UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




___________________________





FORM
10-QSB /A










(Mark
      One)x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Quarterly Period Ended December 31 , 2007ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from ________________to
      ___________________





Commission
File Number: 000-24595





NEXTPHASE
WIRELESS, INC.


(Exact
name of small business issuer as specified in its charter)




Nevada
            
            88-0343832(State
      or other jurisdiction of incorporation or organization)
            
            (IRS
      Employer Identification No.)







300 S. Harbor
Blvd.,Anaheim,California92805


(Address
of principal executive offices)





(800)
748-5548


(Issuer's
telephone number, including area code)




________________________________________________________________


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








Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 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 x  No o




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




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEEDING FIVE
YEARS.





Check
whether registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes o  No o





APPLICABLE
TO CORPORATE ISSUERS





State the
number of shares outstanding of each of the issuer's class of common equity, as
of the latest practicable date: There are 3,913,181 shares of common
stock outstanding as of February 29, 2008




Transitional
Small Business Disclosure Format (check one) Yes o  No x





Table of Contents




NEXTPHASEWIRELESS, INC.





Quarterly
Report on Form 10- QSB/A for the


Quarterly
Period Ending December 31, 2007




EXPLANATORY
NOTE
 
 On
February 15, 2008, we filed our Quarterly Report on Form 10-QSB for the Quarter
ended December 31, 2007 (the “Original Report”) with the Securities and Exchange
Commission.  Our previously filed interim condensed consolidated
financial statements as of December 31, 2007 and for the three and nine
months ended December 31, 2007 had not been reviewed by the Company’s
independent registered public accounting firm as required under Statement of
Auditing Standards (“SAS”) No. 100 pursuant to Item 310(b) of the Securities and
Exchange Commission’s Regulation S-B.  At the time of filing of the
Original Report, the Company was unable to provide information to its
independent registered public accounting firm to permit a complete review of the
interim financial information included therein.
 
 The
unaudited condensed consolidated financial statements as of December 31, 2007
and for the three and nine months ended December 31, 2007 included in Part
I of this Amendment No. 1 to the Original Report have been reviewed by the
Company’s independent registered public accounting firm as required by SAS No.
100.  Each item has been reproduced in its entirety in this Amendment
No. 1.  Our Chief Executive Officer and Chief Financial Officer have
also reissued their certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act.


TABLE OF
CONTENTS
  
 
  Page
      no.PART
      I - FINANCIAL INFORMATION
              
              1Financial Statements
      (Unaudited)
              
              1Item 2. Management's Discussion
      and Analysis or Plan of Operation
              
              16Item 3. Controls and
      Procedures
              
              22PART
      II - OTHER INFORMATION
              
              23Item 1. Legal
      Proceedings
              
              23Item 2. Unregistered Sales of Equity
      Securities and Use of Proceeds
              
              23Item 3. Defaults Upon Senior
      Securities
              
              23Item 4. Submission of Matters to a
      Vote of Security Holders
              
              23Item 5. Other
      Information
              
              23Item 6.
      Exhibits
              
              23SIGNATURES
              
              24
    Table of Contents


PARTI. FINANCIAL INFORMATION
 
 
 NextPhase
Wireless, Inc.
 Condensed
Consolidated Balance Sheet
 (Unaudited)
  December
      31,2007ASSETSCurrent
      assets:Cash
                
                $
                5,370Accounts
      receivable
                
                
                84,630Prepaid
      consulting fees
                
                
                567,934Prepaid
      expenses
                
                
                45,203Total
      current assets
                
                
                703,137Property
      and equipment -net
                
                
                358,156Customer
      lists - net
                
                
                747,000Trademarks
                
                
                100,000Supply
      contracts -net
                
                
                39,000Goodwill
                
                
                340,000Deposits
                
                
                8,636Total
      assets
                
                $
                2,295,929LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                
                $
                1,125,138Accrued
      expenses
                
                
                128,873Deferred
      revenue
                
                
                166,000Cash
      advance payable
                
                
                375,000Due
      to officer shareholders
                
                
                89,208Notes
      payable - current portion
                
                
                3,600,106Total
      current liabilities
                
                
                5,484,325Notes
      payable, net of current portion, net of debt discount
                
                
                26,082Total
      liabilities
                
                
                5,510,407Commitments
      and contingenciesStockholders'
      deficit:Preferred
      stock, $0.001 par value, 20,000,000 sharesauthorized;
      no shares issued and outstanding
                
                
                -Common
      stock, $0.001 par value, 10,000,000 sharesauthorized;  3,733,181
      shares issued and outstanding
                
                
                3,733Additional
      paid-in capital
                
                
                16,468,529Accumulated
      deficit
                
                
                (19,686,740
                )Total
      stockholders' deficit
                
                
                (3,214,478
                )Total
      liabilities and stockholders' deficit
                
                $
                2,295,929
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
   1
 Table of Contents
  NextPhase
Wireless, Inc.
 Condensed
Consolidated Statements of Operations
 (Unaudited)
 
 For
      the Three Months Ended
                  
                  
                  For
      the Nine Months EndedDecember
      31,
                  
                  
                  December
      31,2007
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2006RevenueBroadband
      and internet
                  
                  $
                  435,902
                  
                  
                  $
                  487,412
                  
                  
                  $
                  1,367,802
                  
                  
                  $
                  1,376,760Products
      and consulting services
                  
                  
                  16,750
                  
                  
                  
                  43,683
                  
                  
                  
                  77,293
                  
                  
                  
                  312,039Total
      revenue
                  
                  
                  452,652
                  
                  
                  
                  531,095
                  
                  
                  
                  1,445,095
                  
                  
                  
                  1,688,799Cost
      of revenue
                  
                  
                  276,564
                  
                  
                  
                  250,195
                  
                  
                  
                  759,406
                  
                  
                  
                  861,210Gross
      profit
                  
                  
                  176,088
                  
                  
                  
                  280,900
                  
                  
                  
                  685,689
                  
                  
                  
                  827,589-Operating
      expenses:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  -Selling,
      general and administrative
                  
                  
                  620,205
                  
                  
                  
                  464,653
                  
                  
                  
                  1,883,975
                  
                  
                  
                  1,513,715Stock-based
      compensation
                  
                  
                  9,259,201
                  
                  
                  
                  129,600
                  
                  
                  
                  9,551,753
                  
                  
                  
                  281,128Depreciation
      and amortization
                  
                  
                  104,797
                  
                  
                  
                  67,943
                  
                  
                  
                  289,599
                  
                  
                  
                  201,266Total
      operating expenses
                  
                  
                  9,984,203
                  
                  
                  
                  662,196
                  
                  
                  
                  11,725,327
                  
                  
                  
                  1,996,109Operating
      loss
                  
                  
                  (9,808,115
                  )
                  
                  
                  (381,296
                  )
                  
                  
                  (11,039,638
                  )
                  
                  
                  (1,168,520
                  )Other
      income (expense):Gain
      on settlements of liabilities, net
                  
                  
                  36,734
                  
                  
                  
                  -
                  
                  
                  
                  181,085
                  
                  
                  
                  -Interest
      income (expense), net
                  
                  
                  (71,819
                  )
                  
                  
                  23,825
                  
                  
                  
                  (196,477
                  )
                  
                  
                  (104,016
                  )Other
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,251Total
      other income (expense), net
                  
                  
                  (35,085
                  )
                  
                  
                  23,825
                  
                  
                  
                  (15,392
                  )
                  
                  
                  (99,765
                  )Loss
      before income taxes
                  
                  
                  (9,843,200
                  )
                  
                  
                  (357,471
                  )
                  
                  
                  (11,055,030
                  )
                  
                  
                  (1,268,285
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  $
                  (9,843,200
                  )
                  
                  $
                  (357,471
                  )
                  
                  $
                  (11,055,030
                  )
                  
                  $
                  (1,268,285
                  )Basic
      and diluted net loss per share
                  
                  $
                  (3.35
                  )
                  
                  $
                  (0.28
                  )
                  
                  $
                  (5.39
                  )
                  
                  $
                  (1.03
                  )Weighted
      average shares outstanding
                  
                  
                  2,934,960
                  
                  
                  
                  1,273,452
                  
                  
                  
                  2,050,065
                  
                  
                  
                  1,227,214
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
   2
 Table of Contents
  NextPhase
Wireless, Inc.
 Condensed
Consolidated Statements of Cash Flows
 (Unaudited)
 For
      the Nine Months
      EndedDecember
      31,2007
                
                
                2006Cash
      flows from operating activities:Net
      loss
                
                $
                (11,055,030
                )
                
                $
                (1,268,285
                )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Gain
      on settlement of liabilities, net
                
                
                (181,085
                )
                
                
                -Issuance
      of common stock for consulting services
                
                
                5,287,001
                
                
                
                282,128Issuance
      of warrants and options for consulting services
                
                
                3,352,255
                
                
                
                -Amortization
      of discount on notes payable
                
                
                26,136
                
                
                
                16,920Amortization
      of prepaid consulting services
                
                
                912,566Interest
      expense
                
                
                -
                
                
                
                50,086Bad
      debt expense
                
                
                20,000
                
                
                
                -Depreciation
      and amortization
                
                
                289,599
                
                
                
                201,266Changes
      in assets and liabilities:(Increase)
      decrease in assets:Accounts
      receivable
                
                
                214,006
                
                
                
                7,547Other
      current assets
                
                
                (5,800
                )
                
                
                2,225Other
      receivables
                
                
                -
                
                
                
                (46,890
                )Deposits
                
                
                -
                
                
                
                (600
                )Increase
      (decrease) in liabilities:Accounts
      payable and accrued liabilities
                
                
                308,258
                
                
                
                475,297Advances
      payable
                
                
                -
                
                
                
                7,500Due
      to officers-shareholders
                
                
                89,208
                
                
                
                -Deferred
      revenue
                
                
                (121,870
                )
                
                
                13,779Net
      cash used in operating activities
                
                
                (864,756
                )
                
                
                (259,027
                )Cash
      flows from investing activities:Purchase
      of furniture and equipment
                
                
                (36,744
                )
                
                
                (36,405
                )Purchase
      of Interactive Network Services, Inc.
                
                
                (342,612
                )
                
                
                -Purchase
      of company stock
                
                
                -
                
                
                
                (9,979
                )Net
      cash used in investing activities
                
                
                (379,356
                )
                
                
                (46,384
                )Cash
      flows from financing activities:Proceeds
      from notes payable
                
                
                910,000
                
                
                
                196,132Proceeds
      from cash advances payable
                
                
                275,000
                
                
                
                100,000Principal
      payments on notes payable and capital leases
                
                
                (7,201
                )
                
                
                (10,639
                )Proceeds
      from sale of common stock
                
                
                -
                
                
                
                -Net
      cash provided by financing activities
                
                
                1,177,799
                
                
                
                285,493Change
      in cash
                
                
                (66,313
                )
                
                
                (19,918
                )Cash
      at beginning of period
                
                
                71,683
                
                
                
                35,847Cash  end
      of period
                
                $
                5,370
                
                
                $
                15,929Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
                
                $
                -
                
                
                $
                1,676Income
      taxes
                
                $
                -
                
                
                $
                -Non-cash
      investing and financing transactions:Issuance
      of previously subscribed common stock
                
                $
                -
                
                
                $
                25,000Cancellation
      of stock from legal settlements
                
                $
                -
                
                
                $
                250,000Cancellation
      of stock originally issued in reverse merger
                
                $
                -
                
                
                $
                121Beneficial
      conversion feature of notes payable
                
                $
                -
                
                
                $
                69,697Acquisition
      of equipment under capital lease agreements and notes
    payable
                
                $
                -
                
                
                $
                50,650Amortization
      of deferred compensation
                
                $
                -
                
                
                $
                79,000Common
      stock issued for services and legal settlement
                
                $
                -
                
                
                $
                223,128Common
      stock issued for accounts payable and accrued expenses
                
                $
                391,554
                
                
                $
                37,639Note
      payable issued in connection with acquisition
                
                $
                -
                
                
                $
                1,500,000Common
      stock issued for prepaid consulting services
                
                $
                1,480,500
                
                
                $
                -
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  3
 Table of Contents
   NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 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.
 
 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”). Management's plans are discussed
further in the Going Concern portion of Note 1.
 
 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.
 
 Interim
Financial Information
 The
accompanying unaudited condensed consolidated financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States of America for interim financial information.
These principles are consistent in all material respects with those applied in
the Company's consolidated financial statements contained in the Company's
annual report on Form 10-KSB for the year ended March 31, 2007, and pursuant to
the instructions to Form 10-QSB and Item 310(b) of Regulation S-B promulgated by
the United States Securities and Exchange Commission ("SEC"). Interim financial
statements do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
(all of which are of a normal recurring nature, including the elimination of
intercompany accounts) necessary to present fairly the financial position,
results of operations and cash flows of the Company for the periods indicated.
Interim results of operations are not necessarily indicative of the results to
be expected for the full year or any other interim periods. These unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto contained in the
Company's annual report on Form 10-KSB for the year ended March 31,
2007.
 
 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 presented include only the accounts
of NTI, from its inception (September 14, 2000) through December 31, 2007, of
NextPhase from August 3, 2004 through December 31, 2007, of SpeedFactory
from April 6, 2006 (date of acquisition) through December 31, 2007 and
INS, a division of SpeedFactory from July 23, 2007 (date of acquisition) through
December 31, 2007. The acquisition of INS was accounted for using the purchase
method in accordance with Statement of Financial Accounting Standards
("SFAS") No. 141 (see Note 2). The results of operations for INS have been
included in the condensed consolidated Statements of Operations since the date
of acquisition. All significant inter-company accounts and transactions have
been eliminated in consolidation.
 
 4
 Table of Contents
  NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
  The
Company conducts its operations from its offices located in Anaheim, California,
the SpeedFactory location in Marietta, Georgia and the INS operation in
Blackwood, New Jersey.
  Reverse
Stock Split
 On
November 5, 2007, the Company effected a one for twenty reverse stock
split. As a result of the reverse stock split, each 20 shares of issued and
outstanding common stock as of close of trading on November 2, 2007 were
automatically converted into one share of split-adjusted common
stock.  No fractional shares of common stock were issued in connection
with the reverse split. The accompanying condensed consolidated financial
statements have given effect to the reverse split effective at the beginning of
the periods reported herein.
 
 Going
Concern and Management’s Plan
 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. While the
Company now has an established source of revenue, it has experienced net
losses of $19,686,740 since inception. The Company has a working capital deficit
of $4,781,188 at December 31, 2007. These factors raise substantial doubt about
the Company's ability to continue as a going concern. 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.
 
 During
the nine months ended December 31, 2007, the Company executed short-term notes
for $910,000 (see Note 4). In January 2008, the Company issued a convertible
note totaling $80,000 (see Note 7) with interest at 7%, due 90 days from the
date of issuance. In March 2008, the Company issued a 90 day note for $60,000
with interest at 7%.  In addition, the Company received a $275,000
advance from its secured note holder in July 2007 to assist in the acquisition
of INS which was finalized on July 23, 2007.
 
 The
Company has developed a plan to integrate additional Internet Service Providers
(“ISPs”) in a scalable roll-up strategy.  The Company will acquire
only profitable operations, both wireless and landline based, which are
synergistic to the Company’s current operations in California, Georgia and
New Jersey. The Company acquired the business of INS in July 2007 and has
entered into a letter of intent to acquire four additional companies whose
acquisitions will greatly reduce the negative cash flow on a monthly basis. The
Company expects these acquisitions to be completed in April 2008. Under its
plans, management expects to generate positive operating cash flow during the
3rd calendar quarter of 2008. 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 anticipates its current cash reserves, plus its expected generation of
cash from existing operations, will only be sufficient to fund its anticipated
operations through the 1st quarter
of 2008. Consequently, the Company will need to raise additional debt and/or
equity capital in order to finance its business plan and needs for working
capital. Such financing(s), if available, may increase the risk of the Company
not being able to service its debt obligations, and/or cause dilution to
existing equity holders. The accompanying unaudited condensed consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets and
liabilities that might result from the outcome of this uncertainty.
 
 Segment
Information
 SFAS
("Statement of Financial Accounting Standards") No. 131, “ Disclosures
about Segments of an Enterprise and Related Information” establishes standards
for reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS No. 131 also
establishes standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision maker, or decision-making group, in
making decisions regarding the allocation of resources and asset performance.
The information disclosed herein materially represents all of the financial
information related to the Company's principal operating segment.
  
 5
 Table of Contents
 
 NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
 
 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 No.
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 unaudited condensed consolidated financial position and results
of operations was not significant.
 
 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.
 
 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.
 
  
 6
 Table of Contents
 
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 
 NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
 
 
 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 reporting unit level by comparing the reporting unit's net
carrying value, including goodwill, to the fair value of the reporting unit. The
fair values of the Company’s reporting units 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
reporting unit exceeds its fair value, goodwill is potentially impaired and a
second test would be performed to measure the amount of impairment loss, if
any.
  Beneficial
Conversion Feature
 The
convertible feature of certain 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 EITF 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 amortizes
the discount using the effective interest method through the conversion or
maturity date of such instrument.
  Recent
Accounting Pronouncements
 In July
2006, the Financial Accounting Standard Board ("FASB")  issued
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No.
48”) which clarifies the accounting for uncertainty in income taxes recognized
in the financial statements in accordance with SFAS No. 109, “Accounting
for Income Taxes.” This pronouncement recommends a recognition threshold and
measurement process for recording in the consolidated financial statements
uncertain tax positions taken or expected to be taken in the Company’s tax
return. FIN No. 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods and disclosure
requirements for uncertain tax positions. The accounting provisions of FIN No.
48 were effective for the Company beginning April 1, 2007.  Management
believes that the adoption of FIN 48 had no material impact to the
financial statements.
  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.
 
 
 
 
 7
 Table of Contents
 
 
 NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
  NOTE
1-NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
 
 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 Statement No.
157.  The adoption of this pronouncement is not expected to have material
effect on the Company’s consolidated financial statements.
  In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations." SFAS No.
141R provides companies with principles and requirements on how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree
as well as the recognition and measurement of goodwill acquired in a business
combination. SFAS No. 141R also requires certain disclosures to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. Acquisition costs associated with the business combination
will generally be expensed as incurred. SFAS No. 141R is effective for business
combinations occurring in fiscal years beginning after December 15, 2008. Early
adoption of SFAS No. 141R is not permitted. We are currently evaluating the
impact SFAS No. 141R will have on any future business
combinations.
  Basic
and Diluted Loss per Common Share
 Basic
loss per share is calculated by dividing net loss by the weighted average common
shares outstanding during the period. Diluted net loss
per share reflects the potential dilution to basic EPS that could occur upon
conversion or exercise of securities, options or other such items to common
shares using the treasury stock method, based upon the weighted average fair
value of our common shares during the period.  During the nine months
ended December 31, 2007 and 2006, the Company had 494,625 and
-0- potentially dilutive securities which were excluded in the
calculation of the weighted average number of shares outstanding because they
would be anti-dilutive.
  The
Company has changed its method in calculating the weighted average of common
shares from the method used in the filing on February 15, 2008 which resulted in
an increased in the weighed average of common shares to compute the basic and
dilutive net loss per share for the three months and nine months ended December
31, 2007. The previous loss per share was $3.60 and $5.42 for the three months
and nine months ended December 31, 2007 and have been restated to a loss per
share of $3.35 and $5.39 for the respective periods.
 NOTE
2 - ACQUISITIONS
 
 On April
5, 2006, the Company, through its wholly-owned subsidiary SpeedFactory, acquired
all of the assets of Synkronus excluding cash, pursuant to an asset purchase
agreement dated March 29, 2006 between SpeedFactory and Synkronus. The assets
acquired by SpeedFactory comprise Synkronus's Internet service and connectivity
business operated by Synkronus under the name "SpeedFactory."
 
 The
Company paid $1,500,000 in cash for the assets at closing. SpeedFactory did not
assume any pre-closing liabilities from Synkronus. The amount of $1,200,000 was
delivered to the seller on April 7, 2006 and the closing documents were released
from escrow on that date. The amount of $300,000 was delivered to escrow on
April 7, 2006, pending resolution of certain elements of the transaction, which
were resolved in May 2007.  There were no acquisition related expenses
incurred.  The closing was effective as of April 5, 2006.
 
 NextPhase
borrowed $1,500,000 to fund the purchase price from a private lender (see Note
4). This borrowing was secured by substantially all the assets of the
Company.
  The
acquisition of Synkronus was accounted for using the purchase method in
accordance with SFAS No. 141. The results of operations for Synkronus have been
included in the condensed consolidated Statements of Operations since the date
of acquisition.
  In
accordance with SFAS No. 141, the total purchase price was allocated to the
estimated fair value of assets acquired and liabilities assumed. The fair value
of the assets acquired was based on management's best estimates and independent
third party appraisal. The Company has made an allocation of the purchase price
to the Synkronus assets at estimated fair values.  The purchase price
was allocated to the fair value of assets acquired as follows:
  Amount
              
              Estimated
      LivesComputers
      and related equipment
              
              $
              100,000
              
              3
      yearsCustomer
      lists
              
              
              980,000
              
              5
      yearsTrademarks
              
              
              100,000
              
              indefiniteSupply
      contracts
              
              
              60,000
              
              5
      yearsGoodwill
              
              
              260,000
              
              indefinite$
              1,500,000
 
 8
 Table of Contents
  NEXTPHASE
WIRELESS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 The
trademarks are deemed to have an indefinite life and, accordingly, are not being
amortized, but will be subject to periodic impairment testing at future periods
in accordance with SFAS No. 142. The customer lists and supply contracts will be
amortized based on estimated weighted cash flows over their lives. Amortization
expense for the three months and nine months ended December 31, 2007 and
2006 was $52,000, $49,000, $156,000 and $147,000 respectively.
 
 On July
23, 2007, the Company, through its wholly-owned subsidiary SpeedFactory,
acquired  assets (excluding cash) and assumed certain liabilities of
INS, pursuant to an asset purchase agreement between SpeedFactory and INS. The
assets and liabilities acquired by SpeedFactory comprised the INS Internet
service and connectivity business.
 
 The
Company paid $342,612 in cash for the assets and certain
liabilities.  SpeedFactory did not assume any pre-closing liabilities
(except deferred revenue) from INS. The acquisition of INS was accounted
for using the purchase method in accordance with SFAS No. 141. The results of
operations for INS have been included in the condensed consolidated Statements
of Operations since the date of acquisition.
  In
accordance with SFAS No. 141, the total purchase price was allocated to the
estimated fair value of net assets acquired. The fair value of the net assets
acquired was based on management's best estimates. The Company has made an
allocation of the purchase price to the INS assets at their estimated fair
values as follows:
  Amount
              
              Estimated
      LivesAccounts
      receivable
              
              $
              202,482Computers
      and related equipment
              
              
              150,000
              
              3
      yearsCustomer
      lists
              
              
              120,000
              
              5
      yearsGoodwill
              
              
              80,000
              
              indefiniteDeferred
      revenue
              
              
              (209,870
              )$
              342,612
  The
customer lists will be amortized based on estimated weighted cash flows over
their lives. Amortization expense for the three and nine months ended December
31, 2007 was $6,000 and $10,000.
  
 9
 Table of Contents
  NEXTPHASE WIRELESS, INC. AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 Three
      Months Ended
                
                
                Nine
      Months EndedDecember
      31,
                
                
                December
      31,2007
                
                
                2006
                
                
                2007
                
                
                2006RevenuesINS
                
                $
                -
                
                
                $
                134,694
                
                
                $
                93,785
                
                
                $
                393,536NextPhase
                
                
                452,652
                
                
                
                531,095
                
                
                
                1,445,095
                
                
                
                1,688,799Total
      Revenues
                
                $
                452,652
                
                
                $
                665,789
                
                
                $
                1,538,880
                
                
                $
                2,082,335Net
      Income (Loss)INS
                
                $
                -
                
                
                $
                583
                
                
                $
                (15,124
                )
                
                $
                (49,311
                )NextPhase
                
                
                (9,843,200
                )
                
                
                (357,471
                )
                
                
                (11,055,030
                )
                
                
                (1,268,285
                )$
                (9,843,200
                )
                
                $
                (356,888
                )
                
                $
                (11,070,154
                )
                
                $
                (1,317,596
                )NextPhase,
      as reportedLoss
      per share
                
                $
                (3.35
                )
                
                $
                (0.28
                )
                
                $
                (5.39
                )
                
                $
                (1.03
                )Pro
      formaLoss
      per share
                
                $
                (3.35
                )
                
                $
                (0.28
                )
                
                $
                (5.40
                )
                
                $
                (1.07
                )
 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 at the beginning of the periods
presented.  The unaudited pro forma condensed combined results
of operations do not purport to represent what the companies’ combined
results of operations would have been if such transaction had occurred at the
beginning of the periods presented, and are not necessarily indicative of the
Company's future results.
  NOTE
3 - RELATED PARTY TRANSACTIONS
  For
the nine months ended December 31, 2006
 
 The
Company made principal payments in the amount of $9,100 on a note payable to an
ex-Company officer.  Principal in the amount of $0 remained
outstanding under this note at December 31, 2006.
 
 The
Company issued an aggregate of 12,000 shares of common stock valued at $60,000
to two officers in lieu of cash salary during the three months ended March 31,
2006.  The value of these shares was accrued during the three months
ended March 31, 2006.
 
 The
Company issued an aggregate of 45,000 shares of common stock valued at $126,000
to two officers as a bonus for the year ended March 31, 2006. The value of these
shares was accrued during the three months ended March 31,
2006.
 
 The
Company's chairman personally guaranteed payment on a note from the Company to a
lender in the amount of $50,650 with regard to the acquisition of a Company
vehicle.
  The
Company has a line of credit with America Express of $4,400. The Company's
ex-Chairman co-signs on this line of credit. At December 31, 2006 the Company
had an outstanding balance on the credit card of $2,514.
 
 The
Company had a line of credit with Bank of America of $25,000. The Company's
ex-Chairman had co-signed on this line of credit. At December 31, 2006 the
Company had an outstanding balance on the credit card of
$20,085.
 
 The
Company's ex-Chairman made payments on the Company's behalf in the amount of
$7,534, during the three months ended December 31, 2006.
 
 The
Company issued 11,538 shares of common stock with a fair value of $24,231 to its
President and Chief Executive Officer in lieu of cash salary.
 
 
 10
 Table of Contents
  NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 
 The
Company issued 11,538 shares of common stock with a fair value of $24,231 to its
ex-Chairman in lieu of cash salary.
  For
the nine months ended December 31, 2007
 
 In June
2007, the Company and its former chairman entered into a settlement agreement
whereby the former chairman forgave notes payable and accrued expenses in the
aggregate amount of $96,291, which was recorded in gain on settlement of
liabilities-net in the accompanying unaudited condensed consolidated statements
of operations.
 
 In
November 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 as signing bonuses.  These issuances were valued at
$4,712,500 and the shares are subject to lock-up provisions.  Also, in
connection with the agreements, the Company granted options to purchase 600,000,
600,000 and 250,000 shares of the Company’s common stock at $3.25 per share to
Messrs. Ford, Hemingway and Noyes, respectively. The options are fully vested
and are exercisable for a three -year period. These options were valued
at $3,270,368.
 
 In
November 2007, the Company issued 25,000 shares to Michael Jones, Director,
valued at $81,250.
 
 From time
to time the officer shareholders have advanced funds to the
Company.  As of December 31, 2007, $89,208 was due to
officer-shareholders.
  NOTE
4 – NOTES PAYABLE
 At
      December 31, 2007 notes payable and capital leases consisted of the
      following:Total
                
                
                Current
                
                
                Long-TermSecured
      convertible note payable, interest at 6%, due April 2008
                
                $
                2,300,000
                
                
                $
                2,300,000
                
                
                $
                -Less
      discount
                
                
                (8,858
                )
                
                
                (8,858
                )
                
                
                -Convertible
      notes, interest at 7%, due between December 2007 and December
      2008
                
                
                1,300,000
                
                
                
                1,300,000
                
                
                
                -Automobile
      loan, interest at 5.9%, $924 monthly, due May 2011
                
                
                35,046
                
                
                
                8,964
                
                
                
                26,082$
                3,626,188
                
                
                $
                3,600,106
                
                
                $
                26,082Advance
      payable on demand, interest at 9%
                
                $
                375,000
                
                
                $
                375,000
                
                
                $
                -
 The
convertible note payable in the amount of $2,300,000 is dated March 31, 2006 and
is fully secured by all the assets of the Company. It was deemed effective at
the date upon when the cash was received by Synkronus on behalf of the Company,
or April 7, 2006. The note bears interest at the rate of 6% per annum, and is
due in full on April 1, 2008. Upon maturity, the note and accrued interest are
convertible into common stock of the Company at the lower of the fair market
value of the Company's common stock at the date of conversion or $6.60 per
share. The minimum price at which the note and accrued interest may convert is
$3.00 per share. The Company determined the value of the embedded beneficial
conversion feature of this note payable at the time of issuance to be $69,697,
which is considered a discount to the note. The Company is amortizing the
discount over the life of the note and charged $8,844, $8,844, $26,532 and
$25,763 to interest expense for the three and nine months ended
December 31, 2007 and 2006, respectively.  On July 18, 2007, the
Company issued 32,271 shares of its common stock for payment of accrued interest
at June 30, 2007 in the amount of $78,908 and on December 18, 2007 issued 11,753
shares for accrued interest of $42,241(see Note 5).
 
 During
the year ended March 31, 2007, the Company issued 11 convertible notes totaling
$390,000, with an interest rate of 7%, and all maturing in one year from the
date of issuance. The maturity dates of the notes are between December 2007 and
March 2008. As a stipulation, when the Company’s common stock reaches $4.00 or
above for a period of 10 consecutive days, the principal and accrued
 11
 Table of Contents
  NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
  
  In June
2007, the Company and its former chairman, entered into a settlement agreement
whereby the former chairman forgave notes payable in the amount of
$63,000 and accrued expenses in the aggregate amount of $33,291, which was
recorded as a gain on settlement of liabilities (see Note 3).
  During
the three months ended June 30, 2007, the Company issued 2 convertible notes
totaling $150,000, with an interest rate of 7%, and all maturing in one year
from the date of issuance with a stipulation when the Company’s common stock
reaches $6.00 or above for a period of 10 consecutive days, the principal and
accrued interest due under the note will convert at the Company’s
option into common stock of the Company at a rate of $3.00 per
share.  If the notes were convertible at December 31, 2007, the
Company would have recorded a debt discount of $150,000.  If the stock does
not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended September 30, 2007, the Company issued 13 convertible
notes totaling $395,000, with an interest rate of 7%, and all maturing in one
year from the date of issuance with a stipulation when the Company’s common
stock reaches $6.00 or above for a period of 10 consecutive days, the principal
and accrued interest due under the note will convert, at the Company’s option,
into common stock of the Company at a rate of $3.00 per
share.  If  the notes were convertible at December 31, 2007,
the Company would have recorded a debt discount of $395,000.  If the stock
does not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended December 31, 2007, the Company issued 5 convertible notes
totaling $170,000, with an interest rate of 7%, maturing in one year from the
date of issuance with a stipulation when the Company’s common stock reaches
$6.00 or above for a period of 10 consecutive days, the principal and accrued
interest due under the note will convert, at the Company’s option, into common
stock of the Company at a rate of $3.00 per share.  If the notes
were converted at December 31, 2007, the Company would have recorded a debt
discount of $170,000.  If the stock does not reach $6.00 or above for ten
consecutive days, the notes are not convertible.  The Company
also issued 3 additional convertible notes due between 90 and 180 days from the
date of issuance in the amount of $195,000 and convertible into stock of the
Company at prices between $2 and $3 per share
 
 On July
13, 2007, the Company issued a convertible promissory note for $85,920 for
accrued liabilities of the same amount.  The note was due in one year
with interest at 7% and is convertible at $0.15 per share into the Company’s
common stock at the holder’s option.  This note and accrued interest
was converted into 28,868 shares of the Company’s common stock on August 22,
2007.
 
 On July
13, 2007, the Company issued a convertible promissory note for $75,000 for
payment of accounts payable of $142,229.  The note was due in one
year with interest at 7% and was convertible at $3.00 per share into the
Company’s common stock at the holder’s option.  This note and accrued
interest was converted into 25,233 shares of the Company’s common stock
effective August 31, 2007.
  NOTE
5 – EQUITY
  Common
Stock
 The
Company completed a one for twenty reverse stock split effective November
5, 2007.  All stock issuances below have been given the retroactive
active effect of the reverse split.
 
 The
Company had the following common stock transactions during nine months ended
December 31, 2006:
 
 The  Company  issued  17,546  shares  of
common  stock  valued  at  $82,457  to consultants
and employees for services.
  
 12
 Table of Contents
  NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 
 The Company issued 74,561 shares
of common stock valued at $263,456 to consultants and
employees for services performed in a prior period. The cost of these
services was accrued during the year ended March 31, 2006.
 
 The  Company  issued  6,273  shares  of
common  stock  valued  at  $37,639  in satisfaction
of certain accounts payable.
 
 The  Company  issued  2,500  shares  of
common  stock  valued  at  $25,000  for subscriptions
payable.
 
 The
Company issued 2,000 shares of common stock valued at $20,000 pursuant
to the terms of a legal settlement.
 
 The
Company cancelled 6,031 shares of common stock received by the
Company during the twelve months ended March 31,
2005 pursuant to a stock purchase agreement.  Upon
cancellation, the Company credited additional paid-in
capital with the par value of these shares, or $6.
 
 The
Company received for cancellation 50,000 shares of common stock valued
at $250,000 pursuant to the terms of a legal settlement from a
prior period.  The value of these shares was charged to stock
cancellation receivable in the prior period.
  The
Company recorded a discount related to the beneficial conversion feature
of a note payable in the amount of $69,697 and charged this
amount to additional paid-in capital during the three months ended
June 30, 2006
 
 The
Company issued 2,500 shares of common stock valued at $4,500 as a bonus for
services performed, during the three months ended September 30,
2006.
 
 The
Company issued 12,000 shares of common stock valued at $20,400 pursuant to the
terms of a consulting agreement, during the three months ended September 30,
2006.
 
 The Company
charged to operations
 the amount of  $57,671  of deferred
compensation, during the six months ended September 30, 2006.
 
 The
Company purchased shares of the Company’s common stock
valued at $9,979 during the three months ended September 30, 2006.
 
 The
Company issued 26,923 shares of common stock with a fair value of $56,538
officers in lieu of cash compensation during the three months ended December 31,
2006.
 
 The
Company issued a total of 26,047 shares of common stock with a fair value of
$69,000 as interest under a note payable agreement during the three months ended
December 31, 2006.
 
 The
Company issued 3,655 shares with a fair value of $6,832 to a consultant during
the three months ended December 31, 2006.
  The
Company issued 24,000 shares of common stock valued at $40,800 pursuant to the
terms of a consulting agreement, during the three months ended December 31,
2006.
 
 The
Company charged to operations $26,429 of deferred compensation during the three
months ended December 31, 2006.
 
 The
Company had the following common stock transactions during nine months ended
December 31, 2007:
 
 In May
2007, the Company issued 16,500 shares for payment of a consulting
agreement in the amount of $29,700 which was recorded as an accrued liability at
March 31, 2007; 28,000 shares for a settlement of a lawsuit in the amount of
$78,400 and recorded as an accrued liability at March 31, 2007 and 50,000 shares
valued at $130,000 for consulting services.
 
 On July
1, 2007, the Company entered into a one year agreement for market relations
support. In connection with the agreement the Company granted options to
purchase 10,000 shares of common stock of the Company at prices ranging from
$4.00 to $7.00 per share, the value of which was $32,000, of which $6,666 and
$29, 333 was charged to stock-based compensation in the three months and
nine months ended December 31, 2007, respectively.
 
 On July
13, 2007, the Company issued a convertible promissory note for $85,920 for
accrued liabilities of the same amount.  The note was due in one year
with interest at 7% and was convertible at $3.00 per share into the Company’s
common stock at the holder’s option.  This note and accrued interest
was converted into 28,868 shares of the Company’s common stock on August 22,
2007.
 
 On July
13, 2007, the Company issued a convertible promissory note for $75,000 for
payment of accounts payable of $142,229.  The note was due in one
year with interest at 7% and was convertible at $3.00 per share into the
Company’s common stock at the holder’s option.  This note and accrued
interest was converted into 25,233 shares of the Company’s common stock
effective August 31, 2007 (see Note 4).
 
 
 
 13
 Table of Contents
 
 
 NEXTPHASE WIRELESS,
INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 On July
18, 2007, the Company issued 32,271 shares of its common stock for payment of
accrued interest at June 30, 2007 in the amount of $78,908 (see Note
4).
 
 On
July 23, 2007, the Company entered into a consulting agreement for
business advisory services for a one year period for the issuance of 50,000
shares of common stock valued at $170,000 of which $42,500 and $74,611 was
charged to stock- based compensation in the three months and nine months ended
December 31, 2007, respectively and $95,389 has been included as prepaid
consulting fees at Decemeber 31, 2007.
 
 On
August 23, 2007, the Company entered into a consulting agreement for business
advisory services for a one year period for the issuance of 27,500 shares of
common stock valued at $121,000, of which $69,911 and $121,000 was charged to
stock-based compensation in the three and nine months ended December 31,
2007.
  On
September 6, 2007 the Company entered into a consulting agreement for
investor relationship services whereby the Company agreed to issue 5,250 shares
of common stock valued at $26,250 of which $4,200 was charged to stock based
compensation.  The stock was issued on November 6,
2007.  The stock was cancelled and the charge reversed in December
2007.  In addition, as part of the agreement, the Company agreed to
issue a warrant to purchase 10,500 shares of common stock at $8.00 per share,
which was valued at $52,485 and charged to stock-based compensation in the nine
months ended September 30, 2007 as the warrant was immediately vested and
exercisable upon issuance.
 
 On
October 23, 2007, the Company entered into a consulting agreement for financial
and business planning for $40,000 which was paid in 17,778 shares of the
Company’s common stock on December 18, 2007.  $7,788 was charged to
stock-based compensation during the three months ended December 31, 2007 and
$32,222 was recorded as prepaid consulting fees at December 31,
2007.
 
 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 as signing bonuses to Messrs. Ford,
Hemingway and Noyes, respectively.  These issuances were valued at
$4,712,500 and charged to stock-based compensation in the three months ended
December 31, 2007. The shares are subject to lock-up
provisions.  Also, in connection with the agreements, The Company
granted options, which immediately vested  to purchase 600,000, 600,000 and
250,000 shares of the Company’s common stock at $3.25 per share to Messrs. Ford,
Hemingway and Noyes, respectively. The options are exercisable for a three-year
period. These options were valued at $3,270,368 and charged to stock-based
compensation in the three months ended December 31, 2007.
 
 On
November 5, 2007, the Company issued 25,000 shares to Michael Jones, Director,
for services rendered valued at $81,250 which was charged to stock-based
compensation in the three months ended December 31, 2007.
 
 On
November 5, 2007 the Company issued 100,000 shares in total to five
employees and one consultant for services rendered. These shares were valued at
$325,000 and charged to stock-based compensation in the three months ended
December 31, 2007
 
 On
November 5, 2007, the Company entered into a consulting agreement for business
advisory services for a one-year period for the issuance of 350,000 shares of
common stock valued at $1,137,500 . $707,778 was charged to stock-based
compensation during the three months ended December 31, 2007 and $429,722 was
recorded as prepaid consulting fees at December 31, 2007.
 
 On
November 9, 2007, the Company entered into a consulting agreement for marketing
services for $12,000 which was paid with the issuance in the 5,333 shares of
Company’s common stock. $1,400 was charged to stock-based compensation during
the three months ended December 31, 2007 and $10,600 was recorded
as prepaid consulting fees at December 31, 2007.
 
 On
December 18, 2007 the Company issued 17,000 shares to a consultant for business
advisory services.  These shares were valued at $38,250 and charged to stock-based
compensation in the three months ended December 31,
2007.
 
 On
December 18, 2007, the Company issued 11,753 shares of its common stock for
payment of accrued interest at September 30, 2007 in the amount of $42,241 (see
Note 4).
 
 14
 Table of Contents
  NEXTPHASE
WIRELESS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 (Unaudited)
 
 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 nine months ended
December 31, 2007, the Company recorded an additional expense $22,222 related to
the settlement agreement which was recorded in gain on settlement of
liabilities.
  NOTE
7 – SUBSEQUENT EVENTS
  The
Company issued a convertible note payable for $80,000 in January
2008.
 
 In
January 2008, the Company entered into a consulting agreement for business
advisory services for a one-year period with the issuance of 170,000 shares of
common stock valued at $340,000.  In January 2008 the Company entered
in a consulting agreement for legal services for a one-year period to be paid
with the issuance of 35,000 shares of common stock valued at
$70,000.  In January 2008 the Company entered into an investor
relations consulting agreement with the issuance of 10,000 shares of common
stock valued at $20,000 and the issuance of five year warrants to purchase
100,000 shares at $3 per share and 100,000 shares at $4 per share which were
valued at $303,000.
 
 In
March 2008, the Company issued a note payable for $60,000.  The
Company entered into a consulting agreement for public relations services with
the issuance of 10,000 shares of common stock valued at
$20,000.
 
 
 
 15
 Table of Contents
 
 
 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" or "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:
  
 ·      our
ability to generate sufficient cash to pay our lenders and other
creditors,
 
 ·      our
ability to obtain regulatory permits and approvals to operate in the high-speed
wireless network industry,
  ·       
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,
  ·      our
ability to identify and complete acquisitions and successfully integrate the
businesses we acquire, if any,
 
 ·      our
ability to employ and retain qualified management and employees,
 
 ·      our
dependence on the efforts and abilities of our current employees and executive
officers,
 
 ·      changes
in government regulations that are applicable to our anticipated
business,
 
 ·      changes
in the demand for our services,
 
 ·        the
degree and nature of our competition,
 
 ·        our
lack of diversification of our business plan,
 
 ·        the
general volatility of the capital markets and the establishment of a market for
our shares, and
  ·      
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.
 
 16
 Table of Contents
  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.
 
 On
August 3, 2004, NextPhase  consummated  a
share  exchange in which it issued
2,943,000  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 December 31, 2007, of
NextPhase from August 3, 2004 through December 31, 2007, of SpeedFactory from
April 6, 2006 (date of acquisition) through December 31, 2007 and INS, a
division of SpeedFactory, from July 23, 2007 (date of acquisition) through
December 31, 2007.
  
 17
 Table of Contents
  RESULTS
OF OPERATIONS
 
 Three
Months ended December 31, 2007 and 2006:
 
 For the
three months ended December 31, 2007, revenue was $452,652 as compared with
$531,095 with the same period in the previous year.  The reduction was
due to decreased emphasis on consulting activities resulting in lower sales of
products and consulting services of $26,933 and lower revenues from internet
services in the amount of $51,510 in the three months ended December 31,
2007.  Internet fees were $435,902 for the three months ended December
31, 2007 as compared with $487,412 for the same period in the previous
year.
  Cost of
revenue was $276,564 or 61.1% of revenue for the three months ended December 31,
2007, compared to $250,195 or 47.1% during the three months ended December
31, 2006.  As a result, gross profit decreased to $176,088 or 37.3%
for the three months ended December 31, 2007 as compared with $280,900 for the
same period in the previous year.
 
 Selling,
general, and administrative expenses were $620,205 for the three months
ended December 31, 2007 as compared with $464,653 for the three months ended
December 31, 2006, an increase of $155,552 or approximately 33.5%. The
increase was due more business and accounting advisory services resulting
in increased professional fees of $41,000, in the three months ended December
31, 2007 and increase staffing of $41,000.  As a result, selling,
general and administrative expenses represented 137.0% of revenue for the three
months ended December 31, 2007 versus 87.4% in the same period in
2006.  The Company’s expenses will begin to reduce as a
percentage of revenues as the Company follows its acquisition
strategy.
 
 Stock-based
compensation expense was $9,259,201 in the three months ended December 31, 2007
as compared with $129,600 in the same period in the previous year. The
increase was due to the cost of stock issued to officers as part of newly
executed employment contracts ($4,712,500), options granted to officers as part
of the employment contracts ($3,270,368), stock granted to employees ($325,000)
and stock granted under various consulting contracts ($951,333)
 
 Depreciation
expense for the three months ended December 31, 2007 and 2006 was $46,797 and
$32,943 respectively. Amortization of the intangible assets acquired in the
SpeedFactory and INS acquisitions was $58,000 and $52,000 for the three months
ended December 31, 2007 and 2006.
  The
operating loss for the Company for the three months ended December 31, 2007 was
$9,808,115 versus $381,296 for the same period in the prior year. This was an
increase of $9,426,819 of which $9,129,601 was for stock-based compensation, and
$36,854 for depreciation and amortization, with the balance $260,363 being for
cash items involved in the restructuring of the Company. The net gain on
settlement of liabilities was $36,734 during the three months ended December 31,
2007.
 
 Interest expense,
net of interest income, for the three months ended December 31, 2007 was
$71,819, as compared with interest income of $23,825 for the same
period in the previous year.
 
 Net
loss for the three months ended December 31, 2007 was $9,843,200 or $3.35 per
share as compared with a net loss of $357,471 or $0.28 per share for the three
months ended December 31, 2006. Monthly operating cash losses are now
approximately $150,000 per month.  Management expects this to
continue to decline as the Company continues its acquisition strategy, with four
acquisition closings expected in March 2008.
 
 Nine
months ended December 31, 2007 and 2006:
 
 For
the nine months ended December 31, 2007, revenue was $1,445,095 as compared with
$1,688,799 for the same period in the previous year.  The
reduction of $243,704 was due to decreased emphasis on consulting
activities resulting in lower sales of products and consulting services of
$234,746 which were $77,293 in the nine months ended December 31,
2007.  Internet fees were $1,367,802 for the nine months ended
December 31, 2007 as compared with $1,376,760 for the same period in the
previous year.
 
 Cost
of revenue was $759,406 or 52.5% of revenue for the nine months ended December
31, 2007, as compared to $861,210 or 51.0% of revenue during the nine
months ended December 31, 2006.  As a result, gross profit decreased
to $685,689 or 17.1% for the nine months ended December 31, 2007 as compared
with $827,589 for the same period in the previous year.
 
 Selling,
general, and administrative expenses were $1,883,975 for the nine months
ended December 31, 2007 as compared with $1,513,715 for the nine months ended
December 31, 2006, an increase of $370,260 or approximately 24.5%. The
increase was largely due to increased staffing for growth, $226,000 and
increased business advisory and accounting professional fees of $101,000 in
the nine months ended December 31, 2007 and the expense for
INS of $109,000.    As a result, selling, general and
administrative expenses represented 130.3% of revenue for the nine months ended
December 31, 2007 versus 89.6% in the same period in 2006.  The
Company’s expenses will begin to reduce as a percentage of revenues as the
Company follows its acquisition strategy.
 
 Stock-based
compensation expense was $9,551,753 in the nine months ended December 31, 2007
as compared with $281,128 in the same period in the previous year.  This
amount included $5,118,750 for 1,575,000 shares granted to officer, a director
and employees and $3,270,368 which represents the value of stock options for
1,450,000 shares at $3.25 per share granted to management.
 
 Depreciation
expense for the nine months ended December 31, 2007 and 2006 was $123,599 and
$201,266, respectively. Amortization of the intangible assets acquired in the
SpeedFactory and INS acquisitions was $166,000 and $156,000 for the nine months
ended December 31, 2007 and 2006.
 
  18
 Table of Contents
  The
operating loss for the Company for the nine months ended December 31, 2007 was
$11,039,638 versus $1,168,520 for the same period in the prior year. This was an
increase of $9,871,118 of which $9,551,753 of the increase was for non-cash
items. The net gain for settlement of liabilities was $181,085 during the
nine months ended December 31, 2007.
 
 Interest
expense, net of interest income, for the nine months ended December 31,
2007 was $196,477 as compared with $104,016 for the same period in the
previous year.
 
 Net loss
for the nine months ended December 31, 2007 was $11,050,030 or $5.39 per shares
as compared with a net loss of $1,268,285 or $1.03 per share for the nine months
ended December 31, 2006. Monthly operating cash losses are now
approximately $150,000 per month.  Management expects this to
continue to decline as the Company continues its acquisition strategy, four
additional companies in the 2nd calendar quarter of
2008.
  Liquidity and Capital
Resources
 
 As of
December 31, 2007, the Company had a cash balance of $5,370 and the Company's
accumulated deficit was $19,686,740. The Company had negative working capital of
$4,781,188.  Total liabilities were $5,510,407 which included accounts
payable of $1,125,138, accrued expenses of $128,873, deferred revenue of
$166,000 and notes and advances payable of $4,001,188.  The Company’s
cash used in operations for the nine months ended December 31, 2007 was
$864,756and the Company currently is using $150,000 cash per month in
operations.
 
 The
Company has developed a plan to integrate additional ISPs in a scalable roll-up
strategy.  The Company will acquire only profitable operations, both
wireless and land based, which are synergistic to the Company’s current
operations. The Company has entered into letters of intent to acquire two
companies which would greatly reduce the negative cash flow on a monthly basis.
The Company completed the INS acquisition in July 2007 and has entered into
letters of intent to acquire four additional companies. The Company has retained
an investment banking firm to raise $5 million upon the receipt of which, the
Company will be able to complete the acquisitions which is expected to occur in
the 2nd calendar quarter of 2008. Under its plans, management expects to
generate positive operating cash flow during the 3rd quarter of calendar 2008.
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 acquisitions will be made by
a cash purchase and there is no assurance that the Company will be able to raise
the required capital through equity or debt offerings.
 
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. While the
Company now has an established source of revenue, it has experienced net
losses of $19,686,740 since inception.  The Company has a working capital
deficit of $4,781,188 at December 31, 2007. These factors raise substantial
doubt about the Company's ability to continue as a going concern. 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.
 
 During
the three months ended June 30, 2007, the Company issued 2 convertible notes
totaling $150,000, with an interest rate of 7%, and all maturing in one year
from the date of issuance with a stipulation when the Company’s common stock
reaches $6.00 or above for a period of 10 consecutive days, the principal and
accrued interest due under the note will convert at the Company’s
option into common stock of the Company at a rate of $3.00 per
share.  If the notes were convertible at December 31, 2007, the
Company would have recorded a debt discount of $150,000.  If the stock does
not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended September 30, 2007, the Company issued 13 convertible
notes totaling $395,000, with an interest rate of 7%, and all maturing in one
year from the date of issuance with a stipulation when the Company’s common
stock reaches $6.00 or above for a period of 10 consecutive days, the principal
and accrued interest due under the note will convert, at the Company’s option,
into common stock of the Company at a rate of $3.00 per
share.  If the notes were convertible at December 31, 2007, the
Company would have recorded a debt discount of $395,000.  If the stock does
not reach $6.00 or above for ten consecutive days, the notes are not
convertible.
 
 During
the three months ended December 31, 2007, the Company issued 5 convertible notes
totaling $170,000, with an interest rate of 7%, maturing in one year from the
date of issuance with a stipulation when the Company’s common stock reaches
$6.00 or above for a period of 10 consecutive days, the principal and accrued
interest due under the note will convert, at the Company’s option, into common
stock of the Company at a rate of $3.00 per share.  If the notes
were converted at December 31, 2007, the Company would have recorded a debt
discount of $170,000.  If the stock does not reach $6.00 or above for ten
consecutive days, the notes are not convertible.  The Company
also issued 3 additional convertible notes due between 90 and 180 days in the
amount of $195,000 and convertible into stock of the Company at prices between
$2 and $3 per share
 
   The
Company anticipates its current cash reserves, plus its expected generation of
cash from existing operations and new short-term borrowings, will only be
sufficient to fund its anticipated operations through the 1st quarter of
2008 . Consequently, the Company will need to raise additional debt and/or
equity capital in order to finance its business plan and needs for working
capital. Such financing(s), if available, may increase the risk of the Company
not being able to service its debt obligations, and/or cause dilution to
existing equity holders. The accompanying unaudited condensed consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets and
liabilities that might result from the outcome of this uncertainty.
  The
Company has a convertible note payable in the amount of $2,300,000 which is due
in full on April 1, 2008. Upon maturity, the note and accrued interest are
convertible into common stock of the Company at the lower of the fair market
value of the Company's common stock at the date of conversion or $6.60 per
share. The minimum price at which the note and accrued interest may convert is
$3.00 per share.
  19
 Table of Contents
  NextPhase
plans on continuing to fund working capital requirements, necessary equipment
purchases, marketing costs, and other operations for the next year and
foreseeable future by raising capital through the sale of equity and/or debt
securities, issuing common stock in lieu of cash for services and by advances
from shareholders.
 
 The
Company expects that any sale of additional equity securities or convertible
debt will result in additional dilution to our stockholders. The Company can
give no assurance that it will be able to generate adequate funds from
operations, that funds will be available to us from debt or equity financing, or
that if available, the Company will be able to obtain such funds on favorable
terms and conditions. If the Company cannot secure additional funds it will not
be able to continue as a going concern. The Company currently has no definitive
arrangements with respect to additional financing.
 
 By
adjusting its operations and development to the level of capitalization,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next year. However, if thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.
 
 The
report of our independent registered public accounting firm on our March
31, 2007 consolidated financial statements states that our recurring losses
raise substantial doubt about our ability to continue as a going
concern.
 
 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.
   20
 Table of Contents
 
 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.
 21
 Table of Contents
  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.
 
 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.
  In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations." SFAS No.
141R provides companies with principles and requirements on how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree
as well as the recognition and measurement of goodwill acquired in a business
combination. SFAS No. 141R also requires certain disclosures to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. Acquisition costs associated with the business combination
will generally be expensed as incurred. SFAS No. 141R is effective for business
combinations occurring in fiscal years beginning after December 15, 2008. Early
adoption of SFAS No. 141R is not permitted. We are currently evaluating the
impact SFAS No. 141R will have on any future business
combinations.
  ITEM
3. CONTROLSAND 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 Chief Executive Officer
and 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
Chief Executive Officer and principal financial officer concluded that our
current system of disclosure controls and procedures was effective.
  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.
 
 22
 Table of Contents
  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 $4,712,500 and charged
to stock-based compensation in the three 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 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 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 32 ,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.
  During
the three months ended December 31, 2007, the Company issued 5 convertible notes
totaling $170,000, with an interest rate of 7%, maturing in one year from the
date of issuance with a stipulation when the Company’s common stock reaches
$6.00 or above for a period of 10 consecutive days, the principal and accrued
interest due under the note will convert, at the Company’s option, into common
stock of the Company at a rate of $3.00 per share.  If the notes
were converted at December 31, 2007, the Company would have recorded a debt
discount of $170,000.  If the stock does not reach $6.00 or above for ten
consecutive days, the notes are not convertible.  The Company
also issued 3 additional convertible notes due between 90 and 180 days from the
date of issuance in the amount of $195,000 and convertible into stock of the
Company at prices between $2 and $3 per share
 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.
 
 None.
 
 ITEM4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 
 ITEM5: OTHER
INFORMATION.
   ITEM6. EXHIBITS
 
 Exhibit
      Number
              
              Description
      of Exhibit31.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2
              
              Certification
      of 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
  
 
 23
 Table of Contents
 
 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.March
      6 , 2008
              By:
              /s/ Robert
      FordRobert
      FordPresident
      and Chief Executive Officer






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