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

**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTER ENDED DECEMBER 31, 2004**

 **COMMISSION FILE NO. 000-24969**

 **mPhase Technologies, Inc.**(Exact name of registrant as specified in itscharter)  

| **NEW JERSEY**
**22-2287503**
(State or other jurisdiction of       incorporation or organization) 

(I.R.S. Employer       Identification Number) 

**587 CONNECTICUT AVE., NORWALK, CT**
**06854-1711**
(Address of principal executive offices)      
(Zip Code) 
 **ISSUER'S TELEPHONE NUMBER, (203) 838-2741**

 **INDICATEBY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BEFILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, DURING THEPRECEDING 12 MONTHS (OR FOR SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TOFILE SUCH REPORT), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THEPAST 90 DAYS.**

**YES         NO**

 **THE NUMBER OF SHARESOUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF February9, 2005 IS 120,349,661 SHARES, ALL OF ONE CLASS OF $.01 STATED VALUE COMMONSTOCK.**

 mPHASE TECHNOLOGIES, INC. **INDEX**

 

 
 
 
 
PAGE 
PART I 
 
FINANCIAL INFORMATION      
 
 
ITEM 1 
       
 
 
 
 
 
Unaudited Consolidated      Balance Sheets-June 30, 2004 and December 31, 2004
 
3   
 
 
Unaudited Consolidated      Statements of Operations-Three months ended December 31, 2003 and 2004 and      from October 2, 1996 (Date of Inception) to December 31, 2004
 
4   
 
 
Unaudited Consolidated      Statements of Operations-Six Months ended December 31, 2003 and 2004 and      from October 2, 1996 (Date of Inception) to December 31, 2004
 
5   
 
 
Unaudited Consolidated      Statement of Changes in Shareholders Deficit Six months ended December 31,      2004
 
6   
 
 
Unaudtied Consolidated      Statement of Cash Flow-Six Months Ended December 31, 2003 and 2004 and      from October 2, 1997 (Date of Inception) to December 31, 2004
 
7   
 
 
Notes to Consolidated      Financial Statments
 
8   
ITEM 2   
 
Management's Discussion and Analysis of      Financial Condition and Condition and Results of Operations   
 
15   
ITEM 3   
 
Quantitative and Qualitative Disclosures      about market risk   
 
26   
ITEM 4   
 
CONTROLS AND PROCEDURES   
 
26   
PART II   
 
OTHER INFORMATION   
 
 
Item 1.   
 
Legal Proceedings   
 
27   
Item 2.   
 
Changes in Securities   
 
27   
Item 3.   
 
Defaults Upon Senior Securities   
 
27   
Item 4.   
 
Submission of Matters to a Vote of Security      Holders   
 
27   
Item 5.   
 
Other Information   
 
27   
Item 6.   
 
Exhibits and Reports on Form 8-K   
 
28   
Signature Page   
 
 29  
 
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 **mPHASE TECHNOLOGIES, INC.(A Development Stage Company) Consolidated Balance Sheets (Unaudited)** 
  **June 30,** **December 31,**  **2004** **2004**ASSETS    CURRENT ASSETS    Cash and cash    equivalents$    90,045$    1,010,903Accounts    receivable, net of bad debt reserve of $0 for each period     64,100     206,069Stock    subscription receivable     886,000 50,000Inventories, net     1,237,972     790,500Prepaid expenses    and other current assets 81,061 229,123TOTAL CURRENT    ASSETS 2,359,178 2,286,595Property and    equipment, net     52,685     240,393Patents and    licensing rights, net     161,605     144,380Other Assets 17,250 37,250TOTAL ASSETS 2,590,718 2,708,618LIABILITIES AND    STOCKHOLDERS' EQUITY    CURRENT    LIABILITIES    Accounts payable     2,088,658     2,633,363,Accrued expenses     691,033     1,131,529Due to related    parties     625,956     310,960Notes payable,    related parties     300,000     686,046Deferred revenue     214,180     100,295Current portion    of long term debt     550,803     517,805TOTAL CURRENT    LIABILITIES     4,470,630     5,379,998Long-term debt,    net of current portion     139,500     175,000Other Liabilities 618,550 -Notes payable,    related parties     280,000     223,049COMMITMENTS AND    CONTINGENCIES (Note 9)    STOCKHOLDERS'    DEFICIT    Common stock,    stated value $.01, 150,000,000 shares authorized; 88,899,962 and    109,743,391    shares issued and outstanding at June 30, 2004 and December 31, 2004,    respectively     888,999     1,097,433Additional paid    in capital     111,976,095     116,754,086Deficit    accumulated during development stage     (115,775,083)     (120,912,875)Less-Treasury    stock, 13,750 shares at cost (7,973) (7,973)TOTAL    STOCKHOLDERS' DEFICIT (2,917,962) (3,069,329)TOTAL LIABILITIES    AND STOCKHOLDERS' DEFICIT$2,590,718$2,708,718               
The accompanying notes are an integral part of these    financial statements.
 
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 **mPHASETECHNOLOGIES, INC. (A Development Stage Company) Consolidated Statements of Operations (Unaudited)**  **Three Months Ended****October 2, 1996    (Date of****Inception)**  **December 31,****to December 31,**       **2003** **2004** **2004**REVENUES$    1,290,935$    295,524$    20,083,728COSTS AND    EXPENSES      Cost of Sales     1,191,193     245,124     14,288,122Research and    development      (including    non-cash stock related charges of $0,$385,495 and     843,478     1,054,761     40,572,961$2,503,114,    respectively)      General and    Administrative      (including    non-cash stock related charges of $195,000, $1,127,833     913,519     2,071,396     81,835,388and $48,460,975    respectively)      Depreciation and    amortization     27,978     127,485     3,018,413TOTAL COSTS AND    EXPENSES     2,976,168     3,498,766     139,714,874LOSS FROM    OPERATIONS     (1,685,233)     (3,203,242)     (119,631,146)OTHER INCOME    (EXPENSE)      Gain (Loss) on    extinguishments - - 313,020Minority interest    loss in consolidated subsidiary - -     20,000Capital losses -     (36,911)     (48,169)Loss from    unconsolidated subsidiary - -     (1,466,467)Interest Income    (expense), net     (15,633)     (65,777)     (100,113)TOTAL OTHER    INCOME (EXPENSE)     (15,633)     (102,688)     (1,281,729)NET LOSS$    (1,700,866)$    (3,305,930)$    (120,912,875)LOSS PER COMMON    SHARE, basic and diluted$    (.02)$    (.04)  WEIGHTED AVERAGE    COMMON      SHARES    OUTSTANDING, basic and diluted     72,814,272     93,388,584  
The accompanying notes are an integral part ofthese consolidated financial statements. 
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**mPHASE TECHNOLOGIES, INC. (A Development Stage Company) Consolidated Statements of Operations (Unaudited)  **Six Months Ended****October 2, 1996    (Date of** **December 31,****Inception) to    December 31,**      **2003** **2004** **2004**REVENUES$    3,780,137$    474,687$    20,083,728COSTS AND    EXPENSES      Cost of Sales     3,289,937     374,905     14,288,122Research and    development      including    non-cash stock related charges of $7,200, $385,495 and     1,454,899     2,156,161     40,572,961$2,503,114,    respectively)      General and    Administrative      (including    non-cash stock related charges of $748,840, $1,127,833     1,518,411     2,780,291     81,835,388and $48,460,975,    respectively)      Depreciation and    amortization     74,082     128,506     3,018,413TOTAL COSTS AND    EXPENSES     6,337,329     5,439,862     139,714,874LOSS FROM    OPERATIONS     (2,557,192)     (4,965,176)     (119,631,146)OTHER INCOME    (EXPENSE)      Gain (Loss) on    extinguishments     23,087     (40,500)     318,020Minority interest    loss in consolidated subsidiary - -     20,000Capital losses - (36,911)     (48,169)Loss from    unconsolidated subsidiary - --     (1,466,467)Interest Income    (expense), net     (31,272)     (95,205)     (100,113)TOTAL OTHER    INCOME (EXPENSE)     (8,185)     (172,616)     (1,281,729)NET LOSS$    (2,565,377)$    (5,137,792)$    (120,912,875)LOSS PER COMMON    SHARE, basic and diluted$    (.04)$    (.06)  WEIGHTED AVERAGE    COMMON      SHARES    OUTSTANDING, basic and diluted     72,251,251     91,474,828  
The accompanying notes are an integral part ofthese consolidated financial statements.  
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**mPHASE TECHNOLOGIES, INC. (A Development Stage Company) Consolidated Statement of Changes in Shareholders'Deficit (Unaudited)**
 **Shares****$.01 Stated Value****Treasury Stock** **Additional****Accumulated Deficit****Total Shareholders (Deficit)**      **Paid-in**   **Equity**      **Capital**    Balance June 30,    88,899,962$888,999$      (7,973)$    111,976,095$    (115,755,083)$    (2,917,962)2004          Issuance of          common stock with- -- 169,500 - 169,500warrants in connection          with settlement          of liabilities          Issuance of common    1,672,000 16,720- 385,380 - 402,100stock with warrants in           private placements, net of          cash expenses of    $15,900                  Net Loss- -- - (1,831,862) (1,831,862)Balance,          September 30,90,571,962$905,719$      (7,973)$112,530,975$(117,606,945)$(4,178,224)2004          Issuance of    10,717,700 107,177-     2,009,423 -     2,166,600common stock          with warrants in          private          placements          Sale of common    2,817,954 28,179- 535,411 - 563,590stock through          exercise of          warrants          Issue of Stock- -- 936,333 - 936,333Options to Consultants          Issuance of Common    Stock          to Consultants for    services134,500 1,345- 25,555 - 26,900Issue of          additional shares891,000 8,910- 176,811 - 185,721and warrants to          effect revised          pricing on          previous private          offering          Conversion of    4,610,275 46,103- 539,576 - 585,679Debt to          Common Stock          and Warrants          Net loss- -- -$    (3,305,930)     (3,305,930)Balance,          December 31,109,743,391$        1,097,433$     (7,973) $     116,754,086 $     (120,912,875) $     (3,069,329)2004          
The accompanying notes are anintegral part of these consolidated financial statements.6

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 **mPHASE TECHNOLOGIES, INC.(A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited)**

 
 **Six    Months Ended****October 2, 1996 (Date of Inception)** **December 31,**** to December 31,**         **2003** **2004** **2004**Cash Flow From Operating    Activities:      Net Loss$(2,565,377) (5,137,792) $(120,912,875)Adjustments to reconcile net loss    to net cash used in operating      activities:      Depreciation and amortization 402,257 128,506 6,458,745Book Value of fixed assets disposed -   74,272Provision for doubtful accounts -   32,124Gain on debt extinguishments (23,087 ) 40,500 (316,609)Loss on unconsolidated subsidiary -   1,466,467Impairment of note receivable -   232,750Loss on securities -   11,258Non-cash charges relating to    issuance of common stock, common 307,245 1,122,054 50,580,944stock options and Warrants      Changes in assets and liabilities:      Subscription Receivable      Accounts receivable 104,999 (141,969) (238,193)Inventories 614,876 237,251 (790,482)Prepaid expenses and other current    assets 30,418 (165,447) (742,629)Other non-current assets - (20,000) (20,000)Accounts payable 401,394 564,705 4,893,812Accrued expenses (419,559 ) 467,221 2,247,090Due to/from related parties      Microphase 313,226 (96,437) 2,,283,274Janifast 534,887 (64,636) 2,638,269Officers (450,583 ) 181,970 650,726Lintel -   477,000Others - (50,000) 129,472Receivables from Subsidiary -   (150,000)Deferred revenue - (113,885) 100,295Net cash used in operating    activities (749,304 ) (3,037,959) (50,890,701)Cash Flow from Investing    Activities:      Payments related to patents and    licensing rights - (64,902) (416,613)Purchase of fixed assets (5,500)     (105,973)     (2,747,079)Net Cash  used in    investing activities (5,500) (170,875) (3,228,594)Cash Flow from Financing    Activities:      Proceeds from issuance of common    stock and exercises of options 679,867 3,945,190 53,532,166and warrants      Payments of notes payable (2,000) (105,498) (327,335)Advances from Microphase    Corporation - - 347,840Proceeds from notes    payable-officers 
- 
600,000
 
1,030,000Repayments of notes    payable-officers 
- 
(300,000) 
(300,000)Repurchase of treasury stock at    cost - - (7,973)Net cash provided by financing    activities 677,867 4,138,692 55,130,198Net increase (decrease) in cash (76,937) 920,858     1,010,903CASH AND CASH EQUIVALENTS,    beginning of period 396,860 90,045 -CASH AND CASH EQUIVALENTS, end of    period$319,923$1,010,903$1,010,903
 The accompanying notes are an integral part ofthese consolidated financial statements. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) **1.**BASIS OFPRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
NATURE OF OPERATIONS 
mPhase Technologies, Inc. (the "Company") was organized on October 2, 1996.On February 17, 1997, the Company acquired Tecma Laboratories, Inc. ("Tecma") ina transaction accounted for as a reverse merger. On June 25, 1998, the Companyacquired Microphase Telecommunications, Inc. ("MicroTel"), through the issuanceof 2,500,000 shares of its common stock in exchange for all the issued andoutstanding shares of MicroTel. The assets acquired in this acquisition werepatents related to the mPhase line of DSL component products (e.g., POTSSplitters) and patent applications utilized in the Company's proprietary TraverserTM Digital Video Data Delivery System ("Traverser"). The primarybusiness of the company is to design, develop, manufacture and market highband-width telecommunication products incorporating digital subscriber line("DSL") technology. The Company has replaced the legacy Traverser product withits new TV+ platform developed by Lucent Technologies. The present activities ofthe Company are focused (a) upon deployment of its TV+ platform and (b)exploratory research and development of a new generation of power cells formilitary and commercial applications through the use of the science ofNanotechnology. The TV+ platform enables telecommunications service providers tosimultaneously deliver broadcast digital television high-speed Internet andvoice over copper telephone wires utilizing DSL technology and over fiber.Additionally, the Company sells DSL component products which includesmicrofilters, splitters, and line extenders, as well as a new line ofintelligent pots splitters designed to reduce the cost of deploying DSL. 

The Company is in the development stage, as defined by Statement of FinancialAccounting Standards ("SFAS") No. 7, "Accounting and Reporting by DevelopmentStage Enterprises." and its present activities are focused on the commercialdeployment of its proprietary TraverserTM and associated DSL component products.Since mPhase is in the development stage, the accompanying consolidatedfinancial statements should not be regarded as typical for normal operatingperiods. 

BASIS OF PRESENTATION - The accompanying unaudited consolidated financialstatements have been prepared in accordance with generally accepted accountingprinciples for interim financial information and pursuant to the regulations ofthe Securities Exchange Commission. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the six months endingDecember 31, 2004 are not necessarily indicative of the results that may beexpected for a full fiscal year. For further information, refer to theconsolidated financial statements and footnotes thereto included in theCompany's Annual Report on Form 10-K for the year ended June 30, 2004. 

Through December 31, 2004, the Company had incurred cumulative (a)development stage losses totaling approximately $120,912,875 and (b) negativecash flow from operations equal to $150,996,674. At December 31, 2004, theCompany had approximately $1,010,903of cash, cash equivalents and approximately$ 206,069 of trade receivables to fund short-term working capital requirements.The Company's ability to continue as a going concern and its future success isdependent upon its ability to raise capital in the near term to: (1) satisfy itscurrent obligations, (2) continue its research and development efforts, and (3)allow the successful wide scale development, deployment and marketing of itsproducts. 

USE OF ESTIMATES - The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting periods. Actual results could differ from those estimates. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

RECLASSIFICATIONS - Certain reclassifications have been made in the priorperiod consolidated financial statements to conform to the current periodpresentation. 

LOSS PER COMMON SHARE, BASIC AND DILUTED - The Company accounts for net lossper common share in accordance with the provisions of SFAS No. 128, "EARNINGSPER SHARE" ("EPS"). SFAS No. 128 requires the disclosure of the potentialdilution that could occur if securities or other contracts to issue common stockwere exercised or converted into common stock or resulted in the issuance ofcommon stock that then shared in the earnings of the entity. Common equivalentshares have been excluded from the computation of diluted EPS for all periodspresented since their affect is antidilutive. 

RESEARCH AND DEVELOPMENT - Research and development costs are charged tooperations as incurred. 

REVENUE RECOGNITION - All revenue included in the accompanying consolidatedstatements of operations for all periods presented relates to sales of mPhase'sline of POTS Splitter products and other related DSL component products. Asrequired, the Company adopted the Securities and Exchange Commission ("SEC")Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIALSTATEMENTS, which provides guidance on applying generally accepted accountingprinciples to revenue recognition based on the interpretations and practices ofthe SEC. The Company recognizes revenue for its line of POTS Splitter productsand other DSL component products at the time of shipment, at which time, noother significant obligations of the Company exist, other than normal warrantysupport. In addition, the Company includes costs of shipping and handling billedto customers in revenue and the related expenses of shipping and handling costsis included in cost of sales. 

STOCK-BASED COMPENSATION - During the second quarter of fiscal 2004, theCompany adopted the fair value recognition provisions of FASB Statement No. 123,*Accounting for Stock-BasedCompensation*, forstock-based employee compensation, effective as of the beginning of the fiscalyear. Under the modified prospective method of adoption selected by the Company,stock-based employee compensation cost recognized in 2003 is the same as thatwhich would have been recognized had the fair value recognition provisions ofStatement 123 been applied to all awards granted after October 1, 1995. Thefollowing table illustrates the effect on net income and earnings per share asif the fair value based method has been applied to all outstanding and unvestedawards in each period.  **Three Months Ended****Six Months Ended** **December 31,****December 31,**  **2004** **2003**     **2004** **2003**Net loss, as    reported$    (3,305,930)$    (1,700,866 ) $    (5,137,992)$    (2,565,377 )Add: Stock-based    employee compensation expense - - - -included in    reported net income, net of related tax        effects        Deduct: Total    stock-based employee compensation - - - -expense    determined under fair value based method        for all awards,    net of related tax effects        Pro forma net    loss$    (3,305,930)$    (1,700,866 ) $    (5,137,992)$    (2,565,337 )Loss per share:                Basic and diluted-as reported$    (.03)$    (.02 ) $    (.05)$    (.04 )        Basic and diluted-pro forma$    (.04)$    (.02 ) $    (.06)$    (.04 ) 9

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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
**RECENT ACCOUNTING PRONOUNCEMENTS - 
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),"Consolidation of Variable Interest Entities, an 

Interpretation of ARB No. 51." FIN 46 requires certain variable interestentities to be consolidated by the primary beneficiary of the entity if theequity investors in the entity do not have the characteristics of a controllingfinancial interest or do not have sufficient equity at risk for the entity tofinance its activities without additional subordinated financial support fromother parties. FIN 46 is effective for all new variable interest entitiescreated or acquired after January 31, 2003. For variable interest entitiescreated or acquired prior to February 1, 2003, the provisions of FIN 46 must beapplied for the first interim or annual period beginning after June 15, 2003.The adoption of FIN 46 did not have a significant impact on our consolidatedfinancial position or results of operations. 

In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity". ThisStatement establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity. It requires that an issuer classify a financial instrument that iswithin its scope as a liability (or an asset in some circumstances). Thisstatement is effective for financial instruments entered into or modified afterMay 31, 2003, and otherwise is effective at the beginning of the first interimperiod beginning after June 15, 2003, except for mandatorily redeemablefinancial instruments of nonpublic entities, if applicable. It is to beimplemented by reporting the cumulative effect of a change in an accountingprinciple for financial instruments created before the issuance date of theStatement and still existing at the beginning of the interim period of adoption.The adoption of this statement is not expected to have a significant impact onthe Company's results of operations or financial position. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
**STATEMENT OF CASH FLOW SUPPLEMENTAL INFORMATION**                 **2003****2004** Interest Paid$    6,000 $0 Taxes Paid$250    $0                 Schedule of Non-Cash Activities:       Conversion of accounts payable and accrued expenses to equity$    470,000     Conversion of interest accrued to equity     26,725     Conversion of Notes Payable to equity     88,954 Total    Liability to equity Conversions$    585,679         Private Placement Reparation Expense - additional issuance of shares$    185,721     Non-    Cash Compensation of Consultants$    936,333 **2.**RELATED PARTYTRANSACTIONS**
mPhase's President, Chief Operating Officer and Chairman of the Board of theCompany are also officers of Microphase and mPhase's president and chairman ofthe board are shareholders of Microphase. On May 1, 1997, the Company enteredinto an agreement with Microphase, whereby it will use office space as well asthe administrative services of Microphase, including the use of accountingpersonnel. This agreement was for $5,000 per month and was on a month-to-monthbasis. In July 1998, the office space agreement was revised to $10,000, inJanuary 2000 to $11,050 per month, in July 2001 to $11,340 per month, in July2002 to $12,200 per month, in January 2003 to $10,000 per month, and in July2003 to $18,000 per month. Additionally, in July 1998, mPhase entered into anagreement with Microphase, whereby mPhase reimburses Microphase $40,000 permonth for technical research and development. In January 2003 the technicalresearch and development agreement was revised to $20,000 per month, and in July2003 it was further revised to $5,000 per month. 

Microphase also charges fees for specific projects on a project-by-projectbasis. During the three months ended December 31, 2003 and 2004 and frominception (October 2, 1996) to December 31, 2004 $87,948, $0 and $7,269,526,respectively, have been charged to expense or inventory under these Agreementsand is included in operating expenses in the accompanying consolidatedstatements of operations. 

The Company is obligated to pay a 3% royalty to Microphase on revenues fromits proprietary TraverserTM Digital Video and Data Delivery System and DSLcomponent products. For the six months ended December 31, 2003 and 2004, mPhaserecorded royalties to Microphase totaling $103,185 and $11,784, respectively.

As a result of the foregoing transactions as of December 31, 2004, theCompany had a $355,000 payable to Microphase, which is included in notes payableto related parties and $ 132,990 of unpaid invoices are included in amounts dueto related parties in the accompanying consolidated balance sheet. Additionally,at December 31, 2004, there are no undelivered purchase orders that remainoutstanding to Microphase. 

The Company purchases products and incurs certain research and developmentexpenses with Janifast Ltd., which is owned by U.S. Janifast Holdings, Ltd., acompany in which three directors of mPhase are significant shareholders and oneis an officer, in connection with the manufacturing of POTS Splitter shelves andcomponent products including cards and filters sold by the Company. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

During the six months ended December 31, 2003 and 2004 and the period frominception (October 2, 1996) to December 31, 2004, $1,816,019, $398,715 and$2,214,734, respectively have been charged by Janifast to inventory or expenseand is included in operating expenses in the accompanying statements ofoperations. 

As a result of the foregoing transactions as of December 31,2004, the Company had $ 274,144 payable to Janifast, which is included inamounts due to related parties in the accompanying balance sheet. Additionally,at December 31, 2004, approximately $94,700 of undelivered purchase ordersremain outstanding to Janifast Ltd. 

As consideration for a letter of settlement with a former consultant ofmPhase, the Company had loaned the former consultant $250,000 in the form of aNote ("Note"), secured by 75,000 shares of the former consultants common stockof mPhase. The Note was due April 7, 2001. 

On August 30, 2004, the Company paid $100,000 in cash to Piper Rudnick LLP,outside legal counsel to the Company as part of a renegotiated settlementagreement that was originally effective as of March 31, 2002. The Company was inarrears with respect to payments due under the original settlement agreement andas part of the renegotiated agreement agreed to make the following payments: 
- $25,000 on each of December 1, 2004, March 1, 2005, June 1,2005, September  1, 2005 and a $50,000 payment on December 1, 2005. Thereafter the Company is  obligated to pay $25,000 on each of March 1, 2006, June 1, 2006, September 1,  2006 with a final payment of $75,000 on December 1, 2006.   
- The Company also delivered a 5 year cashless warrant to purchase $150,000  worth of common stock at $.25 per share.
**3.**INVENTORIES**
Inventory is stated at the lower of cost, determined on a first-in, first-outbasis, or market. Inventory consists mainly of the Company's POTS Splittershelves and cards. At December 31, 2004 inventory is comprised of the following:
  Raw materials      75,833Work in      progress-Finished goods      1,102,284Total      1,178,717Less: Reserve      for Obsolescence      (388,235)Net Inventory      790,482**4.**INCOME TAXES**
The Company accounts for income taxes using the asset and liability method inaccordance with SFAS No. 109 "ACCOUNTING FOR INCOME TAXES". Under this method,deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective taxbases and operating loss and tax credit carry-forwards. Because of theuncertainty as to their future realizability, net deferred tax assets,consisting primarily of net operating loss carry-forwards, have been fullyreserved for. Accordingly, no income tax benefit for the net operating loss hasbeen recorded in the accompanying consolidated financial statements. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

Utilization of net operating losses generated through December 31, 2004 maybe limited due to changes in ownership that have occurred. 
**5.**ACCRUED EXPENSES**

Accrued expenses representing accrued general and administrative expenditureswere $1,131,529 at December 31, 2004. At December 31, 2004 unpaid invoices forexpenses for research and development expenses incurred with LucentTechnologies, Inc. totaling $613,600 were included in accounts payable. 
**6.**JOINT VENTURE**

In March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Netpursuant to a Joint Venture Agreement (the "Agreement") for $20,000. Theagreement stipulates for mPhase's joint venture partner, AlphaStarInternational, Inc., ("Alphastar"), to provide mPhaseTelevision.Net right offirst transmission for its transmissions including MPEG-2 digital satellitetelevision. In addition, in March 2000, mPhase loaned the joint venture$1,000,000 at 8% interest per annum. The loan is repayable to the Company fromequity infusions to the subsidiary, no later than such time thatmPhaseTelevision.Net qualifies for a NASDAQ Small Cap Market Listing. DuringApril 2000, the Company acquired an additional 6.5% interest inmPhaseTelevision.Net for $1,500,000 and presently the Company owns 56.5% of thisventure. 

During the three months ended December 31, 2003 and ended December 31, 2004,mPhaseTelevision.Net, Inc., was charged $0 and $0, respectively for fees andcosts by its joint venture partner and its affiliates. 

Pursuant to an agreement dated as of June 18, 2002,mPhaseTelevision.Net has terminated its lease of the earth station and Alphastarand its affiliated entity have converted certain accounts payable into shares ofthe Company's common stock. Additionally, under this Agreement, mPhase isobligated to pay Alphastar and its affiliates $35,000, which is included inamounts due to related parties in the accompanying consolidated balance sheet.
**7.**EQUITY TRANSACTIONS**

In July of 2004, the Company issued 622,000 shares of its common stocktogether with a like amount of callable warrants at $.35 and $.50 respectivelyin a private placement. In August and September of 2004, the Company issued1,050,000 shares of its common stock together with a like amount of callablewarrants at $.25 and $.50 per share in private placements, which after cashoutlays of approximately $15,900, generated net proceeds of $247,500. Theaggregate net proceeds of such private placements of $402,100 were collectedduring the three month period ended September 30, 2004. On December 7, 2004, theCompany issued an additional 891,000 shares to the investors in the foregoingprivate placements due to a market value adjustment. These shares were valued at$185,721 which is included in general and administrative expenses in theaccompanying statement of operations for the period ended December 31, 2004. 

During the three months ending December 31, 2004, the Company granted 134,500shares of its common stock to consultants for 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

services performed valued at $26,900. Additionally, the Company issued2,817,914 shares of its common stock pursuant to the exercise of previouslyoutstanding warrants, generating net proceeds intended to be used for generalcorporate purpose of $563,590. During the quarter ended December 31 of 2004, theCompany issued equity units consisting of 10,717,700 shares of its common stocktogether with a like amount of warrants, with an exercise price of $.25, in aprivate placement generating net proceeds intended to be used for workingcapital and general corporate purposes, of $2,116,600 of which $2,066,600 wascollected through December 31, 2004 and $50,000 was collected in January of2005. A consultant who assisted the Company with this transaction also received100,000 shares of the Company's common stock. Additionally, in connection withsuch private placement, the Company issued an additional 3,750,000 equity unitsin January of 2005 generating proceeds of $750,000. 
**8.**DEBT CONVERSIONSAND EXTENSIONS**
During the six months ending December 31, 2004, accounts payable in theamount of $250,000 owed by mPhase to Microphase Corporation was cancelled inexchange for the 1,250,000 shares of common stock and a 5 year warrant topurchase a like amount of shares at $.25.In addition for such period, JanifastLtd. cancelled $200,000 of accounts payable owed by mPhase in exchange for1,000,000 shares of common stock and a 5 year warrant to purchase a like amountof shares at $.25 per share. 

In addition a demand note payable to Martin Smiley, CFO and General Counselof mPhase, in the amount of $75,000 was converted into 375,000 shares of commonstock plus a 5 year warrant to purchase a like amount of shares at $.25 pershare and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000promissory note carrying 12% interest. In addition Mr. Smiley converted accruedand unpaid interest on his various promissory notes of $ 9,975 through December31, 2004 into 49,875 shares of common stock plus a 5 year warrant to purchase alike amount of common stock at $.25 per share. Mr. Smiley's remaining $100,000note is convertible into Common Stock of mPhase at the rate of $.25 cents pershare through July 25, 2009. Upon conversion, the note holder will be grantedwarrants to purchase an equivalent amount of mPhase Common Stock at $.25 centsper share for a period of five years from the date of conversion plus a 5 yearwarrant for a like amount of shares at $.25 per share. Mr. Ronald A. Durando converted $13,000 of accrued and unpaid interest on various demand notesissued by the Company for loans by Mr. Durando during the six month period endedDecember 31, 2004 into 65,000 shares of common stock plus a 5 year warrant topurchase a like amount of shares at $.25 per share. In addition Mr. Durandoconverted $13,954 of principal of a $75,000 promissory note into the exercise,in full , of a warrant to purchase 1,395,400 shares of common stock at $.01previously granted to Mr. Durando in exchange for cancellation of unpaidcompensation. Finally, Mr. Gustave Dotoli, Chief Operating Officer of theCompany converted $ 3,750 of accrued and unpaid interest on a $75,000 promissorynote into 375,000 shares of common stock at $.01 pursuant to a portion of awarrant previously granted to Mr. Dotoli for unpaid compensation. 

Mr. Edward Suozzo, a consultant of the Company, converted $20,000 of accountspayable owed by the Company to 100,000 shares of common stock plus a 5 yearwarrant to purchase 100,000 shares of common stock at $.25 per share.
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
**9.**COMMITMENTS ANDCONTINGENCIES**
The Company has entered into various agreements with Georgia Tech ResearchCorporation ("GTRC"), pursuant to which the Company receives technicalassistance in developing the commercialization of its Digital Video and DataDelivery System (DVDDS). The amounts incurred by the Company for GTRC technicalassistance with respect to its research and development activities and includedin the accompanying consolidated statement of operations for the six monthsending December 31, 2003 and 2004 and for the period from inception throughDecember 31, 2004 totaled approximately $0, $0 and $13,539,952 respectively. 

If and when sales commence utilizing this particular technology, the Companywill be obligated to pay to GTRC a royalty of up to 5% of sales of the TraverserTMDVDDS. 
**10. DEFERRED REVENUE 
Deferred revenue of $ 100,295 held on December 31, 2004 consists of acustomer deposit made upon placement of a customer purchase order for deliveryof TV+ products. This advance payment will be recorded as a sale upon delivery ofthe product scheduled for the third quarter of fiscal year 2005. 
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**mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
**ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITIONS AND RESULTS OFOPERATIONS 
The following is management's discussion and analysis of certain significantfactors, which have affected mPhase's financial position and should be read inconjunction with the accompanying financial statements, financial data, and therelated notes. 
**CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATELITIGATION REFORM ACT OF 1995: 
Some of the statements contained in or incorporated by reference in this Form10-Q discuss the Company's plans and strategies for its business or state otherforward-looking statements, as this term is defined in the Private SecuritiesLitigation Reform Act of 1995. The words "anticipate," "believe," "estimate,""expect," "plan," "intend," "should," "seek," "will," and similar expressionsare intended to identify these forward-looking statements, but are not theexclusive means of identifying them. These forward-looking statements include,among others, statements concerning the Company's expectations regarding itsworking capital requirements, gross margin, results of operations, business,growth prospects, competition and other statements of expectations, beliefs,future plans and strategies, anticipated events or trends, and similarexpressions concerning matters that are not historical facts. Anyforward-looking statements contained in this Quarterly Report on Form 10-Q aresubject to risks and uncertainties that could cause actual results to differmaterially from those results expressed in or implied by the statementscontained herein. 
**RESULTS OF OPERATIONS **OVERVIEW 
mPhase, a New Jersey corporation, founded in 1996 is a publicly-held companywith over 12,000 shareholders and approximately 120 million shares of commonstock outstanding. The Company's common stock is traded on the Over the CounterBulletin Board under the ticker symbol XDSL. We are headquartered in Norwalk,Connecticut with offices in Little Falls, NJ and New York, N.Y. mPhase sharescommon office space with Microphase Corporation, a privately held company.Microphase is a leader in the field of radio frequency and filteringtechnologies within the defense and telecommunications industry. It has been inoperation for almost 50 years and supports mPhase with both engineering,administrative and financial resources as needed. 
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mPhase develops, markets and sells a line of innovative DSL ("digitalsubscriber line")-based broadband telecommunications equipment. Our flagshipproduct is our TV+ solution enabling the delivery of television over DSLby telephone service providers. This product facilitates telephonecompanies becoming full service communications providers by enabling thesimultaneous delivery of digital broadcast television, high speed data and voiceservices over the existing telephone line infrastructure. mPhase has developedits flagship product with a specific target in mind-telephone companiesin parts of the world where access to multichannel television is limited. Tothat end, mPhase's primary goal is to develop cost-effective TV over DSLsolutions that support proven, revenue-generating services (i.e., broadcasttelevision) rather than developing robust, feature-intensive and expensiveplatforms intended to compete with cable companies such as those that exist inthe US. 

mPhase introduced its first TV over DSL product, the TraverserTM Digital Videoand Data Delivery System in 1999. The TraverserTM DVDDS, is a patented end-to-endsystem based upon proprietary technology developed in conjunction with GeorgiaTech Research Corporation. Because it is an end-to-end video-over-ADSL system,the TraverserTM does not interoperate with other manufacturer's DSL CO equipmentor CPE modems. This system is the only non-Internet Protocol system on themarket today. 

The TraverserTM is installed at Hart Telephone Company in Hartwell, Georgia,where a 20 user system is currently operational. Hart Telephone competed theconstruction of its digital head end toward the end of 2001, marking theTraverser'sTM transition to commercial deployment. A TraverserTM system is alsoinstalled at the BMW manufacturing plant in Spartanburg, South Carolina for useas a telebroadcast system in a commercial setting. 

The mPhase TV+ platform, developed in conjunction with the Bell Labs divisionof Lucent Technologies, Inc.  Lucent has replaced the Company's legacy TraverserDVDDS system. The TV+ system enables telephone service providers todeliver high speed data, and broadcast TV over copper telephone lines between atelephone service provider's central office and the customer premises. The new mPhase TV+ system, developed in conjunction with Bell Laboratories division ofLucent Technologies, Inc., is also designed to allow for the simultaneousdelivery of voice, high speed data, and broadcast TV over copper telephone linesbetween a telephone service provider's central office (CO) and the customerpremises. The TV+ system was developed as an outgrowth of mPhase's engagement of Bell Labs in fiscal year 2003 to costreduce mPhase's set top box that operates with the legacy DVDDS sytem developedby GTRC. The TV+ system replaces the DVDDS system with an open industrystandards-based platform. Release 1 of the mPhaseTV+ system is complete andready for commercial deployment. The TV+ system delivers 255 broadcasttelevision channels over ADSL and utilizes an industry-leading, standards-basedLucent Technologies, Inc.'s Stinger TM DSL Access Concentrator fortransport of digital television plus high speed internet and voice. The mPhaseTV+ system consists of a powerful software platform and a cost reduced set topbox located in a telephone customer's premises plus the Lucent Stinger locatedat the CO or in the loop servicing the customer. 

The mPhase TV+ system provides comprehensive end to end management ofdelivery of digital broadcast television by interfacing with the Stinger and avideo headend built by a telephone service provider to downlink broadcasttelevision programming from satellites. mPhase software manages the broadcasttelevision compressed data prior to the distribution to a customer by theStinger and supports administrative tasks associated with subscriber management.The use of the Lucent Stinger (digital subscriber line access mutiplexercommonly known as a DSLAM) for transport in the TV+ system results in a highlyscalable architecture for the delivery of broadcast television. This isaccomplished by internally multicasting each television channel for deliveryfrom the CO to a larger number of end users. Release 1.0 of the TV+ system iscapable of distributing 255 channels of broadcast television simultaneously to455 customers by one Lucent Stinger DSLAM concentrator. We believe that the TV+platform is the most cost-effective standards-based solution for delivery ofbroadcast television using ADSL. For mPhase the alliance with Lucent marks achange in strategy from selling a complete proprietary platform to providing anindustry-standards solution. 

The Company believes that the demand for the TV+ system will be greatest inmarkets primarily outside of the United States that do not have a hybrid fibercoaxial cable ("HFC") infrastructure necessary for cable TV or fiber to the curbnecessary for very fast DSL (VDSL). We believe there is a significant costadvantage when our mPhase TV+ solution is compared against other platformsutilizing existing telephone lines containing the *same*features. Release 1.0 of the mPhaseTV+ system completed in July of 2004 does not contain features such as thedelivery of two or more TV channels over a single DSL copper telephone line,video on demand, or interactive TV. Release 2.0 of the TV+ completed inSeptember of 2004 contains the same basic characteristics of Release 1.0 plus anenhanced electronic program guide. Releases 1.0 and 2.0 of the TV+ system aredesigned to operate only with the Lucent Stinger DSLAM. 
Release 3.0 of the TV+ solution, expected to be completed in the thirdquarter of fiscal year 2005, will utilize a communications framework based uponInternet Protocol (IP) instead of Asynchronous Transfer Mode (ATM) that isutilized by Releases 1.0 and 2.0. ATM is an industry standard for transportationof data based upon a packaging of information into a fixed-size cell format fortransportation across networks. Many telecommunications service providerscurrently deploy equipment that handles this protocol because it can supportvoice, video, data and multimedia applications simultaneously with a high degreeof reliability. IP is another 
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transport protocol that maintains network information and routes packetsacross networks. IP packets are larger and can hold more data than ATM cells.Historically, there have been concerns that service providers would be unable toprovide the same quality of service with IP because it is not optimized fortime-sensitive signals such as broadcast television and voice. Nevertheless,there is a greater demand by telecommunication service providers for IP systemsfor delivery of television, voice and high-speed data because such systems aresignificantly more cost effective to deploy based upon greater scalability. 

Release 3.0 of the TV+ system will operate with both the Lucent Stinger aswell as the DSLAM's of other major vendors. Release 3.0 of the TV system willalso be able to send multiple TV channels down a single DSL line using ADSL2supported DSLAM's and be capable of delivery of Video on Demand. As ADSLtechnology migrates forward to ADSL2 or ADSL2+, mPhase plans to includeadditional features in future versions of the TV+ system in a scalable, cost -effective manner depending upon *actual*market demandfor such features in markets that mPhase is targeting. In addition, mPhase willbe continuously updating its set top box to be used as part of the TV+ systemand as a stand - alone product. 
For those television markets in the United States that are not served by HFC,we believe the availability of programming content is essential to facilitatepotential sales of our TV platforms over ADSL. In March of 2000, we establishedmPhase Television net., Inc. (mPhase TV), a joint venture between mPhase andAlphastar International, Inc. mPhase TV can provide contracts, licensingagreements, marketing and legal support to service providers interested indeploying television over ADSL for U.S. markets. mPhase TV has secured licensesto resell programming for approximately 80 channels of U.S. broadcasttelevision. mPhase TV enables telecommunications service providers in the U.S.to provide customers a full complement of television programming. This enables aU.S. telecommunications service provider to avoid the necessity of securing suchcontracting rights individually with many different providers of broadcasttelevision content. It is important to note that the role of mPhase TV haschanged since its inception. Originally, mPhase TV was to utilize a satelliteuplink/downlink facility and serve as an aggregator of television content. Thiswould eliminate the need for a telecommunications service provider, purchasing aTV delivery platform from mPhase, from having to build a full scale televisionreception facility (head-end) to downlink broadcast television channels fromsatellites orbiting the earth. However, recent advances in technology havesignificantly reduced the costs for a telephone company to build a full scaleheadend. Therefore, the role of mPhaseTV is now limited to providing theappropriate licenses and relationships as opposed to offering a contentaggregation solution. As part of its cost reduction efforts, mPhase terminatedits lease of Alphastar's earth station satellite uplink and downlink facility inOxford, CT. mPhase owns approximately 57% of mPhase TV. 

To effectively market the joint solution of the TV+ and the Lucent StingerDSLAM, mPhase has been established as aLucent Business Partner. As a business partner, mPhase is able to sell thecomplete TV+ platform, including reselling the Lucent Stinger®. Theagreement enables mPhase to sell the TV+ platform anywhere in the worldwhere the customer is interested in supporting digital video services.Additionally, mPhase and Lucent are jointly marketing this product solution toexisting Lucent customers, as well as to Lucent's extensive network of businesspartners around the world. Together the two companies are in the process ofidentifying strong opportunities and target markets. Once identified,collectively mPhase and Lucent will approach Lucent's established businesspartner in that region for further marketing to the appropriate end customer.This co-marketing relationship adds tremendous value to mPhase. By gainingaccess to Lucent's business partners, mPhase will have the opportunity tosignificantly increase exposure for its TV+ solution without having toincrease the size of its direct sales force. 

mPhase DSL Component Products - mPhase also has designed and markets a lineof DSL component products ranging from items such as Plain Old Telephone Service(POTS) splitters to innovative loop management products. From our inception in1996 to date virtually all of mPhase's revenue has been derived from sales ofour component DSL products such as POTS splitters and low pass filters. Ournewest innovation in our suite of DSL component products is our iPOTS orIntelligent POTS splitter product. This product enables telephone serviceproviders comprehensive remote and automated test access to all elements of aDSL network. The iPOTS1, and iPOTS3 allow a telephone service provider to bypassPOTS splitters on a DSL network and avoid having to manually intervene anddisrupt line usage so a test signal can pass through a DSL network. This productmarks an advancement in automating DSL loop management. As DSL deploymentsincrease, it is becoming more important for telecommunications service providersto streamline the process for rolling-out and troubleshooting DSL services.Additionally, as competition for high speed Internet expands, the market iswitnessing a reduction in the price for such service. Therefore, it has becomeimperative that telecommunications service providers lower the operational costsinvolved with supporting DSL services. Currently our iPOTS1 is designed for usewith the Lucent Stinger, whereas, the iPOTS3 (recently renamed the "BroadbandWatch") product is compatible with DSLAM's manufactured by other vendors. mPhasecurrently has a non-exclusive worldwide distribution agreement with CorningCable Systems for the sale of the iPOTS products. 
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mPhase was organized on October 2, 1996. On February 17, 1997, the Companyacquired Tecma Laboratories, Inc., a public corporation in a reverse mergertransaction. This resulted in the Company's stock becoming publicly traded onthe NASDAQ Over-the-Counter Bulletin Board. On June 25, 1998, the Companyacquired Microphase Telecommunications, Inc. in a stock for stock exchange,whose principal assets included patents and patent applications utilized in theCompany's TraverserTM product. On March 2, 2000, mPhase acquired an interest inmPhaseTelevision.Net, Inc., a joint venture organized to provide digitaltelevision programming content to service providers deploying television overDSL. 

From mPhase's inception, the operating activities related primarily toresearch and development, establishing third-party manufacturing anddistribution relationships and developing product brand recognition amongtelecommunications service providers. These activities included establishingtrials and field tests of the TraverserTM product with Hart Telephone Company inGeorgia and the TV+ in Russia, and establishing a core administrative and salesorganization. 

In February of 2004, the Company entered into the exploratory development ofa new power cell with an extended shelf life utilizing the science ofNanotechnology. The Company has currently engaged Lucent Technologies, Inc. toperform Research and Development of this product. 

Revenues. To date, all material revenues have been generated from sales ofthe POTS Splitter Shelves and other DSL component products to a small number oftelecommunications companies. In December of 2004, the Company received an orderfor 1000 ports at a price of 280 per port of its TV+ product from Lucent Russiafor deployment by a major telephone service provider in Russia. Future revenuesbecause of the length and variability of the commercial roll-out of the TV+ tovarious telecommunications service providers. Since the Company believes thatthere may be a significant international market for the TV+ involving manydifferent countries, with different regulations, certifications and commercialpractices than the United States, future revenues are highly subject to thechanging variables and uncertainties. Additionally, the recent instability ofthe telecommunications market evidenced by reduction in capital spending acrossthe whole telecom sector contributes to our difficulty in accurately predictingfuture revenues. 

Cost of revenues. The costs necessary to generate revenues from the sale ofPOTS Splitter Shelves and other related DSL component products include directmaterial, labor and manufacturing. mPhase paid these costs to Janifast Ltd.,which has facilities in the People's Republic of China and is owned by andmanaged by certain senior executives of the Company. The cost of revenues alsoincludes certain royalties paid to Microphase Corporation, a privately heldcorporation organized in 1955, which shares certain common management with theCompany. Costs for future production , if any, of the legacy TraverserTM productwill consist primarily of payments to manufacturers to acquire the necessarycomponents and assemble the products and future patent royalties payable toGeorgia Tech Research Corporation, ("GTRC"). 

Research and development. Research and development expenses consistprincipally of payments made to  LucentTechnologies, Inc. for development of its TV+ and exploratory research ofNanotechnology battery. In addition, the Company has incurred certain researchand development expenses with Mircrophase Corporation in connection with itsBroadband Watch product. All research and development costs are expensed asincurred. 

General and administrative. Selling, general and administrative expensesconsist primarily of salaries and related expenses for personnel engaged indirect marketing of the TV+, the POTS Splitter Shelves and other DSL componentproducts and Nanotechnology battery product, as well as support functionsincluding executive, legal and accounting personnel. Certain administrativeactivities are outsourced on a monthly fee basis to Microphase Corporation.Finally, mPhase leases the principal office from Microphase Corporation. Non-cashcompensation charge. The Company makes extensive use of stock options andwarrants as a form of compensation to employees, directors and outsideconsultants. From inception (October 2, 1996) through December 31, 2004 theCompany has incurred cumulative (a) development stage losses and has anaccumulated deficit of $120,912,875 and (b) negative cash flow from operationsof $50,890,701. The auditors report for the fiscal year ended June 30, 2004includes the statement that "there is substantial doubt of the Company's abilityto continue as a going concern". Management estimates that the Company needs toraise approximately $5,000,000-$10,000,000 during the next 12 months to continueits present level of operations. As of December 31, 2004, the Company had anegative net worth of $3,069,329 compared to a negative net worth of $2,917,962as a result of continuing net losses incurred after June 30, 2004. 
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In fiscal 2001, the Company had anticipated that the sales of its componentproducts would be able to supplement the underwriting of the completion of ourflagship product television over DSL product line. In fiscal 2002 these salesdeclined with the overall decline of DSL deployments and spending in thetelephone industry. For the second three months of fiscal year 2005, sales ofPOTS splitters were $171,864. The Company believes its new IPOTS product willcapture some of the existing DSL deployments, providing increases in revenue inthe third quarter of fiscal 2005. Until such time such revenues are realized,the Company intends on maintaining its reduced cost structure to minimize itslosses, which management believes will permit the Company to sustain itsdevelopment process and ultimately achieve profitability. 

The Company believes that significant deployments and resulting revenues fromthe deployment of the TV+ are not expected until the second quarter of fiscalyear 2005.. The Company further believes that an increase in capitalexpenditures in the telecommunications industry will also increase sales andimprove the Company's margins as well as increase the probability that theCompany will attain profitability. The Company does not expect to derive anymaterial revenue from its Nanotechnology product development until fiscal year2006 
**THREE MONTHS ENDED DECEMBER 31, 2004 VS. DECEMBER 31, 2003 **REVENUE 
Total revenues were $295,524 for the three months ended December 31, 2004compared to $1,290,935 for the three months ended December 31, 2003. Thedecrease was primarily attributable to an decreased demand of the Company's POTSSplitter product line. The Company continues to believe that its line of POTSSplitter products is positioned to be competitively priced with high reliabilityand connectivity, and as such has the potential to be a part of continuing DSLdeployment worldwide. The Company cannot predict when a new upturn in sales ofits POTS Splitter product might begin. The revenue was primarily from onecustomer, Covad Communications. 
**COST OF REVENUES 
Cost of sales were $245,125 for the three months ended December 31, 2004 ascompared to $1,191,193 in the comparable prior period in 2003, representing 83%of gross revenues for the quarter ended December 31, 2004 and 92.3% for thequarter ended December 31, 2003, respectively. Our margins have contracteddramatically over the past three years as spending among the telecommunicationsproviders has contracted, coupled with downward pressures related to the supplyand demand of telecommunications products. Margins for the quarter endedDecember 31, 2004, decreased by 4.7 % over the margins for the same period endedDecember 31, 2003 due primarily due to an increase in manufacturing cost relatedto the startup and deployment of the Company's TV+ product. 
**RESEARCH AND DEVELOPMENT 
Research and development expenses were $1,054,761 for the three months endedDecember 31, 2004 as compared to $843,478 during the comparable period in 2003or an increase of $211,830. This consists of increased spending in TV+ productdevelopment activity and Nanotechnology battery exploratory research. Both areasrepresent activities contracted though Lucent Technologies and other vendorssuch as Magpie, Velonkani, and Espeal and managed by mPhase. Reduced spendingwith Microphase Corporation  partially offsets these spending increases. 
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The Company  expects continued increases in research and developmentcosts throughout fiscal year 2005 as the Company continues and expands itsdevelopment through Lucent Technologies, Inc of the TV+ and Nanotechnologyproduct lines.. In order to broaden and diversify its current line of businessinto additional high growth technology areas, the Company plans to continue itsdevelopment efforts commenced in fiscal year 2004, with the Bell labs divisionof Lucent Technologies, Inc. to commercialize the use of nano power celltechnology. Lucent/ Bell Labs is developing for mPhase micro-power source arraysfabricated using nanotextured, superhydrophobic materials. This new businessarrangement with Lucent Bell Labs will give mPhase the opportunity to developand offer breakthrough battery technology applications, initially to governmentmarket segments including defense and homeland security, and ultimately to thecommercial market. The initial applications for the nano power cell technologywill address the need to supply emergency and reserved power to a wide range ofelectronic devices for the defense department. 

Research expenditures incurred with Microphase were related to the continuingdevelopment of the company's DSL component products, including the company'sline of pots splitters and microfilters and the company's newest products, the*ipots(tm*) and the mphase stretch. We believethe mphase *ipots(tm*) offers a much-neededsolution for the DSL industry; the *ipots(tm*) or Broadband Watch product thatenables telcos to remotely and cost-effectively perform loop management andmaintenance including line testing, qualification and troubleshooting. Prior tothe introduction of such product**, loop management couldnot be remotely performed through a conventional pots splitter without manualintervention.. The unique (patent pending) *ipots(tm*) or Broadband Watch circuit allowsmost test heads to perform both narrow and wideband testing of the local loopthrough the central office pots splitter without having to physically disconnectthe pots splitter, thereby eliminating the need to dispatch personnel and atruckroll. **GENERAL AND ADMINISTRATIVE EXPENSES 
Selling, general and administrative expenses were $2,780,291 for the sixmonths ending December 31, 2004 up from $1,518,411 or an increase of $1,261,880from the comparable period in 2003. The increase in the selling, general andadministrative costs is comprised primarily of non-cash charges relating to theissuance of common stock and options to consultants, which totaled $1,127,283for the six months ended December 31, 2004 as compared to $307,245 for thecomparable period ended December 31, 2003 resulting in an increase of $820,038.The increase in selling, general and administrative expenses is alsoattributable to $185,721 of expenses associated with adjustments of offeringprices of certain of the private placements completed in fiscal year 2005.Additionally travel expenses increased by $69,494 and increased spending inadvertising, trade shows and marketing and resulting expenses amounted to anaggregate of $119,503.We expect sales and travel expenses to grow as theCompany's approaches the deployment of its TV+ products in the future. 
**DEPRECIATION AND AMORTIZATION 
Depreciation and amortization expense was $128,506 for the six months endingDecember 31, 2004, up from $74,082, or an increase of $54,424 from thecomparable period in 2003. The decrease is a result of the company's reducedoutlays for capital expenditures in its two most recent fiscal years. We do notexpect such downward trend to continue but such depreciation and amortizationexpense should remain at the current reduced levels until the company commencesdeployment of its television over DSL platforms. We expect to increase capitalexpenditures in connecting with the deployment of equipment at test sites withvarious telecommunications service providers globally as deployment of our TV+product progresses. 
**NET LOSS 
The Company recorded a net loss of $5,137,192 for the sixmonths ended December 31, 2004 as compared to a loss of $2,565,377 for the sixmonths ended December 31, 2003. This represents a loss per common share of $.06for the six month period ended December 31, 2004 as compared to a loss percommon share of $.04 for the six months ending December 31, 2003; based uponweighted average common shares outstanding of 91,474,828 and 72,251,251 duringthe periods ending December 31, 2004 and 2003, respectively. 

Although it is difficult to predict the exact timing of additional materialdeployments of its TV+ product, the Company believes that significant revenue isnot expected until the fourth quarter of fiscal year 2005, which along with anyupturn of spending in the telephone industry, will also increase sales andimprove the Company's operating margins and provide the Company with theopportunity to attain profitability sometime in fiscal year 2006. 
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**CRITICAL ACCOUNTING POLICIES **REVENUE RECOGNITION 
All revenue included in the accompanying consolidated statements ofoperations for all periods presented relates to sales of mPhase's POTS SplitterShelves and DSL component products. 

As required, mPhase has adopted the Securities and Exchange Commission("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition inFinancial Statements", which provides guidelines on applying generally acceptedaccounting principals to revenue recognition based upon the interpretations andpractices of the SEC. The Company recognizes revenue for its POTS Splitter Shelfand Other DSL component products at the time of shipment, at which time, noother significant obligations of the Company exist, other than normal warrantysupport. 
**RESEARCH AND DEVELOPMENT 
Research and development costs are charged to operations as incurred inaccordance with Statement of Financial Accounting Standards ("SFAS"), No.2,"Accounting for Research and Development Cost." 
**INCOME TAXES 
mPhase accounts for income taxes using the asset and liability method inaccordance with SFAS No.109 "Accounting for Income Taxes." Under this method,deferred tax assets and liabilities are measured using currently enacted taxrates. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in results of operations in the period that includes theenactment date. Because of the uncertainty as to their future realizability, netdeferred tax assets, consisting primarily of net operating loss carryforwards,have been fully reserved for. Accordingly, no income tax benefit for the netoperating loss has been recorded in the accompanying financial statements. 

Utilization of net operating losses generated through June 30, 2003 may belimited due to "changes in control" of our common stock that occurred. 
**STOCK-BASED COMPENSATION 
Financial Accounting Statement No. 123, Accounting for Stock BasedCompensation, encourages, but does not require companies to record compensationcost for stock-based employee compensation plans at fair value. The Company haschosen to continue to account for stock-based compensation for grants toemployees using the intrinsic method prescribed in Accounting Principles BoardOpinion No. 25, Accounting for Stock Issued to Employees, and relatedinterpretations. Accordingly, compensation cost for stock options is measured asthe excess, if any, of the quoted market price of the Company's stock at thedate of the grant over the amount an employee must pay to acquire the stock. TheCompany has adopted the "disclosure only" alternative described in SFAS 123 andSFAS 148, which require pro forma disclosures of net income and earnings pershare as if the fair value method of accounting had been applied. The Companyaccounts for non-employee stock based awards in which goods or services are theconsideration received for the equity instruments issued based on the fair valueof the consideration received or the fair value of the equity instrument issued,whichever is more readily determinable. 
**INVENTORY RESERVE AND VALUATION ALLOWANCE 
The Company carries its inventory at the lower of cost, determined on a firstin, first out basis, or market. Inventory consists mainly of the Company's POTSSplitter Shelf and Filters. In determining the lower of cost or market, theCompany periodically reviews and estimates a valuation allowance to reserve fortechnical obsolescence and marketability. The allowance represents management'sassessment and reserve for the technical obsolescence based upon theinter-operability of its component products, primarily filters and splitters,with presently deployed and next generation DSL infrastructures as well as areserve for marketability based upon current prices and the overall demand forthe individual inventory items. Material changes in either the technicalstandards of future DSL deployments or further erosion in the demand fordeployments of DSL infrastructures could affect the estimates and assumptionsresulting in the amounts reported. 
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**MATERIAL RELATED PARTY TRANSACTIONS 
The Company records material related party transactions. The Company incurscosts for engineering, design and production of prototypes and certainadministrative functions from Microphase Corporation and the purchase offinished goods, primarily consisting of DSL splitter shelves and filters, fromJanifast Limited. The Company has incurred costs for obtaining transmissionrights. This enabled the Company to obtain re-transmission accreditation toproprietary television content that the Company plans to provide with itsflagship product, the TV+ within its incorporated joint venture mPhaseTelevision.net, in which the Company owns a 56.5% interest. 

The Company has also incurred charges for beta testing and on-site marketing,including the display of a live working model at Hart Telephone. In addition,the Company has entered into a supply agreement with Hart Telephone, which isscheduled to commence upon the commercial production of the TraverserTM. A memberof mPhase's board of directors is employed by Lintel, Inc., the parentcorporation of Hart Telephone. 

Mr. Durando, the President and CEO of mPhase, owns a controlling interest andis a director of Janifast Limited. Mr. Durando and Mr. Dotoli are officers ofMicrophase Corporation. Mr. Ergul, the chairman of the board of mPhase, owns acontrolling interest and is a director of Microphase Corporation. Microphase,Janifast, Hart Telephone and Lintel Corporation are significant shareholders ofmPhase. Microphase, Janifast and Hart Telephone have converted significantliabilities to equity in fiscal years June 30, 2001, 2002 and 2003 and JanifastLtd. and Microphase Corporation converted $200,000 and $250,000 of accountspayable respectively into common stock and warrants as of December 31, 2004. Managementbelieves the amounts charged to the Company by Microphase, Janifast, mPhaseTelevision.net and Hart Telephone are commensurate to amounts that would beincurred if outside parties were used. The Company believes Microphase, Janifastand Hart Telephone have the ability to fulfill their obligations to the Companywithout further support from the Company. 

Mr. Durando's June 30, 2004 note payable balance of $300,00 was repaid by theCompany during the six month period ending December 30, 2004. During the 6 monthperiod, Mr. Durando made additional bridge loans to the Company evidenced byvarious 12% demand notes in the Aggregate of $525,000. Mr. Durando was repaid atotal of $450,000 of such loans in January of 2005. Inaddition, Mr. Durando converted $13,954 of the principal amount of a $75,000promissory note leaving unpaid principal of $61,046 outstanding. Mr. Durandoconverted $13,000 of accrued and unpaid interest on various promissory notes ofthe Company into 65,000 shares of common stock and a 5 year warrant to purchasea like amount of common stock at $.25 per share. 

During the 6 month period ended December 31, 2005 Mr. Dotoli and Mr. Smiley,the COO and CFO and General Counsel of the Company respectively, each lent theCompany $75,000. Mr. Dotoli was repaid, the principal amount of such loan, incash in January of 2005 and Mr. Smiley converted his $75,000 loan into 375,000shares of common stock of the Company plus a 5 year warrant to purchase a likeamount of shares at $.25 per share. Mr. Dotoli cancelled $3,750 of accrued andunpaid interest from August 15, 2004 through January 15, 2004 into 375,000shares of common stock pursuant to the terms of a portion of a warrant that wasexercised at $.01 per share previously given by the Company to Mr. Dotoli inexchange for and cancellation of unpaid compensation. 
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**LIQUIDITY AND CAPITAL RESOURCES 
At December 31, 2004 mPhase had working capital deficit of $3,093,043 ascompared to working capital deficit of $3,007,748 at December 31, 2003. ThroughDecember 31, 2004, the Company had incurred development stage losses totalingapproximately $120,912,875. At December 31, 2004, the Company had approximately$1,010,903 of cash, cash equivalents and approximately $206,069 of tradereceivables to fund short-term working capital requirements. The Company'sability to continue as a going concern and its future success is dependent uponits ability to raise capital in the near term to: (1) satisfy its currentobligations, (2) continue its research and development efforts, and (3) thesuccessful wide scale development, deployment and marketing of its products. 

Historically, mPhase has funded its operations and capital expendituresprimarily through private placements of common stock. Management expects thatits ongoing financial needs will be provided by financing activities andbelieves that the sales of its line of POTS Splitter products and other relatedDSL component products will provide some offset to cash flow used in operations,although there can be no assurance as to the level and growth rate of such salesin future periods as seen with quarter to quarter fluctuations in componentsales. At December 31, 2004, the Company had cash and cash equivalents of$1,010,903 compared to $90,045 at June 30, 2004, accounts receivable of $206,069and inventory of $790,500. This compared to $64,100 of accounts receivable and$1,237,972 of inventory at June 30, 2004. 

Cash used in operating activities was $1,615,859 during the six months endingDecember 31, 2004. The cash used by operating activities principally consists ofthe net loss, and significant changes in assets and liabilities, includingadditional cash provided by increasing accounts payable and accrued expenses byapproximately $985,201 offset by depreciation and amortization of $128,506, andby non-cash charges of $1,242,793 for common stock options and warrants issuedfor services and cash flow provided from a decrease in inventory ofapproximately $447,490. The Company does not expect decreases of inventory to beas significant in upcoming quarters, yet we will not need to increase inventoryuntil the roll out of our TV+ platform. 

The Company has entered into various agreements with GTARC, pursuant to whichthe Company receives technical assistance in developing the Digital Video andData Delivery System. The Company has incurred expenses in connection withtechnical assistance from GTARC totaling approximately $0, $0, for the threemonth periods ended December 31, 2004 and 2003, respectively, and $13,539,932from the period from inception through December 31, 2004. On February 18, 2004the Company entered into an Agreement with GTARC to convert approximately $1.8million in outstanding payables into a 5 year cashless warrant to purchase up to5.069,200 shares of the Company's common stock through 2009. GTRC may receive aroyalty of up to 5% from any future sales by the Company of its legacy TraverserDVDDS product. 

As of December 31, 2004, mPhase is obligated to pay Lucent Technologies,Inc., the sum of $784,000 in 5 payments of $156,800 each against projectmilestones under its current Development Agreement for development of Version3.0 of its TV+ product. In addition, the Company is obligated to make paymentsof $100,000 per month through December of 2004 under a separate DevelopmentAgreement with Lucent covering development of its new battery developed throughthe science of NanoTechnology. 
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**LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS 
From inception (October 2, 1996) through December 31, 2004 the Company hadincurred development stage losses and has an accumulated deficit ofapproximately $120,912,875 and a stockholder's deficit of $3,069,329. For thesix months ended December 31, 2004, and from inception through December 31, 2004respectively, the Company had negative cash flow from operations of $3,037,959 and $50,890,701 respectively. The report of the Company's outside auditor's,Rosenberg, Rich, Baker, Berman and Company with respect to its latest audited10k for the fiscal year ended June 30,2004 stated that "there is substantialdoubt of the Company's ability to continue as a going concern". Managementestimates that the Company will need to raise approximately $5-10 million duringthe next 12 months to continue its present level of operations. 

We continue our efforts to raise additional funds throughprivate placements of our common stock and strategic alliances, the proceeds ofwhich are required to fund continuing expenditures and the controlleddevelopment stage rollout of our TV+. However, there can be no assurance thatmPhase will generate sufficient revenues to provide positive cash flows fromoperations or that sufficient capital will be available, when needed or at termsthat we deem to be reasonable. 

We have evaluated our cash requirements for the remainder of fiscal year 2005based upon certain assumptions, including our ability to raise additionalfinancing and increased sales of our POTS Splitter, Broadband Watch and TV+products . The Company anticipates that it will need to raise, at a minimum,approximately $5-10 primarily in private placement of its common stock withaccredited investors, during the next 12 months, or alternatively we will needto curtail certain expenses as incurred at the present levels includingmarketing and research and development expenses. Additional investments indevelopment of the TV+ and Nanotechnology battery products will be required inthe next 12 months. 

Management believes that the up to $10 million to be raised, in new PrivatePlacements in the capital markets, will be sufficient to cover its currentoperating expenses and permit the company to maintain its present operationallevels. This amount may be supplemented with additional funds that could bereceived from investors, currently holding warrants to purchase up to a total ofapproximately 19.8 million shares of common stock at exercise prices ofapproximately $.30 per share which are presently "in the money" and can beexercised during the next 12 months. 

Should these cash flows not be available to us, we believe we would have theability to revise our operating plan and make certain further reductions inexpenses, so that our resources which were available at December 31, 2004, plusfinancing to be secured during the balance of fiscal year 2005, and expectedPOTS splitter revenues, will be sufficient to meet our obligations through theend of fiscal year 2005 . We have continued to experience operating losses andnegative cash flows. To date, we have funded our operations with a combinationof component sales debt conversions with related parties and strategic vendors,and private equity offerings. Management believes that we will be able to securethe necessary financing in the short-term to fund our operations into our nextfiscal year. However, failure to raise additional funds, or generate significantcash flows through revenues, could have a material adverse effect on our abilityto achieve our intended business objectives. 
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**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
The Company is not exposed to changes in interest rates as the Company has nodebt arrangements and no investments in certain held-to-maturity securities.Under our current policies, we do not use interest rate derivative instrumentsto manage exposure to interest rate changes. A hypothetical 100 basis pointadverse move in interest rates along the entire interest rate yield curve wouldnot materially affect the fair value of any financial instruments at December31, 2004. 
**ITEM 4. CONTROLS AND PROCEDURES 
Under the supervision and with the participation of management including theChief Executive Officer and Chief Financial Officer, we have evaluated theeffectiveness of the design and operation of our disclosure controls andprocedures pursuant to Exchange Act Rule 13a-14c and of the end of the periodcovered by this report. Based on that evaluation, the Chief Executive Officerand Chief Financial Officer have concluded that these disclosure controls andprocedures are effective. There were no changes in our internal control overfinancial reporting during the quarter ended December 31, 2004 that havematerially affected, or are reasonably likely to materially affect, our internalcontrols over financial reporting. 
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**PART II OTHER INFORMATION **ITEM 1. LEGAL PROCEEDINGS 
mPhase was advised in April 2002 that following an investigation by the staffof the Securities and Exchange Commission, the staff intended to recommend thatthe Commission file a civil injunctive action against Packetport.com, Inc. ("Packetport")and its Officer's and Directors. Such recommendation related to alleged civilviolations by Packetport and such Officers and Directors of various sections ofthe Federal Securities Laws. The staff has alleged civil violations of Sections5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(d) of theSecurities Exchanges Act of 1034. As noted in other public filings of mPhase,the CEO and COO of mPhase also serve as Directors and Officers of Packetport. Atthat time these persons advised mPhase that they deny any violation of law ontheir part and intend to vigorously contest such recommendation or action, ifany. To date no action has been filed against Packetport, its Officers orDirectors. mPhase is not named as a party in connection with this matter. 

From time to time mPhase may be involved in various legal proceedings andother matters arising in the normal course of business. 
**ITEM 2. CHANGES IN SECURITIES 
Effective for the three-month period ended December 31, 2004 the Companyissued the following unregistered securities: 

During the three months ending December 31, 2004, the Company granted 134,500shares of its common stock to consultants for services performed valued at$26,900. Additionally, the Company issued 2,817,954 shares of its common stockpursuant to the exercise of previously outstanding warrants, generating netproceeds intended to be used for general corporate purpose of $563,590. Duringthe quarter ended December 31 of 2004, the Company issued equity unitsconsisting of 10,717,500 shares of its common stock together with a like amountof warrants, with an exercise price of $25, in a private placement generatingnet proceeds intended to be used for working capital and general corporatepurposes, of 2,116,600 of which $2,066,600 was collected through December 31,2004 and $50,000 was collected in January of 2005. A consultant who assisted theCompany with this transaction also received 100,000 shares of the Company'scommon stock. 

During January of 2005, the Company issued an additional 3,750,000 shares ofequity units as part of the private placement begun in the second quarter offiscal year 2005, generating additional proceeds of $750,000. Additionally,1,000,000 shares of common stock plus a 5 year warrant for a like amount ofshares at $.25 per share were issued to Janifast Ltd. upon conversion of$200,000 of accounts payable. In addition 424,875 shares of common stock plus a5 year warrant for a like amount of shares at $.25 per share were issued toMartin Smiley, CFO and General Counsel of the Company in connection with hisconversion of a $75,000 promissory note plus accrued interest of $9,975. Inaddition 65,000 shares of common stock and a 5 year warrant for a like amount ofstock at $.25 per share were issued to Mr. Durando, President and CEO of theCompany for conversion of $13,000 of accrued interest on various promissorynotes issued by the Company and also received 1,395,400 shares of common stockof the Company in connection with the exercise of a warrant at $.01 per sharepreviously awarded for unpaid compensation. A reduction in principal of $13,954of a $75,000 promissory note to Mr. Durando was made for payment of the exerciseprice of 0.1 per share under the warrant. Mr. Gustave T. Dotoli, Chief Operating Officer of theCompany also was issued 375,000 shares of common stock of the Company inconnection with the exercise of a portion of a warrant at $.01 per share.Payment for such exercise was made in exchange for cancellation of $3,750 ofaccrued interest on a $75,000 promissory note. Finally Mr.  Souzzo, a consultant, received 100,000 shares of common stock plus a 5 year warrant fora like amount of stock at $.25 per share in exchange for cancellation of $20,000of accounts payable. 
**ITEM 3. DEFAULTS UPON SENIOR SECURITIES 
None. 
**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
None. 
**ITEM 5. OTHER INFORMATION 
None. 
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**ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 

(1)On October 12, 2004 the Company  reported on Form 8-K the sale of a private placement of 950,000 equity units  at $.25 of unregistered securities.

(2)On November 22, 2004 the  Company reported on Form 8-K the selection of the Broadband Loop Watch product  by Saudi Arabia Telecom.

(3)On November 22, 2004 the  Company reported on Form 8-K that is will sell mPhase TV+ product in support  of 1000 deployed ports to a Russian Telecommunications Service Provider  through Lucent Russia. 
 EXHIBITS.31.1Certification of    Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act    of 2002.31.2Certification of    Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act    of 2002.32.1Certification of    Chief Executive Officer pursuant to Section 906 of the Sarbanes - Oxley Act    of 2002.32.2Certification of    Chief Financial Officer pursuant to Section 906 of the Sarbanes - Oxley Act    of 2002.   28

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**SIGNATURES 
Pursuant to the requirements of the Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant, has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. 
 mPHASE    TECHNOLOGIES, INC.Dated: February    15, 2005By: /s/ Martin    S. Smiley Martin S. Smiley Executive Vice    President Chief Financial    Officer and General Counsel**29

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Exhibit 31.1 

CERTIFICATIONS 

I, Ronald A. Durando,certify that: 
-  I have reviewed  this quarterly report on Form 10-Q of mPhase Technologies, Inc.; Based on my knowledge, this report does not contain any untrue statement  of a material fact or omit to state a material fact necessary to make the  statements made, in light of the circumstances under which such statements  were made, not misleading with respect to the period covered by this report;
 
Based on my knowledge, the financial statements, and other financial  information included in this report, fairly present in all material respects  the financial condition, results of operations and cash flows of the  registrant as of, and for, the periods presented in this report;
 
The registrant's other certifying officer and I are responsible for  establishing and maintaining disclosure controls and procedures (as defined in  Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant's and have:
- Designed such disclosure controls and procedures, or caused such    disclosure controls and procedures to be designed under our supervision, to    ensure that material information relating to the registrant, including its    consolidated subsidiaries, is made known to us by others within those    entities, particularly during the period in which this report is being    prepared;
- Evaluated the effectiveness of eth registrant's disclosure controls and    procedures and presented in this report our conclusions about the    effectiveness of the disclosure controls and procedures, as of the end of    the period covered by this report based on such evaluation; and
- Disclosed in this report any change in the registrant's internal control    over financial reporting that occurred during the registrant's most recent    fiscal quarter (the registrant's fourth fiscal quarter in the case of an    annual report) that has materially affected, or is reasonably likely to    materially affect, the registrant's internal control over financial    reporting; and
- The registrant's other certifying officer and I have disclosed, based on  our most recent evaluation of internal control over financial reporting, to  the registrant's auditors and the audit committee of registrant's board of  directors (or persons performing the equivalent functions): 
- All significant deficiencies and material weaknesses in the design or    operation of internal control over financial reporting which are reasonably    likely to adversely affect the registrants' ability to record, process,    summarize and report financial information; and
- Any fraud, whether or not material, that involves management or other    employees who have a significant role in the registrant's internal control    over financial reporting. 
/s/ Ronald A. Durando Ronald A. DurandoChief Executive Officer February 15, 2005** 30

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Exhibit 31.2 

CERTIFICATIONS 

I, Martin S. Smiley,certify that: 
-  I have reviewed  this quarterly report on Form 10-Q of mPhase Technologies, Inc.; Based on my knowledge, this report does not contain any untrue statement  of a material fact or omit to state a material fact necessary to make the  statements made, in light of the circumstances under which such statements  were made, not misleading with respect to the period covered by this report;
 
Based on my knowledge, the financial statements, and other financial  information included in this report, fairly present in all material respects  the financial condition, results of operations and cash flows of the  registrant as of, and for, the periods presented in this report;
 
The registrant's other certifying officer and I are responsible for  establishing and maintaining disclosure controls and procedures (as defined in  Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant's and have:
- Designed such disclosure controls and procedures, or caused such    disclosure controls and procedures to be designed under our supervision, to    ensure that material information relating to the registrant, including its    consolidated subsidiaries, is made known to us by others within those    entities, particularly during the period in which this report is being    prepared;
- Evaluated the effectiveness of eth registrant's disclosure controls and    procedures and presented in this report our conclusions about the    effectiveness of the disclosure controls and procedures, as of the end of    the period covered by this report based on such evaluation; and
- Disclosed in this report any change in the registrant's internal control    over financial reporting that occurred during the registrant's most recent    fiscal quarter (the registrant's fourth fiscal quarter in the case of an    annual report) that has materially affected, or is reasonably likely to    materially affect, the registrant's internal control over financial    reporting; and
- The registrant's other certifying officer and I have disclosed, based on  our most recent evaluation of internal control over financial reporting, to  the registrant's auditors and the audit committee of registrant's board of  directors (or persons performing the equivalent functions): 
- All significant deficiencies and material weaknesses in the design or    operation of internal control over financial reporting which are reasonably    likely to adversely affect the registrants' ability to record, process,    summarize and report financial information; and
- Any fraud, whether or not material, that involves management or other    employees who have a significant role in the registrant's internal control    over financial reporting. 
/s/ Martin S. Smiley Martin S. SmileyChief Financial Officer February 15, 2005** 31

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**Exhibit 32.1 **MPHASE TECHNOLGIES, INC. **CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002 (18 U.S.C. SECTION 1350) 
In connection with the Quarterly Report of mPhase Technologies, Inc., a NewJersey corporation (the "Company"), on Form 10Q for the quarter ended December31, 2004, as filed with the Securities and Exchange Commission (the "Report"),I, Ronald A. Durando, Chief Executive Officer of the Company certify, pursuantto Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), thatto his knowledge: 
- The Report fully complies with the requirements of Section 13(a) or 15(d)  of the Securities Exchange Act of 1934; and   
- The information contained in the Report fairly presents, I all material  respects, the financial condition and results of operations of the Company.
/s/ Ronald A. Durando Ronald A. DurandoChief Executive Officer February 15, 2005**Back to Index   
**Exhibit 32.2 **MPHASE TECHNOLGIES, INC. **CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002 (18 U.S.C. SECTION 1350) 
In connection with the Quarterly Report of mPhase Technologies, Inc., a NewJersey corporation (the "Company"), on Form 10Q for the quarter ended December31, 2004, as filed with the Securities and Exchange Commission (the "Report"),I, Martin S. Smiley, Chief Financial Officer of the Company certify, pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that tohis knowledge: 
- The Report fully complies with the requirements of Section 13(a) or 15(d)  of the Securities Exchange Act of 1934; and   
- The information contained in the Report fairly presents, I all material  respects, the financial condition and results of operations of the Company.
/s/ Martin S. Smiley Martin S. SmileyChief Financial Officer February 15, 2005
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