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, 2006


     [ ]  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 Identification Number)
incorporation of organization)

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

                                 (225) 273-1100
                           (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 ( )


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

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












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


PART I       FINANCIAL INFORMATION
------       ---------------------

Item 1       Financial Statements                                             3
------       --------------------

Item 2       Management's Discussion and Analysis or Plan of Operation       17
------       ---------------------------------------------------------

Item 3       Controls and Procedures                                         23
------       -----------------------




PART II      OTHER INFORMATION
-------      -----------------

Item 1       Legal Proceedings                                               25
------       -----------------

Item 2       Unregistered Sales of Equity Securities and Use of Proceeds     25
------       -----------------------------------------------------------

Item 3       Defaults upon Senior Securities                                 25
------       -------------------------------

Item 4       Submission of Matters to a Vote of Security Holders             25
------       ---------------------------------------------------

Item 5       Other Information                                               25
------       -----------------

Item 6       Exhibits                                                        25
------       --------

SIGNATURES                                                                   26
----------













                                       2
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                                            CONDENSED CONSOLIDATED BALANCE SHEET
                                                                     (UNAUDITED)

                                                                   June 30, 2006
--------------------------------------------------------------------------------
ASSETS

Current assets:
   Cash                                                         $      10,107
   Accounts receivable, net                                             5,452
   Prepaid expenses                                                    16,621
   Note receivable                                                      8,000
                                                                -------------
        Total current assets                                           40,180

Property and equipment, net                                           139,865
                                                                -------------
                                                                $     180,045
                                                                =============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                             $     974,029
   Accrued expenses                                                   255,458
                                                                -------------
        Total current liabilities                                   1,229,487
                                                                -------------
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                                            (9,752,070)
                                                                ------------
    Total stockholders' deficit                                   (1,049,442)
                                                                ------------
                                                                $    180,045
                                                                ============








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

     See accompanying notes to condensed consolidated financial statements.
                                       3
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)


                                 For The Six Months Ended June 30, 2006 and 2005
--------------------------------------------------------------------------------
                                                       2006          2005
                                                   ------------- -------------
Net sales                                          $     91,211  $    487,765

Cost of sales                                            85,574       103,053
                                                   ------------  ------------
Gross profit                                              5,637       384,712
                                                   ------------  ------------
Operating expenses:
  Satellite, bandwidth and other
    telecommunications expenses                          24,851        52,732
  Contract labor                                          6,789       116,205
  Salaries and related expenses                          89,878       216,502
  Noncash compensation                                  263,411     2,410,789
  Impairment                                                  -       531,665
  Other general and administrative
    expenses                                            204,992       633,460
                                                   ------------  ------------
       Total operating expenses                         589,921     3,961,353
                                                   ------------  ------------
Net loss                                           $   (584,284) $ (3,576,641)
                                                   ============  ============
Basic and diluted loss per common share            $      (0.03) $      (0.22)
                                                   ============  ============
Weighted average number of common shars
  outstanding                                        17,528,193    16,147,123
                                                   ============  ============




















--------------------------------------------------------------------------------
     See accompanying notes to condensed consolidated financial statements.
                                       4
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)

                               For The Three Months Ended June 30, 2006 and 2005
--------------------------------------------------------------------------------
                                                        2006           2005
                                                   ------------  -------------
Net sales                                          $      2,246  $     233,727

Cost of sales                                             1,899         36,960
                                                   ------------  -------------
Gross profit                                                347        196,767
                                                   ------------  -------------
Operating expenses:

  Satellite, bandwidth and other
   telecommunications expenses                                -         27,090
  Contract labor                                          1,500         40,620
  Salaries and related expenses                          44,786        125,898
  Noncash compensation                                  231,000      1,274,289
  Impairment                                                  -        531,665
  Other general and administrative expenses              67,519        353,166
                                                   ------------  -------------
       Total operating expenses                         344,805      2,352,728
                                                   ------------  -------------
Net loss                                           $   (344,458) $  (2,155,961)
                                                   ============  =============
Basic and diluted loss per common share            $      (0.02) $       (0.13)
                                                   ============  =============
Weighted average number of common shares
  outstanding                                        17,947,593     16,475,395
                                                   ============  =============





















--------------------------------------------------------------------------------
     See accompanying notes to condensed consolidated financial statements.
                                       5
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                     (UNAUDITED)

                                 For The Six Months Ended June 30, 2006 and 2005
--------------------------------------------------------------------------------
                                                        2006          2005
                                                   ------------  ------------
Cash flows from operating activities:
  Net loss                                         $   (584,284) $ (3,576,641)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
     Depreciation and amortization                       17,492        39,148
     Bad debt expense                                         -        55,000
     Estimated fair value of common stock
      issued for services                               231,600       277,976
     Loss on sale of intangible asset                         -       222,000
     Amortization of prepaid services and
      intangible assets                                  17,186       836,242
     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        73,125
     Changes in operating assets and liabilities:
        Accounts receivable                               4,385        35,340
        Prepaid expenses                                  9,986        (8,143)
        Due from stockholders                                 -         1,963
        Other assets                                          -         9,000
        Accounts payable and accrued expenses           231,991       (41,619)
                                                   ------------  ------------
  Net cash used in operating activities                 (57,019)     (540,694)
                                                   ------------  ------------
Cash flows from investing activities:
     Purchase of intangible assets                            -       (25,000)
     Purchases of fixed assets                                -       (87,743)
     Proceeds from note receivable                       40,000             -
                                                   ------------  ------------
     Net cash provided by (used in) investing
      activities                                         40,000      (112,743)
                                                   ------------  ------------
Cash flows from financing activities:
     Issuance of common stock for cash                   20,655       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
                                                   ------------  ------------
     Net cash provided by financing activities           20,655       762,190
                                                   ------------  ------------
Increase in cash                                          3,636       108,753



--------------------------------------------------------------------------------
     See accompanying notes to condensed consolidated financial statements.
                                       6
<PAGE>
                                      Y-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                                     (UNAUDITED)

                                 For The Six Months Ended June 30, 2006 and 2005
--------------------------------------------------------------------------------
                                                        2006          2005
                                                   ------------  ------------
Cash at beginning of period                               6,471        19,833
                                                   ------------  ------------
Cash at end of period                              $     10,107      $128,586
                                                   ============  ============
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    $          -  $    349,696
                                                   ============  ============
     Receivable in connection with the termination
      of intangible asset agreement                $          -  $     55,000
                                                   ============  ============
























--------------------------------------------------------------------------------
     See accompanying notes to condensed consolidated financial statements.
                                       7
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

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 June 30,
2006, and the results of operations for the three and six months ended June 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 ("SEC"). The
interim results are not necessarily indicative of the results for a full year.

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 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 June 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. The consolidated financial
statements do not include any adjustments to reflect the possible future effects

                                       8
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
--------------------------------------------------------------------
POLICIES (Continued)
--------------------
on the recoverability and classification of assets or the classification of
liabilities that might result from the outcome of these uncertainties.

The Company has curtailed its operations during 2006 in order to conserve its
limited cash. The Company requires additional funding to implement its business
plan. The Company will continue to seek working capital through the public
markets and will seek profitable operating entities (see Note 6) which to
acquire through the issuance of the Company's common stock. 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.

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.

One customer accounted for 87% and 94% of the total net sales for the three
months ended June 30, 2006 and 2005, respectively.  One customer accounted for
10% and 93% of the total net sales for the six months ended June 30, 2006 and
2005, respectively.

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, 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.



                                       9
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
--------------------------------------------------------------------
POLICIES (Continued)
--------------------
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 June 30, 2006, the Company had one stock-based compensation plan. Prior to
January 1, 2006, the Company accounted for these plans 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 six months ended June 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 Payments, 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.
                                       10
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 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 six month period ended June 30, 2006, there was no potential of an
excess tax benefit to the Company.

For the three and six months ended June 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 income and net income per
share for the three and six months ended June 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:

                                                    Six Months   Three Months
                                                       Ended         Ended
                                                   June 30, 2005 June 30, 2005
                                                   ------------- -------------
Net loss - as reported                             $ (3,576,641) $ (2,155,961)
Add: share-based employee compensation
      expense included in net loss, net
      of related tax effects - as reported                    -             -
Deduct: share-based employee compensation
      expense under fair value method, net
      of related tax effects - pro forma                      -             -
                                                   ------------  ------------
Net loss pro forma                                 $ (3,576,641) $ (2,155,961)
                                                   ============  ============
Basic and diluted loss available to common
  stockholders per common share - as reported      $      (0.22) $      (0.13)
                                                   ============  ============
Basic and diluted loss available to common
  stockholders per common share - pro forma        $      (0.22) $      (0.13)
                                                   ============  ============




                                       11
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 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 June 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 six months ended June 30, 2006 and 2005.

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

                                                      June 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 June 30, 2006         2,500,000 $0.55        1.2     $      -
                                        =======================================
   Options exercisable at June 30, 2006 2,500,000 $0.55        1.2     $      -
                                        =======================================







                                       12
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
--------------------------------------------------------------------
POLICIES (Continued)
--------------------
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 June 30, 2006 and 2005, the Company had no potentially dilutive
securities that would affect loss per share.

Reclassifications

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






                                       13
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
--------------------------------------------------------------------
POLICIES (Continued)
--------------------
Recently Issued Accounting Standards

Recent accounting  pronouncements  issued by the Financial  Accounting Standards
Board  (including  it Emerging  Issues Task Force),  the  American  Institute of
Certified Public Accountants and the Securities and Exchange Commissions did not
or are not believed by  management  to have a material  impact on the  Company's
present or future consolidated financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following at June 30, 2006:


Equipment                                            $       169,681
Less accumulated depreciation                                (29,816)
                                                     ---------------
Fixed assets, net                                    $       139,865
                                                     ===============

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
Mercatus & 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 June 30, 2006. As of
August 15, 2006, the Company has not received any funds.

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.

                                       14
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 3 - EQUITY (Continued)
---------------------------
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).

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.

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  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 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


                                       15
<PAGE>
                            Y-TEL INTERNATIONAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
                                  June 30, 2006

NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued)
--------------------------------------------------
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.

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 July 17, 2006, the Company  entered into an Agreement and Plan of Merger (the
"Proposed  Merger  Agreement") for the acquisition of Sunrise  Broadband  Group,
Inc.  ("Sunrise"),  a company in the Internet Protocol based cable TV, wireless,
hi-speed,   Voice  over  Internet  Protocol  Internet  solutions  industry.  The
acquisition  is  dependant  on various  closing  conditions,  including  but not
limited to, approval by the Company's shareholders and the effectiveness of Form
S-4 to be filed with the SEC. Under the Proposed Merger  Agreement,  the Company
will issue approximately  148,614,000 shares of its common stock and warrants to
purchase 3,003,700 shares.  The exercise prices,  vesting periods and expiration
terms of the warrants  have not been  established.  The terms  of  the  Proposed
Merger Agreement  were  determined  by arms-length  negotiations  and  have been
approved by the Boards of Directors of Sunrise and the Company.  The transaction
was not closed as of August 15, 2006.










                                       16
<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 June 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


                                       17
<PAGE>
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 six months ended June 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.

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, 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 - Period June 30, 2006 Compared to Period Ended
June 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 five 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.

                                       18
<PAGE>
Net Sales

Net sales were $91,211 for the period ended June 30, 2006 compared to $487,765
for the period ended June 30, 2005. This represents a decrease of $396,554 or
81.3%. The decrease is primarily attributed to the loss of port rental charges
and domestic traffic originating from Jamaica totaling $475,127 for the period
ended June 30, 2006. However, revenue for the period ended June 30, 2006 also
reflects a 725.9% increase in international traffic when compared to the same
revenue incurred during the period ended June 30, 2005.

Net sales were $2,246 and $233,727 for the quarters ended June 30, 2006 and
2005, respectively; resulting in a 99% decrease in revenue when compared to the
same period of time for the previous year. The incremental 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 six month period ended June 30, 2006 compared
to $103,053 for the six month period ended June 30, 2005. This represents a
decrease of $17,479 or 17%. The variance is attributed to the increase in
international traffic and related termination expenses. It also underscores the
vulnerability of the wholesale business sector and the need to focus resources
on retail products.

Cost of sales were $1,899 and $36,960 for the quarters ended June 30, 2006 and
2005, respectively; resulting in a 94.9% 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 $589,921 for the six month period ended June 30, 2006
compared to $3,961,353 for the six month period ended June 30, 2005. This
represents a decrease of $3,371,432 or 85.1%. Of this decrease, approximately
$819,056 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 $1,284,750 of non cash expenses related to stock options
and warrants issued to consultants during the period ended June 30, 2005.
Additionally, the decrease reflects the non cash expenses related to impairment
losses and the loss of the sale of intangibles of $531,665 incurred during the
period ended June 30, 2005. No such expenses were incurred during the period
ended June 30, 2006.

Operating expenses also include Other G&A expenses of $204,992 compared to
$633,460 for the period ended June 30, 2006 and 2005, respectively. This
represents a decrease of $428,468 or 68% when compared to Other G&A expenses for
2005. Of this decrease, approximately $212,112 is attributed to the reduction in
consulting fees. Additionally, the Company decreased its legal and professional
fees for the period ended June 30, 2006 by $46,881 when compared to the expenses



                                       19
<PAGE>
incurred during the period ended June 30, 2005. The Company also decreased rent
and travel expenses by $41,757 and $41,760 respectively, when compared to the
rent and travel expenses incurred during the period ended June 30, 2005.

Operating expenses were $344,805 for the quarter ended June 30, 2006 compared to
$2,352,728 for the quarter ended June 30, 2005. This represents a decrease of
$2,007,923 or 85.3%. Of this decrease, approximately $1,043,289 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 June 30, 2005. No such expenses were
incurred during the quarter ended June 30, 2006. Additionally, the decrease
reflects the non cash expenses related to impairment losses of $531,665 incurred
during the quarter ended June 30, 2005. No such expenses were incurred during
the quarter ended June 30, 2006.

Operating expenses also include Other G&A expenses of $67,519 compared to
$353,166 for the quarter ended June 30, 2006 and 2005, respectively. This
represents a decrease of $285,647 or 80.9% when compared to G&A 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 $83,174 during the quarter ended June 30, 2006 when
compared to the same expenses during the quarter ended June 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

The Company has a net working capital deficit of $1,179,663 as of June 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. 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 have been issued and are
currently 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 December
31, 2005. As of July 31, 2006, the Company has not received any funds.

During the six month period ended June 30, 2006, the Company issued 92,600
shares of common stock for proceeds of $20,655. In addition, the Company
received proceeds of $40,000 from the collection on a note receivable.

The Company has curtailed its operations during the first seven 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 July 17, 2006, the Company entered into an Agreement and Plan of Merger (the
"Proposed Merger Agreement") for the acquisition of Sunrise Broadband Group,
Inc. ("Sunrise"), a company in the Internet Protocol based cable TV, wireless,


                                       20
<PAGE>
hi-speed, Voice over Internet Protocol Internet solutions industry. The
acquisition is dependant on various closing conditions, including but not
limited to, approval by the Company's shareholders and the effectiveness of Form
S-4 to be filed with the Securities and Exchange Commission. Under the Proposed
Merger Agreement, the Company will issue approximately 148,614,000 shares of its
common stock and warrants to purchase 3,003,700. The exercises prices, vesting
periods and expiration terms of the warrants have not been established. The
terms of the Proposed Merger Agreement were determined by arms-length
negotiations and have been approved by the Boards of Directors of Sunrise and
the Company.

One of the key elements of the merger is the existing funding agreement between
Sunrise Broadband Group and Dutches Private Equities Fund ("Dutches"), whereby,
Dutches has committed to purchase up to $25 million dollars in equity over the
next two-year period. The sale of stock to Dutches is at management's discretion
and will be based on the company's cash flow needs for acquisitions and
operations.

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

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.

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 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 deployment of wireless internet
services and 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.





                                       21
<PAGE>
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.

  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 acquire strategic  companies that complement the
       company's business model.
   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. We cannot guarantee 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 $584,284 and $3,576,641 for the six month
period ended June 30, 2006 and 2005 respectively. Management believes the new
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.

                                       22
<PAGE>
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.

Item 3 - Controls and Procedures.

As of June 30, 2006, an evaluation was carried out under the supervision and

with the participation of the Company's management, including the acting Chief
Executive Officer and 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
concluded 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 March 31, 2006.

(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 acting 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 acting CEO
and CFO concluded that as of June 30, 2006 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 acting 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, 2006 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 acting 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


                                       23
<PAGE>
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
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.















































                                       24
<PAGE>
                                     PART II

Item 1 - Legal Proceedings

While the Company is not formally engaged in any litigation, legal proceedings
or claims, it is involved in resolving the following issues:

Y-Tel has agreed to the settlement offer of $15,000 from creditor's council
related to the Company's failure to complete the acquisition of SunGlobe. The
Company did not follow through on the purchase of SunGlobe because of
misrepresentations made by Seller. Such amount is included in accrued expenses
in the accompanying condensed consolidated balance sheet.

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.

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

For the period ended June 30, 2006, the Company issued the following shares of
its common stock without registration under the Securities Act of 1933, as
amended (the "Securities Act"):

1. May 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 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.

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

                                       25
<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/ John Conroy
                --------------------------------
                    John Conroy, acting President and CEO

       Date:    August 21, 2006
                -------------------








































                                       26