**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-Q**





(Mark
      One)




x
            Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934




For
      the
      quarterly period ended March 31, 2006




o
            Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act




For
      the
      transition period from _____________ to _______________





Commission
      File Number 0-24217





**YP
      CORP.**


(Exact
      Name of Registrant as Specified in Its Charter)




**Nevada**
              (State
                or Other Jurisdiction of Incorporation or Organization)
            **85-0206668**
              (IRS
                Employer Identification No.)**4840
                East Jasmine St. Suite 105**
              **Mesa,
                Arizona**
              (Address
                of Principal Executive Offices)
            **85205**
              (Zip
                Code)





**(480)
      654-9646**


(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 þ No o




Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes o No þ




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




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




The
      number of shares of the issuer’s common equity outstanding as of May 1, 2006 was
      48,726,594 shares of common stock, par value $.001.










**INDEX
      TO FORM 10-Q FILING**


**FOR
      THE QUARTER ENDED MARCH 31, 2006**





**TABLE
      OF CONTENTS**





**PART
      I.**


**FINANCIAL
      INFORMATION**


****  PageItem 1.
              Financial
                  StatementsConsolidated
                    Balance Sheets
                  as
                    of March 31, 2006 and September 30, 2005
              3Unaudited
                      Consolidated Statements of Operations
                    for
                      the Three
                      - Month Periods Ended March 31, 2006 and March 31,
                      2005
              4Unaudited
                  Consolidated Statement of Cash Flows
                for
                  the Three-Month Periods Ended March 31, 2006 and March 31,
                  2005
              5Notes
                  to the Unaudited Consolidated Financial Statements
              6Item 2.
              Management’s
                    Discussion and Analysis of Financial Condition
                  and
Results
                    of Operations
              12Item 3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              21Item 4.
              Controls
                  and Procedures
              21PART
                  IIOTHER
                  INFORMATIONItem 1.
              Legal
                  Proceedings
              22Item 1A.
              Risk
                  Factors
              22Item 2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              22Item 3.
              Defaults
                  Upon Senior Securities
              22Item 4.
              Submission
                  of Matters to a Vote of Security Holders
              22Item 5.
              Other
                  Information
              22Item 6.
              Exhibits
              22Signatures
              24





**PART
      I - FINANCIAL INFORMATION**





ITEM
      1.  FINANCIAL
      STATEMENTS




**YP
                  CORP. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEET****March
                  31,**
              
              **September
                  30,****2006**
              
              **2005****(unaudited)****Assets**Cash
                  and equivalents
              
              $
              8,712,777
              
              $
              8,119,298Restricted
                  cash
              
              
              —
              
              
              500,000Accounts
                  receivable, net
              
              
              6,334,130
              
              
              5,338,533Prepaid
                  expenses and other current assets
              
              
              438,469
              
              
              602,103Deferred
                  tax asset
              
              
              566,253
              
              
              381,887Total
                  current assets
              
              
              16,051,629
              
              
              14,941,821Accounts
                  receivable, long term portion, net
              
              
              580,431
              
              
              873,299Customer
                  acquisition costs, net
              
              
              4,646,546
              
              
              2,337,650Property
                  and equipment, net
              
              
              262,198
              
              
              396,862Deposits
                  and other assets
              
              
              96,838
              
              
              62,029Intangible
                  assets, net
              
              
              5,605,113
              
              
              6,108,823Deferred
                  tax asset, long term
              
              
              —
              
              
              376,708Total
                  assets
              
              $
              27,242,755
              
              $
              25,097,192**Liabilities
                  and Stockholders' Equity**Accounts
                  payable
              
              $
              777,966
              
              $
              655,526Accrued
                  liabilities
              
              
              775,960
              
              
              803,268Income
                  taxes payable
              
              
              18,559
              
              
              108,855Total
                  current liabilities
              
              
              1,572,485
              
              
              1,567,649Deferred
                  income taxes
              
              
              108,958
              
              
              —Total
                  liabilities
              
              
              1,681,443
              
              
              1,567,649Commitments
                  and contingencies
              
              
              —
              
              
              —Series
                  E convertible preferred stock, $.001 par value, 200,000 shares
                  authorized,127,840
                  issued and outstanding, liquidation preference $38,202
              
              
              10,866
              
              
              10,866Common
                  stock, $.001 par value, 100,000,000 shares authorized,48,751,594
                  and 48,837,694 issued and outstanding
              
              
              48,752
              
              
              48,838Treasury
                  stock
              
              
              (2,306,158
              )
              
              (2,171,740
              )Paid
                  in capital
              
              
              11,483,934
              
              
              11,044,400Deferred
                  stock compensation
              
              
              (2,769,967
              )
              
              (3,247,535
              )Retained
                  earnings
              
              
              19,093,885
              
              
              17,844,714Total
                  stockholders' equity
              
              
              25,561,312
              
              
              23,529,543Total
                  liabilities and stockholders' equity
              
              $
              27,242,755
              
              $
              25,097,192See
                  accompanying notes to consolidated financial
                  statements.




3




**YP
                  CORP. AND SUBSIDIARIES****UNAUDITED
                  CONSOLIDATED STATEMENT OF
                  OPERATIONS****Three
                  Months Ended March 31,**
              
              **Six
                  Months Ended March 31,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Net
                  revenues
              
              $
              8,999,196
              
              $
              6,444,609
              
              $
              16,625,972
              
              $
              12,634,764Cost
                  of services
              
              
              1,588,463
              
              
              860,933
              
              
              2,704,809
              
              
              1,995,517Gross
                  profit
              
              
              7,410,733
              
              
              5,583,676
              
              
              13,921,163
              
              
              10,639,247Operating
                  expenses:General
                  and administrative expenses
              
              
              3,712,099
              
              
              3,113,186
              
              
              7,470,948
              
              
              6,433,482Sales
                  and marketing expenses
              
              
              2,115,113
              
              
              1,720,034
              
              
              3,648,904
              
              
              3,330,527Depreciation
                  and amortization
              
              
              369,519
              
              
              366,650
              
              
              766,523
              
              
              726,892Total
                  operating expenses
              
              
              6,196,731
              
              
              5,199,870
              
              
              11,886,375
              
              
              10,490,901Operating
                  income
              
              
              1,214,002
              
              
              383,806
              
              
              2,034,788
              
              
              148,346Other
                  income (expense):Interest
                  expense and other financing costs
              
              
              —
              
              
              (4,447
              )
              
              —
              
              
              (8,610
              )Interest
                  income
              
              
              50,878
              
              
              91,650
              
              
              90,514
              
              
              176,762Other
                  income (expense)
              
              
              14,622
              
              
              21,088
              
              
              (173,923
              )
              
              107,453Total
                  other income (expense)
              
              
              65,500
              
              
              108,291
              
              
              (83,409
              )
              
              275,605Income
                  before income taxes and cumulativeeffect
                  of accounting change
              
              
              1,279,502
              
              
              492,097
              
              
              1,951,379
              
              
              423,951Income
                  tax benefit (provision)
              
              
              (465,362
              )
              
              (193,817
              )
              
              (702,208
              )
              
              (176,447
              )Income
                  before cumulative effect ofaccounting
                  change
              
              
              814,140
              
              
              298,280
              
              
              1,249,171
              
              
              247,504Cumulative
                  effect of accounting change (net ofincome
                  taxes of $53,764 in fiscal 2005)
              
              
              
              
              
              —
              
              
              —
              
              
              99,848Net
                  income
              
              $
              814,140
              
              $
              298,280
              
              $
              1,249,171
              
              $
              347,352Net
                  income per common share:Basic:Income
                  applicable to common stock before cumulative effect of accounting
                  change
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Cumulative
                  effect of accounting change
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  income applicable to common stock
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Diluted:Income
                  applicable to common stock before cumulative effect of accounting
                  change
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Cumulative
                  effect of accounting change
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  income applicable to common stock
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Weighted
                  average common shares outstanding:Basic
              
              
              44,716,622
              
              
              46,749,794
              
              
              44,801,024
              
              
              46,749,544Diluted
              
              
              45,403,761
              
              
              46,825,577
              
              
              45,273,319
              
              
              46,901,954See
                  accompanying notes to consolidated financial
                  statements.




4




**YP
                  CORP. AND SUBSIDIARIES****UNAUDITED
                  CONSOLIDATED STATEMENT OF CASH FLOWS****Six
                  Months Ended March 31,****2006**
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              1,249,171
              
              $
              347,352Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              766,523
              
              
              719,086Amortization
                  of deferred stock compensation
              
              
              917,016
              
              
              567,599Issuance
                  of common stock as compensation for services
              
              
              —
              
              
              119,500Cumulative
                  effect of accounting change
              
              
              —
              
              
              (99,848
              )Deferred
                  income taxes
              
              
              301,300
              
              
              (394,491
              )Provision
                  for uncollectible accounts
              
              
              794,241
              
              
              (16,220
              )Changes
                  in assets and liabilities:Restricted
                  cash
              
              
              500,000
              
              
              —Accounts
                  receivable
              
              
              (1,496,970
              )
              
              2,345,965Customer
                  acquisition costs
              
              
              (2,308,896
              )
              
              1,501,201Prepaid
                  and other current assets
              
              
              163,634
              
              
              (483,159
              )Deposits
                  and other assets
              
              
              (34,809
              )
              
              178,141Accounts
                  payable
              
              
              122,440
              
              
              (626,153
              )Accrued
                  liabilities
              
              
              (27,308
              )
              
              (129,065
              )Income
                  taxes payable
              
              
              (90,296
              )
              
              1,482,933Advances
                  to affiliates (accrued interest)
              
              
              —
              
              
              (157,972
              )Net
                  cash provided by operating activities
              
              
              856,046
              
              
              5,354,869CASH
                  FLOWS FROM INVESTING ACTIVITIES:Expenditures
                  for intangible assets
              
              
              (113,403
              )
              
              (215,767
              )Purchases
                  of equipment
              
              
              (14,746
              )
              
              (44,387
              )Net
                  cash used for investing activities
              
              
              (128,149
              )
              
              (260,154
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Series
                  E preferred stock dividends
              
              
              —
              
              
              (960
              )Repurchases
                  of common stock
              
              
              (134,418
              )
              
              —Proceeds
                  from conversion of preferred stock
              
              
              —
              
              
              225Common
                  stock dividends
              
              
              —
              
              
              (468,950
              )Net
                  cash used for financing activities
              
              
              (134,418
              )
              
              (469,685
              )INCREASE
                  IN CASH AND CASH EQUIVALENTS
              
              
              593,479
              
              
              4,625,030CASH
                  AND CASH EQUIVALENTS, beginning of period
              
              
              8,119,298
              
              
              3,576,529CASH
                  AND CASH EQUIVALENTS, end of period
              
              $
              8,712,777
              
              $
              8,201,559See
                  accompanying notes to consolidated financial
                  statements




5





**YP
      CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**






1.
      ORGANIZATION AND BASIS OF PRESENTATION





The
      accompanying consolidated financial statements include the accounts of YP Corp.,
      a Nevada Corporation, and its wholly owned subsidiaries (collectively the
“Company”). The Company is an Internet-based provider of yellow page directories
      and advertising space on or through www.YP.com, www.YP.net
      and www.Yellow-Page.net. No material or information contained on these websites
      is a part of the notes or the quarterly report to which notes are attached.
      All
      material intercompany accounts and transactions have been
      eliminated.




The
      accompanying unaudited financial statements as of March 31, 2006 and for the
      three and six months ended March 31, 2006 and 2005,  respectively,
      have been prepared in accordance with generally accepted accounting principles
      for interim financial information. Accordingly, they do not include all of
      the
      information and footnotes required by generally accepted accounting principles
      for audited financial statements. In the opinion of the Company’s management,
      the interim information includes all adjustments, consisting only of normal
      recurring adjustments, necessary for a fair presentation of the results for
      the
      interim periods. The footnote disclosures related to the interim financial
      information included herein are also unaudited. Such financial information
      should be read in conjunction with the consolidated financial statements and
      related notes thereto as of September 30, 2005 and for the year then ended
      included in the Company’s annual report on Form 10-K for the year ended
      September 30, 2005.




All
      amounts, except share and per share amounts, are rounded to the nearest thousand
      dollars.




The
      preparation of financial statements in accordance with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amount of assets and liabilities at the date of the
      financial statements and the reported amount of revenues and expenses during
      the
      reporting period. Significant estimates and assumptions have been used by
      management in conjunction with establishing
      allowances for customer refunds, non-paying customers, dilution and fees,
      analyzing the recoverability of the carrying amount of intangible assets,
      estimating amortization periods for direct response advertising costs,
      estimating forfeitures of restricted stock and evaluating the recoverability
      of
      deferred tax assets. Actual results could differ from these estimates. Certain
      prior period amounts have been revised to conform to the current period
      presentation. These changes had no impact on previously reported net income
      or
      stockholders’ equity.




2.
      ACCOUNTING CHANGES





Effective
      October 1, 2004, the Company changed its method of accounting for forfeitures
      of
      restricted stock granted to employees, executives and consultants. Prior to
      this
      date, the Company recognized forfeitures as they occurred. Upon occurrence,
      the
      Company reversed the previously recognized expense associated with such grant.
      Effective October 1, 2004, the Company changed to an expense recognition method
      that is based on an estimate of the number of shares for which the service
      is
      expected to be rendered. The Company believes that this is a preferable method
      as it provides less volatility in expense recognition.





Additionally,
      while both methods of accounting for forfeitures are acceptable under current
      guidance, the implementation of FAS 123R
      (effective during the Company’s first
      quarter of fiscal 2006) will no longer permit companies to recognize forfeitures
      as they occur .
      See
      Note 8. As this new guidance will require the Company to change its method
      of
      accounting for restricted stock forfeitures, the Company has decided to adopt
      such change as of the beginning of its fiscal year. The Company did not adopt
      the provisions of FAS 123R prior to its effective date. Rather, the Company
      changed its accounting for forfeitures under the allowed options prescribed
      in
      FAS 123.





The
      impact of this change for periods prior to October 1, 2004 was an increase
      to
      income of $100,000 (less than $0.01 per share), net of taxes of $54,000, and
      has
      been reflected as a cumulative effect of a change in accounting principle in
      the
      Company’s consolidated statement of operations for the three months ended
      December 31, 2004. Because stock grants are now recorded net of estimated
      forfeitures, the cumulative effect of this change also reduced Additional Paid
      in Capital and Deferred Compensation by $1,013,000 and $1,166,000, respectively,
      at October 1, 2004.





6





**YP
      CORP. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**






3.
      BALANCE SHEET INFORMATION





Balance
      sheet information is as follows:





**March
                  31, 2006**Current
              
              Long-Term
              
              TotalGross
                  accounts receivable
              
              $
              8,267,000
              
              $
              663,000
              
              $
              8,930,000Allowance
                  for doubtful accounts
              
              
              (1,933,000
              )
              
              (83,000
              )
              
              (2,016,000
              )Net
              
              $
              6,334,000
              
              $
              580,000
              
              $
              6,914,000**September
                  30, 2005**Current
              
              
              Long-Term
              
              
              TotalGross
                  accounts receivable
              
              $
              6,451,000
              
              $
              982,000
              
              $
              7,433,000Allowance
                  for doubtful accounts
              
              
              (1,112,000
              )
              
              (109,000
              )
              
              (1,221,000
              )Net
              
              $
              5,339,000
              
              $
              873,000
              
              $
              6,212,000Components
                  of allowance for doubtful accounts are as follows:**March
                  31, 2006**
              
              
              
              
              
              **September
                  30, 2005**Allowance
                  for dilution and fees on amounts due from billing
                  aggregators
              
              $
              1,398,000
              
              
              
              
              $
              923,000Allowance
                  for customer refunds
              
              
              618,000
              
              
              
              
              
              298,000Other
                  allowances
              
              
              —
              
              
              
              
              
              —$
              2,016,000
              
              
              
              
              $
              1,221,000Customer
                  acquisition costs:
              
              
              **March
                  31, 2006**
              
              
              
              
              
              **September
                  30, 2005**Customer
                  acquisition costs
              
              
              7,600,000
              
              
              
              
              
              3,622,000Less:
                  Accumulated amortization
              
              
              (2,953,000
              )
              
              
              
              
              (1,284,000
              )Customer
                  acquisition costs, net
              
              
              4,647,000
              
              
              
              
              $
              2,338,000Property
                  and equipment:
              
              
              **March
                  31, 2006**
              
              
              
              
              
              **September
                  30, 2005**Leasehold
                  improvements
              
              $
              447,000
              
              
              
              
              $
              439,000Furnishings
                  and fixtures
              
              
              295,000
              
              
              
              
              
              295,000Office
                  and computer equipment
              
              
              1,046,000
              
              
              
              
              
              1,040,000Total
              
              
              1,788,000
              
              
              
              
              
              1,774,000Less:
                  Accumulated depreciation
              
              
              (1,526,000
              )
              
              
              
              
              (1,377,000
              )Property
                  and equipment, net
              
              $
              262,000
              
              
              
              
              $
              397,000Intangible
                  assets:
              
              
              **March
                  31, 2006**
              
              
              
              
              
              **September
                  30, 2005**Domain
                  name
              
              $
              5,510,000
              
              
              
              
              $
              5,510,000Non-compete
                  agreements
              
              
              3,465,000
              
              
              
              
              
              3,465,000Website
                  development
              
              
              894,000
              
              
              
              
              
              781,000Software
                  licenses
              
              
              53,000
              
              
              
              
              
              53,000Total
              
              
              9,922,000
              
              
              
              
              
              9,809,000Less:
                  Accumulated amortization
              
              
              (4,317,000
              )
              
              
              
              
              (3,700,000
              )Intangible
                  assets, net
              
              $
              5,605,000
              
              
              
              
              $
              6,109,000Accrued
                  liabilities:
              
              
              **March
                  31, 2006**
              
              
              
              
              
              **September
                  30, 2005**Litigation
                  accrual
              
              $
              —
              
              
              
              
              $
              328,000.00Commissions
                  payable
              
              
              127,000
              
              
              
              
              
              —Deferred
                  revenue
              
              
              282,000
              
              
              
              
              
              291,000Accrued
                  expenses - other
              
              
              367,000
              
              
              
              
              
              184,000Accrued
                  liabilities
              
              $
              776,000
              
              
              
              
              $
              803,000





7


**YP
        CORP. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**




4.
      COMMITMENTS AND CONTINGENCIES





At
      March
      31, 2006, future minimum annual lease payments under operating lease agreements
      for fiscal years ended September 30 are as follows:


Fiscal
                  2006
              
              $
              184,000Fiscal
                  2007
              
              
              28,000Fiscal
                  2008
              
              
              8,000Thereafter
              
              
              —Total
              
              $
              220,000




Termination
      Agreements with Related Parties




Prior
      to
      fiscal 2004, the Company entered into Executive Consulting Agreements with
      four
      entities, each of which was controlled by one of the Company’s four executive
      officers. These agreements called for fees to be paid for the services provided
      by these individuals as officers of the Company, as well as their respective
      staffs. During fiscal 2004, the Company terminated the Executive Consulting
      Agreements with the entities controlled by its former CEO, former Executive
      Vice
      President of Marketing, and former CFO. In fiscal 2005, the
      Company terminated the remaining Executive Consulting Agreement with the entity
      controlled by a former Executive Vice President. These
      termination agreements provided for cash payments totaling $2,145,000 in
      exchange for consulting services and non-compete agreements. Approximately
      $1,643,000 of
      the
      settlement payments described above has been allocated to non-compete
      agreements. The values attributed to the non-compete agreements are being
      amortized on a straight line basis over the six-year life of the non-compete
      agreements .
      The
      remaining $502,000 was allocated to the consulting service portion of the
      termination agreements, which were originally expected to be rendered over
      a
      two-year period, In the fourth quarter of fiscal 2005, however, the Company
      concluded all matters with respect to these parties, made all remaining payments
      owed under the termination agreements, and expensed the remaining unamortized
      amount of $212,000 attributed to the consulting services. All
      amounts related to these agreements were paid by September 30,
      2005.




During
      the fourth quarter of fiscal 2005, the Company entered into a separation
      agreement with its Chief Operating Officer. Under the agreement, the Company
      made a cash payment of $80,000. No further amounts are owed under this
      agreement.





On
      November 3, 2005, the Company entered into a Separation Agreement with its
      Chief
      Executive Officer. Under the terms of the agreement, the Company made a cash
      payment of $337,500 in the second quarter of fiscal 2006. The agreement also
      provides for the continued vesting of 700,000 shares of the Chief Executive
      Officers’ restricted stock awards that were granted in fiscal 2004 and 2005.





At
      a
      meeting of the Board of Directors of the Company, held on January 8, 2006,
      John
      T. Kurtzweil, R.A. Johnson-Clague, Peter J. Bergmann and Paul Gottlieb each
      resigned from the Board of Directors of the Company and the respective
      committees of the Board of Directors on which they were serving. Subsequent
      to
      the foregoing resignations, Joseph F. Cunningham, Jr. and Elisabeth Demarse
      were
      elected to the Board of Directors of the Company. In addition, Daniel L. Coury,
      Sr., a current member of the Board of Directors, was elected Chairman of the
      Board and Mr. Cunningham was appointed to serve as the Chairman of the Audit
      Committee of the Board of Directors.





On
      January 19, 2006, YP Corp. (the Company) entered into a Separation Agreement
      & General Release with its Chief Financial Officer. Under the terms of the
      agreement, the Company made a cash payment of approximately $95,000 in the
      second quarter of fiscal 2006. The agreement also provides for the continued
      vesting of the Chief Financial Officers’ restricted stock awards (totaling
      150,000 shares) that were granted in fiscal 2004 and 2005.








8


**YP
        CORP. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**




Litigation




The
      Company is party to certain legal proceedings incidental to the conduct of
      its
      business. Management believes that the outcome of pending legal proceedings
      will
      not, either individually or in the aggregate, have a material adverse effect
      on
      its business, financial position, results of operations, cash flows or
      liquidity.




During
      the second quarter of fiscal 2005, the Company settled a legal dispute with
      a
      former service provider, resulting in a cash payment of $490,000. As the full
      amount of the settlement was previously accrued, there was no expense incurred
      in the current quarter associated with this settlement. In connection with
      this
      payment, the Company was no longer required to maintain its bond that was
      previously reflected as restricted cash in the accompanying balance sheet
      included elsewhere in this report. Accordingly, the bond has been released
      and
      this amount has been reclassified from restricted cash to cash in our balance
      sheet as of March 31, 2006.,






Commitments
      to Investment Banking Firm







On
      October 8, 2004, pursuant to the terms of a Letter Agreement with Jefferies
      & Company, Inc., the Company issued a total of 925,000 shares of common
      stock to Jefferies. These shares were issued in lieu of cash fees for Jefferies’
investment banking services. These shares were not issued under the Company’s
      2003 Stock Plan. Of the total shares issued to Jefferies, 100,000 shares were
      issued without restrictions on transfer other than those imposed by Rule 144
      under the Securities Act of 1933, as amended. The remaining 825,000 shares
      were
      granted pursuant to a Restricted Stock Agreement. Accordingly, these shares
      remain subject to restrictions on transfer and sale, which lapse in accordance
      with a vesting schedule depending on the achievement of certain performance
      goals, none of which were achieved as of March 31, 2006.





In
      accordance with the provisions of EITF Topic D-90, *Grantor
      Balance Sheet Presentation of Unvested, Forfeitable Equity Instruments Granted
      to a Nonemployee,* because
      the Company has a right to receive future services in exchange for unvested,
      forfeitable equity instruments, the 825,000 shares are treated as unissued
      for
      accounting purposes until such time that the performance goals are achieved.





The
      Company has terminated this agreement in January 2006. However, under the terms
      of the agreement, the vesting provisions are in effect for any performance
      goals
      that are achieved within six months of the termination date.




Other
      Contractual Commitments




During
      the second quarter of fiscal 2006, we entered into a contractual arrangement
      with an attorney to settle previous claims and to engage the future services
      of
      this attorney. Under the terms of the arrangement, we made cash payments during
      the quarter totaling $55,000 and granted 100,000 shares of restricted stock.
      We
      are obligated to make future payments over the next two years totaling $339,750
      in exchange for future services. Such amounts have not been accrued in the
      accompanying financial statements as such payments are for future
      services.




5.
      NET
      INCOME PER
      SHARE




Net
      income per
      share is calculated using the weighted average number of shares of common stock
      outstanding during the year. Preferred stock dividends are subtracted from
      net
      income  to
      determine the amount available to common stockholders.




The
      following table presents
      the computation of basic and diluted income per share:




9


**YP
        CORP. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**




**Three
                  Months Ended March 31,**
              
              **Six
                  Months Ended March 31,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Income
                  before cumulative effect of accounting change
              
              $
              814,000
              
              $
              298,000
              
              $
              1,249,000
              
              $
              248,000Less:
                  preferred stock dividends
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,000
              )Income
                  applicable to common stock before cumulative effect of accounting
                  change
              
              
              814,000
              
              
              298,000
              
              
              1,249,000
              
              
              247,000Cumulative
                  effect of accounting change
              
              
              —
              
              
              —
              
              
              —
              
              
              100,000Net
                  income applicable to common stock
              
              $
              814,000
              
              $
              298,000
              
              $
              1,249,000
              
              $
              347,000Basic
                  weighted average common shares outstanding
              
              
              44,716,622
              
              
              46,749,794
              
              
              44,801,024
              
              
              46,749,544Add
                  incremental shares for:Unvested
                  restricted stock
              
              
              636,003
              
              
              3,795
              
              
              429,961
              
              
              73,021Series
                  E convertible preferred stock
              
              
              51,136
              
              
              71,988
              
              
              42,334
              
              
              79,389Diluted
                  weighted average common shares outstanding
              
              
              45,403,761
              
              
              46,825,577
              
              
              45,273,319
              
              
              46,901,954Net
                  income per share:Basic:Income
                  applicable to common stock before cumulative effect of accounting
                  change
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Cumulative
                  effect of accounting change
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  income applicable to common stock
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Diluted:Income
                  applicable to common stock before cumulative effect of accounting
                  change
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01Cumulative
                  effect of accounting change
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  income applicable to common stock
              
              $
              0.02
              
              $
              0.01
              
              $
              0.03
              
              $
              0.01




The
      following potentially dilutive securities were excluded from the calculation
      of
      net income per share because the effects are antidilutive:




**Three
                  Months Ended March 31,**
              
              **Six
                  Months Ended March 31,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Warrants
                  to purchase shares of common stock
              
              
              500,000
              
              
              500,000
              
              
              500,000
              
              
              500,000Shares
                  of non-vested restricted stock
              
              
              839,152
              
              
              2,920,831
              
              
              1,838,258
              
              
              1,978,5911,339,152
              
              
              3,420,831
              
              
              2,338,258
              
              
              2,478,591





6.
      RELATED PARTY TRANSACTIONS




The
      Company’s related party transactions occurring during fiscal 2005 and the six
      months of fiscal 2006 consisted exclusively of payments under termination
      agreements with former executives as described in Note 4.




7.
      CONCENTRATION OF CREDIT RISK





The
      Company maintains cash balances at major nationwide institutions in Arizona
      and
      Nevada. Accounts are insured by the Federal Deposit Insurance Corporation up
      to
      $100,000. At March 31, 2006, the Company had bank balances exceeding those
      insured limits by
      approximately $6,348,000.




10


**YP
        CORP. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**




Financial
      instruments that potentially subject the Company to concentrations of credit
      risk are primarily trade accounts receivable. The trade accounts receivable
      are
      due primarily from business customers over widespread geographical locations
      within the Local Exchange Carrier (“LEC”) billing areas across the United
      States. The Company historically has experienced significant dilution and
      customer credits due to billing difficulties and uncollectible trade accounts
      receivable. The Company estimates and provides an allowance for uncollectible
      accounts receivable. The handling and processing of cash receipts pertaining
      to
      trade accounts receivable is maintained primarily by three third-party billing
      companies. The net receivable due from such billing services providers
      represented 42%, 26% and 13%, respectively, of the Company’s total net accounts
      receivable at March 31, 2006. Additionally, the Company’s receivable portfolio
      includes amounts due from two service providers that handle and process our
      ACH
      billings. One such service provider represented approximately 16% of the
      Company’s total net accounts receivable at March 31, 2006.




8.
      RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123R, “Share-Based Payment” (“SFAS 123R”). Under this new standard, companies
      will no longer be able to account for share-based compensation transactions
      using the intrinsic method in accordance with APB 25. Instead, companies will
      be
      required to account for such transactions using a fair-value method and to
      recognize the expense over the service period. This new standard also changes
      the way in which companies account for forfeitures of share-based compensation
      instruments. SFAS 123R will be effective for fiscal years beginning after June
      15, 2005 and allows for several alternative transition methods. In light of
      this
      upcoming change, the Company decided
      to change its method of accounting for forfeitures of restricted
      stock , under
      current GAAP rules effective October 1, 2004. See Note
      2. The Company has adopted the provisions of SFAS 123R in the first
      quarter of
      fiscal 2006
      on a
      prospective basis. This adoption did not have a material effect on its financial
      condition or results of operations.








*   *   *


11


ITEM
      2.  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





For
      a
      description of our significant accounting policies and an understanding of
      the
      significant factors that influenced our performance during the three and six
      months ended March 31, 2006, this “Item 2. Management’s Discussion and Analysis
      of Financial Condition and Results of Operations” (hereafter referred to as
“MD&A”) should be read in conjunction with the Consolidated Financial
      Statements, including the related notes, appearing in Item 1 of this Quarterly
      Report ,
      as well
      as our Annual Report on Form 10-K for the year ended September 30,
      2005.




**Forward-Looking
      Statements**




This
      portion of this Annual Report on Form 10-Q, includes statements that constitute
      “forward-looking statements.” These forward-looking statements are often
      characterized by the terms “may,” “believes,” “projects,” “expects,” or
“anticipates,” and do not reflect historical facts. Specific forward-looking
      statements contained in this portion of the Annual Report include, but are
      not
      limited to our (i) our expectation to continue to expand our telemarketing
      campaigns in the future; (ii) our expectation that any future changes in billing
      practices with our remaining LECs will not have a material adverse impact on
      our
      net revenues; (iii) our belief that cost of services will continue to be
      directly correlated to our usage of LEC billing channel; (iv) our belief that
      sales and marketing expenses will increase if we continue to our strategy of
      significant mailing and telemarketing activities; and (v) the belief that our
      existing cash on hand will provide us with sufficient liquidity to meet our
      operating needs for the next twelve months.




Forward-looking
      statements involve risks, uncertainties and other factors, which may cause
      our
      actual results, performance or achievements to be materially different from
      those expressed or implied by such forward-looking statements. Factors and
      risks
      that could affect our results and achievements and cause them to materially
      differ from those contained in the forward-looking statements include those
      identified in the section titled “Risk Factors”, as well as other factors that
      we are currently unable to identify or quantify, but that may exist in the
      future.




In
      addition, the foregoing factors may affect generally our business, results
      of
      operations, and financial position. Forward-looking statements speak only as
      of
      the date the statement was made. We do not undertake and specifically decline
      any obligation to update any forward-looking statements.




**Executive
      Overview**




This
      section presents a discussion of recent developments and summary information
      regarding our industry and operating trends only. For further information
      regarding the events summarized herein, you should read this MD&A in its
      entirety.




*Business
      and Company Overview*




We
      use a
      business model similar to print Yellow Pages publishers. We publish basic
      directory listings on the Internet free of charge. Our basic listings contain
      the business name, address, and telephone number for almost 17 million U.S.
      businesses. We strive to maintain a listing for almost every business in America
      in this format.




We
      generate revenues from advertisers that desire increased exposure for their
      businesses. As described below, advertisers pay us monthly fees in the same
      manner that advertisers pay additional fees to traditional print Yellow Pages
      providers for enhanced advertisement font, location or display. The users of
      our
      website are prospective customers for our advertisers, as well as the other
      businesses for which we publish basic listings.




Our
      primary product is our Internet Advertising PackageTM, or IAP. Under this
      package, advertisers pay for additional exposure by purchasing a Mini-WebPageTM.
      In order to provide search traffic to our advertiser’s Mini-WebPage, we elevate
      the advertiser to a preferred listing status, at no additional charge. We also
      provide our IAP advertisers with enhanced presentation and additional unique
      products, such as larger font, bolded business name, map directions, ease of
      communication between our advertisers and users of our website, a link to the
      advertiser’s webpage, as well as other benefits.




12




*Customer
      Counts*




The
      success of our business model is based on our ability to retain, add and
      efficiently bill our subscribers.





There
      have been different methodologies employed in the reporting of customer count.
      To more properly reflect customer count we changed our methodology in the first
      quarter of fiscal 2006 to count billed listings. A billed listing is defined
      by
      management as any listing that has successfully been submitted through one
      of
      our billing channels or in the case of listings billed by direct invoice only
      those listings that have paid for their listing at the end of the reporting
      period.




Management
      believes that this change when coupled with the knowledge of our average price
      and percentage of returns and allowances will provide greater insight into
      our
      business model for the public.





The
      following represent our counts for billed listings over the last six quarters.
      Where applicable, we have included our previously reported customer count data
      for comparative purposes:




**Quarter
                  Ended**
              **Previously**
                **Reported**
                **Quarter-End
                  Customer Count**
              **Billed
                  Listings**
                **at**
                **Quarter-End**
              **Average
                  Billed Listings During Quarter**
              **Gross
                  Revenue**
              **Returns
                  and Allowances (%**
                **of
                  Gross**
                **Revenue)**
              **Net
                  Revenues**
              **Average**
                **Monthly
                  Gross Revenue per**
                **Average
                  Billed Listing**March
                  31st, 2006
              N/A
              131,394
              116,622
              9,823,664
              8.39%
              8,999,196
              $28.08December
                  31st,
                  2005
              N/A
              95,876
              90,809
              8,328,583
              8.43%
              7,626,776
              $30.57September
                  30th,
                  2005
              92,000
              84,879
              81,342
              6,856,082
              11.71%
              6,052,936
              $28.10June
                  30th,
                  2005
              108,000
              92,600
              83,096
              7,419,827
              12.17%
              6,517,158
              $29.76March
                  31st,
                  2005
              105,000
              76,774
              76,633
              7,527,086
              14.38%
              6,444,609
              $32.74December
                  31st,
                  2004
              95,000
              64,616
              82,579
              7,502,125
              17.49%
              6,190,155
              $30.28




Our
      average monthly gross revenue per average billed listing declined in the current
      quarter, as a significant amount of our increase in billed listings was via
      a
      new fulfillment contract with a new LEC billing vendor. Under the terms of
      this
      new contract, our gross revenues are, on average, approximately $3 lower than
      those of our other LEC billing channels.




*Recent
      Operating Results*




We
      bill
      our customers through four primary channels: LEC billing, ACH billing, recurring
      credit card and direct invoice. During the end of 2004 and throughout 2005,
      we
      had been reducing our use of LEC billing channels as the LEC’s policies
      regarding the use of our check mailer as our primary letter of authorization
      prevented us from billing many existing customers through this particular
      billing channel. Additionally, the major LECs (i.e. Regional Bell Operating
      Companies or RBOCs) prevented us from billing any new customers acquired via
      check mailers. As such, we transitioned a significant number of our customers
      to
      alternate billing means, the most significant of which was ACH billing. ACH
      billing is less expensive than LEC billing; however, many of our customers
      view
      this as a less desirable billing method, leading to increased
      cancellations.




In
      fiscal
      2006, we began acquiring new customers via telemarketing campaigns, which are
      allowed to be billed via LECs. These telemarketing campaigns have reopened
      certain LEC billing channels as a viable billing channel. Additionally, our
      monthly billing rates are higher for customers acquired via telemarketing
      campaigns. For these reasons, we expect to continue to expand our telemarketing
      campaigns in the future. Check mailings remain a component of our marketing
      efforts and a significant increase in the volume of our mailings have
      contributed to our recent revenue growth. Although LEC channels includes fees
      and other costs that exceed those of other channels, the growth in LEC billings
      has contributed to a significant increase in our gross profit. We are in the
      process of petitioning other LECs to reopen these billing channels as
      well.




The
      following represents a summary of recent financial results:




13




**Q2
                  2006**
              
              **Q1
                  2006**
              
              **Q4
                  2005**
              
              **Q3
                  2005**
              
              **Q2
                  2005**Net
                  Revenues
              
              $
              8,999,196
              
              $
              7,626,776
              
              $
              6,052,936
              
              $
              6,517,158
              
              $
              6,444,609Gross
                  margin
              
              
              7,410,733
              
              
              6,510,430
              
              
              4,993,639
              
              
              5,591,353
              
              
              5,583,676Operating
                  expenses
              
              
              6,196,731
              
              
              5,689,644
              
              
              6,295,000
              
              
              5,269,473
              
              
              5,199,870Operating
                  income (loss)
              
              
              1,214,002
              
              
              820,786
              
              
              (1,301,361
              )
              
              321,880
              
              
              383,806Net
                  income (loss)(1)
              
              
              814,140
              
              
              435,031
              
              
              (815,727
              )
              
              (149,784
              )
              
              298,280




_________________




(1)
      The
      following non-recurring items are relevant to our recent quarterly operating
      results, each of which are further described herein:




·
            Second
                quarter of fiscal 2006 - includes an increase of general and
                administrative expenses of approximately $80,000 related to separation
                costs with our former Chief Financial Officer and $39,000 related
                to
                separation costs with other
                employees.




·
            First
                quarter of fiscal 2006 - includes an increase of general and
                administrative expenses totaling approximately $338,000 related to
                separation costs with our former Chief Executive Officer and an increase
                in other expenses associated with an additional expense of $162,000
                relating to an outstanding legal matter
                .




·
            Fourth
                quarter of fiscal 2005 - includes an increase of general and
                administrative expenses totaling approximately $212,000 relating
                to the
                termination of consulting agreements with certain of our former officers
                and an increase in sales and marketing expense of $921,000 associated
                with
                a change in the amortization period of our customer acquisition costs,
                offset by a reduction of general and administrative expenses of
                approximately $295,000 associated with the true-up of estimates of
                forfeitures of restricted stock grants.




·
            Third
                quarter of fiscal 2005 - includes losses of $328,000 associated with
                a
                litigation settlement and approximately $282,000 associated with
                our
                agreement to settle outstanding amounts due from two of our largest
                stockholders (with the loss being equal to the difference between
                the fair
                value of debt forgiven and the value of the consideration
                received).




·
            First
                quarter of fiscal 2005 - includes a gain of approximately $100,000
                (net of
                tax effects) associated with the cumulative effect of an accounting
                change
                with respect to our restricted stock grants.




The
      following represents the breakdown of net billings by channel during recent
      fiscal quarters:




**Q2
                  2006**
              
              **Q1
                  2006**
              
              **Q4
                  2005**
              
              **Q3
                  2005**
              
              **Q2
                  2005**LEC
                  billing
              
              
              49
              %
              
              35
              %
              
              32
              %
              
              23
              %
              
              26
              %ACH
                  billing
              
              
              43
              %
              
              54
              %
              
              54
              %
              
              64
              %
              
              56
              %Direct
                  billing and other
              
              
              8
              %
              
              11
              %
              
              14
              %
              
              13
              %
              
              18
              %




*Other
      Recent Developments*




During
      the second quarter of fiscal 2006, we began engaging the services of a
      consulting firm that has expertise with LEC billing channels, with the intent
      of
      improving operational efficiencies and cash collection cycle times and reducing
      the costs associated with fees, chargebacks and dilution. Such services have
      been expensed as incurred.




14


During
      the second quarter of fiscal 2006, we settled our outstanding litigation with
      a
      former vendor, resulting in a cash payment of $490,000. As the full amount
      of
      the settlement was previously accrued, there was no expense incurred in the
      current quarter associated with this settlement. In connection with this
      payment, we are no longer required to maintain our bond that was previously
      reflected as restricted cash in the accompanying balance sheet included
      elsewhere in this report. Accordingly, the bond has been released and this
      amount has been reclassified from restricted cash to cash in our balance sheet
      as of March 31, 2006.




During
      the second quarter of fiscal 2006, we entered into a contractual arrangement
      with an attorney to settle previous claims and to engage the future services
      of
      this attorney. Under the terms of the arrangement, we made cash payments during
      the quarter totaling $55,000 and granted 100,000 shares of restricted stock.
      We
      are obligated to make future payments over the next two years totaling $339,750
      in exchange for future services. Such amounts have not been accrued in the
      accompanying financial statements as such payments are for future services.
      This
      contract is terminated immediately upon the sale of the Company.




We
      bill a
      significant number of our IAP advertisers through our ACH billing channel.
      ACH
      transactions are closely regulated by NACHA - The Electronic Payments
      Association, which develops operating rules and business practices for the
      Automated Clearing House (ACH) Network and for electronic payments in the areas
      of Internet commerce and other electronic payment means. In February 2006,
      NACHA
      issued an Operating Bulletin concerning the use of the back of a check to obtain
      authorization for an ACH transaction. In this Operating Bulletin, NACHA
      indicated that, while this practice of authorizing ACH debits by relying on
      the
      endorsement of a check is not expressly prohibited by the NACHA operating rules,
      it does contain inherent risks that the underlying transaction was not properly
      authorized or understood. Therefore, service providers in the electronic
      payments network are encouraged to adopt appropriate policies to mitigate such
      risks. We have yet to see any changes in the business practices of our service
      providers as a result of this announcement. However, to the extent that such
      business practices change, it could have an adverse impact on our ability to
      bill a significant number of our clients and result in lost
      revenues




On
      January 19, 2006, we entered into a Separation Agreement with Chris Broquist,
      our Chief Financial Officer, pursuant to which Mr. Broquist and the Company
      have
      agreed to terminate their employment relationship effective February 28, 2006.
      Pursuant to the terms of the Separation Agreement & General Release, among
      other items, Mr. Broquist will receive a severance package consisting of six
      months of compensation and health benefits and the continued vesting of his
      restricted stock and Mr. Broquist has agreed not to compete with the Company
      or
      solicit any of the employees of the Company for a period of two
      years.




At
      a
      meeting of our Board of Directors, held on January 8, 2006, John T. Kurtzweil,
      R.A. Johnson-Clague, Peter J. Bergmann and Paul Gottlieb each resigned from
      our
      Board of Directors and their respective committees on which they were serving.
      Subsequent to the foregoing resignations, Joseph F. Cunningham, Jr. and
      Elisabeth Demarse were appointed to the Board of Directors of the Company.
      In
      addition, Daniel L. Coury, Sr., a current member of our Board of Directors,
      was
      elected Chairman of the Board and Mr. Cunningham was appointed to serve as
      the
      Chairman of the Audit Committee of our Board of Directors.




On
      November 3, 2005, we entered into a Separation Agreement with Peter J. Bergmann
      in connection with his resignation as Chairman and President of our company.
      Under the terms of this agreement, Mr. Bergmann resigned as Chief Executive
      Officer during the second quarter of fiscal 2006. Mr. Bergmann will receive
      a
      cash payment of $337,500 and will continue to vest in a portion of his
      stock-based compensation earned during his tenure, in accordance with the terms
      of this agreement.





*Attorneys
      General Complaints Concerning Direct Marketing Mail Solicitation*




We
      have
      received a number of notices from the Attorney General offices or other
      regulatory agencies of the States of Montana, Nevada, Nebraska, and Oregon
      concerning consumer complaints about the use of our direct mail solicitation.
      In
      Nebraska, the notice required us to cease and desist the use of our check mail
      program in that State immediately. The notices generally claim that the
      promotional check mailer practice engaged in by the Company violates state
      consumer protection statutes and deceptive trade practices acts.




15


We
      believe that the language in the various state statutes referenced is very
      vague
      as to what constitutes a deceptive trade practice or misleading practice, such
      that they are subject to wide-ranging constructions. Moreover, we do not believe
      that we are in violation of the referenced statutes. To this end, we are
      maintaining an ongoing dialogue with the various states in an effort to dispel
      such concerns, explain the non-deceptive nature of our business solicitations,
      and, if practicable, tailor our marketing practices so as to comply with the
      various states’ interpretation of what conduct would not violate the applicable
      consumer protection statutes.




Our
      current cooperative posture, however, does not obviate the possibility of an
      agency instituting formal action against us in a wider attempt to curb
      solicitations for business utilizing check promotions. We hope to continue
      our
      good faith discussions with these various agencies in an effort to formulate
      a
      uniform set of standards to be used to determine if any specific check
      solicitation violates consumer protection laws. However, to the extent future
      standards are deemed too onerous, we may consider pursuing a legal course of
      action challenging those standards.




**Results
      of Operations**




*Net
      Revenues*




**Net
                  Revenues****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              8,999,196
              
              $
              6,444,609
              
              $
              2,554,587
              
              
              40
              %Six
                  Months Ended March 31,
              
              $
              16,625,972
              
              $
              12,634,764
              
              $
              3,991,208
              
              
              32
              %




The
      increase in revenues for the three and six months ended March 31, 2006, as
      compared to March 31, 2005, was largely due to an increased customer count
      attributable to expanded marketing efforts, the reintroduction of the LEC
      billing channel for new customers and higher average monthly revenue
      attributable to the use of telemarketing campaigns.. As discussed in “Executive
      Overview - Recent Operating Results” above, we increased our number of monthly
      check mailers and introduced telemarketing campaigns. Our use of telemarketing
      campaigns has reopened LEC billing as an effective means of billing new
      customers. Additionally, our monthly billing rates are higher for customers
      acquired through telemarketing efforts, which has also contributed to our
      revenue growth.




Although
      we have concentrations of risk with our billing aggregators (as described in
      the
      Notes to Unaudited Consolidated Financial Statements included elsewhere in
      this
      Quarterly Report) these aggregators bill via many underlying LECs, thereby
      reducing our risk associated with credit concentrations. However, there are
      a
      few LECs that service a significant number of our customers. To the extent
      that
      future changes in their billing practices cause a disruption in our ability
      to
      bill through these channels, our revenues could be adversely affected.




The
      majority of our IAP customers pay between $27.50 and $39.95 per month.




*Cost
      of Services*


**Cost
                  of Services****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              1,588,463
              
              $
              860,933
              
              $
              727,530
              
              
              85
              %Six
                  Months Ended March 31,
              
              $
              2,704,809
              
              $
              1,995,517
              
              $
              709,292
              
              
              36
              %




The
      increase in cost of services for the three months ended March 31, 2006, as
      compared to March 31, 2005, is largely due to an increase in LEC billings,
      which
      have higher costs than other billing channels Billings through LEC channels,
      comprised 49% and 34% of total billings in the second and first quarter of
      fiscal 2006, respectively, as compared to 25% and 49% of total billings in
      the
      second and first quarter of fiscal 2005. The increase in cost of sales was
      less
      dramatic when comparing the six months ended March 31, 2006 as compared to
      March
      31, 2005 due to the fact that LEC billing was a smaller component of total
      billings in the first quarter of fiscal 2006 as compared to the first quarter
      of
      fiscal 2005.




16


*Gross
      Profit*




**Gross
                  Profit****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              7,410,733
              
              $
              5,583,676
              
              $
              1,827,057
              
              
              33
              %Six
                  Months Ended March 31,
              
              $
              13,921,163
              
              $
              10,639,247
              
              $
              3,281,916
              
              
              31
              %




The
      increase in our gross profits was due primarily to increased revenues as
      discussed above. Gross margins decreased to 82% of net revenues in the second
      quarter of fiscal 2006 compared to 87% of net revenues in the second quarter
      of
      fiscal 2005 due to increased dilution in fiscal 2006 resulting from the increase
      in LEC billings. Gross margins remained constant at 84% for the first six months
      of fiscal 2006 and fiscal 2005.




*General
      and Administrative Expenses*




**General
                  and Administrative Expenses****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              3,712,099
              
              $
              3,113,186
              
              $
              598,913
              
              
              19
              %Six
                  Months Ended March 31,
              
              $
              7,470,948
              
              $
              6,433,482
              
              $
              1,037,466
              
              
              16
              %






The
      increase in general and administrative expenses for the three months ended
      March
      31, 2006, as compared to March 31, 2005, is largely due to the
      following:




·
            An
                increase in compensation expense of $545,000 stemming from: a) increased
                wages, bonuses and benefits expense of approximately $322,000, b)
                approximately $119,000 of severance costs associated with the termination
                of our CFO and other personnel during the second quarter of fiscal
                2006,
                and c) increased non-cash compensation costs of approximately $104,000
                associated with restricted stock awards;




·
            An
                increase in consulting expenditures of approximately $213,000 with
                the
                intent of improving operational efficiencies and cash collection
                cycle
                times and reducing the costs associated with fees, chargebacks and
                dilution; and




·
            A
                decrease in mailing and other customer costs of approximately $218,000
                associated with the reduction of paper invoices and other methods
                of
                correspondence with customers for which payment is unlikely to be
                received.




The
      increase in general administrative expenses for the six months ended March
      31,
      2006, as compared to March 31, 2006, is due to the reasons mentioned above
      as
      well as an increase of approximately $338,000 of one-time settlement costs
      associated with the separation agreement with our former Chief Executive Officer
      that was incurred during the first quarter of fiscal 2006.




Our
      general and administrative expenses consist largely of fixed expenses such
      as
      compensation, rent, utilities, etc .
      Therefore, we do not consider short-term trends of general and administrative
      expenses as a percent of revenues to be meaningful indicators for evaluating
      operational performance.




The
      following table sets forth our recent operating performance for general and
      administrative expenses:




**Q2
                  2006**
              
              **Q1
                  2006**
              
              **Q4
                  2005**
              
              **Q3
                  2005**
              
              **Q2
                  2005**Compensation
                  for employees, consultants,
                officers
                  and directors
              
              $
              2,414,777
              
              $
              2,423,537
              
              $
              2,215,276
              
              $
              2,115,674
              
              $
              1,869,135Other
                  G&A costs
              
              
              900,439
              
              
              817,826
              
              
              697,436
              
              
              600,442
              
              
              608,428Reconfirmation,
                  mailing, billing and other
                customer-related
                  costs
              
              
              396,883
              
              
              517,486
              
              
              432,447
              
              
              535,861
              
              
              635,624




17


*Sales
      and Marketing Expenses*




**Sales
                  and Marketing Expenses****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              2,115,113
              
              $
              1,720,034
              
              $
              395,079
              
              
              23
              %Six
                  Months Ended March 31,
              
              $
              3,648,904
              
              $
              3,330,527
              
              $
              318,377
              
              
              10
              %




Sales
      and
      marketing expense increased in the second quarter of fiscal 2006 as compared
      to
      the second quarter of fiscal 2005 due to ** an
      increase in the amortization of capitalized costs associated with telemarketing
      and direct mail campaigns *.* We
      capitalize certain direct marketing expenses and amortize those costs over
      a
      period of time that approximates the estimated life of the customer. In the
      fourth quarter of fiscal 2005, this amortization period was reduced from 18
      months to 12 months. This decrease in amortization period, coupled with a larger
      base of capitalizable costs, accounted for the increase in amortization expense.




The
      increase in the first six months of fiscal 2006 as compared to the first six
      months of fiscal 2005 was slightly less than that of second quarter of fiscal
      2006 as compared to fiscal 2005. Prior to the second quarter of fiscal 2006,
      we
      had a smaller base of capitalized costs in fiscal 2006 compared to fiscal 2005,
      resulting in less amortization in the first quarter of fiscal 2006 as compared
      to the first quarter of fiscal 2005.




We
      have
      recently expanded our direct mailings and telemarketing efforts, resulting
      in a
      recent increase in capitalized customer acquisition costs. To the extent that
      we
      continue to expand these efforts, we will experience future increases in sales
      and marketing expense related to this amortization.




*Depreciation
      and Amortization*


**Depreciation
                  and Amortization****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              369,519
              
              $
              366,650
              
              $
              2,869
              
              
              1
              %Six
                  Months Ended March 31,
              
              $
              766,523
              
              $
              726,892
              
              $
              39,631
              
              
              5
              %




Depreciation
      and amortization remained largely consistent between the three and six months
      ended March 31, 2006 as compared to the three and six months ended March 31,
      2005. Depreciation and amortization consists of amortization of fixed assets,
      capitalized website costs, intangible assets and non-compete agreements.
      Amortization relating to the capitalization of our direct mail marketing costs
      is included in marketing expenses, as discussed previously.




*Operating
      Income*




**Operating
                  Income (Loss)****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              1,214,002
              
              $
              383,806
              
              $
              830,196
              
              
              216
              %Six
                  Months Ended March 31,
              
              $
              2,034,788
              
              $
              148,346
              
              $
              1,886,442
              
              
              1272
              %




Our
      operating income increased substantially due primarily to revenue increases
      as
      previously described.





18


*Other
      Income (Expense)*




**Other
                  Income (Expense)****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              14,622
              
              $
              21,088
              
              $
              (6,466
              )
              
              (31
              )%Six
                  Months Ended March 31,
              
              $
              (173,923
              )
              $
              107,453
              
              $
              (281,376
              )
              
              (262
              )%




There
      were no significant changes between other income (expense) for the second
      quarter of fiscal 2006 as compared to the second quarter of fiscal 2005. The
      change in other income (expense) for the first six months of fiscal 2006 as
      compared to fiscal 2005 is due primarily to a $162,000 net increase in a legal
      expense related to a dispute with a former service provider. This matter was
      settled in the second quarter of fiscal 2005.




*Income
      Tax Benefit (Provision)*




**Income
                  Tax Benefit (Provision)****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              (465,362
              )
              $
              (193,817
              )
              $
              (271,545
              )
              
              140
              %Six
                  Months Ended March 31,
              
              $
              (702,208
              )
              $
              (176,447
              )
              $
              (525,761
              )
              
              298
              %




The
      changes in our income tax benefit (provision) for the three and six months
      ended
      March 31, 2006 as compared to the three and six months ended March 31, 2005
      is
      due almost entirely to our increase in profitability. We have not experienced
      a
      significant change in our effective tax rates during these periods.




*Cumulative
      Effect of Accounting Change*




**Cumulative
                  Effect of Accounting Change****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              0
              %Six
                  Months Ended March 31,
              
              $
              —
              
              $
              99,848
              
              $
              (99,848
              )
              
              0
              %




During
      the first fiscal quarter of 2005, we changed our method of accounting for
      forfeitures of restricted stock awards to employees, officers, and directors.
      Prior to October 1, 2004, we recognized forfeitures as they occurred .
      Upon occurrence, we reversed the previously recognized expense associated with such
      grant. Effective October 1,
      2004 ,
      we
      changed to an expense recognition method that is based on an estimate of the
      number of shares that are ultimately expected to vest. We believe that this
      is a
      preferable method as it provides less volatility in expense recognition.
      Additionally, while both methods of accounting for forfeitures are acceptable
      under current guidance, the implementation of FAS 123R
      (effective during the first
      quarter of fiscal 2006) will no longer permit us to recognize forfeitures as
      they occur .
      This
      change resulted in an increase to net income of $99,848, net of income taxes
      of
      $53,764, during the first quarter of fiscal 2005.




*Net
      Income (Loss)*




**Net
                  Income (Loss)****2006**
              
              **2005**
              
              **Change**
              
              **Percent**Three
                  Months Ended March 31,
              
              $
              814,140
              
              $
              298,280
              
              $
              515,860
              
              
              173
              %Six
                  Months Ended March 31,
              
              $
              1,249,171
              
              $
              347,352
              
              $
              901,819
              
              
              260
              %




The
      increase in net income for the three and six months ended March 31, 2006 as
      compared to the three months ended March 31, 2005 is due primarily to increased
      revenues, offset by increased cost of sales, general and administrative, sales
      and marketing and income tax expense and the effects of the cumulative effect
      of
      accounting change in fiscal 2005, each of which is described above.




19




**Liquidity
      and Capital Resources**




Net
      cash
      provided by operating activities decreased $4,498,823 or 84%, to $856,046 for
      the first six months of fiscal 2006, compared to $5,354,869 for the first six
      months of 2005. During the first six months of fiscal 2005, we generated a
      significant portion of our operating cash flow from the conversion of many
      of
      our customers from LEC billing to alternate billing channels that have a shorter
      collection time. During the first six months of fiscal 2006, the opposite
      occurred - a substantial amount of new and existing customers were billed via
      LEC billing channels which have a longer collection time. Additionally, during
      the first six months of fiscal 2006, we made substantial investments in direct
      customer acquisition costs as compared to the first six months of fiscal 2006,
      where we had limited investments. The net changes in these two balance sheet
      items caused a net decrease in our cash flows of over $7.5 million in the first
      six months of fiscal 2006 as compared to the first six months of fiscal 2005.
      This decrease was offset by an increase in net income of over $900,000 and
      an
      increase in noncash expenses of approximately $1,768,000. The remaining
      differences were due to other changes in assets and liabilities.




Our
      primary source of cash inflows is net remittances from our billing channels,
      including LEC billings and ACH billings. For LEC billings, we receive
      collections on accounts receivable through the billing service aggregators
      under
      contracts to administer this billing and collection process. The billing service
      aggregators generally do not remit funds until they are collected. Generally,
      cash is collected and remitted to us (net of dilution and other fees and
      expenses) over a 60- to 120-day period subsequent to the billing dates.
      Additionally, for each monthly billing cycle, the billing aggregators and LECs
      withhold certain amounts, or “holdback reserves,” to cover potential future
      dilution and bad debt expense. These holdback reserves lengthen our cash
      conversion cycle as they are remitted to us over a 12- to 18-month period of
      time. We classify these holdback reserves as current or long-term receivables
      on
      our balance sheet, depending on when they are scheduled to be remitted to us.
      For ACH billings, we generally receive the net proceeds through our billing
      service processors within 15 days of submission. Additionally, three LEC
      aggregators and one ACH service provider accounted for 42%, 26%, 13% and 16%,
      respectively, of our net accounts receivable at March 31, 2006.




Our
      most
      significant cash outflows include payments for marketing expenses and general
      operating expenses. Cash outflows for direct response advertising and
      telemarketing, our primary marketing strategies, typically occur in advance
      of
      expense recognition as these costs are capitalized and amortized over 12 months,
      the average estimated retention period for new customers. General operating
      cash
      outflows consist of payroll costs, income taxes, and general and administrative
      expenses that typically occur within close proximity of expense
      recognition.




Cash
      used
      for investing activities was $128,149 for the first six months of 2006,
      consisting of $113,403 of expenditures for intangible assets and $14,746 of
      equipment purchases. During the first six months of fiscal 2005, cash used
      for
      investing was $260,154 for the first six months of 2006, consisting of $215,767
      of expenditures for intangible assets and $44,387 of equipment
      purchases.




Net
      cash
      used for financing activities was $134,418 for the first six months of fiscal
      2006, consisting of acquisitions of our common stock through our stock
      repurchase program. During
      the first six months of fiscal 2005, cash used for financing activities totaled
      $468,950, consisting primarily of common stock dividends. We have recently
      suspended all payments of common stock dividends.




We
      had
      working capital of $14,479,144 as of March 31, 2006, compared to $13,374,172
      as
      of September 30, 2005. Our cash position increased during the past three months
      to over $8,700,000 at March 31, 2006 from approximately $8,100,000 at the end
      of
      fiscal 2005.




We
      maintain a $1,000,000 credit facility with Merrill Lynch Business Financial
      Services Inc., The applicable interest rate on borrowings, if any, will be
      a
      variable rate of the one-month LIBOR rate (as published in the *Wall
      Street Journal* ),
      plus
      3%. The facility requires an annual line fee of 1% of the committed amount.
      Outstanding advances are secured by all of our existing and acquired tangible
      and intangible assets located in the United States. There was no balance
      outstanding at March 31, 2006. The line has been renewed for an additional
      one-year period, extending the maturity date to April 30, 2007.




The
      credit facility requires us to maintain a “Leverage Ratio” (total liabilities to
      tangible net worth) that does not exceed 1.5-to-1 and a “Fixed Charge Ratio”
(earnings before interest, taxes, depreciation, amortization and other non-cash
      charges minus any internally financed capital expenditures divided by the sum
      of
      debt service, rent under capital leases, income taxes and dividends) that is
      not
      less that 1.5-to-1 as determined quarterly on a 12-month trailing basis. The
      credit facility includes additional covenants governing permitted indebtedness,
      liens, and protection of collateral. As of March 31, 2006, we were in compliance
      with the ratios and the covenants and are able to fully draw on the credit
      facility.




20


Until
      April 1, 2005, we were contractually obligated to pay a $0.01 per share dividend
      each quarter, subject to compliance with applicable laws, to all common
      stockholders, including those who hold unvested restricted stock. We are no
      longer required to pay quarterly dividends. Future dividend payments will be
      evaluated by the Board of Directors based upon earnings, capital requirements
      and financial position, general economic conditions, alternative uses of capital
      and other pertinent factors.





During
      the third quarter of fiscal 2005, our Board of Directors initiated the
      repurchase of up to $3 million of our common stock from time to time on the
      open
      market or in privately negotiated transactions. To date, we have reacquired
      853,850 shares at an aggregate cost of $700,027 under the program.





During
      the second quarter of fiscal 2006, we entered into a contractual arrangement
      with an attorney to settle previous claims and to engage the future services
      of
      this attorney. Under the terms of the arrangement, we made cash payments during
      the quarter totaling $55,000 and granted 100,000 shares of restricted stock.
      We
      are obligated to make future payments over the next two years totaling $339,750
      in exchange for future services. Such amounts have not been accrued in the
      accompanying financial statements as such payments are for future
      services.




The
      following table summarizes our contractual obligations at March 31, 2006 and
      the
      effect such obligations are expected to have on our future liquidity and cash
      flows:




**Payments
                  due by Period****Contractual
                  Obligations**
              
              **Total**
              
              **Fiscal
                  2006**
              
              **Fiscal
                  2007**
              
              **Fiscal
                  2008**
              
              **Thereafter**Lease
                  commitments
              
              $
              220,000
              
              $
              184,000
              
              $
              28,000
              
              $
              8,000
              
              $
              —Contractual
                  commitments
              
              $
              339,750
              
              $
              90,000
              
              $
              186,750
              
              $
              63,000
              
              $
              —




We
      believe that our existing cash on hand and cash flow from operations will
      provide us with sufficient liquidity to meet our operating needs for the next
      twelve months.





*   *   *


21


ITEM
      3.  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




As
      of
      March 31, 2006, we did not participate in any market risk-sensitive commodity
      instruments for which fair value disclosure would be required under Statement
      of
      Financial Accounting Standards No. 107. We believe that we are not subject
      in
      any material way to other forms of market risk, such as foreign currency
      exchange risk or foreign customer purchases (of which there were none in the
      first six months of fiscal 2006 or in any of 2005) or commodity price
      risk.




ITEM
      4.  CONTROLS
      AND PROCEDURES




Disclosure
      controls and procedures are designed with an objective of ensuring that
      information required to be disclosed in our periodic reports filed with the
      Securities and Exchange Commission, such as this Quarterly Report on Form 10-Q,
      is recorded, processed, summarized and reported within the time periods
      specified by the Securities and Exchange Commission. Disclosure controls are
      also designed with an objective of ensuring that such information is accumulated
      and communicated to our management, including our chief executive officer and
      chief financial officer, in order to allow timely consideration regarding
      required disclosures.




The
      evaluation of our disclosure controls by our principal executive officer and
      principal financial officer included a review of the controls’ objectives and
      design, the operation of the controls, and the effect of the controls on the
      information presented in this Quarterly Report. Our management, including our
      chief executive officer and chief financial officer, does not expect that
      disclosure controls can or will prevent or detect all errors and all fraud,
      if
      any. A control system, no matter how well designed and operated, can provide
      only reasonable, not absolute, assurance that the objectives of the control
      system are met. Also, projections of any evaluation of the disclosure controls
      and procedures to future periods are subject to the risk that the disclosure
      controls and procedures may become inadequate because of changes in conditions,
      or that the degree of compliance with the policies or procedures may
      deteriorate.




Based
      on
      their review and evaluation as of the end of the period covered by this Form
      10-Q, and subject to the inherent limitations all as described above, our
      principal executive officer and principal financial officer have concluded
      that
      our disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934) are effective as of the
      end
      of the period covered by this report. They are not aware of any significant
      changes in our disclosure controls or in other factors that could significantly
      affect these controls subsequent to the date of their evaluation, including
      any
      corrective actions with regard to significant deficiencies and material
      weaknesses. During the period covered by this Form 10-Q, there have not been
      any
      changes in our internal control over financial reporting that have materially
      affected, or that are reasonably likely to materially affect, our internal
      control over financial reporting.






22


**PART
      II - OTHER INFORMATION**




ITEM
      1.  LEGAL
      PROCEEDINGS




None




ITEM
      1A.  RISK
      FACTORS




The
      following sets forth additional risk factors that represent material changes
      from those previously disclosed in our Form 10-K for the year ended September
      30, 2005.




***Changes
      in recent operating guidelines from regulatory agencies could impact our ability
      to bill via our ACH channels.***




In
      February 2006, NACHA - The Electronic Payments Association (which develops
      operating rules and business practices for the Automated Clearing House (ACH)
      Network and for other electronic payments), issued an Operating Bulletin
      concerning the use of the back of a check to obtain authorization for an ACH
      transaction. In this Operating Bulletin, NACHA indicated that, while this
      practice of authorizing ACH debits by relying on the endorsement of a check
      is
      not expressly prohibited by the NACHA operating rules, it does contain inherent
      risks that the underlying transaction was not properly authorized or understood.
      Therefore, service providers in the electronic payments network are encouraged
      to adopt appropriate policies to mitigate such risks.




We
      have
      yet to see any changes in the business practices of our service providers as
      a
      result of this announcement. However, to the extent that such business practices
      change, it could have an adverse impact on our ability to bill a significant
      number of our clients and result in lost revenues. To date, we have not yet
      formulated policies or procedures to address any future potential changes in
      our
      billing partners’ business practices.




***We
      acquire new customers via telemarketing activities performed by third-parties.
      Changes in regulations concerning telemarketing activities, or a failure of
      our
      third-party vendors to comply with existing regulations, could result in a
      loss
      of customers and our ability to attract new customers via this marketing
      channel.***




We
      currently utilize telemarketing activities as a significant means of attracting
      new customers. Such telemarketing activities are regulated by the Federal
      Communication Commission and statewide regulations. We outsource such
      telemarketing activities to experienced third-party vendors. To the extent
      that
      these vendors fail to understand or comply with these regulations, our business
      could be adversely affected. Likewise, changes in existing regulations could
      impact our future ability to utilize telemarketing activities as a viable
      marketing strategy.






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




**Issuer
      Purchases of Equity Securities**




Period
            (a)
                Total Number of Shares (or Units) Purchased
            (b)
                Average Price Paid per Share (or Unit)
            (c)
                Total Number of Shares (or Units) Purchased as Part of Publicly Announced
                Plans or Programs
            (d)
                Maximum Number (or Approximate Dollar Value) of Shares (or Units)
                that May
                Yet Be Purchased Under the Plans or ProgramsJanuary
                2006
            78,000
            $0.57
            78,000
            N/AFebruary
                2006
            0
            N/A
            0
            N/AMarch
                2006
            0
            N/A
            0
            N/ATotal
            78,000
            $0.57
            78,000
            $_2,299,973(1)




(1) On
      May 18,
      2005, we announced the adoption of a $3 million stock repurchase program. To
      date, we have purchased 853,850 shares at an aggregate price of $700,027.




23




ITEM
      3.   DEFAULTS
      UPON SENIOR SECURITIES




None




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




None




ITEM
      5.  OTHER
      INFORMATION




None




ITEM
      6.  EXHIBITS




The
      following exhibits are either attached hereto or incorporated herein by
      reference as indicated:





Exhibit
              Number
            
            Description3.1
            
            Amended
                and Restated Articles of Incorporation of YP Corp. (incorporated
                by
                reference to the Company’s current report on Form 8-K filed with the SEC
                on April 12, 2006).10.1
            
            Separation
                Agreement & General Release, dated as of January 19, 2006, by and
                between Chris Broquist and YP Corp.(incorporated
                by reference to the Company’s current report on Form 8-K filed with the
                SEC on January 25, 2006).10.2
            
            Employment
                Agreement, dated as of February 6, 2006, by and between John Raven
                and YP
                Corp.(incorporated
                by reference to the Company’s current report on Form 8-K filed with the
                SEC on February 21, 2006).10.3
            
            Employment
                Agreement, by and between YP Corp. and Gary Perschbacher, dated as
                of
                March 31, 2006. (incorporated by reference to the Company’s current report
                on Form 8-K filed with the SEC on April 3, 2006).31
            
            Certifications
                pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 200232
            
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002





24


SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.


YP.CORP.Date: May
              12,
              2006
            By:
            */s/ Gary
              L. Perschbacher*Gary
              L. PerschbacherChief
              Financial Officer







EXHIBIT
      INDEX


Exhibit
                Number
              
              Description3.1
              
              Amended
                  and Restated Articles of Incorporation of YP Corp. (incorporated
                  by
                  reference to the Company’s current report on Form 8-K filed with the SEC
                  on April 12, 2006).10.1
              
              Separation
                  Agreement & General Release, dated as of January 19, 2006, by and
                  between Chris Broquist and YP Corp.(incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  SEC on January 25, 2006).10.2
              
              Employment
                  Agreement, dated as of February 6, 2006, by and between John Raven
                  and YP
                  Corp.(incorporated
                  by reference to the Company’s current report on Form 8-K filed with the
                  SEC on February 21, 2006).10.3
              
              Employment
                  Agreement, by and between YP Corp. and Gary Perschbacher, dated
                  as of
                  March 31, 2006. (incorporated by reference to the Company’s current report
                  on Form 8-K filed with the SEC on April 3, 2006).31
              
              Certifications
                  pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 200232
              
              Certifications
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002