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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q/A(Amendment No. 3)

Q     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. 
FOR THE QUARTER ENDED September 30, 2009

COMMISSION FILE NO. 000-30202

mPhase Technologies,
Inc.(Exact name of registrant as specified in its
charter)

NEW JERSEY
    22-2287503(State or other jurisdiction of
    (I.R.S. Employerincorporation or organization)
    Identification Number)587 CONNECTICUT AVE., NORWALK, CT
    06854-1711(Address of principal executive offices)
    (Zip Code)


(203) 838-2741
ISSUERS TELEPHONE NUMBER

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

YES [X] NO[ 
]

THE NUMBER OF SHARES OUTSTANDING
OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF NOVEMBER 2, 2009 IS1,026,658,256 SHARES, ALL OF ONE CLASS OF $.01 PAR VALUE COMMON
STOCK.

1

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Explanatory Note

This Form 10-Q/A (3) is being filed for the purpose of
restating those financial statements contained herein affected by the
restatement of the financial statements for fiscal years ended June 30, 2008 and
2009 as originally contained in the Company's Form 10-K filed with the U.S.
Securities and Exchange Commission on October 7, 2009, and restated in the
Company's Form 10-K/A (2) filed with the U.S. Securities and Exchange Commission
on April 21, 2010. The restatement involves reclassifying certain equity
instruments out of additional paid in capital into other contingent liabilities
for free standing warrants to issue shares at a fixed price as such warrants
were issued subsequent to the Company entering into Convertible Debenture
agreements which have features that may result in the obligation to issue shares
in excess of authorized shares available. The contingent liability was recorded
at the fair market value at the issuance date of the free standing warrants and
recalculated at June 30, 2008 and again at September 30, 2008, on the quarterly
measurement date, with the net change in the contingent liability credited to
the change in derivative value in the Consolidated Statement of Operations for
each period in accordance with FASB standards codification topic 815 (previously
known as EITF  0019). The restatements decrease the Net
Loss for the fourth quarter and for the fiscal year ended June 30, 2008 by
$572,900, as well as increase total liabilities and Total Stockholders Deficit
at June, 30 2008 by $433,300. The restatements decrease the Net Loss for the
first quarter and for the fiscal year ended June 30, 2009 by $433,300.

As discussed in the footnote to the financial, the contingent
liability was recorded at the fair market value at the issuance date of the free
standing warrants and recalculated on the quarterly measurement date, with the
net change in the contingent liability credited to the change in derivative
value in the Consolidated Statement of Operations for each period in accordance
with EITF  0019.

In addition, the Company is also concurrently filing certain
additional improvements to its disclosure in this amended Form 10-Q for the
quarter ended September 30, 2009.

This Form 10Q/A (3) has not been updated for any events or
subsequent information other than the restatements discussed above.

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|                             
|-----------------------------
|mPHASE TECHNOLOGIES, INC.    
|(A Development Stage Company)
|Consolidated Balance Sheets  



|                                                                                                                                                                                  |   | June
    30,  |   |   | September 30, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                                                                                                                                                                  |   | 2009          |   |   | 2009          |  
|                                                                                                                                                                                  |   |               |   |   | (Unaudited)   |  
|ASSETS                                                                                                                                                                            |   | (As Restated) |   |   | (As Restated) |  
|CURRENT ASSETS                                                                                                                                                                    |   |               |   |   |               |  
|Cash                                                                                                                                                                              | $ | 100,138       |   | $ | 867,295       |  
|Accounts receivable                                                                                                                                                               |   | 46,065        |   |   | 23,193        |  
|Prepaid and other current assets                                                                                                                                                  |   | 153,636       |   |   | 280,149       |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|Total
    Current Assets                                                                                                                                                          |   | 299,839       |   |   | 1,170,637     |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|Property and equipment, net                                                                                                                                                       |   | 39,648        |   |   | 91,469        |  
|Note
    receivable                                                                                                                                                               |   | 3,150,000     |   |   | 4,450,000     |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|TOTAL
    ASSETS                                                                                                                                                                  | $ | 3,489,487     |   | $ | 5,712,106     |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                             |   |               |   |   |               |  
|CURRENT LIABILITIES                                                                                                                                                               |   |               |   |   |               |  
|Accounts payable                                                                                                                                                                  | $ | 1,864,956     |   | $ | 1,850,365     |  
|Accrued expenses                                                                                                                                                                  |   | 482,388       |   |   | 397,245       |  
|Due
    to related parties                                                                                                                                                        |   | 369,920       |   |   | 51,875        |  
|Notes
    payable, related parties                                                                                                                                                |   | 1,332,400     |   |   | 1,511,514     |  
|Short
    term notes                                                                                                                                                              |   | 240,820       |   |   | 240,820       |  
|Current Portion, Long term debt                                                                                                                                                   |   | -             |   |   | 9,419         |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|TOTAL
    CURRENT LIABILITIES                                                                                                                                                     | $ | 4,290,484     |   | $ | 4,061,238     |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|Long
    term portion Equipment loan                                                                                                                                              |   | -             |   |   | 35,600        |  
|Convertible debt derivative liability - (Note 4)                                                                                                                                  |   | 2,380,816     |   |   | 1,961,370     |  
|Convertible debentures net of discount of $1,385,395 and $2,404,019 on June
    30, 2009 and Sept 30,2009 respectively (Note 4)                                                   |   | 2,052,355     |   |   | 2,957,981     |  
|TOTAL
    LIABILITIES                                                                                                                                                             | $ | 8,723,655     |   | $ | 9,016,189     |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|COMMITMENTS AND CONTINGENCIES (Note 6)                                                                                                                                            |   |               |   |   |               |  
|                                                                                                                                                                                  |   |               |   |   |               |  
|STOCKHOLDERS' DEFICIT                                                                                                                                                             |   |               |   |   |               |  
|Common stock, par value $.01, 2,000,000,000 shares authorized 870,419,882
    and 1,006,285,037 shares issued and outstanding at June 30, 2009 and
    Sept.30, 2009 respectively |   | 8,704,197     |   |   | 10,062,850    |  
|Additional paid in capital                                                                                                                                                        |   | 172,861,427   |   |   | 173,829,801   |  
|Deficit accumulated during development stage                                                                                                                                      |   | (186,791,819  | ) |   | (187,188,761  | )
|Less-Treasury stock, 13,750 shares at cost                                                                                                                                        |   | (7,973        | ) |   | (7,973        | )
|TOTAL
    STOCKHOLDERS' DEFICIT                                                                                                                                                   | $ | (5,234,168    | ) | $ | (3,304,083    | )
|                                                                                                                                                                                  |   |               |   |   |               |  
|TOTAL
    LIABILITIES AND STOCKHOLDERS'DEFICIT                                                                                                                                    | $ | 3,489,487     |   | $ | 5,712,106     |  

3

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mPHASE TECHNOLOGIES, INC.(A Development Stage Company)Consolidated Statements of Operations(unaudited)

|                                                                                                                                                                                                           |   |                                      |   |   |              |   |   | Date of       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------ | - | - | ------------ | - | - | ------------- | -
|                                                                                                                                                                                                           |   | For the Three
    Months ended Ended |   |   | Inception to |  
|                                                                                                                                                                                                           |   | Sept 30,                             |   |   | Sept 30,     |  
|                                                                                                                                                                                                           |   | 2008                                 |   |   | 2009         |   |   | 2009          |  
|                                                                                                                                                                                                           |   | (As Restated)                        |   |   |              |   |   | (As Restated) |  
|                                                                                                                                                                                                           |   |                                      |   |   |              |   |   |               |  
|REVENUES                                                                                                                                                                                                   | $ | 6,266                                |   | $ | 51,837       |   | $ | 22,800,455    |  
|COSTS AND EXPENSES                                                                                                                                                                                         |   |                                      |   |   |              |   |   |               |  
|Cost of Sales                                                                                                                                                                                              |   | 0                                    |   |   | 0            |   |   | 16,424,692    |  
|Research and
    Development (including non-cash stock related charges of $93,600, $0 and
    $2,503,719 for the three months ended Sept 30, 2008, 2009 and inception to
    date respectively)            |   | 387,676                              |   |   | 514,326      |   |   | 60,730,499    |  
|General and
    Administrative (including non-cash stock related charges of $5,511,950, $0
    and 
    $67,844,914 for the three months ended Sept 30, 2008, 2009 and inception to
    date respectively) |   | 6,239,260                            |   |   | 420,824      |   |   | 119,446,777   |  
|Depreciation
    and Amortization                                                                                                                                                                          |   | 13,483                               |   |   | 5,285        |   |   | 3,309,449     |  
|TOTAL COSTS AND EXPENSES                                                                                                                                                                                   |   | 6,640,419                            |   |   | 940,435      |   | $ | 199,911,417   |  
|LOSS FROM OPERATIONS                                                                                                                                                                                       |   | (6,634,153                           | ) |   | (888,598     | ) |   | (177,110,962  | )
|OTHER INCOME (EXPENSE)                                                                                                                                                                                     |   |                                      |   |   |              |   |   |               |  
|Interest
    (Expense), net                                                                                                                                                                                |   | (39,053                              | ) |   | (680,700     | ) |   | (2,384,540    | )
|Reparation,
    Impairment and Other (Expense)
    net                                                                                                                                                     |   | (198,372                             | ) |   | 4,284        |   |   | (8,506,423    | )
|Change in Derivative Value and Debt Discount                                                                                                                                                               |   | 553,880                              |   |   | 1,168,070    |   |   | 813,164       |  
|TOTAL OTHER
    INCOME (EXPENSE)                                                                                                                                                                           |   | 316,455                              |   |   | 491,654      |   |   | (10,077,799   | )
|NET (LOSS)                                                                                                                                                                                                 |   | ($6,317,698                          | ) |   | ($396,944    | ) | $ | (187,188,761  | )
|LOSS PER COMMON SHARE, basic and
diluted                                                                                                                                                                   |   | ($0.01                               | ) |   | ($0.00       | ) |   |               |  
|WEIGHTED AVERAGE COMMON SHARES 
    OUTSTANDING, basic and diluted                                                                                                                                         |   | 452,895,360                          |   |   | 934,821,600  |   |   |               |  

The accompanying notes are an integral part of these consolidated financial statements.

4

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mPHASE TECHNOLOGIES, INC.
(A
Development Stage Company)
Consolidated Statement of Changes in Shareholders'
Deficit For The Three Months Ended September 30, 2009(unaudited)

|                                                                                                 |  | Common Stock  |  |   |                |  |   |                |   |   |                            |   |   |                     |  
|------------------------------------------------------------------------------------------------ |  | ------------- |  | - | -------------- |  | - | -------------- | - | - | -------------------------- | - | - | ------------------- | -
|                                                                                                 |  | Shares        |  |   | $.01 Par Value |  |   | Treasury Stock |   |   | Additional Paid in Capital |   |   | Accumulated Deficit |  
|Balance July 1, 2009, as restated                                                                |  | 870,419,882   |  | $ | 8,704,198      |  | $ | (7,973         | ) | $ | 172,861,427                |   | $ | (186,791,817        | )
|Conversions of Convertible Debentures plus 
    accrued interest                                 |  | 82,531,821    |  |   | 825,318        |  |   | -              |   |   | 452,432                    |   |   | -                   |  
|Conversions of Accounts Payable                                                                  |  | 26,666,667    |  |   | 266,667        |  |   | -              |   |   | (66,667                    | ) |   | -                   |  
|Issuance of common stock in private placements net 
    of offering cost ($20,000)               |  | 26,666,667    |  |   | 266,667        |  |   | -              |   |   | (86,667                    | ) |   | -                   |  
|Beneficial Conversion feature of Officers' Notes 
    Payable and conversion of accounts payable |  | -             |  |   | -              |  |   | -              |   |   | 669,276                    |   |   | -                   |  
|Net
    Loss for the Three Months Ended September 30, 2009                                       |  | -             |  |   | -              |  |   | -              |   |   | -                          |   |   | (396,944            | )
|Balance September 30, 2009, as restated                                                          |  | 1,006,285,037 |  | $ | 10,062,850     |  | $ | (7,973         | ) | $ | 173,829,801                |   | $ | (187,188,761        | )

5

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

|                                                                                                                                |   |                            |   |   |                         |   |   | October 2, 1996   |  
|------------------------------------------------------------------------------------------------------------------------------- | - | -------------------------- | - | - | ----------------------- | - | - | ----------------- | -
|                                                                                                                                |   | For
    Three Months Ended |   |   | (Date
    of Inception) |  
|                                                                                                                                |   | Sept
    30,               |   |   | Sept
    30,            |   |   | To
    Sept 30,   |  
|                                                                                                                                |   | 2008                       |   |   | 2009                    |   |   | 2009              |  
|                                                                                                                                |   | (As Restated)              |   |   |                         |   |   | (As Restated)     |  
|Cash
    Flow From Operating Activities:                                                                                        |   |                            |   |   |                         |   |   |                   |  
|Net
    Income (Loss)                                                                                                           |   | ($6,317,698                | ) |   | ($396,944               | ) |   | (187,188,761      | )
|Adjustments to reconcile net loss to net cash used
    in operating activities:                                                 |   |                            |   |   |                         |   |   |                   |  
|Depreciation and amortization                                                                                                   |   | 40,307                     |   |   | 8,198                   |   |   | 7,408,498         |  
|(Gain) loss on debt extinguishments                                                                                             |   | -                          |   |   | -                       |   |   | (937,370          | )
|Non-cash charges relating to issuance of common
    stock, common stock options and warrants                                    |   | 5,605,550                  |   |   | -                       |   |   | 70,217,431        |  
|Reparation charges                                                                                                              |   | 216,689                    |   |   | -                       |   |   | 8,228,734         |  
|Derivative Value and Debt Discount charges                                                                                      |   | (553,880                   | ) |   | (1,168,070              | ) |   | (163,013          | )
|Write
    off of Granita Inventory/Sovereign
    Investment                                                                     |   | -                          |   |   |                         |   |   | 615,910           |  
|Other
    non cash charges including amortization of 
    deferred compensation and beneficial conversion 
    interest expense |   | -                          |   |   | 669,276                 |   |   | 2,712,901         |  
|Changes in assets and liabilities:                                                                                              |   |                            |   |   |                         |   |   |                   |  
|Accounts receivable                                                                                                             |   | (6,266                     | ) |   | 22,872                  |   |   | 404,683           |  
|Inventories                                                                                                                     |   | -                          |   |   | -                       |   |   | (510,471          | )
|Prepaid expenses and Other current assets                                                                                       |   | 82,395                     |   |   | 5,489                   |   |   | (67,086           | )
|Other                                                                                                                           |   |                            |   |   | -                       |   |   | 906,535           |  
|Accounts payable, Accrued expenses, Deferred revenue                                                                            |   | 58,123                     |   |   | (99,733                 | ) |   | 8,210,148         |  
|Due
    to/from related parties                                                                                                 |   |                            |   |   |                         |   |   | -                 |  
|Microphase / Janifast//Lintel                                                                                                   |   | -                          |   |   | (118,045                | ) |   | 5,391,842         |  
|Officers and Other                                                                                                              |   | 20,836                     |   |   | 179,114                 |   |   | 1,890,471         |  
|Net
    cash used in operating activities                                                                                       |   | ($853,944                  | ) |   | ($897,843               | ) |   | ($82,879,548      | )
|Cash Flow from Investing Activities:                                                                                            |   |                            |   |   |                         |   |   |                   |  
|Payments related to patents and licensing rights                                                                                |   | -                          |   |   | -                       |   |   | (450,780          | )
|Purchase of fixed assets                                                                                                        |   | -                          |   |   | (15,000                 | ) |   | (3,302,560        | )
|Investment in Sovereign                                                                                                         |   | -                          |   |   | -                       |   |   | (110,000          | )
|Net
    Cash (used) in investing activities                                                                                     | $ | 0                          |   |   | ($15,000                | ) |   | ($3,863,340       | )
|Cash Flow from Financing Activities:                                                                                            |   |                            |   |   |                         |   |   |                   |  
|Proceeds from issuance of common stock, 
    exercises warrants and finders fees, net                                           |   | 180,000                    |   |   | 180,000                 |   |   | - 
    82,878,879 |  
|Payments of short term notes                                                                                                    |   |                            |   |   |                         |   |   | (1,281,552        | )
|Advances from Microphase                                                                                                        |   |                            |   |   |                         |   |   | 347,840           |  
|Issuance of Convertible Debentures                                                                                              |   |                            |   |   |                         |   |   | 266,500           |  
|Net
    Proceeds (Repayment) from notes payable related parties                                                                 |   |                            |   |   |                         |   |   | 234,516           |  
|Proceeds from the collection of Notes Receivable under securities purchase agreements
    (note 4)                              |   | 700,000                    |   |   | 1,500,000               |   |   | 4,650,000         |  
|Sale
    of minority interest in Granita subsidiary                                                                             |   |                            |   |   |                         |   |   | 514,000           |  
|Repurchase of treasury stock at cost                                                                                            |   |                            |   |   |                         |   |   | -                 |  
|Net
    cash provided by financing activities                                                                                   | $ | 880,000                    |   | $ | 1,680,000               |   | $ | 87,610,183        |  
|Net increase in cash                                                                                                            | $ | 26,056                     |   | $ | 767,157                 |   | $ | 867,295           |  
|CASH
    AND CASH EQUIVALENTS, beginning
    of period                                                                          |   | 15,533                     |   |   | 100,138                 |   |   |                   |  
|CASH
    AND CASH EQUIVALENTS, end of
    period                                                                                | $ | 41,589                     |   | $ | 867,295                 |   | $ | 867,295           |  

The accompanying notes are an integral part of these consolidated financial
statements.

6

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mPHASE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

NATURE OF OPERATIONS - mPhase Technologies, Inc. (the
"Company") was organized on October 2, 1996 and is in the development stage, as
defined by Statement of Accounting Standards Codification ("ASC") 915-10-20,
"Accounting and Reporting by Development Stage Enterprises." The Company's
present activities are focused on microfluidics, microelectromechanical systems
(MEMS) and nanotechnology. Since mPhase is in the development stage, the
accompanying consolidated financial statements should not be regarded as typical
for normal operating periods.

BASIS OF PRESENTATION - The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and pursuant to the
regulations of the Securities Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the three months ending September 30, 2009
are not necessarily indicative of the results that may be expected for a full
fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K/A (Amendment No. 2) for the year ended June 30, 2009.

Through September 30, 2009, the Company had incurred cumulative
(a) development stage losses totaling $187,188,761 (b) stockholders' deficit of
$3,304,083, and (c) negative cash flow from operations equal to $82,879,548. At
September 30, 2009, the Company had $867,295 of cash and $23,193 of trade
receivables to fund short-term working capital requirements. In addition, the
Company relies on the continuation of funding under certain convertible
securities agreements (See Note 4) The Company's ability to continue as a going
concern and its future success is dependent upon its ability to raise capital in
the near term to: (1) satisfy its current obligations, (2) continue its research
and development efforts, and (3) allow the successful wide scale development,
deployment and marketing of its products.

USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

LOSS PER COMMON SHARE, BASIC AND DILUTED - The Company accounts
for net loss per common share in accordance with the provisions of ASC 260-10,
"EARNINGS PER SHARE" ("EPS"). ASC 260-10 requires the disclosure of the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Common
equivalent shares have been excluded from the computation of diluted EPS for all
periods presented since their affect is anti dilutive. At September 30, 2009,
the Company's convertible debentures agreements are convertible into
approximately 315,100,000 shares of common stock. The officer's notes payable
and accrued interest therein are convertible into 199,140,000 shares of common
stock.

MATERIAL EQUITY INSTRUMENTS

The Company has material equity instruments including
Convertible Debentures and Convertible Notes which are accounted for as
Derivative liabilities and options and
warrants that are evaluated quarterly for potential reclassification as liabilities pursuant to EITF 00-19 (SEE ALSO NOTE 4-Equity Transactions and Convertible Debt under the captions.. Derivative Financial Instruments
and Other Equity).

NEW ACCOUNTING PRONOUNCEMENTS- In June 2008, the Financial Accounting Standards Board (FASB) ratified the final consensuses for ASC 815-40-5 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock
(ASC 815-40-5). ASC 815-40-5 became effective for fiscal years beginning after December 15, 2008. The adoption of ASC 915-40-50 did not have a material effect on the Company's results of operations or financial condition.

Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 105-10, Generally Accepted Accounting Principles  Overall

(ASC 105-10). ASC 105-10 establishes the FASB Accounting Standards Codification(the Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities
in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in
the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is
non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (ASUs). The FASB will not consider ASUs
as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.

7

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Effective January 1, 2009, the Company adopted FASB ASC Topic 805, Business Combinations(ASC 805). ASC 805 establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. ASC 805 also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. ASC 805 also provides guidance for recognizing changes in an acquirers existing income tax
valuation allowances and tax uncertainty accruals that result from a business combination transaction as adjustments to income tax expense. The adoption of ASC 805 did not have an impact on the Company's results of operations or financial condition.

In April 2009, the FASB issued updated guidance related to business combinations, which is included in the Codification in ASC 805-20, Business Combinations  Identifiable Assets, Liabilities and Any Noncontrolling Interest(ASC
805-20). ASC 805-20 amends and clarifies ASC 805 to address application issues regarding initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a
business combination. In circumstances where the acquisition-date fair value for a contingency cannot be determined during the measurement period and it is concluded that it is probable that an asset or liability exists as of the acquisition date
and the amount can be reasonably estimated, a contingency is recognized as of the acquisition date based on the estimated amount. ASC 805-20 is effective for assets or liabilities arising from contingencies in business combinations for which the
acquisition date is on or after the beginning of the first annual reporting periodbeginning on or after December 15, 2008. The Company does not believe ASC 805-20 will have a material impact on the Companys future financial statements.

Effective January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and Disclosures Overall(ASC 820-10) with respect to its financial assets and liabilities. In February 2008, the FASB issued updated
guidance related to fair value measurements, which is included in the Codification in ASC 820-10-55, Fair Value Measurements and Disclosures  Overall  Implementation Guidance and Illustrations. The updated guidance provided a one
year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company adopted the
provisions of ASC 820-10 for non-financial assets and non-financial liabilities effective January 1, 2009, and such adoption did not have a material impact on the Companys results of operations or financial condition.

Effective April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures Overall  Transition and Open Effective Date Information(ASC 820-10-65). ASC 820-10-65 provides additional
guidance for estimating fair value in accordance with ASC 820-10 when the volume and level of activity for an asset or liability have significantly decreased. ASC 820-10-65 also includes guidance on identifying circumstances that indicate a
transaction is not orderly. The adoption of ASC 820-10-65 did not have an impact on the Companys results of operations or financial condition.

Effective April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments  Overall  Transition and Open Effective Date Information(ASC 825-10-65). ASC 825-10-65 amends ASC 825-10 to require disclosures
about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not
have a material impact on the Companys results of operations or financial condition.

Effective April 1, 2009, the Company adopted FASB ASC 855-10, Subsequent Events  Overall(ASC 855-10). ASC 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date  that is, whether that date represents
the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being
presented. Adoption of ASC 855-10 did not have a material impact on the Companys results of operations or financial condition.

8

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Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820)(ASU 2009-05). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures 
Overall,for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure
fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Companys results of operations or financial
condition.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements,(amendments to FASB ASC Topic 605, Revenue Recognition) (ASU 2009-13) and ASU 2009-14,
Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985, Software) (ASU 2009-14). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the
delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products
from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14
should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 or ASU
2009-14 to have a material impact on the Companys results of operations or financial condition.

---



|2SUPPLEMENTAL CASH FLOW INFORMATION                                                                                    |   |         |  |   |           | 
|---------------------------------------------------------------------------------------------------------------------- | - | ------- |  | - | --------- | 
|                                                                                                                       |   |         |  |   |           | 
|For the three months ended September 30,                                                                               |   |         |  |   |           | 
|                                                                                                                       |   |         |  |   |           | 
|                                                                                                                       |   | 2008    |  |   | 2009      | 
|                                                                                                                       |   |         |  |   |           | 
|Interest Accrued Unpaid                                                                                                | $ | 39,053  |  | $ | 39,972    | 
|Non Cash Investing and Financing Activities: Stock issued
      in settlement of accounts payable and accrued expenses | $ | 0       |  | $ | 200,000   | 
|Conversion of convertible debt and accrued
      interest                                                              | $ | 615,000 |  | $ | 1,277,500 | 
|Beneficial Conversion of Officer's Notes and Conversion of Accounts Payable                                            | $ | -       |  | $ | 669,276   | 
|Convertible Debt issued for Notes Receivable                                                                           | $ | -       |  | $ | 2,800,000 | 

9

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4. EQUITY TRANSACTIONS AND CONVERTIBLE DEBT

Private Placements

During the quarter ended September 30, 2009, the Company issued 2,666,667 shares of its common stock at $.0075 per share in private placements generating gross proceeds of $200,000 with placement costs of $20,000, netting
$180,000.

During the quarter ended September 30, 2008, the Company issued 4,000,000 shares of its common stock at $.05 per share in private placements generating net proceeds of $180,000, after placement costs of $20,000. Related to this
transaction was the issuance of 3,862,000 shares as reparations shares to effect repricing costing an estimated $216,689.

Stock Based Compensation

During the quarter ended September 30, 2009, the Company did not issue any stock-based compensation, warrants or options to officers, employees or consultants.

During the three months ended September 30, 2008, the Company issued 5 year options to purchase 104,675,000 shares of common stock at $.05 per share. The value of such options was estimated to be $2,825,900 using the Black Scholes method. In
addition, 61,750,000 shares of common stock valued at $2,779,650 were issued to employees and consultants.

Conversion of debt securities and Strategic vendor payables

During the three months ended September 30, 2009, $1,277,750 of convertible debt and accrued interest thereon was converted into 82,531,821 shares of Common stock.

During the three months ended September 30, 2009, $200,000 of accounts payable to Microphase Corporation was converted into 26,666,667 shares of Common stock. The Company recorded $586,667 interest expense on the beneficial conversion
feature.

During the three months ended September 30, 2008, $615,000 of convertible debt and accrued interest thereon was converted into 16,226,500 shares of Common stock.

DERIVATIVE FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended and EITF Issue No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a Company's Own Stock" require all derivatives to be recorded on the balance sheet at fair value. The beneficial conversion features of the convertible debentures are embedded derivatives and are separately valued and accounted for on our balance
sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model we use for
determining fair value of our derivatives is the Black-Scholes Pricing Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and
stock price volatilities. Selection of these inputs involves management's judgment and may impact net income.

Long Term Convertible Debentures / Note Receivable / Debt Discount

The Company currently has four separate convertible debt arrangements with independent investors. During the three months ended September 30, 2009, $1,277,750 of these convertible debt arrangements and accrued interest thereon was converted into
82,531,821 shares of Common stock.These transactions are intended to provide liquidity and capital to the Company and are summarized below.

Arrangement #1(La Jolla Cove Investors, Inc.)

On Sept 11, 2008, the Company received proceeds of $200,000 under a Securities Purchase Agreement from La Jolla Cove Investors, Inc. This transaction involves three related agreements: 1) A Securities Purchase Agreement which may under certain
circumstances permit the Company to draw up to $2,000,000 of funds; 2) A Convertible Debenture totaling $2,000,000, with a interest rate of 7 1/4% and a maturity date of September 30, 2011 and 3) A Secured Note Receivable in the amount of
$1,800,000, with a interest rate of 8 1/4% and maturity dates of September 30,2011 due from the same parties who are the holders of the Convertible Debentures.

Conversion of outstanding debentures into common shares is at the option of the holder at a price equal to the dollar amount of the debenture divided by the lesser of $.35 per share or 80% of the three lowest Volume Weighted Average Price during
a 20 day trading period. At the time of the transaction (September 11, 2008) the derivative value of this security was calculated to be $1,176,471.On June 30, 2009 the derivative value of this security was calculated to be $1,080,343. On
September 30, 2009, given the changes in the stock price, this value had decreased to $519,044, a $561,299 decrease this quarter creating a non-cash credit to earnings for the quarter ended September 30, 2009 of that amount. During the three
month period ended Sept 30, 2009, amortization of debt discount amounted to $71,646 reducing the balance to $502,790.

12

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Arrangement #2 (JMJ Financial, Inc.)

In April, 2008, the Company received proceeds of $300,000 under a Securities Purchase Agreement. This transaction involves three related agreements: 1) A Securities Purchase Agreement which may under certain circumstances permit the Company to
draw up to $1,000,000 of funds; 2) Two Convertible Debentures totaling $1,450,000, with a one time interest factor of 12% and a maturity date of March 25, 2011 and 3) A Secured Note Receivable in the amount of $1.0 million, with a one
time interest factor of 13.2 % and maturity dates of March 25, 2012 due from the same parties who are the holders of the Convertible Debentures .

Conversion of outstanding debentures into common shares is at the option of the holder. The number of shares into which this debenture can be converted is equal to the dollar amount of the debenture divided by 75%- 80% of the 3 lowest Volume
Weighted Average Prices during a 20 day trading period. At the time of the transaction the derivative value of this security was calculated to be $2,493,212. On June 30, 2008, given the decrease in the stock price, this value had decreased to
$284,922. On September 30, 2008, such value had increased to $378,662 creating a non-cash charge to earnings over the year of $93,740. In addition, the transaction resulted in a note discount which is being amortized as expense over the
life of the loan. Draws under the Note Receivable are not anticipated until November 2008 and are collateralized by $1 million of Blue Chip Stocks. In total 2 million shares were issued in connection with the convertible debentures with a
relative fair value of $160,000 included in debt discount. During the three month period ended Sept 30, 2008, amortization of debt discount amounted to $132,917 reducing the balance to $1,196,250.

On June 30, 2009 the derivative value of this security was calculated to be $444,552. On September 30, 2009, given the changes in the stock price combined with the fact that the principle amount of the two convertible debentures was converted in
full satisfaction during the three months ended September 30, 2009, this value had decreased to $0, a $444,552 decrease this quarter creating a non-cash credit to earnings for the quarter ended September 30, 2009 of that amount. During the
three month period ended Sept 30, 2009, amortization of debt discount amounted to $322,070 reducing the balance to $0.

Arrangement #3 (JMJ Financial, Inc.)

On December 31, 2008, the Company entered into a second agreement with JMJ Financial. This transaction involves; 1) A Convertible Debenture in the amount of $1.1 million, plus a one time interest factor of 12% ($132,000) and a maturity date
of December 31, 2011 and 2) A Secured Note Receivable in the amount of $1.0 million, plus a one time interest factor of 13.2 % ($132,000) and maturity date of December 31, 2012 due from the same parties who are the holders of the Convertible
Debentures. No cash was exchanged relative to this agreement.

Conversion of outstanding debentures into common shares is at the option of the holder. The number of shares into which this debenture can be converted is equal to the dollar amount of the debenture divided by 75% of the lowest Price during the 20
day trading period prior to conversion. At the commitment date the embedded conversion feature of such security was $586,667 and the debt discount valued at $586,667.

On June 30, 2009 the derivative value of this security was calculated to be $855,921. On September 30, 2009, given the changes in the stock price and conversions reducing the principle balance to 482,000, this value had decreased to $195,721
a $660,200 decrease this quarter creating a non-cash credit to earnings for the quarter ended September 30, 2009 of that amount. During the three month period ended Sept 30, 2009, amortization of debt discount amounted to $241,689 reducing
the balance to $247,200.

Arrangement#4 (JMJ Financial, Inc.)

On August 19, 2009, the Company received proceeds of $250,000 in connection with a third agreement with JMJ Financial. This transaction involves 1) a Convertible Debenture in the amount of $1,870,000, plus a one time interest factor of 12%
($224,400) and a maturity date of August 10, 2012 and 2) A Secured Note Receivable in the amount of $1,700,000 plus a one time interest factor of 13.2% ($224,400) and a maturity date of August 10, 2012 due from the same parties who are
the holders of the Convertible Debenture.

13

---

Conversion of outstanding into common shares is at the option of the holder. The number of shares into which this debenture can be converted is equal to the dollar amount of the debenture divided by 75% of the lowest trade price during the 20 day
trading period prior to conversion.At the commitment date the embedded conversion feature of such security was $1,054,395 and the debt discount valued at $1,224,395.

On September 30, 2009, given the changes in the stock price this value had decreased to $759,333 a $295,062 decrease this quarter creating a non-cash credit to earnings for the quarter ended September 30, 2009 of that amount. During the
three month period ended Sept 30, 2009, amortization of debt discount amounted to $102,333 reducing the balance to $1,122,362.

Arrangement#5 (JMJ Financial, Inc.)

On September 30, 2009, the Company received a total of $150,000 of proceeds in connection with another agreement with JMJ Financial. This transaction involves 1) A Convertible Debenture in the amount of
$1,200,000 plus a one time interest factor of 12% ($144,000) and a maturity date of September 23, 2012 and (2) A Secured Note in the amount of $1,100,000 plus a one time interest rate factor of 13.2% ($144,000 each) and a maturity
date of September 23, 2012 due from the same parties who are the holders of the Convertible Debentures.

Conversion of outstanding into common shares is at the option of the holder. The number of shares into which this debenture can be converted is equal to the dollar amount of the debenture divided by 75% of the lowest trade price during the 20 day
trading period prior to conversion. In addition, the Company has received a commitment from JMJ Financial to enter into an identical financing not later than 60 days from September 23, 2009.

At the commitment date the embedded conversion feature of such security was $480,000 and the debt discount valued at $580,000.

On September 30, 2009, given the changes in the stock price this value had increased to $487,272 a $7,272 increase this quarter creating a non-cash charge to earnings for the quarter ended September 30, 2009 of that amount. During the three
month period ended Sept 30, 2009, amortization of debt discount amounted to $48,333 reducing the balance to $531,667.

Other Equity
During the years ended June 30, 2008 and 2009 the Company reevaluated warrants
contracts to purchase 13,104,168 shares at fixed prices ranging from $.05 to
$.15 per share originally issued during Fiscal Year Ended June 30, 2008 pursuant
to FASB Standards Codification Topic 815 (previously known EITF 00-19) , such
reevaluation was to review if the Company should record an additional Derivative
Liability which would be recordable if the other convertible instruments the
Company has outstanding; primarily the Convertible Debentures discussed above;
would limit or prevent the Company from honoring the conversion of these fixed
price warrants during their contract term. The evaluation was performed on a
contract by contract basis to equity instruments subject to FASB Standards
Codification Topic 815 (previously known EITF 00-19); namely the warrants
discussed above and the Convertible Debenture agreements whereby the Company
utilized a sequencing method prescribed therein, based upon applying shares
available to contracts with the earliest inception date first.
During the fiscal year ended June 30, 2008 the Company reclassified contracts
for warrants to purchase 12,604,168 shares of the Companys common stock at
fixed prices ranging from $.13 to $.15 per share to contingent liabilities.
Contracts for warrants to purchase 11,111,113 shares of the Companys common
stock at $.14 per share continued to be subject to reevaluation through March
31, 2009 and contracts for warrants to purchase 1,604,168 shares of the
Companys common stock at fixed prices ranging from $.13 to $.15 per share
continued to be subject to reevaluation through September 30, 2009.

At the issuance dates during the fiscal year ended June 30, 2008 the estimated
value of the contingent liability of these warrants approximated $1,006,200; and
as recalculated on the quarterly measurement dates, as of June 30, 2008 the
estimated value of the contingent liability approximated $433,300, and during
the six months ended December 31, 2008 the estimated value of the contingent
liability was determined to no longer be material. The net change in the
contingent liability was credited to the change in derivative value in the
Consolidated Statement of Operations for each period in accordance FASB
Standards Codification Topic 815 (previously known EITF 00-19).
As recalculated on each of the quarterly measurement dates subsequent to
December 31, 2008, the estimated value of the contingent liability of the
contracts for the warrants to purchase 12,604,168 shares of the Companys common
stock continued to not be material.

14

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5.
GRANITA MEDIA

Effective
July 1, 2007, the Company formed Granita Media, Inc. to separate its IPTV
business and facilitate the raising of capital. Pursuant to an arrangement with
4 employees of mPhase, such employees were terminated from mPhase as of July 1,
2007 and became employees of Granita Media Inc and invested solely in the common
stock of Granita Media Inc. Under the arrangement, each of the 4 employees were
required to invest $125,000 in exchange for an aggregate 2% equity interest in
Granitia Media, Inc with mPhase continuing to own 98% of the Company. The 4
employees contributed a total of $339,000 of the total $500,000 equity
investment required from them and raised from third party investors another
$175,000 for a total of $514,000 Granita Media has 19,000,000 shares of common
stock outstanding of which 18,000,000 was owned by mPhase Technology and
1,000,000 is being held for issuance the 4 employees and the third party
investors pending an agreement among such persons of the allocation of such
shares.

Under the
terms of the arrangement between mPhase and the 4 employees, such employees were
authorized to sell up to 7.99% of additional equity in the Company for a total
of not less than $2,000,000 of additional capital by December 31, 2007. As noted
above, the employees raised a total of $175,000 of outside capital only and
pursuant to the arrangement, such employees either resigned or were terminated
by mPhase together with several lower level employees of Granita. A dispute has
arisen between Granita Media and one of the former employees with respect to a
sum of approximately $176,000 included in short term loans. It is the Companys
position that such sums were voluntarily advanced to fund operating expenses
after July 1, 2007. Since the 4 employee / officers of Granita Media were
required to cover operating expenses of Granita Media after July 1, 2007 through
equity investments either directly or from third parties, the Company has taken
the position that such amount nor any related interest and fees are not owed to
the employee. In addition, the Company has substantial rights of offset for
unpaid rent with respect to the portion of its Little Falls office occupied by
Granita Media after July 1, 2007. Granita Meida, Inc. ceased operations in
December of 2007.

15




6.
COMMITMENTS AND CONTINGENCIES

The
Company has a lease obligation for the rental of office space in Little Falls
New Jersey until May 1, 2010. The annual obligation under such lease requires
rent of $2,245 per month ($21,600 annually) for the year beginning June 1, 2009
and ending May 1, 2010.

mPhase
has entered into various agreements with Georgia Tech Research ("GTRC") and its
affiliate, Georgia Tech Applied Research Corporation, ("GTARC"), pursuant to
which the Company receives technical assistance in developing the
commercialization of its Digital Video and Data Delivery System. The amount
incurred by the Company for GTRC technical assistance with respect to its
research and development activities during the nine months ended, September
30,2007, 2008 and 2009 respectively totaled $0, $0 and $0 respectively, and
$13,539,952 from the period from inception through September 30, 2009.

Legal
Proceedings

From time
to time mPhase may be involved in various legal proceedings and other matters
arising in the normal course of business.

7. FAIR
VALUE MEASUREMENTS

Effective
July 1, 2008, we adopted Accounting Standards Codification (ASC) 820-10-20, Fair Value Measurements, which provides a framework for measuring fair value
under GAAP. ASC 820-10-20defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. ASC 820-10-20
requires that valuation techniques maximize the use of observable inputs and
minimize the use of unobservable inputs. ASC 820-10-20 also establishes a fair
value hierarchy, which prioritizes the valuation inputs into three broad levels.
Financial assets and liabilities valued using level 1 inputs are based on
unadjusted quoted market prices within active markets. Financial assets and
liabilities valued using level 2 inputs are based primarily on quoted prices for
similar assets or liabilities in active or inactive markets. For certain
long-term debt, the fair value was based on present value techniques using
inputs derived principally or corroborated from market data. Financial assets
and liabilities using level 3 inputs were primarily valued using managements
assumptions about the assumptions market participants would utilize in pricing
the asset or liability. Valuation techniques utilized to determine fair value
are consistently applied.

The table
below presents a reconciliation for liabilities measured at fair value on a
recurring basis at September 30, 2009 and 2008:

|                                 |   | Fair
    Value Measurements   |  
|-------------------------------- | - | ----------------------------- | -
|                                 |   | Using
    Significant         |  
|                                 |   | Unobservable Inputs (Level 3) |  
|                                 |   | Derivative Liability          |  
|                                 |   | September                     |  
|                                 |   | 30,
    2009                  |  
|                                 |   | (As Restated)                 |  
|                                 | $ | 2,380,816                     |  
|Balance at July 1,               |   |                               |  
|Decrease in Derivative Liability |   | (1,953,841                    | )
|Debt discounts                   |   | 1,534,395                     |  
|Balance at September 30,         | $ | 1,961,370                     |  

Financial
instruments are considered Level 3 when their values are determined using
pricing models, discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable. Level 3
financial instruments also include those for which the determination of fair
value requires significant management judgment or estimation.

Some of
the Companys financial instruments are not measured at fair value on a
recurring basis but are recorded at amounts that approximate fair value due to
their liquid or short-term nature, such as cash and cash equivalents,
receivables and payables.

We have
determined that it is not practical to estimate the fair value of our notes
payable because of their unique nature and the costs that would be incurred to
obtain an independent valuation. We do not have comparable outstanding debt on
which to base an estimated current borrowing rate or other discount rate for
purposes of estimating the fair value of the notes payable and we have not been
able to develop a valuation model that can be applied consistently in a cost
efficient manner. These factors all contribute to the impracticability of
estimating the fair value of the notes payable. At September 30, 2009, the
carrying value of the notes payable and accrued interest was $4.0 million. The
JMJ Convertible Notes, which are due at various times through December 2012,
yield an interest rate of 12%. Refer to Note 4 of these financial statements for
more information about the Companys notes payable.

8.
SUBSEQUENT EVENTS

On
October 7, 2009, the Company paid Messrs. Durando, Dotoli and Smiley $45,000,
$45,000 and $25,000 respectively in reduction of amounts owed to them by the
Company for unpaid compensation and bridge loans.

Through
October 30, 2009 the Company issued 15,000,000 shares of its common stock in
connection with the conversion of $241,875 of the convertible debt arrangements
and accrued interest thereon discussed in NOTE 4.

Through
November 2, 2009 the Company issued 1,500,000 shares of its common stock to
consultants for services with an issue date value of $32,750.

16

9. RESTATEMENT OF RESULTS
The restatement involves reclassifying certain equity
instruments out of additional paid in capital into other contingent liabilities
for free standing warrants to issue shares at a fixed price as such warrants
were issued subsequent to the Company entering into Convertible Debenture
agreements which have features that may result in the obligation to issue shares
in excess of authorized shares available. The contingent liability was recorded
at the fair market value at the issuance date of the free standing warrants and
recalculated at June 30, 2008 and again during FYE ended June 30, 2009, on the quarterly
measurement date, with the net change in the contingent liability credited to
the change in derivative value in the Consolidated Statement of Operations for
each period in accordance with FASB standards codification topic 815 (previously
known as EITF  0019). The restatements decrease the Net
Loss for the fourth quarter and for the fiscal year ended June 30, 2008 by
$572,900, as well as increase total liabilities and Total Stockholders Deficit
at June, 30 2008 by $433,300. The restatements decrease the Net Loss for the
first quarter and for the fiscal year ended June 30, 2009 by $433,300.
The contingent
liability was recorded at the fair market value at the issuance date of the free
standing warrants and recalculated on the quarterly measurement date, with the
net change in the contingent liability credited to the change in derivative
value in the Consolidated Statement of Operations for each period in accordance
with FASB standards codification topic 815 (previously know as EITF  0019) resulting in the following restatement to the financial
captions listed below:
Consolidated Balance Sheets
    
    June 30, 2008
    
    
    September 30, 2009
      (unaudited)as originally
    
    
    as
    
    
    as originally
    
    
    asreported
    
    
    restated
    
    
    reported
    
    
    restatedContingent liabilities
    $
    -
    
    $
    433,300
    
    $
    -
    
    $
    -Total Liabilities
    $
    5,155,686
    
    $
    5,588,986
    
    $
    9,016,189
    
    $
    9,016,189Additional paid in capital
    $
    165,067,510
    
    $
    164,061,310
    
    $
    174,836,001
    
    $
    173,829,801Deficit accumulated during development stage
    $
    (172,268,340
    )
    $
    (171,695,440
    )
    $
    (188,194,961
    )
    $
    (187,188,761
    )TOTAL STOCKHOLDERS DEFICIT
    $
    (2,804,853
    )
    $
    (3,238,153
    )
    $
    (3,304,083
    )
    $
    (3,304,083
    )Consolidated Statements of Operations-For the Three Months
      Ended
    
    September 30, 2008
    
    
    September 30, 2009(unaudited)
    
    
    (unaudited)Other Income (Expense)
    $
    (116,845
    )
    $
    316,455
    
    $
    491,654
    
    $
    491,654Net (Loss)
    $
    (6,750,998
    )
    $
    (6,317,698
    )
    $
    (396,944
    )
    $
    (396,944
    )Loss per Share
    $
    (0.01
    )
    $
    (0.01
    )
    $
    0.00
    
    $
    0.00In addition, the Company expanded its disclosure with respect
to Convertible Debentures, Certain Equity Instruments and Notes Receivable.
  17


ITEM 2.
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The
following is management's discussion and analysis of certain significant
factors, which have affected mPhase's financial position and should be read in
conjunction with the accompanying financial statements, financial data, and the
related notes.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
LITIGATIONREFORM ACT OF 1995:

Some of
the statements contained in or incorporated by reference in this Form 10-Q
discuss the Company's plans and strategies for its business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate,"
"expect," "plan," "intend," "should," "seek," "will," and similar expressions
are intended to identify these forward-looking statements, but are not the
exclusive means of identifying them. These forward-looking statements include,
among others, statements concerning the Company's expectations regarding its
working 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 similar
expressions concerning matters that are not historical facts. Any
forward-looking statements contained in this Quarterly Report on Form 10-Q are
subject to risks and uncertainties that could cause actual results to differ
materially from those results expressed in or implied by the statements
contained herein.

RESULTS
OF OPERATIONS

OVERVIEW

mPhase, a
New Jersey corporation, founded in 1996 is a publicly-held company with over
19,000 shareholders and approximately 1.027 billion shares of common stock
outstanding. The Company's common stock is traded on the Over the Counter
Bulletin Board under the ticker symbol XDSL. We are headquartered in Norwalk,
Connecticut with offices in Little Falls, NJ. mPhase shares common office space
with Microphase Corporation, a privately held company. Microphase is a leader in
the field of radio frequency and filtering technologies within the defense and
telecommunications industry. It has been in operation for over 50 years and
supports mPhase with both engineering and administrative and financial resources
as needed.

mPhase is
a development company specializing in microfluidics, microelectromechanical
systems (MEMS) and nanotechnology. Through its wholly owned subsidiary
AlwaysReady, Inc., mPhase is commercializing its first nanotechnology-enabled
product for military and commercial applications - The Smart NanoBattery
providing Power On Command. The new well-patented battery technology, based on
the phenomenon of electrowetting, offers a unique way to store energy and manage
power.. Features of the Smart NanoBattery include: potentially infinite shelf
life, environmentally friendly design, fast ramp to power, programmable control,
and direct integration with microelectronic devices.

The
platform technology behind the Smart NanoBattery is a porous nanostructured
material used to repel and precisely control the flow of liquids. The material
has aSmart Surface that can potentially be designed for self-cleaning
applications, water purification/desalination, liquid filtration/separation, and
environmental cleanup.

mPhase
has been awarded a Phase II Small Business Technology Transfer Program (STTR)
grant, part of the Small Business Innovation Research (SBIR) program, from the
U.S. Army for continued development of a reserve Smart NanoBattery for a
critical computer memory application.

mPhase is
headquartered in Little Falls, New Jersey, with additional offices in Norwalk,
Connecticut, and New York, New York.

Since our
inception in 1996 we have been a development-stage company and operating
activities have related primarily to research and development, establishing
third-party manufacturing relationships and developing product brand recognition
among telecommunications service providers.

18




Description of Operations

Microfluidics, MEMS, and Nanotechnology

In
February of 2004, mPhase entered the business of developing new products based
on materials whose properties and behavior are controlled at the micrometer and
nanometer scales. (For reference, a micrometer or micron is equal one millionth
(10 -6 ) of a meter and a nanometer is one billionth (10 -9
) of a meter  the scale of atoms and molecules. A human hair is approximately
50 microns in diameter, or 50,000 nanometers thick.) The Company has expertise
and capabilities in microfluidics, microelectromechanical systems (MEMS), and
nanotechnology. Microfluidics refers to the behavior, precise control and
manipulation of fluids that are geometrically constrained to a small, typically
micrometer scale. MEMS is the integration of mechanical elements, sensors,
actuators, and electronics on a common silicon substrate through
microfabrication technology. Nanotechnology is the creation of functional
materials, devices and systems through control of matter (atoms and molecules)
on the nanometer length scale (1-100 nanometers), and exploitation of novel
phenomena and properties (physical, chemical, biological, mechanical,
electrical) at that length scale. In its Smart NanoBattery, mPhase exploits the
physical phenomenon of electrowetting by which a voltage is used to change the
wetting properties of a liquid/solid interface at the nanometer scale. Consider
water as the liquid. Through electrowetting, mPhase can change a surface from
what is referred to as a hydrophobic ("water fearing") state to a hydrophilic
("water loving") state. In the hydrophobic state, the water beads up or is
repelled by the surface. In the hydrophillc state, the water spreads out or is
absorbed by the surface. The ability to electronically control the wetting
characteristics of a surface at the nanometer scale forms the basis of mPhase's
nanotechnology operations and intellectual property portfolio.

In the
Smart NanoBattery application, mPhase uses electrowetting as a new technique to
s activate or literally "turn on" a battery once it is ready to be used for the
first time.. At the heart of the Smart NanoBattery is a porous, nanostructured
superhydrophic or superlyophobic membrane designed and fabricated by mPhase. The
so-called superhydrophobic membrane applies to water and the superlyophobic
membrane applies to nonaqueous or organic liquids such as ethanol or mineral
oil. The difference between the two membrane types lies in the nanoscale
architecture at the surface. By virtue of its superhydrophobic or superlyophobic
character, the membrane, although porous, is able to physically separate the
liquid electrolyte from the solid electrodes so that the battery remains dormant
or inactive, thus providing no voltage, or current until called upon. This
electrolyte-electrode separation gives the battery the feature of potentially
unlimited shelf life and the benefit of being always ready when needed, which is
not necessarily the case for conventional batteries. Electrowetting alters the
liquid/membrane interface so that the liquid is now able to flow over the
membrane's surface and rapidly move through the pores where it is able to
contact the solid electrode materials located on the other side of the membrane.

mPhase
uses MEMS, to precisely control the machining of silicon-based materials at the
micrometer and nanometer scales. This ability has led to the Company's
proprietary membrane design that controls the wetting and movement of liquids on
a solid surface. mPhase uses microfluidics to control the flow of liquid
electrolyte through the porous membrane and is also the basis for other possible
applications such as self-cleaning surfaces, filtration and separation and
liquid delivery systems.

History
of Nanotechnology Operations

Smart
NanoBattery

mPhase
Technologies along with Bell Labs, jointly conducted research from February 2004
through April of 2007 that demonstratedcontrol and manipulation of fluids on
superhydrophobic and superlyophobic surfaces to create a new type of battery or
energy storagedevice with power management features obtained by controlling the
wetting behavior of a liquid electrolyte on a solid surface. The scientific
research conducted set the ground work for continued development of the Smart
NanoBattery and formed a path to commercialization of the technology for a broad
range of market opportunities. During 2005 and 2006, the battery team tested
modifications and enhancements to the internal design of the battery to optimize
its power and energy density characteristics, as well as making engineering
improvements that were essential in moving the battery from a zinc-based
chemistry to a commercial lithium-based chemistry that can be manufactured on a
large scale. The Company began its efforts by entering into a $1.2 million 12
month Development Agreement with the Bell Labs division of Alcatel/Lucent for
exploratory research of control and manipulation of fluids on superhydrophobic
surfaces to create power cells ( batteries) by controlling wetting behavior of
an electrolyte on nanostructured electrode surfaces. The goal was to develop a
major breakthrough in battery technology creating batteries with longer shelf
lives as the result of no direct electrode contact (meaning no power drain prior
to activation). The Company extended its development effort twice for an
additional 2 year ending in March of 2007 and for two additional periods
thereafter through July 31, 2007. During this time, the technical focus shifted
from trying to separate the liquid electrolyte from nanostructured electrodes to
developing a nanostructured membrane that could physically separate the liquid
electrolyte from the solid electrodes.

19




mPhase
also began working with the Rutgers University Energy Storage Research Group (ESRG)
in July of 2005 to conduct contract research in advanced battery chemistries
involving lithium. This work involved characterizing and testing materials that
could be used in the mPhase battery. In July of 2007, the relationship shifted
to a collaboration focused on developing a memory backup battery needed by the
U.S. Army. The work was funded through a Phase I Small Business Technology
Transfer Program (STTR) grant.

Also in
July of 2007, mPhase formed a new wholly-owned subsidiary, Always Ready, Inc.,
to focus on the development of its nanotechnology products. The Company has used
this subsidiary as a division of the Company in order to develop increasing
brand recognition of its battery product. The Company decided in September of
2007 to transfer its development work out of Bell Labs (Alcatel/Lucent) in order
to broaden its nanotechnology product commercialization efforts. In terms of the
battery, Bell Labs was no longer sufficient because they had no in-house means
to handle lithium chemistry. mPhase/AlwaysReady continued to work with Rutgers
ESRG which could work with lithium, but also engaged in work with other
companies to supply essential components, fabricate prototypes, and plan
manufacturing approaches. These companies included a well-respected silicon
foundry and battery manufacturer.

In
February of 2008, the Company announced that a prototype of its Smart
NanoBattery was successfully deployed in a gun-fired test at the Aberdeen
Proving Ground at Maryland. The test was conducted by the U.S. Army Armament
Research and Development and Engineering Center (ARDEC) of Picatinny, New
Jersey. The battery not only survived the harsh conditions of deployment at a
gravitational force in excess of 45,000 g , but was also flawlessly activated in
the process .

In March
of 2008, mPhase announced that it had been invited to submit a proposal for a
Phase II STTR grant, based upon the successful work it had performed on the
Phase I grant to develop a version of the Smart NanoBattey referred to as the
multi-cell, micro-array reserve battery for a critical U.S. Army memory backup
application. The Phase II grant in the gross amount of $750,000 (net $500,000)
was granted to the Company in the middle of September of 2008 .In March of 2008,
the Company also announced the successful transfer to a commercial foundry of
certain processes critical to the manufacturing of its Smart NanoBattery. This
will enable fabrication of the porous membranes for the multi-cell, micro-array
reserve battery mentioned above. The Company successfully manufactured
nanostructured membranes at the foundry that are essential to commercial
production of the battery. By achieving a series of delayed activations, the
shelf-life and continuous run-time of such battery is increased to a period of
time in excess of twenty years. In April of 2008, the Company announced that it
had successfully activated it's first Smart NanoBattery prototype by
electrowetting using a hard-wired configuration and a remotely-activated device.
Remote activation plays a key role in providing power to wireless sensors
systems and RFID tags.

Also, in
April of 2008, the Company announced that it had successfully produced its first
lithium-based reserve battery with a soft or pouchpackage and breakable
separator (in place of the electrowettable membrane) that relies on mechanical
rather than electrical activation to provide Power On Command. The Company
believes that it is a significant milestone in moving from a low energy density
zinc-based battery to a higher energy density lithium-based battery towards
proving that the Smart NanoBattery will eventually be economically and
commercially viable.

Emergency
Flashlight

On
December 5, 2008 mPhase Technologies, Inc. signed a contract with Porsche Design
Gesellschaft m.b.H., Flugplatzstrasse 29, A,S700 Zell am See. Austrla [Porsche
Design Studio], to design a premium version of the AlwaysReady Emergency
Flashlight. The flashlight will contain mPhases proprietary
mechanically-activated lithium reserve battery. The battery contains a breakable
barrier that separates the solid electrodes from the liquid electrolyte until
the battery is manually activated. Unlike traditional batteries, the mPhase
battery remains in an inert state with no leakage or self-discharge until
activation. The mPhase battery is designed to have an almost infinite shelf life
making it ideal for emergency lighting applications. The premium flashlight will
be marketed as an accessory for automobile roadside emergency kits.

20




On
January 29, 2009, the Company announced that it has contracted with EaglePicher
Technologies to design and manufacture, in small quantities, its
mechanically-activated battery that will be used in its new Emergency
Flashlight. EaglePicher was selected for the project because of their experience
in custom and standardized power solutions for the extreme environments of
aerospace and military applications as well as medical and commercial
applications.

The
reserve battery is a manually activated lithium cell designed to provide Power
On Command. The battery remains dormant until turned on by the user. It will
be built to the highest standards with a minimum storage life of 20 years. Once
activated, the reserve battery is expected to deliver the electrical performance
of a standard primary CR123 battery used in many portable electronic
applications today.

EaglePicher Technologies, LLC (EPT), and EaglePicher company, is a world leader
in custom and standardized power solutions for the extreme environments of
aerospace and military applications as well as medical and commercial
applications. The company specializes in design and manufacture of battery
cells, battery packaging, battery management systems (BMS), analysis,
environmental testing, and energetic devices. Active in battery development and
testing since 1922, EPT has the most experience and broadest capability in
battery electrochemistry of any battery supplier.

Magnetometer

In March
of 2005, the Company entered into a second Development Agreement for 12 months
at a cost of $1.2 million with the Bell Labs to develop MEMS-based
ultrasensitive magnetic sensor devices, also known as magnetometers, that could
be used in military and commercial electronics (e.g., cell phones) for
determining location, as well as in portable security and metal detection
applications. The agreement was renewed in April of 2006 for another 12 months.
Although proven to work in the lab, the magnetometer technology could not be
scaled up as quickly and as cost effectively as the battery. The project was
suspended in September 2007 so that all technical resources could be allocated
to the battery project.

IPTV

Historically, the Company since its inception has focused upon developing
innovative solutions for the delivery of Broadcast Television as part of a
triple play of services that includes voice and high-speed internet for
telephone service providers globally. Beginning in fiscal year 2004, the Company
began developing Broadcast television delivery solutions through
software/middleware designed to enable telephone service providers to deliver
video data using internet protocol. The Companys middleware/software is highly
scalable, potentially saving telephone service providers significant hardware
deployment costs for routers and servers required for the carrier class delivery
of broadcast television using internet protocol. Such solution potentially
expands the content of available information from the internet into broadcast
quality television. The Companys middleware is capable of delivering over
copper, fiber, coax or any infrastructure representing a combination of the
foregoing that is used by a telecommunications service provider. The Company has
not to date been able to derive any significant revenue from our TV+ solution.

Because
the roll-out of broadcast television using internet protocol has been a lengthy
process for major service providers in the United States, the Company has
suspended development of new features for its TV+ solution in order to conserve
financial resources pending further development in the U.S. market. All
inventory has been written off and all strategic alternatives relative to this
business segment including the valuation and sale of assets or licensing of the
technology are being evaluated.

21




FINANCIAL
OVERVIEW

Revenues.
Since July 1,2007 and inclusive of the most current quarter, revenue has
primarily been attributable to grants from the United States Army and testing
arrangements involving its nanotechnology products.

Cost of
revenues
Cost
associated with revenues from Army Grants and fees for testing our
nanotechnology products is currently very low. It is anticipated that the
Companys cost of revenues will increase significantly as the Company moves
forward with the commercialization and distribution of its emergency flashlight
product and other potential products associated with its mechanically-activated
reserve battery.

Research
and development.
Research and development expenses have consisted principally of direct labor and
payments made to Eagle Picher, Porsche Design Studio and Microphase, as well as
other third party vendors involved in the development of the solution and
nanotechnology products. All research and development costs are expensed as
incurred.

General
and administrative.
General
and administrative expenses consist primarily of salaries and related expenses
for personnel engaged in its nanotechnology product line, legal and accounting
personnel. Certain administrative activities are outsourced on a monthly fee
basis to Microphase Corporation and mPhase leases its office in Norwalk,
Connecticut from Microphase Corporation.

Non-Cash
compensation charges.
The Company makes extensive use of stock, stock options and warrants as a form
of compensation to employees, directors and outside consultants. We incurred
non-cash compensation charges totaling $70,217,431 from inception (October 2,
1996) through September 30, 2009.

Other
Income (Expense).
Included
in Other Expense are non-recurring items related to the change in the value of
derivative securities and amortization as related debt discount. Such amounts
will fluctuate significantly and should not be considered as recurring or in any
way indicative of operating results. In addition, it has been the Company's
policy to record as an expense the cost of re-pricing securities (Reparation
Cost) to raise capital.

Cumulative losses, net worth and capital needs

The
Company has incurred cumulative development stage losses of $187,188,761 and
negative cash flow from operations of $82,879,548 from inception through
September 30, 2009. The auditors report for the fiscal year ended June 30, 2009
includes the statement that "there is substantial doubt of the Company's ability
to continue as a going concern". As of September 30, 2009, the Company had a
negative net worth of ($3,304,083) compared to a negative net worth of
($5,234,167) as of June 30, 2009 as a result of continuing net losses. The
Company has Convertible Debentures funded with JMJ Financial, Inc that should
enable the Company to raise significant working capital for the next fiscal
year. Draws under this facility in the current fiscal quarter ended Sept, 30,
2009 amounted to $1,500,000 (accounted for as a pay-down of notes receivable).
The Company expects to be able to receive approximately $300,000 per month
through August of 2012 under its current Convertible Debentures with JMJ
Financial, Inc. While the Company believes these facilities will fund short term
capital needs it may from time to time need to supplement such funding.. In the
longer term, we estimate that the Company will need to raise approximately $5-15
million of additional capital above the funds through June 30, 2010 in order to
fund commercialization of its products. The Company does not expect to derive
any material revenue from its Nanotechnology product development until the third
quarter of fiscal year 2010.

22




THREE
MONTHS ENDED September 30, 2009 VS. September 30, 2008

REVENUE

Total
revenues were $51,837 for the three months ended September 30, 2009 compared to
$6,266 for the three months ended September 30, 2008. Revenues derived in the
current quarter was related to billings under a Phase II U.S. Army Grant of
$750,000 (net to the Company of $500,000) which began September 2008.

RESEARCH
AND DEVELOPMENT

Research
and development expenses were $514,326 for the three months ended September 30,
2009 as compared to $387,676 during the comparable period in 2008 or an increase
of $126,650. This increase in spending is a result of acceleration of work to
bring its emergency flashlight using its mechanically activated reserve batter
to market . In connection with such efforts the Company paid major vendors such
as Eagle Pitcher $125,000, Porsche Design Studio $42,914, MKE $42,336 and
Microphase Corporation $250,000, respectively, for the quarter ended September
30, 2009. Fees paid to Microphase Corporation included $200,000 that was
converted into the Companys common stock at $.0075 per share.

Subject
to available funds, the Company expects to increase its research and development
efforts throughout fiscal year 2009. Such research is expected to also include
products such as the Phase II Army Reserve Battery that is being developed using
the science of nanotechnology . The initial applications for the nano power cell
technology will address the need to supply emergency and reserved power to a
wide range of electronic devices for both commercial and defense applications.

GENERAL
AND ADMINISTRATIVE EXPENSES

General
and administrative (G&A) expenses were $420,824 for the three months ending
September 30, 2009 down from $6,239,260 or a decrease of $5,818,436 from the
comparable period in 2008. The decrease in G&A expense is primarily the result
of non-cash charges relating to the issues of common stock and options to
employees and consultants that amounted to $5,605,550 during the quarter ended
September 30, 2008 compared to $0 for the quarter ended September 30, 2009. In
addition, the Company engaged in significant salary reductions for its employees
in late September of 2008 that has continued and the Company has reduced the
size of its staff to 8 full time employees.

OTHER
(EXPENSE) AND INCOME

Included in the quarter ended September 30, 2008, as restated, are non-cash
gains and costs associated with convertible debt that include a non-cash credit
for the change in derivative value of $1,333,198 , offset by amortization of
debt discount costs of $779,318, resulting in a net gain of $553,880 from
derivative liabilities.

NET
INCOME AND (LOSS)

The
Company recorded a net loss of $396,944 for the three months ended September 30,
2009 as compared to a loss of $6,317,698 for the three months ended September
30, 2008. This represents a net loss per common share of $.00 and loss per share
of $.01 for the three month periods ended September 30, 2009 and 2008
respectively. The decrease in net loss is attributable to the significant
reduction in non-cash compensation to officers, employees and consultants and
the net gain from derivative liabilities associated with the Companys
convertible debt recorded for the three months ended September 30, 2009.

23




CRITICAL
ACCOUNTING POLICIES

REVENUE
RECOGNITION

As
required, mPhase has adopted ASC 605-10-525 "Revenue Recognition in Financial
Statements", which provides guidelines on applying generally accepted accounting
principals to revenue recognition based upon the interpretations and practices
of the SEC.

RESEARCH
AND DEVELOPMENT

Research
and development costs are charged to operations as incurred in accordance with
ASC 730 "Research and Development."

OPTIONS, WARRANTS AN OTHER CONVERTIBLE
EQUITY INSTRUMENTS
STOCK BASED COMPENSATION
On July 1, 2005, the Company adopted the provisions of Financial Accounting
Standards Board Statement No. 123R, "Share-Based Payment" (SFAS 123R). SFAS 123R
revised SFAS 123, "Accounting for Stock Based Compensation" and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R requires
companies to measure and recognize compensation expense for all employee
stock-based payments at fair value over the service period underlying the
arrangement. Therefore, the Company is now required to record the grant-date
fair value of its stock-based payments (i.e., stock options and other
equity-based compensation) in the statement of operations. The fair value of
options granted in fiscal year ended June 30, 2008 and 2009 was estimated as of
the date of grant using the Black-Sholes stock option pricing model, based on
the following weighted average assumptions: annual expected return of 0%, an
average life of 5 years, annual volatility of 71% and 80.3% and a risk-free
interest rate 2.25% and 3.0%in the years 2008 and 2009 respectively.

MATERIAL EQUITY INSTRUMENTS
The Company has material equity instruments including Convertible Debentures and
Convertible Notes that are accounted for as Derivative liabilities (SEE BELOW)
and options and warrants that are evaluated quarterly for potential
reclassification as liabilities pursuant to EITF 00-19 (SEE ALSO NOTE 8
"Stockholders Equity" under the caption "Other Equity"). The Company utilized a
sequencing method prescribed by EITF 00-19, based upon applying shares available
to contracts with the earliest inception date first. During the fiscal year
ended June 30, 2008 the Company reclassified contracts for warrants to purchase
12,604,168 shares at fixed prices ranging from $.13 to $.15 per share to
contingent liabilities.
The contingent liability was recorded at the fair market value, such estimated
value, as restated, was based upon the contractual life of the free standing
warrants, using the Black Scholes pricing model, based on the following weighted
average assumptions: annual expected return of 0%, an average life of 5 years,
annual volatility 81% and a risk-free interest rate 2.25%. At the issuance date
of the free standing warrants, such warrants were issued during the fourth
quarter of fiscal June 30, 2008; the estimated value approximated $1,006,200 and
as recalculated on the quarterly measurement dates, at June 30, 2008 the
estimated value approximated $433,300. During FYE ended June 30, 2009, the estimated
value was determined to no longer be material. The net change in the contingent
liability was credited to the change in derivative value in the Consolidated
Statement of Operations for the Fiscal years ended June 30, 2008 and 2009 for
$572,900 and $433,300, respectively, for each of these periods in accordance
FASB Standards Codification Topic 815 (previously known EITF 00-19). DERIVATIVE FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended and EITF Issue No.
00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock" require all derivatives to be
recorded on the balance sheet at fair value. The beneficial conversion features
of the convertible debentures are embedded derivatives and are separately valued
and accounted for on our balance sheet with changes in fair value recognized
during the period of change as a separate component of other income/expense.
Fair values for exchange-traded securities and derivatives are based on quoted
market prices. The pricing model we use for determining fair value of our
derivatives is the Black-Scholes Pricing Model. Valuations derived from this
model are subject to ongoing internal and external verification and review. The
model uses market-sourced inputs such as interest rates and stock price
volatilities. Selection of these inputs involves management's judgment and may
impact net income. "

MICROPHASE CORPORATION

mPhase's
President, Chief Operating Officer and Chairman of the Board of the Company are
also officers of Microphase and mPhase's President and Chairman of the Board are
shareholders of Microphase. On May 1, 1997, the Company entered into an
agreement with Microphase, whereby it will use office space as well as the
administrative services of Microphase, including the use of accounting
personnel. This agreement was for $5,000 per month and was on a month-to-month
basis. In July 1998, the office space agreement was revised to $10,000, in
January 2000 to $11,050 per month, in July 2001 to $11,340 per month, in July
2002 to $12,200 per month, in January 2003 to $10,000 per month, and in July
2003 to $18,000 per month. Additionally, in July 1998, mPhase entered into an
agreement with Microphase, whereby mPhase reimburses Microphase $40,000 per
month for technical research and development. In January 2003 the technical
research and development agreement was revised to $20,000 per month, and in July
2003 it was further revised to $5,000 per month for technical and research
development, $5,000 per month for administrative services and $5,000 per month
under the office space agreement. Beginning July 1, 2006, billings for all of
the above services has been $5,000 per month and in July, 2008, such fees were
reduced to $3,000 per month. In addition, Microphase also charges fees for
specific projects on a project-by-project basis. During the three months ended
September 30, 2009, $200,000 of accounts payable to Microphase Corporation was
converted into 26,666,667 shares of common stock at a converstion price of
$.0075, which was comparable to private placements during that quarter.  During
the quarter ended September 30, 2009, the company recorded $586,667 interest
expense for this beneficial conversion feature.  During the three months ended
September 30, 2008 and 2009 and from inception (October 2, 1996), $12,644,
$126,846 and $9,434,213 respectively, have been charged to expense. As a result
of the foregoing transactions as of September 30, 2009, the Company had a
$76,875 payable to Microphase $25,000 of which is included in Accounts Payable.

24




JANIFAST
LTD.

The
Company historically has purchased products and incurs certain research and
development expenses with Janifast Ltd., with offices in Hong Kong and with
manufacturing facilities in the Peoples Republic of China. Janifast Ltd was
owned by U.S. Janifast Holdings, Ltd., a company in which three directors of
mPhase were significant shareholders and one is an officer, in connection with
the manufacturing of POTS Splitter shelves and component products including
cards and filters sold by the Company. In March of 2009 Janifast Ltd ceased
operations owing to financial distress and adverse global financial and credit
conditions.

During
the three months ended September 30, 2008 and 2009 and the period from inception
(October 2, 1996), $0, $0 and $16,031,811 respectively, have been charged by
Janifast to inventory or is included in operating expenses in the accompanying
statements of operations.

OTHER
RELATED PARTIES

Mr.
Abraham Biderman was employed until September 30, 2003 by our former
investment-banking firm Lipper & Company On Sept.30, 2009, Mr. Biderman's
affiliated firm of Palladium Capital Advisors was owed unpaid finders fees in
the amount of $150,000. During the three months ended September 30, 2009 finders
fees in the amount of $20,000 were recorded and paid.

Transactions with Officers

At
various points during the current quarter and at various points during the past
fiscal year the Messrs, Durando, Dotoli and Smiley provided bridge loans to the
Company, evidenced by individual promissory notes and deferred compensation so
as to provide working capital to the Company. All of the notes are payable on
demand. In addition, during the three months ended September 30, 2009, the
Company issued to employees and consultants a total of 61,700,000 shares of
common stock and 104,650,000, 5 year options to purchase Company stock at 5
cents per share.During the fourth quarter of the fiscal year ended June 30, 2009, the Board of
Directors authorized a conversion feature on these notes into shares of commons
tock at the discretion of the holder provided such shares are authorized and
available at a conversion price of $.0075 per share, which was comparable to
private placements done during that quarter. During the quarter ended September
30, 2009, the Company recorded $82,609 interest expense on the accrued interest
for this beneficial conversion feature.

Total
compensation (including the value of stock awards) to related parties and
payables to officers are summarized below.

Summary
of compensation to related parties for the Three Months Ended September 30, 2009

|                                                                |   | Durando |  |   | Dotoli |         |   | Smiley  |         |   | Biderman |         |   | Microphase |        |   | Total      | 
|--------------------------------------------------------------- | - | ------- |  | - | ------ | ------- | - | ------- | ------- | - | -------- | ------- | - | ---------- | ------ | - | ---------- | 
|Consulting / Salary                                             | $ | 50,000  |  | $ | 45,000 |         | $ | 43,750  |         |   |          |         |   |            |        | $ | 138,750    | 
|Interest                                                        | $ | 18,523  |  | $ | 13,523 |         | $ | 7,927   |         |   |          |         |   |            |        | $ | 39,972     | 
|Rent                                                            |   |         |  |   |        |         |   |         |         |   |          |         | $ | 9,000      |        | $ | 9,000      | 
|G&A                                                             |   |         |  |   |        |         |   |         |         |   |          |         | $ | 1,846      |        | $ | 1,846      | 
|R&D                                                             |   |         |  |   |        |         |   |         |         |   |          |         | $ | 125,000    |        | $ | 125,000    | 
|Finders Fees                                                    |   |         |  |   |        |         |   |         |         | $ | 20,000   |         |   |            |        | $ | 20,000     | 
|Stock
    based compensation (shares issued)*                   |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        | $ | 0          | 
|Stock
    based compensation (options issued)*                  |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        | $ | 0          | 
|Total
    compensation                                          | $ | 68,523  |  | $ | 58,523 |         | $ | 51,677  |         | $ | 20,000   |         | $ | 135,846    |        | $ | 334,568    | 
|                                                                |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        |   |            | 
|                                                                |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        |   |            | 
|Summary of payables to related parties as of September 30, 2009 |   |         |  |   |        |         |   |         |         |   |          |         |  
|                                                                |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        |   |            | 
|                                                                |   |         |  |   |        |         |   | Durando |         |   | Dotoli   |         |   | Smiley     |        |   | Microphase | 
|Notes
    payable                                               |   |         |  |   |        |         | $ | 617,420 |         | $ | 450,756  |         | $ | 264,224    |        |   |            | 
|Due
    to Officers / Affiliates                                |   |         |  |   |        |         | $ | 0       |         | $ | 5,550    |         |   |            |        | $ | 76,875     | 
|Interest Payable                                                |   |         |  |   |        |         | $ | 79,995  |         | $ | 76,037   |         | $ | 14,890     |        |   |            | 
|                                                                |   |         |  |   |        |         |   |         |         |   |          |         |   |            |        |   |            | 
|Total
    Payable to related parties as of September 30, 2009   |   |         |  |   | $      | 697,415 |   | $       | 532,343 |   | $        | 279,114 |   | $          | 76,875 |  

25




Summary
of compensation to related parties for the three months ended September 30, 2008

|                                              |   | Durando   |  |   | Dotoli  |  |   | Smiley  |  |   | Biderman |  |   | Microphase |  |   | Total     | 
|--------------------------------------------- | - | --------- |  | - | ------- |  | - | ------- |  | - | -------- |  | - | ---------- |  | - | --------- | 
|Consulting / Salary                           | $ | 98,400    |  | $ | 70,500  |  | $ | 50,000  |  |   |          |  |   |            |  | $ | 218,900   | 
|Interest                                      |   |           |  |   |         |  | $ | 4,291   |  |   |          |  |   |            |  | $ | 4,291     | 
|Rent                                          |   |           |  |   |         |  |   |         |  |   |          |  | $ | 9,000      |  | $ | 9,000     | 
|R&D                                           |   |           |  |   |         |  |   |         |  |   |          |  | $ | 3,644      |  | $ | 3,644     | 
|Finders Fees                                  |   |           |  |   |         |  |   |         |  | $ | 20,000   |  |   |            |  | $ | 20,000    | 
|Stock
    based compensation (shares issued)* | $ | 1,215,000 |  | $ | 720,000 |  | $ | 450,000 |  | $ | 180,000  |  |   |            |  | $ | 2,565,000 | 



|Stock
    based compensation (options issued) | $ | 1,350,000  |  | $ | 810,000    |  | $ | 486,000    |  | $ | 54,000    |  |   |        |  | $ | 2,700,000   | 
|--------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- |  | - | --------- |  | - | ------ |  | - | ----------- | 
|Total
    compensation                        | $ | 2,663,400  |  | $ | 1,600,500  |  | $ | 990,291    |  | $ | 254,000   |  | $ | 12,644 |  | $ | 5,520,835   | 
|                                              |   |            |  |   |            |  |   |            |  |   |           |  |   |        |  |   |             | 
|Common stock issued*                          |   | 27,000,000 |  |   | 16,000,000 |  |   | 10,000,000 |  |   | 4,000,000 |  |   |        |  |   | 57,000,000  | 
|Options issued (5years @5 cents)              |   | 50,000,000 |  |   | 30,000,000 |  |   | 18,000,000 |  |   | 2,000,000 |  |   |        |  |   | 100,000,000 | 

*Shares
issued to officers are pursuant to agreements dated August 8, 2008 between the
Company and the Messrs Durando, Dotoli and Smiley. The agreements state that the
stock granted may not be sold until the earlier of two (2) years or when
the stock price for 60 consecutive days closes at a price of $.25 per share or
greater and the average trading volume during such 60 day period is not less
than 1,000,000 shares per day.

|Summary of payables to related parties as of September 30,2008 |   |         |  |   |         |  |   |         |  |  
|-------------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- |  | -
|                                                               |   |         |  |   |         |  |   |         |  |  
|                                                               |   | Durando |  |   | Dotoli  |  |   | Smiley  |  |  
|Notes
    payable                                              |   |         |  | $ | 8,000   |  | $ | 216,538 |  |  
|Deferred Compensation                                          | $ | 278,000 |  | $ | 323,500 |  |   |         |  |  
|Due
    to Officers / Affiliates                               | $ | 295,890 |  | $ | 88,756  |  |   |         |  | $
|Interest Payable                                               |   |         |  |   |         |  | $ | 23,043  |  |  
|Total
    Payable to Officers                                  | $ | 573,890 |  | $ | 420,256 |  | $ | 239,581 |  | $

26




LIQUIDITY
AND CAPITAL RESOURCES

The
Company has incurred cumulative development stage losses of $187,188,761, and
negative cash flow from operations of $82,879,548. The auditors report for the
fiscal year ended June 30, 2009 includes the statement that "there is
substantial doubt of the Company's ability to continue as a going concern". As
of September 30, 2009, the Company had a negative net worth of ($3,304,083)
compared to a negative net worth of ($5,234,168) as of June 30, 2009 as a result
of continuing net losses. The Company received $1,500,000 in connection with
issuance and periodic installment payments received from Convertible Debentures
for the three month period that ended September 30, 2009.  In addition, the
Company has several convertible debentures with JMJ Financial, Inc. in which the
Company expects to fund approximately $300,000 per month through August of 2010.
While the Company believes these facilities will fund short term capital needs
it may from time to time need to supplement such funding. In the longer term, we
estimate that the Company will need to raise approximately $5-15 million of
additional capital above the funds anticipated from the monthly conversion JMJ,
to meet longer term liquidity needs through June 30, 2010. Such monies would be
necessary primarily to fund expenditures for commercialization and distribution
of its emergency flashlight product which includes the Companys
mechanically-activated reserve battery contained therein. The Company does not
expect to derive any material revenue from its Nanotechnology product
development until the third quarter of fiscal year 2010.

MANAGEMENT'S PLANS

The
Company has shifted its focus to the development of its emergency flashlight
product containing its mechanically-activated reserve battery and products using
the science of Nanotechnology. The Company does not expect to derive any
material revenue from its Nanotechnology product development until the third
quarter of fiscal year 2010. In addition, the Company relies on the continuation
of funding under certain convertible securities agreements (See Note 4) The
Company's ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
allow the successful wide scale development, deployment and marketing of its
products.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
Company is not exposed to changes in interest rates as the Company has no debt
arrangements and no investments in certain held-to-maturity securities. Under
our current policies, we do not use interest rate derivative instruments to
manage exposure to interest rate changes. A hypothetical 100 basis point adverse
move in interest rates along the entire interest rate yield curve would not
materially affect the fair value of any financial instruments at September 30,
2009.

27

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ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer,
we have evaluated the effectiveness of our disclosure controls and procedures as
required by Exchange Act Rule 13a-15(b) as of the end of the period covered by
this report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls and procedures
are effective. There were no changes in our internal control over financial
reporting during the quarter ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

28

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time mPhase may be involved in various legal
proceedings and other matters arising in the normal course of business.

ITEM 2. CHANGES IN SECURITIES

Private Placements

During the quarter ended September 30, 2009, the Company
issued 2,666,667 shares of its common stock at $.0075 per share in private
placements generating gross proceeds of $200,000 with placement costs of
$20,000, netting $180,000.

Stock Based Compensation

During the quarter ended September 30, 2009, the Company did
not issue any stock-based compensation, warrants or options to officers,
employees or consultants. Subsequently, through November 2, 2009 the Company
issued 1,500,000 shares of its common stock to consultants for services with an
issue date value of $32,750.

Conversion of debt securities and Strategic vendor
payables

During the three months ended September 30, 2009, $1,277,750
of convertible debt and accrued interest thereon was converted into 82,531,821
shares of Common stock. Subsequently, through October 30, 2009 the Company
issued 15,000,000 shares of its common stock in connection with the conversion
of $241,875 of the convertible debt arrangements and accrued interest thereon.

During the three months ended September 30, 2009, $200,000 of
accounts payable to Microphase Corporation was converted into 26,666,667 shares
of Common stock. The Company recorded $586,667 interest expense for this
beneficial conversion feature.

Long Term Convertible Debentures / Note Receivable / Debt
Discount

The Company currently has four separate convertible debt
arrangements with independent investors. During the three months ended September
30, 2009, $1,277,750 of these convertible debt arrangements and accrued interest
thereon was converted into 82,531,821 shares of Common stock.These
transactions are intended to provide liquidity and capital to the Company and
are summarized below.

Arrangement #1 (La Jolla Cove Investors, Inc.)

On Sept 11, 2008, the Company received proceeds of $200,000
under a Securities Purchase Agreement from La Jolla Cove Investors, Inc. This
transaction involves three related agreements: 1) A Securities Purchase
Agreement which may under certain circumstances permit the Company to draw up to
$2,000,000 of funds; 2) A Convertible Debenture totaling $2,000,000, with a
interest rate of 7 1/4% and a maturity date of September 30, 2011 and 3) A
Secured Note Receivable in the amount of $1,800,000, with a interest rate of 8
1/4% and maturity dates of September 30,2011 due from the same parties who are
the holders of the Convertible Debentures. Conversion of outstanding debentures
into common shares is at the option of the holder at a price equal to the dollar
amount of the debenture divided by the lesser of $.35 per share or 80% of the
three lowest Volume Weighted Average Price during a 20 day trading period. At
the time of the transaction (September 11, 2008) the derivative value of this
security was calculated to be $1,176,471.On June 30, 2009 the derivative value
of this security was calculated to be $1,080,343. On September 30, 2009, given
the changes in the stock price, this value had decreased to $519,044, a $561,299
decrease this quarter creating a non-cash credit to earnings for the quarter
ended September 30, 2009 of that amount. During the three month period ended
Sept 30, 2009, amortization of debt discount amounted to $71,646 reducing the
balance to $502,790.

29

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Arrangement #2 (JMJ Financial, Inc.)

In April, 2008, the Company received proceeds of $300,000
under a Securities Purchase Agreement. This transaction involves three related
agreements: 1) A Securities Purchase Agreement which may under certain
circumstances permit the Company to draw up to $1,000,000 of funds; 2) Two
Convertible Debentures totaling $1,450,000, with a one time interest factor of
12% and a maturity date of March 25, 2011 and 3) A Secured Note Receivable in
the amount of $1.0 million, with a one time interest factor of 13.2 % and
maturity dates of March 25, 2012 due from the same parties who are the holders
of the Convertible Debentures .

Conversion of outstanding debentures into common shares is at
the option of the holder. The number of shares into which this debenture can be
converted is equal to the dollar amount of the debenture divided by 75%- 80% of
the 3 lowest Volume Weighted Average Prices during a 20 day trading period. At
the time of the transaction the derivative value of this security was calculated
to be $2,493,212. In total 2 million shares were issued in connection with the
convertible debentures with a relative fair value of $160,000 included in debt
discount.

On June 30, 2009 the derivative value of this security was
calculated to be $444,552. On September 30, 2009, given the changes in the stock
price combined with the fact that the principle amount of the two convertible
debentures was converted in full satisfaction during the three months ended
September 30, 2009, this value had decreased to $0, a $444,552 decrease this
quarter creating a non-cash credit to earnings for the quarter ended September
30, 2009 of that amount. During the three month period ended Sept 30, 2009,
amortization of debt discount amounted to $322,070 reducing the balance to $0.

Arrangement #3 (JMJ Financial, Inc.)

On December 31, 2008, the Company entered into a second
agreement with JMJ Financial. This transaction involves; 1) A Convertible
Debenture in the amount of $1.1 million, plus a one time interest factor of 12%
($132,000) and a maturity date of December 31, 2011 and 2) A Secured Note
Receivable in the amount of $1.0 million, plus a one time interest factor of
13.2 % ($132,000) and maturity date of December 31, 2012 due from the same
parties who are the holders of the Convertible Debentures. No cash was exchanged
relative to this agreement.

Conversion of outstanding debentures into common shares is at
the option of the holder. The number of shares into which this debenture can be
converted is equal to the dollar amount of the debenture divided by 75% of the
lowest Price during the 20 day trading period prior to conversion. At the
commitment date the embedded conversion feature of such security was $586,667
and the debt discount valued at $586,667.

On June 30, 2009 the derivative value of this security was
calculated to be $855,921. On September 30, 2009, given the changes in the stock
price and conversions reducing the principle balance to 482,000, this value had
decreased to $195,721 a $660,200 decrease this quarter creating a non-cash
credit to earnings for the quarter ended September 30, 2009 of that amount.
During the three month period ended Sept 30, 2009, amortization of debt discount
amounted to $241,689 reducing the balance to $247,200.

Arrangement#4 (JMJ Financial, Inc.)

On August 19, 2009, the Company received proceeds of $250,000
in connection with a third agreement with JMJ Financial. This transaction
involves 1) a Convertible Debenture in the amount of $1,870,000, plus a one time
interest factor of 12% ($224,400) and a maturity date of August 10, 2012 and 2)
A Secured Note Receivable in the amount of $1,700,000 plus a one time interest
factor of 13.2% ($224,400) and a maturity date of August 10, 2012 due from the
same parties who are the holders of the Convertible Debenture.

Conversion of outstanding into common shares is at the option
of the holder. The number of shares into which this debenture can be converted
is equal to the dollar amount of the debenture divided by 75% of the lowest
trade price during the 20 day trading period prior to conversion.At the
commitment date the embedded conversion feature of such security was $1,054,395
and the debt discount valued at $1,224,395.

30

---

On September 30, 2009, given the changes in the stock price
this value had decreased to $759,333 a $295,062 decrease this quarter creating a
non-cash credit to earnings for the quarter ended September 30, 2009 of that
amount. During the three month period ended Sept 30, 2009, amortization of debt
discount amounted to $102,333 reducing the balance to $1,122,362.

Arrangement#5 (JMJ Financial, Inc.)

On September 30, 2009, the Company received a total of
$150,000 of proceeds in connection with another agreement with JMJ Financial.
This transaction involves 1) A Convertible Debenture in the amount of $1,200,000
plus a one time interest factor of 12%  ($144,000) and a maturity date of
September 23, 2012 and (2) A Secured Note in the amount of $1,100,000 plus a one
time interest rate factor of 13.2% ($144,000 each) and a maturity date of
September 23, 2012 due from the same parties who are the holders of the
Convertible Debentures.

Conversion of outstanding into common shares is at the option
of the holder. The number of shares into which this debenture can be converted
is equal to the dollar amount of the debenture divided by 75% of the lowest
trade price during the 20 day trading period prior to conversion. In addition,
the Company has received a commitment from JMJ Financial to enter into an
identical financing not later than 60 days from September 23, 2009. At the
commitment date the embedded conversion feature of such security was $480,000
and the debt discount valued at $580,000.

On September 30, 2009, given the changes in the stock price
this value had increased to $487,272 a $7,272 increase this quarter creating a
non-cash charge to earnings for the quarter ended September 30, 2009 of that
amount. During the three month period ended Sept 30, 2009, amortization of debt
discount amounted to $48,333 reducing the balance to $531,667.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|**EXHIBITS.** | **DESCRIPTION.**                                                                                         
|------------- | ---------------------------------------------------------------------------------------------------------
|              |                                                                                                          
|31.1          | Certification of Chief Executive Officer pursuant to Section 302 of the
    Sarbanes - Oxley Act of 2002.
|              |                                                                                                          
|31.2          | Certification of Chief Financial Officer pursuant to Section 302 of the
    Sarbanes - Oxley Act of 2002.
|              |                                                                                                          
|32.1          | Certification of Chief Executive Officer pursuant to Section 906 of the
    Sarbanes - Oxley Act of 2002.
|              |                                                                                                          
|32.2          | Certification of Chief Financial Officer pursuant to Section 906 of the
    Sarbanes - Oxley Act of 2002.

REPORTS ON FORM 8K

On August 19, 2009 the Company filed a Form 8K announcing
that it had received $250,000 of additional funding from JMJ Financial, Inc
under the terms of a Convertible Note.

31

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SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant, has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

|                     | mPHASE TECHNOLOGIES, INC.  
|-------------------- | ---------------------------
|                     |                            
|Dated:  May 11, 2010 | By:/s/ Martin S. Smiley    
|                     | Martin S. Smiley           
|                     | Executive Vice President   
|                     | Chief Financial Officer and
|                     | General Counsel            

32

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