U.S. Securities and Exchange Commission
                              Washington, DC 20549

                                   FORM 10-QSB

         [x]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For the quarterly period ended September 30, 2005

         [  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                  EXCHANGE ACT

                  For the transition period from __________ to __________


                        Commission File Number 000-13822

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


              Nevada                                   83-0210455
              ------                                   ----------
 (State or other jurisdiction of                     (IRS Employer
         incorporation)                            Identification No.)

       4699 Old Ironsides Drive, Suite 420, Santa Clara, California 95054
  ---------------------------------------------------------------------------
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (408) 956-8000
                                                           --------------

                180 Rose Orchard Way, San Jose, California 95134
  ---------------------------------------------------------------------------
(Former name, former address and former fiscal year if hanged from last report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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.  [X] Yes   [ ] No

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date.

Common stock,  par value $0.0001 - 35,852,504  shares  outstanding as of October
30, 2005.

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


<PAGE>

                         PART I - FINANCIAL INFORMATION

All  financial  information,  with the  exception  of  stock,  are  reported  in
thousands (000's).

Item 1.  Financial Statements

NAYNA NETWORKS, INC.
(a development stage enterprise)
BALANCE SHEET
(in thousands, except share and per share data)
--------------------------------------------------------------------------------
(Unaudited)

<TABLE>
<CAPTION>
                                                                      September 30,
                                                                          2005
<S>                                                                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                           $     91
   Accounts receivable, net of allowance for doubtfuls of $33                63
   Prepaid expenses and other current assets                                 79
                                                                       --------
          Total current assets                                              233

Property and equipment, net                                                 150
Other assets                                                                193
                                                                       --------
              Total assets                                             $    576
                                                                       ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
   Accounts payable                                                    $  1,292
   Accrued liabilities                                                      281
   Accrued payroll liabilities                                              547
   Notes payable                                                          1,328
                                                                       --------
          Total current liabilities                                       3,448
Convertible debentures                                                    2,372
                                                                       --------
          Total liablities                                                5,820
                                                                       --------

Stockholders' (deficit) equity
    Common stock, $0.001 par value:
       Authorized  shares - 1,000,000,000; issued and outstanding
       shares - 35,802,504 at September 30, 2005                             30
    Additional paid-in capital                                           51,981
    Deficit accumulated during the development stage                    (57,255)
                                                                       --------
           Total stockholders' (deficit) equity                          (5,244)
                                                                       --------
              Total liabilities and stockholders' (deficit) equity     $    576
                                                                       ========
</TABLE>

See accompanied notes to these unaudited condensed financial statements

<PAGE>

NAYNA NETWORKS, INC.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(in thousands)
--------------------------------------------------------------------------------
(Unaudited)

<TABLE>
<CAPTION>
                                                                      Quarter Ended September 30,
                                                                    ------------------------------
                                                                        2005              2004
                                                                    ------------      ------------
<S>                                                                 <C>               <C>
Operating expenses:
Research and development                                            $        780      $        693
Business development                                                         110               304
General and administrative                                                   314                52
                                                                    ------------      ------------
         Total operating expenses                                          1,204             1,049
                                                                    ------------      ------------

Loss from operations                                                      (1,204)           (1,049)

Interest income                                                               --                 5
Interest expense                                                             (24)               (4)
Gain on sale of assets                                                        --                --
Merger related costs                                                          (7)               --
Impairment of goodwill and other intangible assets                            --                --
                                                                    ------------      ------------
         Net loss                                                   $     (1,235)     $     (1,048)
                                                                    ============      ============

Net loss per share - basic and diluted
basic                                                                     (0.034)           (0.040)
diluted

Shares used in computing net loss per share - basic and diluted
       2004 adjusted for the 1:5.9  reverse split that occurred
       immediately prior to the April 1, 2005 merger

basic                                                                 35,852,504        26,302,504
diluted
</TABLE>

See accompanied notes to these unaudited condensed financial statements

<PAGE>

NAYNA NETWORKS, INC.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(in thousands)
--------------------------------------------------------------------------------
(Unaudited)

<TABLE>
<CAPTION>
                                                                                                Cumulative
                                                                                                Period from
                                                                                               February 10,
                                                                                               2000 (date of
                                                            Nine Months Ended September 30,    inception) to
                                                            ------------------------------     September 30,
                                                                2005              2004              2005
                                                            ------------      ------------      ------------
<S>                                                         <C>               <C>               <C>
Operating expenses:
Research and development                                    $      2,689      $      3,012      $     41,639
Business development                                                 533               911             3,143
General and administrative                                           740               352             8,274
                                                            ------------      ------------      ------------
        Total operating expenses                                   3,962             4,275            53,056
                                                            ------------      ------------      ------------
Loss from operations                                              (3,962)           (4,275)          (53,056)
Interest income                                                       --                13             2,392
Interest expense                                                     (40)              (37)             (872)
Gain on sale of assets                                               370                --               358
Merger related costs                                                (243)               --              (243)
Impairment of goodwill and other intangible assets                    --                --            (5,834)
                                                            ------------      ------------      ------------
         Net loss                                           $     (3,874)     $     (4,299)     $    (57,255)
                                                            ============      ============      ============
Net loss per share - basic and diluted
basic                                                             (0.119)           (0.186)
diluted

Shares used in computing net loss per share - basic
       and diluted 2004 adjusted for the 1:5.9 reverse
       split that occurred immediately prior to the
       April 1, 2005 merger
basic                                                         32,652,504        23,082,688
diluted
</TABLE>


See accompanied notes to these unaudited condensed financial statements



<PAGE>

NAYNA NETWORKS, INC.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
(in thousands)
--------------------------------------------------------------------------------
(Unaudited)


<TABLE>
<CAPTION>
                                                                                                         Cumulative
                                                                                                         Period from
                                                                                                         February 10,
                                                                                Nine Months Ended       2000 (date of
                                                                                   September 30,        inception) to
                                                                              ----------------------    September 30,
                                                                                2005          2004          2005
                                                                              --------      --------      --------
<S>                                                                           <C>           <C>           <C>
Cash flows from operating activities:

Net loss                                                                      $ (3,874)     $ (4,299)     $(57,256)
Adjustments to reconcile net loss to net cash used in operations:
Noncash charges related to stock options granted to consultants and
  accelerated vesting of employee stock options                                     --            --            40
Depreciation and amortization                                                      388           458         4,138
Amortization of discount on warrants associated with equipment financing            --            17           202
Impairment of goodwill related to acquisitions                                      --            --         5,834
Loss (gain) on sale of property and equipment                                       --            --           756

 Changes in operating assets and liabilities:
   Restricted cash                                                                  49            --
   Accounts receivable                                                              97           (41)          (63)
   Prepaid expenses and other current assets                                       (44)          (38)          (79)
   Other assets                                                                   (177)           29           137
   Accounts payable                                                                639           204         1,294
   Accrued liabilities                                                              41           (76)          288
   Accrued payroll liabilities                                                     250            66           547
                                                                              --------      --------      --------
  Net cash used in operating activities                                         (2,631)       (3,680)      (44,162)
                                                                              --------      --------      --------

Cash flows from investing activities:
 Purchase of property and equipment                                                               (4)       (1,239)
 Proceeds from sale of property and equipment                                      260            --           746
 Costs associated with acquisition of Xpeed, Inc.                                   --            --        (3,685)
                                                                              --------      --------      --------
 Net cash used in investing activities                                             260            (4)       (4,178)
                                                                              --------      --------      --------

Cash flows from financing activities:
 Proceeds from (repayments on) loan facility                                       610          (690)          631
 Payments on capital lease obligations and loan facility                        (1,229)         (148)       (5,599)
 Proceeds from issuance of common stock, net of repurchases                         --            13           243
 Proceeds from issuance of Series A redeemable convertible
   preferred stock, net of issuance costs                                           --            --        11,953
 Proceeds from issuance of Series B redeemable convertible
   preferred stock, net of issuance costs                                           --            --        35,897
 Proceeds from issuance of Series D redeemable convertible
   preferred stock, net of issuance costs                                           --         3,651         3,399
 Issuance of convertible debt                                                    2,372            --         2,072
 Restricted cash                                                                    --            --          (165)
                                                                              --------      --------      --------
 Net cash provided (used) by financing activities                                1,753         2,826        48,431
                                                                              --------      --------      --------
Net decrease in cash and cash equivalents                                         (618)         (858)           91
Cash and cash equivalents at beginning of period                                   709         1,663            --
Cash and cash equivalents at end of period                                    $     91      $    805      $     91
                                                                              ========      ========      ========
</TABLE>

See accompanied notes to these unaudited condensed financial statements


<PAGE>

Notes to Condensed Financial Statements (unaudited)

NOTE 1:  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background

Nayna Networks, Inc., a development stage enterprise (the "Company" or "Nayna"),
is engaged in the development of  next-generation  broadband  access  networking
solutions.  Nayna was  incorporated  in  Delaware  on  February  10, 2000 and is
located in Santa Clara, California.

During 2003, the Company expanded its business  development focus as a result of
an  acquisition  of another  company,  to develop  and  market  passive  optical
networks ("PON") equipment and digital  subscriber line ("DSL")  equipment.  PON
equipment delivers high performance  broadband access over fiber cable,  linking
business and residential subscribers to the local central office. DSL technology
provides  high-speed  data  transmission  using  the local  telephone  company's
existing  infrastructure.  During  2004,  the  Company  shifted its focus in its
development  efforts in the  Ethernet in the First Mile  ("EFM")  segment of the
broadband  access market.  The Company has introduced a new platform that builds
upon the Company's PON expertise  through its support for the latest  generation
Gigabit Ethernet.

On April 4, 2005, Nayna merged into Rescon Technology Corporation ("Rescon"),  a
publicly  traded  company,  and  became a  wholly-owned  subsidiary  of  Rescon.
Following the merger,  Rescon Technology  Corporation  changed its name to Nayna
Networks, Inc.

The  Company is in the  development  stage and,  since  inception,  has  devoted
substantially  all of its efforts to the  development  of its products,  raising
capital,  and recruiting  personnel.  The Company has incurred  losses since its
inception,  and  management  believes  that  it will  continue  to do so for the
foreseeable future because of additional costs and expenses related to continued
development  and  expansion  of the  Company's  product  offerings.  The Company
currently  plans to generate  revenues and reduce  operating  expenses to levels
that will result in at least neutral cash flows from operations. However, until,
and if, that stage is reached, the Company will continue to use its current cash
on hand and require additional  financing to support its operations.  Failure to
generate  sufficient cash flows from operations,  raise additional  financing or
reduce certain  discretionary  spending could have a material  adverse effect on
the Company's ability to continue as a going concern and to achieve its intended
business  objectives.  The accompanying  financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

The Company's  common stock is traded on the Nasdaq OTC Bulletin Board under the
trading symbol OTC:BB:NAYN.OB.


<PAGE>

Development Stage Enterprise

Since  its   inception,   although  the  Company  has  commenced  its  principal
operations, it has not achieved a sufficient level of sales and market demand to
become an established operating enterprise.  Therefore, the Company is currently
classified as a development  stage  enterprise  under the Statement of Financial
Accounting  Standards  ("SFASB") No. 7, "Accounting and Reporting by Development
Stage Enterprises."  Successful  completion of the Company's development program
and the  attainment  of  profitable  operations  is dependent on future  events,
including, among other things, the receipt of adequate financing to continue its
operations and fulfill its development activities and the achievement of a level
of sales  adequate  to support the  Company's  cost  structure.  There can be no
assurance that the Company will successfully accomplish these events.

The  Company  has  experienced  net  losses  since  its  inception  and  had  an
accumulated  deficit of $57.3 million as of September 30, 2005.  Such losses are
attributable to cash and non-cash expenses  resulting from costs incurred in the
development of the Company's  products and  infrastructure.  The Company expects
operating  losses to continue  for the  foreseeable  future as it  continues  to
develop and market its products.  However, the Company's ability to continue its
operations  as a going  concern  is in  doubt  (See  Note  10 - Going  Concern).
Regardless of when or if the Company is able to commercialize its products,  the
Company will require  additional  funding and may sell additional  shares of its
common stock or preferred stock through private  placement or public  offerings.
There can be no  assurance  that the Company  will be able to obtain  additional
debt or equity financing, if and when needed, on terms acceptable to the Company
or at all. Any  additional  equity or  convertible  debt  financing  may involve
substantial dilution to the Company's  stockholders,  restrictive covenants,  or
high interest costs. The failure to raise needed funds on sufficiently favorable
terms could have a material adverse effect on the Company's business,  operating
results, and financial condition. The Company's long-term liquidity also depends
upon its ability to increase  revenues from the sale of its products and achieve
profitability.  The failure to achieve these goals could have a material adverse
effect on the operating results and financial condition of the Company.

The successful  accomplishment  of future  activities and initiatives  cannot be
determined at this time due to, among other things,  current market  conditions,
the  volatility of the Company's  business and the industry in which it competes
and other factors as are set forth herein under the caption  "Risk  Factors" and
in other filings made, from time to time,  with the Commission.  There can be no
assurance  that the Company will have  sufficient  funds to execute its intended
business plan or generate positive operating results.

Basis of Presentation

The  accompanying  condensed  financial  statements are unaudited,  as permitted
pursuant to the rules and regulations of the Securities and Exchange  Commission
(the  "Commission").  Certain  information and disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  These interim  financial  statements
include all  adjustments,  which in the opinion of management,  are necessary in
order to make the financial  statements  not  misleading.  It is suggested  that
these condensed  financial  statements be read in conjunction with the financial
statements and notes thereto included in the Company's Transition Report on Form
10-KSB for the  transition  period from  September  1, 2004 to December 31, 2004
filed with the Commission on August 16, 2005, the Company's  Current  Reports on
Form 8-K filed with the  Commission  on April 8,  2005,  as amended on April 18,
April 20, April 26 and July 29, 2005,  the  Company's  Quarterly  Report on Form
10-QSB,  for the period ended June 30, 2005, filed with the Commission on August
19, 2005, and other filings that the Company may make,  from time to time,  with
the Commission.


<PAGE>

The information  contained herein has been prepared by the Company in accordance
with the rules of the Commission.  The financial information contained herein as
of September 30, 2005, for the three and nine month periods ended  September 30,
2005  and  corresponding  periods  is  unaudited.   The  consolidated  financial
statements  reflect  all  adjustments,   consisting  of  only  normal  recurring
accruals,  which  are,  in  the  opinion  of  management,  necessary  for a fair
statement of the results of the interim  periods  presented.  The results of the
Company's  operations for any interim period are not  necessarily  indicative of
the results of the Company's  operations  for ay other  interim  period or for a
full year.

All amounts set forth in these Notes to Condensed  Financial  Statements  are in
thousands  (`000s),  except  per share data  (except  where  specifically  noted
otherwise).

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and assumptions.  These estimates and assumptions  affect the reported
amounts of assets, liabilities, revenues, expenses and disclosures of contingent
assets and  liabilities  at the date of the  financial  statements.  Significant
estimates include revenue recognition, inventory valuation, useful lives and the
valuation  of  long-lived  assets.   Actual  results  could  differ  from  these
estimates.  Additionally,  a change in the facts and  circumstances  surrounding
these  estimates  could  result in a change to the  estimates  and could  impact
future results.

Inventory Valuation

As a development  stage  enterprise,  the Company  expenses all  inventories  to
research and development until such time as commercial revenues may commence.

Impairment of Long-Lived Assets

The Company evaluates its long-lived  assets,  including property and equipment,
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying amount of an asset may not be recoverable.  When the sum of the present
value of future net cash flows  expected to result from the use of the asset and
its eventual  disposition is less than its carrying  amount,  an impairment loss
would be measured  based on the  discounted  cash flows compared to the carrying
amount.  No impairment  charge has been recorded in any of the periods presented
herein.


<PAGE>

Cash and Cash Equivalents

For  purposes  of the  statement  of  cash  flows,  the  Company  considers  all
instruments  with  an  original  maturity  of  three  months  or less to be cash
equivalents.

Property and Equipment

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  expense is  determined  using the  straight-line  method  over the
estimated  useful lives of the respective  assets,  which are generally three to
five years for  computers,  equipment and furniture.  Depreciation  on leasehold
improvements is provided using the straight-line  method over the shorter of the
estimated useful lives of the  improvements or the lease term.  Expenditures for
maintenance  and repairs  are charged to  operating  expense as  incurred.  Upon
retirement or sale, the original cost and related  accumulated  depreciation are
removed from the respective  accounts,  and the gains and losses are included in
other income or expense.

Business and Credit Risk

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents invested in deposits and
trade receivables. The Company has not experienced any losses on its deposits of
cash  and cash  equivalents.  Management  believes  that  the  institutions  are
financially  sound and,  accordingly,  minimal credit risk exists.  The carrying
values  reported  in the balance  sheets for cash,  cash  equivalents  and trade
receivables approximate their fair values.

Research and Development

The Company  accounts for  research and  development  costs in  accordance  with
Statement of Financial  Accounting  Standards  ("SFAS") No. 2,  "Accounting  for
Research and development Costs," and, accordingly, the Company expenses research
and development costs when incurred.

Income Taxes

The Company  recognizes  deferred tax assets and  liabilities for operating loss
carryforwards,   tax  credit   carryforwards   and  the  estimated   future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which the  temporary  differences  are  expected to be
recovered or settled.  A valuation  allowance is recorded to reduce the carrying
amounts of net  deferred  tax  assets if there is  uncertainty  regarding  their
realization.

Stock-Based Compensation

The  Company  accounts  for its  stock-based  employee  compensation  using  the
intrinsic  value method in accordance  with  Accounting  Principles  Board (APB)
Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees,"  and  Financial
Accounting Standards Board ("FASB")  Interpretation  ("FIN") No. 44, "Accounting
for Certain Transactions Involving Stock Compensation."


<PAGE>

Stock and other equity  instruments issued to non-employees are accounted for in
accordance with SFAS No. 123,  "Accounting for  Stock-Based  Compensation,"  and
EITF Issue No.  96-18,  "Accounting  for Equity  Instruments  That Are Issued to
Other Than Employees for Acquiring,  or in  Conjunction  with Selling,  Goods or
Services," and are valued using the Black-Scholes model.

No stock-based employee  compensation cost related to stock options is reflected
in net income  (loss),  as all options  granted under the Company's  stock-based
compensation  plans had an exercise  price equal to fair value of the underlying
common stock on the applicable grant date.

Goodwill and Purchased Intangible Assets

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142,  "Goodwill and Other  Intangible  Assets"  ("SFAS 142").  SFAS 142 requires
goodwill to be tested for impairment on an annual basis and between annual tests
in certain  circumstances,  and written  down when  impaired,  rather than being
amortized  as previous  accounting  standards  required.  Furthermore,  SFAS 142
requires  purchased  intangible  assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite.

NOTE 2:  PREPAID EXPENSES

Prepaid  expenses  consisted of the following at September 30, 2005 and December
31, 2004:

<TABLE>
<CAPTION>
                                                     September 30,    December 31,
                                                         2005             2004
                                                      ----------      ----------
<S>                                                  <C>             <C>
Prepaid lease                                         $      177      $        0
Other                                                         91              35
                                                      ----------      ----------

Balance                                               $      268      $       35
                                                      ==========      ==========
</TABLE>

NOTE 3:  PROPERTY AND EQUIPMENT

Property and  equipment  consisted of the following as of September 30, 2005 and
December 31, 2004:

<TABLE>
<CAPTION>
                                                    September 30,    December 31,
                                                        2005            2004
                                                     ----------      ----------
<S>                                                 <C>             <C>
Computer equipment                                   $      450      $      417
Computer software                                         1,354           1,354
Test equipment                                              173           1,608
Furniture and fixtures                                        2               2
                                                     ----------      ----------
                                                          1,979           3,381
Less: Accumulated depreciation                           (1,829)         (2,583)
                                                     ----------      ----------
Balance                                              $      150      $      798
                                                     ==========      ==========
</TABLE>


<PAGE>

NOTE 4:  LEASES

On July 31, 2005,  the  Company's  lease on 180 Rose  Orchard Way, San Jose,  CA
expired.  The Company has subsequently signed a six month lease for the premises
located at 4699 Old Ironsides Drive, Santa Clara, California,  which the Company
now occupies as its primary headquarters.

On June 1,  2005,  the  Company  completed  the  sale of  certain  equipment  to
TFG-California,  L.P.  ("TFG").  Subsequent to such sale, the Company leased the
equipment  back from TFG through an operating  lease having a term of 24 months.
Under the terms of the  lease  agreement,  the  Company  received  approximately
$700,000.  Such amount is being held, on the Company's  behalf, by TFG, and will
be released upon the Company meeting certain conditions.

NOTE 5:  DEBT

In April 2003,  in  connection  with the Company's  acquisition  of Xpeed,  Inc.
("Xpeed"), the Company agreed to pay off $5,904 towards liabilities of Xpeed. As
of  September  30, 2005 and  December  31,  2004,  the  following  amounts  were
outstanding under this obligation:

<TABLE>
<CAPTION>
                                                      September 30,   December 31,
                                                          2005           2004
                                                       ----------     ----------
<S>                                                    <C>            <C>
Accrued liabilities for expenses                       $      122     $      106
Notes payable                                                 225            360
                                                       ----------     ----------
Total                                                  $      347     $      466
                                                       ==========     ==========
</TABLE>

<PAGE>



Beginning in late 2004 and during this fiscal year, the Company has continued to
fund its  operations  through  debt.  As of September  30, 2005 and December 31,
2004, the following amounts are outstanding:

<TABLE>
<CAPTION>
                                                      September 30,  December 31,
                                                          2005           2004
                                                       ----------     ----------
<S>                                                   <C>            <C>
Notes Payable (includes $23 of
        interest accrued on Bridge Loan)               $    1,103     $        0
Convertible Debentures                                      2,372          1,138
                                                       ----------     ----------
Total Notes Payable                                    $    3,475     $    1,138
                                                       ==========     ==========
</TABLE>

NOTE 6:  NET LOSS PER SHARE

Basic  Earnings  (Loss) per Share ("EPS")  excludes  dilution and is computed by
dividing  net  income  or  loss  attributable  to  common  stockholders  by  the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects  the  potential  dilution  that  could  occur  if  securities  or other
contracts to issue common stock (convertible notes,  warrants to purchase common
stock and common stock options using the treasury  stock method) were  exercised
or converted  into common stock.  Potentially  dilutive  securities are excluded
from the  diluted  EPS  computation  in loss  periods as their  effect  would be
anti-dilutive.

<TABLE>
<CAPTION>
                                          Three months ended                  Nine months ended
                                   September 30,      September 30,    September 30,      September 30,
                                       2005               2004             2005               2004
<S>                                <C>               <C>               <C>               <C>
Numerator - Basic                  $     (1,235)     $     (1,048)     $     (3,874)     $     (4,299)

Denominator - basic
Weighted average common shares
outstanding                          35,852,504        26,302,504        32,652,504        23,082,688

Net loss per share - basic               (0.034)           (0.040)           (0.119)           (0.186)

Antidilutive securities
   Options                            4,987,443         1,297,031         4,780,776         1,297,031
   Warrants                             525,445            88,600           218,630            88,600
</TABLE>


NOTE 7:  COMMON STOCK (in actual amounts)

As of September 30, 2005,  there were  35,852,504  shares of Common Stock issued
and outstanding.


<PAGE>

NOTE 8:  RESEARCH AND DEVELOPMENT EXPENSE

Research  and  development  expense for the quarter  ended  September  30, 2005,
included the following:

                                                        September 30, 2005
                                                        ------------------
        Employee payroll and related expense                  $  251
        Cost of material                                          74
        Outside services                                          90
        Allocation of administrative overheads                   392
        Recovery of expenses from customers                      (27)
                                                              ------
                                                              $  780
                                                              ======

NOTE 9:  LEGAL MATTERS

The Company is from time to time party to various legal proceedings,  arising in
the  ordinary  course of  business.  Based on  evaluation  of these  matters and
discussions  with the Company's  counsel,  the Company believes that liabilities
arising from or sums paid in settlement of these existing  matters will not have
a material adverse effect on the consolidated results of operations or financial
position of the Company.

NOTE 10:    GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles in the United States of America,  which
contemplate continuation of the Company as a going concern. However, the Company
has incurred losses since its inception and has current liabilities in excess of
current  assets.  In October  and  November  of 2005,  the  Company  received an
aggregate of approximately  $180,000 in bridge loans from certain lenders.  Such
notes are due  within  120 days of the  respective  issuance  dates and carry an
interest rate of 8% per annum.  Notwithstanding the foregoing,  the Company does
not have  sufficient  cash on hand to continue its operations in the manner they
have  historically  been conducted.  These factors raise substantial doubt about
the  ability of the  Company to continue  as a going  concern.  In this  regard,
management is proposing to raise any necessary  additional funds not provided by
operations  through loans or through additional sales of its common stock. There
is no assurance  that the Company will be successful in raising this  additional
capital or in achieving profitable  operations.  The financial statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.

Item 2.  Management's Discussion and Analysis or Plan of Operations

This Quarterly Report on Form 10-QSB, including the following sections, contains
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1995 and Section 21E of the Securities  Exchange Act of
1934,  as amended.  Any  statements  contained  in this Form 10-QSB that are not
statements of historical  fact may be deemed to be  forward-looking  statements.
Without  limiting  the  foregoing,   words  such  as  "may,"  "will,"  "expect,"
"believe,"  "anticipate," "estimate" or "continue" or comparable terminology are
intended to identify  forward-looking  statements.  These  statements,  by their
nature,  involve  substantial  risks  and  uncertainties,   and  the  cautionary
statements set forth below and those set forth herein under the caption entitled
"Risk  Factors"  identify  important  factors that could cause actual results to
differ materially from those predicted in any such  forward-looking  statements.
Investors  should  not place  any undue  reliance  on any such  forward  looking
statements  and are cautioned  that actual  results may differ  materially  from
those  projected in the  forward-looking  statements as a result of certain risk
factors  identified in this Quarterly Report on Form 10-QSB and other filings we
have made, and may make, with the Securities and Exchange Commission.


<PAGE>

Any forward-looking statements made by us do not reflect the potential impact of
any future acquisitions,  mergers,  dispositions,  joint ventures or investments
the Company may make. The Company does not assume,  and specifically  disclaims,
any obligation to update any  forward-looking  statements,  and these statements
represent the Company's current outlook only as of the date given.

The  following  discussion  should  be read in  conjunction  with the  condensed
financial  statements and notes thereto  included  elsewhere in this report,  as
well as, the financial  statements  and notes thereto  included in the Company's
Transition  Report on Form 10-KSB for the transition period from August 31, 2004
to December 31, 2004 filed with the Commission on August 16, 2005, the Company's
Current  Report on Form 8-K  filed  with the  Commission  on April 8,  2005,  as
amended  on April  18,  April  20,  April 26 and July 29,  2005,  the  Company's
Quarterly Report on Form 10-QSB, for the period ending June 30, 2005, filed with
the  Commission  on August 19,  2005,  and other  reports and  filings  that the
Company may make from time to time with the Commission.

OVERVIEW

Headquartered  in  Santa  Clara,  CA,  Nayna  Networks,  Inc.,  ("Nayna"  or the
"Company") is a hardware and software development company that designs, develops
and markets next generation  broadband access solutions,  also known as Ethernet
in the First Mile ("EFM") for the secure communications market.

Nayna  was  formed  as a result  of a merger  and  plan of  reorganization  (the
"Merger") between ResCon Technology  Corporation  ("Rescon") and Nayna Networks,
Inc.  ("NNI").  On April 1, 2005,  NNI merged into  Rescon in a  stock-for-stock
transaction.  As a result  of the  Merger,  Rescon  continued  as the  surviving
corporation,  assumed the operations and business plan of NNI, the  stockholders
of NNI became  stockholders  of Rescon,  and  Rescon  changed  its name to Nayna
Networks, Inc. (trading symbol OTC:BB:NAYN.OB).


<PAGE>

RESULTS OF OPERATIONS

Revenues, Cost of Sales and Gross Profit

For the three and nine month periods ended  September 30, 2005 and September 30,
2004,  the Company  did not have any  material  revenue,  cost of sales or gross
profit.  As a development  stage  company,  any revenues  generated by trial and
evaluation sales have been classified as a reduction of expenses.

Operating Expenses

Operating  expenses include research and development,  business  development and
general and  administrative  expenses.  Total  operating  expenses for the three
months ended  September  30, 2005 and  September  30, 2004 were $1.2 million and
$1.0 million,  respectively.  Such increase of $155,000 resulted  primarily from
the following:

      o     Increased  research  and  development  expenditures  of $88,000 as a
            result of the Company's recent  completion of development of the its
            ExpressSTREAM product line;

      o     Decreased business development  expenditures of $194,000 as a result
            of a decrease in the number of sales and  marketing  employees and a
            focus on large partners and channels; and

      o     Increased general and  administration  expenditures of $262,000 as a
            result of expenses  related to the Company's  increased  obligations
            upon becoming a reporting enterprise.

Operating  expenses for the nine months ended  September  30, 2005 and September
30, 2004 totaled $4.0 million and $4.3 million,  respectively.  Such decrease of
$313,000 resulted primarily from cost savings associated with a reduction in the
number of employees.

Other Expenses

Other expenses include interest expense and merger-related  costs. Other expense
for the three months  ended  September  30, 2005 and  September  30,  2004,  was
$31,000 and $4,000, respectively.  Such increase of $27,000 was primarily due to
ongoing costs related to the Company's recent merger with Rescon.

Other  expenses for the nine months ended  September  30, 2005 and September 30,
2004, were $283,000 and $37,000,  respectively.  Such increase was primarily due
to costs related to the Company's recent merger with Rescon.


<PAGE>

Other Income

Other income  includes  interest  income and gains on the sale of certain of the
Company's assets. There was no other income for the three months ended September
30, 2005,  and other income for the three  months ended  September  30, 2004 was
$5,000.  Such decrease was the result of the Company's no longer having interest
bearing deposits.

Other  income for the nine months ended  September  30, 2005 and  September  30,
2004, was $370,000 and $13,000, respectively. Such increase was due primarily to
the Company's gain on the sale of certain fixed assets.

Net Loss

As a result of the foregoing  factors,  for the three months ended September 30,
2005 and September 30, 2004, the Company incurred a net loss of $1.2 million and
$1.0 million, respectively.

For the nine months ended September 30, 2005 and September 30, 2004, the Company
incurred a net loss of $3.9 million and 4.3 million, respectively.

During the Company's continuing development phase, it has consistently sustained
operating  losses and expects such losses to continue through the rest of fiscal
2005 and for the foreseeable future.

Liquidity and Capital Resources

As of September 30, 2005, the Company had an accumulated deficit since inception
of $57.3  million  and cash and cash  equivalents  of  $91,000.  The Company has
incurred  losses since its  inception and has current  liabilities  in excess of
current  assets.  In October  and  November  of 2005,  the  Company  received an
aggregate of approximately  $180,000 in bridge loans from certain lenders.  Such
notes are due  within  120 days of the  respective  issuance  dates and carry an
interest rate of 8% per annum.  Notwithstanding the foregoing,  the Company does
not have  sufficient  cash on hand to continue its operations in the manner they
have  historically  been conducted.  These factors raise substantial doubt about
the ability of the Company to continue as a going concern.

In this regard,  as the Company has limited  working capital and limited cash on
hand, and as it is not currently  realizing revenue from operations,  management
is proposing to raise any necessary  additional funds not provided by operations
through  loans or  through  additional  sales of its common  stock.  There is no
assurance that the Company will be successful in raising this additional capital
or in achieving  profitable  operations.  This funding may be sought by means of
private equity or debt financing.  The Company currently has no commitments from
any party to provide  funding  and there is no way to predict  when,  or if, any
such funding could  materialize.  There is no assurance that the Company will be
successful in obtaining additional funding on attractive terms, or at all.


<PAGE>

Cash Flows

During the quarter  ended  September 30, 2005,  cash was primarily  used to fund
Company  expenses.  Cash and cash  equivalents  decreased by $618,000 during the
nine  months  ended  September  30,  2005.  The  Company's   summary  cash  flow
information  for the nine month periods ended September 30, 2005 and 2004 is set
forth below:

<TABLE>
<CAPTION>
                                                 For the Nine         For the Nine
                                                 Months Ended         Months Ended
                                              September 30, 2005   September 30, 2004
                                              ------------------   ------------------

<S>                                                <C>                 <C>
Net cash used in operating activities              $(2,631)            $(3,680)
Net cash used in investing activities              $   260             $    (4)
Net cash used in financing activities              $ 1,753             $ 2,826

Net Increase/(Decrease) in Cash                    $  (618)            $  (858)
</TABLE>


During the nine months ended September 30, 2005, net cash used in operations was
$2.6  million,  as net  loss and loss on the  sale of  fixed  assets  were  only
partially  offset by depreciation  and increases in accounts payable and accrued
payroll  liabilities.  During the nine months  ended  September  30,  2005,  the
Company realized loan proceeds of $1.8 million.

Significant Events

Dr. Raj Jain

In August 2005,  Dr. Raj Jain,  the Company's  Chief  Technical  Officer  (CTO),
accepted a professorship at Washington  University in St. Louis,  Missouri.  Dr.
Jain will be devoting one day a week to his duties as CTO.

Merger with ResCon

On April 1, 2005, NNI merged into Rescon in a stock-for-stock  transaction. As a
result of the Merger, Rescon continued as the surviving corporation, assumed the
operations and business plan of NNI, the stockholders of NNI became stockholders
of Rescon, and Rescon changed its name to Nayna Networks, Inc.

South Seas Data, Inc.

On  May  17,  2005,   the  Company   entered  into  an  Agreement  and  Plan  of
Reorganization  (the "SSDI  Acquisition  Agreement")  with South Seas Data, Inc.
("South Seas"),  which provided for the acquisition of SSDI. SSDI is a privately
held  company  located in  Englewood,  Colorado,  that  provides  sophisticated,
enterprise-class network solutions and services. This SSDI Acquisition Agreement
was terminated by mutual agreement on October 24, 2005.


<PAGE>

Risk Factors

We are a development  stage company and have only a limited operating history on
which to evaluate our potential for future success.

We have only  recently  launched many of our products and services and therefore
have a limited  operating  history  upon which you can evaluate our business and
future prospects. In addition, since we are a development stage company, we have
yet to develop  sufficient  experience in forecasting  the revenues we expect to
receive from the sale of our products and services.  If we are  unsuccessful  in
addressing  the risks and  uncertainties  commonly  faced by  development  stage
companies,  our business,  results of operations and financial condition will be
materially and adversely affected.

We expect to incur operating losses for the foreseeable future.

We continue to incur operating losses due primarily to product development costs
and increasing sales and marketing expenses.  In addition,  we plan to undertake
significant  investments  in marketing and  promotion,  the hiring of additional
employees and to enhance our network content and management technologies through
both internal  development  efforts and strategic  acquisitions.  As a result of
these expenditures, we expect to incur net losses for the foreseeable future. We
believe these  expenditures are necessary to build and maintain our hardware and
software  technology and to penetrate our target product markets. If our revenue
growth is  slower  than we  anticipate  or our  operating  expenses  exceed  our
expectations,  our losses  will be  significantly  greater  than they are at the
present time and we may never achieve profitability.

We will need to raise additional capital in the immediate future.

We have incurred losses since  inception and have current  liabilities in excess
of our  current  assets.  We do not  have  sufficient  cash on hand to  continue
operations in the manner they have historically been conducted.  We will need to
raise additional funds or significantly  decrease or curtail our operations.  We
cannot assure you that we will be able to raise such additional capital on terms
that are  favorable  to us, or at all.  Such  inability  could  have a  material
adverse effect on our business, results of operations and financial condition.


<PAGE>

Acquisitions may disrupt or otherwise have a negative impact on our business.

We may  acquire  or make  investments  in  complementary  businesses,  products,
services or  technologies  on an  opportunistic  basis when we believe they will
assist  us in  carrying  out our  business  strategy.  Although  growth  through
acquisitions  has been a successful  strategy used by other network  control and
management  technology  companies,  we cannot assure you that we will be able to
successfully pursue this strategy. We plan to use this as a strategy to grow our
business. If we buy a company, then we could have difficulty in integrating that
company's  personnel  and  operations.  In  addition,  the key  personnel of the
acquired  company  may  decide  not to work for us. An  acquisition  could  also
distract our key  management  and employees and increase our operating and other
expenses.  Furthermore,  we may have to incur debt or issue equity securities to
pay for any such future acquisitions, the issuance of which could be dilutive to
our existing stockholders.

Our common stock price is highly  volatile and the current market for our common
stock is limited.

The market price of our common  stock is highly  volatile as the stock market in
general,  and the market  for small cap and micro cap  technology  companies  in
particular,  has been highly volatile. You may not be able to resell your shares
of our common  stock  following  periods of  volatility  because of the market's
adverse  reaction to volatility.  We cannot assure you that our stock will trade
at the same levels of other stocks in our  industry or that our industry  stocks
in general will sustain their current market prices.

Factors that could cause such volatility may include, among other things:

      o     actual  or  anticipated  fluctuations  in  our  quarterly  operating
            results;
      o     announcements of technological innovations;
      o     changes in financial estimates by securities analysts;
      o     conditions or trends in the network control and management industry;
      o     changes in the market  valuations  of other  such  industry  related
            companies; and
      o     the acceptance of market makers and  institutional  investors of the
            Company and our stock.

In addition, our stock is currently traded on the NASD OTC Bulletin Board and it
is  uncertain  that we will be able to  successfully  apply for  listing  on the
American  Stock  Exchange  or the NASDAQ  National  or Small Cap  Markets in the
foreseeable  future due to our  inability to satisfy  their  respective  listing
criteria.  Failure to list our shares on either the American  Stock  Exchange or
the NASDAQ National or Small Cap Markets will impair the liquidity of our common
stock.

<PAGE>

Your holdings may be diluted in the future.

We are authorized to issue up to 1,000,000,000 shares of common stock. Our board
of directors  has the ability to issue  additional  shares of our common  stock,
without stockholder  approval, in exchange for such consideration that the board
of directors may deem adequate,  up to such authorized  amount.  The issuance of
additional  shares of common stock will reduce the  proportionate  ownership and
voting power of our existing common stockholders. In addition, we currently have
outstanding options and warrants to purchase  approximately  3,700,000 shares of
common  stock,  the  exercise  of which could also have a  substantial  dilutive
effect on the  ownership of our common  stockholders.  In  addition,  the future
designation  and issuance of one or more series of preferred  stock would create
additional  securities  that  would  have,  among  other  things,  dividend  and
liquidation preferences senior to our common stock.

Shares eligible for future sale by our current stockholders may adversely affect
our stock price.

Sales of substantial  amounts of our common stock,  including shares issued upon
the exercise of outstanding options and warrants,  under Securities and Exchange
Commission Rule 144, or otherwise,  could adversely affect the prevailing market
price of our common stock and could impair our ability to raise  capital at that
time through the sale of our securities.

If we lose the services of our President  and Chief  Executive  Officer,  Naveen
Bisht,  or other  key  personnel,  we may not be able to  execute  our  business
strategy effectively.

Our future success depends in large part upon the continued  services of our key
technical,  sales,  marketing and senior  management  personnel.  In particular,
Naveen Bisht, our President and Chief Executive Officer is very important to our
business.  The  loss of any of our  senior  management  or other  key  research,
development, sales or marketing personnel,  particularly if lost to competitors,
could harm our ability to  implement  our  business  strategy and respond to the
rapidly changing needs of our customers. In addition, we believe we will need to
attract,  retain and  motivate  talented  management  and other  highly  skilled
employees to be successful.  Competition for such individuals is intense. We may
be unable to retain our key  employees or attract,  assimilate  and retain other
highly qualified employees in the future.

We may not be able to compete successfully.

We are engaged in new, rapidly evolving and intensely  competitive  markets, and
we expect  competition  to  intensify  further in the future.  We  currently  or
potentially compete with a number of other companies, such as Alcatel, Alloptic,
Inc., Salira Networks, Inc. (Hitachi),  Tellabs and TeraWave  Communications.  A
number of our  competitors,  such as Alcatel,  are large,  well-funded  and have
resources  significantly greater than ours. Competitive pressures created by any
one  of  these  companies,  or by our  competitors  collectively,  could  have a
material  adverse  effect on our business,  results of operations  and financial
condition.


<PAGE>

The market in which we compete is subject to rapid technological progress and to
compete  successfully  we must  continually  introduce new products that achieve
broad market acceptance.

The network equipment market is characterized by rapid  technological  progress,
frequent  new  product  introductions,  changes  in  customer  requirements  and
evolving industry  standards.  If we do not regularly  introduce new products in
this dynamic environment,  our product lines will become obsolete.  Developments
in routers and routing software could also  significantly  reduce demand for our
products.  Alternative  technologies  could achieve widespread market acceptance
and displace the technology on which we have based our product architecture.  We
cannot  assure you that our  technological  approach  will achieve  broad market
acceptance  or that other  technologies  or devices  will not  supplant  our own
products and technology.

Our products must comply with evolving industry standards and complex government
regulations or else our products may not be widely  accepted,  which may prevent
us from growing our net revenue or achieving profitability.

The  market  for  network  equipment  is  characterized  by the need to  support
industry standards as different standards emerge, evolve and achieve acceptance.
We will not be  competitive  unless we  continually  introduce  new products and
product  enhancements  that meet these  emerging  standards.  Our products  must
comply with various United States federal  government  regulations and standards
defined by agencies such as the Federal  Communications  Commission,  as well as
standards   established  by  various   foreign   governmental   authorities  and
recommendations  of  the  International  Telecommunication  Union.  If we do not
comply  with  existing or evolving  industry  standards  or if we fail to obtain
timely domestic or foreign regulatory approvals or certificates,  we will not be
able to sell our products where these standards or regulations  apply, which may
prevent us from sustaining our net revenue or achieving profitability.

Our future performance will depend on the successful  development,  introduction
and market acceptance of new and enhanced products.

Our new and enhanced products must address customer requirements in a timely and
cost-effective  manner.  In the past,  we have  experienced  delays  in  product
development and such delays may occur in the future. The introduction of new and
enhanced products may cause our customers to defer or cancel orders for existing
products.  Therefore,  to the  extent  customers  defer or cancel  orders in the
expectation  of  new  product   releases,   any  delay  in  the  development  or
introduction  of new products could cause our operating  results to suffer.  The
inability to achieve and maintain widespread levels of market acceptance for our
current and future products may significantly impair our revenue growth.


<PAGE>

Our limited ability to protect our proprietary  intellectual property rights may
adversely affect our ability to compete.

We rely on a combination of patent,  copyright,  trademark and trade secret laws
and restrictions on disclosure to protect our proprietary  intellectual property
rights.  We cannot assure you that we have adequately  protected our proprietary
intellectual  property  or that other  parties  will not  independently  develop
similar  or  competing  products  that do not  infringe  our  patents  or  other
intellectual property protections. We also enter into confidentiality or license
agreements with our employees, consultants and corporate partners to protect our
intellectual  property.  In  addition,  we  control  access  to  and  limit  the
distribution of our software,  documentation and other proprietary  information.
Despite our efforts to protect our  proprietary  intellectual  property  rights,
unauthorized parties may attempt to copy or otherwise  misappropriate or use our
products or technology.  If we are  unsuccessful  in protecting our  proprietary
intellectual property rights, our business,  results of operations and financial
condition may be harmed.

Our  limited  ability  to  defend  ourselves   against   intellectual   property
infringement claims made by others may adversely affect our ability to compete.

Our industry is  characterized by the existence of a large number of patents and
frequent claims and related  litigation  regarding patent and other intellectual
property rights.  If we are found to infringe the proprietary  rights of others,
or if we otherwise settle any such claims,  we could be compelled to pay damages
or royalties and either obtain a license to those  intellectual  property rights
or alter our  products  so that they no longer  infringe  upon such  proprietary
rights. Such a license could be very expensive to obtain or may not be available
at all.  Similarly,  changing our products or processes to avoid  infringing the
rights of others may be costly or impractical.  Litigation resulting from claims
of infringement  could result in substantial costs and a diversion of resources,
and could have a material  adverse effect on our business,  financial  condition
and operating results.

Our  dependence  on  contract   manufacturers   for  substantially  all  of  our
manufacturing requirements could harm our operating results.

We rely on independent  contractors to manufacture our products.  We do not have
long-term contracts with any of these manufacturers. Delays in product shipments
from contract manufacturers are not unusual. Similar or other problems may arise
in the future,  such as inferior quality,  insufficient  quantity of products or
the interruption or discontinuance of operations of a manufacturer, any of which
could have a material  adverse effect on our business,  financial  condition and
operating results.

We do not  know  whether  we will be able to  effectively  manage  our  contract
manufacturers,  that these  manufacturers will meet our future  requirements for
timely  delivery of products of sufficient  quality and  quantity,  or that such
contract  manufacturers  will properly satisfy their contractual  obligations to
us.  We will  continue  to  monitor  the  performance  of our  current  contract
manufacturers  and if they are unable to meet our future  requirements,  we will
need to transition to other manufacturers. We also intend to regularly introduce
new  products  and  product  enhancements,  which will  require  that we rapidly
achieve  volume  production  by  coordinating  our efforts of our  suppliers and
contract  manufacturers.  The inability of our contract manufacturers to provide
us with adequate supplies of high-quality  products or a reduction in the number
of contract manufacturers we utilize may cause a delay in our ability to fulfill
orders  and may  have a  material  adverse  effect  on our  business,  financial
condition and operating results.


<PAGE>

If our products contain  undetected  software or hardware errors, we could incur
significant unexpected expenses and lose sales.

Network equipment products  frequently  contain undetected  software or hardware
errors when new  products,  versions or updates of existing  products  are first
released to the marketplace.  We have experienced such errors in connection with
prior product releases. We expect that such errors or component failures will be
found from time to time in the future in new or existing products, including the
components incorporated therein, after the commencement of commercial shipments.

These errors may have a material  adverse  effect on our business and may result
in the following, among other things:

      o     significant warranty and repair costs;
      o     diverting  the  attention  of our  engineering  personnel  from  new
            product development efforts;
      o     delaying the recognition of revenue; and
      o     significant customer relations problems.

In addition,  if our products are not accepted by customers due to defects,  and
such  returns  exceed any  amounts we accrued  for defect  returns  based on our
historical experience, our operating results would be adversely affected.

If problems occur in a computer or communications  network, even if unrelated to
our products, we could incur unexpected expenses and lose sales.

Our products must successfully interoperate with products from other vendors. As
a result, when problems occur in a computer or communications network, it may be
difficult to identify the sources of these problems.  The occurrence of hardware
and software errors, whether or not caused by our products,  could result in the
delay or loss of market  acceptance of our products and any necessary  revisions
may cause us to incur significant expenses.  The occurrence of any such problems
would likely have a material adverse effect on our business, financial condition
and operating results.


<PAGE>

We expect the average  selling  prices of our  products to  decrease,  which may
reduce our gross margin or revenue.

The  network  equipment  industry  has  experienced  a rapid  decline in average
selling  prices  due to a  number  of  factors,  including  competitive  pricing
pressures,  promotional pricing, technological progress and lower selling prices
as companies  attempt to liquidate excess inventory  resulting from the industry
slowdown that began in the later part of 2000.

We anticipate  that the average  selling prices of our products will decrease in
the future in response to the following, among other things:

      o     competitive pricing pressures;
      o     excess inventories;
      o     increased sales discounts; and
      o     new product introductions by us or our competitors.

We may experience  substantial  decreases in future operating results due to the
erosion of our  average  selling  prices.  We expect  competitive  pressures  to
increase as a result of the  industry  slowdown  that began in the later part of
2000,  coupled  with the slow  recovery  and still  uncertainty  of the  broader
economy.

Some of our  customers  may not have the  resources to pay for our products as a
result of the current economic environment.

Some of our  customers  are  experiencing  cash flow problems as a result of the
current economic environment and are finding it increasingly difficult to obtain
financing.  As a result, we may be unable to collect the payments owed to us, or
such payments may be significantly delayed, if our customers are unsuccessful in
generating sufficient revenue or securing alternate financing  arrangements.  In
addition,  our  customers  may  not  order  as many  products  from us as we had
originally  forecasted  or they may cancel their  orders with us  entirely.  The
inability  of some  of our  current  or  potential  customers  to pay us for our
products  may  adversely  affect  our  cash  flow,  the  timing  of our  revenue
recognition  and the amount of revenue  we  generate,  which may cause our stock
price to decline.

Failure to  successfully  expand our sales and support  teams or educate them in
regard to technologies and our product families may harm our business, financial
condition and operating results.

The sale of our products and services requires a sophisticated sales effort that
frequently involves several levels within a prospective customer's organization.
We may not be able to  increase  net  revenue  unless  we  expand  our sales and
support teams in order to address all of the customer requirements  necessary to
sell our products.

We  cannot  assure  you  that we will be  able  to  successfully  integrate  new
employees into our company or to educate current and future  employees in regard
to rapidly evolving  technologies and our product  families.  A failure to do so
may hurt our business, financial condition and operating results.


<PAGE>

We must  continue  to develop and  increase  the  productivity  of our sales and
distribution channels to increase net revenue and improve our operating results.

Our sales channel includes our own direct sales people, large original equipment
manufacturer,  system integrators,  agents, resellers and distributors.  Outside
sales channels require us to develop and cultivate  strategic  relationships and
allocate   substantial   internal   resources  for  the   maintenance   of  such
relationships.  We may not be able to increase gross  revenues  unless we expand
our sales channel and support  teams to handle all of our customer  requirements
in a  professional  manner.  If we are  unable to expand our sales  channel  and
support teams in a timely  manner,  and/or  manage them in all cases,  we may be
unable to grow our business and revenues as expected and our financial condition
and operating results may suffer.

In addition,  many of our sales channel  partners also carry  products they make
themselves  or that are made by our  competitors.  We cannot assure you that our
sales channel partners will continue to market or sell our products  effectively
or  continue  to devote the  resources  necessary  to provide us with  effective
sales,  marketing  and  technical  support.  Their failure to do so may hurt our
revenue growth and operating results.

Legislative  actions,  higher  insurance  costs  and  potential  new  accounting
pronouncements are likely to impact our future financial position and results of
operations.

There have been regulatory  changes,  including the  Sarbanes-Oxley Act of 2002,
which have had,  and will  continue to have,  an impact on our future  financial
position and results of  operations.  The  Sarbanes-Oxley  Act of 2002 and other
rule changes and proposed  legislative  initiatives  are  resulting in increased
general  and  administrative  costs  to us.  The new  rules  could  make it more
difficult for us to obtain  certain types of insurance,  including  director and
officer  liability  insurance,  and we may be forced to  accept  reduced  policy
limits and coverage and/or incur  substantially  higher costs to obtain the same
or  similar  coverage.  The  impact  of these  events  could  also  make it more
difficult for us to attract and retain  qualified  persons to serve on our board
of directors,  on committees of our board of directors or as executive officers.
We cannot predict or estimate the amount of the additional costs we may incur or
the timing of such costs as we implement these new and proposed rules.

In addition,  proposed  initiatives could result in changes in accounting rules,
including  legislative and other proposals to account for employee stock options
as an expense.  These and other potential changes could materially  increase the
expenses we report under generally accepted accounting principles, and adversely
affect our operating results.


<PAGE>

We may need to expend considerable  resources in order to comply with recent SEC
rulemaking including the Sarbanes-Oxley Act of 2002.

The costs associated with being a public company have increased  dramatically in
recent years following the advent of the  Sarbanes-Oxley  Act of 2002. We expect
to spend  significant  resources in order to comply with the new legislation and
rulemaking  aimed at public  companies.  As a result,  we expect our general and
administrative  expenses will rise as a result of these compliance  efforts.  In
addition,  our management team will need to devote a substantial  amount of time
to these efforts which could distract them from their current responsibilities.

Our headquarters are located in Northern  California where natural disasters may
occur that could disrupt our operations and harm our business.

Our corporate headquarters are located in Silicon Valley in Northern California.
Historically,  this region has been  vulnerable  to natural  disasters and other
risks, such as earthquakes,  which at times have disrupted the local economy and
posed physical risks to our and our manufacturers' property.

In addition,  terrorist acts or acts of war targeted at the United  States,  and
specifically  Silicon  Valley,  could  cause  damage or  disruption  to us,  our
employees,  facilities,  partners,  suppliers,  distributors and resellers,  and
customers,  which could have a material  adverse  effect on our  operations  and
financial results. We currently do not have redundant, multiple site capacity in
the event of a natural  disaster or catastrophic  event. In the event of such an
occurrence, our business would suffer.

Item 3.  Controls and Procedures

The Company's  principal  executive officer and principal financial officer (the
"Certifying   Officers")  are  responsible  for   establishing  and  maintaining
disclosure  controls and procedures (as defined in Exchange Act Rules  13a-15(e)
and  15d-15(e).  Such officers have concluded  (based upon their  evaluations of
these  controls  and  procedures  as of the end of the  period  covered  by this
report) that the Company's  disclosure  controls and procedures are effective to
ensure  that  information  required  to be  disclosed  by it in this  report  is
accumulated and communicated to management, including the Certifying Officers as
appropriate, to allow timely decisions regarding required disclosure.

The  Certifying  Officers  have also  indicated  that there were no  significant
changes in the Company's  internal  controls over  financial  reporting or other
factors during the period covered by this report,  that has materially  affected
or is reasonably likely to materially  affect,  such controls  subsequent to the
date of  their  evaluation,  and  there  were no  significant  deficiencies  and
material weaknesses.


<PAGE>

                           PART II - OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On September 16, 2005,  the Company  issued an aggregate of 50,000 shares of its
common  stock,  $0.001  par  value  per  share  (the  "Shares"),   to  Stonegate
Securities,  Inc.  ("Stonegate") in consideration for certain investment banking
services rendered by Stonegate to the Company.

No  underwriter  was employed by the Company in connection  with the issuance of
the Shares. The Company believes that the issuance of the Shares was exempt from
registration  under Section 4(2) of the Securities  Act of 1933, as amended,  as
transactions not involving a public offering.  Stonegate acquired the securities
for  investment  purposes  only  and not  with a view to  distribution,  and had
adequate information about the Company.

Item 6.  Exhibits

Exhibits.

The  following  exhibits are included as part of this  Quarterly  Report on Form
10-QSB:

         Exhibit 31.1    Certification of Principal Executive Officer pursuant
                         to Section 302 of the Sarbanes-Oxley Act of 2002.

         Exhibit 31.2    Certification of Principal Financial Officer pursuant
                         to Section 302 of the Sarbanes-Oxley Act of 2002.

         Exhibit 32.1    Certification of Principal Executive Officer Pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002.

         Exhibit 32.2    Certification of Principal Financial Officer Pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002.


<PAGE>

                                   SIGNATURES

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

                                           Nayna Networks, Inc.

Dated: November 18, 2005                   By: /s/ Naveen S. Bisht
                                              ------------------------------
                                                Naveen S. Bisht, CEO



Dated: November 18, 2005                   By: /s/ Michael Meyer
                                              ------------------------------
                                                Michael Meyer, CFO