UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   -----------

                                   FORM 10-QSB

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

                       FOR THE PERIOD ENDED MARCH 31, 2007

            [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from _________ to _________

                        COMMISSION FILE NUMBER : 0-50914

                                   -----------

                                   BIOTEL INC.
             (Exact name of registrant as specified in its charter)

              MINNESOTA                                   41-1427114
    (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                     Identification No.)

                     1285 CORPORATE CENTER DRIVE, SUITE 150
                                 EAGAN, MN 55121
          (Address of principal executive offices, including zip code)

                                 (651) 286-8620
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that 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 shell company (as defined in
Rule 12b-2 of the Exchange Act)
Yes [_]           No [X]

The number of shares of registrant's common stock, par value $0.01 per share,
outstanding as of March 31, 2007, was 2,673,827.

Transitional Small Business Disclosure Format (check one):
Yes [_]           No [X]



<PAGE>



                                   BIOTEL INC.
                                      INDEX
                                  _____________




PART I                                                              Page Number
------                                                              -----------
    ITEM 1:   Financial Information

              Consolidated Balance Sheets - March 31, 2007 and
                June 30, 2006                                             1
              Consolidated Statement of Income - Three Months
                Ended March 31, 2007 and 2006                             2
              Consolidated Statement of Income - Nine Months
                Ended March 31, 2007 and 2006                             3
              Consolidated Statements of Cash Flows - Nine Months
                Ended March 31, 2007 and 2006                             4
              Consolidated Statement of Stockholders' Equity -Nine
                Months Ended March 31, 2007 and 2006                      5
              Notes to Consolidated Financial Statements (Unaudited)      6

    ITEM 2:   Management's Discussion and Analysis of Financial
                Condition and Results of Operations                      12

    ITEM 3:   Controls and Procedures                                    17

PART II
-------

    ITEM 1-ITEM 5: NOT APPLICABLE
    ITEM 6:   Exhibits                                                   17

    SIGNATURES                                                           18


<PAGE>


                                     PART I

ITEM 1:  FINANCIAL INFORMATION


                          BIOTEL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       MARCH 31,     JUNE 30,
                                                                        2007          2006
                                                                      UNAUDITED      AUDITED
                                                                      ----------   -----------

<S>                                                                   <C>          <C>
                                          ASSETS
CURRENT ASSETS:
  CASH AND CASH EQUIVALENTS                                           $  286,204   $   51,186
  TRADE ACCOUNTS RECEIVABLE, NET OF ALLOWANCE                          1,876,032    2,200,817
    FOR DOUBTFUL ACCOUNTS OF $53,016 AND $50,034
    AT MARCH 31, 2007 AND JUNE 30, 2006, RESPECTIVELY
  INVENTORIES, NET                                                     1,141,334    1,141,289
  DEFERRED TAX ASSET                                                     290,094      290,094
  PREPAID EXPENSES                                                       150,395       87,607
  OTHER CURRENT ASSETS                                                     1,800        1,800
                                                                      ----------   ----------

          TOTAL CURRENT ASSETS                                         3,745,859    3,772,793
                                                                      ----------   ----------

PROPERTY, PLANT & EQUIPMENT, NET                                         767,717      701,868
                                                                      ----------   ----------

OTHER ASSETS:
  GOODWILL                                                               695,551      695,551
  OTHER ASSETS                                                            12,400       24,108
                                                                      ----------   ----------

          TOTAL OTHER ASSETS                                             707,951      719,659
                                                                      ----------   ----------

                                                                      $5,221,527   $5,194,320
                                                                      ==========   ==========

                           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  REVOLVING LINE OF CREDIT                                            $       --   $  110,000
  CURRENT PORTION OF NOTES PAYABLE                                       109,691      268,717
  TRADE ACCOUNTS PAYABLE                                                 500,415      484,605
  ACCRUED PAYROLL AND RELATED LIABILITIES                                262,369      214,748
  DEFERRED SERVICE CONTRACT REVENUE                                      156,593      168,470
  OTHER ACCRUED EXPENSES                                                 282,945      319,034
  ACCRUED INCOME TAXES                                                     4,838       76,545
                                                                      ----------   ----------

        TOTAL CURRENT LIABILITIES                                      1,316,851    1,642,119

LONG-TERM LIABILITIES:
  NOTES PAYABLE                                                          217,541      241,525
                                                                      ----------   ----------

          TOTAL LIABILITIES                                            1,534,392    1,883,644
                                                                      ----------   ----------

STOCKHOLDERS' EQUITY:
  PREFERRED STOCK, $.01 STATED VALUE; 2,000,000 SHARES
    AUTHORIZED; NO SHARES ISSUED                                              --           --
  COMMON STOCK, $.01 STATED VALUE; 10,000,000 SHARES
    AUTHORIZED; 2,673,827 AND 2,649,827 SHARES ISSUED, RESPECTIVELY       26,738       26,498
  ADDITIONAL PAID-IN CAPITAL                                           2,018,591    1,941,324
  RETAINED EARNINGS                                                    1,641,806    1,342,854
                                                                      ----------   ----------

          TOTAL STOCKHOLDERS' EQUITY                                   3,687,135    3,310,676
                                                                      ----------   ----------

                                                                      $5,221,527   $5,194,320
                                                                      ==========   ==========
</TABLE>

              See notes to consolidated financial statements which
              are an integral part of these financial statements.

                                       1

<PAGE>


                          BIOTEL INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                    UNAUDITED

                                                      FOR THE THREE MONTHS ENDED
                                                              MARCH 31,
                                                        2007            2006
                                                     -----------    ------------

SALES AND SERVICES                                   $ 2,989,879    $ 2,468,581

COST OF SALES AND SERVICES                             1,705,385      1,391,191
                                                     -----------    -----------

GROSS PROFIT                                           1,284,494      1,077,390
                                                     -----------    -----------

OPERATING EXPENSES
  SELLING AND ADMINISTRATIVE EXPENSES                    616,333        605,126
  RESEARCH AND DEVELOPMENT                               341,518        265,238
                                                     -----------    -----------

    TOTAL OPERATING EXPENSES                             957,851        870,364
                                                     -----------    -----------

INCOME FROM OPERATIONS                                   326,643        207,026
                                                     -----------    -----------

OTHER INCOME (EXPENSE)
  INTEREST INCOME                                            981             --
  INTEREST EXPENSE                                        (7,302)       (14,399)
  MISCELLANEOUS                                          (17,947)         2,317
                                                     -----------    -----------

    TOTAL OTHER INCOME (EXPENSE)                         (24,268)       (12,082)
                                                     -----------    -----------

NET INCOME BEFORE
    PROVISION FOR INCOME TAXES                           302,375        194,944

PROVISION FOR INCOME TAXES                               112,291         64,971
                                                     -----------    -----------

NET INCOME                                           $   190,084    $   129,973
                                                     ===========    ===========

INCOME PER SHARE
     BASIC                                           $      0.07    $      0.05
                                                     ===========    ===========
     DILUTED                                         $      0.07    $      0.05
                                                     ===========    ===========

              See notes to consolidated financial statements which
              are an integral part of these financial statements.

                                       2
<PAGE>


                          BIOTEL INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                    UNAUDITED

                                                      FOR THE NINE MONTHS ENDED
                                                              MARCH 31,
                                                        2007            2006
                                                     -----------    -----------

SALES AND SERVICES                                   $ 8,118,606    $ 7,488,421

COST OF SALES AND SERVICES                             4,758,808      4,399,765
                                                     -----------    -----------

GROSS PROFIT                                           3,359,798      3,088,656
                                                     -----------    -----------

OPERATING EXPENSES
  SELLING AND ADMINISTRATIVE EXPENSES                  1,796,712      1,623,806
  RESEARCH AND DEVELOPMENT                             1,044,635        766,906
                                                     -----------    -----------

    TOTAL OPERATING EXPENSES                           2,841,347      2,390,712
                                                     -----------    -----------

INCOME FROM OPERATIONS                                   518,451        697,944
                                                     -----------    -----------

OTHER INCOME (EXPENSE)
  INTEREST INCOME                                          2,719             --
  INTEREST EXPENSE                                       (28,168)       (48,669)
  MISCELLANEOUS                                          (17,254)         4,563
                                                     -----------    -----------

    TOTAL OTHER INCOME (EXPENSE)                         (42,703)       (44,106)
                                                     -----------    -----------

NET INCOME BEFORE
    PROVISION FOR INCOME TAXES                           475,748        653,838

PROVISION FOR INCOME TAXES                               176,796        228,241
                                                     -----------    -----------

NET INCOME                                           $   298,952    $   425,597
                                                     ===========    ===========

INCOME PER SHARE
     BASIC                                           $      0.11    $      0.16
                                                     ===========    ===========
     DILUTED                                         $      0.11    $      0.15
                                                     ===========    ===========


              See notes to consolidated financial statements which
              are an integral part of these financial statements.

                                       3
<PAGE>


                                  BIOTEL INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                    FOR THE NINE MONTHS ENDED
                                                                            MARCH 31,
                                                                      2007            2006
                                                                    ---------       ---------
<S>                                                                 <C>             <C>
OPERATING ACTIVITIES
      NET INCOME                                                    $ 298,952       $ 425,597
      ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
        PROVIDED BY OPERATING ACTIVITIES
           DEPRECIATION AND AMORTIZATION                              245,619         192,382
           STOCK-BASED COMPENSATION                                    62,507              --
           INCREASE (DECREASE) IN ALLOWANCE FOR DOUBTFUL ACCOUNTS       2,982         (23,483)
           INCREASE IN INVENTORY VALUATION ALLOWANCE                   16,416          68,781
           LOSS (GAIN) ON DISPOSAL OF FIXED ASSETS                     16,588          (2,350)
           CHANGES IN DEFERRED AND ACCRUED AMOUNTS
                TRADE ACCOUNTS RECEIVABLE                             321,803         (55,268)
                PREPAID EXPENSES                                      (62,788)        (21,105)
                INVENTORIES                                           (16,461)          2,165
                OTHER ASSETS                                            7,708         (12,400)
                TRADE ACCOUNTS PAYABLE                                 15,810        (190,993)
                ACCRUED PAYROLL AND RELATED LIABILITIES                47,621          (7,501)
                OTHER ACCRUED EXPENSES                                (36,089)        207,228
                DEFERRED SERVICE CONTRACT REVENUE                     (11,877)        (21,019)
                INCOME TAXES PAYABLE                                  (71,707)         87,780
                                                                    ---------       ---------

                     NET CASH PROVIDED BY OPERATING ACTIVITIES        837,084         649,814
                                                                    ---------       ---------

INVESTING ACTIVITIES
      PURCHASES OF PROPERTY AND EQUIPMENT                            (337,356)       (260,488)
      PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT                     13,300          13,950
                                                                    ---------       ---------

                     NET CASH USED FOR INVESTING ACTIVITIES          (324,056)       (246,538)
                                                                    ---------       ---------

FINANCING ACTIVITIES
      PROCEEDS FROM ISSUANCE OF COMMON STOCK                           15,000              --
      NET CHANGE ON LINE OF CREDIT                                   (110,000)       (235,394)
      PAYMENTS OF LONG-TERM DEBT                                     (183,010)       (150,322)
                                                                    ---------       ---------

                     NET CASH USED FOR FINANCING ACTIVITIES          (278,010)       (385,716)
                                                                    ---------       ---------

                     NET INCREASE IN CASH AND CASH EQUIVALENTS        235,018          17,560

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2006 AND 2005                 51,186          17,045
                                                                    ---------       ---------

CASH AND CASH EQUIVALENTS AS OF MARCH 31, 2007 AND 2006             $ 286,204       $  34,605
                                                                    =========       =========

CASH PAID FOR
      INTEREST EXPENSE                                              $  31,234       $  40,892
                                                                    =========       =========
      INCOME TAXES                                                  $ 248,449       $ 140,000
                                                                    =========       =========
</TABLE>

              See notes to consolidated financial statements which
              are an integral part of these financial statements.

                                       4
<PAGE>


                          BIOTEL INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               For the nine months ended March 31, 2007 and 2006

<TABLE>
<CAPTION>
                                   COMMON STOCK        ADDITIONAL
                             -----------------------    PAID-IN      RETAINED
                               AMOUNT       SHARES      CAPITAL      EARNINGS       TOTAL
                             ----------   ----------   ----------   ----------   ----------

<S>                          <C>           <C>         <C>          <C>          <C>
Balance, June 30, 2005       $   26,498    2,649,827   $1,941,324   $  890,629   $2,858,451

  Net Income                         --           --           --      425,597      425,597
                             ----------   ----------   ----------   ----------   ----------

Balance, March 31, 2006      $   26,498    2,649,827   $1,941,324   $1,316,226   $3,284,048
                             ==========   ==========   ==========   ==========   ==========

Balance, June 30, 2006       $   26,498    2,649,827   $1,941,324   $1,342,854   $3,310,676

  Options exercised                 240       24,000       14,760           --       15,000

  Stock-based compensation           --           --       62,507           --       62,507

  Net Income                         --           --           --      298,952      298,952
                             ----------   ----------   ----------   ----------   ----------

Balance, March 31, 2007      $   26,738    2,673,827   $2,018,591   $1,641,806   $3,687,135
                             ==========   ==========   ==========   ==========   ==========
</TABLE>

              See notes to consolidated financial statements which
              are an integral part of these financial statements.

                                       5
<PAGE>



BIOTEL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION
------------------------------

         The unaudited interim consolidated financial statements and related
notes have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in complete financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying unaudited interim
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Form 10-KSB for the fiscal year ended June 30, 2006, filed by
Biotel Inc. (the "Company") on September 28, 2006.

         The information furnished reflects, in the opinion of the management of
the Company, all adjustments necessary for a fair presentation of the financial
results for the interim periods presented. Interim results are subject to year
end adjustments and audit by independent certified public accountants.


NOTE 2 - INVENTORIES
--------------------

         As of March 31, 2007 and June 30, 2006, inventories consist of the
following:

                                                 MARCH 31,      JUNE 30,
                                                   2007           2006
                                                -----------    -----------

Raw materials and supplies                      $ 1,317,301    $ 1,296,078
Work in process                                       2,041             --
Finished Goods                                      342,165        351,340
Evaluation units and replacements                     9,455          7,082
                                                -----------    -----------

                                                  1,670,962      1,654,500
Valuation Allowance                                (529,628)      (513,211)
                                                -----------    -----------

                                                $ 1,141,334    $ 1,141,289
                                                ===========    ===========



NOTE 3 - WARRANTY RESERVE

         The Company offers warranties of up to a year to its customers
depending on the specific product sold. The Company's warranties require it to
repair or replace defective products during the warranty period at no cost to
the customer. The Company records a liability for estimated costs that may be
incurred under its warranties based on recorded sales. Although historical
warranty costs have been within expectations, there can be no assurance that
future warranty costs will not exceed historical amounts. The Company
periodically assesses the adequacy of its recorded liability and adjusts the
balance as necessary. At March 31, 2007 and June 30, 2006, the warranty reserve
totaled $79,191 and $97,471, respectively. At March 31, 2006 and June 30, 2005,
the warranty reserve totaled $99,171 and $79,062, respectively. Warranty reserve
is included in Other Accrued Expenses. The following is a reconciliation of the
aggregate warranty liability as of March 31, 2007 and 2006:

                                       6

<PAGE>

                                                      MARCH 31,   MARCH 31,
                                                        2007        2006
                                                      --------    --------

Beginning of Period, June 30, 2006 and 2005           $ 97,471    $ 79,062

Claims Paid                                            (39,009)    (62,139)
Additional warranties issued and revisions in
    estimates of previously issued warranties           20,729      82,248
                                                      --------    --------

End of Period, March 31, 2007 and 2006                $ 79,191    $ 99,171
                                                      ========    ========


NOTE 4 - STOCK-BASED COMPENSATION
---------------------------------

         On July 1, 2006, the Company adopted the fair value recognition
provision of Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 123(R), ACCOUNTING FOR STOCK-BASED
COMPENSATION, to account for compensation costs under its stock option plan. The
Company previously utilized the intrinsic value method under Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (AS
AMENDED) ("APB 25"). Under the intrinsic value method prescribed by APB 25, no
compensation costs were recognized for the Company's stock options because the
option exercise price in its plan equals the market price on the date of grant.
Prior to July 1, 2006, the Company only disclosed the pro forma effects on net
income and earnings per share as if the fair value recognition provisions of
SFAS 123(R) had been utilized.

         In adopting SFAS No. 123, the Company elected to use the modified
prospective method to account for the transition from the intrinsic value method
to the fair value recognition method. Under the modified prospective method,
compensation cost is recognized from the adoption date forward for all new stock
options granted and for any outstanding unvested awards as if the fair value
method had been applied to those awards as of the date of grant. The following
table illustrates the effect on net income and earnings per share as if the fair
value based method had been applied to all outstanding and unvested awards in
each period.





                                       7
<PAGE>

                                                         THREE MONTHS ENDED
                                                      MARCH 31,      MARCH 31,
                                                        2007           2006
                                                     -----------    -----------
Net income, as reported                              $   190,084    $   129,973
Add:  Stock-based employee compensation expense
  included in reported net income, net of
  related tax effects                                     21,748             --
Deduct:  Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects             (21,748)            --
                                                     -----------    -----------

Pro forma net income                                 $   190,084    $   129,973
                                                     ===========    ===========

Earnings per share:
  Basic - as reported                                $      0.07    $      0.05
  Basic - pro forma                                  $      0.07    $      0.05
  Diluted - as reported                              $      0.07    $      0.05
  Diluted - pro forma                                $      0.07    $      0.05



                                                         NINE MONTHS ENDED
                                                      MARCH 31,      MARCH 31,
                                                        2007           2006
                                                     -----------    -----------
Net income, as reported                              $   298,952    $   425,597
Add:  Stock-based employee compensation expense
  included in reported net income, net of
  related tax effects                                     62,507
Deduct:  Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects             (62,507)       (58,762)
                                                     -----------    -----------

Pro forma net income                                 $   298,952    $   366,835
                                                     ===========    ===========

Earnings per share:
  Basic - as reported                                $      0.11    $      0.14
  Basic - pro forma                                  $      0.11    $      0.13
  Diluted - as reported                              $      0.11    $      0.16
  Diluted - pro forma                                $      0.11    $      0.15


         Options to purchase shares of the Company's common stock are granted at
a price not less than 100% of the fair market value of the common stock, as
determined by the Board of Directors using the best available market data, on
the date the options are granted. As of March 31, 2007 and 2006, Biotel Inc. had
301,000 and 358,000 outstanding options, respectively. Currently option prices
range from $.375 to $2.00 per share with a weighted average remaining contract
life of 2.13 years. During the three months ended March 31, 2007, 24,000 options
were exercised. No options were exercised during the three months ended March
31, 2006. During the nine months ended March 31, 2007, 24,000 options were
exercised. No options were exercised during the nine months ended March 31,
2006. Option vesting and expiration is determined by the Board of Directors at
the time they are awarded. No options may be awarded with an expiration greater
than 10 years.

                                       8
<PAGE>

         A summary of the activity under the Company's plan is as follows:

<TABLE>
<CAPTION>
                                                OUTSTANDING          EXERCISABLE
                                           --------------------  -------------------
                                                       WEIGHTED             WEIGHTED
                                                       AVERAGE              AVERAGE
                                SHARES      NUMBER     EXERCISE   NUMBER    EXERCISE
                               AVAILABLE   OF SHARES    PRICE    OF SHARES   PRICE
------------------------------------------------------------------------------------

<S>                             <C>         <C>        <C>        <C>       <C>
Balance at June 30, 2005        296,000     354,000    $1.1379    185,750   $0.9040

Granted                         (10,000)     10,000
Expired                           6,000      (6,000)
                               ----------------------------------------------------

Balance at December 31, 2005    292,000     358,000    $1.2784    245,000   $1.2712
                               ====================================================

Balance at March 31, 2006       292,000     358,000    $1.2784    245,000   $1.2712
                               ====================================================

Balance at June 30, 2006        322,000     328,000    $1.1898    230,000   $1.0510

Granted                         (10,000)     10,000
Expired                           5,000      (5,000)
                               ----------------------------------------------------

Balance at December 31, 2006    317,000     333,000    $1.2260    286,500   $1.1876
                               ====================================================

Exercised                        24,000     (24,000)
Expired                           8,000      (8,000)
                               ----------------------------------------------------

Balance at March 31, 2007       349,000     301,000     1.2386    254,500    1.2584
                               ====================================================
</TABLE>


NOTE 5 - EARNINGS PER SHARE OF COMMON STOCK
--------------------------------------------

         The weighted average number of shares used in the computation of basic
and diluted income per common share for the three months ended March 31, 2007
was 2,657,827 and 2,761,264, respectively, and for the three months ended March
31, 2006 was 2,649,827 and 2,746,853, respectively. The weighted average number
of shares used in the computation of basic and diluted income per common share
for the nine months ended March 31, 2007 was 2,652,455 and 2,758,078,
respectively, and for the nine months ended March 31, 2006 was 2,649,827 and
2,763,427, respectively.


NOTE 6 - OPERATIONS AND INDUSTRY SEGMENTS
-----------------------------------------

         The Company reports on two segments of business: OEM Medical Equipment
Sales and Direct Medical Equipment Sales. The industry segment information
corresponds with the Company's different customer and product types and
therefore complies with the requirements of SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.

                                       9
<PAGE>

         In calculating segment information, certain corporate operating
expenses incurred for the benefit of all segments are included on an allocated
basis. The corporate profit amount includes non-allocable general corporate
expenses, interest expense and other income.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED MARCH 31, 2007
                                     ---------------------------------------------------------------------
                                       OEM MEDICAL     DIRECT MEDICAL
                                     EQUIPMENT SALES   EQUIPMENT SALES      CORPORATE           TOTALS
                                     ---------------   ---------------   ---------------   ---------------

<S>                                  <C>               <C>               <C>               <C>
Domestic Revenues                    $     2,563,261   $       130,404   $            --   $     2,693,665
International Revenues                       256,477            39,737                --           296,214
                                     ---------------   ---------------   ---------------   ---------------
Revenues from external customers           2,819,738           170,141                --         2,989,879
Intersegment revenues                         49,028           (49,028)               --                --
Interest expense                                  --                --             7,302             7,302
Income tax expense                           113,819             5,233            (6,761)          112,291
Depreciation and amortization                 77,767             2,193             6,141            86,101
Segment profit                               193,075            10,157           (13,148)          190,084
Goodwill                                     695,551                --                --           695,551
Total segment assets                       4,386,592           137,313           697,622         5,221,527
Purchase of property and equipment            95,265                --                --            95,265
</TABLE>


<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED MARCH 31, 2006
                                     ---------------------------------------------------------------------
                                       OEM MEDICAL     DIRECT MEDICAL
                                     EQUIPMENT SALES   EQUIPMENT SALES      CORPORATE           TOTALS
                                     ---------------   ---------------   ---------------   ---------------

<S>                                  <C>               <C>               <C>               <C>
Domestic revenues                    $     2,032,501   $       237,029   $            --   $     2,269,530
International revenues                       163,474            35,577                --           199,051
                                     ---------------   ---------------   ---------------   ---------------
Revenues from external customers           2,195,975           272,606                --         2,468,581
Intersegment revenues                         47,224           (47,224)               --                --
Interest expense                               1,227                --            13,172            14,399
Income tax expense                            34,751            29,513               707            64,971
Depreciation and amortization                 60,318             2,462             6,017            68,797
Segment profit                                70,078            58,521             1,374           129,973
Goodwill                                     695,551                --                --           695,551
Total segment assets                       4,834,890           203,942           551,109         5,589,941
Purchase of property and equipment           123,289                --                --           123,289
</TABLE>



                                       10
<PAGE>


<TABLE>
<CAPTION>
                                                       NINE MONTHS ENDED MARCH 31, 2007
                                     ---------------------------------------------------------------------
                                       OEM MEDICAL     DIRECT MEDICAL
                                     EQUIPMENT SALES   EQUIPMENT SALES      CORPORATE           TOTALS
                                     ---------------   ---------------   ---------------   ---------------

<S>                                  <C>               <C>               <C>               <C>
Domestic revenues                    $     7,218,735   $       537,690   $            --   $     7,756,425
International revenues                       256,477           105,704                --           362,181
                                     ---------------   ---------------   ---------------   ---------------
Revenues from external customers           7,475,212           643,394                --         8,118,606
Intersegment revenues                        137,518          (137,518)               --                --
Interest expense                               1,272                --            26,896            28,168
Income tax expense                           138,312            40,393            (1,909)          176,796
Depreciation and amortization                220,373             6,947            18,299           245,619
Segment profit                               243,931            78,286           (23,265)          298,952
Goodwill                                     695,551                --                --           695,551
Total segment assets                       4,386,592           137,313           697,622         5,221,527
Purchase of property and equipment           335,854                --             1,502           337,356
</TABLE>


<TABLE>
<CAPTION>
                                                       NINE MONTHS ENDED MARCH 31, 2006
                                     ---------------------------------------------------------------------
                                       OEM MEDICAL     DIRECT MEDICAL
                                     EQUIPMENT SALES   EQUIPMENT SALES      CORPORATE           TOTALS
                                     ---------------   ---------------   ---------------   ---------------

<S>                                  <C>               <C>               <C>               <C>
Domestic revenues                    $     6,269,621   $       682,639   $            --   $     6,952,260
International revenues                       481,280            54,881                --           536,161
                                     ---------------   ---------------   ---------------   ---------------
Revenues from external customers           6,750,901           737,520                --         7,488,421
Intersegment revenues                        155,005          (155,005)               --                --
Interest expense                               3,494                --            45,175            48,669
Income tax expense                           143,465            74,549            10,227           228,241
Depreciation and amortization                169,805             5,385            17,192           192,382
Segment profit                               259,853           145,892            19,852           425,597
Goodwill                                     695,551                --                --           695,551
Total segment assets                       4,834,890           203,942           551,109         5,589,941
Purchase of property and equipment           226,910            26,078             7,500           260,488
</TABLE>


NOTE 7 - FINANCING ACTIVITIES
-----------------------------

On January 31, 2007, the Company refinanced its line of credit and note payable
and obtained a $350,000 term note payable and lines of credit for $1,000,000 and
$500,000 with a bank. The term note requires 36 monthly payments of $11,079 of
principal and interest at 8.5%, beginning March 5, 2007, with all unpaid
principal and interest due February 5, 2010. The lines of credit bear interest
at the bank's prime rate (8.25% at March 31, 2007) plus .25% and expire on
February 5, 2008. These debt agreements are collateralized by all of the
Company's assets. As of March 31, 2007, the balance of the term note was
$327,000, compared with the balance of $510,000 on the term note as of June 30,
2006. As of March 31, 2007, there was no balance outstanding on the line of
credit, compared with a balance of $110,000 as of June 30, 2006.

                                       11
<PAGE>


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

CAUTIONARY STATEMENT

         Statements included or incorporated by reference in this Quarterly
Report on Form 10-QSB which are not historical in nature are identified as
"forward looking statements" for the purposes of the safe harbor provided by
Section 27A of the Securities Act of 1933, as amended. Biotel cautions readers
that forward looking statements, including, without limitation, those relating
to our future business prospects, revenues, working capital, liquidity, capital
needs, interest costs and income, are subject to certain risks and uncertainties
that could cause actual results to differ materially from those indicated in the
forward looking statements. The risks and uncertainties include, but are not
limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, new product
development and market acceptance, the regulatory and trade environment and
other risks indicated in filings with the Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

         The consolidated financial statements of Biotel include the accounts of
Biotel Inc. and its wholly-owned subsidiaries (collectively, "Biotel").
Significant intercompany accounts and transactions are eliminated in
consolidation.

         Management uses estimates and assumptions in preparing financial
statements, including those assumed in computing the allowance for doubtful
receivable accounts, inventory valuation allowances and warranty reserves and
deferred income tax valuation allowances. Those estimates and assumptions may
affect the reported amounts of assets and liabilities, disclosures of contingent
assets and liabilities, and reported revenues and expenses. Actual results may
vary from these estimates.

         At times Biotel maintains bank deposits in excess of federally insured
limit. Management monitors the soundness of these financial institutions and
believes Biotel's risk is negligible.

         Biotel sells its products to customers on credit in the ordinary course
of business. A customer's credit history is reviewed and must meet certain
standards before credit is extended. Biotel establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.

         Biotel follows the policy of charging the costs of advertising, except
for costs associated with direct response advertising, to operating expenses as
incurred. The costs of direct response advertising are capitalized and amortized
over the period during which future benefits are expected to be received.

         Inventories are valued at lower of cost (using the average and first-in
first-out cost methods) or market.

         Property, equipment and leasehold improvements are recorded at cost.
Depreciation is calculated using the straight-line or declining-balance methods
over estimated useful lives of three to 10 years for equipment, three to five
years for automobiles and two to 31 years for leasehold improvements.

         SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill is deemed
to have an indefinite useful life and is not amortized but is subject to
impairment tests performed at least annually. During fiscal 2006 and 2005,
Biotel performed the required impairment tests of goodwill and determined our
recorded goodwill had not been impaired.

         Amounts billed to customers for service contracts are recognized as
income over the term of the agreements, and the associated costs are recognized
as incurred.

                                       12
<PAGE>

         Biotel warrants its products against defects in material and
workmanship for 90 days for electromagnetic and ultrasound probes and one year
for all other manufactured equipment. An accrual is provided for estimated
future claims. Such accruals are based on historical experience and management's
estimate of the level of future claims.

         Revenues from product sales are recognized at date of shipment.

         Research and development costs are charged to operations as incurred.
These costs are for proprietary research and development activities that are
expected to contribute to the future profitability.

         Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes relate primarily to differences between financial and
income tax reporting for the basis of inventory, accounts receivable, property
and equipment, and accrued liabilities. The deferred tax accounts represent
future tax return consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or settled.
Deferred taxes may also be recognized for operating losses that are available to
offset future taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.

         Biotel considers all highly liquid short term investments purchased
with an original maturity of three months or less to be cash equivalents.

OVERVIEW

         Biotel has been implementing a strategy to expand its base of
operations among medical companies who seek to outsource strategic items
provided by various Biotel companies. From its operating subsidiaries located
within the United States, Biotel supplies an array of products and services to
provide for the research, development, testing, and manufacturing needs of its
customers.

         Biotel business units, Braemar, Inc. and Agility Centralized Research
Services, Inc., sell medical devices, technology and research services to
medical companies. They design, manufacture, and test 24- and 48-hour Holter
recorders, 30-day ECG event recorders, tissue extraction components and flow
control devices; provide 24/7 clinical ECG research services and internet
technologies; complete FDA, CE and other regulatory testing; and develop, test
and manufacture other custom medical devices. These subsidiaries form a base of
products and services which we believe are attractive to medical device and
pharmaceutical companies, allowing accelerated and improved research,
development, testing and manufacturing operations for its customers.

         Biotel business unit, Advanced Biosensor Inc., sells maintenance
services, Holter recorders and event recorders manufactured by Braemar,
diagnostic Holter software provided by others and Holter supplies to hospitals
and clinics.

         These subsidiaries have experienced improvements in their business
activity as a result of marketing efforts to acquire new customers and to expand
relationships among current customers.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007

         Biotel's net revenues for the three months ended March 31, 2007, were
$2,990,000, 21.1% above net revenues of $2,469,000 for the three months ended
March 31, 2006. This increase is a result of increased sales to medical
corporations during the third quarter of fiscal 2007. In the three months ended
March 31, 2007, 49% of Biotel's revenues were derived from three customers; and
in the three months ended March 31, 2006, 40% of Biotel's revenues were derived
from two customers. The loss of any of these customers would have immediate
significant adverse effect on our financial results.

                                       13
<PAGE>

         Gross profit margin was $1,284,000 for the quarter ended March 31,
2007, 19.2% better than the gross profit margin of $1,077,000 for the third
quarter of fiscal year 2006. Cost of sales and service increased to $1,705,000
(57.0% of sales) for the three months ended March 31, 2007, compared to
$1,391,000 (56.4% of sales) for the third quarter of fiscal year 2006. Cost of
sales and service increased in accordance with the increase in sales. Gross
profit margin increased due in part to changes in product mix. Model mix
variations are a normal part of the purchase cycle of Biotel customers.

         Selling, general and administrative expenses increased to $616,000
(20.6% of sales) for the three months ended March 31, 2007, compared to $605,000
(24.5% of sales) for the three months ended March 31, 2006. This increase was
due in part to the adoption of SFAS No. 123(R), ACCOUNTING FOR STOCK-BASED
COMPENSATION, which resulted in $21,748 in compensation expense for the third
quarter of fiscal 2007. Management believes Biotel will recognize similar
compensation expense in the remaining quarter of fiscal year 2007.

         Research and development expenditures for the third quarter of fiscal
year 2007 were $342,000, an increase of 28.8% compared to $265,000 in the third
quarter of fiscal year 2006. The increase was primarily the result of increases
in research and development efforts in the third quarter of fiscal year 2007
related to new Holter and event recorder products. Biotel believes its research
and development expenses related to new Holter and event recorder products
presently in product development have peaked. Biotel plans include significant
investment in research and development during fiscal year 2007.

         Interest expenditures decreased to $7,300 for the three-month period
ended March 31, 2007, compared to interest expenditures of $14,000 for the three
months ended March 31, 2006. Interest expenditures decreased corresponding to
the reduction in long term debt.

         Net earnings of $190,000 were posted for the third quarter of fiscal
year 2007, versus net earnings of $130,000 in the third quarter of fiscal year
2006. Net earnings for the third quarter of fiscal year 2007 improved as a
result of increased sales.

NINE MONTHS ENDED MARCH 31, 2007

         Biotel's net revenues for the nine months ended March 31, 2007, were
$8,119,000, 8.4% above net revenues of $7,488,000 for the nine months ended
March 31, 2006. This increase is a result of increased sales to medical
corporations during fiscal 2007. In the nine months ended March 31, 2007, 44% of
Biotel's revenues were derived from three customers; and in the nine months
ended March 31, 2006, 37% of Biotel's revenues were derived from two customers.
The loss of any of these customers would have immediate significant adverse
effect on our financial results.

         Gross profit margin was $3,360,000 for the nine months ended March 31,
2007, 8.8% better than the gross profit margin of $3,089,000 for the first nine
months of fiscal year 2006. Cost of sales and service increased to $4,759,000
(58.6% of sales) for the nine months ended March 31, 2007, compared to
$4,400,000 (58.7% of sales) for the first nine months of fiscal year 2006. Cost
of sales and service increased in accordance with the increase in sales. Gross
profit margin improved in part due to changes in product mix. Model mix
variations are a normal part of the purchase cycle of Biotel customers.

         Selling, general and administrative expenses increased to $1,797,000
(22.1% of sales) for the nine months ended March 31, 2007, compared to
$1,624,000 (21.7% of sales) for the nine months ended March 31, 2006. This
increase was due in part to the adoption of SFAS No. 123(R), ACCOUNTING FOR
STOCK-BASED COMPENSATION, which resulted in $62,507 in compensation expense for
the first nine months of fiscal 2007. Management believes Biotel will recognize
similar compensation expense in the remainder of fiscal year 2007.

         Selling, general and administrative expenses for the nine months ended
March 31, 2007, also include $80,000 in compensation paid to the former owner of
Agility. This amount was paid as a result of an amendment to the purchase
agreement which was executed on August 31, 2006. By executing this amendment,
the Company actually eliminated its remaining contingent obligation of up to
$150,000 under the original purchase agreement and completed all payments due
under the Agility purchase agreement.

                                       14
<PAGE>

         Research and development expenditures for the first nine months of
fiscal year 2007 were $1,045,000, an increase of 36.2% compared to $767,000 in
the first nine months of fiscal year 2006. The increase was primarily the result
of increases in research and development efforts in fiscal year 2007 related to
new Holter and event recorder products. Biotel believes its research and
development expenses related to new Holter and event recorder products presently
in product development have peaked. Biotel plans include significant investment
in research and development during fiscal year 2007.

         Interest expenditures decreased to $28,000 for the nine-month period
ended March 31, 2007, compared to interest expenditures of $49,000 for the nine
months ended March 31, 2006. Interest expenditures decreased corresponding to
the reduction in long term debt.

         Net earnings of $299,000 were posted for the first nine months of
fiscal year 2007, versus net earnings of $426,000 in the first nine months of
fiscal year 2006. Net earnings for fiscal year 2007 were affected by the
increased expenditures for research and development and the Agility purchase
settlement. Net earnings in fiscal year 2007 were also affected by the adoption
of SFAS No. 123(R), ACCOUNTING FOR STOCK-BASED COMPENSATION, as outlined above.

OFF-BALANCE SHEET ARRANGEMENTS

         Biotel does not have any off-balance sheet financing arrangements.

LIQUIDITY AND CAPITAL RESOURCES

         Working capital increased to $2,429,000 at March 31, 2007, compared to
$2,131,000 at June 30, 2006. The increase in working capital was largely due to
refinancing of a note payable which reduced the current portion of the note
payable.

         Cash and cash equivalents were $286,000 at March 31, 2007, compared to
$51,000 at June 30, 2006. The increase in cash was influenced by many factors,
primarily operating activities and improvements in cost structures. The ratio of
current assets to current liabilities ("current ratio") was 2.84 to one at March
31, 2007 and 2.30 to one at June 30, 2006.

         Accounts receivable decreased to $1,876,000 at March 31, 2007, versus
$2,201,000 at June 30, 2006. The decrease in accounts receivable was related to
strong collections during the third quarter of fiscal 2007. To the extent that
credit terms are extended to customers, Biotel's cash position is diminished and
debt may be required to supplement cash flows. Accordingly, Biotel attempts to
make timely collections from its customers in accordance with credit terms,
extend credit only to credit worthy customers with a strong payment history, and
to keep credit terms as short as is practicable.

         During the first nine months of fiscal year 2007, $337,000 was used for
capital expenditures, compared with $260,000 in the first nine months of fiscal
year 2006. Capital expenditures were increased as a result of Biotel's
development of new products. Biotel primarily invests in molds, tooling and
fixtures for custom components used in its product lines. Levels of capital
investment are expected to vary from year to year.

         Inventory of $1,141,000 as of March 31, 2007 was unchanged from the
inventory level of $1,141,000 as of June 30, 2006. Biotel's subsidiaries manage
inventories to provide safety stock and product flow for customers while
controlling the amount of inventory.

         Current liabilities decreased to $1,317,000 at March 31, 2007, compared
to $1,642,000 on June 30, 2006. This decrease was primarily due to payment a
note payable and estimated income taxes during the first nine months of fiscal
2007.

         Long term liabilities were reduced to $218,000 at March 31, 2007,
compared to $242,000 at June 30, 2006, as a result of principal payments and
refinancing of the note payable.

                                       15
<PAGE>

         On January 31, 2007, the Company refinanced its line of credit and note
payable and obtained a $350,000 term note payable and lines of credit for
$1,000,000 and $500,000 with a bank. The term note requires 36 monthly payments
of $11,079 of principal and interest at 8.5%, beginning March 5, 2007, with all
unpaid principal and interest due February 5, 2010. The lines of credit bear
interest at the bank's prime rate (8.25% at March 31, 2007) plus .25% and expire
on February 5, 2008. These debt agreements are collateralized by all of the
Company's assets. As of March 31, 2007, the balance of the term note was
$327,000, compared with the balance of $510,000 on the term note as of June 30,
2006. As of March 31, 2007, there was no balance outstanding on the line of
credit, compared with a balance of $110,000 as of June 30, 2006.

         As of March 31, 2007, stockholders' equity had increased to $3,687,000
from $3,311,000 at June 30, 2006. The increase in stockholder's equity was a
result of the increase in retained earnings and the increase in additional paid
in capital due to stock-based compensation.

         Management believes that present cash balances, internally generated
funds and its credit line should provide sufficient working capital to meet
present and projected needs for the coming 12 months, including principal
payments required under present debt instruments. There is no assurance that
Biotel will be successful in obtaining additional working capital if more is
required. Biotel believes it will be able to finance operations at its Agility
subsidiary over the next 12 months using cash generated from Biotel operations
and Biotel credit facilities.






                                       16
<PAGE>

ITEM 3:  CONTROLS AND PROCEDURES

(a) As of March 31, 2007, an evaluation was performed by Biotel's Chief
Executive Officer and Chief Financial Officer of the effectiveness of the design
and operation of the disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Based
upon, and as of the date of, that evaluation, the President and Chief Financial
Officer concluded that the registrant's disclosure controls and procedures were
effective.

(b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in Biotel's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were no significant
deficiencies or material weaknesses, and therefore there were no corrective
actions taken.

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS.  Not applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  Not applicable.

ITEM 5.  OTHER INFORMATION.  Not applicable.

ITEM 6.  EXHIBITS

         Listing of Exhibits:

         31.1     Certification of Chief Executive Officer.
         31.2     Certification of Chief Financial Officer.
         32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



                                       17
<PAGE>

                                   SIGNATURES


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


                              BIOTEL INC.


Date:  May 14, 2007           By: /s/ B. Steven Springrose
                                  --------------------------------------------
                                  Its:  Chief Executive Officer and President



Date:  May 14, 2007           By: /s/ Judy E. Naus
                                  --------------------------------------------
                                  Its:  Chief Financial Officer













                                       18