SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED June 30, 2006
                       Commission File Number: 000-27867

                                  TECHALT, INC.
        (Exact name of small business issuer as specified in its charter)

                                     Nevada
         (State or other jurisdiction of incorporation or organization)

                                   87-0533626
                      (IRS Employer Identification Number)

                          601 Union Street, Suite 4500
                                Seattle, WA 98101
               (Address of principal executive offices)(Zip Code)

                                 (206) 838-9736

(Registrant's telephone no., including area code) Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes |X| No |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)

Yes |_| No |X|

The number of shares of the Company's common stock outstanding on June 30, 2006
was 13,307,719.

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

Transitional Small Business Disclosure Format (Check One):

Yes |_| No |X|


<PAGE>

                                  TECHALT, INC.
                                   FORM 10-QSB

TABLE OF CONTENTS

PART  I     FINANCIAL INFORMATION

Item 1      Financial Statements

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

Item 3      Controls and Procedures

PART II     OTHER INFORMATION

Item 1      Legal Proceedings

Item 2      Unregistered Sales of Equity Securities and Use of Proceeds

Item 3      Defaults Upon Senior Securities

Item 4      Submission of Matters to a Vote of Security Holders

Item 5      Other Information

Item 6      Exhibits

SIGNATURES


                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          TechAlt, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheet
                                    Unaudited

                                                                 June 30,
                                                                   2006
                                                              ------------
           Total assets                                       $         --
                                                              ============
Current liabilities
  Notes payable to bank                                       $     38,180
  Accounts payable                                               1,080,145
  Accounts payable - related parties                               586,328
  Accrued liabilities                                              130,791
  Customer deposits                                                350,513
  Convertible and other notes payable, net of
   debt discount of $77,490                                        204,010
  Advances due to officer                                          183,201
  Fair value of registration rights liability                    1,540,000
  Accrued preferred stock dividends                                365,108
                                                              ------------
           Total current liabilities                             4,478,276
                                                              ------------

Commitments and contingencies (Notes 1, 4 and 7)

Series A Preferred stock subject to potential
   recission (Note 4), 4,820,000 authorized,
   4,816,260 issued and outstanding, liquidation
   preference of $9,632,520                                      5,182,993
                                                              ------------


Stockholders' Deficit
  Preferred stock, $0.001 par value, 100,000,000
    shares authorized
  Common stock and additional paid-in capital.
    $0.001 par value, 500,000,000 shares
    authorized, 13,307,719 shares issued
    and outstanding                                                 13,308
  Common stock issuable (169,577 shares)                               170
  Additional paid-in capital                                     2,522,130
  Accumulated deficit                                          (12,196,877)
                                                              ------------
     Total stockholders' deficit                                (9,661,269)
                                                              ------------

           Total liabilities and stockholders' deficit        $         --
                                                              ============

     See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>

                          TechAlt, Inc. and Subsidiary
                 Condensed Consolidated Statements of Operations
                                    Unaudited

<TABLE>
<CAPTION>
                                          Three months ended June 30,      Six months ended June 30,
                                         ----------------------------    ----------------------------
                                             2006            2005            2006            2005
                                         ------------    ------------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>
Revenue                                  $         --    $  1,318,938    $         --    $  2,315,320
Cost of goods sold                                 --         411,517              --         901,040
                                         ------------    ------------    ------------    ------------
Gross profit                                       --         907,421              --       1,414,280
                                         ------------    ------------    ------------    ------------
Operating expenses
  General and administrative                  110,128         907,056         222,168       1,713,428
  Research and development                     16,940         568,725          16,940       1,038,653
  Business development                             --         639,688              --       1,096,685
                                         ------------    ------------    ------------    ------------
     Total operating expenses                 127,068       2,115,469         239,108       3,848,766
                                         ------------    ------------    ------------    ------------

Loss  from operations before interest        (127,068)     (1,208,048)       (239,108)     (2,434,486)
                                         ------------    ------------    ------------    ------------

Other income (expense)
  Change in fair value of registration
  rights liability                            (50,000)       (200,000)        (50,000)       (409,000)
  Loss on repossession of assets              (24,842)                        (24,842)
  Interest expense, net                       (15,189)        (15,855)        (20,955)        (29,127)
                                         ------------    ------------    ------------    ------------

     Total other income (expense)             (90,031)       (215,855)        (95,797)       (438,127)
                                         ------------    ------------    ------------    ------------

Net loss                                     (217,099)     (1,423,903)       (334,905)     (2,872,613)

Preferred stock dividends                     (60,698)        (59,291)       (119,417)       (119,281)
                                         ------------    ------------    ------------    ------------

Net loss attributable to holders of
  common stock                           $   (277,797)   $ (1,483,194)   $   (454,322)   $ (2,991,894)
                                         ============    ============    ============    ============

Basic and diluted net loss per
  share attributable to holders
  of common stock                        $      (0.02)   $      (0.11)   $      (0.03)   $      (0.22)
                                         ============    ============    ============    ============

Weighted average shares used
  in computing loss per share              13,477,296      13,477,296      13,477,296      13,418,033
                                         ============    ============    ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>

                          TechAlt, Inc. and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited

<TABLE>
<CAPTION>
                                                                   Six months ended June 30,
                                                                  --------------------------
                                                                      2006           2005
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Cash flows from operating activities:
 Net loss                                                         $  (334,905)   $(2,872,613)
    Adjustments to reconcile net loss to net cash
     used by operating activities:
        Depreciation                                                    5,421         56,425
        Amortization of deferred stock-based consulting                    --        177,573
       Stock-based compensation expense                                    --        102,000
       Change in fair value of registration rights liability           50,000        409,000
       Amortization of debt discount                                    9,010             --
       Loss on repossession of assets                                  24,842             --
        Changes in operating assets and liabilities:
          Accounts receivable                                              --       (483,929)
          Inventories                                                      --       (186,383)
          Prepaid expenses and other current assets                        --         32,310
          Accounts payable and accounts payable - related party       147,588        815,688
          Accrued liabilities                                          11,544        187,540
          Customer deposits and deferred revenue                           --       (763,657)
                                                                  -----------    -----------
               Net cash used by operating activities                  (86,500)    (2,526,046)
                                                                  -----------    -----------
Cash flows from investing activities:
    Purchase of property, plant & equipment                                --       (181,844)
                                                                  -----------    -----------
               Net cash used by investing activities                       --       (181,844)
                                                                  -----------    -----------
Cash flows from financing activities:
    Decrease in excess of checks issued over bank balance                  --         18,777
    Proceeds from notes payable                                        86,500             --
    Proceeds from notes payable from bank                                  --        628,094
    Principal payment on notes payable to bank                             --        (10,608)
    Proceeds from sale of preferred stock                                  --        881,260
    Decrease in loans payable to officer                                   --        (12,381)
                                                                  -----------    -----------
               Net cash provided by financing activities               86,500      1,505,142
                                                                  -----------    -----------
Net decrease in cash and cash equivalents                                  --     (1,202,748)
Cash and cash equivalents, beginning of period                             --      1,202,748
                                                                  -----------    -----------
Cash and cash equivalents, end of period                          $        --    $        --
                                                                  ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest                                          $        --    $    35,846
                                                                  ===========    ===========
  Cash paid for income taxes                                      $        --    $        --
                                                                  ===========    ===========
  Non-cash investing and financing activities
     Common stock issued for preferred stock dividends            $        --    $    13,860
                                                                  ===========    ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                          Techalt, Inc. and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                                  June 30, 2006

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business and Organization - TechAlt, Inc. ("TechAlt") and its
wholly-owned subsidiary Technology Alternatives, Inc. ("TAI", and together, the
"Company") is engaged in the business of providing portable wireless
communications solutions used by emergency first responders for interagency
interoperability, communication and collaboration used in homeland security,
emergency medical and disaster response, as well as in the acquisition and
development of patentable and/or licensable technology in the homeland security
industries. Sales of these products are generally made to an independent
contractor hired by local, state or federal agencies.

Excess of Liabilities Extinguished Over Recorded Value of Assets Seized in
Foreclosure and Compensatory Damages and Discontinued Operations- In September
2005, a creditor (the Company's majority shareholder) foreclosed on all the
assets of the Company and the Company ceased substantially all operations.
Effective 90 days after the foreclosure date, the Company has no rights to
foreclosed assets nor to obligations foreclosed and extinguished. The excess of
liabilities over the recorded value of assets seized and of compensatory damages
approximated $951,000 and was recorded as other income during 2005. The
accompanying financial statements do not present discontinued operations for the
foreclosed business as there was only one operating segment.

Basis of Presentation and Going Concern - The accompanying condensed
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has
incurred recurring net losses and used cash in operating activities. During the
six months ended June 30, 2006, the Company reported a net loss of approximately
$335,000, and used cash of $86,500 in operating activities, and at June 30, 2006
has a working capital deficit of approximately $4.5 million (including
approximately $1.5 million of fair value of registration rights liability), and
a stockholders' deficit of approximately $9.7 million. Additionally, in 2005 a
creditor foreclosed and seized all of the Company's assets and the Company
ceased substantially all operations. These factors, among others, raise
substantial doubt about the ability of the Company to continue as a going
concern. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Management's plans include, among other things, additional financing activities,
and entering into business combinations and/or other strategic operational
relationships, the cash flows from which, Management believes will provide the
Company the ability to continue as a going concern.

Principals of Consolidation - The condensed consolidated financial statements
include the accounts of TechAlt, Inc. and its wholly-owned subsidiary.
Intercompany balances and transactions have been eliminated in consolidation.

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. Significant estimates include
valuation of capital stock and warrants issued for services, valuation of
registration rights liability and valuation of deferred tax assets. Actual
results could differ from those estimates.

Unaudited Interim Financial Statements - The accompanying condensed consolidated
financial statements are unaudited and have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission with regard to
interim financial information. Accordingly, the condensed consolidated financial
statements do not include all of the information and notes to financial
statements required by accounting principles generally accepted in the United
States for complete financial statements. The unaudited interim condensed
consolidated financial statements have been prepared on the same basis as the
annual consolidated financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the interim periods presented. Results for the
interim 2006 periods are not necessarily indicative of results to be expected
for the year ending December 31, 2006 or for any other future period.

Cash and Cash Equivalents - The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.

Revenue Recognition - Prior to the foreclosure of the Company's assets, the
Company recognized revenue when there was persuasive evidence of an arrangement,
the product had been delivered or services provided to the customer, the sales
price was fixed or determinable, and collectibility reasonably assured. Customer
payments received that do not meet revenue recognition criteria are recorded as
deferred revenue until revenue recognition criteria are met. Revenues from
product sales are recognized when the product is shipped to the customer and
there are no unfulfilled obligations that affect customer acceptance.


                                       4
<PAGE>

The Company intends to provide other services in 2006 and thereafter to
potentially include grant writing, integration services, project implementation
services and maintenance and support services. Revenues from providing such
services will be recognized pro rata as the services are provided.

In the event that a contract with a customer includes multiple elements (e.g.
product, integration services and maintenance and support services), the total
sale amount of the contract will be allocated to these multiple elements based
on vendor specific evidence of the fair value of each of these elements. The
applicable revenue recognition criteria as discussed above will then be applied
to each of these individual elements. If the delivered items do not have
standalone value to the customer, then the contract will be accounted for as one
element. Generally, the Company's products and services each have standalone
value to the customers since the customer may engage other service providers to
provide integration, project implementation or maintenance and support services.

Stock-based Compensation - Prior to 2006, the Company accounted for stock
options issued to employees in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. As such, compensation cost is measured
on the date of grant as the excess of the current market price of the underlying
stock over the exercise price. Such compensation amounts are amortized over the
respective vesting periods of the option grant. The Company followed the
disclosure-only provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation," and SFAS No. 148 "Accounting for Stock Based Compensation -
Transition and Disclosure," which permits entities to provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants as if the fair-valued based method defined in SFAS No. 123
had been applied. Had the Company accounted for stock-based compensation
utilizing the fair value method, its reported net loss and net loss per share
attributable to holders of common stock would not have differed from actual
amounts reported.

In 2004, the Financial Accounting Standards Board ("FASB") released a revision
to Statement of Financial Accounting Standard ("SFAS") No. 123, Accounting for
Stock-Based Compensation ("FAS 123R"). FAS 123R addresses accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates accounting for share-based compensation transactions
using APB Opinion No. 25, Accounting for Stock Issued to Employees, and
generally requires instead that such transactions be accounted for using a
fair-value-based method. The Company adopted FAS 123R effective January 1, 2006.

Research and Development - Research and development costs are comprised
primarily of compensation, consulting costs, supplies, materials and related
costs, and expensed as incurred.

Income taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". SFAS 109 requires the Company to provide a net deferred tax
asset/liability equal to the expected future tax benefit/expense of temporary
reporting differences between book and tax and any available operating loss or
tax credits. The Company continues to record a valuation allowance for the full
amount of deferred income taxes, which would otherwise be recorded for tax
benefits relating to operating loss carryforwards, as realization of such
deferred tax assets cannot be determined to be more likely than not.

Accounting for Derivatives - The Company evaluates its convertible debt,
options, warrants or other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted
for under Statement of Financial Accounting Standards 133 "Accounting for
Derivative Instruments and Hedging Activities" and related interpretations,
including EITF 00-19 "Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Company's Own Stock". The result of this
accounting treatment is that the fair value of the embedded derivative is
marked-to-market each balance sheet date and recorded as a liability. In the
event that the fair value is recorded as a liability, the change in fair value
is recorded in the condensed consolidated statement of operations as other
income or expense. Upon conversion or exercise of a derivative instrument, the
instrument is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Equity instruments that are initially
classified as equity that become subject to reclassification under SFAS 133 are
reclassified to liabilities at the fair value of the instrument on the
reclassification date.

Loss per share - The computation of net loss per share attributable to holders
of common stock is based on the weighted average number of shares outstanding
during the period presented in accordance with Statement of Financial Accounting
Standards No. 128 "Earnings Per Share". Net loss is increased by preferred stock
dividends (paid or payable) in the computation of net loss per share
attributable to holders of common stock. Dilutive loss per share is not
presented as the effects of including common stock equivalent shares would be
anti-dilutive. Computations of net loss per share for the three and six months
ended June 30, 2005, exclude 9,632,520 common shares potentially issuable
pursuant to terms of outstanding Series A Convertible Preferred Stock and
12,915,772 common shares issuable upon exercise of outstanding options and
warrants. Computations of net loss per share for the three and six months ended
June 30, 2006, exclude 9,632,520 common shares potentially issuable pursuant to
terms of outstanding Series A Convertible Preferred Stock, 4,325,000 common
shares potentially issuable pursuant to convertible promissory notes and
14,151,664 common shares issuable upon exercise of outstanding options and
warrants. Such common stock equivalents may dilute future net income per share.


                                       5
<PAGE>

Fair Value of Financial Instruments-The Company's financial instruments consist
of accounts payable, amounts payable to related parties, notes payable and
Series A Convertible Preferred Stock, and their carrying amounts approximate
fair value due to their short maturities and recent occurrences.

Recent Accounting Pronouncements - In May 2005, the FASB issued Statement of
Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections", (SFAS 154"). SFAS 154 replaces APB Opinion No. 20, "Accounting
Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements," and changes the requirements for the accounting for and reporting
of a change in accounting principle. The Company adopted SFAS 154 in 2006. The
Company's results of operations and financial condition will only be impacted by
SFAS 154 if the Company implements changes in accounting principles that are
addressed by the standard or correct accounting errors in future periods.

Note 2 - Agreement and Plan of Merger, Settlement Agreement and Foreclosure

In December 2004, TechAlt paid $650,000 to the former 45% owner of TAI
("Masanek"), which such payment then provided that certain documents and
agreements became effective pursuant to terms of an Escrow Agreement entered
into in November 2004 between TechAlt, TAI, Masanek and the former 55% owner of
TAI ("Solomon"). Material terms of the agreements and transactions occurring
subsequent to these payments are as follows:

Agreement and Plan of Merger - Pursuant to the Merger Agreement, all of the
shares of common stock of TAI (all of which were owned by Solomon and Masanek)
were exchanged for 9,544,000 shares of common stock of TechAlt. TechAlt
Acquisitions, Inc., a wholly-owned subsidiary of TechAlt, was merged with and
into TAI, with TAI becoming a wholly-owned subsidiary of TechAlt (the "Merger").
Upon consummation of the Merger, Solomon and Masanek together owned
approximately 83% of the voting common stock of the merged entity and obtained
management control and the shareholders of TechAlt prior to the License
Agreement owned approximately 17%. The transaction, in which TechAlt
Acquisitions, Inc. was merged with and into TAI, was accounted for as a
recapitalization of TAI and combination of entities under common control as of
the August 2004 license date and the Company is deemed to have issued 1,656,000
common shares to the shareholders of TechAlt. Inasmuch as the former TAI
shareholders owned a majority of TechAlt common stock after the merger and
obtained management control, TAI is considered to be the acquiring corporation
for accounting purposes.

Settlement Agreement - Pursuant to terms of the Settlement Agreement between
TechAlt and Masanek, among other things, (i) the License Agreement entered into
between TechAlt and TAI in August 2004 was rescinded, which rescission included
rescinding the 10,044,000 shares of TechAlt common stock issued pursuant to the
License agreement, (ii) TechAlt paid Masanek $650,000 cash, (iii) TechAlt and
Masanek entered into Sales, Consulting, Registration Rights, Right of First
Refusal and Escrow Agreements, (iv) TechAlt issued a Convertible Promissory Note
for $1,150,000 to Services by Designwise, Ltd. ("SBD"), a company owned by
Masanek, payable $650,000 one year from issuance and the remainder two years
from issuance subject to acceleration, as defined, based on capital raises, with
interest at 5%, and convertible into shares of TechAlt common stock on the basis
of $1.00 per share, and secured by substantially all assets of TechAlt, (v)
TechAlt issued warrants to Masanek for the right to purchase for a period of
five years 750,000 shares of TechAlt common stock for $1.00 per share with a
cashless exercise provision, (vi) TechAlt received from SBD the assignment of
all right, title and interests in certain intellectual property and inventory of
SBD relating to In-Car Based Communications Data Capture and Video Systems,
(vii) TechAlt paid $140,000 for the attorneys fees of Masanek, (viii) settlement
of certain claims made by Masanek against TechAlt and others in a lawsuit filed
in the Circuit Court of Cook County, Illinois, (ix) the Company entered into a 3
year sales agreement with a minimum annual equipment purchase commitment for the
Company to purchase equipment from SBD and to pay royalties on certain third
party supplied goods, and (x) a consulting agreement for which the Company will
pay SBD $25,000 for the first four months and $6,250 per month for the next 32
months plus other benefits.

License Agreement - In August 2004, the predecessor company's then majority
(52%) shareholder and sole member of its board of directors entered into an
Intellectual Property License Agreement with TAI, which agreement (the "License
Agreement") was consummated on August 24, 2004. Pursuant to the License
Agreement, in exchange for issuance of 10,044,000 shares of Company common stock
("Common Stock"), the Company licensed certain intellectual property owned by
TAI. The initial term of the License was 6 months, extendable for additional 6
month terms until terminated by mutual agreement. In connection with the License
Agreement the Company made payments to the former shareholders of approximately
$77,000 for the cancellation of 27,219,000 shares of predecessor common stock.
After issuance of shares and cancellation of shares in connection with the
License Agreement, TAI owned 4 million shares of the 12 million outstanding and
Solomon, directly or beneficially owned an additional approximately 4.5 million
shares. In certain circumstances, Solomon, voting shares directly or
beneficially owned, along with voting shares beneficially owned by TAI, and had
control to vote approximately 71% of the Company's outstanding common shares


                                       6
<PAGE>

Foreclosure on substantially all assets - In June 2005, the Company received a
letter from SBD claiming that the Company had defaulted on its payment
obligations under the Note and that SBD has the right to accelerate the full
payment of the $1.15 million promissory note, and in July 2005, the Company
received a letter from SBD's legal counsel demanding possession of "all
accounts, accounts receivable, goods, equipment, inventory, machinery, fixtures,
cash, securities, all intellectual property, including trademarks, services
marks, trade names, copyrights, patents, licenses, including patent licenses,
contracts and other tangible and intangible property." In September 2005, the
Company received a court ordered judgment and entered into a settlement
agreement to allow foreclosure of substantially all the assets of the Company by
the creditor discussed above. The settlement allowed for certain payments to the
Company by the creditor to cover health insurance and accrued payroll and
certain assets not covered by the foreclosure. The final balance due to the
creditor prior to the settlement was approximately $1.9 million. The settlement
agreement stipulates that the creditor may not sue the Company to recover the
liability unless the Company is subjected to bankruptcy proceedings. Upon
consultation with legal counsel it was determined that this settlement is in
effect a legal dismissal of the liabilities since whether under the settlement
agreement or under bankruptcy, the liabilities would ultimately be dismissed.
Under the bankruptcy laws, the settlement could be disturbed if within 90 days
of the settlement date the Company is put into bankruptcy. Inasmuch as the
Company has not entered into bankruptcy, liabilities foreclosed upon were
written off at December 31, 2005.

Note 3 - Notes Payable

In 2004, the Company entered into promissory notes payable to a bank totaling
$54,201, due in April and May 2007, bearing interest at an annual rate of 5.75%,
and payable in equal monthly payments for 30 months. The promissory notes were
collateralized by automobiles owned by the Company. Principal payments on the
notes approximate $23,000 and $10,000 in 2006 and 2007, respectively. In April
2006, the bank repossessed the automobiles in partial satisfaction of notes
payable obligations, and the Company is engaged in discussions with the bank as
to any remaining amount owed. The Company has recorded expense of $24,842, the
book value of automobiles repossessed, and when the balance due the bank is
determined, the carrying amount of notes payable will be adjusted.

During 2005 the Company issued a $135,000 10% secured convertible promissory
note, due August 15, 2006. This note is convertible at the same price of a
future Offering and therefore there is no beneficial conversion value as the
intrinsic value is zero. In addition, the Company issued three separate 10%
secured promissory notes for $20,000 each due at the next round of Company
financing. At the holder's option, these notes may be converted into common
stock in the second round of financing at the same price of that second round
future offering and therefore there is no beneficial conversion feature value as
the intrinsic value is zero.

In April 2006, the Company entered into a convertible debenture for borrowings
up to $100,000, pursuant to which the Company received $86,500 during the six
months ended June 30, 2006, and has received additional amounts subsequently.
Borrowings bear interest at an annual rate of 8%, are due in full, together with
interest, in 2 years, and are convertible into shares of the Company's common
stock at a per share conversion price of $0.02. The embedded conversion option
is excluded from derivative treatment since the debt is considered conventional
convertible debt. The conversion price was less than the $0.14 per share OTCBB
quote, and the estimated fair value of the beneficial conversion feature of has
been calculated and $86,500, the maximum to be recorded, has been recorded as
debt discount, presented as a deduction from the related notes payable and an
increase in additional paid-in capital. The debt discount is being amortized
into interest expense over the borrowing term, and in the three months ended
June 30, 2006, amortization expense was approximately $9,010.

Note 4 - Stockholders' Equity

Series A Convertible Preferred Stock, Warrants and Additional Investment Rights
- During 2004, pursuant to the private offering exemption provided in Rule 506
of Regulation D of the Securities Act of 1933 (the "Securities Act"), in
exchange for $3,835,000, the Company sold 3,835,000 shares of its Series A
Convertible Preferred Voting Stock (purchase price of $1.00 per share) (the
"Series A Preferred"), warrants to purchase 7,670,000 shares of the Company's
common stock at an exercise price of $1.00 per share with a cashless exercise
provision for the period ending five years from issuance (the "Warrants") and
Additional Investment Rights to purchase 65,000 additional shares of Series A
Preferred with 130,000 warrants at a purchase price of $1.00 per share (the
"Series A Preferred Rights"). All such rights have been exercised. Each share of
Series A Preferred is convertible under certain circumstances into two shares of
the Company's common stock, at a conversion price of $0.50 per common share. The
Series A Preferred holders have voting rights on an as converted basis.

During 2005, pursuant to the private offering exemption provided in Rule 506 of
Regulation D of the Securities Act, in exchange for $881,260 the Company sold
881,260 shares of its Series A Preferred (purchase price of $1.00 per share) and
Warrants to purchase 1,762,520 shares of the Company's common stock.

Terms of Series A Preferred provides for, among other things, cumulative
dividends to be paid to holders at a rate of 5% per annum, which accumulate
daily from issuance date and payable quarterly, in certain circumstances payable
in the Company's common stock, each preferred share to be convertible into 2
shares of Company common stock, subject to anti-dilution conversion rate
adjustments, a $2.00 per share liquidation preference amount, if common stock
dividends are declared, Series A receives the same on an as converted basis,
voting rights on an as converted basis, and limits payment of dividends on
common stock until certain financial targets are met.


                                       7
<PAGE>

The Series A Preferred shares contain registration rights and damages of 1.5%
per month or part of any month based on filing and effectiveness deadlines. The
Company determined that the registration rights agreement was a separate
freestanding derivative pursuant to SFAS 133 and related interpretations and has
recorded the derivative liability at fair value of $1,540,000 as of June 30,
2006. The expense for the change in fair value of the derivative for the three
and six months ended June 30, 2006 was $50,000 and for the three and six months
ended June 30, 2005 was $200,000 and $409,000, respectively.

Series A Convertible Preferred Stock Subject to Potential Rescission - In 2005,
Company management became aware that holders of shares of the Company's Series A
Preferred Stock may be entitled to certain rescission rights. The resale
registration statement of shares of common stock underlying these securities
(which was withdrawn in 2005) was originally filed by the Company in 2004.
Pursuant to the Securities Act and the related rules and regulations, as
interpreted by the Securities and Exchange Commission, as a result of a portion
of additional investment rights granted with the initial sale of 500,000 shares
of Series A Preferred Stock being unexercised when the resale registration
statement was originally filed, the private offerings have not been completed
and, accordingly, the public and private offerings would be integrated and
result in a violation of Section 5 of the Securities Act. Accordingly, investors
who purchased the private placement securities may have a number of remedies
available to them, including the potential right to rescind the purchase of
those securities plus, potentially, any amount representing damage to such
investors.

The Company is unable to predict if the investors would attempt to exercise such
potential rescission rights. Each investor's decision would be based upon, among
other things, the price of the Company's common stock and other factors. These
potential rescission rights could require the Company to refund at least the
gross proceeds of these private offerings to the investors. In order to satisfy
such potential obligations, the Company would be required to obtain alternate
sources of capital for such purposes. The Company presently does not have the
capital available to satisfy all potential claims for rescission. The inability
to obtain alternative sources of capital would have a material effect on the
Company's financial condition and results of operations.

For purposes of accounting for this contingency in accordance with Statement of
Financial Accounting Standards 5, "Accounting for Contingencies", the Company's
management has evaluated the above factors and has determined that the ultimate
liability to the Company from the potential assertion by investors of rescission
rights is not probable. This conclusion is based on management's determination
that the factors and/or conditions that would encourage an attempt to assert
such rights are significantly outweighed by the factors and/or conditions that
would discourage an attempt to assert such rights. Since the Company determined
that a rescission is not probable, although it may be possible, no accrual is
required under SFAS 5. As of June 30, 2006, the Company's consolidated balance
sheet reflects a temporary equity value of approximately $5.2 million, comprised
of $4.8 million of preferred stock value less offering costs of $1.4 million
plus the value of the beneficial conversion feature of $1.8 million relating to
that portion of Series A Preferred Stock subject to potential rescission, in
accordance with Emerging Issues Task Force Topic D-98, Classification and
Measurement of Redeemable Securities.

Common Stock - During 2005, 45,200 common shares were issued and 169,577 are
issuable pursuant to an Investment Banking Agreement relating to the Series A
Preferred sale. The shares were valued at $107,388 based on the $.50 per share
common stock value of contemporaneous issuances and charged to Series A
Preferred Stock value as an offering cost.

Warrants and Options - During 2005, the Board of Directors of TechAlt approved
the 2005 Stock Option Plan (the "Plan") to provide additional incentives to key
employees, officers, directors and independent contractors of TechAlt and any
Parent or Subsidiary it may at any time have, thereby helping to attract and
retain the best available personnel for positions of responsibility with those
entities and otherwise promoting the success of the business activities of such
entities. It is intended that options issued under the Plan constitute either
incentive stock options or nonqualified stock options. The maximum number of
shares that may be optioned and sold under the Plan is the greater of (i) twenty
million (20,000,000) shares of Common Stock of the Company, as amended, subject
to adjustment, or (ii) twenty percent of the total number of shares of Common
Stock that would be outstanding if each class of the Company's stock (including
each class of preferred stock) were converted into shares of Common Stock. The
Plan is administered by the Board directly, serving as a Committee of the whole,
or if the Board elects, by a Committee appointed by the Board for that purpose
and consisting of at least two Board members, all of whom shall be Non-Employee
Director. The adoption of the Plan is subject to ratification by the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy at a duly convened meeting of the shareholders of the
Company, which ratification shall occur within twelve (12) months before or
after the date of adoption of the Plan by the Board. A summary of options
issued, all of which are exercisable, as of June 30, 2006, and changes during
the six months then ended is as follows:


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                Number of          Weighted-Average
                                             Warrants/Options       Exercise Price
                                             -----------------    -----------------
<S>                                          <C>                  <C>
Balance at January 1, 2006                          16,001,664    $            0.88
Options granted to employees and directors                  --                   --
Exercised                                                   --                   --
Cancellations and terminations                      (1,850,000)                0.50
                                             ----------------
Balance at June 30, 2006                            14,151,664    $            0.93
                                             =================
</TABLE>

The following summarizes information about warrants and options outstanding, all
of which are exercisable, at June 30, 2006:

                                               Weighted average
                                            remaining contractual
 Exercise price              Number            life (in years)
 --------------          -----------        ---------------------
   $    0.50               1,961,664                  3.6
   $    1.00              12,190,000                  3.6
                         -----------
                          14,151,664
                         ===========

Note 5 - Related Party Transactions

An officer/director of the Company is also a principal owner of a law firm that
provides services to the Company. Expenses incurred to this law firm during the
six months ended June 30, 2006 and 2005 approximated $90,000 and $102,000,
respectively. Accounts payable of approximately $586,000 were due at June 30,
2006 and reported as accounts payable-related party.

Advances payable to the Company's former Chairman and Chief Executive Officer
and 55% shareholder were $183,201 at June 30, 2006 and December 31, 2005. These
advances are due on demand, unsecured and non-interest bearing.

Note 6 - Agreement With Cypher Wireless and Business Combination Not Consummated

Pursuant to terms of a February 2006 Agreement and Plan of Reorganization, in
April 2006, the Company was to have acquired all of the outstanding shares of
common stock of Cypher Wireless, Inc. ("Cypher Wireless"), in exchange for 35%
of the Company's issued and outstanding common stock, subject to satisfaction of
several conditions, including, among others breach of representations and
warranties or covenants of the merger, if the parties fail to obtain external
financing of not less than $2 million, or for failure to acceptably resolve the
existing debt and material liabilities of the parties. In August 2006, the
Company gave notice to Cypher Wireless that certain conditions had not been met
and that the proposed business combination and issuance of Company shares would
not occur. The Company had advanced Cypher Wireless approximately $17,000, which
has been recorded as expense during the three and six months ended June 30,
2006.

Note 7 - Commitments and Contingencies

The settlement agreement discussed in Note 2 stipulates that the creditor may
not sue the Company to recover the approximate $1.9 million liability unless the
Company is subjected to bankruptcy proceedings. Upon consultation with legal
counsel it was determined that this settlement is in effect a legal dismissal of
the liabilities since whether under the settlement agreement or under
bankruptcy, the liabilities would ultimately be dismissed.

Agreement with IBM - In 2004, the Company entered into a Statement of Work
("SOW") with International Business Machines Corporation ("IBM") for the Phase 1
Implementation of the Company's wireless communications product line in
connection with Cook County's mobile wireless video and data network project.
Pursuant to terms of the SOW, the Company would be providing hardware and
software, and maintenance services for which it was to receive payments of
approximately $2.9 million. Prior to foreclosure and discontinuance of the
project, the Company received payments of approximately $1.8 million, and
recognized revenue of approximately $1.6 million. The Company advised the
customer it could no longer perform under the contract and this contract was
ultimately cancelled. (see Notes 1 and 2)

Operating Lease Agreement - In 2005, the Company entered into an operating lease
for equipment to be used in a multi-city demo network. The total value of the
equipment was $670,000. The term of the lease was twenty-four months with
monthly payments of $7,600. The equipment was returned to the lessor in
September 2005 and management believes there may still be obligations under the
lease.

Debt forbearance - The Company has been contacted by certain convertible note
holders regarding repayment of the notes. No claims have been filed, but certain
note holders have expressed intent to do so in the event repayment does not
commence in a reasonable period of time. The Company continues to be in the
process of meetings and discussions with note holders with respect to continued
forbearance.

Legal Matters - The Company is engaged in two regulatory actions against the
Company relating to unpaid employee salaries and reimbursable expenses
aggregating approximately $33,000, and in 2006 has entered into settlement
agreements with respect to such matters.

Note 8 - Subsequent events

In July 2006, the Company entered into employment agreements with nine
individuals, some of whom are former employees of the Company, for past and in
some instances future services, pursuant to which, among other things, the
Company issued stock options, with cashless exercise features, to purchase
7,475,000 Company common stock at an exercise price of $0.001 per share, a price
per share being less than the quoted market price of $0.02 at the grant date.
The options were exercised, on a cashless basis, and 7,288,125 shares of Company
common stock were issued. The Company expects to record approximately $145,000
in compensation expense in connection with these option grants.


                                       9
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes to
financial statements included elsewhere in this Quarterly Report on Form 10-QSB
and the Company's financial statements and management's discussion and analysis
of financial condition and results of operations included in the Company's 2005
Annual Report on Form 10-KSB. This discussion regarding the Company may contain
forward-looking statements that relate to future events or future financial
performance. Historical results should not be relied on as indicative of trends
in operating results for any future period. The actual results of the future
events described in such forward-looking statements could differ materially from
those stated in such forward-looking statements. When used in this report, the
words or phrases "would be", "will allow", "intends to", "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "project", or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. The Company
cautions readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made, and advises readers that forward-looking
statements involve various risks and uncertainties. All subsequent written and
oral forward-looking statements attributable to us, or persons acting on our
behalf, are expressly qualified in their entirety by the foregoing. Except as
otherwise required by law, we assume no duty to update or revise our
forward-looking statements based on changes in internal estimates or
expectations or otherwise subsequent to the date of this filing.

These statements involve known and unknown risks, uncertainties and other
factors that may cause actual results, levels of activity, performance or
achievements to be materially different from any future results, performance or
achievements that may be expressed or implied by these forward-looking
statements. Important factors that could cause actual results to differ
materially from the Company's stated or implied expectations include, but are
not limited to: the Company's ability to fund expansions of future growth and to
implement our business strategy; the Company's ability to integrate the
operations of any businesses we may acquire; potential legal claims against the
Company; general economic and business conditions; the condition of the
securities and capital markets; legislative or regulatory changes that affect
the Company and our ability to ability to comply with regulatory bodies; and
statements of assumption underlying any of the foregoing, as well as any other
factors set forth in the Company's Annual Report on Form 10-KSB, in our
consolidated financial statements contained in this report and the notes
thereto, all of which investors are encouraged to read and consider.

OVERVIEW

TechAlt and its subsidiary, TAI, (together, the "Company") is engaged in the
homeland security sector with a focus on emergency first responders in the
public sector and on communications interoperability, integration of multi
source communications and collaboration enhancement solutions within both the
public and private sectors and in the acquisition and development of patentable
and/or licensable technology in the homeland security industries. Sales of these
products to governmental entities or their agents are generally made to an
independent contractor hired by local, state or federal agencies, or directly to
businesses seeking internal communications and tracking security.

The Company is currently targeting local, state, and federal public safety and
service agencies that are interested in pooling their communications resources
into a single, shared standards-based infrastructure that will support public
safety first responders within Department of Homeland Security designated Urban
Area Security Initiative ("UASI") communities, as well as privately operated,
public events security firms and systems managers.


                                       10
<PAGE>


The Company's financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has
incurred recurring net losses, and has used cash by operating activities. During
the six months ended June 30, 2006, the Company reported a net loss of
approximately $335,000, and used cash of $86,500 in operating activities, and at
June 30, 2006 has a working capital deficit of approximately $4.5 million
(including $1.5 million of fair value of registration rights liability), and a
stockholders' deficit of $9.7 million. Additionally, in 2005 a creditor
foreclosed and seized all of the Company's assets and the Company ceased all
operations. These matters, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. Management's plans include, among other things, additional
financing activities, which, Management believes will provide the Company the
ability to continue as a going concern.

In June 2005, the Company received a letter from Service By Designwise, Ltd. and
Paul Masanek (collectively, "Designwise"), a creditor of the Company (and its
majority shareholder) claiming that the Company had defaulted on its payment
obligations under its promissory note and that SBD has the right to accelerate
the full payment of the $1.15 million promissory note, and in July 2005, the
Company received a letter from SBD's legal counsel demanding possession of "all
accounts, accounts receivable, goods, equipment, inventory, machinery, fixtures,
cash, securities, all intellectual property, including trademarks, services
marks, trade names, copyrights, patents, licenses, including patent licenses,
contracts and other tangible and intangible property." In September 2005, the
Company received a court ordered judgment and entered into a settlement
agreement to allow foreclosure of substantially all the assets of the Company by
the creditor discussed above. The settlement allowed for certain payments to the
Company by the creditor to cover health insurance and accrued payroll and
certain assets not covered by the foreclosure. The final balance due to the
creditor prior to the settlement was approximately $1.9 million. The settlement
agreement stipulates that the creditor may not sue the Company to recover the
liability unless the Company is subjected to bankruptcy proceedings. Upon
consultation with legal counsel it was determined that this settlement is in
effect a legal dismissal of the liabilities since whether under the settlement
agreement or under bankruptcy, the liabilities would ultimately be dismissed.
Under the bankruptcy laws, the settlement could be disturbed if within 90 days
of the settlement date the Company is put into bankruptcy. Inasmuch as the
Company has not entered into bankruptcy, liabilities foreclosed upon were
written off at December 31, 2005.

As a result of the above foreclosure, the Company ceased substantially all
operations in connection with its IBM and Cook County related contracts and
closed its offices in Arlington Heights, IL, but continues to focus on the
development of technologies in the homeland security sector.

Pursuant to terms of a February 2006 Agreement and Plan of Reorganization, in
April 2006, the Company was to have acquired all of the outstanding shares of
common stock of Cypher Wireless, Inc. ("Cypher Wireless"), in exchange for 35%
of the Company's issued and outstanding common stock, subject to satisfaction of
several conditions, including, among others breach of representations and
warranties or covenants of the merger, if the parties fail to obtain external
financing of not less than $2 million, or for failure to acceptably resolve the
existing debt and material liabilities of the parties. In August 2006, the
Company gave notice to Cypher Wireless that certain conditions had not been met
and that the proposed business combination and issuance of Company shares would
not occur.

In 2005, pursuant to the private offering exemption provided in Rule 506 of
Regulation D of the Securities Act of 1933, in exchange for $4,816,000.00,
before offering costs, the Company sold 4,816,260 shares of its Series A
Convertible Preferred Stock (purchase price of $1.00 per share) (the "Series A
Preferred") and warrants to purchase 9,632,520 shares of the Company's common
stock at an exercise price of $1.00 per share with a cashless exercise provision
(the "Warrants") The Series A Preferred contain registration rights and damages
based on filing and effectiveness deadlines. Company management became aware
that holders of shares of the Company's Series A Preferred Stock may be entitled
to certain rescission rights. The resale registration statement of shares of
common stock underlying these securities was originally filed by the Company in
2004, and has subsequently been withdrawn. Pursuant to the Securities Act of
1933 and the related rules and regulations, as interpreted by the Securities and
Exchange Commission, as a result of a portion of the additional investment
rights granted with the initial sale of 500,000 shares of Series A Preferred
Stock, which were the basis of the sale of additional shares of Series A
Preferred Stock, being unexercised at the time the resale registration statement
was originally filed, the private offerings have not been completed and
accordingly, the public and private offerings would be integrated and result in
a violation of Section 5 of the Securities Act. Accordingly, the investors who
purchased private placement securities may have a number of remedies available
to them, including the potential right to rescind the purchase of those
securities plus, potentially, any amount representing damage to such investors.

                                       11
<PAGE>

The Company is unable to predict if the investors would attempt to exercise such
potential rescission rights. Each investor's decision would be based upon, among
other things, the price of the Company's common stock and other factors. These
potential rescission rights could require the Company to refund at least the
gross proceeds of these private offerings to the investors. In order to satisfy
such potential obligations, the Company would be required to obtain alternate
sources of capital for such purposes. The Company presently does not have the
capital available to satisfy potential claims for rescission. The inability to
obtain alternative sources of capital would have a material effect on the
Company's financial condition and results of operations. For purposes of
accounting for this contingency in accordance with Statement of Financial
Accounting Standards 5, "Accounting for Contingencies", the Company's management
has evaluated the above factors and determined that the ultimate liability to
the Company from the potential assertion by investors of rescission rights is
not probable. This conclusion is based on management's determination that
factors and/or conditions that would encourage an attempt to assert such rights
are significantly outweighed by factors and/or conditions that would discourage
an attempt to assert such rights. Since the Company has determined that a
rescission is not probable, although it may be possible, no accrual is recorded.
The Series A Preferred Stock, net of offering costs plus the value of the
beneficial conversion feature is reflected as temporary equity on the Company's
condensed consolidated balance sheet.

The Company filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission regarding registration of approximately 40 million shares of
Company common stock to be sold by certain stockholders. In 2005, the Company
withdrew this Registration Statement and expects to file a new registration
statement. It is expected that the selling stockholders will offer common stock
in amounts, at prices and on terms to be determined at the time of the offering.
The Company will not receive any proceeds from sales of common stock by selling
stockholders. Shares of Company common stock are not currently quoted on any
exchange or over-the-counter bulletin board market. The Company has applied for
trading of its common stock on the over-the-counter bulletin board.

RESULTS OF OPERATIONS

The following discussion and analysis provides information, which management
believes is relevant to an assessment and understanding of the Company's results
of operations for the three and six months ended June 30, 2006 as compared to
the three and six months ended June 30, 2005, and of its financial condition at
June 30, 2006. The discussion should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report.

Subsequent to foreclosure the Company has had no operating revenues. Revenue of
$1.3 million and $2.3 million was recognized for the three and six months ended
June 30, 2005 relating to Phase 1 implementation for the IBM contract relating
to the Cook County project.

General and administrative expenses of approximately $110,000 and $222,000 for
the three and six months ended June 30, 2006, respectively, were comprised
primarily of legal fees, and to a lesser extent, accounting and audit fees.
General and administrative expenses for the comparable periods in 2005 were
approximately $907,000 and $1.7 million, respectively. The decrease is
attributed to reduction in staff and related expenses to support the IBM
contract, which ceased upon foreclosure.

The Company incurred no business development expenses in 2006 as a result of the
discontinuance of operations subsequent to foreclosure. Business development
expenses in 2005 related to the foreclosed operations.

Pursuant to terms of a February 2006 Agreement and Plan of Reorganization, in
April 2006, the Company was to have acquired all of the outstanding shares of
common stock of Cypher Wireless, Inc. ("Cypher Wireless"), subject to
satisfaction of several conditions. In August 2006, the Company gave notice to
Cypher Wireless that certain conditions had not been met and that the proposed
business combination and issuance of Company shares would not occur. The Company
had advanced Cypher Wireless approximately $17,000, which has been recorded as
research and development expense during the three and six months ended June 30,
2006. Research and development expenses in 2005 related to the foreclosed
operations.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2006, cash used by operating activities was
$86,500, as compared to the approximate $335,000 net loss, as expenses were
substantially the result of increases of accounts payable - related party, and
change in fair value of the registration rights liability. Cash used by
operations for the six months ended June 30, 2005 approximated $2.5 million and
related to the foreclosed operations, primarily the result of the $2.9 million
net loss.

There was no cash provided or used by investing activities during the six months
ended June 30, 2006 as a result of the foreclosure. Cash used by investing
activities for the six months ended June 30, 2005 approximated $182,000 for
capital expenditures related to the foreclosed operations.

During the six months ended June 30, 2006, cash provided by operations was
$86,500 from proceeds from convertible debenture borrowings. Cash provided by
financing activities for the six months ended June 30, 2005, approximated $1.5
million comprised primarily of $881,000 proceeds from sales of preferred stock
and $628,000 of bank borrowings.

The Company currently does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on its financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material.


                                       12
<PAGE>

As previously described, Company management became aware that holders of shares
of the Company's Series A Preferred Stock may be entitled to certain rescission
rights. The Company is unable to predict if investors would attempt to exercise
such potential rescission rights. Each investor's decision would be based upon,
among other things, the price of the Company's common stock and other factors.
These potential rescission rights could require the Company to refund at least
the gross proceeds of these private offerings to the investors. In order to
satisfy such potential obligations, the Company would be required to obtain
alternate sources of capital for such purposes. While Company management has
determined that a rescission is not likely to result, the Company presently does
not have the capital available to satisfy all potential claims for rescission.
The inability to obtain alternative sources of capital would have a material
effect on the Company's financial condition and results of operations.

CRITICAL ACCOUNTING POLICIES

The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which among other
things, requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of financial statements and reported amounts of
revenues and expenses during reporting periods. These estimates and assumptions
are affected by management's application of accounting policies. Critical
accounting policies applied in the accompanying financial statements include
accounting for revenue recognition and accounting for income taxes.

REVENUE RECOGNITION - Prior to the foreclosure of the Company's assets, the
Company recognized revenue when there was persuasive evidence of an arrangement,
the product had been delivered or services provided to the customer, the sales
price was fixed or determinable, and collectibility reasonably assured. Funds
received pursuant to contracts with customers that include multiple elements
(e.g. product, integration services and maintenance and support services), were
allocated to multiple elements based on vendor specific evidence of fair value
of each of the elements and the applicable revenue recognition criteria applied
to each of these individual elements. If the delivered items do not have
standalone value to the customer, then the contract will be accounted for as one
element. Customer payments received that do not meet revenue recognition
criteria are recorded as deferred revenue until revenue recognition criteria are
met.

INCOME TAXES - The Company continues to record a valuation allowance for the
full amount of deferred income taxes, which would otherwise be recorded for tax
benefits relating to operating loss carryforwards, as realization of such
deferred tax assets has not been determined to be more likely than not.

ITEM 3.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer/Chief Financial Officer, as appropriate, to allow timely decisions in
accordance with the required "disclosure controls and procedures" as defined in
Rule 13a-15(e). The Company's disclosure and control procedures are designed to
provide reasonable assurance of achieving their objectives, and the principal
executive officer and principal financial officer of the Company concluded that
the Company's disclosure controls and procedures were effective at the
reasonable assurance level.

At the end of the period covered by this Quarterly Report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based of the foregoing, the
principal executive officer and principal financial officer of the Company
concluded that the Company's disclosure controls and procedures were effective
to ensure that the information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management including the
Company's principal executive officer and principal financial officer to allow
timely decisions regarding required disclosure.

There were no changes in the Company's internal control over financial reporting
that occurred during the Company's last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.


                                       13
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On October 26, 2005, the Company received notice that Bruno J. Riegl, a former
officer of the Company, filed a Wage Claim against the Company in the State of
Illinois, Department of Labor, Fair Labor Standards Division, seeking $28,153.38
in accrued salary and expenses, Wage Claim No. 05-004880. The Company filed a
response to Mr. Riegl's claim and subsequently entered into a settlement
agreement with Mr. Riegl, the obligations of which were satisfied in August of
2006, subsequent to the closing the Company's 2nd fiscal quarter.

On March 10, 2006, the Company received notice that Francine Winters, a former
employee of the Company, filed a Wage Claim against the Company in the State of
Illinois, Department of Labor, Fair Labor Standards Division, seeking $5,083,24
in accrued salary and expenses, Wage Claim No. 05-005086. The Company and Ms.
Winters have entered settlement discussions for settlement of the claim.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In April 2006, pursuant to the private offering exemption provided in Rule 506
of Regulation D of the Act the Company issued a convertible debenture to TTTK,
LLC in exchange for borrowings up to $100,000, pursuant to which the Company
received $86,500 during the six months ended June 30, 2006. The debenture bears
interest at an annual rate of 8% with a maturity date of April 6, 2008 and is
convertible into shares of the Company's common stock at a per share conversion
price of $0.02.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

On July 11, 2006, the Board ratified the Company's entry into Employment
Agreements for employment services in exchange for the grant of options with
Bruno Riegl, Terrence Byrne, David Moore, Craig Fischer, Shai Stern, Seth
Farbman, James Hurley, George Grumley and Monty Abbot. In connection with the
exercise of these options, on a cashless basis, the Company issued 731,250
shares of common stock to Bruno Riegl, 1,950,000 shares of common stock
registered on Form S-8 to Terrence Byrne, 901,875 shares of common stock to
David Moore, 975,000 shares of common stock to Craig Fischer, 146,250 shares of
common stock to Shai Stern, 146,250 shares of common stock to Seth Farbman,
243,750 shares of common stock to James Hurley, 243,750 shares of common stock
to George Grumley and 1,950,000 shares of common stock to Monty Abbot.

ITEM 6.  EXHIBITS

(a) Exhibits

2.1      Form of Agreement and Plan of Merger

2.2      Agreement and Plan of Reorganization

3.1(i)   Articles of Incorporation

3.2(i)   Certificate of Amendment to the Articles of Incorporation

3.3(i)   Certificate of Amendment to the Articles of Incorporation

3.4(ii)  Bylaws

3.5(ii)  Amended Bylaws

4.1      Certificate of Designation

4.2      Amended Certificate of Designation

4.3      Form of Securities Purchase Agreement

                                       14
<PAGE>


4.4      Form of Registration Rights Agreement

4.5      Form of Warrant

4.6      Form of Additional Warrant

4.7      Form of Additional Investment Right

4.8      Form of Lock-Up Agreement

4.9      Form of Warrant issued to Paul Masanek

4.10     Secured Convertible Promissory Note

4.11     Form of Registration Rights Agreement with Paul Masanek and Services By
         Designwise, Ltd.

4.12     Form of Right of First Refusal Agreement

4.13     Form of Non-Qualified Stock Option Agreement

4.14     Form of Incentive Stock Option Agreement

4.15     Form of Excipio Group, S.A. Warrant

10.1     Employment Agreement with James E. Solomon

10.2     Intellectual Property License Agreement

10.3     Financial  Advisory  and  Investment  Banking  Agreement  with  Sunrise
         Securities Corp.

10.4     Public Relations  Retainer Agreement with Sunrise Financial Group,
         Inc.

10.5     Base Agreement with International Business Machines Corporation

10.6     IBM Solutions Engagement Agreement Statement of Work

10.7     Arias Technology Corporation, Inc., Agreement for Consulting Services

10.8     TechAlt/Arias Statement of Work

10.9     Form of Agreement to Rescind Intellectual Property License Agreement

10.10    Form of Sales Agreement

10.11    Form of Security Agreement

10.12    Form of Settlement Agreement

10.13    Form of Technology Assignment and Bill of Sale

10.14    Form of Escrow Agreement

10.15    Form of Consulting Agreement

10.16    Form of Waiver and Amendment Agreement

10.17    2005 Stock Option Plan

10.18    Business Development Agreement with Excipio Group, S.A.

31.1     Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act

31.2     Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act

32       Certification of CEO and CFO pursuant to Section 906 of the
         Sarbanes-Oxley Act

(b) Reports on Form 8-K.

During the period ended June 30, 2006, and for the subsequent period through the
date of this report, the Company filed the following reports on Form 8-K:

Date of Event Reported              Items Reported*
----------------------              --------------
August 18, 2006                     Items 1.02

* Previously filed.


                                       15
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.

                                      TECHALT, INC.

August 21, 2006                       /s/ David M. Otto
---------------                       ------------------------------------------
                                      David M. Otto
                                      Chairman & Chief Executive Officer

August 21, 2006                       /s/ David M. Otto
---------------                       ------------------------------------------
                                      Chief Financial Officer
                                      (Principal Financial Officer)

<PAGE>

                                  EXHIBIT INDEX

2.1      Form of Agreement and Plan of Merger*

2.2      Agreement and Plan of Reorganization*

3.1(i)   Articles of Incorporation*

3.2(i)   Certificate of Amendment to the Articles of Incorporation*

3.3(i)   Certificate of Amendment to the Articles of Incorporation*

3.4(ii)  Bylaws*

3.5(ii)  Amended Bylaws*

4.1      Certificate of Designation*

4.2      Amended Certificate of Designation*

4.3      Form of Securities Purchase Agreement*

4.4      Form of Registration Rights Agreement*

4.5      Form of Warrant*

4.6      Form of Additional Warrant*

4.7      Form of Additional Investment Right*

4.8      Form of Lock-Up Agreement*

4.9      Form of Warrant issued to Paul Masanek*

4.10     Secured Convertible Promissory Note*

4.11     Form of Registration Rights Agreement with Paul Masanek and Services By
         Designwise, Ltd.*

4.12     Form of Right of First Refusal Agreement*

4.13     Form of Non-Qualified Stock Option Agreement*

4.14     Form of Incentive Stock Option Agreement*

4.15     Form of Excipio Group, S.A. Warrant*

10.1     Employment Agreement with James E. Solomon*

10.2     Intellectual Property License Agreement*

10.3     Financial  Advisory  and  Investment  Banking  Agreement  with  Sunrise
         Securities Corp.*

10.4     Public Relations  Retainer Agreement with Sunrise Financial Group,
         Inc.*

<PAGE>

10.5     Base Agreement with International Business Machines Corporation*

10.6     IBM Solutions Engagement Agreement Statement of Work*

10.7     Arias Technology Corporation, Inc., Agreement for Consulting Services*

10.8     TechAlt/Arias Statement of Work*

10.9     Form of Agreement to Rescind Intellectual Property License Agreement*

10.10    Form of Sales Agreement*

10.11    Form of Security Agreement*

10.12    Form of Settlement Agreement*

10.13    Form of Technology Assignment and Bill of Sale*

10.14    Form of Escrow Agreement*

10.15    Form of Consulting Agreement*

10.16    Form of Waiver and Amendment Agreement*

10.17    2005 Stock Option Plan*

10.18    Business Development Agreement with Excipio Group, S.A.*

31.1     Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act
         Attached

31.2     Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act
         Attached

32       Certification of CEO and CFO pursuant to Section 906 of the
         Sarbanes-Oxley Act
         Attached

* Previously filed.