UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
      One)ý
            
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934For
      the Quarterly Period Ended September 30, 2008oro
            
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934For
      the transition period
      from                             to




Commission
File No. 000-24595




NEXTPHASE
WIRELESS, INC.






(Exact
name of registrant as specified in its charter)




Nevada
              (State
      or other jurisdiction of
              incorporation
      or organization)
            
            88-0343832
              (I.R.S.
      Employer
              Identification
      No.)300
      S. Harbor Blvd., Suite 500, Anaheim, California
              (Address
      of principal executive offices)
            
            92805
              (Zip
      Code)(714)
      765-0010
              (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 twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days.    Yes o    No ý






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




Large
      accelerated filer   o
            Accelerated
      filer  oNon-accelerated
      filer     o
            Smaller
      reporting company  ý




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






The
number of shares of the issuer's Common Stock, $0.001 par value, outstanding on
November 19, 2008 was 6,671,181






________________________________________________________________


(Former
name, former address and former fiscal year if changed since last
report)
















NEXTPHASE
WIRELESS, INC.











TABLEOF
CONTENTS




Page
      no.PART
      I - FINANCIAL INFORMATION
            
            1Item
      1. Condensed Consolidated Financial Statements (Unaudited)
            
            1Unaudited
      Condensed Consolidated Balance Sheets, September 30, 2008 and March 31,
      2008
            
            1Unaudited
      Condensed Consolidated Statements of Operations for the Three and Six
      Months Ended September 30, 2008 and 2007
            
            2Unaudited
      Consolidated Statements of Cash Flows for the Six Months Ended September
      30, 2008 and 2007
            
            3Notes to Unaudited Condensed Consolidated Financial
      Statements
            
            4Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
            
            7Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
            
            12Item
      4. Controls and Procedures
            
            12PART
      II - OTHER INFORMATION
            
            13Item
      1. Legal Proceedings
            
            13Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
            
            13Item
      3. Defaults Upon Senior Securities
            
            13Item
      4. Submission of Matters to a Vote of Security Holders
            
            13Item
      5. Other Information
            
            13Item
      6. Exhibits
            
            13SIGNATURES
            
            14
















PART I.
FINANCIAL INFORMATION





NEXTPHASE
WIRELESS, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)




September
      30,
              
              
              March
      31,2008
              
              
              2008ASSETSCurrent
      assets:Cash
              
              $
              221
              
              
              $
              592Accounts
      receivable, net of allowance for doubtful accounts of
      $16,800 and $4,000 respectively
              
              
              21,111
              
              
              
              38,601Prepaid
      expenses
              
              
              148,089
              
              
              
              39,703Total
      current assets
              
              
              169,421
              
              
              
              78,896Property
      and equipment, net of $427,907 and $361,502 of accumulated
      depreciation, respectively
              
              
              271,101
              
              
              
              330,166Intangible
      assets:Customer
      lists - net of $28,333 and $408,000 ofaccumulated amortization, respectively
              
              
              173,667
              
              
              
              692,000Trademarks
              
              
              100,000
              
              
              
              100,000Supply
      contracts - net of $30,000 and $24,000 ofaccumulated amortization, respectively
              
              
              30,000
              
              
              
              36,000Goodwill
              
              
              340,000
              
              
              
              340,000Total
      intangible assets
              
              
              643,667
              
              
              
              1,168,000Deposits
              
              
              8,637
              
              
              
              8,636Total
      assets
              
              $
              1,092,826
              
              
              $
              1,585,698LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              1,294,036
              
              
              $
              1,241,018Accrued
      expenses
              
              
              440,701
              
              
              
              225,175Deferred
      revenue
              
              
              78,500
              
              
              
              101,500Cash
      advance payable
              
              
              -
              
              
              
              375,000Due
      to officer and shareholders
              
              
              147,160
              
              
              
              326,852Notes
      payable - current portion
              
              
              715,779
              
              
              
              3,762,323Total
      current liabilities
              
              
              2,676,176
              
              
              
              6,031,868Long-
      term notes payable, net of current portion
              
              
              -
              
              
              
              23,766Total
      liabilities
              
              
              2,676,176
              
              
              
              6,055,634Stockholders'
      deficit:Class
      A Convertible Preferred stock, $0.001 par value; 476,804
      shares authorized; 4,198,036 outstanding; liquidation preference
      $4,768,036
              
              
              4,768,036
              
              
              
              -Undesignated preferred stock, $0.001 par value; 19,400,000 shares
      authorized; no shares outstanding
              
              
              -
              
              
              
              -Common
      stock, $0.001 par value; 10,000,000 shares authorized;6,571,181
      and 4,123,000 shares issued and outstanding,
      respectively
              
              
              6,571
              
              
              
              4,123Additional
      paid-in capital
              
              
              15,236,743
              
              
              
              13,872,121Accumulated
      deficit
              
              
              (21,594,700
              )
              
              
              (18,346,180
              )Total
      stockholders' deficit
              
              
              (1,583,350
              )
              
              
              (4,469,936
              )Total
      liabilities and stockholders' deficit
              
              $
              1,092,826
              
              
              $
              1,585,698


The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.




1





NEXTPHASE
WIRELESS, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




For
      the Three Months
              
              
              For
      the Six MonthsEnded
      September 30,
              
              
              Ended
      September 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenue
              
              $
              159,090
              
              
              $
              511,454
              
              
              $
              584,462
              
              
              $
              992,443Cost
      of revenue
              
              
              126,886
              
              
              
              245,923
              
              
              
              385,176
              
              
              
              482,842Gross
      Profit
              
              
              32,204
              
              
              
              265,531
              
              
              
              199,286
              
              
              
              509,601Operating
      expenses:Loss
      on impairment of intangible assets
              
              
              -
              
              
              
              -
              
              
              
              490,000
              
              
              
              -General
      and administrative expenses
              
              
              984,609
              
              
              
              973,919
              
              
              
              2,797,686
              
              
              
              1,741,124Total
      operating expenses
              
              
              984,609
              
              
              
              973,919
              
              
              
              3,287,686
              
              
              
              1,741,124Operating
      loss
              
              
              (952,405
              )
              
              
              (708,388
              )
              
              
              (3,088,400
              )
              
              
              (1,231,523
              )Other
      income (expense)Gain
      on forgiveness of notes payable and accrued expenses
              
              
              -
              
              
              
              70,282
              
              
              
              -
              
              
              
              144,351Interest  expense,
      net
              
              
              (80,562
              )
              
              
              (66,906
              )
              
              
              (160,120
              )
              
              
              (124,659
              )Total
      other income (expense)
              
              
              (80,562
              )
              
              
              3,376
              
              
              
              (160,120
              )
              
              
              19,692Net
      Loss
              
              $
              (1,032,967
              )
              
              $
              (705,012
              )
              
              $
              (3,248,520
              )
              
              $
              (1,211,831
              )Basic
      and diluted net loss per common share
              
              $
              (0.18
              )
              
              $
              (0.42
              )
              
              $
              (0.60
              )
              
              $
              (0.76
              )Weighted-average
      common shares outstanding
              
              
              5,728,348
              
              
              
              1,681,927
              
              
              
              5,416,770
              
              
              
              1,602,864




The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.




2




NEXTPHASE
WIRELESS, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Six Months EndedEnded
      September 30,2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (3,248,520
              )
              
              $
              (1,211,831
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Gain
      on forgiveness of notes payable and accrued expenses
              
              
              -
              
              
              
              (144,351
              )Impairment
      of intangible assets
              
              
              490,000
              
              
              
              -Issuance
      of preferred stock for services
              
              
              1,242,819
              
              
              
              130,000Issuance of common stock for services
              
              
              390,308
              
              
              
              -Issuance
      of warrants and options for consulting services
              
              
              -
              
              
              
              75,152Depreciation
      expense
              
              
              66,405
              
              
              
              76,802Amortization
      expense
              
              
              34,333
              
              
              
              125,688Changes
      in assets and liabilities:Accounts
      receivable
              
              
              17,490
              
              
              
              259,717Prepaid
      expenses
              
              
              (108,386
              )
              
              
              87,400Accounts
      payable
              
              
              325,018
              
              
              
              114,820Accrued
      expenses
              
              
              550,812Due
      to officers-shareholders
              
              
              -
              
              
              
              70,723Deferred
      revenue
              
              
              (23,000
              )
              
              
              (92,793
              )Net
      cash used in operating activities
              
              
              (262,721
              )
              
              
              (508,673
              )Cash
      flows from investing activities:Purchase
      of property and equipment
              
              
              (7,340
              )
              
              
              (26,410
              )Purchase
      of Interactive Network Services, Inc.
              
              
              -
              
              
              
              (342,612
              )Net
      cash used in investing activities
              
              
              (7,340
              )
              
              
              (369,022
              )Cash
      flows from financing activities:Proceeds
      from issuance of notes payable
              
              
              269,690
              
              
              
              545,000Proceeds
      from cash advances payable
              
              
              -
              
              
              
              275,000Principal
      payments on notes payable and capital leases
              
              
              -
              
              
              
              (5,811
              )Net
      cash provided by financing activities
              
              
              269,690
              
              
              
              814,189Net
      decrease in cash
              
              
              (371
              )
              
              
              (63,506
              )Cash
      at beginning of period
              
              
              592
              
              
              
              71,683Cash at end
      of period
              
              $
              221
              
              
              $
              8,177Supplemental
      disclosure of cash flow information:Non-cash
      investing and financing transactions:Accrued
      liabilities issued for prepaid consulting fees
              
              $
              -
              
              
              $
              26,250Preferred
      stock issued in satisfaction of accrued compensation
              
              
              179,692
              
              
              
              -Preferred
      stock issued upon conversion of notes payable, cash advances, accounts
      payable and accrued interest
              
              
              4,198,036
              
              
              
              -Common
      stock issued upon conversion of notes payable
              
              
              50,000
              
              
              
              162,305Common
      stock issued for consulting services
              
              
              -
              
              
              
              291,000Common
      stock issued upon conversion of accounts payable
              
              
              47,250
              
              
              
              187,008


The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.




3





NEXTPHASE
WIRELESS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008


(Unaudited)




NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Basis
of Presentation





The
unaudited condensed financial statements included in this Form 10-Q have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, these
financial statements do not include all of the disclosures required by U.S.
generally accepted accounting principles for complete financial
statements.  These unaudited interim financial statements should be
read in conjunction with the audited financial statements for the fiscal year
ended March 31, 2008 in the Company’s annual report on Form 10-K, as
amended.  The financial information furnished herein reflects all
adjustments consisting of normal, recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the Company's financial
position, the results of operations and cash flows for the periods
presented.  Operating results for the period ended September 30, 2008
are not necessarily indicative of the results that may be expected for the year
ending March 31, 2009.




Reclassification




Certain
reclassifications have been made to conform prior periods' data to the current
presentation. These reclassifications had no effect on reported
loss.




Basis
of Presentation




The
condensed consolidated financial statements include the accounts and
transactions of NextPhase Wireless, Inc. and its subsidiaries. The results of
operations for Interactive Network Systems, have been included since the date of
acquisition on July 23, 2007. All significant inter-company accounts and
transactions have been eliminated in consolidation.





Business
Condition




The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplate the continuation of the Company as a going concern. As of
September 30, 2008, the Company has an accumulated deficit of $21,594,700.
During the six months ended September 30, 2008, the Company suffered a loss of
$3,248,520 and used$262,721 of cash in its
operating activities. The Company has a working capital deficit of $2,506,755
and a stockholders’ deficit of $1,583,350 at September 30, 2008.These factors raise
substantial doubt about the Company's ability to continue as a going concern for
a reasonable period of time. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. These unaudited
condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or
amounts and classification of liabilities that might result from this
uncertainty.




The
Company has developed a plan to integrate additional internet service providers
in a scalable roll-up strategy.  The Company plans to acquire only
profitable operations, both wireless and landline based, which are synergistic
to the Company’s current operations in California, Georgia and New Jersey.
Through its business plan to position Nextphase as a nationwide provider of
WiMax ready networks and advanced wired and wireless broadband connectivity
solutions, management expects to generate positive operating cash flows during
the first calendar quarter of 2009. There is no assurance that management
will achieve its plan. There is further no assurance that the proceeds from
operating cash flows or future financings will be sufficient to obtain
profitable operations.  The Company will need to raise additional debt
and/or equity capital in order to finance its business plan and its need for
working capital. Such financing, if available, may increase the risk of the
Company not being able to service its debt obligations.






4





Revenue
Recognition and Deferred Revenue




Revenues
are recognized in the period that services are provided.  For revenue
from product sales, the Company recognizes revenue in accordance with Staff
Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” when (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded. The Company defers any
revenue for which the product has not been delivered or for which services have
not been rendered or are subject to refund until such time that the Company and
the customer jointly determine that the product has been delivered or services
have been rendered or no refund will be required.




The
Company generates and recognizes revenue as follows:




Revenue
from operating as a wireless Internet service provider of tiered wireless
Internet services to business and residential subscribers:  Internet
services are billed at the beginning of each month's activity at a fixed rate
for each customer.  Customers sign an annual agreement or utilize the
service on a month-to-month basis.  Revenue not yet earned is recorded
as deferred revenue and is considered earned when a month of service has
concluded.




Revenue
from the sale and configuration of wireless equipment:  NextPhase acts
as a reseller of certain components and equipment related to its products and
services.  Equipment revenue is recognized at the time of shipment to
the customer.  Configuration is billed at an hourly rate and
recognized after completion. Costs associated with the equipment are recognized
at the time of shipment.  Revenue from the sale and configuration of
wireless equipment is sometimes billed in advance of shipment. In such cases,
the amount billed is recorded as deferred revenue until shipment and
configuration are completed.




Revenue
from consulting services:  These services include wireless network
consulting, interference surveys, network management and telephone
consulting.  Revenue is recognized after the service has been
provided. $evenue from consulting services is sometimes billed in advance
of project completion. In such cases, the amount billed is recorded as deferred
revenue until the services are provided.




Net
Loss per Common Share





Basic and
diluted net loss per common share are calculated by dividing net loss
attributable to common stockholders by the weighted average number of shares of
common stock outstanding during the period.  As of September 30, 2008
and 2007, there were outstanding common stock equivalents to purchase
4,208,736 and 20,700 shares of common stock, respectively, that were not
included in the computation of diluted net loss per common share as their effect
would have been anti-dilutive, thereby decreasing the net loss per common
share.







5




NOTE
2 - ACQUISITIONS




On July
23, 2007, the Company, acquired all of the assets (excluding cash) and
assumed certain liabilities of Interactive Network Systems (INS), pursuant to an
asset purchase agreement. The assets and liabilities acquired comprised
the INS Internet service and connectivity business.





The
following unaudited condensed combined pro forma results of operations reflect
the pro forma combination of the NextPhase and INS businesses as if the
combination had occurred on April 1, 2007.  The unaudited pro forma
condensed combined results of operations do not purport to represent what
the companies’ actual combined results of operations would have been if such
transaction had occurred at that date, and are not necessarily indicative of the
Company's future results.




Three
      Months Ended
              
              
              Six
      Months EndedSeptember
      30, 2007
              
              
              September
      30, 2007Revenues:INS
              
              $
              13,500
              
              
              $
              93,785NextPhase
              
              
              511,454
              
              
              
              992,443Total
      Revenues
              
              $
              524,954
              
              
              $
              1,086,228Net
      Loss:INS
              
              $
              -
              
              
              $
              (15,124NextPhase
              
              
              (705,012
              
              
              
              (1,211,831
              )$
              (705,012
              
              
              $
              (1,226,955
              )NextPhase,
      as reportedLoss
      per share
              
              $
              (0.42
              
              
              $
              (0.76
              )Pro
      formaLoss
      per share
              
              $
              (0.42
              
              
              $
              (0.77
              )







NOTE
3 - RELATED PARTY TRANSACTIONS





In 2007,
the Company issued 230,769 shares of common stock with a fair value of $24,231,
or $0.11 per share, to its President and Chief Executive Officer in lieu of
cash salary.





On
September 30, 2008, the form President, the former CFO and the current President
and CEO entered into a Securities Exchange Agreement with the Company
wherein they were issued 25,000, 25,000 and 7,000 shares, respectively, or
Series A, Preferred Stock valued at $570,000 or $10.00 per share. These
shares were accepted as payment in full of $172,692 of unpaid compensation
rendered to the Company and for all loans extended to the Company.





From time
to time the officer-shareholders have loaned cash to the Company.  As
of September 30, 2008, $147,160 was due to officers-shareholders.  The
Company’s obligation to reimburse the President for expenses as previously
approved by the Company was not affected by the agreement.





NOTE
4 – NOTES PAYABLE





On
September 30, 2008, the Company entered into a Securities Exchange Agreement,
mentioned in Note 3, that also called for note holders to surrender, cancel and
release promissory notes issued by the Company along with all claims of
principal and interest or other charges there-under in exchange for Preferred
Stock.  In addition to the 57,000 shares of Preferred Stock mentioned
in Note 3, the Company issued 99,000 shares of Preferred stock in satisfaction
of $990,000 of 6% notes payable; 230,000 shares of Preferred Stock in
satisfaction of $2,300,000 of 6% secured notes payable; 37,500 shares of
Preferred Stock in satisfaction of $375,000 of a 9% cash-advance
payable;  27,200 shares of Preferred Stock to vendors in satisfaction
of $272,000 of accounts payable and 26,104 shares of  Preferred Stock in
satisfaction of $261,036 of accrued interest.




September
      30,
              
              
              March
      31,Notes
      payable consisted of the following balances as of:
              
              2008
              
              
              2008Secured
      convertible note payable, interest at 6%,
              
              $
              -
              
              
              $
              2,300,000Convertible
      notes, interest at 7%
              
              
              660,000
              
              
              
              1,440,000Convertible
      notes, interest at 10%
              
              
              26,049
              
              
              
              13,300Automobile
      loan,interest at 5.9%, due $924 monthly
              
              
              29,730
              
              
              
              32,789Total
      Notes Payable
              
              
              715,779
              
              
              
              3,786,089Less:
      Current portion
              
              
              (715,779
              )
              
              
              (3,762,323
              )Total
      Long Term Notes Payable
              
              $
              -
              
              
              $
              23,766Cash-advance
      payable on demand, interest at 9%
              
              $
              -
              
              
              $
              375,000





6





NOTE
5 – EQUITY





On
September 30, 2008, the Company entered into a Securities Exchange Agreement
whereby it designated 600,000 preferred shares as Series A Preferred Stock with
a $.001 par value per share and then issued 476,804 shares, as described in
Notes 3 and 4 above.  In addition, the Securities Exchange Agreement
sets forth registration rights for the shares when converted.





In the
six months ended September 30, 2008 the Company issued; 2,113,000 shares of
common stock at values ranging from $0.15 to $2.05 to various consultants for
business advisory services, recorded as stock based compensation, at a value of
$1,298,320; 310,000 shares of common stock as payment to a number of employees,
in lieu of cash, at a value of $47,500 and 25,000 shares of common stock to a
vendor in satisfaction of a debt valued at $21,250.





In April
2008, the Company issued 50,000 common shares in redemption of convertible
promissory notes payable totaling $50,000. Additionally in April, the Company
issued 35,000 common shares in payment of legal fees.





In March
2008, the Company issued 340,000 shares of common stock for business advisory
services. These shares were valued at $255,000 and was charged to stock based
compensation.




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 actions or transactions. The Company indemnifies its directors,
officers, employees and agents, as permitted under the laws of the State of
Nevada. The duration of the guarantees and indemnities varies, and is generally
tied to the life of the agreement. These 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 nor
incurred any payments for these obligations and, therefore, no liabilities have
been recorded for these indemnities and guarantees in the accompanying condensed
consolidated balance sheet.





Litigation


The
Company is, from time to time, involved in various legal and other proceedings
which arise in the ordinary course of operating its business. In the opinion of
management, the amount of ultimate liability, if any, with respect to these
actions will not materially affect the financial position or results of
operations of the Company.




During
the year ended March 31, 2007 the Company entered into a settlement agreement in
which the Company was to pay $45,000.  During the 2008 fiscal year,
the Company recorded an additional expense of $22,222 related to the settlement
agreement which was recorded to reduce gain on settlement of
liabilities.




In July
2008, a vendor filed a complaint for breach of lease agreement in the amount of
$55,412. The company believes that the lawsuit is without merit and anticipates
resolving the matter without incurring expenses in excess of the amounts
accrued.




Tessco
Technologies, Inc. v. NextPhase Wireless, Inc.: The Company is being sued by a
vendor in a collection action. The amount at issue is approximately
$65,000. Agility
Lease Fund-L LLC: The Company is being sued by a vendor in a collection action .
The amount at issue is approximately $ 12,000. Certilman:
The Company is being sued by its former securities counsel, Certilman Balin, in
a collections action relating to unpaid legal fees. The amount at issue is approximately
$125,000. There is
a current dispute with the Sublessor (INS) for the premises occupied by our wholly-awned
subsidiary, Speed Factory. The amount at issue is approximately $225,000.
Speed Factory has ceased most of its operations.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS




Forward Looking
Statements





Certain
information contained in this report may include "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
is subject to the safe harbor created by that act. The safe harbor created by
the Securities Litigation Reform Act will not apply to certain "forward looking
statements" because we issued "penny stock" (as defined in Section 3(a) (51) of
the Securities Exchange Act of 1934 and Rule 3a51-1 under the Exchange Act)
during the three year period preceding the date(s) on which those forward
looking statements were first made, except to the extent otherwise specifically
provided by rule, regulation or order of the Securities and Exchange
Commission(“SEC”). We caution readers that certain important factors may affect
our actual results and could cause such results to differ materially from any
forward-looking statements which may be deemed to have been made in this Report
or which are otherwise made by or on behalf of us. For this purpose, any
statements contained in this report that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may", "will", "expect", "believe", "explore",
"consider", "anticipate", "intend", "could", "estimate", "plan", "propose",
"seem", "hope", "continue" or the negative variations of those words or
comparable terminology are intended to identify forward-looking statements.
Factors that may affect our results include, but are not limited to, the risks
and uncertainties associated with:







7





o
            Our
      ability to generate sufficient cash to pay our lenders and other
      creditors





o
            Our
      ability to obtain regulatory permits and approvals to operate in the
      high-speed wireless network
industry





o
            The
      introduction of new broadband connectivity technologies by our competitors
      that may have advantages over our planned products and may make our
      planned products less attractive to our potential
  customers





o
            Our
      ability to identify and complete acquisitions and successfully integrate
      the businesses we acquire, if any





o
            Our
      ability to employ and retain qualified management and
      employees





o
            Our
      dependence on the efforts and abilities of our current employees and
      executive officers





o
            Changes
      in government regulations that are applicable to our anticipated
      business





o
            Changes
      in the demand for our services





o
            He
      degree and nature of our
competition





o
            Our
      lack of diversification of our business
plan





o
            The
      general volatility of the capital markets and the establishment of a
      market for our shares




o
            Disruption
      in the economic and financial conditions primarily from the impact of past
      terrorist attacks in the United States, threats of future attacks, police
      and military activities overseas and other disruptive worldwide political
      events






We are
also subject to other risks detailed from time to time in other SEC filings and
elsewhere in this report. Any one or more of these uncertainties, risks and
other influences could materially affect our results of operations and whether
forward-looking statements made by us ultimately prove to be accurate. Our
actual results, performance and achievements could differ materially from those
expressed or implied in these forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
from new information, future events or otherwise.




Management
believes that cash on hand and cash generated from operations may be
insufficient to fund its current or planned operating needs, and the Company
currently has insufficient revenue to fund its operations. The Company plans on
funding working capital requirements, necessary equipment purchases, marketing
costs, and all other operations for the next quarter and foreseeable future by
raising capital with the sale of equity and/or debt securities.





As widely
reported, financial markets in the United States, Europe and Asia have been
experiencing extreme disruption in recent months.  Unfavorable changes
in economic conditions, including declining consumer confidence, inflation,
recession or other changes, may lead our customers to delay or reduce purchases
of our products and our results of operations and financial condition could be
adversely affected thereby.  Challenging economic conditions also may
impair the ability of our customers or distributors to pay for products they
have purchased, and as a result, our reserves for doubtful accounts and
write-offs of accounts receivable could increase.  Our cash flows may
be adversely affected by delayed payments or underpayments by our
customers.  We are unable to predict the duration and severity of the
current disruption in financial markets and adverse economic conditions in the
U.S. and other countries.





Financial Statement
Overview




Nature
of Operations




NextPhase
Wireless, Inc. (“NextPhase” or the “Company”) was incorporated on August 28,
1995 in Nevada under the name of Professional Mining Consultants,
Inc.





8




On August
3, 2004, NextPhase consummated a share exchange in which it
issued 12,943,000 shares of common stock, or approximately 76% of
its outstanding common stock, to the shareholders of NextPhase Technologies,
Inc. ("NTI")  in  exchange  for all of the shares
of NTI.  As a result, NTI became a wholly owned subsidiary of
NextPhase.  NTI was formed on September 14, 2000. For accounting
purposes, this transaction is considered a "reverse merger,” and the historical
financial statements of NextPhase reflect the operations of
NTI.  Effective on the merger date, all financial activity became
generated by NextPhase and NTI became an inactive subsidiary.  On
January 21, 2005 the Company changed its name to NextPhase Wireless,
Inc.




Effective
April 5, 2006, through its wholly-owned subsidiary SpeedFactory, Inc.
(“SpeedFactory”), NextPhase acquired the Internet service and connectivity
business assets previously operated by Synkronus, Inc. (“Synkronus”) under the
name "SpeedFactory." Effective July 23, 2007 SpeedFactory acquired the Internet
service and connectivity business assets previously operated by Interactive
Network Systems, Inc.  (“INS”).





Prior to
the acquisition of SpeedFactory, NextPhase had a limited operating history with
revenue-generating products and services only recently entering the
market.





With the
acquisition of SpeedFactory, NextPhase enhanced its position as a nationwide
provider of scalable, reliable and cost effective connectivity solutions,
expanding its portfolio of products and services to include DSL, T1s,
co-location and web hosting. NextPhase continues to extend its wireless
“footprint” in Southern California, through a combination of organic growth and
acquisition, NextPhase has continued to add small to medium business
subscribers, small office/home office (SOHO) subscribers, and residential
subscribers in underserved markets to its network.




Effective
October 1, 2006, all revenue generating activity was combined with SpeedFactory
and INS a division of SpeedFactory.




The
Company conducts its operations from its office located in Anaheim, California,
the SpeedFactory location in Marietta, Georgia and the INS operation in
Blackwood, New Jersey.





The
condensed consolidated financial statements presented include only the accounts
of NTI, from its inception (September 14, 2000) through September 30, 2008, of
NextPhase from August 3, 2004 through September 30, 2008, of SpeedFactory from
April 6, 2006 (date of acquisition) through September 30, 2008 and INS, a
division of SpeedFactory, from July 23, 2007 (date of acquisition) through
September 30, 2008.




Results
of Operations:




For the
three months and six months ended September 30, 2008, revenue was $159,090 as
compared with $584,462 and $511,454 as compared with $992,443 forthesame period of the
previous year. The reduction was due to the decreased emphasis on the sale of
wired services and an increased effort for the sale of wireless services.Cost of revenue
was $126,886 or 79.8% of revenue for the three months ended September 30, 2008,
compared to $245,923 or 48.1% during the three months ended September 30,
2007.   Reorganization of the Company’s network infrastructure is
resulting in reduced costs, not all of the anticipated reductions have been
realized yet. The apparent increase is the result of fixed costs remaining in
place as revenue has temporarily declined.  Management anticipates
that, with additional capital expenditures, these fixed costs will be reduced to
more acceptable levels.




Selling,
general, and administrative expenses were $957,998 for the three months ended
September 30, 2008 as compared with $973,919 for the three months ended
September 30, 2007, a decrease of $15,921 for the most recent 3
months.The
decrease was due primarily to managements’ cost cutting efforts while engaging
in the paradigm shift from wired to wireless services. Management believes that
based on its cost cutting program, savings will continue to be realized for this
sector.  Included in the 6 months ended September 30, 2008, are stock
based compensation payments totaling $1,633,127 which if excluded would create
an expense saving, for the six months ended September 30, 2008, of
$603,176.




Depreciation
and amortization expense for the three months ended September 30, 2008 and 2007
was $100,738 and $184,802 respectively. Amortization of the intangible assets
acquired in the SpeedFactory and INS acquisitions was $17,167 and $56,000 for
the three months ended September 30, 2008 and 2007.








9





Interest
expense of $80,562 and $160,120 for the three and six months ended September 30,
2008 increased over the same periods of the previous year as a result of
additional funds being borrowed through the issuance of convertible promissory
notes.  The conversion of $3,665,000 of those notes to Preferred A
stock will significantly reduce that cost in future accounting
periods.




Net loss
for the three months ended September 30, 2008 was $1,032,967 or $.18 per share
as compared with a net loss of $705,012 or $0.42 per share for the three months
ended September 30, 2007. Monthly operating cash losses are now
approximately $87,500 per month.  Management expects this to
continue to decline as the Company continues to implement its new business
plan.





Liquidity and Capital
Resources




As of
September 30, 2008, the Company had a cash balance of $221, used $262,721 of
cash for operations  and the Company's accumulated deficit was
$21,594,700.The
Company had negative working capital of $2,506,7550.  Total
liabilities were $2,676,176, which included accounts payable of $1,294,036,
accrued expenses of $440,701, deferred revenue of $78,500 and notes and advances
payable of $715,779.




Off-Balance Sheet
Arrangements





We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operation, liquidity, capital
expenditures or capital resources that is material to investors.




Inflation





In the
opinion of management, inflation has not had a material effect on the Company's
financial condition or results of its operations





Critical Accounting
Policies





Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the U.S., which requires us to make estimates
and assumptions in certain circumstances that affect amounts reported. In
preparing these financial statements, management has made its best estimates and
judgments of certain amounts, giving due consideration to materiality. We
believe that of our significant accounting policies (more fully described in
notes to the consolidated financial statements), which are particularly
important to the portrayal of our results of operations and financial position
and may require the application of a higher level of judgment by our management,
and as a result are subject to an inherent degree of uncertainty. While there
are a number of accounting policies, methods and estimates affecting our
unaudited condensed consolidated financial statements, areas that are
particularly significant include:




Revenue
Recognition and Deferred Revenue


Revenues
are recognized in the period that services are provided.  For revenue
from product sales, the Company recognizes revenue in accordance with Staff
Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”, which superseded SAB
No. 101, Revenue Recognition in Financial Statements). SAB No. 104 requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded. The Company defers any
revenue for which the product has not been delivered or for which services have
not been rendered or are subject to refund until such time that the Company and
the customer jointly determine that the product has been delivered or services
have been rendered or no refund will be required.




SAB 104
incorporates Emerging Issues Task Force Issue (“EITF”) No. 00-21,
“Deliverable Revenue Arrangements.” EITF No. 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF No. 00-21
on the Company's consolidated financial position and results of operations was
not significant.







10





The
Company considers amounts to be earned once evidence of an arrangement has been
obtained, services are delivered, fees are fixed or determinable, and
collectibility is reasonably assured.  The Company generates and
recognizes revenue as follows:




Revenue
from operating as a wireless Internet service provider of tiered wireless
Internet services to business and residential subscribers:  Internet
services are billed at the beginning of each month's activity at a fixed rate
for each customer.  Customers sign an annual agreement or utilize the
service on a month-to-month basis.  Revenue not yet earned is recorded
as deferred revenue.




Revenue
from the sale and configuration of wireless equipment:  NextPhase acts
as a reseller of certain components and equipment related to its products and
services.  Equipment revenue is recognized at the time of shipment FOB
to the customer.  Configuration is billed at an hourly rate and
recognized after completion. Costs associated with the equipment are expensed at
the time of shipment.  In order to maximize the Company’s cash flows,
revenue from the sale and configuration of wireless equipment is sometimes
billed in advance of shipment. In such cases, these invoices are recorded as
deferred revenue.




Revenue
from professional and consulting services provided by its
staff:  These services include wireless network consulting,
interference surveys, network management and telephone
consulting.  Revenue is recognized after the professional or
consulting service has been provided. In order to maximize the Company’s cash
flows, revenue from professional services is sometimes billed in advance of
project completion. In such cases, these invoices are recorded as deferred
revenue.




Long-Lived
Assets


The
Company reviews its fixed assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The test for impairment is
required to be performed by management at least annually. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to the future undiscounted operating cash flow expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds the fair value of the asset. Long-lived assets to be disposed of are
reported at the lower of carrying amount or fair value less costs to
sell.





Goodwill and Other Intangible
Assets


The
Company has adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS
No. 142 requires that goodwill and intangible assets deemed to have indefinite
lives are no longer amortized but are subject to an annual impairment test which
has two steps to determine whether asset impairment exists. The first step of
the impairment test identifies potential impairment by comparing the fair value
with the carrying amount of the reporting unit, including goodwill. If the
carrying amount of the reporting unit exceeds its fair value, the second step of
the impairment test shall be performed to measure the amount of the impairment
loss, if any. Intangibles with indefinite useful lives are measured for
impairment by the amount that the carrying value exceeds the estimated fair
value of the intangible. The fair value is calculated using the income approach.
Intangible assets with definite useful lives will continue to be amortized over
their estimated useful lives. Any impairment is recorded at the date of
determination.




The
Company’s policy provides for annual evaluation of goodwill on the first day of
the fourth fiscal quarter and whenever events and changes in circumstances
suggest that the carrying amount may not be recoverable. Impairment of goodwill
is tested at the operating segment level by comparing the segments' net carrying
value, including goodwill, to the fair value of the segment. The fair values of
our segments are estimated using a combination of the income or discounted cash
flows approach and the market approach, which uses comparable market data. If
the carrying amount of the segment exceeds its fair value, goodwill is
potentially impaired and a second test would be performed to measure the amount
of impairment loss, if any.




Business
Combinations


In
accordance with SFAS No. 141,  “Business Combinations,” the Company
allocates the purchase price of acquired entities to the tangible and intangible
assets acquired and, liabilities assumed, based on their estimated fair
values.  Such a valuation requires management to make significant
estimates and assumptions, especially with respect to intangible
assets.




Management
makes estimates of fair values based upon assumptions believed to be reasonable.
These estimates are based on historical experience and information obtained from
the management of the acquired companies. Critical estimates in valuing certain
of the intangible assets include but are not limited to: future expected cash
flows from revenues, customer relationships, key management and market position,
assumptions about the period of time the acquired trade names will continue to
be used in the Company's combined product portfolio, and discount rates used to
establish fair value. These estimates are inherently uncertain and
unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
events and circumstances may occur which may affect the accuracy or
validity of such assumptions, estimates or actual results.







11




Beneficial
Conversion Feature


The
convertible feature of one of the Company’s convertible notes provided for a
rate of conversion that was below market value (see Note 4). Such feature
is normally characterized as a “beneficial conversion feature” (“BCF”). Pursuant
to Emerging Issues Task Force (“EITF”) Issue No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratio” and EITF No. 00-27, “Application of EITF Issue
No. 98-5 to Certain Convertible Instruments”, the estimated relative fair
value of the BCF was recorded as a discount from the face amount of the
convertible note. The Company amortized the discount using the effective
interest method through the conversion of such instrument.





Income
Taxes


The
Company utilizes the liability method of accounting for income taxes as set
forth in SFAS No. 109, “Accounting for Income Taxes”. Under the
liability method, deferred taxes are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates. A valuation allowance is recorded when it
is more likely than not that some of the deferred tax assets will not be
realized. The Company also determines its tax contingencies in accordance with
SFAS No. 5, “Accounting for Contingencies.” The Company records
estimated tax liabilities to the extent the contingencies are probable and can
be reasonably estimated.




Recent
Accounting Pronouncements


In
September 2006, the FASB issued SFAS No. 157 “Fair Value
Measurements,”  to eliminate the diversity in practice that exists due
to the different definitions of fair value and the limited guidance for applying
those definitions in accounting principles generally accepted in the United
States of America that are dispersed among the many accounting pronouncements
that require fair value measurements.




SFAS No.
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years, although
earlier application is encouraged. Additionally, prospective application of the
provisions of SFAS No. 157 is required as of the beginning of the fiscal year in
which it is initially applied, except when certain circumstances require
retrospective application. The Company is currently evaluating the effect of
adopting SFAS No. 157 on its consolidated financial statements.




SFAS No.
159 permits all entities to choose to measure eligible items at fair value at
specified election dates. A business entity will report unrealized gains and
losses on items for which the fair value option has been elected in earnings (or
another performance indicator if the business entity does not report earnings)
at each subsequent reporting date. The fair value option: ( a ) may be applied instrument
by instrument, with a few exceptions, such as investments otherwise accounted
for by the equity method; ( b ) is irrevocable (unless a
new election date occurs); and ( c ) is applied only to entire
instruments and not to portions of instruments. SFAS No. 159 is effective as of
the beginning of an entity’s first fiscal year that begins after November 15,
2007.  Early adoption is permitted as of the beginning of the previous
fiscal year provided that the entity makes that choice in the first 120 days of
that fiscal year and also elects to apply the provisions of SFAS No. 157. The
adoption of this pronouncement is not expected to have material effect on the
Company’s consolidated financial statements.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




None.





ITEM
4 CONTROLS AND PROCEDURES.




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, among other things, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.




Evaluation of Disclosure
Controls and Procedures





As of the
end of the period covered by this Quarterly Report, we conducted an evaluation,
under the supervision and with the participation of our principal financial
officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e)
of the Exchange Act). Based on his evaluation, our principal financial officer
concluded that our current system of disclosure controls and procedures still
contains a significant deficiency.




There was
no change in our internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which
this report relates that has materially affects, or is reasonable likely to
materially affect, our internal control over financial reporting.










12





PART
II - OTHER INFORMATION




ITEM1: LEGAL
PROCEEDINGS.




None




ITEM2: UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.




On
November 5, 2007 the Company executed employment agreements with Messrs. Ford,
Hemingway and Noyes.  In connection with the agreements, the Company
granted 600,000, 600,000 and 250,000 shares to Messrs. Ford, Hemingway and Noyes
respectively.  These issuances were valued at $4,550,000 and charged
to stock-based compensation in the three and nine months ended December 31,
2007. The shares are subject to lock-up provisions.  The issuance was
exempt from registration under Section 4(2) of the Securities Act of
1933.




On
November 5, 2007, we issued 25,000 shares to Michael Jones, Director, valued at
$81,250 which was charged to stock-based compensation in the three months and
nine months ended December 31, 2007. The issuance was exempt from registration
under Section 4(2) of the Securities Act of 1933.




On
November 5, 2007 we issued 100,000 shares in total to five employees and
one consultant. These shares were valued at $325,000 and charged to stock-based
compensation in the three and nine months ended December 31, 2007. . The
issuance was exempt from registration under Section 4(2) of the Securities Act
of 1933.




On
November 5, 2007 we issued 36,271 shares of our common stock valued at $78,908
to a note holder for payment of interest. The issuance was exempt from
registration under Section 4(2) of the Securities Act of 1933.




On
December 18, 2007 we issued 11,753 shares of our common stock valued at $42,241
to a note holder for payment of interest. The issuance was exempt from
registration under Section 4(2) of the Securities Act of 1933.





On July
18, 2008 we issued 100,000 shares of our common stock valued at $15,000 to a
consultant for services rendered. The issuance was exempt from registration
under Section 4(2) of the Securities Act of 1933.





On
September 18, 2008 we issued 50,000 shares of our common stock valued at $9,000
to several  consultants for services rendered.  The issuance
was exempt from registration under Section 4(2) of the Securities Act of
1933.





None of
the sales of securities described above have been registered with the Securities
and Exchange Commission because they are believed to be exempt from registration
under the Securities Act of 1933 pursuant to Regulation D, Rule 506, promulgated
thereunder or generally section 4(2) of the Act. Each purchaser represented his,
her or its intention to acquire the securities for investment only and not with
a view toward distribution. Each investor was given adequate information about
us to make an informed investment decision. We did not engage in any general
solicitation or advertising. The stock certificates issued in each case contain
an appropriate legend identifying each as restricted stock.




ITEM3: DEFAULTS UPON SENIOR
SECURITIES.




The
Company does not hold any assets or liabilities requiring disclosure under this
item.




ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS




None.




ITEM 5: OTHER
INFORMATION.




None.




ITEM
6. EXHIBITS





Please
see Exhibit Index located behind the signature page.










13





SIGNATURES







In
accordance with the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.






NextPhase
      Wireless, Inc.November
      17, 2008
            By:
            /s/ Thomas HemingwayThomas
      HemingwayPresident
      and Chief Executive Officer








14





EXHIBIT
INDEX





Exhibit
      Number
            
            Description of
      Exhibit10.9
            
            Securities
      Exchange Agreement filed with the Securities and Exchange Commission in
      the exhibits attached to Form 8-K filed on October 2,2008 and incorporated
      by reference here in.31
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002







15