**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, 2007




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




For
      the
      transition period from _____________ to _______________





Commission
      File Number 0-24217





**YP
      CORP.**


(Exact
      name of registrant as specified in its charter)




**Nevada**
            **85-0206668**(State
                or other jurisdiction of incorporation or organization)
            (IRS
                Employer Identification No.)**4840
                East Jasmine St. Suite 105**
              **Mesa,
                Arizona**
            **85205****(Address
                of principal executive offices)**
            **(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 a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.  Large Accelerated Filer o  Accelerated
      Filer o  Non-Accelerated
      Filer  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, 2007 was
      50,122,344 shares of common stock, par value $.001.















**INDEX
      TO FORM 10-Q FILING**




**FOR
      THE QUARTER ENDED MARCH 31, 2007**





**TABLE
      OF CONTENTS**





**PART
      I**


**Page****Item
                1.**
            **Financial  Statements****Consolidated
                Balance Sheets as of March 31, 2007
                (Unaudited) and September 30, 2006**
            **3****Unaudited
                Consolidated Statements of Operations for the
                Three and Six Month Periods Ended March 31, 2007 and  March 31,
                2006**
            **4****Unaudited
                Consolidated Statements of Cash Flows for the Six
                Month Periods Ended March 31, 2007 and   March 31,
                2006**
            **5****Notes
                to Unaudited Consolidated Financial
                Statements**
            **6****Item
                2.**
            **Management’s
                Discussion and Analysis of Financial
                Condition  and Results of
                Operations**
            **14****Item
                3.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**
            **22****Item
                4.**
            **Controls
                and Procedures**
            **22****PART
                II**
              **OTHER
                INFORMATION****Item
                1.**
            **Legal
                Proceedings**
            **23****Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders**
            **23****Item
                6.**
            **Exhibits**
            **24****Signatures**
            **25**




2
 ***Index***





**PART
      I – FINANCIAL INFORMATION**





ITEM
                1.
            FINANCIAL
                STATEMENTS




**YP
                    CORP. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEETS****March
                    31,**
                  **2007**
                
                
                **September
                    30,**
                  **2006****(unaudited)****Assets**Cash
                    and cash equivalents
                
                $
                5,912,686
                
                
                $
                6,394,775Certificates
                    of deposit and other investments
                
                
                3,140,318
                
                
                
                3,082,053Accounts
                    receivable, net of allowance of $1,693,916 and $3.034,504
                
                
                5,767,127
                
                
                
                7,991,781Prepaid
                    expenses and other current assets
                
                
                376,110
                
                
                
                259,069Income
                    tax receivable
                
                
                1,114,107
                
                
                
                -Deferred
                    tax asset
                
                
                301,475
                
                
                
                1,781,736Total
                    current assets
                
                
                16,611,823
                
                
                
                19,509,414Accounts
                    receivable, long term portion, net of allowance of $113,004 and
                    $234,445
                
                
                2,147,060
                
                
                
                1,140,179Property
                    and equipment, net
                
                
                187,279
                
                
                
                178,883Deposits
                    and other assets
                
                
                84,427
                
                
                
                91,360Intangible
                    assets, net
                
                
                5,599,006
                
                
                
                5,722,604Deferred
                    tax asset, long term
                
                
                1,396,406
                
                
                
                1,334,787Total
                    assets
                
                $
                26,026,001
                
                
                $
                27,977,227**Liabilities
                    and Stockholders' Equity**Liabilities:Accounts
                    payable
                
                $
                719,323
                
                
                $
                773,653Accrued
                    liabilities
                
                
                985,380
                
                
                
                4,565,439Income
                    taxes payable
                
                
                -
                
                
                
                261,762Total
                    current liabilities
                
                
                1,704,703
                
                
                
                5,600,854Commitments
                    and contingenciesStockholders'
                    equity: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, 50,112,594
                    and
                    50,021,594 issued and outstanding
                
                
                50,113
                
                
                
                50,022Treasury
                    stock (2,843,416 shares carried at cost)
                
                
                (2,407,158
                )
                
                
                (2,407,158
                )Paid
                    in capital
                
                
                10,229,855
                
                
                
                9,395,044Retained
                    earnings
                
                
                16,437,622
                
                
                
                15,327,599Total
                    stockholders' equity
                
                
                24,321,298
                
                
                
                22,376,373Total
                    liabilities and stockholders' equity
                
                $
                26,026,001
                
                
                $
                27,977,227See
                    accompanying notes to unaudited consolidated financial
                    statements.


3
 ***Index***




**YP
      CORP. AND SUBSIDIARIES**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**Three
                  Months ended March 31,**
              
              
              **Six
                  Months ended March 31,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Net
                  revenues
              
              $
              6,106,544
              
              
              $
              7,997,623
              
              
              $
              13,230,227
              
              
              $
              15,045,024Cost
                  of services
              
              
              782,198
              
              
              
              586,890
              
              
              
              1,609,007
              
              
              
              1,123,861Gross
                  profit
              
              
              5,324,346
              
              
              
              7,410,733
              
              
              
              11,621,220
              
              
              
              13,921,163Operating
                  expenses:General
                  and administrative expenses
              
              
              3,310,578
              
              
              
              4,081,619
              
              
              
              6,781,364
              
              
              
              8,237,470Sales
                  and marketing expenses
              
              
              1,108,760
              
              
              
              3,207,315
              
              
              
              3,194,793
              
              
              
              5,957,802Litigation
                  and related expenses
              
              
              (200,718
              )
              
              
              (10,062
              )
              
              
              (200,718
              )
              
              
              161,804Total
                  operating expenses
              
              
              4,218,620
              
              
              
              7,278,872
              
              
              
              9,775,439
              
              
              
              14,357,076Operating
                  income (loss)
              
              
              1,105,726
              
              
              
              131,861
              
              
              
              1,845,781
              
              
              
              (435,913
              )Other
                  income (expense):Interest
                  income
              
              
              86,463
              
              
              
              50,878
              
              
              
              164,697
              
              
              
              90,514Other
                  income (expense)
              
              
              (1,310
              )
              
              
              4,562
              
              
              
              13,755
              
              
              
              (12,117
              )Total
                  other income (expense)
              
              
              85,153
              
              
              
              55,440
              
              
              
              178,452
              
              
              
              78,397Income
                  (loss) before income taxes
              
              
              1,190,879
              
              
              
              187,301
              
              
              
              2,024,233
              
              
              
              (357,516
              )Income
                  tax benefit (provision)
              
              
              (564,617
              )
              
              
              (57,303
              )
              
              
              (912,773
              )
              
              
              160,422Net
                  income (loss)
              
              $
              626,262
              
              
              $
              129,998
              
              
              $
              1,111,460
              
              
              $
              (197,094
              )Net
                  income (loss) per common share:Basic
              
              $
              0.01
              
              
              $
              -
              
              
              $
              0.02
              
              
              $
              -Diluted
              
              $
              0.01
              
              
              $
              -
              
              
              $
              0.02
              
              
              $
              -Weighted
                  average common shares outstanding:Basic
              
              
              45,700,242
              
              
              
              44,716,622
              
              
              
              45,614,253
              
              
              
              44,801,024Diluted
              
              
              48,027,656
              
              
              
              45,403,761
              
              
              
              47,808,716
              
              
              
              45,273,319
 
 See
        accompanying notes to unaudited consolidated financial statements.


4
 ***Index***




**YPCORP.
      AND SUBSIDIARIES**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**Six
                  Months Ended March 31,****2007**
              
              
              **2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              1,111,460
              
              
              $
              (197,094
              )Adjustments
                  to reconcile net income (loss) to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              701,611
              
              
              
              766,523Amortization
                  of deferred stock compensation
              
              
              834,902
              
              
              
              917,016Noncash
                  compensation expense to Chief Executive Officer
              
              
              88,680
              
              
              
              -Deferred
                  income taxes
              
              
              1,418,642
              
              
              
              (561,330
              )Provision
                  for uncollectible accounts
              
              
              (1,462,029
              )
              
              
              794,240Changes
                  in operating assets and liabilities:Restricted
                  cash
              
              
              -
              
              
              
              500,000Accounts
                  receivable
              
              
              2,679,802
              
              
              
              (1,496,970
              )Prepaid
                  and other current assets
              
              
              (117,041
              )
              
              
              163,634Deposits
                  and other assets
              
              
              6,933
              
              
              
              (34,809
              )Accounts
                  payable
              
              
              (54,330
              )
              
              
              122,440Accrued
                  liabilities
              
              
              (3,581,496
              )
              
              
              (27,308
              )Income
                  taxes receivable
              
              
              (1,375,869
              )
              
              
              (90,296
              )Net
                  cash provided by operating activities
              
              
              251,265
              
              
              
              856,046CASH
                  FLOWS FROM INVESTING ACTIVITIES:Net
                  purchases of certificates of deposits and other
                  investments
              
              
              (58,265
              )
              
              
              (32,203
              )Expenditures
                  for intangible assets
              
              
              (502,487
              )
              
              
              (113,403
              )Purchases
                  of  equipment
              
              
              (172,602
              )
              
              
              (14,746
              )Net
                  cash used in investing activities
              
              
              (733,354
              )
              
              
              (160,352
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Repurchases
                  of common stock
              
              
              -
              
              
              
              (134,418
              )Net
                  cash used in financing activities
              
              
              -
              
              
              
              (134,418
              )INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (482,089
              )
              
              
              561,276CASH
                  AND CASH EQUIVALENTS, beginning of period
              
              
              6,394,775
              
              
              
              6,114,311CASH
                  AND CASH EQUIVALENTS, end of period
              
              $
              5,912,686
              
              
              $
              6,675,587
 
 See
        accompanying notes to unaudited consolidated financial
        statements





5
 ***Index***




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





1.
            ORGANIZATION
                AND BASIS OF PRESENTATION





The
      accompanying unaudited 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 these notes or this Quarterly Report on Form
      10-Q.  All material intercompany accounts and transactions have been
      eliminated.




The
      accompanying unaudited consolidated financial statements as of March 31, 2007
      and for the three and six months ended March 31, 2007 and 2006,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, 2006 and for the year then ended included in the Company’s
      Annual Report on Form 10-K for the year ended September 30,
      2006.




Due
      to
      the short term nature and market rates of interest for the certificates of
      deposit and other investments, the carrying value (cost) approximates the fair
      value for these investments.




The
      preparation of financial statements in accordance with U.S. 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 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 as follows:





·
            Accrued
                refunds and fees of $1,250,000 relating to the attorneys’ general
                settlement described in note 4 have been reclassified from accounts
                receivable, net to accrued liabilities in the accompanying consolidated
                balance sheet as of September 30,
                2006.


·
            Depreciation
                and amortization expenses that were previously separately stated
                are now
                included in general and administrative expenses in the consolidated
                statement of operations.


·
            Litigation
                and related expenses that were previously included in other income
                and
                expense are now separately stated as a component of operating expenses
                in
                the consolidated statement of
                operations.


·
            Dilution
                and charge backs have been reclassified from cost of services to
                a
                reduction in net revenues in the consolidated statement of
                operations.





These
      changes had no impact on previously reported net income or stockholders’
equity.  "While the other changes are self-evident, the following
      table sets forth the impact of reclassifying dilution and charge backs on the
      Company’s statements of operations:





6
 ***Index***


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


**Statements
                  of Operations**
              
              **Three
                  Months Ended March 31, 2006**As
                  Originally Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeNet
                  revenues
              
              $
              8,999,196
              
              
              $
              7,997,623
              
              
              $
              (1,001,573
              )Cost
                  of services
              
              $
              1,588,463
              
              
              $
              586,890
              
              
              $
              (1,001,573
              )Gross
                  profit
              
              $
              7,410,733
              
              
              $
              7,410,733
              
              
              $
              -**Six
                  Months Ended March 31, 2006**As
                  Originally Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeNet
                  revenues
              
              $
              16,625,972
              
              
              $
              15,045,024
              
              
              $
              (1,580,948
              )Cost
                  of services
              
              $
              2,704,809
              
              
              $
              1,123,861
              
              
              $
              (1,580,948
              )Gross
                  profit
              
              $
              13,921,163
              
              
              $
              13,921,163
              
              
              $
              -




2.
            ACCOUNTING
                CHANGES IN 2006





Prior
      to
      fiscal 2006, the Company capitalized customer acquisition costs and amortized
      them on a straight-line basis over the average expected life of the related
      customers. The majority of the capitalized customer acquisition costs related
      to
      the Company’s mailing campaigns.  During fiscal 2006, the Company
      began increasing its expenditures for telemarketing campaigns.  The
      capitalization of such costs requires that the Company amortize them over the
      average expected life of acquired customers on a cost-pool by cost-pool basis;
      however, the Company’s systems were not equipped to monitor customer lives by
      method of acquisition.  Therefore, the Company was unable to determine
      the average expected life of those customers acquired via telemarketing versus
      those acquired via mailing campaigns and cannot assess the value of the future
      benefits.  As the Company could not effectively evaluate such costs on
      a cost-pool by cost-pool basis, the Company determined in fiscal 2006 that
      the
      preferable method of accounting for these costs was to expense them when
      incurred.  The Company received a preferablty letter from its
      predecessor auditors relating to this change.  The Company enacted
      this change in accounting principle during the fourth quarter of fiscal 2006
      and, in accordance with SFAS 154, in the Company’s 10-K for the year ended
      September 30, 2006, the Company restated all periods presented to reflect this
      new method of accounting for such costs.




The
      following tables set forth the impact of such a change on the Company’s
      previously reported financial results:




**Statements
                  of Operations**
              
              **Three
                  Months Ended March 31, 2006**As
                  Originally Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeSales
                  and marketing expense
              
              $
              2,115,113
              
              
              $
              3,207,315
              
              
              $
              1,092,202Income
                  tax expense (benefit)
              
              $
              465,362
              
              
              $
              57,303
              
              
              $
              (408,059
              )Net
                  income (loss)
              
              $
              814,140
              
              
              $
              129,998
              
              
              $
              (684,142
              )Net
                  income (loss) per common share:Basic
              
              $
              0.02
              
              
              $
              -
              
              
              $
              (0.02
              )Diluted
              
              $
              0.02
              
              
              $
              -
              
              
              $
              (0.02
              )**Six
                  Months Ended March 31, 2006**As
                  Originally Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeSales
                  and marketing expense
              
              $
              3,648,904
              
              
              $
              5,957,802
              
              
              $
              2,308,898Income
                  tax expense (benefit)
              
              $
              702,208
              
              
              $
              (160,422
              )
              
              $
              (862,630
              )Net
                  income (loss)
              
              $
              1,249,171
              
              
              $
              (197,094
              )
              
              $
              (1,446,265
              )Net
                  income (loss) per common share:Basic
              
              $
              0.03
              
              
              $
              -
              
              
              $
              (0.03
              )Diluted
              
              $
              0.03
              
              
              $
              -
              
              
              $
              (0.03
              )


7
 ***Index***


**YP
                CORP. AND SUBSIDIARIES**


**NOTES
                TO UNAUDITED CONSOLIDATED FINANCIAL
                STATEMENTS**




**Statement
                  of Cash Flows**
              
              **Six
                  Months Ended March 31, 2006**As
                  Originally Reported
              
              
              As
                  Adjusted
              
              
              Effect
                  of changeNet
                  income (loss)
              
              $
              1,249,171
              
              
              $
              (197,094
              )
              
              $
              (1,446,265
              )Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Deferred
                  income taxes
              
              $
              301,300
              
              
              $
              (561,330
              )
              
              $
              (862,630
              )Changes
                  in assets and liabilities:Customer
                  acquisition costs
              
              $
              (2,308,896
              )
              
              $
              -
              
              
              $
              2,308,896Net
                  cash provided by operating activities
              
              $
              856,047
              
              
              $
              856,047
              
              
              $
              -


3.
            BALANCE
                SHEET INFORMATION





Balance
      sheet information is as follows:




**March
                  31, 2007**Current
              
              
              Long-Term
              
              
              TotalGross
                  accounts receivable
              
              $
              7,461,043
              
              
              $
              2,260,064
              
              
              $
              9,721,107Allowance
                  for doubtful accounts
              
              
              (1,693,916
              )
              
              
              (113,004
              )
              
              
              (1,806,920
              )Net
              
              $
              5,767,127
              
              
              $
              2,147,060
              
              
              $
              7,914,187**September
                  30, 2006**Current
              
              
              Long-Term
              
              
              TotalGross
                  accounts receivable
              
              $
              11,026,285
              
              
              $
              1,374,624
              
              
              $
              12,400,909Allowance
                  for doubtful accounts
              
              
              (3,034,504
              )
              
              
              (234,445
              )
              
              
              (3,268,949
              )Net
              
              $
              7,991,781
              
              
              $
              1,140,179
              
              
              $
              9,131,960


Components
        of allowance for doubtful accounts are as follows:


**March
                    31, 2007**
                
                
                **September
                    30, 2006**Allowance
                    for dilution and fees on amounts due from billing
                    aggregators
                
                $
                1,297,663
                
                
                $
                2,465,423Allowance
                    for customer refunds
                
                
                509,257
                
                
                
                803,526$
                1,806,920
                
                
                $
                3,268,949
  Property
                    and equipment:
                
                **March
                    31, 2007**
                
                
                **September
                    30, 2006**Leasehold
                    improvements
                
                $
                447,681
                
                
                $
                447,681Furnishings
                    and fixtures
                
                
                305,193
                
                
                
                296,074Office
                    and computer equipment
                
                
                1,122,286
                
                
                
                1,055,545Total
                
                
                1,875,160
                
                
                
                1,799,300Less:
                    Accumulated depreciation
                
                
                (1,687,881
                )
                
                
                (1,620,417
                )Property
                    and equipment, net
                
                $
                187,279
                
                
                $
                178,883


8
 ***Index***


**YP
                CORP. AND SUBSIDIARIES**


**NOTES
                TO UNAUDITED CONSOLIDATED FINANCIAL
                STATEMENTS**


Intangible
                  assets:
              
              **March
                  31, 2007**
              
              
              **September
                  30, 2006**Domain
                  name
              
              $
              5,708,600
              
              
              $
              5,708,600Non-compete
                  agreements
              
              
              3,465,000
              
              
              
              3,465,000Website
                  development
              
              
              1,047,837
              
              
              
              1,009,356Software
                  licenses
              
              
              891,641
              
              
              
              427,635Total
              
              
              11,113,078
              
              
              
              10,610,591Less:
                  Accumulated amortization
              
              
              (5,514,072
              )
              
              
              (4,887,987
              )Intangible
                  assets, net
              
              $
              5,599,006
              
              
              $
              5,722,604
  Accrued
                    liabilities:
                
                **March
                    31, 2007**
                
                
                **September
                    30, 2006**Litigation
                    accrual, including customer refunds
                
                
                50,338
                
                
                
                3,525,000Deferred
                    revenue
                
                
                135,972
                
                
                
                188,399Accrued
                    payroll and bonuses
                
                
                471,318
                
                
                
                187,973Accrued
                    expenses - other
                
                
                327,752
                
                
                
                664,067Accrued
                    liabilities
                
                $
                985,380
                
                
                $
                4,565,439




During
      fiscal 2007, the Company implemented additional quality control procedures
      to
      reduce the number of unbillable accounts through its LEC
      channels.  This change permitted the Company to identify certain
      accounts that were unbillable prior to submission of billing records to
      LECs.  This change served to reduce both the gross accounts receivable
      and the related allowance from September 30, 2006 to March 31,
      2007.





During
      fiscal 2007, the decrease in the litigation accrual was attributable to the
      payment of the settlement fee, refunds and other expenses attributable to the
      attorneys’ general settlement described in Note 4 as well as the reversal of
      approximately $200,000 of accruals based on revised estimates of future payment
      obligations.





4.
            COMMITMENTS
                AND CONTINGENCIES





At
      March
      31, 2007, future minimum annual lease payments under operating lease agreements
      for fiscal years ended September 30 are as follows:




2007
              
              $
              144,9502008
              
              
              159,8992009
              
              
              116,7332010
              
              
              116,7332011
              
              
              87,550Thereafter
              
              
              -$
              625,865




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.




In
      the
      past, the Company has received inquiries from the attorneys general offices
      of
      several states investigating its promotional activities, specifically, the
      use
      of its check mailer for customer activation.  On December 14, 2006,
      the Company voluntarily entered into a settlement with thirty-four states’
attorneys general to address their inquiries and bring finality to the
      process.  The Company voluntarily agreed to the
      following:





9
 ***Index***


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


·
            The
                Company paid a settlement fee of $2,000,000 to the state consortium,
                which
                they may distribute among
                themselves;


·
            The
                Company discontinued the use of activation checks as a promotional
                incentive;


·
            The
                Company suspended billing of any active customer that was acquired
                in
                connection with the use of an activation check until a letter was
                mailed
                notifying the customer of their legal rights to cancel the service
                and
                providing them a 60-day opportunity to receive a refund equivalent
                to the
                customer’s last two payments; and


·
            The
                Company will not employ any collection efforts with respect to past-due
                accounts of customers that were secured through the use of an activation
                check, nor will it represent its ability to do
                so.





The
      Company recorded a charge of $3,525,000 in litigation and related expenses
      in
      the fourth quarter of fiscal 2006, consisting of a settlement accrual of
      $2,000,000 and $1,525,000 of accrued refunds, processing fees, legal and other
      related fees.  Customers had through February 2007 to apply for these
      refunds.





Through
      March 31, 2007, the Company paid the settlement fee of $2,000,000, refunds
      totaling approximately $917,000 and other related costs of approximately
      $341,000.  During the second quarter of fiscal 2007, the Company
      reversed approximately $200,000 of accruals, which is included in litigation
      and
      related expenses in the accompanying consolidated statement of
      operations.   The remaining accrual of $50,338, for estimated
      future administrative costs, is included in accrued liabilities in the
      accompanying consolidated balance sheet at March 31, 2007.





Other
      Contractual Commitments




During
      the second quarter of fiscal 2006, the Company entered into a contractual
      arrangement with an attorney to provide contracted legal
      services.  Under the terms of the agreement, the Company is obligated
      to make future payments over the next two years totaling $141,750 in exchange
      for future services.  Such amounts have not been accrued in the
      accompanying consolidated financial statements as such payments are for future
      services.  The Company has expensed all amounts related to services
      rendered through March 31, 2007.




During
      the third quarter of fiscal 2006, the Company entered into a contractual
      arrangement with a consulting firm to provide strategic and operational related
      consulting services.  Under the terms of the agreement, the Company is
      obligated to make future payments through February 2010 that vary based on
      the
      Company’s billed customer count, subject to a minimum of $20,000 per
      month.  Current payments are approximately $65,000 per
      month.  Such amounts have not been accrued in the accompanying
      consolidated financial statements as such payments are for future
      services.  The Company has expensed all amounts related to services
      rendered through March 31, 2007.




During
      the fourth quarter of fiscal 2006, the Company entered into a contractual
      arrangement with an information technology company to provide information
      technology consulting services.  Under the terms of the agreement, the
      Company is obligated to make future monthly  payments of $29,500 through
      September 2009.  Such amounts have not been accrued in the
      accompanying consolidated financial statements as such payments are for future
      services.  The Company has expensed all amounts related to services
      rendered through March 31, 2007.




5.
            INCOME
                TAXES




The
      Company provides for income taxes based on the provisions of SFAS No. 109,*Accounting for Income Taxes,*which, among other things, requires that
      recognition of deferred income taxes be measured by the provisions of enacted
      tax laws in effect at the date of financial statements. The Company records,
      among other items, deferred tax assets related to book-tax differences in the
      recognition of restricted stock awards to officers, directors, employees and
      consultants.  During the three and six months ended March 31, 2007, a
      portion of our restricted stock awards had vested and, due to declines in our
      stock price from grant date to vest date, the tax effects of the vesting of
      these awards were less than the carrying value of our related deferred tax
      assets.  Accordingly, the Company incurred an additional $112,000 and
      $135,000 of income tax expense for the three and six months ended March 31,
      2007, related to the write-off of these deferred tax assets.




10
 ***Index***


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


6.
            NET
                INCOME (LOSS) PER SHARE




Net
      income (loss) 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 (loss) to determine the amount
      available to common stockholders.




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




**Three
                  Months Ended March 31,**
              
              
              **Six
                  Months Ended March 31,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Income
                  (loss) before cumulative effect of accounting change
              
              $
              626,262
              
              
              $
              129,998
              
              
              $
              1,111,460
              
              
              $
              (197,094
              )Less:
                  preferred stock dividends
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Income
                  (loss) applicable to common stock
              
              $
              626,262
              
              
              $
              129,998
              
              
              $
              1,111,460
              
              
              $
              (197,094
              )Basic
                  weighted average common shares outstanding
              
              
              45,700,242
              
              
              
              44,716,622
              
              
              
              45,614,253
              
              
              
              44,801,024Add
                  incremental shares for:Unvested
                  restricted stock
              
              
              2,262,539
              
              
              
              636,003
              
              
              
              2,131,047
              
              
              
              429,961Series
                  E convertible preferred stock
              
              
              64,875
              
              
              
              51,136
              
              
              
              63,416
              
              
              
              42,334Outstanding
                  warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
                  weighted average common shares outstanding
              
              
              48,027,656
              
              
              
              45,403,761
              
              
              
              47,808,716
              
              
              
              45,273,319Net
                  income (loss) per share:Basic
              
              $
              0.01
              
              
              $
              -
              
              
              $
              0.02
              
              
              $
              -Diluted
              
              $
              0.01
              
              
              $
              -
              
              
              $
              0.02
              
              
              $
              -




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




**Three
                  Months Ended March 31,**
              
              
              **Six
                  Months Ended March 31,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Warrants
                  to purchase shares of common stock
              
              
              -
              
              
              
              500,000
              
              
              
              -
              
              
              
              500,000Shares
                  of non-vested retricted stock
              
              
              650,750
              
              
              
              839,152
              
              
              
              739,875
              
              
              
              1,838,258650,750
              
              
              
              1,339,152
              
              
              
              739,875
              
              
              
              2,338,258





The
      warrants were antidilutive for the three and six months ended March 31, 2006
      as
      they were “out-of-the-money” and were excluded from the calculations for the
      three and six months ended March 31, 2007 as they expired in fiscal
      2006.  The shares of non-vested restricted stock included in the above
      table were determined to be antidilutive based on the application of the
      treasury stock method.




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 times, including at March 31, 2007,
      the Company’s bank balances exceed federally insured limits.




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 four third-party billing companies.  The
      net receivable due from three of these billing service providers represented
      26%, 22% and 21%, respectively, of the Company’s total net accounts receivable
      (excluding non-specific reserves) at March 31, 2007. The net
      receivable due from such billing services providers represented 27%, 27% and
      27%, respectively, of the Company’s total net accounts receivable at September
      30, 2006.




11
 ***Index***


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




8.
            RECENT
                ACCOUNTING PRONOUNCEMENTS





In
      February of 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”, which is intended to simplify the accounting and improve
      the financial reporting of certain hybrid financial instruments (i.e.,
      derivatives embedded in other financial instruments). The statement amends
      SFAS
      No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and
      SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities—a replacement of FASB Statement No. 125.” SFAS
      No. 155 is effective for all financial instruments issued or acquired after
      the
      beginning of an entity's first fiscal year that begins after September 15,
      2006.
      The Company has not issued any such instruments since the effective date of
      this
      pronouncement.





In
      March
      of 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets, an amendment of FASB Statement No. 140” (SFAS 156).  SFAS 156
      amends SFAS 140, ”Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities a replacement of FASB Statement No. 125,” with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. SFAS 156 requires an entity to recognize a servicing
      asset or servicing liability each time it undertakes an obligation to service
      a
      financial asset by entering into a servicing contract in any of the following
      situations: (a) a transfer of the servicer’s financial assets that meets the
      requirements for sale accounting, (b) a transfer of the servicer’s financial
      assets to a qualifying special-purpose entity in a guaranteed mortgage
      securitization in which the transferor retains all of the resulting securities
      and classifies them as either available-for-sale securities or trading
      securities, and (c) an acquisition or assumption of an obligation to service
      a
      financial asset that does not relate to financial assets of the servicer or
      its
      consolidated affiliates. SFAS 156 is effective for all servicing assets and
      liabilities as of the beginning of an entity’s first fiscal year that begins
      after September 15, 2006.  The Company has no such servicing
      arrangements and, thus, the effect of adoption of SFAS 156 did not have a
      material impact on the Company’s consolidated financial statements.





In
      July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes (FIN 48) – an interpretation of FASB Statement No.
      109, Accounting for Income Taxes (SFAS No. 109)” (FIN 48). FIN 48 clarifies the
      accounting for uncertainty in income taxes recognized in accordance with SFAS
      No. 109 and prescribes a recognition threshold and measurement attribute for
      the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a return. Guidance is also provided on de-recognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006.  The Company is currently evaluating the impact of
      FIN 48 on its financial position and results of operations.





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108,
**“Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial
      Statements”**(“SAB 108”).  SAB 108 provides guidance on
      how prior year misstatements should be considered when quantifying misstatements
      in the current year financial statements.  The SAB requires
      registrants to quantify misstatements using both a balance sheet and an income
      statement approach and evaluate whether either approach results in quantifying
      a
      misstatement that, when all relevant quantitative and qualitative factors are
      considered, is material.  SAB 108 does not change the guidance in SAB
      99, “Materiality”, when evaluating the materiality of
      misstatements.  SAB 108 is effective for fiscal years ending after
      November 15, 2006.  The adoption of this pronouncement did not have a
      material effect of the Company’s consolidated financial statements.





12
 ***Index***


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


In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS
      157).  SFAS 157 defines fair value, establishes a framework for
      measuring fair value and expands disclosures about fair value measurements.
      Where applicable, SFAS 157 clarifies and codifies related guidance within other
      generally accepted accounting principles. SFAS 157 is effective for fiscal
      years
      beginning after November 15, 2007.  The effect of adoption of SFAS 157
      is not anticipated to have a material impact on the Company’s consolidated
      financial statements.





9.
            SUBSEQUENT
                EVENTS





On
      March
      29, 2007, the Company dismissed Moss Adams LLP (“Moss Adams”) as its independent
      public accountant. Also on March 29, 2007, the Company engaged Mayer Hoffman
      McCann P.C. (“MHM”) to replace Moss Adams as its independent public accountant.
      Both actions were approved by the Audit Committee of the Company’s Board of
      Directors.




Moss
      Adams became the Company’s independent public accountant when it combined with
      the Company’s previous independent public accountant, Epstein, Weber &
Conover, P.L.C. (“EWC”), effective January 1, 2007. As such, Moss Adams was only
      involved in reviewing the Company’s financial statements for its fiscal quarter
      ended on December 31, 2006. The reports issued by EWC with respect to the
      Company’s financial statements for the past two fiscal years, which ended on
      September 30, 2005 and September 30, 2006, respectively, did not contain an
      adverse opinion or a disclaimer of opinion, nor were they qualified or modified
      as to uncertainty, audit scope or accounting principles.




During
      the two most recent fiscal years ended September 30, 2005 and September 30,
      2006
      (during which time EWC was the Company’s independent public accountant) and the
      subsequent interim period preceding the Company’s dismissal of Moss Adams
      (during which time Moss Adams was the Company’s independent public accountant),
      there were no disagreements between the Company and EWC or Moss Adams on any
      matters relating to accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure. In addition, there were no
“reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K during
      such periods.




During
      the two most recent fiscal years ended September 30, 2005 and September 30,
      2006
      and the subsequent interim period preceding the Company’s engagement of MHM,
      neither the Company nor anyone on its behalf consulted MHM regarding (i) the
      application of accounting principles to a specified transaction, either
      completed or proposed, or the type of audit opinion that might be rendered
      by
      MHM with respect to the Company’s financial statements; or (ii) any matter that
      was either the subject of a disagreement between the Company and Moss Adams
      or a
“reportable event” as defined in Item 304(a)(1)(v) of Regulation
      S-K.




Both
      Moss
      Adams and EWC furnished the Company with a letter addressed to the U.S..
      Securities and Exchange Commission stating whether Moss Adams agrees with the
      above statements.





*                 *                      *





13
 ***Index***





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 months
      ended March 31, 2007, 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 on Form 10-Q, as well as our Annual Report
      on
      Form 10-K for the year ended September 30, 2006.




**Forward-Looking
      Statements**




This
      portion of this Quarterly 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 herein include,
      but are not limited to our (i) our expectation that the settlement with the
      attorneys general will limit our exposure to significant legal fees and costs
      that may otherwise have been incurred; (ii) our expectation of expanding our
      telemarketing campaigns in the future and that such campaigns will be our
      primary source of sales and marketing expenditures; (iii) the belief that our
      existing cash on hand will provide us with sufficient liquidity to meet our
      operating needs for the next twelve months; and (iv) our expectation of
      continuing to grant restricted stock awards under our 2003 stock
      plan.




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 our Annual Report on
      Form
      10-K for the fiscal year ended September 30, 2006 under Item 1A “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.




*Attorneys’
      General Settlement*




During
      fiscal 2006, we received numerous inquiries from the attorneys general offices
      of several states investigating our promotional activities, specifically, the
      use of our check mailer for customer activation.  On December 14,
      2006, we voluntarily entered into a settlement with thirty-four states’
attorneys general to address their inquiries and bring finality to the
      process.  We have voluntarily agreed to the following:





·
            We
                paid a settlement fee of $2,000,000 in December 2006 to the state
                consortium, which they may distribute among
                themselves;


·
            We
                discontinued the use of activation checks as a promotional
                incentive;


·
            We
                suspended billing of any active customer that was acquired in connection
                with the use of an activation check until a letter was mailed notifying
                the customer of their legal rights to cancel the service and providing
                them a 60-day opportunity to receive a refund equivalent to the customer’s
                last two payments; and


·
            We
                will not employ any collection efforts with respect to past-due accounts
                of customers that were secured through the use of an activation check,
                nor
                will we represent our ability to do
                so.





14
 ***Index***





Through
      March 31, 2007, we have paid the entire settlement fee, refunds totaling
      approximately $917,000 and  other related costs of approximately
      $341,000.





*Customer
      Counts*




The
      success of our business model is
      based on our ability to retain, add and efficiently bill our subscribers. The
      following represent our counts for billed listings over the last six
      quarters:




**Quarter
                  Ended**
              
              **Average
                  Billed Listings During Quarter**
              
              
              **Gross
                  Revenue**
              
              
              **Returns
                  & Allowances (% of Gross Revenue)**
              
              
              **Net
                  Revenues**
              
              
              **Average
                  Monthly Gross Revenue per Average Billed Listing**March
                  31st, 2007
              
              
              77,411
              
              
              $
              6,828,319
              
              
              
              10.57
              %
              
              $
              6,106,544
              
              
              $
              29.40December
                  31st, 2006
              
              
              99,758
              
              
              
              8,379,609
              
              
              
              14.99
              %
              
              
              7,123,683
              
              
              $
              28.00September
                  30th, 2006
              
              
              130,627
              
              
              
              10,672,074
              
              
              
              21.90
              %
              
              
              8,335,284
              
              
              $
              27.23June
                  30th, 2006
              
              
              134,264
              
              
              
              10,869,020
              
              
              
              21.08
              %
              
              
              8,577,639
              
              
              $
              26.98March
                  31st, 2006
              
              
              116,622
              
              
              
              9,823,663
              
              
              
              18.59
              %
              
              
              7,997,623
              
              
              $
              28.08December
                  31st, 2005
              
              
              90,809
              
              
              
              8,328,583
              
              
              
              15.38
              %
              
              
              7,047,401
              
              
              $
              30.57




Due
      primarily to the terms of the attorneys’ general settlement, we experienced a
      decline in our average customer count during fiscal 2007 because of customer
      cancellations associated with the refund requests and our inability to activate
      approximately 20,000 potential customers that responded to our last activation
      check campaign.




*Income
      Statement Reclassifications*




During
      the second quarter of fiscal 2007, we have revisited our financial statement
      presentation.  As such, we have determined that it is preferable to
      reflect dilution and chargeback amounts as a reduction in net revenues, include
      depreciation and amortization in general and administrative expenses, and show
      expenses related to the attorneys general settlement as litigation and related
      expenses.  Previously, these amounts were respectively included in
      cost of services, shown as a separate expense item, and presented in other
      income (expense).  Our auditors have reviewed this change and concur
      with our current presentation.  All prior periods have been
      reclassified to conform to the current period presentation.




*Recent
      Operating Results*




We
      bill
      our customers through four primary channels: LEC billing, ACH billing, recurring
      credit card and direct invoice.  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, as well as the cessation of the use of
      our activation checks, we expect to continue to expand our telemarketing
      campaigns in the future.




In
      fiscal
      2007, as a result of the attorneys’ general settlement, we experienced an
      increase in customer cancellations associated primarily with customers billed
      through our ACH channel.  The net impact of this was to reduce our ACH
      revenues and, because we experienced a decline in ACH customer counts, this
      increased the relative percentage of customers that are billed through LEC
      channels.




During
      2007, because we were no longer able to utilize activation check campaigns,
      we
      reduced our headcount associated with customer service representatives that
      previously reconfirmed activated customers and performed other service
      activities related to the check campaigns.  We also began to invest in
      the necessary infrastructure to expand our telemarketing campaigns in the future
      and made additional




The
      following represents a summary of recent financial results (certain amounts
      have
      been reclassified to conform to the current period presentation as described
      in
      Note 1 to our Unaudited Consolidated Financial Statements):




15
 ***Index***




**Q2
                  2007**
              
              
              **Q1
                  2007**
              
              
              **Q4
                  2006**
              
              
              **Q3
                  2006**
              
              
              **Q2
                  2006**
              
              
              **Q1
                  2006**Net
                  Revenues
              
              $
              6,106,544
              
              
              $
              7,123,683
              
              
              $
              8,335,284
              
              
              $
              8,577,639
              
              
              $
              7,997,623
              
              
              $
              7,047,401Gross
                  margin
              
              
              5,324,346
              
              
              
              6,296,874
              
              
              
              7,047,642
              
              
              
              7,843,120
              
              
              
              7,410,733
              
              
              
              6,510,430Operating
                  expenses
              
              
              4,218,620
              
              
              
              5,556,819
              
              
              
              9,403,319
              
              
              
              6,613,886
              
              
              
              7,278,872
              
              
              
              7,078,205Operating
                  income (loss)
              
              
              1,105,726
              
              
              
              740,055
              
              
              
              (2,355,677
              )
              
              
              1,229,234
              
              
              
              131,861
              
              
              
              (567,775
              )Net
                  income (loss)
              
              
              626,262
              
              
              
              485,198
              
              
              
              (1,680,673
              )
              
              
              826,847
              
              
              
              129,998
              
              
              
              (327,092
              )




_________________




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




·
            Second
                quarter of fiscal 2007 –  includes the reversal of approximately
                $200,000 of accrued expenses related to the attorneys’ general
                settlement.




·
            First
                quarter of fiscal 2007 – includes approximately $1,000,000 of direct
                response advertising costs incurred in October 2006 for which we
                derived
                no substantial benefit based on the attorneys’ general settlement that was
                agreed to in December 2006.




·
            Fourth
                quarter of fiscal 2006 – includes the following charges associated with
                the voluntary agreement with various regulatory agencies surrounding
                the
                use of activation checks (described in Recent Developments and Outlook
                above):




o
            $2,000,000
                accrual to cover regulatory and related
                expenses




o
            $1,525,000
                of accrued refunds, processing fees, legal and other related
                fees




·
            Third
                quarter of fiscal 2006 –  no significant unusual expenses were
                incurred.




·
            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.





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




**Q2
                  2007**
              
              
              **Q1
                  2007**
              
              
              **Q4
                  2006**
              
              
              **Q3
                  2006**
              
              
              **Q2
                  2006**
              
              
              **Q1
                  2006**LEC
                  billing
              
              
              65
              %
              
              
              55
              %
              
              
              56
              %
              
              
              55
              %
              
              
              44
              %
              
              
              31
              %ACH
                  billing
              
              
              31
              %
              
              
              41
              %
              
              
              39
              %
              
              
              39
              %
              
              
              47
              %
              
              
              56
              %Direct
                  billing
              
              
              4
              %
              
              
              4
              %
              
              
              5
              %
              
              
              6
              %
              
              
              9
              %
              
              
              12
              %




**The
      higher percentage of LEC billings is directly related to the effects of the
      attorneys general settlement, as most of the customer cancellations were for
      customers billed through our ACH channel.**




16
 ***Index***





**Results
      of Operations**




*Net
      Revenues*


**Net
                  Revenues****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              6,106,544
              
              
              $
              7,997,623
              
              
              $
              (1,891,079
              )Six
                  Months Ended March 31,
              
              $
              13,230,227
              
              
              $
              15,045,024
              
              
              $
              (1,814,797
              )




The
      decrease in revenues for the three and six months ended March 31, 2007, as
      compared to March 31, 2006, was largely due to the effects of the attorneys
      general settlement as we experienced an increase in customer cancellations
      and
      were unable to activate a significant number of potential customers that had
      responded to our final activation check campaign that occurred in October
      2006.




Although
      we have concentrations of risk with our billing aggregators (see Note 7 to
      our
      Unaudited Consolidated Financial Statements) 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****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              782,198
              
              
              $
              586,890
              
              
              $
              195,308Six
                  Months Ended March 31,
              
              $
              1,609,007
              
              
              $
              1,123,861
              
              
              $
              485,146




The
      increase in cost of services for the three and six months ended March 31, 2007,
      as compared to March 31, 2006, is largely due to an increase in LEC billing
      fees
      attributable to our wholesale accounts, which were not part
      of our marketing progrmas until the third quarter of fiscal
      2006.




*Gross
      Profit*


**Gross
                  Profit****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              5,324,346
              
              
              $
              7,410,733
              
              
              $
              (2,086,387
              )Six
                  Months Ended March 31,
              
              $
              11,621,220
              
              
              $
              13,921,163
              
              
              $
              (2,299,943
              )




The
      decrease in our gross profits was due to decreased net revenues due to the
      effects of the attorneys general settlement discussed above and an increase
      in
      cost of services fueled by our increased LEC billing  fees
      attributable to our wholesale accounts, also described above.




*General
      and Administrative
      Expenses*




**General
                  and Administrative Expenses****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              3,310,578
              
              
              $
              4,081,619
              
              
              $
              (771,041
              )Six
                  Months Ended March 31,
              
              $
              6,781,364
              
              
              $
              8,237,470
              
              
              $
              (1,456,106
              )




17
 ***Index***





General
      and administrative expenses decreased for the quarter and six months ended
      March
      31, 2007 compared to the quarter and six months ended March 31,
      2006.  This decrease in general and administrative expenses is largely
      due to reductions in our workforce and other costs related to the cessation
      of
      call center activities and other administrative functions associated with our
      check activation campaigns which served to reduce our expenses for compensation
      and reconfirmation, mailing, billing, and other customer-related
      costs.  During the quarter ended March 31, 2006 we incurred
      a  charge of $119,000 associated with the termination of our former
      Chief Financial Officer and various other employees.  We also incurred
      a charge of $337,500 in the six months ended March 31, 2006 associated with
      the
      termination of our former Chief Executive Officer.  These decreases
      were partially offset by increased travel costs related to investor relations
      campaigns and an increase in operational consulting fees.




Our
      general and administrative expenses consist largely of fixed expenses such
      as
      compensation, depreciation, 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
                  2007**
              
              
              **Q1
                  2007**
              
              
              **Q4
                  2006**
              
              
              **Q3
                  2006**
              
              
              **Q2
                  2006**
              
              
              **Q1
                  2006**Compensation
                  for employees,leased
                  employees, officers and directors
              
              $
              1,877,103
              
              
              $
              1,873,582
              
              
              $
              2,073,646
              
              
              $
              1,908,099
              
              
              $
              2,476,713
              
              
              $
              2,476,713Professional
                  fees
              
              
              495,459
              
              
              
              678,089
              
              
              
              697,784
              
              
              
              649,706
              
              
              
              479,696
              
              
              
              416,088Reconfirmation,
                  mailing, billing and othercustomer-related
                  costs
              
              
              34,042
              
              
              
              23,715
              
              
              
              39,180
              
              
              
              245,597
              
              
              
              396,883
              
              
              
              491,947Depreciation
                  and amortization
              
              
              364,724
              
              
              
              336,887
              
              
              
              316,688
              
              
              
              351,342
              
              
              
              369,519
              
              
              
              397,005Other
                  general and administrative costs
              
              
              539,250
              
              
              
              558,513
              
              
              
              411,225
              
              
              
              326,405
              
              
              
              358,808
              
              
              
              374,098




Included
      in compensation for employees, leased employees, officers and directors is
      stock
      compensation, which is the amortization of estimated value for our
      stock  grants under our 2003 Restricted Stock
      Plan.   For the quarter ended March 31, 2007, this expense was
      approximately $467,000 as compared to approximately $471,000 for the same period
      in fiscal 2006.  For the six months ended March 31, 2007, this expense
      was approximately $835,000 as compared to $917,000  for the six months
      ended march 31, 2006.




Included
      in other general and administrative costs are expenses for facilities,
      utilities, telephone, communications, insurance, travel, office-related,
      investor relations and other miscellaneous charges.




*Sales
      and Marketing
      Expenses*




**Sales
                  and Marketing Expenses****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              1,108,760
              
              
              $
              3,207,315
              
              
              $
              (2,098,555
              )Six
                  Months Ended March 31,
              
              $
              3,194,793
              
              
              $
              5,957,802
              
              
              $
              (2,763,009
              )




As
      discussed in Note 2 to our Unaudited Consolidated Financial Statements, we
      enacted a change in accounting principle in the fourth quarter of fiscal 2006
      to
      expense customer acquisition costs when they are incurred and have retroactively
      restated all prior periods presented to reflect such a change.




Sales
      and
      marketing expenses decreased in the quarter and six months ended March 31,
      2007
      as compared to the quarter and six months ended March 31, 2006 primarily due
      to
      the cessation of activation checks in November 2006.  As previously
      discussed, in connection with the attorneys’ general settlement, we have ceased
      utilizing activation checks.  However, we did incur approximately
      $1,000,000 of expenses in the first quarter of fiscal 2007 associated with
      check
      mailers for which we derived no substantial benefit based on the attorneys’
general settlement described above.  Funds previously spent on mail
      campaigns will be earmarked toward other marketing efforts in the
      future.  We expect telemarketing campaigns to be our primary source of
      sales and marketing expenditures in fiscal 2007.




18
 ***Index***





*Litigation
      and Related Expenses*




**Litigation
                  and Related Expenses****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              (200,718
              )
              
              $
              (10,062
              )
              
              $
              (190,656
              )Six
                  Months Ended March 31,
              
              $
              (200,718
              )
              
              $
              161,804
              
              
              $
              (362,522
              )




Litigation
      and related expenses for the three and six months ended March 31, 2007 relate
      to
      the reversal of a portion of the accruals for refunds and other costs that
      were
      recorded in the fourth quarter of fiscal 2006 associated with the attorneys’
general settlement.  Litigation and related expenses for the three and
      six months ended March 31, 2006 relate to adjustments for legal accruals related
      to the settlement of a dispute with a former vendor.




*Operating
      Income (Loss)*


**Operating
                  Income (Loss)****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              1,105,726
              
              
              $
              131,861
              
              
              $
              973,865Six
                  Months Ended March 31,
              
              $
              1,845,781
              
              
              $
              (435,913
              )
              
              $
              2,281,694




Our
      operating income increased substantially in the three and six months ended
      March
      31, 2007 as compared to 2006 due primarily to decreases in sales and marketing
      and general and administrative expenses as well as a reversal of a portion
      of
      our litigation related accruals, offset by decreases in gross profit, each
      of
      which is described above.




*Income
      Tax Benefit (Provision)*




**Income
                  Tax Benefit (Provision)****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              (564,617
              )
              
              $
              (57,303
              )
              
              $
              (507,314
              )Six
                  Months Ended March 31,
              
              $
              (912,773
              )
              
              $
              160,422
              
              
              $
              (1,073,195
              )




The
      changes in our income tax benefit (provision) for the three and six months
      ended
      March 31, 2007 as compared to the three and six months ended March 31, 2006
      are
      due primarily to our change in profitability.   However, we also
      incurred an additional $112,000 and $135,000 of income tax expense for the
      three
      and six months ended March 31, 2007, respectively, due to book-tax differences
      in the recognition of restricted stock awards.  During these periods,
      a portion of our restricted stock awards had vested and, due to declines in
      our
      stock price from grant date to vest date, the tax effects of the vesting of
      these awards were less than the carrying value of our related deferred tax
      assets.




*Net
      Income (Loss)*




**Net
                  Income (Loss)****2007**
              
              
              **2006**
              
              
              **Change**Three
                  Months Ended March 31,
              
              $
              626,262
              
              
              $
              129,998
              
              
              $
              496,264Six
                  Months Ended March 31,
              
              $
              1,111,460
              
              
              $
              (197,094
              )
              
              $
              1,308,554




The
      increase in net income for the three and six months ended March 31, 2007 as
      compared to the three and six months ended March 31, 2006 is primarily due
      to
      reduced general and administrative and sales and marketing expenses, and
      increased other income, offset by decreased gross profit and increased income
      tax expense, each of which is described above.




**Liquidity
      and Capital Resources**




Net
      cash
      provided by operating activities decreased $604,782 to $251,265 for the first
      six months of fiscal 2007, compared to $856,046 for the first six months of
      fiscal 2006.  This was due primarily to the payment of our $2,000,000
      settlement fee with the attorneys general, $917,000 of related refunds and
      approximately $300,000 of legal and other related costs associated with the
      settlement, partially offset by an increase in net income and changes in
      operating assets and liabilities.




19
 ***Index***





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, the net receivable due from
      three of our billing services providers represented 26%, 22% and 21%,
      respectively, of our total net accounts receivable (excluding
      non-specific reserves) at March 31, 2007. The net receivable due from
      such billing services providers represented 27%, 27% and 27%, respectively,
      of
      our total net accounts receivable at September 30, 2006.




Our
      most
      significant cash outflows include payments for marketing expenses and general
      operating expenses.   Marketing costs have historically included
      direct response mailing costs and telemarketing costs, but we no longer expect
      to incur significant mailing costs in the future due to the attorneys’ general
      settlement.  Funds previously spent on mail campaigns will be
      earmarked toward other marketing efforts in the future.  General
      operating cash outflows consist of payroll costs, professional fees income
      taxes, and general and administrative expenses that typically occur within
      close
      proximity of expense recognition.  We utilize non-cash compensation
      awards through grants of restricted stock under our 2003 Stock Plan and expect
      to continue to utilize such awards in the future.




Cash
      used
      for investing activities was $733,354 for the six months ended March 31, 2007,
      consisting of $502,487 of expenditures for intangible assets for website
      licenses, website development costs, online customer service and customer
      relationship management software, $172,602 of equipment purchases, and increases
      in certificates of deposits and other investments of $58,265.  During
      the six months ended March 31, 2006, cash used for investing activities was
      $160,352, consisting of $113,403 of website development costs, $14,746 for
      equipment purchases and $32,203 for purchases of certificates of deposits and
      other investments.




There
      were no financing cash flows for the six months ended March 31,
      2007.  For the six months ended March 31, 2006, cash flows used in
      financing activities consisted of $134,418 of acquisitions of our common stock
      through our stock repurchase program.




We
      had
      working capital of $14,907,120 as of March 31, 2007, compared to $13,908,560
      as
      of September 30, 2006.  During the six months ended March 31, 2007,
      total current assets declined by approximately $2.9 million while total current
      liabilities decreased by approximately $3.9 million.  The decline
      in current assets was primarily attributable to an approximate $2.2 million
      reduction in net accounts receivable and an approximate $1.5 million decline
      in
      deferred tax asset partially offset by a $1.1 million increase in income tax
      receivable.  Accounts receivable declined primarily due to collections
      and lower revenues.  Deferred tax assets declined primarily due
      to  payments made in connection with attorneys general settlement,
      vesting of restricted stock  and a reduction in accounts receivable
      reserves.  Our increase in income tax receivable is attributable to
      estimated tax payments that exceeded our tax liability as we made payments
      based
      on book income, whereas, after utilization of certain deferred tax items, we
      did
      not owe any taxes for the six months ended March 31, 2007.




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 to our common
      shareholders.  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 second quarter of fiscal 2006, the Company entered into a contractual
      arrangement with an attorney to provide contracted legal services.
      Under the terms of the agreement , the Company is obligated to make future
      payments over the next two years totaling $141,750 in exchange for future
      services. Such amounts have not been accrued in the accompanying consolidated
      financial statements as such payments are for future services.  The
      Company has expensed all amounts related to services rendered through March
      31,
      2007.





20
 ***Index***





During
      the third quarter of  fiscal 2006, the Company entered into a
      contractual arrangement with a consulting firm to provide strategic and
      operational related consulting services.  Under the terms of the
      agreement, the Company is obligated to make future payments through February
      2010 that vary based on the Company’s billed customer count, subject to a
      minimum of $20,000 per month.  Current payments are approximately
      $65,000 per month.  Such amounts have not been accrued in the
      accompanying consolidated financial statements as such payments are for future
      services.  The Company has  expensed all amounts related to
      services rendered through March 31, 2007.





During
      the fourth quarter of fiscal 2006, we entered into a contractual arrangement
      with an information technology company to provide information technology
      consulting services.  Under the terms of the agreement, we are
      obligated to make future payments of $29,500 per month through September
      2009.  Such amounts have not been accrued in the accompanying
      consolidated financial statements as such payments are for future
      services.  We have expensed all amounts related to services rendered
      through March 31, 2007.




The
      following table summarizes our contractual obligations at March 31, 2007 and
      the
      effect such obligations are expected to have on our future liquidity and cash
      flows:


**Payments
                  Due by Fiscal Year****Total**
              
              
              **2007**
              
              
              **2008**
              
              
              **2009**
              
              
              **2010**
              
              
              **2011**
              
              
              **Thereafter**Operating
                  lease commitments
              
              $
              625,865
              
              
              $
              144,950
              
              
              $
              159,899
              
              
              $
              116,733
              
              
              $
              116,733
              
              
              $
              87,550
              
              
              $
              -Noncanceleable
                  service contracts
              
              
              1,726,750
              
              
              
              391,500
              
              
              
              641,250
              
              
              
              594,000
              
              
              
              100,000
              
              
              
              -
              
              
              
              -$
              2,352,615
              
              
              $
              536,450
              
              
              $
              801,149
              
              
              $
              710,733
              
              
              $
              216,733
              
              
              $
              87,550
              
              
              $
              -


We
      have
      no off-balance sheet arrangements at March 31, 2007.





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
 ***Index***





ITEM3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK





As
      of
      March 31, 2007, 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
      periods set forth in this report) 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
 ***Index***





**PART
      II – OTHER INFORMATION**




ITEM
        1.   LEGAL PROCEEDINGS




See
        Note
        4 of the Company’s Notes to Unaudited Consolidated Financial
        Statements




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





The
      following matters were submitted to a vote of our stockholders at our annual
      stockholders meeting held on February 8, 2007:




·
            Election
                of Joseph Cunningham, Daniel L. Coury, Sr., Richard Butler, Benjamin
                Milk
                and Elisabeth DeMarse to the Company’s board of
                directors.




·
            Approval
                of an amendment to the YP Corp. 2003 Stock Plan to increase the number
                of
                shares authorized for issuance under the plan from 5,000,000 shares
                to
                8,000,000 shares.




·
            Amendment
                to and restatement of the Company’s articles of incorporation to provide
                for the classification of the board of directors into three classes
                of
                directors, each with staggered three-year
                terms.




·
            Ratification
                of the appointment of Epstein, Weber & Conover, P.L.C. as the
                Company’s independent auditor for the fiscal year ending September 30,
                2007.




**Election
      of Directors**




The
      allocation of votes for the election of the nominees to the board of directors
      was as follows:




Nominee
            Class
                (Term expires)
            Votes
                For
            Votes
                Withheld
            Abstentions
                and Broker Non-VotesJoseph
                Cunningham
            I
                (2010)
            45,004,286
            856,144
            N/ADaniel
                L. Coury, Sr.
            I
                (2010)
            48,231,766
            137,244
            N/ARichard
                Butler
            II
                (2009)
            46,207,366
            61,644
            N/ABenjamin
                Milk
            II
                (2009)
            46,194,866
            74,144
            N/AElisabeth
                DeMarse
            III
                (2008)
            46,204,866
            64,144
            N/A




**Approval
      of Amendment to YP Corp. 2003 Stock Plan**




The
      allocation of votes with respect to the proposed amendment to the YP Corp.
      2003
      Stock Plan was as follows:




Votes
                For
            Votes
                Against
            Abstentions
                and Broker Non-VotesProposal
                to Increase the Number of Shares Authorized for Issuance Under the
                YP
                Corp. 2003 Stock Plan from 5,000,000 shares to 8,000,000
                shares
            15,454,650
            12,880,749
            20,033,611




23
 ***Index***





**Amendment
      to Articles of Incorporation – Classification of Board of
      Directors**




The
      allocation of votes with respect to the proposed amendment to the Company’s
      articles of incorporation was as follows:




Votes
                For
            Votes
                Against
            Abstentions
                and Broker Non-VotesProposal
                to Amend the Articles of Incorporation to Classify the Board of Directors
                Into Three Classes of Directors with Staggered Three-Year
                Terms
            9,910,131
            18,420,702
            20,033,177




**Ratification
      of Independent Auditors**




The
      allocation of votes for the ratification of Epstein, Weber & Conover, P.L.C.
      as the Company’s independent auditor for the fiscal year ending September 30,
      2007 was as follows:




Votes
                For
            Votes
                Against
            Abstentions
                and Broker Non-VotesProposal
                to Ratify Epstein, Weber & Conover, P.L.C. as the Company’s
                Independent Auditor
            48,174,996
            164,014
            25,000




The
      proposals above are described in detail in the Company’s definitive proxy
      statement dated January 9, 2007, for the Annual Meeting of Stockholders held
      on
      February 8, 2007.




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 Annual Report on Form 10-K, filed December 29,
                2006)3.2
            
            Amended
                and Restated Bylaws (incorporated by reference to the Company’s Annual
                Report on Form 10-K, filed December 29, 2006)31
            
            Certifications
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200232
            
            Certifications
                pursuant to 18 U.S.C. Section 1350





24
 ***Index***





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.




Dated:  May
                15 , 2007
            */s/
                Gary L. .Perschbacher*Gary
                L. PerschbacherChief
                Financial Officer