**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        DC 20549
 
 **FORM
        10-QSB**
 
 [X]
              Quarterly
                  Report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934For
                  the quarterly period endedJune
                  30, 2006[
                  ]
              Transition
                  Report pursuant to 13 or 15(d) of the Securities Exchange Act of
                  1934For
                  the transition periodto__________Commission
                  File Number:000-27621
 
 United
        American Corporation
 (Exact
        name of small business issuer as specified in its charter)
 
 Florida
              95-4720231(State
                  or other jurisdiction of incorporation or
                  organization)
              (IRS
                  Employer Identification No.)
  1080
                  Beaver Hall Suite 1555 Montreal, Quebec, Canada H2Z
                  1S8(Address
                  of principal executive offices)
 
 514-313-6010(Issuer’s
                  telephone number)_______________________________________________________________(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 Securities Exchange Act of 1934 during the preceding 12 months
        (or
        for such shorter period that the issuer was required to file such reports),
        and
        (2) has been subject to such filing requirements for the past 90 days [X]
        Yes [
        ] No
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). [ ] Yes [X] No
 
 State
        the
        number of shares outstanding of each of the issuer’s classes of common stock, as
        of the latest practicable date: 49,969,985 common shares as of August 14,
        2006
 
 Transitional
        Small Business Disclosure Format (check one): Yes [ ] No [X]
  Table
            of Contents




TABLE
                  OF CONTENTS
              PagePART
                  I - FINANCIAL INFORMATIONItem
                  1.
              Financial
                  Statements
              3Item
                  2.
              Management’s
                  Discussion and Analysis
              4Item
                  3.
              Controls
                  and Procedures
              14PART
                  II - OTHER INFORMATIONItem
                  1.
              Legal
                  Proceedings
              16Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              16Item
                  3.
              Defaults
                  Upon Senior Securities
              16Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              16Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16
 
 2
 Table
              of Contents
 
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1.****Financial
        Statements**
 
 Our
                  unaudited condensed consolidated financial statements included
                  in this
                  Form 10-QSB are as follows:F-1
              Condensed
                  Consolidated Balance Sheet as of June 30,
                  2006;F-2
              Condensed
                  Consolidated Statements of Operations and
                  Comprehensive Income (Loss) for the three and six months ended
                  June 30,
                  2006 and 2005;F-3
              Condensed
                  Consolidated Statements of Cash Flows for the six
                  months ended June 30, 2006 and 2005;F-4
              Notes
                  to Condensed Consolidated Financial
                  Statements;
 
 
 These
        unaudited condensed consolidated financial statements have been prepared
        in
        accordance with accounting principles generally accepted in the United States
        of
        America for interim financial information and the SEC instructions to Form
        10-QSB. In the opinion of management, all adjustments considered necessary
        for a
        fair presentation have been included. Operating results for the interim period
        ended June 30, 2006 are not necessarily indicative of the results that can
        be
        expected for the full year.
 3
 Table
            of Contents
  **UNITED
        AMERICAN CORPORATION**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **JUNE
        30, 2006**
 **(UNAUDITED)**




**ASSETS****(IN
                  US$)**Current
                  Assets:Cash
                  and cash equivalents
              $
              32,912Accounts
                  receivable, net
              
              325,796Investment
                  tax credit receivable
              
              17,191Inventory
              
              15,862Prepaid
                  expenses and other current assets
              
              21,256Total
                  Current Assets
              
              413,017Fixed
                  assets, net of depreciation
              
              571,460**TOTAL
                  ASSETS**
              $
              984,477**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)****LIABILITIES**Current
                  Liabilities:Loan
                  payable
              $
              86,926Loan
                  payable - related parties
              
              594,417Convertible
                  debentures
              
              90,961Derivative
                  liability
              
              9,039Accounts
                  payable and accrued expenses
              
              268,376Total
                  Current Liabilities
              
              1,049,719**Total
                  Liabilities**
              
              1,049,719**STOCKHOLDERS'
                  EQUITY (DEFICIT)**Common
                  stock, $.001 Par Value; 50,000,000 shares authorizedand
                  49,969,985 shares issued and outstanding
              
              49,970Additional
                  paid-in capital
              
              4,219,448Accumulated
                  deficit
              
              (4,918,305)Accumulated
                  other comprehensive income (loss)
              
              92,799Noncontrolling
                  interest
              
              490,846**Total
                  Stockholders' Equity (Deficit)**
              
              (65,242)**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
              $
              984,477






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




F-1
 Table
          of Contents


**UNITED
        AMERICAN CORPORATION**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
        (LOSS)**
 **FOR
        THE SIX AND THREE MONTHS ENDED JUNE 30, 2006 AND 2005**
 **(UNAUDITED)**
  **IN
                  US$****SIX
                    MONTHS ENDED**
              
              
              **THREE
                  MONTHS ENDED****JUNE
                    30,**
              
              
              **JUNE
                  30,****2006**
              
              
              **2005**
              
              
              **2006**
              
              
              **2005****OPERATING
                  REVENUES**Sales
              $
              4,347,336
              
              $
              1,216,396
              
              $
              1,884,166
              
              $
              912,653**COST
                  OF SALES**Inventory,
                  beginning of period
              
              51,652
              
              
              44,059
              
              
              20,014
              
              
              121,236Purchases
              
              3,759,996
              
              
              1,109,880
              
              
              1,466,103
              
              
              833,232Inventory,
                  end of period
              
              (15,862)
              
              
              (102,490)
              
              
              (15,862)
              
              
              (102,490)**Total
                  Cost of Sales**
              
              3,795,786
              
              
              1,051,449
              
              
              1,470,255
              
              
              851,978**GROSS
                  PROFIT**
              
              551,550
              
              
              164,947
              
              
              413,911
              
              
              60,675**OPERATING
                  EXPENSES**Selling
                  and promotion
              
              56,220
              
              
              123,044
              
              
              29,232
              
              
              67,336Professional
                  and consulting fees
              
              139,188
              
              
              584,664
              
              
              68,352
              
              
              388,050Commissions
                  and wages
              
              441,569
              
              
              232,610
              
              
              185,985
              
              
              159,359Other
                  general and administrative expenses
              
              72,091
              
              
              56,866
              
              
              34,562
              
              
              10,930Depreciation,
                  amortization and impairment
              
              118,750
              
              
              99,083
              
              
              62,005
              
              
              49,082**Total
                  Operating Expenses**
              
              827,818
              
              
              1,096,267
              
              
              380,136
              
              
              674,757**INCOME
                  (LOSS) BEFORE OTHER INCOME (EXPENSE)**
              
              (276,268)
              
              
              (931,320)
              
              
              33,775
              
              
              (614,082)**OTHER
                  INCOME (EXPENSE)**Interest
                  expense
              
              (16,627)
              
              
              (6,000)
              
              
              (12,361)
              
              
              (3,000)**Total
                  Other Income (Expense)**
              
              (16,627)
              
              
              (6,000)
              
              
              (12,361)
              
              
              (3,000)**NET
                  INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES****AND
                  NONCONTROLLING INTEREST**
              
              (292,895)
              
              
              (937,320)
              
              
              21,414
              
              
              (617,082)Noncontrolling
                  interest
              
              47,820
              
              
              13,750
              
              
              19,993
              
              
              12,572**NET
                  INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES**
              
              (245,075)
              
              
              (923,570)
              
              
              41,407
              
              
              (604,510)**Provision
                  for Income Taxes**
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  INCOME (LOSS) APPLICABLE TO COMMON SHARES**
              $
              (245,075)
              
              $
              (923,570)
              
              $
              41,407
              
              $
              (604,510)**NET
                  (EARNINGS (LOSS) PER BASIC AND DILUTED SHARES**
              $
              (0.00)
              
              $
              (0.02)
              
              $
              0.00
              
              $
              (0.01)**WEIGHTED
                  AVERAGE NUMBER OF COMMON****SHARES
                  OUTSTANDING**
              
              49,969,985
              
              
              46,132,692
              
              
              49,969,985
              
              
              47,055,150**COMPREHENSIVE
                  INCOME (LOSS)**Net
                  income (loss)
              $
              (245,075)
              
              $
              (923,570)
              
              $
              41,407
              
              $
              (604,510)Other
                  comprehensive income (loss)Currency
                  translation adjustments
              
              53,777
              
              
              44,677
              
              
              47,303
              
              
              (100,196)Comprehensive
                  income (loss)
              $
              (191,298)
              
              $
              (878,893)
              
              $
              88,710
              
              $
              (704,706)




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




F-2
 Table
          of Contents




**UNITED
        AMERICAN CORPORATION**


**CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
        THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005**
 **(UNAUDITED)**


**IN
                US$****2006**
            
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            $
            (245,075)
            
            $
            (923,570)**Adjustments
                to reconcile net loss to net cash****used
                in operating activities:**Depreciation,
                amortization and impairment
            
            118,750
            
            
            99,083Shares
                issued for services
            
            -
            
            
            473,750**Changes
                in assets and liabilities**(Increase)
                in accounts receivable
            
            (138,966)
            
            
            (29,519)(Increase)
                in investment tax credit receivable
            
            (689)
            
            
            -(Increase)
                in inventory
            
            35,790
            
            
            (58,431)(Increase)
                decrease in prepaid expenses and other current assets
            
            12,298
            
            
            4Increase
                (decrease) in accounts payable andand
                accrued expenses
            
            (339,600)
            
            
            109,428Total
                adjustments
            
            (312,417)
            
            
            594,315**Net
                cash (used in) operating activities**
            
            (557,492)
            
            
            (329,255)**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisitions
                of fixed assets
            
            (50,110)
            
            
            (36,271)**Net
                cash (used in) investing activities**
            
            (50,110)
            
            
            (36,271)**CASH
                FLOWS FROM FINANCING ACTIVITES**(Decrease)
                in bank overdraft
            
            (16,905)
            
            
            -Proceeds
                from loan payable
            
            9,225
            
            
            24,712Proceeds
                from loan payable - related parties
            
            594,417
            
            
            (42,702)Proceeds
                from convertible debentures
            
            -
            
            
            289,325**Net
                cash provided by financing activities**
            
            586,737
            
            
            271,335Effect
                of foreign currency
            
            53,777
            
            
            44,677**NET
                INCREASE (DECREASE) IN****CASH
                AND CASH EQUIVALENTS**
            
            32,912
            
            
            (49,514)**CASH
                AND CASH EQUIVALENTS -****BEGINNING
                OF PERIOD**
            
            -
            
            
            84,254**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            $
            32,912
            
            $
            34,740**CASH
                PAID DURING THE PERIOD FOR:**Interest
                expense
            $
            6,000
            
            $
            6,000


The
        accompanying notes are an integral part of the condensed consolidated financial
        statements.
  F-3
 Table
            of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          1-** **ORGANIZATION
          AND BASIS OF PRESENTATION**
 
 The
          unaudited condensed consolidated financial statements included herein have
          been
          prepared, without audit, pursuant to the rules and regulations of the Securities
          and Exchange Commission (“SEC”). The condensed consolidated financial statements
          and notes are presented as permitted on Form 10-QSB and do not contain
          information included in the Company’s annual consolidated statements and notes.
          Certain information and footnote disclosures normally included in financial
          statements prepared in accordance with accounting principles generally
          accepted
          in the United States of America have been condensed or omitted pursuant
          to such
          rules and regulations, although the Company believes that the disclosures
          are
          adequate to make the information presented not misleading. It is suggested
          that
          these condensed consolidated financial statements be read in conjunction
          with
          the December 31, 2005 audited consolidated financial statements and the
          accompanying notes thereto. While management believes the procedures followed
          in
          preparing these condensed consolidated financial statements are reasonable,
          the
          accuracy of the amounts are in some respects dependent upon the facts that
          will
          exist, and procedures that will be accomplished by the Company later in
          the
          year.
 
 These
          condensed consolidated unaudited financial statements reflect all adjustments,
          including normal recurring adjustments which, in the opinion of management,
          are
          necessary to present fairly the consolidated operations and cash flows
          for the
          periods presented.
 
 United
          American Corporation (the “Company”) was incorporated under the laws of the
          State of Florida on July 17, 1992 under the name American Financial Seminares,
          Inc. with authorized common stock of 1,000 shares at $1.00 par value. Since
          its
          inception the Company has made several name changes and increased the authorized
          common stock to 50,000,000 shares with a par value of $.001. On February
          5,
          2004, the name was changed to United American Corporation.
 
 The
          Company was first organized for the purpose of marketing a software license
          known as “Gnotella”, however, in late 2001 this activity was
          abandoned.
 
 On
          July
          18, 2003, the Company entered into a share exchange agreement with 3874958
          Canada Inc. (a Canadian corporation and an affiliate of the Company by
          common
          officers) to transfer 26,250,000 shares of its common stock for 100 shares
          of
          American United Corporation (a Delaware corporation and wholly owned subsidiary
          of 3874958 Canada Inc.) which represented 100% of the outstanding shares
          of
          American United Corporation. The Company in this transaction acquired internet
          telecommunications equipment valued at $874,125. These assets did not go
          into
          service until 2004. The 26,250,000 shares of the Company were issued into
          an
          escrow account on October 6, 2003, the effective date of the transaction.
          Later,
          American United Corporation was dissolved. The equipment value was based
          on an
          independent valuation. The shares issued were to 3874958 Canada Inc., whose
          sole
          owner at the time, was the President and CEO of the Company. This transaction
          did not constitute a reverse merger even though the Company issued in excess
          of
          50% of its then current issued and outstanding shares.
  F-4
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          1-** **ORGANIZATION
          AND BASIS OF PRESENTATION** **(CONTINUED)**
 
 In
          January 2004, the Company took ownership of all 100 shares issued and
          outstanding of 3894517 Canada, Inc. (a Canadian corporation), whose 100%
          owner
          was at the time President and CEO of the Company. At this time, 3894517
          Canada,
          Inc. became the operating unit of the Company for the services they were
          providing utilizing the equipment acquired in 2003 from American United
          Corporation. There was no consideration paid for these 100 shares.
 
 On
          August
          27, 2004, the Company entered the telecommunications business by the creation
          of
          United American Telecom, a division focused on terminating call traffic
          in the
          Caribbean, and by the creation of Teliphone, a division focused on providing
          Voice-over-Internet -Protocol (VoIP) calling services to residential and
          business customers.
 
 Teliphone,
          Inc. was founded in order to develop a VoIP network which enables users
          to
          connect an electronic device to their internet connection at the home or
          office
          which permits them to make telephone calls to any destination phone number
          anywhere in the world. VoIP is currently growing in scale significantly
          in North
          America. Industry experts predict the VoIP offering to be one of the fastest
          growing sectors from now until 2009. This innovative new approach to
          telecommunications has the benefit of drastically reducing the cost of
          making
          these calls as the distances are covered over the Internet instead of over
          dedicated lines such as traditional telephony. Teliphone has grown primarily
          in
          the Province of Quebec, Canada through the sale of its product offering
          in
          retail stores and over the internet. During this time, Teliphone also expanded
          its network in order to offer services outside of the Province of Quebec,
          mainly
          in the Province of Ontario and the State of New York.
 
 In
          March
          2005, Teliphone Inc. issued 4 shares of stock to management. After this
          transaction, the Company owned 96% of Teliphone, Inc. Therefore, a
          noncontrolling interest is reflected in the consolidated financial statements.
          Subsequently, on April 28, 2005, the Company entered into a merger and
          reorganization agreement with OSK Capital II Corp., a Nevada corporation,
          where
          OSK Capital II Corp. became a majority owned subsidiary of the Company,
          and
          Teliphone, Inc. became a wholly owned subsidiary of OSK Capital II Corp.
 
 On
          August
          1, 2006, Teliphone Inc. entered into an agreement with 3901823 Canada Inc.
          (“3901823”) and Intelco Communications (“Intelco Communications”) whereby
          Teliphone will issue 35 class A voting shares of its common stock representing
          25.2% of Teliphone’s issued shares to 3901823 in exchange for fixed costs
          approximating $144,000 for the period August 1, 2006 through July 31, 2007,
          a
          line of credit of $75,000 (CAD$), of which $25,000 (CAD$) was drawn upon
          in July
          2006 and the use of its software to sell to Intelco Communications existing
          customer base the services of Teliphone. In lieu of receiving cash for
          the
          licensing of its software,
  F-5
 Table
              of Contents
 
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          1-** **ORGANIZATION
          AND BASIS OF PRESENTATION** **(CONTINUED)**
 
 Teliphone
          will apply $1 per customer per month at a minimum of $5,000 per month for
          the
          25.2% ownership. 3901823 will receive additional shares of Teliphone should
          Intelco Communications not earn $144,000 in charges under these license
          fees
          over the one-year period. 3901823 could earn a maximum of 8.34% in addition
          to
          the 25.2% for a total of 33.54% of Teliphone.
 
 **Going
          Concern**
 
 As
          shown
          in the accompanying condensed consolidated financial statements the Company
          has
          incurred recurring losses of $245,075 and $923,570 for the six months ended
          June
          30, 2006 and 2005, and has a working capital deficiency of $636,702 as
          of June
          30, 2006. The Company had emerged from the development stage and as of
          March 31,
          2004 has started generating revenues.
 
 There
          is
          no guarantee that the Company will be able to raise enough capital or generate
          revenues to sustain its operations. These conditions raise substantial
          doubt
          about the Company’s ability to continue as a going concern for a reasonable
          period.
 
 Management
          believes that the Company’s capital requirements will depend on many factors.
          These factors include the increase in sales through existing channels as
          well as
          the Company’s ability to continue to expand its distribution points and
          leveraging its technology into the commercial small business segments.
          The
          Company’s strategic relationships with telecommunications interconnection
          companies, internet service providers and retail sales outlets has permitted
          the
          Company to achieve consistent monthly growth in acquisition of new customers.
 
 In
          the
          near term, the Company will continue to pursue bridge financing, in addition
          to
          the approximately $100,000 it raised through convertible debentures in
          2004 to
          assist them in meeting their current working capital needs. The Company’s
          ability to continue as a going concern for a reasonable period is dependent
          upon
          management’s ability to raise additional interim capital and, ultimately,
          achieve profitable operations. There can be no assurance that management
          will be
          able to raise sufficient capital, under terms satisfactory to the Company,
          if at
          all.
 
 The
          condensed consolidated financial statements do not include any adjustments
          relating to the carrying amounts of recorded assets or the carrying amounts
          and
          classification of recorded liabilities that may be required should the
          Company
          be unable to continue as a going concern.
  F-6
 Table
              of Contents
 
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
  **Principles
          of Consolidation**
 
 The
          condensed consolidated financial statements include the accounts of the
          Company
          and all of its wholly owned and majority owned subsidiaries. All significant
          intercompany accounts and transactions have been eliminated in consolidation.
          All noncontrolling interests are reflected in the condensed consolidated
          financial statements.
 
 **Use
          of Estimates**
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America requires management
          to make
          estimates and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of
          the financial statements and the reported amounts of revenues and expenses
          during the reporting period. On an on-going basis, the Company evaluates
          its
          estimates, including, but not limited to, those related to bad debts, income
          taxes and contingencies. The Company bases its estimates on historical
          experience and on various other assumptions that are believed to be reasonable
          under the circumstances, the results of which form the basis for making
          judgments about the carrying value of assets and liabilities that are not
          readily apparent from other sources. Actual results could differ from those
          estimates.
 
 **Cash
          and Cash Equivalents**
 
 The
          Company considers all highly liquid debt instruments and other short-term
          investments with an initial maturity of three months or less to be cash
          equivalents.
 
 **Comprehensive
          Income**
 
 The
          Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
          Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
          comprehensive income in addition to net income from operations.
 
 Comprehensive
          income is a more inclusive financial reporting methodology that includes
          disclosure of information that historically has not been recognized in
          the
          calculation of net income.
 
 **Inventory**
 
 Inventory
          is valued at the lower of cost or market determined on a first-in-first-out
          basis. Inventory consisted only of finished goods.
  F-7
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Fair
          Value of Financial Instruments (other than Derivative Financial
          Instruments)**
 
 The
          carrying amounts reported in the condensed consolidated balance sheet for
          cash
          and cash equivalents, and accounts payable approximate fair value because
          of the
          immediate or short-term maturity of these financial instruments. For the
          notes
          payable, the carrying amount reported is based upon the incremental borrowing
          rates otherwise available to the Company for similar borrowings. For the
          convertible debentures, fair values were calculated at net present value
          using
          the Company’s weighted average borrowing rate for debt instruments without
          conversion features applied to total future cash flows of the
          instruments.
 
 **Currency
          Translation**
  For
          subsidiaries outside the United States that prepare financial statements
          in
          currencies other than the U.S. dollar, the Company translates income and
          expense
          amounts at average exchange rates for the year, translates assets and
          liabilities at year-end exchange rates and equity at historical rates.
          The
          Company’s reporting currency is that of the US dollar while its functional
          currency is that of the Canadian dollar. The Company records these translation
          adjustments as accumulated other comprehensive income (loss). Gains and
          losses
          from foreign currency transactions commenced in 2004 when the Company utilized
          a
          Canadian subsidiary to record all of the transactions. The Company recognized
          a
          gain (loss) of $53,777 and $44,677 for the six months ended June 30, 2006
          and
          2005.
  **Research
          and Development**
 
 The
          Company annually incurs costs on activities that relate to research and
          development of new products. Research and development costs are expensed
          as
          incurred. Certain of these costs are reduced by government grants and investment
          tax credits where applicable.
 
 **Revenue
          Recognition**
 
 In
          2004,
          when the Company emerged from the development stage with the acquisition
          of
          American United Corporation/ 3874958 Canada Inc. and after assuming ownership
          of
          3894517 Canada Inc. as well as the establishment of Teliphone, Inc. they
          began
          to recognize revenue from their VoIP services when the services were rendered
          and collection was reasonably assured in accordance with SAB 101.
  **Accounts
          Receivable**
 
 The
          Company conducts business and extends credit based on an evaluation of
          the
          customers’ financial condition, generally without requiring collateral. Exposure
          to losses on receivables is expected to vary by customer due to the financial
          condition of each customer. The Company monitors exposure to credit losses
          and
          maintains allowances for anticipated losses considered necessary under
          the
          circumstances. The Company has recorded an allowance for doubtful accounts
          of
          $7,232 as of June 30, 2006.
  F-8
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Accounts
          Receivable** **(Continued)**
 
 Accounts
          receivable are generally due within 30 days and collateral is not required.
          Unbilled accounts receivable represents amounts due from customers for
          which
          billing statements have not been generated and sent to the
          customers.
 
 **Income
          Taxes**
 
 The
          Company accounts for income taxes utilizing the liability method of accounting.
          Under the liability method, deferred taxes are determined based on differences
          between financial statement and tax bases of assets and liabilities at
          enacted
          tax rates in effect in years in which differences are expected to reverse.
          Valuation allowances are established, when necessary, to reduce deferred
          tax
          assets to amounts that are expected to be realized.
 
 **Convertible
          Instruments**
 
 The
          Company reviews the terms of convertible debt and equity securities for
          indications requiring bifurcation, and separate accounting, for the embedded
          conversion feature. Generally, embedded conversion features where the ability
          to
          physical or net-share settle the conversion option is not within the control
          of
          the Company are bifurcated and accounted for as a derivative financial
          instrument. (See Derivative Financial Instruments below). Bifurcation of
          the
          embedded derivative instrument requires allocation of the proceeds first
          to the
          fair value of the embedded derivative instrument with the residual allocated
          to
          the debt instrument. The resulting discount to the face value of the debt
          instrument is amortized through periodic charges to interest expense using
          the
          Effective Interest Method.
 
 **Derivative
          Financial Instruments**
 
 The
          Company generally does not use derivative financial instruments to hedge
          exposures to cash-flow or market risks. However, certain other financial
          instruments, such as warrants or options to acquire common stock and the
          embedded conversion features of debt and preferred instruments that are
          indexed
          to the Company’s common stock, are classified as liabilities when either (a) the
          holder possesses rights to net-cash settlement or (b) physical or net share
          settlement is not within the control of the Company. In such instances,
          net-cash
          settlement is assumed for financial accounting and reporting, even when
          the
          terms of the underlying contracts do not provide for net-cash settlement.
          Such
          financial instruments are initially recorded at fair value and subsequently
          adjusted to fair value at the close of each reporting period. Fair value
          for
          option-based derivative financial instruments is determined using the
          Black-Scholes Valuation Method.
  F-9
 Table
              of Contents
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Advertising
          Costs**
 
 The
          Company expenses the costs associated with advertising as incurred. Advertising
          expenses for the six months ended June 30, 2006 and 2005 are included in
          general
          and administrative expenses in the condensed consolidated statements of
          operations.
 
 **Fixed
          Assets**
  Fixed
          assets are stated at cost. Depreciation is computed using the straight-line
          method over the estimated useful lives of the assets; automobiles - 3 years,
          computer and internet telecommunications equipment - 5 years, and furniture
          and
          fixtures - 5 years.
 
 When
          assets are retired or otherwise disposed of, the costs and related accumulated
          depreciation are removed from the accounts, and any resulting gain or loss
          is
          recognized in income for the period. The cost of maintenance and repairs
          is
          charged to income as incurred; significant renewals and betterments are
          capitalized. Deduction is made for retirements resulting from renewals
          or
          betterments.
 
 **Impairment
          of Long-Lived Assets**
 
 Long-lived
          assets, primarily fixed assets, are reviewed for impairment whenever events
          or
          changes in circumstances indicate that the carrying amount of the assets
          might
          not be recoverable. The Company does not perform a periodic assessment
          of assets
          for impairment in the absence of such information or indicators. Conditions
          that
          would necessitate an impairment assessment include a significant decline
          in the
          observable market value of an asset, a significant change in the extent
          or
          manner in which an asset is used, or a significant adverse change that
          would
          indicate that the carrying amount of an asset or group of assets is not
          recoverable. For long-lived assets to be held and used, the Company recognizes
          an impairment loss only if its carrying amount is not recoverable through
          its
          undiscounted cash flows and measures the impairment loss based on the difference
          between the carrying amount and estimated fair value. The Company, determined
          based upon an independent valuation performed on its equipment acquired
          from
          American United Corporation that their was impairment of $1,750,875 (on
          October
          6, 2003) based upon the fair value of the stock issued for the equipment.
          This
          amount is reflected as impairment in the December 31, 2003 financial
          statements.
 
 **(Loss)
          Per Share of Common Stock**
 
 Basic
          net
          (loss) per common share is computed using the weighted average number of
          common
          shares outstanding. Diluted earnings per share (EPS) includes additional
          dilution from common stock equivalents, such as stock issuable pursuant
          to the
          exercise of stock options and warrants. Common stock equivalents were not
          included in the computation of diluted earnings per share when the Company
          reported a loss because to do so would be antidilutive for periods
          presented.
 
 F-10
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **(Loss)
          Per Share of Common Stock** **(Continued)**
 
 The
          following is a reconciliation of the computation for basic and diluted
          EPS:
  **June
                        30,**
                  
                  
                  **June
                      30,****2006**
                  
                  
                  **2005**Net
                      loss
                  $
                  (245,075)
                  
                  $
                  (923,570)Weighted-average
                      common sharesOutstanding
                      (Basic)
                  
                  49,969,985
                  
                  
                  46,132,692Weighted-average
                      common stockEquivalentsStock
                      options
                  
                  -
                  
                  
                  -Warrants
                  
                  -
                  
                  
                  -Weighted-average
                      common sharesOutstanding
                      (Diluted)
                  
                  49,969,985
                  
                  
                  46,132,692
 
 **Stock-Based
          Compensation**
 
 The
          Company measures compensation expense for its employee stock-based compensation
          using the intrinsic-value method. Under the intrinsic-value method of accounting
          for stock-based compensation, when the exercise price of options granted
          to
          employees and common stock issuances are less than the estimated fair value
          of
          the underlying stock on the date of grant, deferred compensation is recognized
          and is amortized to compensation expense over the applicable vesting period.
          In
          each of the periods presented, the vesting period was the period in which
          the
          options were granted. All options were expensed to compensation in the
          period
          granted rather than the exercise date.
 
 The
          Company measures compensation expense for its non-employee stock-based
          compensation under the Financial Accounting Standards Board (FASB) Emerging
          Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
          for Equity Instruments that are Issued to Other Than Employees for Acquiring,
          or
          in Conjunction with Selling, Goods or Services* ”.
          The
          fair value of the option issued is used to measure the transaction, as
          this is
          more reliable than the fair value of the services received. The fair value
          is
          measured at the value of the Company’s common stock on the date that the
          commitment for performance by the counterparty has been reached or the
          counterparty’s performance is complete. The fair value of the equity instrument
          is charged directly to compensation expense and additional paid-in
          capital.
 
 F-11
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Segment
          Information**
 
 The
          Company follows the provisions of SFAS No. 131, “ *Disclosures
          about Segments of an Enterprise and Related Information”* .
          This
          standard requires that companies disclose operating segments based on the
          manner
          in which management disaggregates the Company in making internal operating
          decisions. Commencing with the creation of Teliphone, Inc. the Company
          began
          operating in two segments, and two geographical locations.
 
 **Recent
          Accounting Pronouncements**
 
 On
          December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
          Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
          Payment* ”
(“SFAS
          123R”). SFAS 123R requires that compensation cost related to share-based payment
          transactions be recognized in the financial statements. Share-based payment
          transactions within the scope of SFAS 123R include stock options, restricted
          stock plans, performance-based awards, stock appreciation rights, and employee
          share purchase plans. The provisions of SFAS 123R, as amended, are effective
          for
          small business issuers beginning as of the next interim period after December
          15, 2005.
 
 In
          February 2006, the FASB issued Statement of Financial Accounting Standard
          No.
          155, *“Accounting
          for Certain Hybrid Instruments”* (“SFAS
          155”). FASB 155 allows financial instruments that have embedded derivatives
          to
          be accounted for as a whole (eliminating the need to bifurcate the derivative
          from its host) if the holder elects to account for the whole instrument
          on a
          fair value basis. This statement is effective for all financial instruments
          acquired or issued after the beginning of an entity’s first fiscal year that
          begins after September 15, 2006. The Company will evaluate the impact of
          SFAS
          155 on its consolidated financial statements.
 
 In
          May
          2005, the FASB issued Statement of Financial Accounting Standard No. 154, *“Accounting
          Changes and Error Corrections”* (“SFAS
          154”). SFAS 154 is a replacement of APB No. 20, *“Accounting
          Changes”* ,
          and
          SFAS No. 3, *“Reporting
          Accounting Changes in Interim Financial Statements”* .
          SFAS
          154 applies to all voluntary changes in accounting principle and changes
          the
          requirements for accounting and reporting of a change in accounting principle.
          This statement establishes that, unless impracticable, retrospective application
          is the required method for reporting of a change in accounting principle
          in the
          absence of explicit transition requirements specific to the newly adopted
          accounting principle. It also requires the reporting of an error correction
          which involves adjustments to previously issued financial statements similar
          to
          those generally applicable to reporting an accounting change retrospectively.
          SFAS 154 is effective for accounting changes and corrections of errors
          made in
          fiscal years beginning after December 15, 2005. The Company believes the
          adoption of SFAS 154 will not have a material impact on its consolidated
          financial statements.
  F-12
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          3-** **FIXED
          ASSETS**
 
 Fixed
          assets as of June 30, 2006 were as follows:
 
 Estimated
                    UsefulLives
                      (Years)Computer
                    equipment
                5
                
                $
                1,063,283Less:
                    accumulated depreciation
                
                
                
                (491,823)Fixed
                    assets, net
                
                
                $
                571,460
 
 There
          was
          $118,750 and $99,083 depreciation charged to operations for the six months
          ended
          June 30, 2006 and 2005, respectively.
 
 The
          Company acquired telecommunications equipment in its acquisition of American
          United Corporation valued at $874,125, net of impairment of $1,750,875
          in the
          issuance of the 26,250,000 shares of common stock. This equipment however,
          was
          not placed into service until 2004, therefore no depreciation was recorded
          for
          those assets in 2003.
 
 **NOTE
          4-** **LOANS
          PAYABLE**
 
 The
          Company beginning in 2004 entered into unsecured loans payable with non-related
          parties. There was $86,926 outstanding as of June 30, 2006.
 
 **NOTE
          5-** **RELATED
          PARTY LOANS**
 
 Beginning
          in April 2005, the Company’s subsidiary entered into non-interest bearing loans
          with OSK Capital II Corp, a company with common officers and directors.
          There
          were no amounts outstanding as of June 30, 2006.
 
 Additionally,
          the Company had loans with various directors that were non-interest bearing.
          There was $594,417 outstanding as of June 30, 2006.
  **NOTE
          6-    **CONVERTIBLE
          DEBENTURES****
  On
          October 18, 2004, the Company entered into 12% Convertible Debentures (the
          “Debentures”) with Strathmere Associates International Limited in the amount of
          $100,000. The Debentures have a maturity date of October 31, 2006, and
          incur
          interest at a rate of 12% per annum, payable every six months.
  F-13
 Table
              of Contents
 
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 **NOTE
            6- **CONVERTIBLE
            DEBENTURES****(CONTINUED)****
  The
          Debentures can either be paid to the holders on October 31, 2006 or converted
          at
          the holders’ option any time up to maturity at a conversion price equal of $.20
          per share. The convertible debentures met the definition of hybrid instruments,
          as defined in SFAS 133, *Accounting
          for Derivative Instruments and Hedging Activities* (SFAS
          No. 133). The hybrid instruments are comprised of a i) a debt instrument,
          as the
          host contract and ii) an option to convert the debentures into common stock
          of
          the Company, as an embedded derivative. The embedded derivative derives
          its
          value based on the underlying fair value of the Company’s common stock. The
          Embedded Derivative is not clearly and closely related to the underlying
          host
          debt instrument since the economic characteristics and risk associated
          with this
          derivative are based on the common stock fair value. The Company has separated
          the embedded derivative from the hybrid instrument based on an independent
          valuation of $43,537 based on 500,000 shares ($100,000 at a $.20 exercise
          price).
 
 For
          disclosure purposes, the fair value of the derivative is estimated on the
          date
          of issuance of the debenture (October 18, 2004) using the Black-Scholes
          option-pricing model, which approximates fair value, with the following
          weighted-average assumptions used for June 30, 2006 and 2005; no annual
          dividends, volatility of 125%, risk-free interest rate of 3.28%, and expected
          life of 2 years. For disclosure purposes as of June 30, 2006 and 2005 the
          derivative call option was approximately $.018 and $.024 per share, therefore
          there was a decrease of $0 and $31,622 in the derivative liability recognized
          for the six months ended June 30, 2006 and 2005, respectively.
 
 The
          embedded derivative did not qualify as a fair value or cash flow hedge
          under
          SFAS No. 133.
 
 Interest
          expense for the six months ended June 30, 2006 and 2005 was $6,000 and
          $6,000,
          respectively. At June 30, 2006, there was $2,419 of interest
          accrued.
  F-14
 Table
              of Contents
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          7-** **COMMITMENTS**
 
 On
          October 12, 2004, the Company entered into a carrier agreement with XO
          Communications, Inc. This carrier agreement provides the Company with the
          ability to purchase telephone numbers in any of thirty-seven major metropolitan
          markets in the United States. As a result, services can be provided to
          consumers
          in any of these markets with each consumer being assigned a telephone number
          with a local area code. Prior to this agreement, we were only able to provide
          phone numbers with Canadian area codes. This contract was cancelled in
          July
          2006. The Company is able to offer US-based area codes utilizing RNK Telecom’s
          network, an agreement entered into December 2005 which really took effect
          in
          June 2006.
 
 Additionally,
          the Company in 2004 and 2005 entered into various agreements with wireless
          Internet access providers, to provide VoIP services to the Company’s customers.
          On November 3, 2004, the Company also entered into a telecommunications
          agreement with Kore Wireless Canada, Inc., a supplier of global systems
          for
          mobile communications.
 
 On
          March
          1, 2005, the Company entered into a distribution agreement with MSBR
          Communication Inc. for the purpose of accessing the retail consumer portion
          of
          the Company’s target market through retail and Internet-based sales. The
          territory for this distribution is the Province of Quebec in Canada exclusive
          of
          Sherbrooke, Quebec. This is a renewable two-year agreement.
 
 On
          March
          11, 2005, the Company entered into a marketing and distribution rights
          with
          Podar Infotech Ltd. The five-year renewable agreement grants Podar the
          exclusive
          marketing and distribution rights for the Company’s products and services for
          India, China, Sri Lanka, Russia and UAE for which the Company will receive
          contractually agreed payments.
 
 **NOTE
          8-** **STOCKHOLDERS’
          EQUITY (DEFICIT)**
 
 **Common
          Stock**
  As
          of
          June 30, 2006, the Company has 50,000,000 shares of common stock authorized
          with
          a par value of $.001.
 
 The
          Company has 49,969,985 shares issued and outstanding as of June 30,
          2006.
 
 The
          Company has not issued any shares for the six months ended June 30,
          2006.
 
 During
          the year ended December 31, 2005, the Company issued 1,400,000 for services
          at
          $.10 per share and 4,450,000 at $.075 per share for a value of
          $473,750.
  F-15
 Table
              of Contents
 
 **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          8-** **STOCKHOLDERS’
          EQUITY (DEFICIT)** **(CONTINUED)**
 
 **Common
          Stock** **(Continued)**
  During
          2004, the Company issued 926,743 for services at a fair market value of
          $.10 or
          $92,674; and 2,250,000 shares of common stock for services at a fair market
          value of $.15 per share or $337,500.
 
 The
          Company has not issued any options or warrants.
 
 **NOTE
          9-** **PROVISION
          FOR INCOME TAXES**
 
 Deferred
          income taxes are determined using the liability method for the temporary
          differences between the financial reporting basis and income tax basis
          of the
          Company’s assets and liabilities. Deferred income taxes are measured based on
          the tax rates expected to be in effect when the temporary differences are
          included in the Company’s tax return. Deferred tax assets and liabilities are
          recognized based on anticipated future tax consequences attributable to
          differences between financial statement carrying amounts of assets and
          liabilities and their respective tax bases.
 
 At
          June
          30, 2006, deferred tax assets consist of the following:
  2006Net
                      operating losses
                  $
                  1,672,224Valuation
                      allowance
                  
                  (1,672,224)$
                  
                  -
 At
          June
          30, 2006, the Company had a net operating loss carryforward in the approximate
          amount of $4,918,305, available to offset future taxable income through
          2026.
          The Company established valuation allowances equal to the full amount of
          the
          deferred tax assets due to the uncertainty of the utilization of the operating
          losses in future periods.
 
 A
          reconciliation of the Company’s effective tax rate as a percentage of income
          before taxes and federal statutory rate for the periods ended June 30,
          2006 and
          2005 is summarized as follows:
  2006
                
                2005Federal
                    statutory rate
                (34.0)%
                
                (34.0)%State
                    income taxes, net of federal benefits
                3.3
                
                3.3Valuation
                    allowance
                30.7
                
                30.70%
                
                0%
  F-16
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          10-** **SEGMENT
          INFORMATION** ****
 
 The
          Company’s reportable operating segments include wholesale VoIP services which is
          the physical buying of minutes (3894517 Canada Inc.), and the VoIP connection
          services (Teliphone, Inc.). The Company also has corporate overhead expenses.
          The wholesale services are essentially provided in the Caribbean, and the
          connection services are provided in North America. The segment data presented
          below details the allocation of cost of revenues and direct operating expenses
          to these segments.
 
 Operating
          segment data for the six months ended June 30, 2006 are as follows:
 
 Wholesale
                
                ConnectionCorporate
                
                Services
                
                Services
                
                TotalSales
                $
                -
                
                $
                4,143,624
                
                $
                203,712
                
                $
                4,347,336Cost
                    of sales
                
                -
                
                
                3,601,033
                
                
                194,753
                
                
                3,795,786Gross
                    profit (loss)
                
                -
                
                
                542,591
                
                
                8,959
                
                
                551,550Operating
                    expenses
                
                60,045
                
                
                470,450
                
                
                178,573
                
                
                709,068Depreciation,
                    amortization and impairment
                
                89,220
                
                
                8,511
                
                
                21,019
                
                
                118,750Interest
                    (net)
                
                (6,000)
                
                
                (647)
                
                
                (9,980)
                
                
                (16,627)Net
                    income (loss)
                
                (155,265)
                
                
                62,983
                
                
                (200,613)
                
                
                (292,895)Segment
                    assets
                
                356,880
                
                
                433,786
                
                
                193,811
                
                
                984,477Fixed
                    Assets, net of depreciation
                
                356,880
                
                
                87,043
                
                
                127,537
                
                
                571,460
 
 Operating
          segment data for the six months ended June 30, 2005 are as follows:
 
 Wholesale
                
                ConnectionCorporate
                
                Services
                
                Services
                
                TotalSales
                $
                -
                
                $
                1,091,273
                
                $
                125,123
                
                $
                1,216,396Cost
                    of sales
                
                -
                
                
                1,016,740
                
                
                34,709
                
                
                1,051,449Gross
                    profit (loss)
                
                -
                
                
                74,533
                
                
                90,414
                
                
                164,947Operating
                    expenses
                
                473,750
                
                
                280,059
                
                
                243,375
                
                
                997,184Depreciation,
                    amortization and impairment
                
                74,350
                
                
                4,912
                
                
                19,821
                
                
                99,083Interest
                    (net)
                
                (6,000)
                
                
                (0)
                
                
                (0)
                
                
                (6,000)Net
                    income (loss)
                
                (554,100)
                
                
                (210,438)
                
                
                (172,782)
                
                
                (937,320)Segment
                    assets
                
                520,450
                
                
                108,430
                
                
                251,847
                
                
                880,727Fixed
                    Assets, net of depreciation
                
                520,450
                
                
                44,526
                
                
                95,442
                
                
                660,418
  F-17
 Table
              of Contents
  **UNITED
          AMERICAN CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2006 AND 2005**
 
 **NOTE
          11-** **SUBSEQUENT
          EVENTS**
 
 Teliphone
          Inc., a wholly-owned subsidiary of our majority-owned subsidiary OSK Capital
          II,
          Corp., 3901823 Canada Inc., the holding company of Intelco Communications
          (“3901823”), and Intelco Communications (“Intelco Communications”) entered into
          an agreement (the “Agreement”) on July 14, 2006. Pursuant to the terms of the
          Agreement, Teliphone agreed to issue 35 class A voting shares of its common
          stock representing 25.2% of Teliphone’s issued shares to 3901823 in exchange for
          office rent, use of Intelco’s data center for Teliphone’s equipment, and use of
          Intelco’s broadband telephony network valued at approximating $144,000 (CDN$)
          for the period August 1, 2006 through July 31, 2007, a line of credit of
          $75,000
          (CDN$), of which $25,000 (CDN$) was already drawn upon in July 2006.
 
 Teliphone
          also agreed to make available to the customers of Intelco Communications
          certain
          proprietary software for broadband telephony use. In lieu of receiving
          cash for
          the licensing of this software, Teliphone will apply $1 per customer per
          month
          at a minimum of $5,000 per month. Following a twelve month period, Intelco
          Communications will receive additional shares of class A voting common
          stock of
          Teliphone for the difference in the value between $144,000 and the total
          payments credited back to Teliphone. The maximum amount of additional shares
          that can be issued to Intelco Communications after the twelve month period
          is an
          additional 8.34% of Teliphone’s issued and outstanding shares. In the event that
          the total payments credited back to Teliphone exceeds $144,000, Intelco
          Communications will not be entitled to the issuance of any additional shares
          of
          Teliphone common stock.
 
 Upon
          the
          effective date of this transaction on August 1, 2006, Teliphone, Inc. will
          no
          longer be a wholly-owned subsidiary of OSK Capital II, Corp. Teliphone
          will
          become a majority owned subsidiary and the noncontolling interest will
          be
          reflected in the consolidated financial statements.
 
 F-18
 Table
              of Contents
  **Item
              2.     Management’s Discussion and Analysis**
 
 **Forward-Looking
              Statements**
 
 Certain
              statements, other than purely historical information, including estimates,
              projections, statements relating to our business plans, objectives,
              and expected
              operating results, and the assumptions upon which those statements
              are based,
              are “forward-looking statements” within the meaning of the Private Securities
              Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933
              and Section 21E of the Securities Exchange Act of 1934. These
              forward-looking statements generally are identified by the words “believes,”
“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and
              similar expressions. We
              intend
              such forward-looking statements to be covered by the safe-harbor provisions
              for
              forward-looking statements contained in the Private Securities Litigation
              Reform
              Act of 1995, and are including this statement for purposes of complying
              with
              those safe-harbor provisions. Forward-looking
              statements are based on current expectations and assumptions that are
              subject to
              risks and uncertainties which may cause actual results to differ materially
              from
              the forward-looking statements. Our
              ability to predict results or the actual effect of future plans or
              strategies is
              inherently uncertain. Factors which could have a material adverse affect
              on our
              operations and future prospects on a consolidated basis include, but
              are not
              limited to: changes in economic conditions, legislative/regulatory
              changes,
              availability of capital, interest rates, competition, and generally
              accepted
              accounting principles. These risks and uncertainties should also be
              considered
              in evaluating forward-looking statements and undue reliance should
              not be placed
              on such statements. We
              undertake no obligation to update or revise publicly any forward-looking
              statements, whether as a result of new information, future events or
              otherwise. Further
              information concerning our business, including additional factors that
              could
              materially affect our financial results, is included herein and in
              our other
              filings with the SEC.
 
 **Business
              Description**
 
 Following
              the acquisition of American United Corporation (“AUC”) in 2003, we revised our
              business plan and implemented the business plan of AUC. AUC began its
              operations
              in 2002 as a holding company focused on the acquisition of network-centric
              technology and telecommunication companies. Given the rapid changes
              in the
              telecommunications marketplace, and the strong need for a competitive
              edge, we
              revised our business plan and set out on a new course to provide Voice
              over
              Internet Protocol (VoIP) solutions.
 
 VoIP
              means that the technology used to send data over the Internet is now
              being used
              to transmit voice as well. The technology is known as packet switching.
              Instead
              of establishing a dedicated connection between two devices (computers,
              telephones, etc.) and sending the message "in one piece," this technology
              divides the message into smaller fragments, called 'packets'. These
              packets are
              transmitted separately over a decentralized network and when they reach
              the
              final destination, they're reassembled into the original
              message.
  4
 Table
                  of Contents
  VoIP
              allows a much higher volume of telecommunications traffic to flow at
              much higher
              speeds than traditional circuits do, and at a significantly lower cost.
              VoIP
              networks are significantly less capital intensive to construct and
              much less
              expensive to maintain and upgrade than legacy networks or what is commonly
              referred to as traditional circuit-switched networks. Since VoIP networks
              are
              based on internet protocol, they can seamlessly and cost-effectively
              interface
              with the high-technology, productivity-enhancing services shaping today's
              business landscape. These networks can seamlessly interface with web-based
              services such as virtual portals, interactive voice response (IVR),
              and unified
              messaging packages, integrating data, fax, voice, and video into one
              communications platform that can interconnect with the existing
              telecommunications infrastructure.
 
 Since
              we
              implemented our new business plan to provide Voice over Internet Protocol
              (VoIP)
              solutions, our business has evolved and we have organized our operations
              into
              two different segments of the market. Our operations are focused servicing
              the
              wholesale VoIP market or retail VoIP providers by constructing VoIP
              networks and
              enabling them to purchases termination minutes using our networks.
              In August
              2004, we incorporated Teliphone, Inc. (“Teliphone”), a Canadian corporation, as
              a wholly-owned subsidiary to service the retail VoIP market by handling
              the
              origination, management, and billing of calls. Teliphone also handles
              servicing
              and providing businesses and individuals with a mobile or landline
              phone to
              access our VoIP networks.
 
 *Wholesale
              VoIP Market*
 
 We
              constructed our first VoIP network which we refer to as CaribbeanONE.
              To
              construct this network, we established servers in Haiti that utilize
              our
              intellectual property to connect with our servers located in Montreal,
              Quebec,
              Canada. Following the successful testing of our servers in Haiti, the
              CaribbeanONE network was completed in March 2004. The establishment
              of the
              CaribbeanONE network was critical in that it enabled us to charge significantly
              less than other providers that exclusively utilize established telecommunication
              lines for calls that originate in North America and terminate in any
              country in
              the Caribbean. When one of our consumers originates a call in North
              America, our
              VoIP network will receive the call and transmit the call to our server
              in Haiti
              and an established telecommunication line will only be utilized to
              transmit the
              call from our server in Haiti to the termination point of the call
              in the
              Caribbean. The establishment of the CaribbeanONE network was our first
              step in
              strategically establishing computer servers in specified geographical
              areas to
              construct an international VoIP network. Since the establishment of
              the
              CaribbeanONE network, we have worked to improve this VoIP network by
              added
              additional capacity.
 
 During
              the reporting period, we were forced to shut down our CarribbeanOne
              network due
              to political changes with government telecommunications regulators
              in Haiti, the
              hosting site of our gateway. We anticipate that we will be able to
              recommence
              use of our CarribbeanOne network in this area before the end of the
              current
              fiscal year. The success of our business plan is not dependent on the
              CarribbeanOne network. Notwithstanding, we anticipate that the shut
              down of the
              CarribbeanOne network will negatively impact our results of operations
              until
              such time that we able to recommence use of the CarribbeanOne
              network.
 5
 Table
                    of Contents
  As
              part
              of our growth plan, we expanded our long distance VoIP termination
              services
              outside of the
              Caribbean and into additional routes in Africa. During the third quarter
              of
              2005, we built a VoIP gateway in Gabon, Africa. Similar to our CaribbeanONE
              infrastructure located in Haiti, we are now able to offer wholesale
              termination
              services to global Tier1 and Tier 2 telecommunications companies to
              utilize our
              VoIP link between Montreal, Canada and Gabon in order to terminate
              their long
              distance calls. This gateway installation permits us to expand the
              number of
              voice channels that we have in operation in our global network and
              sell more
              long distance termination minutes to our existing and future customers.
 
 We
              further expanded our network by entered into a partnership with Tectacom
              Inc. of
              Montreal and established a VoIP gateway in Mali, Africa in May of 2006.
              As a
              result, we have established a profit-sharing understanding with Tectacom
              for
              VoIP long distance termination minutes transiting through our gateways.
              Tectacom
              holds agreements with the domestic telecommunications operator in Mali,
              permitting them to reserve voice channel capacity within the Mali
              telecommunications infrastructure. This agreement permits us to install
              our
              gateways and to interconnect the Mali voice channels with our servers
              in
              Montreal. This enables us to sell this direct route connection to our
              customers
              in order for them to offer long distance services to their respective
              retail
              customer base. Tectacom is further developing additional routes in
              Africa and we
              anticipate growth in the establishment of new gateways with them in
              the
              future.
 
 *Retail
              VoIP Network*
 
 In
              order
              to target the retail market segment and provide VoIP directly to consumers,
              we
              incorporated Teliphone, Inc. (“Teliphone”), a Canadian corporation as a
              wholly-owned subsidiary in August 2004. We formed Teliphone as a wholly-owned
              subsidiary for the purpose handling the origination, management, and
              billing of
              calls. Teliphone also handles servicing and providing businesses and
              individuals
              with a mobile or landline phone to access our VoIP network. The management
              of
              calls refers to the routing of calls from the origination point to
              the
              termination point. The billing of calls refers to the collection of
              charges for
              utilization of our VoIP network
 
 Following
              the incorporation of Teliphone, we began to offer businesses and individuals
              located in the Montreal, Quebec geographical area with the ability
              to utilize
              our VoIP network to transmit communications through the use of a mobile
              and
              landline phone that connects to the Internet. A critical component
              of
              Teliphone’s ability to expand its business and increase its sales presence
              internationally required that it have the ability to offer local phone
              numbers
              in an increasing amount of geographical areas. An inability to offer
              consumers
              area codes in their local would result in a competitive disadvantage
              with other
              providers that have the ability to offer local area codes to a consumer.
              During
              the fourth quarter of 2005, Teliphone entered into an agreement with
              RNK Telecom
              (“RNK”), a Massachusetts corporation, which provides it with the ability
              to
              offer potential consumers phone numbers with area codes in over 200
              metropolitan
              markets throughout the United States and Canada. This agreement also
              provides it
              with access to international affiliates of RNK that will enable Teliphone
              to
              offer local phone number in various international cities in Europe,
              Asia and
              Latin America.
  6
 Table
                  of Contents
  Teliphone
              has increased the availability of its service by entering into agreements
              with
              Internet Service Providers within retail establishments such as coffee
              shops,
              hotels and airports enabling
 its
              consumers to access our VoIP network through the use their laptop or
              wireless
              VoIP devices in these particular retail establishments. In addition,
              Teliphone
              also entered into an agreement to make available a mobile phone that
              is
              compatible with both a VoIP network and a GSM network utilized for
              traditional
              cellular phone use resulting in an expanding coverage area. For consumers
              that
              utilize this service, Teliphone has the ability to integrate into a
              single bill
              charges for calls placed utilizing both the VoIP and GSM networks.
              Prior to this
              agreement, Teliphone was unable to offer phone service to consumers
              at times
              when they did not maintain an Internet connection.
 
 
 Once
              the
              requisite infrastructure was in place and operational, Teliphone sought
              to
              establish distribution agreements and incentives for retailers of telephone
              products to make available to retail consumers and small and medium
              sized
              companies a mobile or landline phone that utilizes VoIP. On March 1,
              2005,
              Teliphone entered into a distribution agreement with BR Communications
              (“BR”),
              formerly known as MSBR Communication Inc., for the purpose accessing
              the retail
              target market through retail and Internet-based sales. Under the terms
              of this
              agreement, BR was granted the exclusive right to distribute mobile
              or landline
              phones that utilize our VoIP network via Internet-based sales or direct
              sales to
              retail establishments in the territory consisting of the Province of
              Quebec in
              Canada exclusive of Sherbrooke, Quebec. This agreement was entered
              into for a
              term of two (2) years with automatic renewals for additional one year
              terms
              unless either party provides notice within 90 days of the initial two
              year term.
              This agreement is subject to termination upon the occurrence of specified
              events
              triggering default. BR receives a pre-determined commission based upon
              sales of
              mobile or landline phones that utilize our VoIP network and revenues
              derived
              from retailer consumers who activated their VoIP service through distribution
              channels used by BR. As a result of this agreement, BR has succeeded
              in building
              a distribution network of over 70 points of retail sale, telemarketing
              sales
              partners and small business telecommunications interconnect companies.
              This
              distribution network is the primary source for the acquisition of new
              customers
              for Teliphone’s retail business.
 
 Teliphone
              has also entered into an exclusive marketing and distribution agreement
              to make
              available its products and services in India, China, Sri Lanka, United
              Arab
              Emirates, and Russia. Accounts activated in any of these geographical
              markets
              will be assigned a North American telephone number. To date, retail
              sales to
              consumers in these geographical areas have not materially contributed
              to
              Teliphone’s sales.
 
 *Agreement
              with Intelco Communication, Inc.*
 
 Teliphone
              Inc., a wholly-owned subsidiary of our majority-owned subsidiary OSK
              Capital II,
              Corp., 3901823 Canada Inc., the holding company of Intelco Communications
              (“3901823”), and Intelco Communications (“Intelco Communications”) entered into
              an agreement (the “Agreement”) on July 14, 2006. Pursuant to the terms of the
              Agreement, Teliphone agreed to issue 35 class A voting shares of its
              common
              stock representing 25.2% of Teliphone’s issued shares to 3901823 in exchange for
              office rent, use of Intelco’s data center for Teliphone’s
  7
 Table
                  of Contents
  equipment,
              and use of Intelco’s broadband telephony network valued at approximating
              $144,000 (CDN$) for the period August 1, 2006 through July 31, 2007,
              a line of
              credit of $75,000 (CDN$),
 of
              which
              $25,000 (CDN$) was already drawn upon in July 2006.
 
 Teliphone
              also agreed to make available to the customers of Intelco Communications
              certain
              proprietary software for broadband telephony use. In lieu of receiving
              cash for
              the licensing of this software, Teliphone will apply $1 per customer
              per month
              at a minimum of $5,000 per month. Following a twelve month period,
              Intelco
              Communications will receive additional shares of class A voting common
              stock of
              Teliphone for the difference in the value between $144,000 and the
              total
              payments credited back to Teliphone. The maximum amount of additional
              shares
              that can be issued to Intelco Communications after the twelve month
              period is an
              additional 8.34% of Teliphone’s issued and outstanding shares. In the event that
              the total payments credited back to Teliphone exceeds $144,000, Intelco
              Communications will not be entitled to the issuance of any additional
              shares of
              Teliphone common stock.
 
 Upon
              the
              effective date of this transaction on August 1, 2006, Teliphone, Inc.
              was longer
              a wholly-owned subsidiary of OSK Capital II, Corp. Teliphone became
              a majority
              owned subsidiary and the noncontolling interest is reflected in the
              consolidated
              financial statements.
 
 **Subsidiary
              Spin-off**
 
 In
              March
              2005, our management proposed to spin-off one of our subsidiaries,
              Teliphone,
              Inc., subject to the approval of the stockholders. At the time of this
              proposal,
              we owned 100 common shares of the 104 common shares issued and outstanding
              in
              Teliphone. Under the terms of this proposal, our shareholders would
              have
              received 1 share of Teliphone for each share of our company they owned.
 
 Our
              board
              of directors believed that spinning-off Teliphone would accomplish
              an important
              objective. The spin-off would enable Teliphone to focus on handling
              the
              origination, management, and billing of calls and allow us to concentrate
              on
              building an international VoIP focused primarily on call termination.
              This will
              allow both companies that have operations that are focused on different
              objectives to better prioritize the allocation of their management
              and their
              financial resources for achievement of their corporate objectives.
 
 In
              April
              2005, our management was presented with an opportunity where Teliphone
              would
              enter into a merger with a wholly-owned subsidiary of OSK Capital II
              Corp.
              (“OSK”), a public reporting company under Section 12(g) of the Securities
              Exchange Act of 1934. As a result of this opportunity, we did not present
              our
              original proposal to the shareholders for their consideration and approval.
 
 On
              April
              28, 2005, OSK completed its acquisition of Teliphone, pursuant to an
              Agreement
              and Plan of Merger and Reorganization. At the effective time of the
              merger, OSK
              acquired all of the outstanding shares of Teliphone and Teliphone merged
              with
              OSK II Acquisition Corp., a Florida corporation and wholly-owned subsidiary
              of
              OSK Capital II, Corp. Following the merger, Teliphone was the surviving
              corporation. OSK issued 25,000,000 common shares in exchange for all
              of the
              issued and outstanding shares of Teliphone and these shares of OSK
              were issued
              to
  8
 Table
                  of Contents
  the
              shareholders Teliphone shareholders on a pro rata basis. We owned 100
              common
              shares of the 104 common shares issued and outstanding in Teliphone.
              As a
              result, we received 24,038,462
 shares
              of
              OSK. Following the effectiveness of the merger, OSK had 30,426,000
              common shares
              issued and outstanding. Consequently, Teliphone became a wholly owned
              subsidiary
              of OSK and OSK is currently a majority-owned subsidiary of our company.
 
 Our
              management proposed to spin-off our majority-owned subsidiary, OSK.
              To complete
              the spin-off, we propose to distribute the shares of OSK that we own
              on a pro
              rata basis to our shareholders. A record date to present the proposed
              spin-off
              to our shareholders has not yet been set.
 
 **Results
              of Operations for the three and six months ended June 30, 2006 and
              2005**
 
 *Revenues*
 
 Our
              total
              revenue reported for the three months ended June
              30 ,
              2006
              was $ 1,884,166 ,
              a 106%
              increase from $ 912,653 for
              the
              three months ended June 30, 2005. Our total revenue reported for the
              six months
              ended June 30, 2006 was $4,347,336, a 257% increase from $1,216,396
              for the six
              months ended June 30, 2005. Our
              revenue for the three and six month ended June 30, 2006 and 2005 was
              generated
              by sales of retail domestic and international voice and data products
              and
              services using VoIP.  The increase in revenue for the three and six month
              period ended June 30, 2006 from the same reporting period in the prior
              year is
              primarily attributable to increases sales of termination services at
              locations
              where we do not maintain a VoIP gateway. As a result of increased telephony
              traffic on our networks primarily to Mexico and the Philippines, we
              acquired
              termination minutes in these locations to provide to our customers.
              The ability
              to sell the termination minutes we acquired in locations which we do
              not
              maintain a VoIP gateway has enabled us to generate additional revenue
              from our
              existing consumer base.
 
 Sales
              of
              VoIP termination services through our existing VoIP gateways accounted
              for
              $1,347,674 or 31% of our total revenue generated for the six months
              ended June
              30, 2006. Retail sales of VoIP services in Canada through our subsidiary,
              OSK
              Capital II Corp./Teliphone, accounted for $95,994 or 4.8% of our total
              revenue
              generated for the three months ended June 30, 2006 and $203,712 or
              4.7% of our
              total revenue generated for the six months ended June 30, 2006.
 
 *Cost
              of Sales*
 
 Our
              cost
              of sales for the three months ended June 30, 2006 was $1,470,255, a
              72% increase
              from $851,978 for the three months ended June 30, 2005. Our cost of
              sales for
              the six months ended June, 2006 was $3,795,786, a 261% increase from
              $1,051,449
              for the six months ended June 30, 2005. The
              increase in cost of sales is primarily attributable to increased sales
              in the
              reporting period. The
              increased purchases of inventory were required to service our expanding
              consumer
              base. Our purchases for the three months ended June 30, 2006 was $1,466,103,
              compared to $833,232 for the same period in the prior year. Our purchases
              for
              the six months ended June 30, 2006 $3,759,996, compared to $1,109,880
              for the
              six months ended June 30, 2005.
 
  9
 Table
                  of Contents
  *Gross
              Profit*
 
 Gross
              profit increased to $413,911, or approximately 21% of sales, for the
              three
              months ended June
              30,
              2006. This is an increase from a gross profit of $60,675, or approximately
              6% of
              sales for the three months ended June 30, 2005. The significant increase
              in
              gross profit for the three months ended June 30, 2006 when compared
              to the same
              reporting period in the prior fiscal year is attributable to increased
              sales of
              termination traffic in our Gabon or Mali networks which now have greater
              profit
              margins that our CaribbeanOne network. During the reporting period,
              increased
              telephony traffic through our Gabon network enabled us to receive volume
              discounts for termination minutes with domestic
              telecommunication operators translating into higher profit margins.
              We acquire
              termination minutes from domestic telecommunication operators in order
              to be
              able to route calls from our gateways to the destination point.
 
 Gross
              profit increased to $551,550 for the six months ended June 30, 2006
              from gross
              profit of $164,947 for the six months ended June 30, 2005. Gross profit
              as a
              percentage of sales was 12% for the six months ended June 30, 2006
              which was
              relatively consistent with the 13% of sales reported for the six month
              ended
              June 30, 2005.
 
 *Operating
              Expenses*
 
 Operating
              expenses for the three months ended June 30, 2006 was $380,136, a 41%
              decrease
              from $674,757 for the three months ended June 30, 2005. Our operating
              expenses
              for the three months ended June 30, 2006 consisted of selling and promotion
              expenses of $29,232, professional and consulting fees of $68,352, commissions
              and wages of $185,985, general and administrative expenses of $34,562,
              and
              depreciation, amortization and impartment expenses of $62,005. Our
              operating
              expenses for the three months ended June 30, 2005 consisted of selling
              and
              promotion expenses of $67,336, professional and consulting fees of
              $388,050,
              commissions and wages of $159,359, general and administrative expenses
              of
              $10,930, and depreciation, amortization and impartment expenses of
              $49,082.
 
 Operating
              expenses for the six months ended June 30, 2006 was $827,818, a 24%
              decrease
              from $1,096,267 for the six months ended June 30, 2005. Our operating
              expenses
              for the six months ended June 30, 2006 consisted of selling and promotion
              expenses of $53,220, professional and consulting fees of $139,188,
              commissions
              and wages of $441,569, general and administrative expenses of $72,091,
              and
              depreciation, amortization and impartment expenses of $118,750. Our
              operating
              expenses for the six months ended June 30, 2005 consisted of selling
              and
              promotion expenses of $123,044, professional and consulting fees of
              $584,664,
              commissions and wages of $232,610, general and administrative expenses
              of
              $56,866, and depreciation, amortization and impairment expenses of
              $99,083.
 
 The
              decrease in operating expenses was primarily a result of incurring
              significant
              less professional and consulting fees. Professional and consulting
              fees
              decreased by $319,698 for the three months ended June 30, 2006 from
              the prior
              year and $445,476 for the six months ended June 30, 2006 from the prior
              year.
              The decrease in operating expenses is also attributable to lower selling
              and
              promotional expenses during the reporting period. We
              pay
              commissions based upon sales of VoIP termination services. As a result
              of an
              increase in the sales of VoIP
  10
 Table
                  of Contents
  termination
              services, our commissions and wages increased correspondingly.
 
 *Other
              Income (Expense)*
 
 During
              the three months ended June 30, 2006, we reported other expenses in
              the amount
              of $12,361, compared to reporting other income in the amount of $3,000
              for the
              same reporting period in the prior year. During the six months ended
              June 30,
              2006, we reported other expenses in the amount of $16,627, compared
              to reporting
              other income in the amount of $6,000 for the same reporting period
              in the prior
              year. The other income reported during the three and six months ended
              June 30,
              2006 and 2005 is attributable to interest expenses incurred on an outstanding
              convertible debenture.
 
 *Net
              Income (Loss)*
 
 We
              had
              net income of $41,407 for the three months ended June 30, 2006, compared
              to net
              loss of $604,510 for the three months ended June 30, 2005. This three-month
              period represents the first time since our inception that we have reported
              a net
              income. Net loss for the six months ended June 30, 2006 was $245,075,
              compared
              to a net loss of $923,570 for the six months ended June 30, 2005. The
              reporting
              of net income during the three months ended June 30, 2006 was primarily
              attributable to increased sales with a higher profit margin.
 
 Our
              income per common share for the three months ended June 30, 2006 was
              $0.00,
              compared to a loss per common share of $0.01 for the three months ended
              June 30,
              2005. Our income per common share for the six months ended June 30,
              2006 was
              $0.00, compared to a loss per common share of $0.02 for the six months
              ended
              June 30, 2005.
 
 **Liquidity
              and Capital Resources**
 
 As
              of
              June 30, 2006, we had total current assets of $413,017 and cash and
              cash
              equivalents of $32,912. Our total current liabilities as of June 30,
              2006 were
              $1,049,719, resulting in a working capital deficit of $636,702 as of
              June 30,
              2006.
 
 Operating
              activities used $557,492 in cash for the six months ended June 30,
              2006. Our net
              loss of $245,075 and the payment of accounts payable and accrued expenses
              in the
              amount of $339,600 were the primary components of our negative operating
              cash
              flow. Investing activities during the six months ended June 30, 2006
              used
              $50,110 for the purchase of fixed assets. These
              fixed assets are attributable to our new gateway installations in Gabon
              and Mali
              Africa. Net
              cash
              flows provided by financing activities during the six months ended
              June 30, 2006
              was $586,737. We received $594,417 as proceeds from the issuance of
              notes
              payable to related parties during the six months ended June 30,
              2006.
 
 The
              success of our business plan beyond the next 12 months is contingent
              upon us
              obtaining additional financing. We intend to fund operations through
              debt and/or
              equity financing arrangements, which may be insufficient to fund our
              capital
              expenditures, working capital, or other cash requirements. We do not
              have any
              formal commitments or arrangements for the sales of stock or the advancement
              or
              loan of funds at this time. There can be no assurance that such
  11
 Table
                  of Contents
  additional
              financing will be available to us on acceptable terms, or at all.
 
 **Off
              Balance Sheet Arrangements**
 
 As
              of
              June 30, 2006, there were no off balance sheet arrangements.
 
 **Going
              Concern**
 
 As
              shown
              in the accompanying condensed consolidated financial statements, we
              have
              incurred recurring losses of $245,075 and $923,570 for the six months
              ended June
              30, 2006 and 2005, and had a working capital deficiency of $636,702
              as of June
              30, 2006. We have recently emerged from the development stage and started
              generating revenues as of March 31, 2004. There is no guarantee that
              we will be
              able to raise enough capital or generate revenues to sustain our operations.
              These conditions raise substantial doubt about our ability to continue
              as a
              going concern for a reasonable period.
 
 Management
              believes that our capital requirements will depend on many factors.
              These
              factors include the increase in sales through existing channels as
              well as our
              ability to continue to expand our distribution points and leveraging
              our
              technology into the commercial small business segments. Our strategic
              relationships with telecommunications interconnection companies, internet
              service providers and retail sales outlets has permitted us to achieve
              consistent monthly growth in acquisition of new customers.
 
 In
              the
              near term, we will continue to pursue bridge financing to assist us
              in meeting
              our current working capital needs. Our ability to continue as a going
              concern
              for a reasonable period is dependent upon management’s ability to raise
              additional interim capital and, ultimately, achieve profitable operations.
              There
              can be no assurance that management will be able to raise sufficient
              capital,
              under terms satisfactory to us, if at all.
 
 **Critical
              Accounting Policies**
 
 In
              December 2001, the SEC requested that all registrants list their most
“critical
              accounting polices” in the Management Discussion and Analysis. The SEC indicated
              that a “critical accounting policy” is one which is both important to the
              portrayal of a company’s financial condition and results, and requires
              management’s most difficult, subjective or complex judgments, often as a result
              of the need to make estimates about the effect of matters that are
              inherently
              uncertain. We believe that the following accounting policies fit this
              definition.
 
 **Currency
              Translation**
 
 For
              subsidiaries outside the United States that prepare financial statements
              in
              currencies other than the U.S. dollar, we translates income and expense
              amounts
              at average exchange rates for the year, translates assets and liabilities
              at
              year-end exchange rates and equity at historical rates. Our reporting
              currency
              is that of the US dollar while its functional currency is that of the
              Canadian
              dollar. We record these translation adjustments as accumulated other
              comprehensive income (loss). Gains and losses from foreign currency
              transactions
              commenced in 2004 when we utilized a
  12
 Table
                  of Contents
  Canadian
              subsidiary to record all of the transactions. We recognized a gain
              (loss) of
              $53,777 and $44,677 for the six months ended June 30, 2006 and 2005.
 
 **Revenue
              Recognition**
 
 In
              2004,
              when we emerged from the development stage with the acquisition of
              American
              United Corporation/ 3874958 Canada Inc. and after assuming ownership
              of 3894517
              Canada Inc. as well as the establishment of Teliphone, Inc., we began
              to
              recognize revenue from our VoIP services when the services were rendered
              and
              collection was reasonably assured in accordance with SAB 101.
 
 **Impairment
              of Long-Lived Assets**
 
 Long-lived
              assets, primarily fixed assets, are reviewed for impairment whenever
              events or
              changes in circumstances indicate that the carrying amount of the assets
              might
              not be recoverable. We do not perform a periodic assessment of assets
              for
              impairment in the absence of such information or indicators. Conditions
              that
              would necessitate an impairment assessment include a significant decline
              in the
              observable market value of an asset, a significant change in the extent
              or
              manner in which an asset is used, or a significant adverse change that
              would
              indicate that the carrying amount of an asset or group of assets is
              not
              recoverable. For long-lived assets to be held and used, we recognize
              an
              impairment loss only if its carrying amount is not recoverable through
              its
              undiscounted cash flows and measures the impairment loss based on the
              difference
              between the carrying amount and estimated fair value. We, determined
              based upon
              an independent valuation performed on our equipment acquired from American
              United Corporation that there was impairment of $1,750,875 (on October
              6, 2003)
              based upon the fair value of the stock issued for the equipment. This
              amount is
              reflected as impairment in the December 31, 2003 financial
              statements.
 
 **Recent
              Accounting Pronouncements**
 
 On
              December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
              Statement of Financial Accounting Standards No. 123 (Revised 2004),
              “ *Share-Based
              Payment* ”
(“SFAS
              123R”). SFAS 123R requires that compensation cost related to share-based
              payment
              transactions be recognized in the financial statements. Share-based
              payment
              transactions within the scope of SFAS 123R include stock options, restricted
              stock plans, performance-based awards, stock appreciation rights, and
              employee
              share purchase plans. The provisions of SFAS 123R, as amended, are
              effective for
              small business issuers beginning as of the next interim period after
              December
              15, 2005.
 
 In
              February 2006, the FASB issued Statement of Financial Accounting Standard
              No.
              155, *“Accounting
              for Certain Hybrid Instruments”* (“SFAS
              155”). FASB 155 allows financial instruments that have embedded derivatives
              to
              be accounted for as a whole (eliminating the need to bifurcate the
              derivative
              from its host) if the holder elects to account for the whole instrument
              on a
              fair value basis. This statement is effective for all financial instruments
              acquired or issued after the beginning of an entity’s first fiscal year that
              begins after September 15, 2006. We will evaluate the impact of SFAS
              155 on our
  13
 Table
                  of Contents
  consolidated
              financial statements.
 
 In
              May
              2005, the FASB issued Statement of Financial Accounting Standard No.
              154,
 *“Accounting
              Changes and Error Corrections”* (“SFAS
              154”). SFAS 154 is a replacement of APB No. 20, *“Accounting
              Changes”* ,
              and
              SFAS No. 3, *“Reporting
              Accounting Changes in Interim Financial Statements”* .
              SFAS
              154 applies to all voluntary changes in accounting principle and changes
              the
              requirements for accounting and reporting of a change in accounting
              principle.
              This statement establishes that, unless impracticable, retrospective
              application
              is the required method for reporting of a change in accounting principle
              in the
              absence of explicit transition requirements specific to the newly adopted
              accounting principle. It also requires the reporting of an error correction
              which involves adjustments to previously issued financial statements
              similar to
              those generally applicable to reporting an accounting change retrospectively.
              SFAS 154 is effective for accounting changes and corrections of errors
              made in
              fiscal years beginning after December 15, 2005. We believe the adoption
              of SFAS
              154 will not have a material impact on our consolidated financial statements.
 
 **Item
              3.     Controls and Procedures**
 
 Disclosure
              controls and procedures are controls and other procedures that are
              designed to
              ensure that information required to be disclosed in our reports filed
              or
              submitted under the Exchange Act are recorded, processed, summarized
              and
              reported, within the time periods specified in the SEC's rules and
              forms.
              Disclosure controls and procedures include, without limitation, controls
              and
              procedures designed to ensure that information required to be disclosed
              in our
              reports filed under the Exchange Act is accumulated and communicated
              to
              management, including our Chief Executive Officer and Chief Financial
              Officer,
              to allow timely decisions regarding required disclosure.
 
 We
              carried out an evaluation of the effectiveness of the design and operation
              of
              our disclosure controls and procedures (as defined in Exchange Act
              Rules
              13a-15(e) and 15d-15(e)) as of June 30, 2006. This evaluation was carried
              out
              under the supervision and with the participation of our Chief Executive
              Officer
              and Chief Financial Officer, Mr. Simon Lamarche. Based upon that evaluation,
              our
              Chief Executive Officer and Chief Financial Officer concluded that,
              as of June
              30, 2006, our disclosure controls and procedures are not effective.
              There have
              been no significant changes in our internal controls over financial
              reporting
              during the quarter ended June 30, 2006 that have materially affected
              or are
              reasonably likely to materially affect such controls.
 
 Our
              board
              of directors are currently working towards implementing significant
              changes in
              our internal controls over financial reporting that are expected to
              materially
              affect such controls. Our board of directors is seeking to retain a
              consultant
              to recommend for implementation specific disclosure controls and procedures
              to
              ensure that information required to be disclosed in our reports filed
              or
              submitted under the Exchange Act are recorded, processed, summarized
              and
              reported, within the time periods specified in the SEC's rules and
              forms.
  14
 Table
                  of Contents
  Limitations
              on the Effectiveness of Internal Controls
 
 Our
              management does not expect that our disclosure controls and procedures
              or our
              internal control over financial reporting will necessarily prevent
              all fraud and
              material error. Our disclosure controls and procedures are designed
              to provide
              reasonable assurance of achieving our objectives and our Chief Executive
              Officer
              and Chief Financial Officer concluded that our disclosure controls
              and
              procedures are effective at that reasonable assurance level. Further,
              the design
              of a control system must reflect the fact that there are resource constraints,
              and the benefits of controls must be considered relative to their costs.
              Because
              of the inherent limitations in all control systems, no evaluation of
              controls
              can provide absolute assurance that all control issues and instances
              of fraud,
              if any, within the Company have been detected. These inherent limitations
              include the realities that judgments in decision-making can be faulty,
              and that
              breakdowns can occur because of simple error or mistake. Additionally,
              controls
              can be circumvented by the individual acts of some persons, by collusion
              of two
              or more people, or by management override of the internal control.
              The design of
              any system of controls also is based in part upon certain assumptions
              about the
              likelihood of future events, and there can be no assurance that any
              design will
              succeed in achieving its stated goals under all potential future conditions.
              Over time, control may become inadequate because of changes in conditions,
              or
              the degree of compliance with the policies or procedures may deteriorate.
 15
 Table
                    of Contents
  **PART
              II - OTHER INFORMATION**
 
 **Item
              1.     Legal
              Proceedings**
 
 We
              are
              not a party to any pending legal proceeding. We are not aware of any
              pending
              legal proceeding to which any of our officers, directors, or any beneficial
              holders of 5% or more of our voting securities are adverse to us or
              have a
              material interest adverse to us.
 
 **Item
              2.     Unregistered Sales of Equity
              Securities and Use of Proceeds**
 
 None
 
 **Item
              3.     Defaults upon Senior
              Securities**
 
 None
 
 **Item
              4.     Submission of Matters to a Vote of
              Security Holders**
 
 No
              matters have been submitted to our security holders for a vote, through
              the
              solicitation of proxies or otherwise, during the quarterly period ended
              June 30,
              2006.
 
 **Item
              5.     Other
              Information**
 
 None
 
 **Item
              6.      Exhibits**
 
 **Exhibit**
                      **Number**
                    **Description
                        of Exhibit**10.1
                    Letter
                        of intent for Joint Venture Agreement between Teliphone,
                        Inc. and Intelco
                        Communication, inc. dated July 14, 2006131.1
                    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 200232.1
                    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
 
 1  Previously
              filed as an exhibit to current report on Form 8-K filed on August 3,
              2006
  16
 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.
 
 **United
                        American Corporation**Date:
                    August
                        14, 2006By:       /s/
                        Simon Lamarche
                      Mr.
                        Simon Lamarche
                      Title:**Chief
                        Executive Officer and
                        Director**