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 JUNE 30, 2005


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

                          Commission File No. 000-33327


                            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)

              1100 NW 163rd Drive, North Miami Beach, Florida 33169
              -----------------------------------------------------
                     (Address of principal executive office)

                                 (305) 623-1140
                           (Issuer's telephone number)

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 ( )


As of July 31, 2005, there were 16,363,762 shares of Common Stock outstanding.


















                                       1
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
                                   FORM 10-QSB
                                TABLE OF CONTENTS


PART I           FINANCIAL INFORMATION

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


PART II          OTHER INFORMATION

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


SIGNATURES


































                                       2
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
                                            CONDENSED CONSOLIDATED BALANCE SHEET
                                                                     (UNAUDITED)
                                                                   June 30, 2005
--------------------------------------------------------------------------------
ASSETS

Current assets:
  Cash                                                         $      128,586
  Accounts receivable, net                                             29,900
  Prepaid expenses                                                     28,118
  Prepaid services                                                    450,104
  Due from stockholders                                                44,800
                                                               --------------
    Total current assets                                              681,508

Property and equipment, net                                           885,692

Other assets                                                           25,600
                                                               --------------
                                                               $    1,592,800
                                                               ==============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                             $      642,364
  Accrued expenses                                                    120,818
  Current portion of note payable to related party                    222,500
                                                               --------------
    Total current liabilities                                         985,682
                                                               --------------
Long term liabilities
  Convertible note payable                                             70,000
  Note payable to related party, net of current portion                87,598
                                                               --------------
Total liabilities                                                   1,143,280
                                                               --------------
Commitments and contingencies

Stockholders' equity:
  Preferred stock, $0.0001 par value, 5,000,000 authorized;
     no shares  issued and outstanding
  Common stock, $0.0001 par value, 50,000,000 authorized;
     16,363,762 issued and outstanding                                  1,636
  Additional paid in capital                                        7,950,779
  Accumulated deficit                                              (7,502,895)
                                                               --------------
     Total stockholders' equity                                       449,520
                                                               --------------







--------------------------------------------------------------------------------
                                       3
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)
                                 For the Six Months Ended June 30, 2005 and 2004
--------------------------------------------------------------------------------
                                                       2005          2004
                                                  -------------  -------------
Net sales                                         $    487,765   $    521,437

Cost of sales                                          103,053        263,984
                                                  ------------   ------------
Gross profit                                           384,712        257,453

Operating expenses:
   Satellite, bandwidth and other
      telecommunications expenses                       52,732        166,385
   Contract labor                                      116,205              -
   Contract labor paid to related party                      -        142,297
   Salaries and related expenses                       216,502         16,733
   Noncash compensation                              2,410,789        286,000
   Impairment                                          531,665              -
   Other general and administrative expenses           633,460        312,111
                                                  ------------   ------------
     Total operating expenses                        3,961,353        923,526
                                                  ------------   ------------
Net loss                                          $ (3,576,641)  $   (666,073)
                                                  ============   ============
Basic and diluted loss per common share and
     member unit, respectively                           (0.22)         (0.08)
                                                  ============   ============
Weighted average number of common
     shares and member units outstanding,
     respectively                                   16,147,123      8,583,410
                                                  ============   ============





















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

                                       4
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)

                               For the Three Months Ended June 30, 2005 and 2004
--------------------------------------------------------------------------------
                                                       2005           2004
                                                  -------------  -------------
Net sales                                         $    233,727   $    300,752

Cost of sales                                           36,960        100,629
                                                  ------------   ------------
Gross profit                                           196,767        200,123

Operating expenses:

 Satellite, bandwidth and other
     telecommunications expenses                        27,090        108,850
 Contract labor                                         40,620          1,500
 Contract labor paid to related party                        -         77,512
 Salaries and related expenses                         125,898          3,982
 Noncash compensation                                1,274,289        139,900
 Impairment                                            531,665              -
 Other general and administrative expenses             353,166        152,707
                                                  ------------   ------------
     Total operating expenses                        2,352,728        484,451
                                                  ------------   ------------
Net loss                                          $ (2,155,961)  $   (284,328)
                                                  ============   ============
Basic and diluted loss per common share and
     member unit, respectively                    $      (0.13)  $      (0.03)
                                                  ============   ============
Weighted average number of common
  shares and member units outstanding,
  respectively                                      16,475,395      8,583,410
                                                  ============   ============





















--------------------------------------------------------------------------------
                                       5
<PAGE>
                                       YTEL INTERNATIONAL, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                     (UNAUDITED)
                                 For the Six Months Ended June 30, 2005 and 2004
-------------------------------------- -----------------------------------------
<TABLE>
<S>                                                                 <C>            <C>
                                                                         2005          2004
                                                                    -------------  -------------
Cash flows from operating activities:
  Net loss                                                          $ (3,576,641)  $   (666,073)
  Adjustments to reconcile net loss to
   net cash used in operating activities:
     Depreciation and amortization                                        39,148         20,482
     Bad debt expense                                                     55,000         39,800
     Estimated fair value of common stock issued for services            277,976              -
     Decrease in fair value of stock issued for intangible asset         222,000              -
     Amortization of prepaid services and intangible assets              836,242              -
     Amortization of Deferred Compensation                                     -         46,000
     Impairment loss on prepaid services                                 150,000              -
     Impairment loss on property and equipment                           159,665              -
     Estimated fair value of services rendered by members                      -        240,000
     Estimated fair value of options granted for consulting services   1,226,250              -
     Estimated fair value of warrants issued for services                 73,125              -
     Changes in operating assets and liabilities:
       Accounts receivable                                                35,340        (46,858)
       Deposits                                                                -        (47,962)
       Prepaid expenses                                                   (8,143)        (7,060)
       Due from stockholders                                               1,963              -
       Due from members                                                        -         (6,075)
       Other assets                                                        9,000              -
       Accounts payable and accrued expenses                             (41,619)       236,723
       Due to related parties                                                  -        138,284
       Unearned income                                                         -         18,427
                                                                    ------------   ------------
Net cash used in operating activities                                   (540,694)       (34,312)
                                                                    ------------   ------------
Cash flows from investing activities:

  Purchase of intangible assets                                          (25,000)             -
  Purchases of fixed assets                                              (87,743)      (134,498)
                                                                    ------------   ------------
Net cash used in investing activities                                   (134,498)      (112,743)
                                                                    ------------   ------------
Cash flows from financing activities:
  Issuance of common stock for cash                                      707,590              -
  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
  Proceeds from issuance of member units                                       -        152,000
  Purchase of member units                                                     -        (15,000)
                                                                    ------------   ------------
</TABLE>


                                       6
<PAGE>


                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005


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

Company Description and Nature of Operations
--------------------------------------------
Nature of Business

The accompanying  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  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 June 30, 2005,  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 raise working  capital
through the public  markets.  Specifically,  the  Company  has  entered  into an
agreement with Revlon Holdings and Omega Financial  Services  regarding the sale
of the  Company's  restricted  common  stock to  non-U.S.  persons as defined in
Regulation S,  promulgated  under the  Securities  Act of 1933, as amended,  for
amounts up to  $2,000,000.  The  Company  has  received  proceeds  approximating
$707,590 under such  agreement.  In addition,  in June 2005, the Company entered
into a line of credit agreement with Barclay Asset Management for proceeds up to
$5,000,000 (See note 7).

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.
                                       7

<PAGE>


Principles of Consolidation

The accompanying 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.

  Concentration of Credit Risk and Foreign Operations

The Company offers its services predominately 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.

One customer  accounted for 93% and 66% of the total net sales for the six-month
periods ended June 30, 2005 and June 30, 2004,  respectively and 94% and 100% of
the accounts receivable as of June 30, 2005 and June 30, 2004, respectively. All
funds have subsequently been collected.





<PAGE>


                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005


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

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 June 30, 2005,  the Company
recorded  impairment charges totaling $531,665 relating to the decline in market
value of the stock received in connection with the cancellation of its agreement
with EBI  Communications  (see note 3),  valuation of property and  equipment in
Panama (see note 8), and the  assessment  of the  valuation of prepaid  services
(see Note 5). 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.

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 two sources:
1) 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;  and 2) port rental  charges  resulting  from  leasing a
portion of the DMS switch to Digicel,  whereby the revenue is recognized  during
the month for which the revenue applies.

Stock-Based Compensation

The Company  uses the  intrinsic  value  method of  accounting  for  stock-based
compensation to employees in accordance with Accounting Principles Board Opinion
("APB")  No.  25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
Interpretations.  The Company accounts for non-employee stock-based compensation
under Statement of Financial  Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation." At June 30, 2005, the Company has one stock-based
employee  compensation  plan.  No  option-based  employee  compensation  cost is
reflected in the June 30, 2005 and 2004  consolidated  statements of operations.
The following table illustrates the effect on net loss and loss per share if the
Company  had applied the fair value  recognition  provisions  of SFAS No. 123 to
stock-based employee compensation:


<PAGE>


                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005


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

                                              6 months ended    6 months ended
                                                  6/30/05           6/30/04
                                              --------------    --------------
         Net loss, as reported                $   (3,576,641)   $     (666,073)
         Deduct:
           Total stock-based employee
             compensation under APB
             No. 25, net of related
             tax expense                                   -                 -
         Add:
           Total stock-based employee
             compensation expense
             under fair value based
             method for all awards,
             net of related tax effect                     -                 -
                                              --------------    --------------
         Pro forma net loss                   $   (3,576,641)   $     (666,073)
                                              ==============    ==============
         Basic and diluted loss per
           share and member unit,
           respectively - as reported         $        (0.22)   $        (0.08)
                                              ==============    ==============
         Basic and diluted loss per
           share and member unit,
           respectively - proforma            $        (0.22)   $        (0.08)
                                              ==============    ==============


                                              3 months ended    3 months ended
                                                  6/30/05           6/30/04
                                              --------------    --------------
         Net loss, as reported                $   (2,155,961)   $     (284,328)
         Deduct:
           Total stock-based employee
             compensation under APB
             No. 25, net of related
             tax expense                                   -                 -
         Add:
           Total stock-based employee
             compensation expense
             under fair value based
             method for all awards,
             net of related tax effect                     -                 -
                                              --------------    --------------
         Pro forma net loss                   $   (2,155,961)   $     (284,328)
                                              ==============    ==============
         Basic and diluted loss per
           share and member unit,
           respectively - as reported         $        (0.13)   $        (0.03)
                                              ==============    ==============
         Basic and diluted loss per
           share and member unit,
           respectively - proforma            $        (0.13)   $        (0.03)
                                              ==============    ==============


<PAGE>




                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005


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

Issuance of Stock for Non-cash Considerations

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.
Accordingly,  the Company recorded the fair value of the common stock issued for
consulting  services as prepaid services in its consolidated  balance sheet (see
Note 5).

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 June 30, 2005 and 2004, the Company had no potentially dilutive
securities that would affect loss per share or per member unit, respectively.

Reclassifications

Certain   reclassifications  have  been  made  to  prior  year  amounts  in  the
consolidated  financial  statements  in order to  conform  to the  current  year
presentation.  These  reclassifications  have no effect on  previously  reported
results of operations.


NOTE 2 - PROPERTY AND EQUIPMENT
         ----------------------

Property and equipment consists of the following at June 30, 2005:



         Equipment                                               $    687,460
         Furniture                                                      3,000
                                                                 ------------
                                                                      690,460

         Less accumulated depreciation                              ( 104,768)
                                                                 ------------
         Fixed assets, net                                            585,692

         Equipment installation in process (Panama)                   300,000
                                                                 ------------
         Property and equipment, net                             $    885,692
                                                                 ============

On August 3, 2005 the Company entered into an agreement to sell the property and
equipment in Panama for $300,000  (see Note 8).  Depreciation  and  amortization
expense for property and  equipment for the periods ended June 30, 2005 and 2004
was $39,148 and $20,482 respectively.


                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005

NOTE 3 - INTANGIBLE ASSET
         ----------------

In October 2004, the Company  entered into an exclusive  worldwide  distribution
agreement (the "Distribution Agreement") with EBI Communications,  Inc. ("EBI").
In accordance  with the  Distribution  Agreement,  the Company  agreed to pay an
exclusive  marketing  fee of  $100,000,  $5,000  payable  upon  execution of the
Distribution  Agreement and $95,000 within 60 days thereafter,  of which $25,000
was paid during the six months ended June 30, 2005. Also, in  consideration  for
receiving  the exclusive  distribution  rights,  the Company  issued EBI 300,000
shares of restricted common stock valued at approximately $675,000 (based on the
estimated fair market value on the date of issuance) and recorded such amount as
an intangible asset in accompanying  consolidated  balance sheet. The Company is
amortizing  such amount to expense over the 10-year life of the  agreement.  The
Company has amortized  $18,277 to expense during the three months ended June 30,
2005.

Effective June 2005, the Company terminated the contract with EBI, canceling all
shares and  requiring  EBI to refund all advances  made by the Company under the
Distribution  Agreement,  which totaled  $55,000 at June 30, 2005 due to alleged
breach of contract by EBI.  The Company has  recorded  the  decrease in the fair
value of the stock issued and returned to the Company as an  impairment  loss of
$222,000 in the accompanying  condensed  consolidated  financial statements.  In
addition, the Company has recorded a reserve against the amounts due from EBI of
$55,000, due to the potential uncollectibility of such amounts.


NOTE 4 - RELATED PARTY TRANSACTIONS
         --------------------------

On February  18, 2004,  the Company  repurchased  2,474,581  member units from a
majority  member for  $242,000  for the purpose of  reissuing  such units to new
members. At December 31, 2004, the remaining balance to be paid was $227,000. In
January 2005, as part of a settlement agreement (see below), all amounts payable
to the related  party were  forgiven and the $227,000 was recorded as additional
paid in capital.

During the year ended  December  31,  2004 and the  period  from  August 8, 2003
through  December 31, 2003,  the Company  purchased  several pieces of equipment
(totaling  $3,472 and  $132,000  in 2004 and 2003,  respectively)  and  received
contract  labor and other services  (totaling  $197,949 and $172,437 in 2004 and
2003,  respectively) from a company owned by a stockholder of the Company.  Such
amounts totaled $327,598, net of amounts due from the related party of $178,260.
In January  2005,  the Company and the related  party  entered into a settlement
agreement  (the  "Settlement")  for all amounts owed and amounts due between the
parties.  In  accordance  with the  Settlement,  the Company is required to make
payments of $20,000 per month  beginning in February 2005 and a final payment of
$12,402 in June  2006.  In  connection  with the  Settlement,  the  Company  was
relieved from $227,000 owed to the related party (see above), which was credited
to additional paid in capital in 2005.

The Company  entered into  consulting  agreements  with three  stockholders  for
services to be provided through June 2005 (see Note 6).


NOTE 5 - EQUITY
         ------

During the  six-month  period  ended June 30,  2005 the Company  issued  955,812
shares of restricted common stock for cash totaling $707,590.

During the three months ended June 30, 2005,  the Company  issued 100,000 shares
of restricted common stock to a consultant in connection with the performance of
consulting  services.  The 100,000  shares were valued at $84,000  (based on the
fair value of the common stock at the respective  measurement date) and expensed
during the three month period ended June 30, 3005.

During the three months ended June 30, 2005,  the Company issued 3,600 shares of
restricted  common stock to a consultant in connection  with the  performance of
consulting  services.  The 3,600 shares were valued at $4,476 (based on the fair
value of the common  stock at the  respective  measurement  dates) and  expensed
during the three month period ended June 30, 2005.

During the three months ended June 30, 2005, the Company issued 50,000 shares of
restricted  common stock to the Company's new Chief Technical Officer and 50,000
shares of restricted common stock to a new board member as signing bonuses.  The
100,000  shares were  valued at $141,000  (based on the fair value of the common
stock at the respective  measurement dates) and expensed during the period ended
June 30, 2005.

Stock for Services:

During the year ended  December 31, 2004,  the Company  issued 510,000 shares of
restricted   common  stock  to  various   consultants  in  connection  with  the
performance of consulting  services to be performed  through  December 2005. The
510,000 shares were valued at $1,470,000  (based on the fair value of the common
stock at the respective  measurement  dates) and recorded as prepaid services in
the



<PAGE>


                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2005

NOTE 5 - EQUITY (Continued)
         ------

consolidated  balance sheet.  Such amount is being amortized to expense over the
lives of the related agreements, of which $339,375 was expensed during the three
month period ended June 30, 2005.  Effective June 2005,  the Company  terminated
the contract  with Van Orten & Partners.  The Company has recorded an impairment
loss of $150,000 in the accompanying condensed consolidated financial statements
based  on the  carrying  value  of the  prepaid  services  at  the  time  of the
impairment.

During the three months ended March 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 as prepaid services in
the accompanying  consolidated  balance sheet. Such amount is being amortized to
expense over the lives of the related agreements,  of which $31,563 was expensed
during the three month period ended June 30, 2005.

Stock Options

For the three month period ended June 30, 2005, the Company expensed $613,125 as
stock  compensation  expenses for the vesting of options  issued to  consultants
during fiscal 2004. In connection with consulting  agreements (see Note 6), with
three  stockholders,  the Company  issued  options to purchase an  aggregate  of
1,500,000  shares of common stock,  with an exercise price of $0.55,  which vest
immediately and expire through September 2007. The options were valued using the
Black Scholes option  pricing model at an aggregate of  $1,635,000.  The Company
amortized such amount over the lives of the related consulting  agreements which
ended on June 30, 2005.

Warrants

During the three months ended March 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),  vests monthly through January 2006 and expires in January 2008.
Such amount is being recorded as noncash  compensation  expense over the life of
the related  agreement,  of which  $43,875 was  expensed  during the three month
period ended June 30, 2005.

NOTE 6 - 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 State of
Florida and Delaware.  In connection with its facility  leases,  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 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  financial  position  or  results of
operations.

Employment Agreements

During 2004, the Company entered into  employment  agreements with two officers.
Such agreements are in effect through September 2006 and continue in effect from
year to year thereafter  unless otherwise  terminated,  pursuant to the terms of
such contracts. Future annual minimum payments under these employment agreements
approximate $288,000, with potential annual increases, as defined.

Consulting Agreements
In October  2004,  the Company  entered into  consulting  agreements  with three
stockholders.  Such agreements were in effect through June 2005 and provided for
aggregate monthly consulting fees of $36,000.  In connection with the consulting
agreements,  the Company  issued  options to purchase an  aggregate of 1,500,000
shares of  common  stock  (see Note 5).  Approximately  $108,000  of  consulting
expense  related to the monthly  consulting  fees was recorded  during the three
month period ended June 30, 2005.


<PAGE>



                            Y-TEL INTERNATIONAL, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                            June 30, 2005 (unaudited)


NOTE 7 - DEBT
         ----

The Company  entered into a secured  line-of-credit  agreement (the "Line") with
Barclay Asset  Management  on June 29, 2005,  secured by shares of the Company's
common stock  ("Security  Interest").  The Line provides for borrowings of up to
$5,000,000  at LIBOR  plus 2%. The Line  requires  quarterly  interest  payments
beginning  with the  completion  of the draws  against  the credit line with one
principal payment on July 31, 2010, the maturity date. The Company may borrow up
to 50% of the  value  of the  Security  Interest.  The  Company  has  designated
approximately  7,000,000 shares of its common stock as security for the Line and
has placed  such  shares in escrow.  The  shares are not  recorded  as issued or
outstanding in the accompanying condensed consolidated financial statements.  In
accordance with the terms of the Line, the Company has approximately  $5,000,000
available  under the Line.  As of August 15, 2005,  the Company has not received
any proceeds under the Line.

In June 2005,  the Company issued a convertible  note payable (the  "Convertible
Note") totaling $70,000,  bearing interest at 8% per annum. The Convertible Note
requires  quarterly  interest  payments  beginning  in  September  2005  and one
principal  payment in June 2007, the maturity date. The Convertible  Note may be
converted to common stock of the Company at any time at the option of the holder
at $3.00 per share.


NOTE 8 - SUBSEQUENT EVENTS
         -----------------

On August 3, 2005 the Company entered into an agreement to sell the property and
equipment in Panama City,  Panama for  $300,000.  Management  has  concluded the
opportunities in Panama have  significantly  changed and no longer require a DMS
platform  to  generate  revenue.   Accordingly,  the  Company  has  recorded  an
impairment expense of $159,665 based on the book value of such assets.


<PAGE>



Item 2 - Management's Discussion and Analysis or Plan of Operation

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 June 30,
2005 and  therefore,  an  allowance  for bad debts has not been  recorded in the
financial statements.  For the quarter ended June 30, 2005, 93% of the Company's
revenue was provided  from one customer and there have been no  indications  the
customer's  financial  condition  has  deteriorated.  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 currently generated from two sources:
1) 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;  and 2) port rental  charges  resulting  from  leasing a
portion of the DMS switch to Digicel,  whereby the revenue is recognized  during
the month for which the revenue applies.

Stock-Based Compensation




<PAGE>

The Company  uses the  intrinsic  value  method of  accounting  for  stock-based
compensation to employees in accordance with Accounting Principles Board Opinion
("APB") No. 25, as amended,  "Accounting  for Stock  Issued to  Employees."  The
Company accounts for non-employee  stock-based  compensation  under Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation."  At June 30,  2005,  the  Company  had one  stock-based  employee
compensation  plan. The Company accounts for this plan under the recognition and
measurement principles of APB No. 25, and related  interpretations.  The Company
has  applied  the  disclosure  provisions  in SFAS No.  148 in its  consolidated
financial statements and the accompanying notes.

Issuance of Stock for Non-cash Considerations

All issuance 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 bat 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.
Accordingly,  the Company  records the fair value of the common stock issued for
consulting services to be performed in future periods as prepaid services in its
consolidated balance sheet.

Results of Operations - Period Ended June 30, 2005 Compared to
                        Period Ended June 30, 2004

Summary

The second  quarter of 2005 became the starting point of a new direction for the
Company.  Y-Tel is no longer just a wholesale  telecomm  company  utilizing  the
standard  DMS  platforms.  Y-Tel  is now a  wholesale  and  retail  provider  of
telecommunication,  Voice over Internet  Protocol  (VoIP) and Wi-Fi services and
devices.  To support this new  direction,  the Company  recently  completed  the
deployment  of a fully  redundant  VoIP  network to support  the  company's  new
wholesale and retail product lines.  Additionally,  management has  restructured
the entire Company and implemented plans to relocate the base of operations from
Miami, Florida to Dallas, Texas.


<PAGE>

The restructure focused on accountability and productivity.  It required a total
restructure of the Board of Directors and implementation of a new organizational
structure,  capitalizing on the technical expertise of the new leadership of the
Company.  The new Board of Directors consists of Steve Lipman, John Conroy, Todd
Wallace,  Dan Robison and Allan Tracey.  Mr. Wallace was hired in April to serve
as the Company's  Chief  Technical  Officer and Mr. Robison was hired in July to
serve as the Company's new Chief Operating Officer. Accompanied by Allan Tracey,
these three individuals have the technical  expertise and organizational  skills
needed to successfully penetrate the new VoIP and Wifi markets.

To further support the technical requirements of the plan, management hired Hugh
Goldstein as the Company's new VP of Carrier  Services and contracted with Steve
Chapman and Bob Wright to initiate the  implementation  of the new VoIP and Wifi
infrastructure.

On May 17, the Company  purchased a  soft-switch  manufactured  by Nextone.  The
equipment was installed in Miami and is now facilitating  the wholesale  traffic
utilizing  a VoIP  network.  A  second  soft-switch  was  purchased  in  June to
establish  the  redundant  VoIP  network.  This second  switch was  installed in
Dallas,  Texas and became  operational  on August 8,  2005.  To  compliment  the
performance of the Company's new VoIP network, management implemented a 24/7 NOC
(Network  Operations  Center)  to  ensure  constant  monitoring  of  routes  for
utilization and quality.

During the second quarter, the new management team also selected two Wifi phones
to market and  tested a mesh  network  to be used in  conjunction  with the wifi
phones.  The test was  successful  and  management is now deploying its own test
site in Texas.

On  July  20,  2005,   the  Company  filed  patents  for  its  new   combination
Wi-Fi/Hotspot phone.

Net Sales

Net Sales were  $487,765 and $521,437 for the six months ended June 30, 2005 and
2004, respectively, resulting in a 6.4% decrease in revenue when compared to the
same period of time for the previous year. The  incremental  decrease in revenue
reflects the net effect for increased  revenues from port rental charges related
to Digicel and a decrease in international and domestic traffic.

Net sales were  $233,727 and  $300,752 for the quarters  ended June 30, 2005 and
2004,  respectively;  resulting in a 22.2%  decrease in revenue when compared to
the same  period of time for the  previous  year.  The  incremental  decrease in
revenue is directly  attributed  to lower  international  and  domestic  traffic
revenues.

Cost of Sales

Cost of Sales were  $103,053 and $263,984 for the six months ended June 30, 2005
and 2004,  respectively,  resulting in a 61% decrease  when compared to the same
period of time for the previous  year.  The decrease in Cost of Sales is largely
attributed to lower  terminating  expenses  resulting  from the  elimination  of
routes to Nigeria  because of low margins and poor  quality.  Additionally,  the
Company experienced lower terminating  expenses resulting from a drop in traffic


<PAGE>

volumes for both Domestic and International  routes during the second quarter of
2005.

Cost of sales were $36,960 and $100,629 for the quarters ended June 30, 2005 and
2004, respectively; resulting in a 62.3% decrease in Cost of Sales when compared
to the same period of time for the previous year.  The reduction  reflects lower
terminating  expenses resulting from a drop in traffic volumes for both Domestic
and International routes.

Operating Expenses

Operating  Expenses were  $3,961,353  and $923,526 for the six months ended June
30, 2005 and 2004,  respectively,  resulting in a 329% increase when compared to
the same period of time for the previous year. Of this  increase,  approximately
$2,410,789 is related to non-cash  expenses  related to consulting  services and
stock  options for  non-employees;  and $531,665  related to  impairment  losses
resulting from the termination of the EBI Communications contract, impairment of
prepaid services and a write-down of the assets in Panama.

Operating  Expenses were $2,352,728 and $484,451 for the quarters ended June 30,
2005 and 2004,  respectively;  resulting in a 386% increase  Operating  Expenses
when  compared  to the  same  period  of time  for the  previous  year.  Of this
increase,  approximately  $1,274,289 is related to non-cash  expenses related to
consulting services and stock options for non-employees; and $531,665 related to
impairment  losses  resulting  from the  termination  of the EBI  Communications
contract,  impairment  of prepaid  services  and a  write-down  of the assets in
Panama.  This compares to $139,900  related to non cash consulting fees incurred
during the same quarter in fiscal 2004.

Liquidity and Capital Resources

The  Company had net working  capital  deficit of $304,174 as of June 30,  2005.
This is largely  attributed  to the  decrease of amount  capitalized  as prepaid
services  resulting from common stock issued for services to be rendered through
March 2006. The Company believes the funding  arrangements  provided through the
sale of common stock under  Regulation S and the funding  agreement  executed in
June 2005 are  sufficient to meet its working  capital needs for the next twelve
months.  However,  implementation of the Company's strategic plan related to the
production of the Company's Wifi phones, will require additional capital.

Going Concern

The accompanying  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 June 30, 2005,  and has a lack of
operational history,  which, among other factors, raises 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 raise working  capital
through the public  markets.  Specifically,  the  Company  has  entered  into an
agreement with Revlon Holdings and Omega Financial  Services  regarding the sale


<PAGE>

of the  Company's  restricted  common  stock to  non-U.S.  persons as defined in
Regulation S,  promulgated  under the  Securities  Act of 1933, as amended,  for
amounts up to  $2,000,000.  During the first quarter  ended March 31, 2005,  the
Company sold 769,888  shares of restricted  common stock for cash  approximating
$569,000.  During the second  quarter  ended June 30,  2005,  the  Company  sold
185,924 shares of restricted common stock for cash approximating $138,000.

In addition,  in June 2005, the Company entered into a line of credit  agreement
with Barclay Asset Management for proceeds up to $5,000,000.

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.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most  significant  risks to
our business,  but we cannot predict whether or to what extent any of such risks
may be realized, nor can there be any assurances that the Company has identified
all possible  risks that might arise.  Current and  potential  investors  should
carefully consider all of the following risk factors before making an investment
decision with respect to our stock.

We Have a Limited History

The  Company  was  founded  in August  2003 and thus,  has a limited  history of
operations.  The Company may  encounter  unanticipated,  unusual,  or unexpected
risks and problems,  which could adversely affect our operations,  revenue,  and
ability to obtain a profit.

We Require Additional Capital for Production of Wifi Phones

The Company will require additional capital for production of Wifi phones. If we
are unable to raise  capital when our needs  arise,  we will be unable to pursue
our current business strategy and may not be able to fund our operations.

We Require Additional Capital for Acquiring Other Companies

The Company will require  additional  capital for acquisition of other companies
that will complement the Company's  growth  strategy.  If we are unable to raise
capital when our needs arise,  we will be unable to pursue our current  business
strategy and may not be able to fund our operations.

If We Obtain Additional Financing, or Acquire Companies using Our Common Stock,
It Could Dilute Present Stockholder Holdings.

We will likely need to raise money through the sale of additional  equity within
the  next  twelve  months,  in one or  more  private  placements  and/or  public
offerings.  If we do so, all of the then current existing stockholders and their
stock  holdings will be  proportionately  diluted.  In addition,  we will likely
acquire companies using our common stock as  consideration.  If we do so, all of
our  existing  stockholders  at such  time  and  their  stock  holdings  will be
proportionately diluted.


<PAGE>

Our Business Depends on:

     A.   The Company's ability to secure adequate funding to ensure the Company
          meets its financial objectives.
     B.   The Company's ability to obtain Tier 1 routes for our customers.
     C.   The Company's ability to offer competitive rates to our customers.

Our Aggressive Business Plans Will Place a Significant Strain on Our Assets.

Implementation of our aggressive  acquisition  strategy will impose  significant
strains on our  management,  operating  systems  and  financial  resources.  The
acquisitions  that we are  currently  contemplating  would  involve  substantial
expenditures of our time and resources to close. If we fail to manage our growth
or encounter unexpected  difficulties during expansion, it could have a material
adverse effect on our financial condition and results of operations. The pursuit
and  integration of  acquisitions  will require  substantial  attention from our
senior  management,  which will limit the amount of time they are able to devote
to our existing operations.

We Are Heavily Dependent on Our Senior Management.

If we  lose  members  of our  senior  management,  we may  not be  able  to find
appropriate  replacements on a timely basis, and our business could be adversely
affected.  Our existing  operations and continued future development depend to a
significant extent upon the performance and active  participation of certain key
individuals,  including  our Chief  Executive  Officer  and our Chief  Financial
Officer.  We  cannot  guarantee  that we will be  successful  in  retaining  the
services  of  these  or  other  key  personnel.  If we were to lose any of these
individuals,  we may not be able to find  appropriate  replacements  on a timely
basis and our financial  condition and results of operations could be materially
adversely affected.

We have a history of losses.

We incurred consolidated net losses of $3,576,641 and $666,073 during the period
ended June 30, 2005 and 2004, respectively. Management believes that our revised
business plan will be successful and we will become profitable;  however,  there
can be no assurance that we will be successful in implementing our business plan
or that we will be profitable now or in the future.

Because Our Competition Has Greater Experience and Resources Than We Do, We May
Be at a Competitive Disadvantage.

Many of our  competitors  have  significantly  greater  experience and financial
resources than us, which could place us at a competitive disadvantage.

In addition to historical  information,  management's discussion and analysis or
plan of operation includes certain forward-looking  statements,  including,  but
not limited to, those  related to our growth and  strategies,  future  operating
results and financial position as well as economic and market events and trends.
All  forward-looking  statements made by us,  including such statements  herein,
include  material  risks and  uncertainties  and are subject to change  based on
factors beyond our control.


<PAGE>

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.

Item 3 - Controls and Procedures

As of June 30, 2005, an  evaluation  was carried out under the  supervision  and
with  the  participation  of  the  Company's  management,  including  our  Chief
Executive Officer and our Chief Financial  Officer,  of the effectiveness of the
design and operation of our  disclosure  controls and  procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under Securities  Exchange Act of 1934.) Based upon
that  evaluation,  the Chief Executive  Officer and the Chief Financial  Officer
conclude  that the  design  and  operation  of  these  disclosure  controls  and
procedures  were  effective.  No  significant  changes were made in our internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to June 30, 2005.

(a) Evaluation of Disclosure Controls and Procedures. The Company carried out an
evaluation  under the  supervision and with the  participation  of the Company's
management,  including the Company's Chief  Executive  Officer ("CEO") and Chief
Financial  Officer ("CFO"),  of the  effectiveness  of the Company's  disclosure
controls and procedures.  Based upon that evaluation,  the CEO and CFO concluded
that as of June 30, 2005 our disclosure  controls and procedures  were effective
in timely alerting them to the material  information relating to the Company (or
the  Company's  consolidated  subsidiaries)  required  to  be  included  in  the
Company's  periodic filings with the SEC, subject to the various  limitations on
effectiveness   set  forth  below  under  the  heading,   "LIMITATIONS   ON  THE
EFFECTIVENESS  OF INTERNAL  CONTROL," such that the information  relating to the
Company,  required to be disclosed  in SEC reports (i) is  recorded,  processed,
summarized  and  reported  within the time  periods  specified  in SEC rules and
forms,  and (ii) is accumulated and  communicated  to the Company's  management,
including our CEO and CFO, as  appropriate to allow timely  decisions  regarding
required disclosure.

(b) Changes in internal  control  over  financial  reporting.  There has been no
change in the Company's internal control over financial  reporting that occurred
during the fiscal quarter ended June 30, 2005 that has materially  affected,  or
is reasonably likely to materially  affect,  the Company's internal control over
financial reporting.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

The  Company's  management,  including the CEO and CFO, does not expect that our
disclosure  controls  and  procedures  or our internal  control  over  financial
reporting will  necessarily  prevent all fraud and material  error.  An internal
control  system,  no matter how well  conceived and  operated,  can provide only
reasonable,  not absolute,  assurance  that the objectives of the control system
are met.  Further,  the design of the control  system must reflect that the fact
that there are  resource  constraints,  and the  benefits  of  controls  must be
considered  relative to their costs.  Because of the inherent  limitation in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control issues and instances of fraud,  if any, within the Company have been
detected.  These  inherent  limitations  include the realities that judgments in
decision-making  can be faulty,  and that breakdowns can occur because of simple


<PAGE>

error or mistake.  Additionally,  controls can be circumvented by the individual
acts of some  persons,  by  collusion of two or more  people,  or by  management
override of the internal  control.  The design of any system of controls also is
based in part upon certain assumption about the likelihood of future events, and
there can be no assurance  that any design will succeed in achieving  its stated
goals  under all  potential  future  conditions.  Over time,  control may become
inadequate  because of changes in  conditions,  and/or the degree of  compliance
with the policies or procedures may deteriorate.


                                     PART II

Item 1 - Legal Proceedings

     None

Item 2 - Unregistered Sale of Equity Securities and Use of Proceeds

For the period ended June 30, 2005, the Company  issued the following  shares of
its common stock  without  registration  under the  Securities  Act of 1933,  as
amended (the "Securities Act"):

     1.   On April,  May 1 and June 1, 2005,  the Company issued 3,600 shares of
          common  stock  to  Osprey   Partners  in  connection  with  consulting
          services;

     2.   On April 26, 2005,  the Company  issued 100,000 shares of common stock
          to Harvey Nelson in connection with consulting services;

     3.   On June 9, 2005,  the Company  issued 50,000 shares of common stock to
          Todd  Wallace as a signing  bonus for  assuming  the position of Chief
          Technical Officer for the Company;

     4.   On June 23, 2005,  the Company issued 50,000 shares of common stock to
          Allan  Tracey as a signing  bonus for assuming a position on the Board
          of Directors and providing technical guidance for the Company;

     5.   During  the period  ended June 30,  2005 the  Company  issued  185,924
          shares of restricted common stock for cash totaling $137,909.

The above  issuances  were  unregistered,  as the  Company  was  relying  on the
exemptions  from  registration  contained in  Regulation  S, Section 4(2) of the
Securities Act, and Regulation D promulgated thereunder,  on the basis that such
transactions  were effected  outside of the United States and/or did not involve
public offerings of securities.

Item 3 - Defaults upon Senior Securities

     Not applicable.

Item 4 - Submission of Matters to a Vote of Security Holders

     Not applicable.


<PAGE>

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
                32.2     Certification of Chief Financial Officer



<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/ Steve Lipman
                ----------------
                    Steve Lipman, President and CEO

       Date:    August 15, 2005