SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

     (Mark One)

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

     For Quarter Ended: September 30, 1996; or

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

     For the transition period _________ to __________

     Commission File Number:   0-25632


                         GUINNESS TELLI*PHONE CORPORATION
               ---------------------------------------------------
             (Exact name of Registrant as specified in its charter)


          Nevada                                            68-0310550
--------------------------------                       ---------------------
(State or other jurisdiction of                          (I.R.S Employer
incorporation or organization)                          Identification No.)

655 Redwood Highway, #219, Mill Valley, California            94941
--------------------------------------------------          ----------
Address of principal executive offices)                     (Zip Code)


                                 (415) 389-9442
              ---------------------------------------------------
              (Registrant's telephone number, including area code)


     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12  months  (or for  such  shorter  period  that a
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]

     On September 30, 1996,  there were  13,427,480  shares of the  registrant's
Common Stock, $.001 par value, outstanding.


<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

     The condensed  financial  statements  included herein have been prepared by
the  Company,  without  audit  pursuant  to the  rules  and  regulations  of the
Securities and Exchange Commission.  Certain information and footnote disclosure
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
rules and  regulations,  although the Company  believes that the disclosures are
adequate to make the information presented not misleading.
         
     In the opinion of the Company,  all adjustments,  consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 1996 and the results of its  operations  and changes
in its financial  position from inception  through  September 30, 1996 have been
made. The results of its  operations for such interim period is not  necessarily
indicative of the results to be expected for the entire year.

                                     Page 2

<PAGE>

                 GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                           Consolidated Balance Sheet
<TABLE>
<CAPTION>

                                          (Unaudited)
                                         September 30,         December 31,
                                             1996                  1995
                                          -----------           ---------
<S>                                       <C>                   <C>
ASSETS

CURRENT ASSETS:
      Cash                                $  2,555              $  97,997
      Due from stockholder                      --                 27,195

      TOTAL CURRENT ASSETS                   2,555                125,192
                                          --------              ---------
FIXED ASSETS:
      Equipment                             58,707                 25,637
      Less accumulated depreciation         28,260                 22,663
                                          --------               --------

                                            30,447                  2,974
                                          --------               --------

                                         $  33,002              $ 128,166
                                          ========               ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
      Notes payable                      $ 435,000              $ 435,000
      Accounts payable                     659,373                659,372
      Accrued interest payable             426,270                366,180
      Deferred royalty income              125,000                125,000
                                         ---------              ---------

           TOTAL CURRENT LIABILITIES     1,645,642              1,585,552
                                        ----------             ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
      Common stock, $.001 par value; 
      authorized 25,000,000 shares, 
      issued and outstanding
      13,427,480 shares                     13,427                 13,427
      Additional paid-in capital         8,363,766              8,363,766
      Deficit accumulated during
            development stage           (9,989,833)            (9,733,329)
                                        ----------             ----------

                                        (1,612,640)            (1,356,136)

      Less stock subscription 
      receivable                               --                (101,250)
                                         ----------             ----------
                                        (1,612,640)            (1,457,386)
                                         ----------             ----------

                                         $   33,002             $  128,166
                                         ==========             ==========
</TABLE>

                                     Page 3

<PAGE>
                 GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statement Of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                     Cumulative
                       During          Nine Months             Three Months
                     Development    Ended September 30,     Ended September 30,
                        Stage         1996        1995       1996       1995
                     ------------   -------     -------    --------    --------
<S>                  <C>            <C>         <C>        <C>         <C>
OPERATING EXPENSES:
 Research and 
    development ....   $4,551,152
Interest expense ...   $4,150,989   $ 60,090   $ 54,624   $ 20,030     $ 18,208
Officer's salary ...      314,599     17,293     42,384      5,764       14,128
Rent ...............      306,393     17,540      5,400      7,061        1,800
Other administrative
 expense ...........      666,700     161,581    47,256     67,709       15,752
                       ----------   --------  ----------  ---------   ----------

NET LOSS              $(9,989,833) (256,504)   (149,664)  (100,564)   (49,888)  
                      ============ =========  ==========  ==========  =========

LOSS PER SHARE                     $  (.02)   $   (.01)    $  --       $   --
                      ============  ========  ==========  ==========  ==========
WEIGHTED AVERAGE
 SHARES OUTSTANDING              13,427,480  12,592,480  13,427,480  12,592,480
                                 ==========  ==========  ==========  ==========
</TABLE>

                                     Page 4

<PAGE>
                 GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statement Of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                    
                       Cumulative
                       During         Nine Months             Three Months
                     Development     Ended September 30,    Ended September 30,
                        Stage         1996        1995       1996       1995
                     ------------   -------     -------    --------    --------
<S>                  <C>            <C>         <C>        <C>         <C>
CASH USED IN OPERATIONS:
  Net loss .........  $(9,989,269)  $(256,504) $(149,664) $(100,564) $(49,888)

  Adjustments to reconcile 
  net loss to cash used in 
  operations:
   Depreciation .......    28,260         5,597        1,443    2,135       481
   Increase in accounts 
   payable ............   659,372                     84,371   (11,529)  31,199
   Increase in accrued 
   interest ..........    426,270        60,090      54,624    20,030    18,208
                       ----------     ---------   ---------   --------  --------

                       (8,875,931)     (190,817)    (9,226)   (89,929)       --
                       ----------     ---------   ---------   --------  --------

CASH USED IN INVESTING ACTIVITIES:
  Additions to 
  fixed assets .......   (58,707)      (33,070)               ( 8,079)   
                       ----------     ---------   ---------   --------  --------


CASH PROVIDED BY (USED IN) FINANCING
 ACTIVITIES:
 Contributed capital    8,363,766
 Sale of stock             13,427
 Notes payable            435,000
 Stockholder advances                   27,195      9,226     27,195
 Deferred royalty income  125,000
 Collection of stock 
  subscriptions receivable     --      101,250
                       ----------     ---------   ---------   --------  --------

                        8,937,193      128,445      9,226     27,195
                       ----------     ---------   ---------   --------  --------

NET INCREASE (DECREASE)
 IN CASH AND CASH 
 EQUIVALENTS ..........     2,555      (95,442)        --     (70,812       --

CASH AND CASH EQUIVALENTS,
 BEGINNING OF YEAR             --       97,997         --      73,812       --
                       ----------     ---------   ---------   --------  --------

CASH AND CASH EQUIVALENTS,
 END OF YEAR          $     2,555     $  2,555     $   --    $  2,555   $   --
                      ===========     =========    ========  =========  =======

</TABLE>


                                     Page 5

<PAGE>

                 GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
                             (A Development Company)
                    Note To Consolidated Financial Statements


     Note  1.  In  the  opinion  of  the  management  of  Guinness   Telli*Phone
Corporation  and  Subsidiary,  the  unaudited  financial  statements of Guinness
Telli*Phone Corporation and Subsidiary for the interim periods shown include all
adjustments,  consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position at September 30, 1996, and the results of
operations and cash flows for the periods then ended.  The results of operations
for the interim  periods  shown may not be indicative of the results that may be
expected for the fiscal year.  These  statements  should be read in  conjunction
with the financial  statements and notes thereto  included in the Company's Form
10-K for the year December 31, 1995.

     Note 2: The prior periods financial statements have been changed to correct
an  error  relating  to  the  accounting  for  costs  incurred  to  develop  the
Telli*Phone.  The  Company  had  been  capitalizing  development  costs  through
December 31, 1994, when such costs should have been expensed.  The effect of the
correction  was to write  off the  product  development  cost and  increase  the
accumulated  deficit  at  January  1, 1995,  by  $7,777,102.  Other  corrections
included an adjustment to accrued  interest and accumulated  depreciation  which
reduced the  accumulated  deficit by a net of  $110,876 at January 1, 1995,  and
reduced interest expense for the year ended December 31, 1995, by $17,488.

                                     Page 6
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Liquidity and Capital Resources:
--------------------------------

     There have been no  significant  changes  in the  Company's  liquidity  and
capital resources since the Company filed its annual report on Form 10-K for the
year ended December 31, 1995.  Reference is made to that document with regard to
these matters.

     The Company is currently in discussion with qualified investors for private
financing.

     The Company is also in discussion with a major  international  manufacturer
of computer equipment and peripherals for the manufacture of the Telli*phone.

Results of operation:
---------------------

     The loss for the six months ended  September  30, 1996,  was $106,639  more
than the loss for the six months  ended  September  30,  1995.  This  change was
principally due to the following:

     1. An increase in interest expense of $5,466 on outstanding debt, including
accrued interest.

     2. A reduction of $25,092 in officer's  salaries as the officer reduced his
salary commensurate with the cash flow of the Company.
   
     3. An increase in rent expense of $12,140 attributable to a rent adjustment
during the first quarter and its carryover to the second quarter.

     4. An increase in other administrative expenses of $114,325 as follows:

     a. An increase in other compensation of $58,133, none being incurred during
the comparable period in 1995.

     b.  An  increase  in  professional  fees  of  $29,584  as a  result  of the
completion of the Telli*Phone and efforts to now bring it to the market place.

     c. An increase in general office expense of $22,912.

     d. A decrease in travel and promotion of $458.

     e. An increase in depreciation expense of $4,154.

     The loss for the three months ended  September  30, 1996,  was $50,676 less
than the loss for the three months  ended  September  30, 1995.  This change was
principally due to the following:

     1. An increase in interest expense of $1,822 on outstanding debt, including
accrued interest.

     2. A reduction of $8,364 in officer's  salaries as the officer  reduced his
salary commensurate with the cash flow of the Company.

                                     Page 7

<PAGE>

     3. An increase in rent expense of $5,261  attributable to a rent adjustment
during the first quarter.

     4. An increase in other administrative expenses of $51,957 as follows:

     a. An increase in other compensation of $25,342, none being incurred during
the 1995 quarter.

     b. A decrease in professional fees of $10,923.

     c. An increase in general office expense of $11,157.

     d. A decrease in travel and promotion of $2,881.

     e. An increase in depreciation expense of $1,654.

                                     Page 8

<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

     At the present time there are no legal proceedings  against the Company and
the Company is unaware of any unasserted  claim or assessment  which will have a
material effect on the financial position or future operations of the Company.

Item 2.  Changes in Securities.

         Not required.

Item 3.  Defaults Upon Senior Securities.

         Not required.

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

         Not required.

Item 5.  Other Information.

         Not required.

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

         (a) No exhibits have been filed with this Form 10-Q.

         (b) No other  reports on Form 8-K were filed during the last quarter of
the period covered.

                                     Page 9

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.

                                               GUINNESS TELLI*PHONE CORPORATION
                                                           (Registrant)


 Date:   December 5, 1996                    /S/ Lawrence A. Guinness
                                             --------------------------
                                             By:  Lawrence A. Guinness
                                             Its: President


Date:   December 5, 1996                     /S/ Arthur Korn
                                             --------------------------
                                             By:  Arthur Korn
                                             Its: Chief Financial Officer


                                    Page 10