALES

Net sales were $91,211 for the nine months ended  September 30, 2006 compared to
$737,503  for the nine months  ended  September  30,  2005.  This  represents  a
decrease of $646,292 or 87.6%. The decrease in revenue is directly attributed to
management's  decision to suspend  operations  until  adequate  funding has been
secured to fully execute the Company's new business model.

Net sales were $0 and $249,738 for the three months ended September 30, 2006 and
2005, respectively; resulting in a 100% decrease in revenue when compared to the
same  period  for the  previous  year.  The  decrease  in  revenue  is  directly
attributed to management's decision to suspend operations until adequate funding
has been secured to fully execute the Company's new business model.

COST OF SALES

Cost of sales were $85,574 for the nine months ended September 30, 2006 compared
to $203,632 for the nine months ended  September  30,  2005.  This  represents a
decrease  of  $118,050  or  57.9%.  The  decrease  in cost of sales is  directly
attributed to management's decision to suspend operations until adequate funding
has been secured to fully execute the Company's new business model.

Cost of sales were $0 and $100,579 for the three months ended September 30, 2006
and 2005,  respectively;  resulting  in a 100%  decrease  in cost of sales  when
compared to the same period of time for the previous  year. The decrease in cost
of sales is directly  attributed to management's  decision to suspend operations
until  adequate  funding has been  secured to fully  execute the  Company's  new
business model.

OPERATING EXPENSES

Operating  expenses were  $675,196 for the nine months ended  September 30, 2006
compared to  $4,799,126  for the nine months  ended  September  30,  2005.  This
represents a decrease of $4,123,930 or 85.9%.  Of this  decrease,  approximately
$1,099,991 is non-cash related and is attributed to the completion of amortizing
the prepaid  services  and  intangible  asset.  Prepaid  services  consisted  of
consultants that received stock for services in 2004 and 2005. The decrease also
reflects a decrease of $1,434,609 of non cash expenses  related to stock options
and warrants  issued to consultants  during the period ended September 30, 2005.
Additionally,  the decrease reflects the non cash expenses related to impairment
losses and the loss on the sale of intangibles of $531,665  incurred  during the
period ended  September 30, 2005.  No such  expenses  were  incurred  during the
period ended September 30, 2006.

Operating  expenses also include other  general and  administrative  expenses of
$243,981 compared to $883,827 for the nine month period ended September 30, 2006
and 2005,  respectively.  This  represents  a decrease of $639,846 or 72.4% when
compared  to  other  general  and  administrative  expenses  for  2005.  Of this
decrease,  approximately  $216,926 is  attributed to the reduction in consulting
fees.  Additionally,  the Company  decreased its legal and professional fees for
the period ended  September  30, 2006 by $90,864  when  compared to the expenses
incurred  during the period ended September 30, 2005. The Company also decreased
rent and travel expenses by $40,257 and $41,760  respectively,  when compared to
the rent and travel  expenses  incurred  during the period ended  September  30,
2005.

Operating  expenses  were $85,275 for the three months ended  September 30, 2006
compared to  $837,773  for the three  months  ended  September  30,  2005.  This
represents  a decrease  of  $752,498  or 90%.  Of this  decrease,  approximately
$363,769 is non-cash  related and is attributed to the  completion of amortizing
the prepaid  services and  expenses  related to shares of common stock and stock
options  issued to consultants  during the quarter ended  September 30, 2005. No
such expenses were  incurred  during the three months ended  September 30, 2006.
Additionally,  the Company  decreased  its legal and  professional  fees for the
quarter  ended  September  30, 2006 by $43,981  when  compared  to the  expenses
incurred during the quarter ended September 30, 2005.

                                        3


<PAGE>



Operating  expenses also include other  general and  administrative  expenses of
$38,988  compared to $250,367 for the three months ended  September 30, 2006 and
2005,  respectively.  This  represents  a  decrease  of  $211,378  or 84.4% when
compared to general and  administrative  expenses  for 2005.  Of this  decrease,
approximately  $112,762 is  attributed  to the  reduction  in  consulting  fees.
Additionally,  the  Company  decreased  expenses  related  to rent,  travel  and
utilities by $49,744  during the quarter ended  September 30, 2006 when compared
to the same  expenses  during the quarter  ended  September  30, 2005.  The cost
savings is directly  related to  management's  decision to scale back operations
until  sufficient  funding has been  achieved to fully execute the Company's new
business model.

LIQUIDITY AND CAPITAL RESOURCES

For the Nine Month Period Ended September 30, 2006

The Company incurred a net loss of ($699,559) or $(.04) per share as compared to
the same period in 2005 when the Company  had a loss of  ($4,265,255)  or ($.26)
per shares.  Management  expects  that the trend of losses will  continue  until
consistently  profitable business revenues can be achieved, of which there is no
assurance.

For the  quarter  ended  September  30,  2006,  the  Company  incurred a loss of
($85,275) or nominal loss per share, compared to a loss of ($688, 614) or a loss
of ($.04) per share in the share period in 2005.

The Company has a net working  capital deficit of $1,267,083 as of September 30,
2006.  Management  recognizes the Company must generate additional  resources to
enable it to continue  operations.  The Company  will  continue to seek  working
capital  through  the  equity  markets  and  the  merger  described  below.  The
successful  outcome of future fund raising  activities  cannot be  determined at
this time,  and there is no assurance  that, if achieved,  the Company will have
sufficient  funds to execute its  intended  business  plan or generate  positive
operating results.

On December 1, 2005,  the Company  executed two stock purchase  agreements  with
Mercatus & Partners,  reflecting the potential  sale of 2,625,000  shares of its
common  stock  for  $1,200,000.  The  stock  certificates  were  issued  and are
currently  held in escrow until receipt of funds.  As the shares were in escrow,
the Company has not  recorded the shares as issued and  outstanding  at December
31, 2005. As of October 13, 2006,  the Company  terminated  the  agreement  with
Mercatus and Partners as a result of non-performance by Mercatus,  and cancelled
the shares.

During the nine month period ended September 30, 2006, the Company issued 92,600
shares of common  stock for  proceeds  of  $20,655.  In  addition,  the  Company
received proceeds of $48,000 from the collection on a note receivable.

                                 4
<PAGE>

The Company has curtailed its operations  during the first ten months of 2006 in
order to conserve its limited cash. The Company requires  additional  funding to
implement  its business  plan of  developing  its VOIP and Wifi  infrastructure,
products and services.

On October 17, 2006, the Company agreed to acquire Sunrise Television  Networks,
Inc.,  ("STN") from Sunrise Broadband Group,  Inc., by merging STN with a wholly
owned  subsidiary of Y-Tel called  Sunrise  Acquisitions,  Inc. The  transaction
includes Sunrise Broadband of Colorado, Inc., holder of a cable network license.
Y-Tel agreed to issue two series of preferred stock to Sunrise shareholders, one
for preferred  shareholders of Sunrise,  Series A (2,550,000 shares) convertible
to a minimum of 12,600,001  shares and a maximum of 31,500,003  shares of common
stock under certain terms and one for common  shareholders of Sunrise (1,800,000
shares),  Series B, which  Series B is  convertible  to a minimum of  12,000,000
shares  and a maximum  of  30,000,000  shares of common  stock and which will be
restricted  and held in trust  for  Sunrise  common  shareholders  subject  to a
registration  statement registering the underlying common conversion shares. The
dividend  (in  trust) to  Sunrise  common  shareholders  will be based  upon the
Sunrise  shareholders  of record on October 30, 2006.  After  registration,  the
Series B Preferred  shares will be converted  to common  shares of Y-Tel in four
equal  quarterly  distributions,  to  shareholders  of Sunrise  Broadband  as of
October 30, 2006.


The  closing of the  transaction  is subject to  delivery  of audits for Sunrise
Television Networks,  Inc. and its subsidiary Sunrise Broadband of Colorado,  by
December 31, 2006, which may take up to 60 days.

Management continues to seek other forms of funding to ensure the Company's cash
flow needs are met.

NEED FOR ADDITIONAL FUNDING

The Company does not have capital  sufficient to meet the Company's  cash needs,
including the costs of compliance with the continuing reporting  requirements of
the  Securities  Exchange  Act of 1934.  The Company  will have to seek loans or
equity  placements  to cover  operational  cash  needs.  There is no  assurance,
however,  that without  adequate funds it will  ultimately  allow  registrant to
carry out its new business.

The Company will need to raise  additional funds to conduct its planned business
activities in the next twelve months. No commitments to provide additional funds
have been made by management or other stockholders. Accordingly, there can be no
assurance that any additional funds will be available to the Company to allow it
to cover its expenses as they may be incurred.

                                        5


<PAGE>




Irrespective of whether the Company's cash assets prove to be inadequate to meet
the Company's  operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.

The Company's auditor has issued a "going concern"  qualification as part of his
opinion in the Audit Report. There is substantial doubt about the ability of the
Company to continue as a "going  concern." The Company has no business,  limited
capital, no cash, nominal other assets, and no capital commitments.  The effects
of such conditions could easily be to cause the Company's bankruptcy.

Management  intends to develop its business  plan in the  biofuels  industry and
will need to seek and obtain funding,  via loans or private placements of stock,
for  operations  and to provide  working  capital.  Management has plans to seek
capital in the form of loans or stock private placements in the next quarter, of
several million dollars.

GOING CONCERN

The Company's independent  registered public accounting firm has stated in their
report  included in the  Company's  Form 10-KSB for the year ended  December 31,
2005 that the Company  incurred an operating  loss and had  negative  cash flows
from  operations  for the year ended  December 31, 2005,  and had an accumulated
deficit of $9,167,784 at December 31, 2005. These factors,  among others,  raise
substantial doubt about the Company's ability to continue as a going concern.

ITEM 3 - CONTROLS AND PROCEDURES.
--------------------------------
a.       Evaluation of Disclosure Controls and Procedures:

The  management of the company has evaluated the  effectiveness  of the issuer's
disclosure  controls  and  procedures  as of the end of the period of the report
September 30, 2006 and have  concluded  that the  disclosure  controls  internal
controls and procedures are adequate and effective  based upon their  evaluation
as of the evaluation date.

b.       Changes in Internal Control over Financial Reporting:

There  were no changes  in the small  business  issuers  internal  control  over
financial  reporting  identified  in  connection  with  the  Company  evaluation
required by  paragraph  (d) of Rule 13a-15 or Rule 15d-15 under the Exchange act
that occurred  during the small  business  issuers last fiscal  quarter that has
materially  affected or is  reasonable  likely to materially  affect,  the small
business issuers internal control over financial reporting.

                                        6



<PAGE>




                                     PART II

ITEM 1 - LEGAL PROCEEDINGS
--------------------------

     Not Applicable.

ITEM 2 - UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
For the quarter ended  September 30, 2006,  the Company did not issue any common
stock.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
     Not applicable.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
     Not applicable.

ITEM 5 - OTHER INFORMATION
--------------------------
     None.

ITEM 6 - EXHIBITS
-----------------
(a)      Exhibits

                  Section 302 Certification
31.1     Certification of Chief Executive Officer

31.2     Certification of Chief Financial Officer

                  Section 906 Certification
32.1     Certification of Chief Executive Officer and Chief Financial Officer



                                        7




<PAGE>




                                   SIGNATURES


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




                          Y-Tel International, Inc.
                                 (Registrant)
         By:    /s/ Calvin D. Smiley, Sr
              --------------------------
                    Calvin D. Smiley, Sr. President and CEO

       Date:  November 14, 2006


                                        8